SmartFinancial (SMBK) Reports Q4 EPS of $0.40

January 24, 2022 5:04 PM EST
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SmartFinancial, Inc. (NASDAQ: SMBK), today announced net income of $6.7 million, or $0.40 per diluted common share, for the fourth quarter of 2021, compared to net income of $9.0 million, or $0.59 per diluted common share, for the fourth quarter of 2020, and compared to prior quarter net income of $9.6 million, or $0.61 per diluted common share. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $8.7 million, or $0.52 per diluted common share, in the fourth quarter of 2021, compared to $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020, and compared to $9.9 million, or $0.63 per diluted common share, in the third quarter of 2021.

Billy Carroll, President & CEO, stated: “SmartFinancial reported another solid quarter as we wrapped up an outstanding year for our company. Loans and deposits continued to organically grow at a strong pace. We also expanded our sales team again this quarter with experienced and seasoned industry professionals. The investments we made in 2021 are positioning us very well as we look into 2022 and beyond.”

SmartFinancial's Chairman, Miller Welborn, concluded: “We couldn’t be more excited about where we are as a company. Our 2021 was a fantastic year on many fronts and it’s nice to finish with strong numbers and incredible momentum. Our team is poised and ready for 2022.”

Net Interest Income and Net Interest Margin

Net interest income was $29.9 million for the fourth quarter of 2021, compared to $30.4 million for the prior quarter. Average earning assets totaled $4.08 billion, an increase of $469.4 million. The growth in average earnings assets was primarily driven by an increase in average securities of $167.7 million, average interest-earning cash of $163.2 million and average loans and leases of $137.3 million. Average interest-bearing liabilities increased $354.3 million, related to continued core deposit growth.

The tax equivalent net interest margin was 2.92% for the fourth quarter of 2021, compared to 3.35% for the prior quarter. The tax equivalent net interest margin was impacted by a 47 basis point decrease in the average yield on interest-earning assets and offset by a 5 basis point decline in the rate on interest-bearing liabilities over the prior quarter. The decrease in yield on interest-earning assets was due to the combined impact of a quarter-over-quarter loan discount accretion and Payroll Protection Program (“PPP”) fee accretion decrease of $2.5 million and increased interest-earning cash position.

The yield on interest-bearing liabilities decreased to 0.39% for the fourth quarter of 2021 compared to 0.44% for the prior quarter. The cost of average interest-bearing deposits was 0.29% for the fourth quarter of 2021 compared to 0.34% for the prior quarter, a decrease of 5 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, which decreased 13 basis points during the period. The cost of total deposits for the fourth quarter of 2021 was 0.22% compared to 0.25% in the prior quarter.

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

Three Months Ended
Dec Sep Increase
Selected Interest Rates and Yields 2021 2021 (Decrease)
Yield on loans and leases 4.53%4.95%(0.42)%
Yield on earning assets, FTE 3.20%3.67%(0.47)%
Cost of interest-bearing deposits 0.29%0.34%(0.05)%
Cost of total deposits 0.22%0.25%(0.03)%
Cost of interest-bearing liabilities 0.39%0.44%(0.05)%
Net interest margin, FTE 2.92%3.35%(0.43)%

Provision for Loan and Lease Losses and Credit Quality

At December 31, 2021, the allowance for loan and lease losses was $19.4 million. The allowance for loan and lease losses to total loans and leases was 0.72% as of December 31, 2021, compared to 0.73% as of September 30, 2021. For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.74% as of December 31, 2021, compared to 0.76% as of September 30, 2021. The remaining discounts on the acquired loan and lease portfolio totaled $15.5 million, or 3.42% of acquired loans and leases as of December 31, 2021.

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

Three Months Ended
Dec Sep
Provision for Loan and Lease Losses Rollforward 2021 2021 Change
Beginning balance $19,295 $18,310 $985
Charge-offs (499) (239) (260)
Recoveries 134 75 59
Net charge-offs (365) (164) (201)
Provision 422 1,149 727
Ending balance $19,352 $19,295 $57
Allowance for loan losses to total loans and leases, gross 0.72% 0.73% (0.01)%

The Company is not required to implement the provisions of the Current Expected Credit Losses (“CECL”) accounting standard until January 1, 2023 and is continuing to account for the allowance for loan and lease losses under the incurred loss model.

Nonperforming loans and leases as a percentage of total loans and leases was 0.12% as of December 31, 2021, a decrease of 1 basis point from the 0.13% reported in the third quarter of 2021. Total nonperforming assets (which include nonaccrual loans and leases, loans and leases past due 90 days or more and still accruing, other real estate owned and other repossessed assets) as a percentage of total assets was 0.11% as of December 31, 2021, as compared to 0.14% as of September 30, 2021.

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 2021 2021 (Decrease)
Nonaccrual loans and leases $3,124 $3,567 $(443)
Loans and leases past due 90 days or more and still accruing 64 - 64
Total nonperforming loans and leases 3,188 3,567 (379)
Other real estate owned 1,780 2,415 (635)
Other repossessed assets 90 77 13
Total nonperforming assets $5,058 $6,059 $(1,001)
Nonperforming loans and leases to total loans and leases, gross 0.12% 0.13% (0.01)%
Nonperforming assets to total assets 0.11% 0.14% (0.03)%

Noninterest Income

Noninterest income increased $497 thousand to $6.8 million for the fourth quarter of 2021 compared to $6.3 million for the prior quarter. During the fourth quarter of 2021, the primary components of the changes in noninterest income were as follows:

  • Increase in service charges on deposit accounts, related to the SCB acquisition, account growth and transaction volume;
  • Increase in investment income, related to increased volume;
  • Decrease in insurance commissions, due to lower transaction volume, primarily driven by seasonality;
  • Increased interchange and debit card transaction fees, related to higher volume, account growth and the SCB acquisition; and
  • Increase in other, primarily from the gain on sale of credit card portfolio.

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 2021 2021 (Decrease)
Service charges on deposit accounts $1,372 $1,220 $152
Gain (loss) on sale of securities, net - 45 (45)
Mortgage banking income 803 994 (191)
Investment services 621 448 173
Insurance commissions 517 745 (228)
Interchange and debit card transaction fees 1,445 1,078 367
Other 2,048 1,779 269
Total noninterest income $6,806 $6,309 $497

Noninterest Expense

Noninterest expense increased $4.5 million to $27.8 million for the fourth quarter of 2021 compared to $23.3 million for the prior quarter. During the fourth quarter of 2021, the primary components of the changes in noninterest expense were as follows:

  • Increase in salaries and employee benefits, primarily due to:
    • Additional personnel related to the SCB acquisition;
    • Banking team hires in Auburn, Dothan, Montgomery and Birmingham, AL, Tallahassee, FL and Nashville, TN;
    • The Gulf Coast Wealth Management team lift-out;
  • Increase in occupancy and equipment expense from the SCB acquisition and expansion in Alabama; and
  • Increase in other expense, primarily related to overall franchise growth.

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 2021 2021 (Decrease)
Salaries and employee benefits $14,990 $13,594 $1,396
Occupancy and equipment 3,026 2,536 490
FDIC insurance 567 525 42
Other real estate and loan related expenses 583 407 176
Advertising and marketing 176 235 (59)
Data processing and technology 1,722 1,753 (31)
Professional services 847 810 37
Amortization of intangibles 660 711 (51)
Merger related and restructuring expenses 2,762 464 2,298
Other 2,490 2,274 216
Total noninterest expense $27,823 $23,309 $4,514

Income Tax Expense

Income tax expense was $1.8 million for the fourth quarter of 2021, a decrease of $872 thousand, compared to $2.6 million for the prior quarter.

The effective tax rate was 20.9% for the fourth quarter of 2021 and 21.5% for the prior quarter.

Balance Sheet Trends

Total assets at December 31, 2021 were $4.61 billion compared with $3.30 billion at December 31, 2020. The increase of $1.31 billion is primarily attributable to increases in cash and cash equivalents of $563.4 million, securities of $343.8 million, loans and leases of $311.2 million, bank owned life insurance of $48.4 million and goodwill and intangibles of $19.4 million related to the SCB acquisition and the acquisition of Fountain Equipment Finance, LLC.

Total liabilities increased to $4.18 billion at December 31, 2021 from $2.95 billion at December 31, 2020. The increase of $1.23 billion was primarily from organic deposit growth of $809.8 million and deposits of $407.0 million from the SCB acquisition.

Shareholders' equity at December 31, 2021 totaled $429.4 million, an increase of $72.3 million, from December 31, 2020. The increase in shareholders' equity was primarily from the issuance of $42.3 million of common stock for the acquisition of SCB and net income of $34.8 million for the twelve months ended December 31, 2021, which was offset by repurchase of the Company's common stock of $1.2 million and $3.7 million of dividends paid. Tangible book value per share (Non-GAAP) was $19.26 at December 31, 2021, compared to $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.18% at December 31, 2021, compared with 8.41% at December 31, 2020.

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

Dec Dec Increase
Selected Balance Sheet Information 2021 2020 (Decrease)
Total assets $4,611,579 $3,304,949 $1,306,630
Total liabilities 4,182,149 2,947,781 1,234,368
Total equity 429,430 357,168 72,262
Securities 559,422 215,634 343,788
Loans and leases 2,693,397 2,382,243 311,154
Deposits 4,021,938 2,805,215 1,216,723
Borrowings 87,585 81,199 6,386

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2021 on Monday, January 24, 2022, and will host a conference call on Tuesday, January 25, 2022, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 for United States or +1 (929) 526-1599 for other locations and enter the access code, 574606. A replay of the conference call will be available through March 26, 2022, by dialing (866) 813-9403 for United States or +44 (204) 525-0658 and entering the access code, 247688. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.

About SmartFinancial, Inc.

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

Source
SmartFinancial, Inc.
Investor Contacts
Billy Carroll
President & CEO
(865) 868-0613 [email protected]
Ron Gorczynski
Executive Vice President, Chief Financial Officer
(865) 437-5724 [email protected]
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611 [email protected]

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets, (iv) operating return on average shareholders' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision earnings (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value; (xiv) tangible assets; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, proceeds related to the termination of an Alabama Department of Economic and Community Affairs (“ADECA”) loan program, merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by average assets. Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income earnings (Non-GAAP) by average assets. Operating return on average shareholders' equity is the annualized operating earnings (Non-GAAP) divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity (Non-GAAP). Operating return on average tangible common equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses, proceeds related to the termination of the ADECA loan program. Operating pre-tax pre-provision earnings is net interest income plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). 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 (Non-GAAP) divided by common shares outstanding. Tangible assets excludes goodwill and other intangibles from total assets. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the effects of the COVID-19 pandemic and related variants on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) risks related to the acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the acquisition of SCB may not be realized in the time frame anticipated; (8) changes in management’s plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19 and related variants; (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 and related variants; (15) the impact of the COVID-19 pandemic and related variants 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 related variants; 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 SubsidiaryCondensed Consolidated Financial Information - (unaudited)(dollars in thousands)

Ending Balances
Dec Sep Jun Mar Dec
2021 2021 2021 2021 2020
Assets:
Cash and cash equivalents $1,045,077 $1,091,160 $673,515 $556,701 $481,719
Securities available-for-sale, at fair value 482,453 339,343 250,817 250,937 215,634
Securities held-to-maturity, at amortized cost 76,969
Other investments 16,494 14,972 14,584 14,728 14,794
Loans held for sale 5,103 3,418 4,334 7,870 11,721
Loans and leases 2,693,397 2,652,663 2,468,318 2,487,129 2,382,243
Less: Allowance for loan and lease losses (19,352) (19,295) (18,310) (18,370) (18,346)
Loans and leases, net 2,674,045 2,633,368 2,450,008 2,468,759 2,363,897
Premises and equipment, net 85,958 85,346 72,314 72,697 72,682
Other real estate owned 1,780 2,415 2,499 3,946 4,619
Goodwill and other intangibles, net 105,852 104,930 90,966 86,350 86,471
Bank owned life insurance 79,619 79,145 72,013 71,586 31,215
Other assets 38,229 29,934 23,306 23,629 22,197
Total assets $4,611,579 $4,384,031 $3,654,356 $3,557,203 $3,304,949
Liabilities:
Deposits:
Noninterest-bearing demand $1,055,125 $977,180 $807,560 $777,968 $685,957
Interest-bearing demand 899,158 847,007 702,470 683,887 649,129
Money market and savings 1,493,007 1,389,393 1,140,029 1,073,941 919,631
Time deposits 574,648 585,692 489,413 512,417 550,498
Total deposits 4,021,938 3,799,272 3,139,472 3,048,213 2,805,215
Borrowings 87,585 88,748 78,834 82,642 81,199
Subordinated debt 41,930 41,909 39,388 39,367 39,346
Other liabilities 30,696 29,382 23,269 22,923 22,021
Total liabilities 4,182,149 3,959,311 3,280,963 3,193,145 2,947,781
Shareholders' Equity:
Common stock 16,803 16,801 15,110 15,105 15,107
Additional paid-in capital 292,937 292,760 252,039 251,836 252,693
Retained earnings 118,247 112,600 103,906 96,034 87,185
Accumulated other comprehensive income 1,443 2,559 2,338 1,083 2,183
Total shareholders' equity 429,430 424,720 373,393 364,058 357,168
Total liabilities & shareholders' equity $4,611,579 $4,384,031 $3,654,356 $3,557,203 $3,304,949

SmartFinancial, Inc. and SubsidiaryCondensed 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
2021 2021 2021 2021 2020 2021 2020
Interest income:
Loans and leases, including fees$30,567 $31,674 $28,323 $28,018 $28,594 $118,582 $112,312
Investment securities:
Taxable 1,341 832 916 724 609 3,813 2,423
Tax-exempt 322 331 304 259 306 1,215 1,369
Federal funds sold and other earning assets 547 474 309 291 303 1,622 1,509
Total interest income 32,777 33,311 29,852 29,292 29,812 125,232 117,613
Interest expense:
Deposits 2,116 2,153 2,248 2,331 2,580 8,849 13,597
Borrowings 180 121 123 117 142 540 816
Subordinated debt 626 655 584 584 584 2,449 2,334
Total interest expense 2,922 2,929 2,955 3,032 3,306 11,838 16,747
Net interest income 29,855 30,382 26,897 26,260 26,506 113,394 100,866
Provision for loan and lease losses 422 1,149 (5) 67 1,633 8,683
Net interest income after provision for loan and lease losses 29,433 29,233 26,902 26,193 26,506 111,761 92,183
Noninterest income:
Service charges on deposit accounts 1,372 1,220 1,048 1,009 1,032 4,650 3,403
Gain (loss) on sale of securities, net 45 45 6
Mortgage banking 803 994 1,105 1,139 1,331 4,040 3,875
Investment services 621 448 567 531 407 2,167 1,566
Insurance commissions 517 745 557 1,466 548 3,285 1,850
Interchange and debit card transaction fees 1,445 1,078 922 839 760 4,284 2,413
Other 2,048 1,779 944 707 898 5,478 2,313
Total noninterest income 6,806 6,309 5,143 5,691 4,976 23,949 15,426
Noninterest expense:
Salaries and employee benefits 14,990 13,594 12,203 10,869 11,516 51,656 42,911
Occupancy and equipment 3,026 2,536 2,294 2,341 2,256 10,196 8,348
FDIC insurance 567 525 371 371 297 1,833 1,190
Other real estate and loan related expense 583 407 506 602 516 2,098 2,050
Advertising and marketing 176 235 230 190 181 830 834
Data processing and technology 1,722 1,753 1,509 1,379 1,182 6,364 4,476
Professional services 847 810 849 641 786 3,147 2,958
Amortization of intangibles 660 711 441 444 571 2,256 1,740
Merger related and restructuring expenses 2,762 464 372 103 702 3,701 4,565
Other 2,490 2,274 2,022 2,524 1,946 9,310 7,647
Total noninterest expense 27,823 23,309 20,797 19,464 19,953 91,391 76,719
Income before income taxes 8,416 12,233 11,248 12,420 11,529 44,319 30,890
Income tax expense 1,761 2,633 2,470 2,664 2,499 9,529 6,558
Net income$6,655 $9,600 $8,778 $9,756 $9,030 $34,790 $24,332
Earnings per common share:
Basic$0.40 $0.62 $0.59 $0.65 $0.60 $2.23 $1.63
Diluted$0.40 $0.61 $0.58 $0.65 $0.59 $2.22 $1.62
Weighted average common shares outstanding:
Basic 16,699,010 15,557,528 15,003,657 15,011,573 15,109,298 15,572,537 14,955,423
Diluted 16,846,315 15,691,126 15,126,184 15,111,947 15,182,796 15,699,215 15,019,175

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

Three Months Ended
December 31, 2021 September 30, 2021 December 31, 2020
Average Yield/ Average Yield/ Average Yield/
Balance Interest1 Cost1 Balance Interest1 Cost1 Balance Interest1 Cost1
Assets:
Loans and leases, including fees2 $2,669,943 $30,510 4.53% $2,532,604 $31,623 4.95% $2,401,406 $28,506 4.72%
Loans held for sale 5,116 57 4.45% 3,987 51 5.09% 10,191 88 3.45%
Taxable securities 339,371 1,341 1.57% 187,032 832 1.77% 119,936 609 2.02%
Tax-exempt securities 102,989 479 1.85% 87,621 477 2.16% 90,200 456 2.01%
Federal funds sold and other earning assets 965,899 547 0.22% 802,712 474 0.23% 349,167 303 0.35%
Total interest-earning assets 4,083,318 32,934 3.20% 3,613,956 33,457 3.67% 2,970,900 29,962 4.01%
Noninterest-earning assets 383,783 323,067 255,477
Total assets $4,467,101 $3,937,023 $3,226,377
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits $853,763 403 0.19% $763,613 414 0.21% $570,326 230 0.16%
Money market and savings deposits 1,428,472 920 0.26% 1,233,533 854 0.27% 903,235 774 0.34%
Time deposits 583,165 793 0.54% 524,327 885 0.67% 565,237 1,576 1.11%
Total interest-bearing deposits 2,865,400 2,116 0.29% 2,521,473 2,153 0.34% 2,038,798 2,580 0.50%
Borrowings3 88,828 180 0.80% 80,188 121 0.60% 99,777 142 0.57%
Subordinated debt 41,917 626 5.92% 40,211 654 6.46% 39,332 584 5.90%
Total interest-bearing liabilities 2,996,145 2,922 0.39% 2,641,872 2,928 0.44% 2,177,907 3,306 0.60%
Noninterest-bearing deposits 1,016,438 877,831 670,820
Other liabilities 27,710 24,522 23,624
Total liabilities 4,040,293 3,544,225 2,872,351
Shareholders' equity 426,808 392,798 354,026
Total liabilities and shareholders' equity $4,467,101 $3,937,023 $3,226,377
Net interest income, taxable equivalent $30,012 $30,529 $26,656
Interest rate spread 2.81% 3.23% 3.41%
Tax equivalent net interest margin 2.92% 3.35% 3.57%
Percentage of average interest-earning assets to average interest-bearing liabilities 136.29% 136.80% 136.41%
Percentage of average equity to average assets 9.55% 9.98% 10.97%

1 Taxable equivalent2 Includes average balance of $80,501, $128,408 and $296,337 in PPP loans for the quarters ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively. 3 Includes average balance of $18,092 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended December 31, 2020. No PPPLF funding was used for the quarters ended December 31, 2021, and September 30, 2021.

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

Year Ended
December 31, 2021 December 31, 2020
Average Yield/ Average Yield/
Balance Interest1 Cost1 Balance Interest1 Cost1
Assets:
Loans and leases, including fees2 $2,535,006 $118,332 4.67% $2,289,612 $111,992 4.89%
Loans held for sale 5,571 250 4.48% 7,360 320 4.34%
Taxable securities 207,459 3,813 1.84% 122,900 2,423 1.97%
Tax-exempt securities 92,708 1,817 1.96% 83,765 1,941 2.32%
Federal funds sold and other earning assets 680,909 1,622 0.24% 308,843 1,509 0.49%
Total interest-earning assets 3,521,653 125,834 3.57% 2,812,480 118,185 4.20%
Noninterest-earning assets 317,457 250,955
Total assets $3,839,110 $3,063,435
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits $737,251 1,378 0.19% $481,050 1,013 0.21%
Money market and savings deposits 1,191,916 3,501 0.29% 788,006 3,482 0.44%
Time deposits 533,994 3,970 0.74% 641,647 9,102 1.42%
Total interest-bearing deposits 2,463,161 8,849 0.36% 1,910,703 13,597 0.71%
Borrowings3 83,105 540 0.65% 177,204 816 0.46%
Subordinated debt 40,221 2,449 6.09% 39,301 2,334 5.94%
Total interest-bearing liabilities 2,586,487 11,838 0.46% 2,127,208 16,747 0.79%
Noninterest-bearing deposits 841,746 571,282
Other liabilities 23,189 23,775
Total liabilities 3,451,422 2,722,265
Shareholders' equity 387,688 341,170
Total liabilities and shareholders' equity $3,839,110 $3,063,435
Net interest income, taxable equivalent $113,996 $101,438
Interest rate spread 3.12% 3.41%
Tax equivalent net interest margin 3.24% 3.61%
Percentage of average interest-earning assets to average interest-bearing liabilities 136.16% 132.21%
Percentage of average equity to average assets 10.10% 11.14%

1 Taxable equivalent2 Includes average balance of $196,078 and $201,470 in PPP loans for the twelve months ended December 31, 2021, and 2020, respectively. 3 Includes average balance of $91,190 in PPPLF funding for the twelve months ended December 31, 2020. No PPPLF funding was used for the twelve months ended December 31, 2021.

SmartFinancial, Inc. and SubsidiaryCondensed Consolidated Financial Information - (unaudited)(dollars in thousands)

As of and for The Three Months Ended
Dec Sep Jun Mar Dec
2021 2021 2021 2021 2020
Composition of Loans and Leases:
Commercial real estate:
owner occupied $590,064 $560,671 $492,750 $477,293 $463,771
non-owner occupied 794,092 752,576 669,741 593,348 549,205
Commercial real estate, total 1,384,156 1,313,247 1,162,491 1,070,641 1,012,976
Commercial & industrial 488,024 469,739 496,114 686,010 634,446
Construction & land development 278,386 326,374 300,704 285,973 278,075
Consumer real estate 477,272 478,161 444,640 432,486 443,930
Leases 53,708 53,396 53,038
Consumer and other 11,851 11,746 11,331 12,019 12,816
Total loans and leases $2,693,397 $2,652,663 $2,468,318 $2,487,129 $2,382,243
Asset Quality and Additional Loan Data:
Nonperforming loans and leases $3,188 $3,567 $3,758 $6,234 $5,782
Other real estate owned 1,780 2,415 2,499 3,946 4,619
Other repossessed assets 90 77 199
Total nonperforming assets $5,058 $6,059 $6,456 $10,180 $10,401
Restructured loans and leases not included in nonperforming loans and leases $224 $212 $219 $250 $257
Net charge-offs to average loans and leases (annualized) 0.05% 0.03% 0.01% 0.01% 0.08%
Allowance for loan and leases losses to loans and leases 0.72% 0.73% 0.74% 0.74% 0.77%
Nonperforming loans and leases to total loans and leases, gross 0.12% 0.13% 0.15% 0.25% 0.24%
Nonperforming assets to total assets 0.11% 0.14% 0.18% 0.29% 0.31%
Acquired loan and lease fair value discount balance $15,483 $13,001 $12,982 $12,951 $14,467
Accretion income on acquired loans and leases 457 1,760 761 1,636 768
PPP net fees deferred balance 2,038 3,783 6,651 7,351 4,190
PPP net fees recognized 1,725 2,873 2,132 2,398 2,157
Capital Ratios:
Equity to Assets 9.31% 9.69% 10.22% 10.23% 10.81%
Tangible common equity to tangible assets (Non-GAAP)1 7.18% 7.47% 7.93% 8.00% 8.41%
SmartFinancial, Inc.2
Tier 1 leverage 7.45% 8.36% 8.10% 8.55% 8.69%
Common equity Tier 1 10.23% 10.85% 10.63% 11.29% 11.61%
Tier 1 capital 10.23% 10.85% 10.63% 11.29% 11.61%
Total capital 12.16% 12.92% 12.80% 13.62% 14.07%
SmartBank Estimated3
Tier 1 leverage 8.23% 9.20% 8.75% 9.33% 9.58%
Common equity Tier 1 11.58% 11.94% 11.50% 12.31% 12.79%
Tier 1 capital 11.58% 11.94% 11.50% 12.31% 12.79%
Total capital 12.21% 12.59% 12.19% 13.05% 13.57%

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 SubsidiaryCondensed 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
2021 2021 2021 2021 2020 2021 2020
Selected Performance Ratios (Annualized):
Return on average assets 0.59% 0.97% 0.98% 1.18% 1.11% 0.91% 0.79%
Return on average shareholders' equity 6.19% 9.70% 9.53% 10.96% 10.15% 8.97% 7.13%
Return on average tangible common equity¹ 8.18% 12.84% 12.54% 14.41% 13.43% 11.84% 9.50%
Noninterest income / average assets 0.60% 0.64% 0.58% 0.69% 0.61% 0.62% 0.50%
Noninterest expense / average assets 2.47% 2.35% 2.33% 2.35% 2.46% 2.38% 2.50%
Efficiency ratio 75.89% 63.53% 64.91% 60.92% 63.38% 66.54% 65.97%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1 0.77% 1.00% 1.01% 1.19% 1.14% 0.98% 0.89%
Operating PTPP return on average assets1 1.03% 1.39% 1.30% 1.52% 1.45% 1.29% 1.43%
Operating return on average shareholders' equity1 8.09% 10.01% 9.83% 11.05% 10.34% 9.67% 8.02%
Operating return on average tangible common equity1 10.70% 13.26% 12.93% 14.53% 13.69% 12.77% 10.67%
Operating efficiency ratio1 68.07% 62.09% 63.46% 60.32% 60.86% 63.59% 61.75%
Operating noninterest income / average assets1 0.60% 0.63% 0.58% 0.69% 0.56% 0.62% 0.49%
Operating noninterest expense / average assets1 2.23% 2.30% 2.29% 2.34% 2.37% 2.28% 2.36%
Selected Interest Rates and Yields:
Yield on loans and leases 4.53% 4.95% 4.52% 4.67% 4.72% 4.67% 4.89%
Yield on earning assets, FTE 3.20% 3.67% 3.65% 3.88% 4.01% 3.57% 4.20%
Cost of interest-bearing deposits 0.29% 0.34% 0.39% 0.44% 0.50% 0.36% 0.71%
Cost of total deposits 0.22% 0.25% 0.29% 0.33% 0.38% 0.27% 0.55%
Cost of interest-bearing liabilities 0.39% 0.44% 0.49% 0.54% 0.60% 0.46% 0.79%
Net interest margin, FTE 2.92% 3.35% 3.29% 3.48% 3.57% 3.24% 3.61%
Per Common Share:
Net income, basic$0.40 $0.62 $0.59 $0.65 $0.60 $2.23 $1.63
Net income, diluted 0.40 0.61 0.58 0.65 0.59 2.22 1.62
Operating earnings, basic¹ 0.52 0.64 0.60 0.65 0.61 2.41 1.83
Operating earnings, diluted¹ 0.52 0.63 0.60 0.65 0.61 2.39 1.82
Book value 25.56 25.28 24.71 24.10 23.64 25.56 23.64
Tangible book value¹ 19.26 19.03 18.69 18.39 17.92 19.26 17.92
Common shares outstanding 16,802,990 16,801,447 15,109,736 15,104,536 15,107,214 16,802,990 15,107,214

¹See reconciliation of Non-GAAP measures

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

Three Months Ended Year Ended
Dec Sep Jun Mar Dec Dec Dec
2021 2021 2021 2020 2020 2021 2020
Operating Earnings:
Net income (GAAP) $6,655 $9,600 $8,778 $9,756 $9,030 $34,790 $24,332
Noninterest income:
Securities gains (losses), net (45) (45) (6)
ADECA termination proceeds (465) (465)
Noninterest expenses:
Merger related and restructuring expenses 2,762 464 372 103 702 3,701 4,565
Income taxes:
Income tax effect of adjustments (713) (108) (96) (27) (62) (944) (1,071)
Operating earnings (Non-GAAP) $8,704 $9,911 $9,054 $9,832 $9,205 $37,502 $27,355
Operating earnings per common share (Non-GAAP):
Basic $0.52 $0.64 $0.60 $0.65 $0.61 $2.41 $1.83
Diluted 0.52 0.63 0.60 0.65 0.61 2.39 1.82
Operating Noninterest Income:
Noninterest income (GAAP) $6,806 $6,309 $5,143 $5,691 $4,976 $23,949 $15,426
Securities gains (losses), net (45) (45) (6)
ADECA termination proceeds (465) (465)
Operating noninterest income (Non-GAAP) $6,806 $6,264 $5,143 $5,691 $4,511 $23,904 $14,955
Operating noninterest income (Non-GAAP)/average assets1 0.60% 0.63% 0.58% 0.69% 0.56% 0.62% 0.49%
Operating Noninterest Expense:
Noninterest expense (GAAP) $27,823 $23,309 $20,797 $19,464 $19,953 $91,391 $76,719
Merger related and restructuring expenses (2,762) (464) (372) (103) (702) (3,701) (4,565)
Operating noninterest expense (Non-GAAP) $25,061 $22,845 $20,425 $19,361 $19,251 $87,690 $72,154
Operating noninterest expense (Non-GAAP)/average assets2 2.23% 2.30% % 2.29% 2.34% 2.37% 2.28% 2.36%
Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP) $29,855 $30,382 $26,897 $26,260 $26,506 $113,394 $100,866
Operating noninterest income 6,806 6,264 5,143 5,691 4,511 23,904 14,955
Operating noninterest expense (25,061) (22,845) (20,425) (19,361) (19,251) (87,690) (72,154)
Operating PTPP earnings (Non-GAAP) $11,600 $13,801 $11,615 $12,590 $11,766 $49,608 $43,667
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3 0.77% 1.00% 1.01% 1.19% 1.14% 0.98% 0.89%
Operating PTPP return on average assets (Non-GAAP)4 1.03% 1.39% 1.30% 1.52% 1.45% 1.29% 1.43%
Return on average tangible common equity (Non-GAAP)5 8.18% 12.84% 12.54% 14.41% 13.43% 11.84% 9.50%
Operating return on average shareholders' equity (Non-GAAP)6 8.09% 10.01% 9.83% 11.05% 10.34% 9.67% 8.02%
Operating return on average tangible common equity (Non-GAAP)7 10.70% 13.26% 12.93% 14.53% 13.69% 12.77% 10.67%
Operating Efficiency Ratio:
Efficiency ratio (GAAP) 75.89% 63.53% 64.91% 60.92% 63.38% 66.54% 65.97%
Adjustment for taxable equivalent yields (0.32)% (0.25)% (0.30)% (0.28)% (0.30)% (0.29)% (0.33)%
Adjustment for securities gains (losses) % (0.08)% % % % (0.02)% (0.01)%
Adjustment for merger related income and costs (7.50)% (1.11)% (1.15)% (0.32)% (2.22)% (2.64)% (3.88)%
Operating efficiency ratio (Non-GAAP) 68.07% 62.09% 63.46% 60.32% 60.86% 63.59% 61.75%

1Operating noninterest income (Non-GAAP) is annualized and divided by average assets.2Operating noninterest expense (Non-GAAP) is annualized and divided by average assets.3Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.4Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets. 5Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).6Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.7Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).

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

Three Months Ended Year Ended
Dec Sep Jun Mar Dec Dec Dec
2021 2021 2021 2020 2020 2021 2020
Tangible Common Equity:
Shareholders' equity (GAAP) $429,430 $424,720 $373,393 $364,058 $357,168 $429,430 $357,168
Less goodwill and other intangible assets 105,852 104,930 90,966 86,350 86,471 105,852 86,471
Tangible common equity (Non-GAAP) $323,578 $319,790 $282,427 $277,708 $270,697 $323,578 $270,697
Average Tangible Common Equity:
Average shareholders' equity (GAAP) $426,808 $392,798 $369,325 $360,919 $354,026 $387,688 $341,170
Less average goodwill and other intangible assets 104,193 96,250 88,551 86,424 86,561 93,910 84,913
Average tangible common equity (Non-GAAP) $322,615 $296,548 $280,774 $274,495 $267,465 $293,778 $256,257
Tangible Book Value per Common Share:
Book value per common share (GAAP) $25.56 $25.28 $24.71 $24.10 $23.64 $25.56 $23.64
Adjustment due to goodwill and other intangible assets (6.30) (6.25) (6.02) (5.71) (5.72) (6.30) (5.72)
Tangible book value per common share (Non-GAAP)1 $19.26 $19.03 $18.69 $18.39 $17.92 $19.26 $17.92
Tangible Common Equity to Tangible Assets:
Total Assets $4,611,579 $4,384,031 $3,654,356 $3,557,203 $3,304,949 $4,611,579 $3,304,949
Less goodwill and other intangibles 105,852 104,930 90,966 86,350 86,471 105,852 86,471
Tangible Assets (Non-GAAP): $4,505,727 $4,279,101 $3,563,390 $3,470,853 $3,218,478 $4,505,727 $3,218,478
Tangible common equity to tangible assets (Non-GAAP) 7.18% 7.47% 7.93% 8.00% 8.41% 7.18% 8.41%

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

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Source: SmartFinancial, Inc.



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