SmartFinancial Announces Results for the Third Quarter 2021

October 19, 2021 5:00 PM EDT

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

Highlights for the Third Quarter of 2021

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

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

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

Net Interest Income and Net Interest Margin

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

The tax equivalent net interest margin was 3.35% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021. The tax equivalent net interest margin was impacted by a 2 basis point increase in the average yield on interest-earning assets and offset by a 5 basis point decline in the rate on interest-bearing liabilities over the prior quarter.  The increase in yield on interest-earning assets was primarily driven by an increase of $1.7 million of loan discount accretion and Payroll Protection Program (“PPP”) fee accretion during the third quarter of 2021 when compared to the second quarter of 2021, offset by lower yielding excess liquidity.  

The yield on interest-bearing liabilities decreased to 0.44% for the third quarter of 2021 when compared to 0.49% for the second quarter of 2021. The cost of average interest-bearing deposits was 0.34% for the third quarter of 2021 compared to 0.39% for the second quarter of 2021, a decrease of 5 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, which decreased 16 basis points during the period. The cost of total deposits for the third quarter of 2021 was 0.25% compared to 0.29% in the second quarter of 2021.

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

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

Provision for Loan and Lease Losses and Credit Quality

At September 30, 2021, the allowance for loan and lease losses was $19.3 million. The allowance for loan and lease losses to total loans and leases was 0.73% as of September 30, 2021, compared to 0.74% as of June 30, 2021.   For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.76% as of September 30, 2021, compared to 0.86% as of June 30, 2021. The remaining discounts on the acquired loan and lease portfolio totaled $13.0 million, or 2.48% of acquired loans and leases as of September 30, 2021.  

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

            
   Three Months Ended    
    Sep  Jun    
 Provision for Loan and Lease Losses Rollforward  2021   2021   Change 
 Beginning balance $18,310  $18,370  $(60) 
 Charge-offs  (239)  (153)  (86) 
 Recoveries  75   98   (23) 
 Net charge-offs  (164)  (55)  (109) 
 Provision  1,149   (5)  (1,154) 
 Ending balance $19,295  $18,310  $985  
            
 Allowance for loan losses to total loans and leases, gross  0.73 % 0.74 % (0.01)%

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

Nonperforming loans and leases as a percentage of total loans and leases was 0.13% as of September 30, 2021, a decrease of 2 basis points from the 0.15% reported in the second quarter of 2021. Total nonperforming assets (which include nonaccrual loans and leases, loans and leases past due 90 days or more and still accruing, other real estate owned and other repossessed assets) as a percentage of total assets was 0.14% as of September 30, 2021, as compared to 0.18% as of June 30, 2021. 

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

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

Noninterest Income

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

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

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

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

Noninterest Expense

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

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

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

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

Income Tax Expense

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

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

Balance Sheet Trends

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

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

Shareholders' equity at September 30, 2021 totaled $424.7 million, an increase of $67.6 million, from December 31, 2020. The increase in shareholders' equity was primarily from the issuance of $42.3 million of common stock for the acquisition of SCB and net income of $28.1 million for the nine months ended September 30, 2021, which was offset by repurchase of the Company's common stock of $1.2 million and $2.7 million of dividends paid.   Tangible book value per share (Non-GAAP) was $19.03 at September 30, 2021, compared to $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.47% at September 30, 2021, compared with 8.41% at December 31, 2020.

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

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

Conference Call Information

SmartFinancial issued this earnings release for the third quarter of 2021 on Tuesday, October 19, 2021, and will host a conference call on Wednesday, October 20, 2021, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 or (646) 904-5544 and enter the confirmation number, 289025. A replay of the conference call will be available through December 22, 2021, by dialing (866) 813-9403 or (929) 458-6194 and entering the confirmation number, 781192. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.

About SmartFinancial, Inc.

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

Source 
SmartFinancial, Inc. 
  
Investor Contacts 
Billy Carroll 
President & CEO 
(865) 868-0613   billy.carroll@smartbank.com 
  
Ron Gorczynski 
Executive Vice President, Chief Financial Officer 
(865) 437-5724 ron.gorczynski@smartbank.com 
  
Media Contact 
Kelley Fowler 
Senior Vice President, Public Relations & Marketing 
(865) 868-0611    kelley.fowler@smartbank.com 

Non-GAAP Financial Measures

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

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) risks related to the acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the acquisition of SCB may not be realized in the time frame anticipated; (8) changes in management’s plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; (15) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (17) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

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

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

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

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

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

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

1 Taxable equivalent2 Includes average balance of $128,408, $266,114 and $295,045 in PPP loans for the quarters ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.   3 Includes average balance of $237,780 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended September 30, 2020. No PPPLF funding was used for the quarters ended September 30, 2021, and June 30, 2021.

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

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

1 Taxable equivalent2 Includes average balance of $235,027 and $169,617 in PPP loans for the six months ended September 30, 2021, and 2020, respectively. 3 Includes average balance of $115,734 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the nine months ended September 30, 2020. No PPPLF funding was used for the nine months ended September 30, 2021.

SmartFinancial, Inc. and SubsidiaryCondensed 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 equivalent2 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 twelve months ended December 31, 2020.

 

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

  As of and for The Three Months Ended  
     Sep    Jun    Mar    Dec    Sep 
  2021 2021 2021 2020 2020 
Composition of Loans and Leases:                   
Commercial real estate:                   
owner occupied $560,671 $492,750 $477,293 $463,771 $467,569 
non-owner occupied  752,576  669,741  593,348  549,205  563,082 
Commercial real estate, total  1,313,247  1,162,491  1,070,641  1,012,976  1,030,651 
Commercial & industrial  469,739  496,114  686,010  634,446  644,498 
Construction & land development  326,374  300,704  285,973  278,075  275,172 
Consumer real estate  478,161  444,640  432,486  443,930  440,310 
Leases  53,396  53,038       
Consumer and other  11,746  11,331  12,019  12,816  13,426 
Total loans and leases $2,652,663 $2,468,318 $2,487,129 $2,382,243 $2,404,057 
                 
Asset Quality and Additional Loan Data:                   
Nonperforming loans and leases $3,567 $3,758 $6,234 $5,782 $2,248 
Other real estate owned  2,415  2,499  3,946  4,619  3,932 
Other repossessed assets  77  199       
Total nonperforming assets $6,059 $6,456 $10,180 $10,401 $6,180 
Restructured loans and leases not included in nonperforming loans and leases $212 $219 $250 $257 $8 
Net charge-offs to average loans and leases (annualized)  0.03%   0.01%   0.01%   0.08%   0.01%
Allowance for loan and leases losses to loans and leases  0.73%   0.74%   0.74%   0.77%   0.78%
Nonperforming loans and leases to total loans and leases, gross  0.13%   0.15%   0.25%   0.24%   0.09%
Nonperforming assets to total assets  0.14%   0.18%   0.29%   0.31%   0.18%
Acquired loan and lease fair value discount balance $13,001 $12,982 $12,951 $14,467 $15,141 
Accretion income on acquired loans and leases  1,760  761  1,636  768  960 
PPP net fees deferred balance  3,783  6,651  7,351  4,190  6,348 
PPP net fees recognized  2,873  2,132  2,398  2,157  1,812 
                 
Capital Ratios:                   
Equity to Assets  9.69%   10.22%   10.23%   10.81%   10.33%
Tangible common equity to tangible assets (Non-GAAP)1  7.47%   7.93%   8.00%   8.41%   7.97%
                 
SmartFinancial, Inc.2                   
Tier 1 leverage  8.36%   8.10%   8.55%   8.69%   8.78%
Common equity Tier 1  10.85%   10.63%   11.29%   11.61%   11.33%
Tier 1 capital  10.85%   10.63%   11.29%   11.61%   11.33%
Total capital  12.92%   12.80%   13.62%   14.07%   13.81%
                 
SmartBank  Estimated3               
Tier 1 leverage  9.20%   8.75%   9.33%   9.58%   9.74%
Common equity Tier 1  11.95%   11.50%   12.31%   12.79%   12.57%
Tier 1 capital  11.95%   11.50%   12.31%   12.79%   12.57%
Total capital  12.60%   12.19%   13.05%   13.57%   13.37%

1Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.2All periods presented are estimated.3 Current period capital ratios are estimated as of the date of this earnings release.

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

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

¹See reconciliation of Non-GAAP measures

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

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

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

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

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

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

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Source: SmartFinancial, Inc.


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