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CST: 14/12/2019 11:56:58   

SmartFinancial Announces Earnings with Second Quarter 2019 Net Income of $9.1 million

142 Days ago

Performance Highlights for Second Quarter of 2019

  • Return on average assets of 1.56 percent and net operating return on average assets (Non-GAAP) of 0.96%
  • Asset quality was outstanding with nonperforming assets of 0.17%
  • Recorded $6.4 million merger termination fee
  • Noninterest income to average assets of 1.44%, excluding merger termination fee, amounted to 0.35%
  • Noninterest-bearing demand deposit growth of 34.28% annualized
  • Completed departmental restructuring initiatives

KNOXVILLE, Tenn., July 24, 2019 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), today announced net income of $9.1 million for the second quarter of 2019, compared to $3.9 million for the second quarter of 2018.  Diluted net income per share was $0.65 for the second quarter of 2019, compared to $0.32 during the second quarter of 2018. Net operating earnings (Non-GAAP), which excludes securities gains, merger termination fee and merger related and restructuring expenses, totaled $5.6 million in the second quarter of 2019 compared to $4.8 million in the second quarter of 2018.

Billy Carroll, President & CEO, stated: "This was a very solid quarter for our company.  We took advantage of a very positive earnings event, restructured our finance team and centralized our deposit operations, while showing strong core deposit growth and nice core earnings.  We are positioned well to continue building on our strong foundation."

SmartFinancial's Chairman, Miller Welborn, concluded:  "I am very proud of where the bank is at the halfway mark of 2019. We are on track and executing our strategic plan. Our team has truly gelled and we are very excited about what the second half of the year holds as we continue to build value for our stakeholders."

Second Quarter 2019 compared to First Quarter 2019

Net income increased $4.4 million to $9.1 million for the second quarter of 2019, compared to $4.7 million for the first quarter of 2019 primarily due to a $6.4 million fee received in connection with the merger termination with Entegra Financial Corp.  Diluted net income per share was $0.65 for the second quarter of 2019, compared to $0.34 during the first quarter of 2019. Net operating earnings (Non-GAAP) totaled $5.6 million in the second quarter of 2019 compared to $5.5 million in the previous quarter.

Net interest income for the second quarter of 2019 was $20.8 million, a decrease from $21.0 million for the first quarter of 2019. The tax equivalent net interest margin was 3.94% for the second quarter of 2019 compared to 4.10% for the first quarter of 2019.  The tax equivalent average yield on interest-earning assets was 5.17% for the second quarter of 2019, a decrease from 5.25% for the first quarter of 2019, while the yield on interest-bearing liabilities increased to 1.54% for the  second quarter of 2019 from 1.45% for the first quarter of 2019.

The yield on average loans was 5.53% for the second quarter of 2019 compared to 5.62% for the first quarter of 2019. The decrease in yield on average loans was due to lower discount accretion on acquired loans (30 basis points in the second quarter versus 42 basis points in the first quarter).  For the second quarter of 2019, the yield on average loans, excluding accretion, increased 3 basis points to 5.23% from the first quarter of 2019. The cost of average interest-bearing deposits increased to 1.42% for the second quarter of 2019 from 1.32% for the first quarter of 2019.  The increase was driven primarily from the continued competition for deposits.

Provision for loan losses was $393 thousand in the second quarter of 2019, compared to $797 thousand in the first quarter of 2019.  The decrease in provision was primarily due to the larger provision recorded in the prior quarter from higher organic loan growth.  The allowance for loan losses was $9.1 million, or 0.50% of total loans, as of June 30, 2019, compared to $8.7 million, or 0.47% of total loans, as of March 31, 2019.

Nonperforming loans as a percentage of total loans was 0.12% as of June 30, 2019, consistent with the 0.12% reported in the first quarter of 2019.  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 0.17% as of June 30, 2019, compared to 0.18% as of March 31, 2019.

Noninterest income increased by $6.7 million to $8.4 million for the second quarter of 2019 compared to $1.7 million for the first quarter of 2019 primarily due to the $6.4 million merger termination fee, and to a lesser extent, increases in mortgage banking of $110 thousand and wealth revenue of $86 thousand.  Noninterest income to average assets (excluding the $6.4 million merger termination fee) of .35% for the second quarter of 2019 increased from .30% in the first quarter of 2019.

Noninterest expense increased by $1.2 million to $16.8 million for the second quarter of 2019 compared to $15.6 million for the  first quarter of 2019 including merger related and restructuring expenses of  $1.8 million for the second quarter of 2019 compared to $923 thousand for the first quarter of 2019.  Operating noninterest expense (excludes merger related and restructuring expenses) increased by $357 thousand to $15.0 million for the second quarter of 2019 compared to $14.6 million for the first quarter of 2019.  This increase was primarily due to increases in personnel expense. Operating noninterest expense to average assets of 2.57% for the second quarter of 2019 decreased from 2.60% in the first quarter of 2019.

Income tax expense was $2.9 million in the second quarter of 2019 compared to $1.6 million in the first quarter of 2019.  The overall effective tax rate was 24.1% for the second quarter of 2019 compared to 25.1% in the first quarter of 2019.  The first quarter of 2019 included non-deductible merger related expenses which were subsequently deductible in the second quarter stemming from the acquisition termination.

Second Quarter 2019 compared to Second Quarter 2018

Net income increased by $5.2 million to $9.1 million for the second quarter of 2019 compared to $3.9 million for the second quarter of 2018 primarily due to $6.4 million fee received for the merger termination of Entegra Financial Corp and the operating effects of the Tennessee Bancshares, Inc. and Foothills Bancorp, Inc. acquisitions which were completed in the second and fourth quarters of 2018, respectively. Diluted net income per share was $0.65 for the second quarter of 2019, compared to $0.32 for the second quarter of 2018.  Net operating earnings (Non-GAAP) totaled $5.6 million in the second quarter of 2019 compared to $4.8 million for the second quarter of 2018.

Net interest income for the second quarter of 2019 was $20.8 million, an increase from $19.5 million for the second quarter of 2018. The tax equivalent net interest margin was 3.94% for the second quarter of 2019 compared to 4.57% for the second quarter of 2018.  The tax equivalent average yield on interest-earning assets was 5.17% for the second quarter of 2019 decreasing from 5.37% for the second quarter of 2018, while the yield on interest bearing liabilities increased to 1.54% for the second quarter of 2019 from 1.00% for the second quarter of 2018.

The yield on average loans was 5.53% for the second quarter of 2019 compared to 5.79% for the second quarter of 2018. The decrease in yield on average loans was primarily due to lower discount accretion on acquired loans (30 basis points in the second quarter of 2019 versus 68 basis points in the second quarter of 2018), offset by increases in yield of average loans of 12 basis points.  For the second quarters of 2019 and 2018, the yield on average loans, excluding accretion, was 5.23% and 5.11%, respectively. The cost of average interest-bearing deposits increased to 1.42% for the second quarter of 2019 from 0.96% for the second quarter of 2018.  This increase was due to increases in deposit rates from federal rate increases and increased competition.

Provision for loan losses was $393 thousand in the second quarter of 2019, compared to $617 thousand in the second quarter of 2018. The decrease in provision was primarily due to slower organic loan growth experienced during the second quarter of 2019 when compared to the second quarter of 2018. The allowance for loan losses was $9.1 million, or 0.50% of total loans, as of June 30, 2019, compared to $7.1 million, or 0.45% of total loans, as of June 30, 2018.

Nonperforming loans as a percentage of total loans was 0.12%  as of June 30, 2019, a decrease from 0.14% in the prior year quarter. 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 0.17% as of June 30, 2019, compared to 0.28% as of June 30, 2018.

Noninterest income increased by $6.8 million to $8.4 million for the second quarter of 2019 compared to $1.6 million for the second quarter of 2018 primarily due to the $6.4 million merger termination fee and to a lesser extent, increases in deposit services charges of $150 thousand, increases in mortgage banking of $71 thousand and wealth revenue of $112 thousand. Noninterest income to average assets (excluding the $6.4 million termination fee) of 0.35% for the second quarter of 2019 increased from 0.33% in the second quarter of 2018.

Noninterest expense increased by $1.5 million to $16.8 million for the second quarter of 2019 compared to $15.3 million for the second quarter of 2018 and included $1.8 million in merger related and restructuring expenses for the second quarter of 2019 compared to $1.1 million for the second quarter of  2018. Operating noninterest expense (excludes merger related and restructuring expenses) increased by $864 thousand to $15.0 million for the second quarter of 2019 compared to $14.1 million for the second quarter of 2018.  This increase was primarily due to increases in personnel expense, as the second quarter of 2019 included the full effects of acquisitions completed during the prior reporting periods. Operating noninterest expense to average assets of 2.57% for the second quarter of 2019 decreased from 2.95% in the second quarter of 2018.

Income tax expense was $2.9 million in the second quarter of 2019 compared to $1.3 million in the second quarter of 2018. The overall effective tax rate was 24.1% for the second quarter of 2019 compared 24.8% for the second quarter of 2018.

Certain captions and amounts in the prior periods presented were reclassified to conform to the current presentation.  Such reclassifications had no effect on net income or shareholders' equity.

Conference Call Information

SmartFinancial will to issue its earnings release for the second quarter of 2019 on Wednesday, July 24, 2019, and will host a conference call on Thursday, July 25, 2019 at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 8611763.  A replay of the conference call will be available through July 25, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10133629.  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 29 branches across Tennessee, Alabama, and the Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.

Investor Contacts  
Billy Carroll Ron Gorczynski
President & CEO Executive Vice President, Chief 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 Matters
Statements included in this presentation include Non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) net operating earnings, (ii) net operating return on average assets, (iii) net operating return on average shareholder equity, (iv) return on average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio; (vii) tangible common equity; and (viii) average tangible common equity in its analysis of the company's performance. Net operating earnings excludes the following from net income: securities gains and losses, merger termination fee, merger related and restructuring expenses, the effect of the December, 2017 tax law change on deferred tax assets, tax benefit from director options previously exercised, and the income tax effect of adjustments. Net operating return on average equity is the annualized net operating earnings divided by average assets. Net operating return on average equity is the annualized net operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Net operating return on average tangible common equity is the annualized net 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. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets. Management believes that Non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

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 U.S. federal securities laws.  These statements 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) the risk of litigation related to the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (2) reputational risk resulting from the termination of the Entegra Merger Agreement; (3) potential changes to, or the risk that we may not be able to execute on, our business strategy as a result of the termination of the Entegra Merger Agreement; (4) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize, (5) 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, (7) changes in management’s plans for the future, (8) prevailing, or changes in, economic or political conditions, particularly in our market areas, (9) credit risk associated with our lending activities, (10) changes in interest rates, loan demand, real estate values, or competition, (11) changes in accounting principles, policies, or guidelines, (12) changes in applicable laws, rules, or regulations, and (13) 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)        
(In thousands except share and per share data)        
    As of and for The Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
      2019       2019       2018       2018       2018  
Selected Performance Ratios (Annualized)  
Return on average assets     1.56 %     0.84 %     1.17 %     0.85 %     0.82 %
Return on average shareholder equity     12.34 %     6.71 %     9.44 %     6.86 %     6.76 %
Return on average tangible common equity (Non-GAAP)¹     16.78 %     9.26 %     13.09 %     9.45 %     8.96 %
Noninterest income / average assets     1.44 %     0.30 %     0.31 %     0.36 %     0.33 %
Noninterest expense / average assets     2.88 %     2.77 %     2.84 %     2.90 %     3.15 %
Efficiency ratio     57.53 %     68.65 %     67.71 %     71.33 %     72.34 %
Net operating return on average assets (Non-GAAP)¹     0.96 %     0.98 %     1.07 %     0.98 %     1.00 %
Net operating return on average shareholder equity (Non-GAAP)¹     7.58 %     7.81 %     8.65 %     7.88 %     8.33 %
Net operating return on average tangible common  equity (Non-GAAP)¹     10.31 %     10.79 %     12.00 %     10.84 %     11.04 %
Net interest income / average assets     3.56 %     3.73 %     3.90 %     3.70 %     4.03 %
Operating efficiency ratio (Non-GAAP)¹     65.56 %     64.25 %     61.72 %     67.17 %     66.92 %
Yield on loans     5.53 %     5.62 %     5.81 %     5.43 %     5.79 %
Yield on earning assets     5.15 %     5.27 %     5.34 %     5.02 %     5.34 %
Yield on earning assets, FTE     5.17 %     5.25 %     5.36 %     5.03 %     5.37 %
Cost of interest-bearing deposits     1.42 %     1.32 %     1.21 %     1.11 %     0.96 %
Cost of total deposits     1.18 %     1.10 %     1.00 %     0.91 %     0.79 %
Cost of interest-bearing liabilities     1.54 %     1.45 %     1.33 %     1.15 %     1.00 %
Net interest margin     3.92 %     4.11 %     4.28 %     4.11 %     4.53 %
Net interest margin, FTE     3.94 %     4.10 %     4.28 %     4.11 %     4.57 %
Net interest spread     3.63 %     3.80 %     4.01 %     3.88 %     4.38 %
Pre-tax pre-provision income / average assets     2.12 %     1.26 %     1.36 %     1.16 %     1.21 %
Per Common Share  
Net income, basic   $ 0.65     $ 0.34     $ 0.48     $ 0.34     $ 0.32  
Net income, diluted     0.65       0.34       0.47       0.34       0.32  
Net operating earnings, basic (Non-GAAP)¹     0.4       0.4       0.44       0.39       0.4  
Net operating earnings, diluted (Non-GAAP)¹     0.4       0.39       0.43       0.39       0.39  
Book value     21.47       20.82       20.31       19.74       19.48  
Tangible book value (Non-GAAP)¹     15.86       15.18       14.64       14.38       14.09  
Common shares outstanding     13,953       13,952       13,934       12,750       12,705  
 
¹See reconciliation of Non-GAAP measures  

 

                     
SmartFinancial, Inc. and Subsidiary                    
Condensed Consolidated Financial Information (unaudited)        
(In thousands)        
    As of and for The Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
    2019       2019       2018       2018       2018  
Composition of Loans  
Commercial real estate  
owner occupied   $ 415,502     $ 416,152     $ 372,030     $ 364,164     $ 360,294  
non-owner occupied     464,160       472,790       487,997       401,922       385,570  
Commercial real estate, total     879,662       888,942       860,027       766,086       745,864  
Commercial & industrial     334,258       341,471       308,254       289,784       279,771  
Construction & land development     204,731       187,009       187,895       165,906       179,431  
Consumer real estate     406,357       410,981       407,254       350,422       355,876  
Consumer and other     11,981       12,166       13,809       12,996       14,493  
Total loans   $ 1,836,989     $ 1,840,569     $ 1,777,239     $ 1,585,194     $ 1,575,435  
 
Asset Quality and Additional Loan Data  
Nonperforming loans   $ 2,148     $ 2,282     $ 3,280     $ 2,686     $ 2,205  
Other real estate owned     1,814       2,066       2,495       4,230       3,524  
Total nonperforming assets   $ 3,962     $ 4,348     $ 5,775     $ 6,916     $ 5,729  
Restructured loans not included in nonperforming loans   $ 62     $ 62     $ 116     $ 693     $ 660  
Net charge-offs (recoveries) to average loans (annualized)     0.00 %     0.08 %     0.04 %     0.06 %     0.02 %
Allowance for loan losses to loans     0.50 %     0.47 %     0.47 %     0.45 %     0.45 %
Nonperforming loans to total loans, gross     0.12 %     0.12 %     0.18 %     0.17 %     0.14 %
Nonperforming assets to total assets     0.17 %     0.18 %     0.25 %     0.34 %     0.28 %
Acquisition accounting discounts on loans     18,571       19,954       21,528       19,500       20,748  
Accretion income on acquired loans     1,374       1,881       2,755       1,208       2,583  
 
Capital Ratios  
Equity to Assets     12.53 %     12.34 %     12.44 %     12.27 %     12.00 %
Tangible equity to tangible assets (Non-GAAP)     9.57 %     9.31 %     9.29 %     9.25 %     8.98 %
Tangible common equity to tangible assets (Non-GAAP)     9.57 %     9.31 %     9.29 %     9.25 %     8.98 %
SmartFinancial, Inc.:   Estimated1   
Tier 1 leverage     9.92 %     9.29 %     9.47 %     9.26 %     9.82 %
Common equity Tier 1     11.21 %     10.61 %     10.81 %     10.88 %     10.83 %
Tier 1 capital     11.21 %     10.61 %     10.81 %     10.88 %     10.83 %
Total capital     13.62 %     13.01 %     13.29 %     13.57 %     11.25 %
SmartBank:   Estimated1   
Tier 1 leverage     10.92 %     10.96 %     11.17 %     10.55 %     10.43 %
Common equity Tier 1     12.34 %     12.18 %     12.31 %     11.99 %     11.41 %
Tier 1 risk-based capital     12.34 %     12.18 %     12.31 %     11.99 %     11.41 %
Total risk-based capital     12.80 %     12.62 %     12.74 %     12.40 %     11.83 %
 
1 Current period capital ratios are estimated as of the date of this earnings release.  

 

                     
SmartFinancial, Inc. and Subsidiary                    
Condensed Consolidated Financial Information (unaudited)    
(In thousands)        
BALANCE SHEET                    
    Ending Balances
  June 30,   March 31,   December 31,   September 30,   June 30,
      2019       2019       2018       2018       2018  
Assets                    
Cash and cash equivalents   $ 199,534     $ 132,994     $ 115,822     $ 130,104     $ 170,235  
Securities available-for-sale, at fair value     174,114       198,273       201,688       173,039       156,577  
Other investments     12,905       12,398       11,499       10,736       8,273  
Loans held for sale     4,087       2,103       1,979       4,038       4,948  
Loans     1,832,902       1,838,466       1,775,260       1,581,155       1,570,487  
Less: Allowance for loan losses     (9,097 )     (8,704 )     (8,275 )     (7,156 )     (7,074 )
Loans, net     1,823,805       1,829,762       1,766,985       1,573,999       1,563,413  
Premises and equipment, net     56,589       56,583       56,012       51,138       52,203  
Other real estate owned     1,814       2,066       2,495       4,230       3,524  
Goodwill and core deposit intangibles, net     78,348       78,690       79,034       68,254       68,449  
Bank owned life insurance     24,695       24,540       24,381       22,088       21,944  
Other assets     15,366       16,572       14,514       13,320       12,666  
Total assets   $ 2,391,257     $ 2,353,981     $ 2,274,409     $ 2,050,946     $ 2,062,232  
 
Liabilities                    
Deposits:  
Noninterest-bearing demand   $ 357,220     $ 329,095     $ 319,861     $ 301,197     $ 301,318  
Interest-bearing demand     333,705       331,629       311,482       267,146       246,942  
Money market and savings     648,132       698,431       641,945       570,172       632,518  
Time deposits     673,243       635,175       648,675       568,796       535,879  
Total deposits     2,012,300       1,994,330       1,921,964       1,707,311       1,716,658  
Securities sold under agreements to repurchase     8,219       7,070       11,756       16,786       18,635  
FHLB & other borrowings     15,460       8,605       11,243       25,324       72,040  
Subordinated debt     39,219       39,198       39,177       39,158        
Other liabilities     16,447       14,297       7,258       10,724       7,413  
Total liabilities     2,091,645       2,063,500       1,991,398       1,799,304       1,814,745  
Shareholders' Equity  
Common stock     13,953       13,952       13,934       12,750       12,705  
Additional paid-in capital     232,386       232,241       231,852       208,999       208,513  
Retained earnings     53,843       44,722       39,991       33,559       29,235  
Accumulated other comprehensive loss     (571 )     (434 )     (2,765 )     (3,666 )     (2,966 )
Total shareholders' equity     299,611       290,481       283,011       251,642       247,487  
Total liabilities & shareholders' equity   $ 2,391,257     $ 2,353,981     $ 2,274,409     $ 2,050,946     $ 2,062,232  
 

 

SmartFinancial, Inc. and Subsidiary                    
Condensed Consolidated Financial Information (unaudited)    
(In thousands, except per share data)        
INCOME STATEMENT                    
    Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
    2019     2019     2018       2018     2018  
Interest income  
Loans, including fees   $ 25,278   $ 24,975   $ 25,018     $ 21,572   $ 21,652  
Securities available-for-sale:  
Taxable     871     971     900       839     897  
Tax-exempt     411     424     347       129     76  
Federal funds sold and other earning assets     743     573     506       527     367  
Total interest income     27,303     26,943     26,771       23,068     22,993  
Interest expense  
Deposits     5,788     5,251     4,680       3,969     3,238  
Securities sold under agreements to repurchase     6     8     9       11     11  
FHLB advances and other borrowings     117     103     51       209     207  
Subordinated debt     590     584     584       19      
Total interest expense     6,501     5,945     5,324       4,208     3,455  
Net interest income     20,802     20,997     21,447       18,860     19,538  
Provision for loan losses     393     797     1,329       302     617  
Net interest income after provision for loan losses     20,409     20,200     20,117       18,558     18,921  
Noninterest income  
Service charges on deposit accounts     707     654     663       624     557  
Gain (loss) on sale of securities, net     33         2           (1 )
Mortgage banking     392     282     251       493     322  
Interchange and debit card transaction fees     143     175     162       144     121  
Other     7,140     587     601       570     579  
Total noninterest income     8,415     1,698     1,680       1,831     1,577  
Noninterest expense  
Salaries and employee benefits     8,984     8,398     7,871       7,934     7,649  
Occupancy and equipment     1,658     1,640     1,610       1,638     1,522  
FDIC insurance     180     179     209       158     317  
Other real estate and loan related expense     242     490     738       578     926  
Advertising and marketing     259     295     246       228     215  
Data processing     577     615     372       407     600  
Professional services     489     662     707       727     587  
Amortization of intangibles     342     344     312       248     229  
Software as service contracts     568     567     577       507     492  
Merger related and restructuring expenses     1,796     923     1,322       838     1,123  
Other     1,714     1,467     1,696       1,496     1,613  
Total noninterest expense     16,808     15,579     15,661       14,759     15,272  
Income before income taxes     12,016     6,319     6,137       5,630     5,226  
Income tax expense     2,895     1,588     (307 )     1,305     1,295  
Net income   $ 9,121   $ 4,731   $ 6,444     $ 4,325   $ 3,932  
Earnings Per Common Share  
Basic   $ 0.65   $ 0.34   $ 0.48     $ 0.34   $ 0.32  
Diluted     0.65     0.34     0.47       0.34     0.32  
Weighted average common shares outstanding  
Basic     13,952     13,942     13,535       12,719     12,201  
Diluted     14,047     14,018     13,617       12,818     12,320  

 

                                     
SmartFinancial, Inc. and Subsidiary                                    
Condensed Consolidated Financial Information (unaudited)                
(In thousands)                        
YIELD ANALYSIS                        
  Three Months Ended
    June 30, 2019   March 31, 2019   June 30, 2018
  Average       Yield/   Average       Yield/   Average       Yield/
    Balance   Interest1   Cost1   Balance   Interest1   Cost1   Balance   Interest1   Cost1
Assets                                    
Loans   $ 1,832,639   $ 25,278   5.53 %   $ 1,802,014   $ 24,977   5.62 %   $ 1,501,008   $ 21,654   5.79 %
Taxable securities     136,859     871   2.55 %     147,346     971   2.67 %     149,169     898   2.41 %
Tax-exempt securities     56,475     527   3.75 %     53,492     537   4.07 %     11,698     96   3.29 %
Federal funds sold and other earning assets     102,253     743   2.91 %     86,688     573   2.68 %     56,287     368   2.62 %
Total interest-earning assets     2,128,226     27,419   5.17 %     2,089,540     27,058   5.25 %     1,718,162     23,016   5.37 %
Noninterest-earning assets     215,010             193,698     205,909        
Total assets   $ 2,343,236           $ 2,283,238   $ 1,924,071        
 
Liabilities and Stockholders’ Equity                        
Interest-bearing demand deposits   $ 329,556   $ 464   0.57 %   $ 306,164   $ 474   0.63 %   $ 244,208   $ 265   0.44 %
Money market and savings deposits     673,502     2,272   1.35 %     665,018     1,978   1.21 %     597,353     1,418   0.95 %
Time deposits     629,480     3,052   1.94 %     637,767     2,799   1.78 %     510,445     1,555   1.22 %
Total interest-bearing deposits     1,632,538     5,788   1.42 %     1,608,949     5,251   1.32 %     1,352,006     3,238   0.96 %
Securities sold under agreement to repurchase     7,249     6   0.33 %     7,971     8   0.41 %     15,643     11   0.28 %
Federal funds purchased and other borrowings     16,436     117   2.87 %     10,217     103   4.09 %     22,780     206   3.63 %
Subordinated debt     39,205     590   6.03 %     39,184     584   6.04 %            
Total interest-bearing liabilities     1,695,428     6,501   1.54 %     1,666,321     5,946   1.45 %     1,390,429     3,455   1.00 %
Noninterest-bearing deposits     336,871             320,134     283,413        
Other liabilities     14,367             10,707     16,944        
Total liabilities     2,046,666             1,997,162     1,690,786        
Stockholders’ equity     296,570             286,076     233,285        
Total liabilities and stockholders’ equity   $ 2,343,236           $ 2,283,238   $ 1,924,071        
 
Net interest income, taxable equivalent       $ 20,918       $ 21,112       $ 19,561    
Interest rate spread           3.63 %   3.80 %           4.38 %
Tax equivalent net interest margin           3.94 %   4.10 %           4.57 %
 
Percentage of average interest-earning assets to average interest-bearing liabilities           125.53 %   125.40 %           123.53 %
Percentage of average equity to average assets           12.66 %   12.53 %           12.00 %
                       
1 Taxable equivalent  

 

                           
SmartFinancial, Inc. and Subsidiary                          
Condensed Consolidated Financial Information (unaudited)          
(In thousands)          
NON-GAAP RECONCILIATIONS   Three Months Ended  
  June 30,   March 31,   December 31,   September 30,   June 30,  
      2019       2019       2018       2018       2018    
Operating Earnings  
Net income (GAAP)   $ 9,121     $ 4,731     $ 6,444     $ 4,324     $ 3,931    
Securities (gains) losses     (33 )           (2 )           1    
Merger termination fee     (6,400 )                          
Merger related and restructuring expenses     1,796       923       1,322       838       1,123    
Revaluation of deferred tax assets due to change in tax law                 (1,600 )              
Income tax effect of adjustments     1,120       (145 )     (256 )     (196 )     (211 )  
Net operating earnings (Non-GAAP)   $ 5,603     $ 5,509     $ 5,908     $ 4,966     $ 4,844    
Net operating earnings per common share (Non-GAAP):  
Basic   $ 0.40     $ 0.40     $ 0.44     $ 0.39     $ 0.40    
Diluted     0.40       0.39       0.43       0.39       0.39    
 
Non-GAAP Return Ratios  
Net operating return on average assets (Non-GAAP)1     0.96 %     0.98 %     1.07 %     0.98 %     1.00 %  
Return on average tangible common equity (Non-GAAP)2     16.78 %     9.26 %     13.09 %     9.45 %     8.96 %  
Net operating return on average shareholder equity (Non-GAAP)3     7.58 %     7.81 %     8.65 %     7.88 %     8.33 %  
Net operating return on average tangible common  equity (Non-GAAP)4     10.31 %     10.79 %     12.00 %     10.84 %     11.04 %  
 
Operating Efficiency Ratio  
Efficiency ratio (GAAP)     57.53 %     68.65 %     67.71 %     71.34 %     72.31 %  
Adjustment for taxable equivalent yields     (0.50 )%     (0.49 )%     (0.45 )%     (0.18 )%     (0.11 )%  
Adjustment for securities gains (losses)     0.14 %     %     0.01 %     %     (0.01 )%  
Adjustment for merger related income and costs     8.39 %     (3.91 )%     (5.55 )%     (3.99 )%     (5.28 )%  
Operating efficiency ratio (Non-GAAP)     65.56 %     64.25 %     61.72 %     67.17 %     66.92 %  
 
Tangible Common Equity  
Shareholders' equity (GAAP)   $ 299,611     $ 290,481     $ 283,011     $ 251,642     $ 247,487    
Less goodwill and other intangible assets     78,348       78,690       79,034       68,254       68,449    
Tangible common equity (Non-GAAP)   $ 221,264     $ 211,791     $ 203,977     $ 183,388     $ 179,036    
 
Average Tangible Common Equity  
Average shareholders' equity (GAAP)   $ 296,570     $ 286,076     $ 270,884     $ 250,063     $ 233,285    
Less average goodwill and other intangible assets     78,564       78,913       75,547       68,389       57,251    
Average tangible common equity (Non-GAAP)   $ 218,006     $ 207,163     $ 195,337     $ 181,674     $ 176,034    
 
1 Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets.  
2 Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).  
3 Net operating return on average equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average equity.  
4 Net operating return on average tangible common equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by  average tangible common equity (Non-GAAP).

 

 

 

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