SmartFinancial Announces Results for the First Quarter 2021

Knoxville, Tennessee, UNITED STATES


KNOXVILLE, Tenn., April 20, 2021 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $9.8 million, or $0.65 per diluted common share, for the first quarter of 2021, compared to net income of $9.0 million, or $0.59 per diluted common share for the fourth quarter of 2020. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.8 million, or $0.65 per diluted common share, in the first quarter of 2021, compared to $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020.

Highlights for the First Quarter of 2021

  • Net income and operating earnings (non-GAAP) of $9.8 million, or $0.65 per diluted share
  • Tangible book value per share (Non-GAAP) of $18.39, a 10.5% annualized quarter-over-quarter increase
  • Organic loan growth of over $60 million, a 10.4% annualized quarter-over-quarter increase
  • Originated 1,231 of Paycheck Protection Program (“PPP”) loans totaling $119.5 million
  • Successfully completed a lift-out of an experienced banking team in the Gulf Coast Region
  • Announced on April 14, 2021 the proposed acquisition of Sevier County Bancshares, Inc.

Billy Carroll, President & CEO, stated: “We had an outstanding first quarter. Our team continues to build a great franchise and this quarter highlights their efforts. Organic loan growth coupled with PPP production has been strong to start the year. We are also very excited about what our Gulf Coast Region lift-out and the Sevier County Bank acquisition will do for our company’s growth and profitability.”

SmartFinancial's Chairman, Miller Welborn, concluded: “We are incredibly excited about where we are as a company. Our team continues to execute with precision and our latest quarterly results is a perfect example of their commitment to continually raise the bar. The goals and targets of our Strategic Plan are very clear and the progress we made during the first quarter of 2021 is impressive.”

Net Interest Income and Net Interest Margin

Net interest income was $26.3 million for the first quarter of 2021, compared to $26.5 million for the fourth quarter of 2020. Average earning assets totaled $3.1 billion, an increase of $110.0 million, primarily driven by an increase in average cash and cash equivalents of $68.0 million, an increase in average securities of $17.2 million and an increase in average loans of $27.1 million. Average interest-bearing liabilities increased $94.5 million, directly related to continued deposit growth.

The tax equivalent net interest margin was 3.48% for the first quarter of 2021, compared to 3.57% for the fourth quarter of 2020. The tax equivalent net interest margin was negatively impacted by a 13 basis point decrease in the average yield on interest-earning assets and offset by a 6 basis point decline in the rate on interest-bearing liabilities over the prior quarter. Lower market interest rates continue to negatively impact earning asset yields, but these declines have been largely mitigated by a lower cost of funds. The primary drivers of the yield decrease on interest-earning assets during the first quarter of 2021 was an overall decline in loan yields and a decrease in loan fees. The decrease of $612 thousand in loan fees during the quarter is attributable to $2.4 million of the PPP fee accretion and $454 thousand of other loan fees compared to $2.2 million of PPP fee accretion, and $1.3 million of other loan fees recognized in the fourth quarter of 2020. The decrease was offset by an increase of $867 thousand in acquired loan discount accretion. The Company continues to carry excess liquidity on the balance sheet that resulted from significant deposit growth during the first quarter of 2021 and the fourth quarter of 2020.

The yield on interest-bearing liabilities decreased to 0.54% for the first quarter of 2021 when compared to 0.60% for the fourth quarter of 2020. The cost of average interest-bearing deposits was 0.44% for the first quarter of 2021 compared to 0.50% for the fourth quarter of 2020, a decrease of 6 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, with average costs decreasing 14 basis points. The cost of total deposits for the first quarter of 2021 was 0.33%.

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

  Three Months Ended   
  Mar Dec Increase 
Selected Interest Rates and Yields 2021 2020 (Decrease) 
Yield on loans 4.67%4.72%(0.05)%
Yield on earning assets, FTE 3.88%4.01%(0.13)%
Cost of interest-bearing deposits 0.44%0.50%(0.06)%
Cost of total deposits 0.33%0.38%(0.05)%
Cost of interest-bearing liabilities 0.54%0.60%(0.06)%
Net interest margin, FTE 3.48%3.57%(0.09)%

Provision for Loan Loss and Credit Quality

The provision for loan losses during the first quarter of 2021 was $67 thousand, compared to no provision for the fourth quarter of 2020. At March 31, 2021, the allowance for loan losses was $18.4 million. The allowance for loan losses to total loans was 0.74% as of March 31, 2021, compared to 0.77% as of December 31, 2020. For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.93% as of March 31, 2021, compared to 0.96% as of December 31, 2020. The remaining discounts on the acquired loan portfolio totaled $13.0 million, or 3.60% of acquired loans as of March 31, 2021.

As of March 31, 2021, the Company had COVID related modified loans totaling $1.7 million, or 0.07%, of the loan portfolio, as compared to $17.2 million or 0.7%, of the loan portfolio on December 31, 2020.

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

  Three Months Ended    
   Mar  Dec    
Provision for Loan Losses Rollforward  2021  2020  Change 
Beginning balance $18,346  $18,817  $(471) 
Charge-offs  (120)  (520)  400  
Recoveries  77   49   28  
Net charge-offs  (43)  (471)  428  
Provision  67   -   67  
Ending balance $18,370  $18,346  $24  
           
Allowance for loan losses to total loans, gross  0.74 % 0.77 % (0.03)%

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 losses under the incurred loss model.

Nonperforming loans as a percentage of total loans was 0.25% as of March 31, 2021, an increase of one basis point from the 0.24% reported in the fourth quarter of 2020. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.29% as of March 31, 2021, as compared to 0.31% as of December 31, 2020. 

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

  Three Months Ended    
   Mar  Dec  Increase 
Credit Quality  2021  2020  (Decrease) 
Nonaccrual loans $4,739 $5,633 $(894) 
Loans past due 90 days or more and still accruing  1,495  149  1,346  
Total nonperforming loans  6,234  5,782  452  
Other real estate owned  3,946  4,619  (673) 
Total nonperforming assets $10,180 $10,401 $(221) 
           
Nonperforming loans to total loans, gross  0.25% 0.24% 0.01 %
Nonperforming assets to total assets  0.29% 0.31% (0.02)%

Noninterest Income

Noninterest income increased $715 thousand to $5.7 million for the first quarter of 2021 compared to $5.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest income were as follows:

  • Increase in investment services of $124 thousand, stemming from increased production;
  • Increase in insurance commissions of $918 thousand, primarily due to commissions of $815 thousand from the placement of life insurance policies;
  • Decrease in mortgage banking income of $192 thousand, related to continuing seasonality; and
  • Decrease in other of $191 thousand, is primarily attributable to $465 thousand of non-recurring income recognized in the prior quarter, partially offset by an increase in the cash surrender value of bank owned life insurance income of $189 thousand.

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

  Three Months Ended   
   Mar  Dec  Increase  
Noninterest Income  2021  2020  (Decrease)  
Service charges on deposit accounts $1,009 $1,032 $(23) 
Mortgage banking income  1,139  1,331  (192) 
Investment services  531  407  124  
Insurance commissions  1,466  548  918  
Interchange and debit card transaction fees  839  760  79  
Other  707  898  (191) 
Total noninterest income $5,691 $4,976 $715  

Noninterest Expense

Noninterest expense was $19.5 million for the first quarter of 2021 compared to $20.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest expense were as follows:

  • Salaries and employee benefits declined $647 thousand, primarily attributable to the deferral of salary cost related to the origination of PPP loans;
  • Data processing and technology increased $197 thousand, primarily due to implementation of new contactless chip cards and tier pricing adjustments from our core system provider;
  • Merger related and restructuring expense decreased $599 thousand: and
  • Other increased $578 thousand, primarily from an investment in a start-up fintech company.

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

  Three Months Ended   
   Mar  Dec  Increase  
Noninterest Expense  2021  2020  (Decrease)  
Salaries and employee benefits $10,869 $11,516 $(647) 
Occupancy and equipment  2,341  2,256  85  
FDIC insurance  371  297  74  
Other real estate and loan related expenses  602  516  86  
Advertising and marketing  190  181  9  
Data processing and technology  1,379  1,182  197  
Professional services  641  786  (145) 
Amortization of intangibles  444  571  (127) 
Merger related and restructuring expenses  103  702  (599) 
Other  2,524  1,946  578  
Total noninterest expense $19,464 $19,953 $(489) 

Income Tax Expense

Income tax expense was $2.7 million for the first quarter of 2021, an increase of $165 thousand, compared to $2.5 million for the fourth quarter of 2020.

For the first quarter of 2021, the effective tax rate was 21.5% compared to 21.7% for the fourth quarter of 2020.

Balance Sheet Trends

Total assets at March 31, 2021 were $3.56 billion compared with $3.30 billion at December 31, 2020. The increase of $252.1 million is primarily attributable to increases in cash and cash equivalents of $75.0 million, securities available-for-sale of $35.3 million, loans of $104.9 million, which consisted of organic loan growth of $61.0 million and net increase in PPP loans of $49.3 million, and bank owned life insurance of $40.4 million.

Total liabilities increased to $3.19 billion at March 31, 2021 from $2.95 billion at December 31, 2020. The increase of $245.3 million was primarily from organic deposit growth of $243.0 million.

Shareholders' equity at March 31, 2021 totaled $364.1 million, an increase of $6.9 million, from December 31, 2020. The increase in shareholders' equity was primarily from net income of $9.8 million for the quarter ended March 31, 2021, which was offset by a net change in accumulated other comprehensive income of $1.1 million, repurchase of the Company's common stock of $1.2 million and $907 thousand of dividends paid. Tangible book value per share (Non-GAAP) was $18.39 at March 31, 2021, an increase from $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.00% at March 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):

  Mar Dec Increase 
Selected Balance Sheet Information 2021 2020 (Decrease) 
Total assets $3,557,203 $3,304,949 $252,254 
Total liabilities  3,193,145  2,947,781  245,364 
Total equity  364,058  357,168  6,890 
Securities available-for-sale, at fair value  250,937  215,634  35,303 
Loans  2,487,129  2,382,243  104,886 
Deposits  3,048,213  2,805,215  242,998 
Borrowings  82,642  81,199  1,443 

Conference Call Information

SmartFinancial issued this earnings release for the first quarter of 2021 on Tuesday, April 20, 2021, and will host a conference call on Wednesday, April 21, 2021, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 6293687. A replay of the conference call will be available through April 20, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10154896. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.

About SmartFinancial, Inc.

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

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

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets (iv) operating return on average shareholder' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision earnings (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, 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 proposed acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the proposed 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
  Mar Dec Sep Jun Mar
  2021 2020 2020 2020 2020
Assets:               
Cash and cash equivalents $556,701  $481,719  $541,815  $399,467  $309,089 
Securities available-for-sale, at fair value  250,937   215,634   214,634   219,631   201,002 
Other investments  14,728   14,794   14,829   14,829   14,113 
Loans held for sale  7,870   11,721   11,292   6,330   6,045 
Loans  2,487,129   2,382,243   2,404,057   2,408,284   2,139,247 
Less: Allowance for loan losses  (18,370)  (18,346)  (18,817)  (16,254)  (13,431)
Loans, net  2,468,759   2,363,897   2,385,240   2,392,030   2,125,816 
Premises and equipment, net  72,697   72,682   73,934   73,868   73,801 
Other real estate owned  3,946   4,619   3,932   5,524   5,894 
Goodwill and core deposit intangibles, net  86,350   86,471   86,710   86,327   86,503 
Bank owned life insurance  71,586   31,215   31,034   30,853   30,671 
Other assets  23,629   22,197   24,168   37,126   20,781 
Total assets $3,557,203  $3,304,949  $3,387,588  $3,265,985  $2,873,715 
Liabilities:               
Deposits:               
Noninterest-bearing demand $777,968  $685,957  $669,733  $645,650  $431,781 
Interest-bearing demand  683,887   649,129   534,128   479,212   444,141 
Money market and savings  1,073,941   919,631   871,098   762,246   730,392 
Time deposits  512,417   550,498   577,064   652,581   735,616 
Total deposits  3,048,213   2,805,215   2,652,023   2,539,689   2,341,930 
Borrowings  82,642   81,199   319,391   318,855   131,603 
Subordinated debt  39,367   39,346   39,325   39,304   39,283 
Other liabilities  22,923   22,021   27,060   24,649   24,699 
Total liabilities  3,193,145   2,947,781   3,037,799   2,922,497   2,537,515 
Shareholders' Equity:               
Common stock  15,105   15,107   15,233   15,217   15,222 
Additional paid-in capital  251,836   252,693   254,626   254,396   254,356 
Retained earnings  96,034   87,185   78,918   73,283   67,869 
Accumulated other comprehensive income (loss)  1,083   2,183   1,012   592   (1,247)
Total shareholders' equity  364,058   357,168   349,789   343,488   336,200 
Total liabilities & shareholders' equity $3,557,203  $3,304,949  $3,387,588  $3,265,985  $2,873,715 


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

 Three Months Ended
 Mar Dec Sep Jun Mar
 2021 2020 2020 2020 2020
Interest income:              
Loans, including fees$28,018 $28,594 $28,621  $28,663 $26,434
Securities available-for-sale:              
Taxable 724  609  546   589  679
Tax-exempt 259  306  364   416  283
Federal funds sold and other earning assets 291  303  327   277  602
Total interest income 29,292  29,812  29,858   29,945  27,998
Interest expense:              
Deposits 2,331  2,580  2,897   3,366  4,754
Borrowings 117  142  334   249  89
Subordinated debt 584  584  584   584  584
Total interest expense 3,032  3,306  3,815   4,199  5,427
Net interest income 26,260  26,506  26,043   25,746  22,571
Provision for loan losses 67    2,634   2,850  3,200
Net interest income after provision for loan losses 26,193  26,506  23,409   22,896  19,371
Noninterest income:              
Service charges on deposit accounts 1,009  1,032  892   709  770
Gain (loss) on sale of securities, net     (9)  16  
Mortgage banking 1,139  1,331  1,029   931  584
Investment services 531  407  359   363  437
Insurance commissions 1,466  548  560   473  269
Interchange and debit card transaction fees 839  760  868   508  276
Other 707  898  422   511  482
Total noninterest income 5,691  4,976  4,121   3,511  2,818
Noninterest expense:              
Salaries and employee benefits 10,869  11,516  11,032   10,357  10,006
Occupancy and equipment 2,341  2,256  2,186   1,996  1,911
FDIC insurance 371  297  534   180  180
Other real estate and loan related expense 602  516  643   346  545
Advertising and marketing 190  181  253   202  198
Data processing and technology 1,379  1,182  1,131   1,155  1,008
Professional services 641  786  594   868  711
Amortization of intangibles 444  571  402   405  362
Merger related and restructuring expenses 103  702  290   1,477  2,096
Other 2,524  1,946  2,102   1,820  1,776
Total noninterest expense 19,464  19,953  19,167   18,806  18,793
Income before income taxes 12,420  11,529  8,363   7,601  3,396
Income tax expense 2,664  2,499  1,968   1,427  664
Net income$9,756 $9,030 $6,395  $6,174 $2,732
Earnings per common share:              
Basic$0.65 $0.60 $0.42  $0.41 $0.19
Diluted$0.65 $0.59 $0.42  $0.41 $0.19
Weighted average common shares outstanding:              
Basic 15,011,573  15,109,298  15,160,579   15,152,768  14,395,103
Diluted 15,111,947  15,182,796  15,210,611   15,202,335  14,479,679


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

  Three Months Ended  
  March 31, 2021 December 31, 2020 March 31, 2020 
  Average    Yield/ Average    Yield/ Average    Yield/ 
  Balance Interest1 Cost1 Balance Interest1 Cost1 Balance Interest1 Cost1 
Assets:                         
Loans, including fees2 $2,428,499 $27,943 4.67%$2,401,406 $28,506 4.72%$1,982,997 $26,389 5.35%
Loans held for sale  7,913  75 3.82% 10,191  88 3.45% 4,294  45 4.24%
Taxable securities  136,492  724 2.15% 119,936  609 2.02% 116,837  679 2.34%
Tax-exempt securities  90,849  409 1.82% 90,200  456 2.01% 70,397  400 2.28%
Federal funds sold and other earning assets  417,144  291 0.28% 349,167  303 0.35% 165,512  602 1.46%
Total interest-earning assets  3,080,897  29,442 3.88% 2,970,900  29,962 4.01% 2,340,037  28,115 4.83%
Noninterest-earning assets  275,272       255,477       216,498      
Total assets $3,356,169      $3,226,377      $2,556,535      
                          
Liabilities and Stockholders’ Equity:                         
Interest-bearing demand deposits $641,214  256 0.16%$570,326  230 0.16%$389,500  434 0.45%
Money market and savings deposits  983,893  821 0.34% 903,235  774 0.34% 664,983  1,389 0.84%
Time deposits  526,062  1,254 0.97% 565,237  1,576 1.11% 680,830  2,931 1.73%
Total interest-bearing deposits  2,151,169  2,331 0.44% 2,038,798  2,580 0.50% 1,735,313  4,754 1.10%
Borrowings3  81,837  117 0.58% 99,777  142 0.57% 51,921  89 0.69%
Subordinated debt  39,354  584 6.01% 39,332  584 5.90% 39,269  584 5.98%
Total interest-bearing liabilities  2,272,360  3,032 0.54% 2,177,907  3,306 0.60% 1,826,503  5,426 1.19%
Noninterest-bearing deposits  700,962       670,820       373,125      
Other liabilities  21,928       23,624       27,215      
Total liabilities  2,995,250       2,872,351       2,226,843      
Shareholders' equity  360,919       354,026       329,692      
Total liabilities and shareholders' equity $3,356,169      $3,226,377      $2,556,535      
                          
Net interest income, taxable equivalent    $26,410      $26,656      $22,689   
Interest rate spread       3.33%      3.41%      3.63%
Tax equivalent net interest margin       3.48%      3.57%      3.90%
                          
Percentage of average interest-earning assets to average interest-bearing liabilities       135.58%      136.41%      128.12%
Percentage of average equity to average assets       10.75%      10.97%      12.90%

1 Taxable equivalent
2 Includes average balance of $312,582 and $296,337 in PPP loans for the quarters ended March 31, 2021 and December 31, 2020, respectively. No PPP loans are included in the average balance for the quarter end March 31, 2020.
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 March 31, 2021 and 2020.


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

  Year Ended
      
  December 31, 2020 December 31, 2019 
  Average    Yield/ Average    Yield/ 
  Balance Interest1 Cost1 Balance Interest1 Cost1 
Assets:                 
Loans, including fees2 $2,289,612 $111,992 4.89%$1,836,963 $100,831 5.49%
Loans held for sale  7,360  320 4.34% 3,858  171 4.43%
Taxable securities  122,900  2,423 1.97% 129,705  3,289 2.54%
Tax-exempt securities  83,765  1,941 2.32% 56,458  1,972 3.49%
Federal funds sold and other earning assets  308,843  1,509 0.49% 110,380  2,646 2.40%
Total interest-earning assets  2,812,480  118,185 4.20% 2,137,364  108,909 5.10%
Noninterest-earning assets  250,955       201,976      
Total assets $3,063,435      $2,339,340      
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing demand deposits $481,050  1,013 0.21%$333,100  1,883 0.57%
Money market and savings deposits  788,006  3,482 0.44% 651,855  7,827 1.20%
Time deposits  641,647  9,102 1.42% 635,451  12,205 1.92%
Total interest-bearing deposits  1,910,703  13,597 0.71% 1,620,406  21,915 1.35%
Borrowings3  177,204  816 0.46% 21,526  319 1.48%
Subordinated debt  39,301  2,334 5.94% 39,216  2,341 5.97%
Total interest-bearing liabilities  2,127,208  16,747 0.79% 1,681,148  24,575 1.46%
Noninterest-bearing deposits  571,282       343,611      
Other liabilities  23,775       15,852      
Total liabilities  2,722,265       2,040,611      
Shareholders' equity  341,170       298,729      
Total liabilities and shareholders' equity $3,063,435      $2,339,340      
                  
Net interest income, taxable equivalent    $101,438      $84,334   
Interest rate spread       3.41%      3.64%
Tax equivalent net interest margin       3.61%      3.95%
                  
Percentage of average interest-earning assets to average interest-bearing liabilities       132.21%      127.14%
Percentage of average equity to average assets       11.14%      12.77%

1 Taxable equivalent
2 Includes average balance of $201,470 in PPP loans for the twelve months ended December 31, 2020.
3 Includes average balance of $91,190 in PPPLF funding for the twelve months ended December 31, 2020.



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

  As of and for The Three Months Ended  
  Mar Dec Sep Jun Mar 
  2021 2020 2020 2020 2020 
Composition of Loans:                
Commercial real estate                
owner occupied $477,293 $463,771 $467,569 $464,073 $473,398 
non-owner occupied  593,348  549,205  563,082  552,958  535,637 
Commercial real estate, total  1,070,641  1,012,976  1,030,651  1,017,031  1,009,035 
Commercial & industrial  686,010  634,446  644,498  637,450  377,173 
Construction & land development  285,973  278,075  275,172  279,216  253,445 
Consumer real estate  432,486  443,930  440,310  459,861  482,728 
Consumer and other  12,019  12,816  13,426  14,726  16,866 
Total loans $2,487,129 $2,382,243 $2,404,057 $2,408,284 $2,139,247 
                 
Asset Quality and Additional Loan Data:                
Nonperforming loans $6,234 $5,782 $2,248 $3,776 $3,069 
Other real estate owned  3,946  4,619  3,932  5,524  5,894 
Total nonperforming assets $10,180 $10,401 $6,180 $9,300 $8,963 
Restructured loans not included in nonperforming loans $250 $257 $8 $9 $9 
Net charge-offs to average loans (annualized)  0.01% 0.08% 0.01% % %
Allowance for loan losses to loans  0.74% 0.77% 0.78% 0.67% 0.63%
Nonperforming loans to total loans, gross  0.25% 0.24% 0.09% 0.16% 0.14%
Nonperforming assets to total assets  0.29% 0.31% 0.18% 0.28% 0.31%
Acquired loan fair value discount balance $12,951 $14,467 $15,141 $16,187 $17,237 
Accretion income on acquired loans  1,636  768  960  888  1,841 
PPP net fees deferred balance  7,351  4,190  6,348  8,582   
PPP net fees recognized  2,398  2,157  1,812  1,909   
                 
Capital Ratios:                
Equity to Assets  10.23% 10.81% 10.33% 10.52% 11.70%
Tangible common equity to tangible assets (Non-GAAP)1  8.00% 8.41% 7.97% 8.09% 8.96%
                 
SmartFinancial, Inc.2                
Tier 1 leverage  8.55% 8.69% 8.78% 8.83% 10.28%
Common equity Tier 1  11.30% 11.61% 11.33% 10.92% 10.87%
Tier 1 capital  11.30% 11.61% 11.33% 10.92% 10.87%
Total capital  13.63% 14.07% 13.81% 13.25% 13.13%
                 
SmartBank  Estimated3             
Tier 1 leverage  9.33% 9.58% 9.74% 9.82% 11.42%
Common equity Tier 1  12.32% 12.79% 12.57% 12.14% 12.05%
Tier 1 risk-based capital  12.32% 12.79% 12.57% 12.14% 12.05%
Total risk-based capital  13.07% 13.57% 13.37% 12.82% 12.62%

Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.
All 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 
 Three Months Ended  
 Mar Dec Sep Jun Mar 
 2021 2020 2020 2020 2020 
Selected Performance Ratios (Annualized):               
Return on average assets 1.18% 1.11% 0.76% 0.79% 0.43%
Return on average shareholders' equity 10.96% 10.15% 7.31% 7.31% 3.33%
Return on average tangible common equity¹ 14.41% 13.43% 9.72% 9.80% 4.41%
Noninterest income / average assets 0.69% 0.61% 0.49% 0.45% 0.44%
Noninterest expense / average assets 2.35% 2.46% 2.28% 2.41% 2.96%
Efficiency ratio 60.92% 63.38% 63.54% 64.28% 74.02%
                
Operating Selected Performance Ratios (Annualized):               
Operating return on average assets1 1.19% 1.14% 0.79% 0.93% 0.67%
Operating PTPP return on average assets1 1.52% 1.45% 1.35% 1.53% 1.37%
Operating return on average shareholders' equity1 11.05% 10.34% 7.57% 8.58% 5.22%
Operating return on average tangible common equity1 14.53% 13.69% 10.06% 11.51% 6.90%
Operating efficiency ratio1 60.32% 60.86% 62.25% 58.95% 65.46%
Operating noninterest income / average assets1 0.69% 0.56% 0.49% 0.45% 0.44%
Operating noninterest expense / average assets1 2.34% 2.37% 2.25% 2.23% 2.63%
                
Selected Interest Rates and Yields:               
Yield on loans 4.67% 4.72% 4.71% 4.87% 5.35%
Yield on earning assets, FTE 3.88% 4.01% 3.88% 4.22% 4.83%
Cost of interest-bearing deposits 0.44% 0.50% 0.59% 0.71% 1.10%
Cost of total deposits 0.33% 0.38% 0.44% 0.54% 0.91%
Cost of interest-bearing liabilities 0.54% 0.60% 0.65% 0.77% 1.19%
Net interest margin, FTE 3.48% 3.57% 3.39% 3.63% 3.90%
                
Per Common Share:               
Net income, basic$0.65 $0.60 $0.42 $0.41 $0.19 
Net income, diluted 0.65  0.59  0.42  0.41  0.19 
Operating earnings, basic¹ 0.65  0.61  0.44  0.48  0.30 
Operating earnings, diluted¹ 0.65  0.61  0.44  0.48  0.30 
Book value 24.10  23.64  22.96  22.57  22.09 
Tangible book value¹ 18.39  17.92  17.27  16.90  16.40 
Common shares outstanding 15,104,536  15,107,214  15,233,227  15,216,932  15,221,990 

¹ See reconciliation of Non-GAAP measures


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

  Three Months Ended  
  Mar Dec Sep Jun Mar 
  2021 2020 2020 2020 2020 
Operating Earnings:                
Net income (GAAP) $9,756  $9,030  $6,395  $6,174  $2,732  
Noninterest income:                
Securities gains (losses), net        9   (16)    
ADECA termination proceeds     (465)          
Noninterest expenses:                
Merger related and restructuring expenses  103   702   290   1,477   2,096  
Income taxes:                
Income tax effect of adjustments  (27)  (62)  (77)  (382)  (548) 
Operating earnings (Non-GAAP) $9,832  $9,205  $6,617  $7,253  $4,280  
Operating earnings per common share (Non-GAAP):                
Basic $0.65  $0.61  $0.44  $0.48  $0.30  
Diluted  0.65   0.61   0.44   0.48   0.30  
                 
Operating Noninterest Income:                
Noninterest income (GAAP) $5,691  $4,976  $4,121  $3,511  $2,818  
Securities gains (losses), net        9   (16)    
ADECA termination proceeds     (465)          
Operating noninterest income (Non-GAAP) $5,691  $4,511  $4,130  $3,495  $2,818  
Operating noninterest income (Non-GAAP)/average assets1  0.69 % 0.56 % 0.49 % 0.45 % 0.44 %
                 
Operating Noninterest Expense:                
Noninterest expense (GAAP) $19,464  $19,953  $19,167  $18,806  $18,793  
Merger related and restructuring expenses  (103)  (702)  (290)  (1,477)  (2,096) 
Operating noninterest expense (Non-GAAP) $19,361  $19,251  $18,877  $17,329  $16,697  
Operating noninterest expense (Non-GAAP)/average assets2  2.34 % 2.37 % 2.25 % 2.23 % 2.63 %
                 
Operating Pre-tax Pre-provision ("PTPP") Earnings:                
Net interest income (GAAP) $26,260  $26,506  $26,043  $25,746  $22,571  
Operating noninterest income  5,691   4,511   4,130   3,495   2,818  
Operating noninterest expense  (19,361)  (19,251)  (18,877)  (17,329)  (16,697) 
Operating PTPP earnings (Non-GAAP) $12,590  $11,766  $11,296  $11,912  $8,692  
                 
Non-GAAP Return Ratios:                
Operating return on average assets (Non-GAAP)3  1.19 % 1.14 % 0.79 % 0.93 % 0.67 %
Operating PTPP return on average assets (Non-GAAP)4  1.52 % 1.45 % 1.35 % 1.53 % 1.37 %
Return on average tangible common equity (Non-GAAP)5  14.41 % 13.43 % 9.72 % 9.80 % 4.41 %
Operating return on average shareholders' equity (Non-GAAP)6  11.05 % 10.34 % 7.57 % 8.58 % 5.22 %
Operating return on average tangible common equity (Non-GAAP)7  14.53 % 13.69 % 10.06 % 11.51 % 6.90 %
                 
Operating Efficiency Ratio:                
Efficiency ratio (GAAP)  60.92 % 63.38 % 63.54 % 64.28 % 74.02 %
Adjustment for taxable equivalent yields  (0.28)% (0.30)% (0.32)% (0.34)% (0.34)%
Adjustment for securities gains (losses)   %  % 0.02 % (0.04)%  %
Adjustment for merger related income and costs  (0.32)% (2.22)% (0.99)% (4.95)% (8.21)%
Operating efficiency ratio (Non-GAAP)  60.32 % 60.86 % 62.25 % 58.95 % 65.46 %

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


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

  Three Months Ended
  Mar Dec Sep Jun Mar
  2021 2020 2020 2020 2020
Tangible Common Equity:               
Shareholders' equity (GAAP) $364,058  $357,168  $349,789  $343,488  $336,200 
Less goodwill and other intangible assets  86,350   86,471   86,710   86,327   86,503 
Tangible common equity (Non-GAAP) $277,708  $270,697  $263,079  $257,161  $249,697 
                
Average Tangible Common Equity:               
Average shareholders' equity (GAAP) $360,919  $354,026  $347,907  $339,861  $329,692 
Less average goodwill and other intangible assets  85,486   86,561   86,206   86,484   80,370 
Average tangible common equity (Non-GAAP) $275,433  $267,465  $261,701  $253,377  $249,322 
                
Tangible Book Value per Common Share:               
Book value per common share (GAAP) $24.10  $23.64  $22.96  $22.57  $22.09 
Adjustment due to goodwill and other intangible assets  (5.72)  (5.72)  (5.69)  (5.67)  (5.69)
Tangible book value per common share (Non-GAAP)1 $18.39  $17.92  $17.27  $16.90  $16.40 
                
Tangible Common Equity to Tangible Assets:               
Total Assets $3,557,203  $3,304,949  $3,387,588  $3,265,985  $2,873,715 
Less goodwill and other intangibles  86,350   86,471   86,710   86,327   86,503 
Tangible Assets (Non-GAAP): $3,470,853  $3,218,478  $3,300,878  $3,179,658  $2,787,212 
Tangible common equity to tangible assets (Non-GAAP)  8.00%  8.41%  7.97%  8.09%  8.96%

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