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SmartFinancial Announces Results for the Third Quarter 2023
来源: Nasdaq GlobeNewswire / 23 10月 2023 16:00:04 America/Chicago
KNOXVILLE, Tenn., Oct. 23, 2023 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $2.1 million, or $0.12 per diluted common share, for the third quarter of 2023, compared to net income of $11.5 million, or $0.68 per diluted common share, for the third quarter of 2022, and compared to prior quarter net income of $8.8 million, or $0.52 per diluted common share. Operating earnings1, which excludes securities gains (losses) and merger related and restructuring expenses, net of tax adjustments, totaled $7.2 million, or $0.43 per diluted common share, in the third quarter of 2023, compared to $11.6 million, or $0.69 per diluted common share, in the third quarter of 2022, and compared to $8.8 million, or $0.52 per diluted common share, in the second quarter of 2023.
Highlights for the Third Quarter of 2023
- Operating earnings1 of $7.2 million, or $0.43 per diluted common share
- Repositioned $159.6 million of available-for-sale securities, moving into higher yielding assets
- Net organic loan and lease growth of $42 million - 5% annualized quarter-over-quarter increase
- Credit quality remains solid with nonperforming assets to total assets of 0.12%
- Deposit growth of $46.9 million – 4.5% annualized quarter-over-quarter increase
Billy Carroll, President & CEO, stated: “Our Company and employees continue to operate at a high level, providing excellent client service while tactfully navigating a difficult operating landscape. During September, we strategically took advantage of a balance sheet optimization opportunity, reallocating $160 million from low-yielding investments into higher yielding assets. We felt it prudent to capitalize on the current rate environment and better position our balance sheet as we look toward 2024. Our team continues to grow new loan and deposit relationships despite the higher rate headwinds, a testament to their professionalism and reputations within their respective markets. As our Bank absorbs and moves through the impacts of the recent Fed rate increases, we look forward to continued revenue expansion and remain bullish on our Company outlook.”
SmartFinancial's Chairman, Miller Welborn, concluded: "The entire SmartBank team worked diligently over the past quarter and, quite frankly, over the entire year to exceed client expectations and drive consistent growth. However, this quarter I was especially pleased that SmartBank was once again honored with the “Top Workplace” designation as voted on by employees for the seventh year in a row! I’m so proud of where we are as a company and extremely optimistic about the future.”
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1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliationNet Interest Income and Net Interest Margin
Net interest income was $31.0 million for the third quarter of 2023, compared to $31.6 million for the prior quarter. Average earning assets totaled $4.40 billion, an increase of $58.5 million from the prior quarter. The increase in average earnings assets was primarily driven by an increase in average loans and leases of $52.1 million and average interest-earning cash of $34.2 million, offset by a decrease in average securities of $27.8 million. Average interest-bearing liabilities increased by $73.5 million from the prior quarter, attributable to an increase in average deposits of $82.1 million, offset by a decrease in average borrowings of $8.6 million.
The tax equivalent net interest margin was 2.81% for the third quarter of 2023, compared to 2.93% for the prior quarter. The tax equivalent net interest margin was negatively impacted by the continued rise in the cost of interest-bearing liabilities and increased pricing competition. The yield on loans and leases, excluding loan fees was 5.52% for the third quarter, compared to 5.39% for the prior quarter.
The cost of total deposits for the third quarter of 2023 was 2.20% compared to 1.89% in the prior quarter. The cost of interest-bearing liabilities increased to 2.89% for the third quarter of 2023 compared to 2.53% for the prior quarter. The cost of average interest-bearing deposits was 2.84% for the third quarter of 2023 compared to 2.46% for the prior quarter, an increase of 38 basis points. The increase in the cost of deposits is due to an increase in interest rates, customer migration to higher rate deposit products and increased competition for deposits.
The following table presents selected interest rates and yields for the periods indicated:
Three Months Ended Sep Jun Increase Selected Interest Rates and Yields 2023 2023 (Decrease) Yield on loans and leases, excluding loan fees 5.52 % 5.39 % 0.13 % Yield on loans and leases 5.61 % 5.51 % 0.10 % Yield on earning assets, on a fully tax equivalent basis (FTE) 4.99 % 4.82 % 0.17 % Cost of interest-bearing deposits 2.84 % 2.46 % 0.38 % Cost of total deposits 2.20 % 1.89 % 0.31 % Cost of interest-bearing liabilities 2.89 % 2.53 % 0.36 % Net interest margin, FTE 2.81 % 2.93 % (0.12 ) %
Provision for Credit Losses on Loans and Leases and Credit QualityAt September 30, 2023, the allowance for credit losses was $33.7 million. The allowance for credit losses to total loans and leases was 1.00% as of September 30, 2023, compared to 0.98% as of June 30, 2023.
The following table presents detailed information related to the provision for credit losses for the periods indicated (dollars in thousands):
Three Months Ended Sep Jun Provision for Credit Losses on Loans and Leases Rollforward 2023 2023 Change Beginning balance $ 32,747 $ 32,279 $ 468 Charge-offs (417 ) (207 ) (210 ) Recoveries 73 255 (182 ) Net (charge-offs) recoveries (344 ) 48 (392 ) Provision for credit losses (1) 1,284 420 864 Ending balance $ 33,687 $ 32,747 $ 940 Allowance for credit losses to total loans and leases, gross 1.00 % 0.98 % 0.02 % (1) The current quarter-ended and prior quarter-ended, excludes unfunded commitments release of $489 thousand and $307 thousand, respectively. At September 30, 2023, the unfunded commitment liability totaled $2.3 million. Nonperforming loans and leases as a percentage of total loans and leases was 0.12% as of September 30, 2023, an increase of 1 basis point from the 0.11% reported in the second quarter of 2023. 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 0.12% as of September 30, 2023, and June 30, 2023.
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 2023 2023 (Decrease) Nonaccrual loans and leases $ 3,934 $ 3,722 $ 212 Loans and leases past due 90 days or more and still accruing 229 - 229 Total nonperforming loans and leases 4,163 3,722 441 Other real estate owned 1,370 1,708 (338 ) Other repossessed assets 348 282 66 Total nonperforming assets $ 5,881 $ 5,712 $ 169 Nonperforming loans and leases to total loans and leases, gross 0.12 % 0.11 % 0.01 % Nonperforming assets to total assets 0.12 % 0.12 % - %
Noninterest IncomeNoninterest income decreased $6.4 million to $691 thousand for the third quarter of 2023 compared to $7.1 million for the prior quarter. The current quarter decrease was associated with a $6.8 million pre-tax loss on the sale of $159.6 million of available for sale securities, moving into higher yielding assets. Excluding the loss on securities, noninterest income increased $362 thousand.
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 2023 2023 (Decrease) Service charges on deposit accounts $ 1,736 $ 1,657 $ 79 Gain (loss) on sale of securities, net (6,801 ) - (6,801 ) Mortgage banking income 309 332 (23 ) Investment services 1,461 1,300 161 Insurance commissions 1,153 1,139 14 Interchange and debit card transaction fees 1,357 1,347 10 Other 1,476 1,355 121 Total noninterest income $ 691 $ 7,130 $ (6,439 )
Noninterest ExpenseNoninterest expense increased $1.1 million to $28.5 million for the third quarter of 2023 compared to $27.4 million for the prior quarter. The current quarter increase was primarily related to increases in health insurance claims, incentives and additional commission expense associated with higher production from our leasing company, wealth and capital markets teams.
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 2023 2023 (Decrease) Salaries and employee benefits $ 16,785 $ 15,947 $ 838 Occupancy and equipment 3,547 3,318 229 FDIC insurance 825 875 (50 ) Other real estate and loan related expenses 603 441 162 Advertising and marketing 346 305 41 Data processing and technology 2,378 2,235 143 Professional services 735 764 (29 ) Amortization of intangibles 647 675 (28 ) Merger related and restructuring expenses 110 - 110 Other 2,540 2,850 (310 ) Total noninterest expense $ 28,516 $ 27,410 $ 1,106
Income Tax ExpenseIncome tax expense was $319 thousand for the third quarter of 2023, a decrease of $2.0 million, compared to $2.3 million for the prior quarter.
The effective tax rate was 13.37% for the third quarter of 2023 and 20.98% for the prior quarter. The primary reason for the 7.61% decline in the effective tax rate was due to lower earnings, largely from the $6.8 million pre-tax loss on sale of available-for-sale securities during the quarter.
Balance Sheet Trends
Total assets at September 30, 2023 were $4.80 billion compared to $4.64 billion at December 31, 2022. The $159.7 million increase is primarily attributable to increases in loans and leases of $125.4 million, cash and cash equivalents of $133.8 million and other assets of $15.1 million. Asset increases were offset by a decrease in securities of $102.4 million and an increase in the allowance for credit losses of $10.4 million, primarily for the one-time adjustment of $8.7 million related to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit losses on Financial Instruments (“ASU 2016-13”) on January 1, 2023.
Total liabilities increased to $4.35 billion at September 30, 2023 from $4.21 billion at December 31, 2022. The increase of $145.5 million was primarily from organic deposit growth of $169.4 million, offset by a decrease in borrowings of $27.7 million.
Shareholders' equity at September 30, 2023 totaled $446.7 million, an increase of $14.2 million, from December 31, 2022. The increase in shareholders' equity was primarily driven by net income of $22.4 million for the nine months ended September 30, 2023, offset by the impact of the adoption of ASU 2016-13 on January 1, 2023, of $6.6 million (net of taxes), and dividends paid of $4.1 million. Tangible book value per share1 was $19.94 at September 30, 2023, compared to $19.09 at December 31, 2022. Tangible common equity1 as a percentage of tangible assets1 was 7.23% at September 30, 2023, compared with 7.13% at December 31, 2022.
The following table presents selected balance sheet information for the periods indicated (dollars in thousands):
Sep Dec Increase Selected Balance Sheet Information 2023 2022 (Decrease) Total assets $ 4,797,171 $ 4,637,498 $ 159,673 Total liabilities 4,350,519 4,205,046 145,473 Total equity 446,652 432,452 14,200 Securities 667,444 769,842 (102,398 ) Loans and leases 3,378,999 3,253,627 125,372 Deposits 4,246,509 4,077,100 169,409 Borrowings 14,117 41,860 (27,743 ) ______________________________
1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliationConference Call Information
SmartFinancial issued this earnings release for the third quarter of 2023 on Monday, October 23, 2023, and will host a conference call on Tuesday, October 24, 2023, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 470-1428 or (404) 975-4839 and entering the access code, 071225. A replay of the conference call will be available through December 23, 2023, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 816201. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 a.m. 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 Florida. 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-provision net revenue 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-provision net revenue 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 and merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by average assets. Operating pre-provision net revenue return on average assets is the annualized operating pre-provision net revenue income earnings (Non-GAAP) by average assets. Operating return on average shareholders' equity is the annualized operating earnings (Non-GAAP) divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity (Non-GAAP). Operating return on average tangible common equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses. Operating pre-provision net revenue earnings is net interest income plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity (Non-GAAP) and average tangible common equity (Non-GAAP) excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value (Non-GAAP) is tangible common equity (Non-GAAP) divided by common shares outstanding. Tangible assets (Non-GAAP) 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 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) changes in management’s plans for the future; (7) prevailing, or changes in, economic or political conditions, particularly in our market areas, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; (8) increased technology and cybersecurity risks, including generative artificial intelligence risks; (9) credit risk associated with our lending activities; (10) changes in loan demand, real estate values, or competition; (11) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic and related variants; (15) potential impacts of adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; (16) significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; (17) the effects of war or other conflicts including the impacts related to or resulting from Russia’s military action in Ukraine or the conflict in Israel and surrounding areas; and (18) 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 2023 2023 2023 2022 2022 Assets: Cash and cash equivalents $ 400,258 $ 238,898 $ 306,934 $ 266,424 $ 543,029 Securities available-for-sale, at fair value 385,131 540,308 560,418 483,893 519,723 Securities held-to-maturity, at amortized cost 282,313 283,564 284,776 285,949 287,104 Other investments 13,805 14,396 14,059 15,530 15,528 Loans held for sale 2,734 986 3,324 1,752 2,742 Loans and leases 3,378,999 3,337,790 3,281,787 3,253,627 3,099,116 Less: Allowance for credit losses (33,687 ) (32,747 ) (32,279 ) (23,334 ) (22,769 ) Loans and leases, net 3,345,312 3,305,043 3,249,508 3,230,293 3,076,347 Premises and equipment, net 92,020 92,351 92,190 92,511 91,944 Other real estate owned 1,370 1,708 1,708 1,436 1,226 Goodwill and other intangibles, net 107,792 108,439 109,114 109,772 110,460 Bank owned life insurance 82,914 82,419 81,938 81,470 81,001 Other assets 83,522 77,688 65,836 68,468 67,807 Total assets $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 $ 4,796,911 Liabilities: Deposits: Noninterest-bearing demand $ 923,763 $ 1,003,432 $ 989,753 $ 1,072,449 $ 1,186,209 Interest-bearing demand 993,717 938,758 989,738 965,911 962,901 Money market and savings 1,766,409 1,720,202 1,761,847 1,583,481 1,663,355 Time deposits 562,620 537,192 488,208 455,259 467,944 Total deposits 4,246,509 4,199,584 4,229,546 4,077,100 4,280,409 Borrowings 14,117 15,496 16,546 41,860 18,423 Subordinated debt 42,078 42,057 42,036 42,015 41,994 Other liabilities 47,815 43,816 38,278 44,071 41,374 Total liabilities 4,350,519 4,300,953 4,326,406 4,205,046 4,382,200 Shareholders' Equity: Common stock 16,995 17,004 17,004 16,901 16,888 Additional paid-in capital 295,542 295,296 294,930 294,330 293,907 Retained earnings 168,271 167,564 160,085 156,545 144,723 Accumulated other comprehensive income (loss) (34,156 ) (35,017 ) (28,620 ) (35,324 ) (40,807 ) Total shareholders' equity 446,652 444,847 443,399 432,452 414,711 Total liabilities & shareholders' equity $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 $ 4,796,911 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 2023 2023 2023 2022 2022 2023 2022 Interest income: Loans and leases, including fees $ 47,539 $ 45,446 $ 44,728 $ 40,082 $ 35,127 $ 137,712 $ 96,300 Investment securities: Taxable 4,335 4,335 3,651 3,337 3,135 12,322 8,463 Tax-exempt 356 357 353 797 561 1,066 1,369 Federal funds sold and other earning assets 3,045 1,956 4,446 3,098 3,474 9,448 5,389 Total interest income 55,275 52,094 53,178 47,314 42,297 160,548 111,521 Interest expense: Deposits 23,433 19,554 16,346 8,844 4,866 59,333 9,384 Borrowings 210 339 224 232 97 775 371 Subordinated debt 626 626 626 626 626 1,877 1,877 Total interest expense 24,269 20,519 17,196 9,702 5,589 61,985 11,632 Net interest income 31,006 31,575 35,982 37,612 36,708 98,563 99,889 Provision for credit losses 795 113 550 788 974 1,458 3,230 Net interest income after provision for credit losses 30,211 31,462 35,432 36,824 35,734 97,105 96,659 Noninterest income: Service charges on deposit accounts 1,736 1,657 1,445 1,477 1,611 4,838 4,376 Gain (loss) on sale of securities, net (6,801 ) — — 144 — (6,801 ) — Mortgage banking 309 332 172 77 170 813 1,475 Investment services 1,461 1,300 1,005 958 1,051 3,766 3,186 Insurance commissions 1,153 1,139 1,259 1,233 864 3,551 2,363 Interchange and debit card transaction fees 1,357 1,347 1,383 1,328 1,356 4,087 4,107 Other 1,476 1,355 1,661 1,908 1,198 4,492 5,083 Total noninterest income 691 7,130 6,925 7,125 6,250 14,746 20,590 Noninterest expense: Salaries and employee benefits 16,785 15,947 16,742 16,384 16,317 49,474 47,036 Occupancy and equipment 3,547 3,318 3,208 3,015 3,167 10,073 9,020 FDIC insurance 825 875 541 650 705 2,241 2,022 Other real estate and loan related expense 603 441 572 517 565 1,616 1,930 Advertising and marketing 346 305 355 308 288 1,006 985 Data processing and technology 2,378 2,235 2,163 2,097 1,872 6,777 5,185 Professional services 735 764 807 981 822 2,307 2,809 Amortization of intangibles 647 675 659 688 650 1,981 1,919 Merger related and restructuring expenses 110 — — (45 ) 87 110 607 Other 2,540 2,850 2,482 2,821 2,757 7,870 7,361 Total noninterest expense 28,516 27,410 27,529 27,416 27,230 83,455 78,874 Income before income taxes 2,386 11,182 14,828 16,533 14,754 28,396 38,375 Income tax expense 319 2,346 3,328 3,529 3,211 5,993 8,357 Net income $ 2,067 $ 8,836 $ 11,500 $ 13,004 $ 11,543 $ 22,403 $ 30,018 Earnings per common share: Basic $ 0.12 $ 0.53 $ 0.69 $ 0.78 $ 0.69 $ 1.33 $ 1.79 Diluted $ 0.12 $ 0.52 $ 0.68 $ 0.77 $ 0.68 $ 1.33 $ 1.78 Weighted average common shares outstanding: Basic 16,807,548 16,806,389 16,791,406 16,758,706 16,749,255 16,801,840 16,734,298 Diluted 16,918,635 16,898,091 16,896,494 16,884,253 16,872,022 16,907,325 16,867,970 SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSISThree Months Ended September 30, 2023 June 30, 2023 September 30, 2022 Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost Assets: Loans and leases, including fees1 $ 3,360,678 $ 47,539 5.61 % $ 3,308,595 $ 45,446 5.51 % $ 3,037,092 $ 35,127 4.59 % Taxable securities 743,054 4,335 2.31 % 770,275 4,335 2.26 % 720,114 3,135 1.73 % Tax-exempt securities2 64,707 451 2.77 % 65,265 452 2.78 % 101,559 732 2.86 % Federal funds sold and other earning assets 229,487 3,045 5.26 % 195,266 1,956 4.02 % 587,755 3,474 2.34 % Total interest-earning assets 4,397,926 55,370 4.99 % 4,339,401 52,189 4.82 % 4,446,520 42,468 3.79 % Noninterest-earning assets 379,456 355,701 362,869 Total assets $ 4,777,382 $ 4,695,102 $ 4,809,389 Liabilities and Shareholders’ Equity: Interest-bearing demand deposits $ 969,122 5,463 2.24 % $ 950,227 4,892 2.06 % $ 966,437 1,956 0.80 % Money market and savings deposits 1,753,671 13,744 3.11 % 1,737,303 11,785 2.72 % 1,632,510 2,298 0.56 % Time deposits 551,191 4,226 3.04 % 504,350 2,877 2.29 % 501,919 612 0.48 % Total interest-bearing deposits 3,273,984 23,433 2.84 % 3,191,880 19,554 2.46 % 3,100,866 4,866 0.62 % Borrowings 16,228 210 5.13 % 24,845 339 5.47 % 13,141 97 2.93 % Subordinated debt 42,065 626 5.90 % 42,044 626 5.97 % 41,980 626 5.91 % Total interest-bearing liabilities 3,332,277 24,269 2.89 % 3,258,769 20,519 2.53 % 3,155,987 5,589 0.70 % Noninterest-bearing deposits 951,179 951,381 1,192,813 Other liabilities 48,494 40,669 35,224 Total liabilities 4,331,950 4,250,819 4,384,024 Shareholders' equity 445,432 444,283 425,365 Total liabilities and shareholders' equity $ 4,777,382 $ 4,695,102 $ 4,809,389 Net interest income, taxable equivalent $ 31,101 $ 31,670 $ 36,879 Interest rate spread 2.11 % 2.30 % 3.09 % Tax equivalent net interest margin 2.81 % 2.93 % 3.29 % Percentage of average interest-earning assets to average interest-bearing liabilities 131.98 % 133.16 % 140.89 % Percentage of average equity to average assets 9.32 % 9.46 % 8.84 % 1 Includes average balance of $2.7 million, $2.9 million, and $22.0 million in PPP loans for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $95 thousand, $95 thousand, and $171 thousand of taxable equivalent income for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSISNine Months Ended September 30, 2023 September 30, 2022 Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Assets: Loans and leases, including fees1 $ 3,309,616 $ 137,712 5.56 % $ 2,880,444 $ 96,300 4.47 % Taxable securities 745,694 12,322 2.21 % 683,926 8,463 1.65 % Tax-exempt securities2 65,170 1,349 2.77 % 102,872 1,873 2.43 % Federal funds sold and other earning assets 267,124 9,448 4.73 % 663,400 5,389 1.09 % Total interest-earning assets 4,387,604 160,831 4.90 % 4,330,642 112,025 3.46 % Noninterest-earning assets 365,123 373,081 Total assets $ 4,752,727 $ 4,703,723 Liabilities and Shareholders’ Equity: Interest-bearing demand deposits $ 954,585 14,583 2.04 % $ 952,523 3,137 0.44 % Money market and savings deposits 1,770,232 35,912 2.71 % 1,572,287 4,282 0.36 % Time deposits 508,600 8,838 2.32 % 531,419 1,965 0.49 % Total interest-bearing deposits 3,233,417 59,333 2.45 % 3,056,229 9,384 0.41 % Borrowings 19,309 775 5.37 % 37,933 371 1.31 % Subordinated debt 42,044 1,877 5.97 % 41,959 1,877 5.98 % Total interest-bearing liabilities 3,294,770 61,985 2.52 % 3,136,121 11,632 0.50 % Noninterest-bearing deposits 972,507 1,111,854 Other liabilities 44,703 31,412 Total liabilities 4,311,980 4,279,387 Shareholders' equity 440,747 424,336 Total liabilities and shareholders' equity $ 4,752,727 $ 4,703,723 Net interest income, taxable equivalent $ 98,846 $ 100,393 Interest rate spread 2.39 % 2.96 % Tax equivalent net interest margin 3.01 % 3.10 % Percentage of average interest-earning assets to average interest-bearing liabilities 133.17 % 138.09 % Percentage of average equity to average assets 9.27 % 9.02 % 1 Includes average balance of $2.9 million and $36.6 million in PPP loans for the nine months ended September 30, 2023, and 2022, respectively.
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $283 thousand and $504 thousand of taxable equivalent income for the nine months ended September 30, 2023, and 2022, respectively.SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)As of and for The Three Months Ended Sep Jun Mar Dec Sep 2023 2023 2023 2022 2022 Composition of Loans and Leases: Commercial real estate: Owner occupied $ 776,402 $ 769,978 $ 764,166 $ 765,041 $ 714,734 Non-owner occupied 890,774 871,779 871,368 862,720 822,317 Commercial real estate, total 1,667,176 1,641,757 1,635,534 1,627,761 1,537,051 Commercial & industrial 617,115 594,427 571,153 551,867 514,280 Construction & land development 373,068 394,742 386,253 402,501 405,007 Consumer real estate 638,518 624,828 606,343 587,977 562,408 Leases 68,538 66,401 67,701 67,427 64,798 Consumer and other 14,584 15,635 14,803 16,094 15,572 Total loans and leases $ 3,378,999 $ 3,337,790 $ 3,281,787 $ 3,253,627 $ 3,099,116 Asset Quality and Additional Loan Data: Nonperforming loans and leases $ 4,163 $ 3,722 $ 3,247 $ 2,951 $ 3,379 Other real estate owned 1,370 1,708 1,708 1,436 1,226 Other repossessed assets 348 282 66 422 — Total nonperforming assets $ 5,881 $ 5,712 $ 5,021 $ 4,809 $ 4,605 Restructured loans and leases not included in nonperforming loans and leases $ 2,376 $ 657 $ 97 $ 101 $ 108 Net charge-offs to average loans and leases (annualized) 0.04 % (0.01 ) % 0.03 % 0.03 % 0.02 % Allowance for credit losses to loans and leases 1.00 % 0.98 % 0.98 % 0.72 % 0.73 % Nonperforming loans and leases to total loans and leases, gross 0.12 % 0.11 % 0.10 % 0.09 % 0.11 % Nonperforming assets to total assets 0.12 % 0.12 % 0.11 % 0.10 % 0.10 % Acquired loan and lease fair value discount balance $ — $ — $ — $ 13,128 $ 14,465 Accretion income on acquired loans and leases — — — 1,396 148 PPP net fees deferred balance 94 104 114 122 140 PPP net fees recognized 10 10 8 17 163 Capital Ratios: Equity to Assets 9.31 % 9.37 % 9.30 % 9.33 % 8.65 % Tangible common equity to tangible assets (Non-GAAP)1 7.23 % 7.25 % 7.17 % 7.13 % 6.49 % SmartFinancial, Inc.2 Tier 1 leverage 8.13 % 8.24 % 7.91 % 7.95 % 7.40 % Common equity Tier 1 10.01 % 10.12 % 9.95 % 9.65 % 9.65 % Tier 1 capital 10.01 % 10.12 % 9.95 % 9.65 % 9.65 % Total capital 11.83 % 11.94 % 11.77 % 11.40 % 11.44 % SmartBank Estimated3 Tier 1 leverage 9.00 % 9.18 % 8.87 % 8.90 % 8.27 % Common equity Tier 1 11.13 % 11.27 % 11.15 % 10.82 % 10.78 % Tier 1 capital 11.13 % 11.27 % 11.15 % 10.82 % 10.78 % Total capital 11.85 % 11.97 % 11.85 % 11.44 % 11.41 % 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 2023 2023 2023 2022 2022 2023 2022 Selected Performance Ratios (Annualized): Return on average assets 0.17 % 0.75 % 0.97 % 1.11 % 0.95 % 0.63 % 0.85 % Return on average shareholders' equity 1.84 % 7.98 % 10.79 % 12.28 % 10.77 % 6.80 % 9.46 % Return on average tangible common equity¹ 2.43 % 10.57 % 14.45 % 16.65 % 14.36 % 9.02 % 12.60 % Noninterest income / average assets 0.06 % 0.61 % 0.59 % 0.61 % 0.52 % 0.41 % 0.59 % Noninterest expense / average assets 2.37 % 2.34 % 2.33 % 2.34 % 2.25 % 2.35 % 2.24 % Efficiency ratio 89.96 % 70.82 % 64.16 % 61.28 % 63.39 % 73.65 % 65.47 % Operating Selected Performance Ratios (Annualized): Operating return on average assets1 0.60 % 0.75 % 0.97 % 1.10 % 0.96 % 0.77 % 0.87 % Operating PPNR return on average assets1 0.84 % 0.96 % 1.30 % 1.46 % 1.30 % 1.03 % 1.20 % Operating return on average shareholders' equity1 6.41 % 7.98 % 10.79 % 12.15 % 10.83 % 8.35 % 9.60 % Operating return on average tangible common equity1 8.46 % 10.57 % 14.45 % 16.47 % 14.44 % 11.09 % 12.78 % Operating efficiency ratio1 73.60 % 70.64 % 64.02 % 61.36 % 62.93 % 69.23 % 64.69 % Operating noninterest income / average assets1 0.62 % 0.61 % 0.59 % 0.60 % 0.52 % 0.61 % 0.59 % Operating noninterest expense / average assets1 2.36 % 2.34 % 2.33 % 2.35 % 2.24 % 2.34 % 2.22 % Selected Interest Rates and Yields: Yield on loans and leases, excluding loan fees 5.52 % 5.39 % 5.20 % 4.99 % 4.50 % 5.37 % 4.31 % Yield on loans and leases 5.61 % 5.51 % 5.57 % 5.05 % 4.59 % 5.56 % 4.47 % Yield on earning assets, FTE 4.99 % 4.82 % 4.88 % 4.41 % 3.79 % 4.90 % 3.46 % Cost of interest-bearing deposits 2.84 % 2.46 % 2.05 % 1.18 % 0.62 % 2.45 % 0.41 % Cost of total deposits 2.20 % 1.89 % 1.56 % 0.85 % 0.45 % 1.89 % 0.30 % Cost of interest-bearing liabilities 2.89 % 2.53 % 2.12 % 1.27 % 0.70 % 2.52 % 0.50 % Net interest margin, FTE 2.81 % 2.93 % 3.31 % 3.51 % 3.29 % 3.01 % 3.10 % Per Common Share: Net income, basic $ 0.12 $ 0.53 $ 0.69 $ 0.78 $ 0.69 $ 1.33 $ 1.79 Net income, diluted 0.12 0.52 0.68 0.77 0.68 1.33 1.78 Operating earnings, basic¹ 0.43 0.53 0.69 0.77 0.69 1.64 1.82 Operating earnings, diluted¹ 0.43 0.52 0.68 0.76 0.69 1.63 1.81 Book value 26.28 26.16 26.08 25.59 24.56 26.28 24.56 Tangible book value¹ 19.94 19.78 19.66 19.09 18.02 19.94 18.02 Common shares outstanding 16,994,543 17,004,092 17,004,092 16,900,805 16,887,555 16,994,543 16,887,555 1Non-GAAP measure. See reconciliation of Non-GAAP measures.
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONSThree Months Ended Nine Months Ended Sep Jun Mar Dec Sep Sep Sep 2023 2023 2023 2022 2022 2023 2022 Operating Earnings: Net income (GAAP) $ 2,067 $ 8,836 $ 11,500 $ 13,004 $ 11,543 $ 22,403 $ 30,018 Noninterest income: Securities (gains) losses, net 6,801 — — (144 ) — 6,801 — Noninterest expenses: Merger related and restructuring expenses 110 — — (45 ) 87 110 607 Income taxes: Income tax effect of adjustments (1,785 ) — — 49 (22 ) (1,785 ) (157 ) Operating earnings (Non-GAAP) $ 7,193 $ 8,836 $ 11,500 $ 12,864 $ 11,608 $ 27,529 $ 30,468 Operating earnings per common share (Non-GAAP): Basic $ 0.43 $ 0.53 $ 0.69 $ 0.77 $ 0.69 $ 1.64 $ 1.82 Diluted 0.43 0.52 0.68 0.76 0.69 1.63 1.81 Operating Noninterest Income: Noninterest income (GAAP) $ 691 $ 7,130 $ 6,925 $ 7,125 $ 6,250 $ 14,746 $ 20,590 Securities (gains) losses, net 6,801 — — (144 ) — 6,801 — Operating noninterest income (Non-GAAP) $ 7,492 $ 7,130 $ 6,925 $ 6,981 $ 6,250 $ 21,547 $ 20,590 Operating noninterest income (Non-GAAP)/average assets1 0.62 % 0.61 % 0.59 % 0.60 % 0.52 % 0.61 % 0.59 % Operating Noninterest Expense: Noninterest expense (GAAP) $ 28,516 $ 27,410 $ 27,529 $ 27,416 $ 27,230 $ 83,455 $ 78,874 Merger related and restructuring expenses (110 ) — — 45 (87 ) (110 ) (607 ) Operating noninterest expense (Non-GAAP) $ 28,406 $ 27,410 $ 27,529 $ 27,461 $ 27,143 $ 83,345 $ 78,267 Operating noninterest expense (Non-GAAP)/average assets2 2.36 % 2.34 % 2.33 % 2.35 % 2.24 % 2.34 % 2.22 % Operating Pre-provision Net revenue ("PPNR") Earnings: Net interest income (GAAP) $ 31,006 $ 31,575 $ 35,982 $ 37,612 $ 36,708 $ 98,563 $ 99,889 Operating noninterest income (Non-GAAP) 7,492 7,130 6,925 6,981 6,250 21,547 20,590 Operating noninterest expense (Non-GAAP) (28,406 ) (27,410 ) (27,529 ) (27,461 ) (27,143 ) (83,345 ) (78,267 ) Operating PPNR earnings (Non-GAAP) $ 10,092 $ 11,295 $ 15,378 $ 17,132 $ 15,815 $ 36,765 $ 42,212 Non-GAAP Return Ratios: Operating return on average assets (Non-GAAP)3 0.60 % 0.75 % 0.97 % 1.10 % 0.96 % 0.77 % 0.87 % Operating PPNR return on average assets (Non-GAAP)4 0.84 % 0.96 % 1.30 % 1.46 % 1.30 % 1.03 % 1.20 % Return on average tangible common equity (Non-GAAP)5 2.43 % 10.57 % 14.45 % 16.65 % 14.36 % 9.02 % 12.60 % Operating return on average shareholders' equity (Non-GAAP)6 6.41 % 7.98 % 10.79 % 12.15 % 10.83 % 8.35 % 9.60 % Operating return on average tangible common equity (Non-GAAP)7 8.46 % 10.57 % 14.45 % 16.47 % 14.44 % 11.09 % 12.78 % Operating Efficiency Ratio: Efficiency ratio (GAAP) 89.96 % 70.82 % 64.16 % 61.28 % 63.39 % 73.65 % 65.47 % Adjustment for taxable equivalent yields (0.27 ) % (0.18 ) % (0.14 ) % (0.22 ) % (0.25 ) % (0.18 ) % (0.28 ) % Adjustment for securities (gains) losses 15.89 % — % — % (0.20 ) % — % 4.17 % — % Adjustment for merger related income and costs (31.98 ) % — % — % 0.50 % (0.21 ) % (8.41 ) % (0.50 ) % Operating efficiency ratio (Non-GAAP) 73.60 % 70.64 % 64.02 % 61.36 % 62.93 % 69.23 % 64.69 % 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 PPNR return on average assets (Non-GAAP) is the annualized operating PPNR 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 Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONSThree Months Ended Nine Months Ended Sep Jun Mar Dec Sep Sep Sep 2023 2023 2023 2022 2022 2023 2022 Tangible Common Equity: Shareholders' equity (GAAP) $ 446,652 $ 444,847 $ 443,399 $ 432,452 $ 414,711 $ 446,652 $ 414,711 Less goodwill and other intangible assets 107,792 108,439 109,114 109,772 110,460 107,792 110,460 Tangible common equity (Non-GAAP) $ 338,860 $ 336,408 $ 334,285 $ 322,680 $ 304,251 $ 338,860 $ 304,251 Average Tangible Common Equity: Average shareholders' equity (GAAP) $ 445,432 $ 444,283 $ 432,382 $ 420,037 $ 425,365 $ 440,747 $ 424,336 Less average goodwill and other intangible assets 108,194 108,851 109,537 110,206 106,483 108,856 105,698 Average tangible common equity (Non-GAAP) $ 337,238 $ 335,432 $ 322,845 $ 309,831 $ 318,882 $ 331,891 $ 318,638 Tangible Book Value per Common Share: Book value per common share (GAAP) $ 26.28 $ 26.16 $ 26.08 $ 25.59 $ 24.56 $ 26.28 $ 24.56 Adjustment due to goodwill and other intangible assets (6.34 ) (6.38 ) (6.42 ) (6.50 ) (6.54 ) (6.34 ) (6.54 ) Tangible book value per common share (Non-GAAP)1 $ 19.94 $ 19.78 $ 19.66 $ 19.09 $ 18.02 $ 19.94 $ 18.02 Tangible Common Equity to Tangible Assets: Total Assets (GAAP) $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 $ 4,796,911 $ 4,797,171 $ 4,796,911 Less goodwill and other intangibles 107,792 108,439 109,114 109,772 110,460 107,792 110,460 Tangible Assets (Non-GAAP) $ 4,689,379 $ 4,637,361 $ 4,660,691 $ 4,527,726 $ 4,686,451 $ 4,689,379 $ 4,686,451 Tangible common equity to tangible assets (Non-GAAP) 7.23 % 7.25 % 7.17 % 7.13 % 6.49 % 7.23 % 6.49 % 1Tangible book value per share (Non-GAAP) is computed by dividing total stockholder's equity, less goodwill and other intangible assets, by common shares outstanding.