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SmartFinancial Announces Results for the Fourth Quarter 2023
Source: Nasdaq GlobeNewswire / 22 Jan 2024 17:00:13 America/New_York
KNOXVILLE, Tenn., Jan. 22, 2024 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NYSE: SMBK), today announced net income of $6.2 million, or $0.37 per diluted common share, for the fourth quarter of 2023, compared to net income of $13.0 million, or $0.77 per diluted common share, for the fourth quarter of 2022, and compared to prior quarter net income of $2.1 million, or $0.12 per diluted common share. Operating earnings1, which excludes non-recurring expenses related to a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation, net of tax adjustments, totaled $6.9 million, or $0.41 per diluted common share, in the fourth quarter of 2023, compared to $12.9 million, or $0.76 per diluted common share, in the fourth quarter of 2022, and compared to $7.2 million, or $0.43 per diluted common share, in the third quarter of 2023.
Highlights for the Fourth Quarter of 2023
- Operating earnings1 of $6.9 million, or $0.41 per diluted common share
- Net organic loan and lease growth of $66 million - 8% annualized quarter-over-quarter increase
- Credit quality remains solid with nonperforming assets to total assets of 0.20%
- Deposit growth of $21.3 million – 2.0% annualized quarter-over-quarter increase
- SmartFinancial celebrates successful debut on the New York Stock Exchange
- Chief Banking Officer position added in fourth quarter 2023
- SmartBank President and CEO elected to Federal Reserve Bank of Atlanta’s Board of Directors
Billy Carroll, President & CEO, stated: “Our Company closed 2023 with positive momentum despite persistent operating environment challenges. The fourth quarter was highlighted by continued growth in our balance sheet with loans growing at 8% and deposits growing at 2%, annualized, respectively quarter over quarter. Our operating earnings were bolstered by stabilization of our net interest margin, as well as continued expense control. Despite the headwinds our industry faced during the year, our team responded incredibly well, positioning SmartBank to continue its upward trajectory.”
SmartFinancial's Chairman, Miller Welborn, concluded: “We are extremely proud of the entire SmartBank family for its efforts this year. Once again, this year showed that our team’s steadfast commitment to clients, even in the face of adversity, continues to be a winning formula. And while our growth in 2023 was good, I am especially pleased with the various operational enhancements we implemented throughout the year. Our associates work tirelessly to make SmartBank better and it’s through these initiatives that we improved our organization and ready us for 2024 and beyond. Thank you!”
Net Interest Income and Net Interest Margin
Net interest income was $31.5 million for the fourth quarter of 2023, compared to $31.0 million for the prior quarter. Average earning assets totaled $4.38 billion, a decrease of $17.3 million from the prior quarter. The decrease in average earnings assets was primarily driven by a decrease in average securities of $125.5 million, offset by an increase in average loans and leases of $47.8 million and average interest-earning cash of $60.4 million. Average interest-bearing liabilities increased by $19.7 million from the prior quarter, attributable to an increase in average deposits of $22.5 million, offset by a decrease in average borrowings of $2.8 million.
The tax equivalent net interest margin was 2.86% for the fourth quarter of 2023, compared to 2.81% for the prior quarter. The tax equivalent net interest margin was positively impacted by the increased yield on interest-earning assets coupled with a slower rise in the cost of interest-bearing liabilities, quarter over quarter. The yield on loans and leases, excluding loan fees, was 5.61% for the fourth quarter, compared to 5.52% for the prior quarter.
The cost of total deposits for the fourth quarter of 2023 was 2.35% compared to 2.20% in the prior quarter. The cost of interest-bearing liabilities increased to 3.07% for the fourth quarter of 2023, compared to 2.89% for the prior quarter. The cost of average interest-bearing deposits was 3.00% for the fourth quarter of 2023, compared to 2.84% for the prior quarter, an increase of 16 basis points.
The following table presents selected interest rates and yields for the periods indicated:
Three Months Ended Dec Sep Increase Selected Interest Rates and Yields 2023 2023 (Decrease) Yield on loans and leases, excluding loan fees 5.61 % 5.52 % 0.09 % Yield on loans and leases 5.68 % 5.61 % 0.07 % Yield on earning assets, on a fully tax equivalent basis (FTE) 5.22 % 4.99 % 0.23 % Cost of interest-bearing deposits 3.00 % 2.84 % 0.16 % Cost of total deposits 2.35 % 2.20 % 0.15 % Cost of interest-bearing liabilities 3.07 % 2.89 % 0.18 % Net interest margin, FTE 2.86 % 2.81 % 0.05 % Provision for Credit Losses on Loans and Leases and Credit Quality
At December 31, 2023, the allowance for credit losses was $35.1 million. The allowance for credit losses to total loans and leases was 1.02% as of December 31, 2023, compared to 1.00% as of September 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 Dec Sep Provision for Credit Losses on Loans and Leases Rollforward 2023 2023 Change Beginning balance $ 33,687 $ 32,747 $ 940 Charge-offs (424 ) (417 ) (7 ) Recoveries 302 73 229 Net (charge-offs) recoveries (122 ) (344 ) 222 Provision for credit losses(1) 1,501 1,284 217 Ending balance $ 35,066 $ 33,687 $ 1,379 Allowance for credit losses to total loans and leases, gross 1.02 % 1.00 % 0.02 % (1) The current quarter-ended and prior quarter-ended, excludes unfunded commitments provision of $69 thousand and a release of $489 thousand, respectively. At December 31, 2023, the unfunded commitment liability totaled $2.4 million.
Nonperforming loans and leases as a percentage of total loans and leases was 0.24% as of December 31, 2023, an increase of 12 basis points from the 0.12% reported in the third 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 0.20% as of December 31, 2023, and 0.12% on September 30, 2023.
The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):
Three Months Ended Dec Sep Increase Credit Quality 2023 2023 (Decrease) Nonaccrual loans and leases $ 7,931 $ 3,934 $ 3,997 Loans and leases past due 90 days or more and still accruing 170 229 (59 ) Total nonperforming loans and leases 8,101 4,163 3,938 Other real estate owned 517 1,370 (853 ) Other repossessed assets 1,117 348 769 Total nonperforming assets $ 9,735 $ 5,881 $ 3,854 Nonperforming loans and leases to total loans and leases, gross 0.24 % 0.12 % 0.12 % Nonperforming assets to total assets 0.20 % 0.12 % 0.08 % Noninterest Income
Noninterest income increased $6.9 million to $7.6 million for the fourth quarter of 2023 compared to $691 thousand for the prior quarter. The current quarter increase was associated with the $6.8 million pre-tax loss on the sale of $159.6 million of available for sale securities, moving into higher yielding assets during the prior quarter. Excluding the loss on securities, noninterest income increased $87 thousand quarter over quarter.
The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):
Three Months Ended Dec Sep Increase Noninterest Income 2023 2023 (Decrease) Service charges on deposit accounts $ 1,673 $ 1,736 $ (63 ) Gain (loss) on sale of securities, net - (6,801 ) 6,801 Mortgage banking income 227 309 (82 ) Investment services 1,339 1,461 (122 ) Insurance commissions 1,133 1,153 (20 ) Interchange and debit card transaction fees 1,370 1,357 13 Other 1,837 1,476 361 Total noninterest income $ 7,579 $ 691 $ 6,888 Noninterest Expense
Noninterest expense increased $1.2 million to $29.7 million for the fourth quarter of 2023 compared to $28.5 million for the prior quarter. The current quarter increase was primarily related to an increase in other noninterest expenses associated with a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation.
The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):
Three Months Ended Dec Sep Increase Noninterest Expense 2023 2023 (Decrease) Salaries and employee benefits $ 16,275 $ 16,785 $ (510 ) Occupancy and equipment 3,378 3,547 (169 ) FDIC insurance 915 825 90 Other real estate and loan related expenses 781 603 178 Advertising and marketing 336 346 (10 ) Data processing and technology 2,458 2,378 80 Professional services 1,136 735 401 Amortization of intangibles 643 647 (4 ) Merger related and restructuring expenses - 110 (110 ) Other 3,773 2,540 1,233 Total noninterest expense $ 29,695 $ 28,516 $ 1,179 Income Tax Expense
Income tax expense was $1.6 million for the fourth quarter of 2023, an increase of $1.3 million, compared to $319 thousand for the prior quarter.
The effective tax rate was 20.95% for the fourth quarter of 2023 and 13.37% for the prior quarter. The primary reason for the 7.58% increase in the effective tax rate was due to lower earnings in the prior quarter, largely from the $6.8 million pre-tax loss on sale of available-for-sale securities.
Balance Sheet Trends
Total assets at December 31, 2023 were $4.83 billion compared to $4.64 billion at December 31, 2022. The $191.9 million increase is primarily attributable to increases in loans and leases of $190.8 million, cash and cash equivalents of $85.8 million and other assets of $7.5 million. Asset increases were offset by a decrease in securities of $80.2 million and an increase in the allowance for credit losses of $11.7 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 $4.37 billion at December 31, 2023 from $4.21 billion at December 31, 2022. The increase of $164.5 million was primarily from organic deposit growth of $190.8 million, offset by a decrease in borrowings of $28.8 million.
Shareholders' equity at December 31, 2023, totaled $459.9 million, an increase of $27.4 million, from December 31, 2022. The increase in shareholders' equity was primarily driven by net income of $28.6 million for the twelve months ended December 31, 2023, and the positive change of $9.4 million in accumulated other comprehensive income, 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 $5.4 million. Tangible book value per share1 was $20.76 at December 31, 2023, compared to $19.09 at December 31, 2022. Tangible common equity1 as a percentage of tangible assets1 was 7.47% at December 31, 2023, compared with 7.13% at December 31, 2022.
1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation
The following table presents selected balance sheet information for the periods indicated (dollars in thousands):
Dec Dec Increase Selected Balance Sheet Information 2023 2022 (Decrease) Total assets $ 4,829,387 $ 4,637,498 $ 191,889 Total liabilities 4,369,501 4,205,046 164,455 Total equity 459,886 432,452 27,434 Securities 689,646 769,842 (80,196 ) Loans and leases 3,444,462 3,253,627 190,835 Deposits 4,267,854 4,077,100 190,754 Borrowings 13,078 41,860 (28,782 ) Board of Directors Declares Dividend
On January 18, 2024, the board of directors of SmartFinancial declared a quarterly cash dividend of $0.08 per share of SmartFinancial common stock payable on February 20, 2024, to shareholders of record as of the close of business on February 2, 2024.
Conference Call Information
SmartFinancial issued this earnings release for the fourth quarter of 2023 on Monday, January 22, 2024, and will host a conference call on Tuesday, January 23, 2024, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 470-1428 or (404) 975-4839 and entering the access code, 197280. A replay of the conference call will be available through March 14, 2024, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 371589. 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 per common share, (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 per common share (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 Dec Sep Jun Mar Dec 2023 2023 2023 2023 2022 Assets: Cash and cash equivalents $ 352,271 $ 400,258 $ 238,898 $ 306,934 $ 266,424 Securities available-for-sale, at fair value 408,410 385,131 540,308 560,418 483,893 Securities held-to-maturity, at amortized cost 281,236 282,313 283,564 284,776 285,949 Other investments 13,662 13,805 14,396 14,059 15,530 Loans held for sale 4,418 2,734 986 3,324 1,752 Loans and leases 3,444,462 3,378,999 3,337,790 3,281,787 3,253,627 Less: Allowance for credit losses (35,066 ) (33,687 ) (32,747 ) (32,279 ) (23,334 ) Loans and leases, net 3,409,396 3,345,312 3,305,043 3,249,508 3,230,293 Premises and equipment, net 92,963 92,020 92,351 92,190 92,511 Other real estate owned 517 1,370 1,708 1,708 1,436 Goodwill and other intangibles, net 107,148 107,792 108,439 109,114 109,772 Bank owned life insurance 83,434 82,914 82,419 81,938 81,470 Other assets 75,932 83,522 77,688 65,836 68,468 Total assets $ 4,829,387 $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 Liabilities: Deposits: Noninterest-bearing demand $ 898,044 $ 923,763 $ 1,003,432 $ 989,753 $ 1,072,449 Interest-bearing demand 1,006,915 993,717 938,758 989,738 965,911 Money market and savings 1,812,427 1,766,409 1,720,202 1,761,847 1,583,481 Time deposits 550,468 562,620 537,192 488,208 455,259 Total deposits 4,267,854 4,246,509 4,199,584 4,229,546 4,077,100 Borrowings 13,078 14,117 15,496 16,546 41,860 Subordinated debt 42,099 42,078 42,057 42,036 42,015 Other liabilities 46,470 47,815 43,816 38,278 44,071 Total liabilities 4,369,501 4,350,519 4,300,953 4,326,406 4,205,046 Shareholders' Equity: Common stock 16,989 16,995 17,004 17,004 16,901 Additional paid-in capital 295,699 295,542 295,296 294,930 294,330 Retained earnings 173,105 168,271 167,564 160,085 156,545 Accumulated other comprehensive income (loss) (25,907 ) (34,156 ) (35,017 ) (28,620 ) (35,324 ) Total shareholders' equity 459,886 446,652 444,847 443,399 432,452 Total liabilities & shareholders' equity $ 4,829,387 $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)Three Months Ended Year Ended Dec Sep Jun Mar Dec Dec Dec 2023 2023 2023 2023 2022 2023 2022 Interest income: Loans and leases, including fees $ 48,767 $ 47,539 $ 45,446 $ 44,728 $ 40,082 $ 186,479 $ 136,381 Investment securities: Taxable 4,344 4,335 4,335 3,651 3,337 16,665 11,799 Tax-exempt 352 356 357 353 797 1,418 2,166 Federal funds sold and other earning assets 4,032 3,045 1,956 4,446 3,098 13,481 8,488 Total interest income 57,495 55,275 52,094 53,178 47,314 218,043 158,834 Interest expense: Deposits 24,926 23,433 19,554 16,346 8,844 84,260 18,228 Borrowings 162 210 339 224 232 936 602 Subordinated debt 890 626 626 626 626 2,767 2,503 Total interest expense 25,978 24,269 20,519 17,196 9,702 87,963 21,333 Net interest income 31,517 31,006 31,575 35,982 37,612 130,080 137,501 Provision for credit losses 1,571 795 113 550 788 3,029 4,018 Net interest income after provision for credit losses 29,946 30,211 31,462 35,432 36,824 127,051 133,483 Noninterest income: Service charges on deposit accounts 1,673 1,736 1,657 1,445 1,477 6,511 5,853 Gain (loss) on sale of securities, net — (6,801 ) — — 144 (6,801 ) 144 Mortgage banking 227 309 332 172 77 1,040 1,552 Investment services 1,339 1,461 1,300 1,005 958 5,105 4,144 Insurance commissions 1,133 1,153 1,139 1,259 1,233 4,684 3,595 Interchange and debit card transaction fees 1,370 1,357 1,347 1,383 1,328 5,457 5,435 Other 1,837 1,476 1,355 1,661 1,908 6,329 6,992 Total noninterest income 7,579 691 7,130 6,925 7,125 22,325 27,715 Noninterest expense: Salaries and employee benefits 16,275 16,785 15,947 16,742 16,384 65,749 63,420 Occupancy and equipment 3,378 3,547 3,318 3,208 3,015 13,451 12,034 FDIC insurance 915 825 875 541 650 3,156 2,672 Other real estate and loan related expense 781 603 441 572 517 2,397 2,446 Advertising and marketing 336 346 305 355 308 1,342 1,293 Data processing and technology 2,458 2,378 2,235 2,163 2,097 9,235 7,283 Professional services 1,136 735 764 807 981 3,443 3,790 Amortization of intangibles 643 647 675 659 688 2,624 2,607 Merger related and restructuring expenses — 110 — — (45 ) 110 562 Other 3,773 2,540 2,850 2,482 2,821 11,643 10,183 Total noninterest expense 29,695 28,516 27,410 27,529 27,416 113,150 106,290 Income before income taxes 7,830 2,386 11,182 14,828 16,533 36,226 54,908 Income tax expense 1,640 319 2,346 3,328 3,529 7,633 11,886 Net income $ 6,190 $ 2,067 $ 8,836 $ 11,500 $ 13,004 $ 28,593 $ 43,022 Earnings per common share: Basic $ 0.37 $ 0.12 $ 0.53 $ 0.69 $ 0.78 $ 1.70 $ 2.57 Diluted $ 0.37 $ 0.12 $ 0.52 $ 0.68 $ 0.77 $ 1.69 $ 2.55 Weighted average common shares outstanding: Basic 16,814,647 16,807,548 16,806,389 16,791,406 16,758,706 16,805,068 16,740,450 Diluted 16,918,234 16,918,635 16,898,091 16,896,494 16,884,253 16,911,185 16,871,369 SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSISThree Months Ended December 31, 2023 September 30, 2023 December 31, 2022 Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost Assets: Loans and leases, including fees1 $ 3,408,430 $ 48,767 5.68 % $ 3,360,678 $ 47,539 5.61 % $ 3,150,493 $ 40,082 5.05 % Taxable securities 618,511 4,344 2.79 % 743,054 4,335 2.31 % 701,787 3,337 1.89 % Tax-exempt securities2 63,767 445 2.77 % 64,707 451 2.77 % 93,721 958 4.06 % Federal funds sold and other earning assets 289,896 4,032 5.52 % 229,487 3,045 5.26 % 322,970 3,098 3.81 % Total interest-earning assets 4,380,604 57,588 5.22 % 4,397,926 55,370 4.99 % 4,268,971 47,475 4.41 % Noninterest-earning assets 386,202 379,456 372,864 Total assets $ 4,766,806 $ 4,777,382 $ 4,641,835 Liabilities and Shareholders’ Equity: Interest-bearing demand deposits $ 974,637 5,631 2.29 % $ 969,122 5,463 2.24 % $ 924,320 3,141 1.35 % Money market and savings deposits 1,764,826 14,556 3.27 % 1,753,671 13,744 3.11 % 1,587,688 4,855 1.21 % Time deposits 556,996 4,739 3.38 % 551,191 4,226 3.04 % 459,996 848 0.73 % Total interest-bearing deposits 3,296,459 24,926 3.00 % 3,273,984 23,433 2.84 % 2,972,004 8,844 1.18 % Borrowings 13,420 162 4.79 % 16,228 210 5.13 % 18,309 232 5.03 % Subordinated debt 42,087 890 8.39 % 42,065 626 5.90 % 42,002 626 5.91 % Total interest-bearing liabilities 3,351,966 25,978 3.07 % 3,332,277 24,269 2.89 % 3,032,315 9,702 1.27 % Noninterest-bearing deposits 915,259 951,179 1,146,374 Other liabilities 50,055 48,494 43,109 Total liabilities 4,317,280 4,331,950 4,221,798 Shareholders' equity 449,526 445,432 420,037 Total liabilities and shareholders' equity $ 4,766,806 $ 4,777,382 $ 4,641,835 Net interest income, taxable equivalent $ 31,610 $ 31,101 $ 37,773 Interest rate spread 2.14 % 2.11 % 3.14 % Tax equivalent net interest margin 2.86 % 2.81 % 3.51 % Percentage of average interest-earning assets to average interest-bearing liabilities 130.69 % 131.98 % 140.78 % Percentage of average equity to average assets 9.43 % 9.32 % 9.05 % 1 Includes average balance of $2.3 million, $2.7 million, and $3.3 million in PPP loans for the quarters ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively.
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $94 thousand, $95 thousand, and $161 thousand of taxable equivalent income for the quarters ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively.SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSISYear Ended December 31, 2023 December 31, 2022 Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Assets: Loans and leases, including fees1 $ 3,334,523 $ 186,479 5.59 % $ 2,948,511 $ 136,381 4.63 % Taxable securities 713,637 16,665 2.34 % 688,428 11,799 1.71 % Tax-exempt securities2 64,816 1,795 2.77 % 100,566 2,831 2.82 % Federal funds sold and other earning assets 272,864 13,481 4.94 % 577,593 8,488 1.47 % Total interest-earning assets 4,385,840 218,420 4.98 % 4,315,098 159,499 3.70 % Noninterest-earning assets 370,436 373,026 Total assets $ 4,756,276 $ 4,688,124 Liabilities and Shareholders’ Equity: Interest-bearing demand deposits $ 959,639 20,214 2.11 % $ 945,414 6,278 0.66 % Money market and savings deposits 1,768,869 50,468 2.85 % 1,576,170 9,137 0.58 % Time deposits 520,799 13,578 2.61 % 513,416 2,813 0.55 % Total interest-bearing deposits 3,249,307 84,260 2.59 % 3,035,000 18,228 0.60 % Borrowings 17,824 936 5.25 % 32,986 602 1.83 % Subordinated debt 42,055 2,767 6.58 % 41,970 2,503 5.96 % Total interest-bearing liabilities 3,309,186 87,963 2.66 % 3,109,956 21,333 0.69 % Noninterest-bearing deposits 958,078 1,120,555 Other liabilities 46,052 34,361 Total liabilities 4,313,316 4,264,872 Shareholders' equity 442,960 423,252 Total liabilities and shareholders' equity $ 4,756,276 $ 4,688,124 Net interest income, taxable equivalent $ 130,457 $ 138,166 Interest rate spread 2.32 % 3.01 % Tax equivalent net interest margin 2.97 % 3.20 % Percentage of average interest-earning assets to average interest-bearing liabilities 132.54 % 138.75 % Percentage of average equity to average assets 9.31 % 9.03 % 1 Includes average balance of $2.8 million and $14.1 million in PPP loans for the year ended December 31, 2023, and 2022, respectively.
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $377 thousand and $665 thousand of taxable equivalent income for the year ended December 31, 2023, and 2022, respectively.SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)As of and for The Three Months Ended Dec Sep Jun Mar Dec 2023 2023 2023 2023 2022 Composition of Loans and Leases: Commercial real estate: Owner occupied $ 798,416 $ 776,402 $ 769,978 $ 764,166 $ 765,041 Non-owner occupied 940,789 890,774 871,779 871,368 862,720 Commercial real estate, total 1,739,205 1,667,176 1,641,757 1,635,534 1,627,761 Commercial & industrial 645,918 617,115 594,427 571,153 551,867 Construction & land development 327,185 373,068 394,742 386,253 402,501 Consumer real estate 649,867 638,518 624,828 606,343 587,977 Leases 68,752 68,538 66,401 67,701 67,427 Consumer and other 13,535 14,584 15,635 14,803 16,094 Total loans and leases $ 3,444,462 $ 3,378,999 $ 3,337,790 $ 3,281,787 $ 3,253,627 Asset Quality and Additional Loan Data: Nonperforming loans and leases $ 8,101 $ 4,163 $ 3,722 $ 3,247 $ 2,951 Other real estate owned 517 1,370 1,708 1,708 1,436 Other repossessed assets 1,117 348 282 66 422 Total nonperforming assets $ 9,735 $ 5,881 $ 5,712 $ 5,021 $ 4,809 Restructured loans and leases not included in nonperforming loans and leases $ 4,245 $ 2,376 $ 657 $ 97 $ 101 Net charge-offs to average loans and leases (annualized) 0.04 % 0.04 % (0.01 ) % 0.03 % 0.03 % Allowance for credit losses to loans and leases 1.02 % 1.00 % 0.98 % 0.98 % 0.72 % Nonperforming loans and leases to total loans and leases, gross 0.24 % 0.12 % 0.11 % 0.10 % 0.09 % Nonperforming assets to total assets 0.20 % 0.12 % 0.12 % 0.11 % 0.10 % Acquired loan and lease fair value discount balance $ — $ — $ — $ — $ 13,128 Accretion income on acquired loans and leases — — — — 1,396 PPP net fees deferred balance 84 94 104 114 122 PPP net fees recognized 10 10 10 8 17 Capital Ratios: Equity to Assets 9.52 % 9.31 % 9.37 % 9.30 % 9.33 % Tangible common equity to tangible assets (Non-GAAP)1 7.47 % 7.23 % 7.25 % 7.17 % 7.13 % SmartFinancial, Inc.2 Tier 1 leverage 8.27 % 8.13 % 8.24 % 7.91 % 7.95 % Common equity Tier 1 10.21 % 10.07 % 10.12 % 9.95 % 9.65 % Tier 1 capital 10.21 % 10.07 % 10.12 % 9.95 % 9.65 % Total capital 11.86 % 11.90 % 11.94 % 11.77 % 11.40 % SmartBank Estimated3 Tier 1 leverage 9.18 % 9.00 % 9.18 % 8.87 % 8.90 % Common equity Tier 1 11.29 % 11.15 % 11.27 % 11.15 % 10.82 % Tier 1 capital 11.29 % 11.15 % 11.27 % 11.15 % 10.82 % Total capital 12.04 % 11.87 % 11.97 % 11.85 % 11.44 % 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 Year Ended Dec Sep Jun Mar Dec Dec Dec 2023 2023 2023 2023 2022 2023 2022 Selected Performance Ratios (Annualized): Return on average assets 0.52 % 0.17 % 0.75 % 0.97 % 1.11 % 0.60 % 0.92 % Return on average shareholders' equity 5.46 % 1.84 % 7.98 % 10.79 % 12.28 % 6.45 % 10.16 % Return on average tangible common equity¹ 7.18 % 2.43 % 10.57 % 14.45 % 16.65 % 8.55 % 13.60 % Noninterest income / average assets 0.63 % 0.06 % 0.61 % 0.59 % 0.61 % 0.47 % 0.59 % Noninterest expense / average assets 2.47 % 2.37 % 2.34 % 2.33 % 2.34 % 2.38 % 2.27 % Efficiency ratio 75.95 % 89.96 % 70.82 % 64.16 % 61.28 % 74.24 % 64.33 % Operating Selected Performance Ratios (Annualized): Operating return on average assets1 0.57 % 0.60 % 0.75 % 0.97 % 1.10 % 0.72 % 0.92 % Operating PPNR return on average assets1 0.86 % 0.84 % 0.96 % 1.30 % 1.46 % 0.99 % 1.27 % Operating return on average shareholders' equity1 6.07 % 6.41 % 7.98 % 10.79 % 12.15 % 7.77 % 10.24 % Operating return on average tangible common equity1 7.98 % 8.46 % 10.57 % 14.45 % 16.47 % 10.29 % 13.69 % Operating efficiency ratio1 73.41 % 73.60 % 70.64 % 64.02 % 61.36 % 70.26 % 63.79 % Operating noninterest income / average assets1 0.63 % 0.62 % 0.61 % 0.59 % 0.60 % 0.61 % 0.59 % Operating noninterest expense / average assets1 2.39 % 2.36 % 2.34 % 2.33 % 2.35 % 2.36 % 2.26 % Selected Interest Rates and Yields: Yield on loans and leases, excluding loan fees 5.61 % 5.52 % 5.39 % 5.20 % 4.99 % 5.43 % 4.41 % Yield on loans and leases 5.68 % 5.61 % 5.51 % 5.57 % 5.05 % 5.59 % 4.63 % Yield on earning assets, FTE 5.22 % 4.99 % 4.82 % 4.88 % 4.41 % 4.98 % 3.70 % Cost of interest-bearing deposits 3.00 % 2.84 % 2.46 % 2.05 % 1.18 % 2.59 % 0.60 % Cost of total deposits 2.35 % 2.20 % 1.89 % 1.56 % 0.85 % 2.00 % 0.44 % Cost of interest-bearing liabilities 3.07 % 2.89 % 2.53 % 2.12 % 1.27 % 2.66 % 0.69 % Net interest margin, FTE 2.86 % 2.81 % 2.93 % 3.31 % 3.51 % 2.97 % 3.20 % Per Common Share: Net income, basic $ 0.37 $ 0.12 $ 0.53 $ 0.69 $ 0.78 $ 1.70 $ 2.57 Net income, diluted 0.37 0.12 0.52 0.68 0.77 1.69 2.55 Operating earnings, basic¹ 0.41 0.43 0.53 0.69 0.77 2.05 2.59 Operating earnings, diluted¹ 0.41 0.43 0.52 0.68 0.76 2.03 2.57 Book value 27.07 26.28 26.16 26.08 25.59 27.07 25.59 Tangible book value¹ 20.76 19.94 19.78 19.66 19.09 20.76 19.09 Common shares outstanding 16,988,879 16,994,543 17,004,092 17,004,092 16,900,805 16,988,879 16,900,805 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 Year Ended Dec Sep Jun Mar Dec Dec Dec 2023 2023 2023 2022 2022 2023 2022 Operating Earnings: Net income (GAAP) $ 6,190 $ 2,067 $ 8,836 $ 11,500 $ 13,004 $ 28,593 $ 43,022 Noninterest income: Securities (gains) losses, net — 6,801 — — (144 ) 6,801 (144 ) Noninterest expenses: Donation of a former branch location 250 — — — — 250 — Accruals for pending litigation 675 — — — — 675 — Merger related and restructuring expenses — 110 — — (45 ) 110 562 Income taxes: Income tax effect of adjustments (239 ) (1,785 ) — — 49 (2,024 ) (108 ) Operating earnings (Non-GAAP) $ 6,876 $ 7,193 $ 8,836 $ 11,500 $ 12,864 $ 34,405 $ 43,332 Operating earnings per common share (Non-GAAP): Basic $ 0.41 $ 0.43 $ 0.53 $ 0.69 $ 0.77 $ 2.05 $ 2.59 Diluted 0.41 0.43 0.52 0.68 0.76 2.03 2.57 Operating Noninterest Income: Noninterest income (GAAP) $ 7,579 $ 691 $ 7,130 $ 6,925 $ 7,125 $ 22,325 $ 27,715 Securities (gains) losses, net — 6,801 — — (144 ) 6,801 (144 ) Operating noninterest income (Non-GAAP) $ 7,579 $ 7,492 $ 7,130 $ 6,925 $ 6,981 $ 29,126 $ 27,571 Operating noninterest income (Non-GAAP)/average assets1 0.63 % 0.62 % 0.61 % 0.59 % 0.60 % 0.61 % 0.59 % Operating Noninterest Expense: Noninterest expense (GAAP) $ 29,695 $ 28,516 $ 27,410 $ 27,529 $ 27,416 $ 113,150 $ 106,290 Donation of a former branch location (250 ) — — — — (250 ) — Accruals for pending litigation (675 ) — — — — (675 ) — Merger related and restructuring expenses — (110 ) — — 45 (110 ) (562 ) Operating noninterest expense (Non-GAAP) $ 28,770 $ 28,406 $ 27,410 $ 27,529 $ 27,461 $ 112,115 $ 105,728 Operating noninterest expense (Non-GAAP)/average assets2 2.39 % 2.36 % 2.34 % 2.33 % 2.35 % 2.36 % 2.26 % Operating Pre-provision Net revenue ("PPNR") Earnings: Net interest income (GAAP) $ 31,517 $ 31,006 $ 31,575 $ 35,982 $ 37,612 $ 130,080 $ 137,501 Operating noninterest income (Non-GAAP) 7,579 7,492 7,130 6,925 6,981 29,126 27,571 Operating noninterest expense (Non-GAAP) (28,770 ) (28,406 ) (27,410 ) (27,529 ) (27,461 ) (112,115 ) (105,728 ) Operating PPNR earnings (Non-GAAP) $ 10,326 $ 10,092 $ 11,295 $ 15,378 $ 17,132 $ 47,091 $ 59,344 Non-GAAP Return Ratios: Operating return on average assets (Non-GAAP)3 0.57 % 0.60 % 0.75 % 0.97 % 1.10 % 0.72 % 0.92 % Operating PPNR return on average assets (Non-GAAP)4 0.86 % 0.84 % 0.96 % 1.30 % 1.46 % 0.99 % 1.27 % Return on average tangible common equity (Non-GAAP)5 7.18 % 2.43 % 10.57 % 14.45 % 16.65 % 8.55 % 13.60 % Operating return on average shareholders' equity (Non-GAAP)6 6.07 % 6.41 % 7.98 % 10.79 % 12.15 % 7.77 % 10.24 % Operating return on average tangible common equity (Non-GAAP)7 7.98 % 8.46 % 10.57 % 14.45 % 16.47 % 10.29 % 13.69 % Operating Efficiency Ratio: Efficiency ratio (GAAP) 75.95 % 89.96 % 70.82 % 64.16 % 61.28 % 74.24 % 64.33 % Adjustment for taxable equivalent yields (0.18 ) % (0.27 ) % (0.18 ) % (0.14 ) % (0.22 ) % (0.18 ) % (0.26 ) % Adjustment for securities gains (losses) — % (15.89 ) % — % — % 0.20 % (3.17 ) % 0.06 % Adjustment for donation of a former branch location (0.64 ) % — % — % — % — % (0.16 ) % — % Adjustment for accruals for pending litigation (1.72 ) % — % — % — % — % (0.44 ) % — % Adjustment for merger related income and costs — % (0.20 ) % — % — % 0.10 % (0.03 ) % (0.34 ) % Operating efficiency ratio (Non-GAAP) 73.41 % 73.60 % 70.64 % 64.02 % 61.36 % 70.26 % 63.79 % 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 Year Ended Dec Sep Jun Mar Dec Dec Dec 2023 2023 2023 2022 2022 2023 2022 Tangible Common Equity: Shareholders' equity (GAAP) $ 459,886 $ 446,652 $ 444,847 $ 443,399 $ 432,452 $ 459,886 $ 432,452 Less goodwill and other intangible assets 107,148 107,792 108,439 109,114 109,772 107,148 109,772 Tangible common equity (Non-GAAP) $ 352,738 $ 338,860 $ 336,408 $ 334,285 $ 322,680 $ 352,738 $ 322,680 Average Tangible Common Equity: Average shareholders' equity (GAAP) $ 449,526 $ 445,432 $ 444,283 $ 432,382 $ 420,037 $ 442,960 $ 423,252 Less average goodwill and other intangible assets 107,551 108,194 108,851 109,537 110,206 108,527 106,834 Average tangible common equity (Non-GAAP) $ 341,975 $ 337,238 $ 335,432 $ 322,845 $ 309,831 $ 334,433 $ 316,418 Tangible Book Value per Common Share: Book value per common share (GAAP) $ 27.07 $ 26.28 $ 26.16 $ 26.08 $ 25.59 $ 27.07 $ 25.59 Adjustment due to goodwill and other intangible assets (6.31 ) (6.34 ) (6.38 ) (6.42 ) (6.50 ) (6.31 ) (6.50 ) Tangible book value per common share (Non-GAAP)1 $ 20.76 $ 19.94 $ 19.78 $ 19.66 $ 19.09 $ 20.76 $ 19.09 Tangible Common Equity to Tangible Assets: Total Assets (GAAP) $ 4,829,387 $ 4,797,171 $ 4,745,800 $ 4,769,805 $ 4,637,498 $ 4,829,387 $ 4,637,498 Less goodwill and other intangibles 107,148 107,792 108,439 109,114 109,772 107,148 109,772 Tangible Assets (Non-GAAP) $ 4,722,239 $ 4,689,379 $ 4,637,361 $ 4,660,691 $ 4,527,726 $ 4,722,239 $ 4,527,726 Tangible common equity to tangible assets (Non-GAAP) 7.47 % 7.23 % 7.25 % 7.17 % 7.13 % 7.47 % 7.13 % 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.