Exhibit 99.1

 

 

1Q 2016

 

 

  

SmartFinancial Reports First Quarter Results

 

KNOXVILLE, TN - April 27, 2016 - SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), announced today net income of $1.3 million in its first quarter, compared to $1.2 million in the prior quarter. In the third quarter 2015, SmartFinancial successfully completed the merger of two holding companies, legacy SmartFinancial, Inc. and Cornerstone Bancshares, Inc., and carried forward the name "SmartFinancial, Inc.". This quarter completes a second full quarter’s results from the combined company; in addition, SmartBank and Cornerstone Community Bank completed their merger at the end of February.

 

Billy Carroll, President & CEO stated: "We are pleased with these results as our newly combined company continues to build momentum and realize greater efficiencies. It’s powerful to move past internally focused merger work and set the stage for growth. Our organic loan and deposit growth kept good pace during the first quarter, even with a number of our team members involved in the bank integration. We’re on plan and expect continued merger efficiencies in the coming months. We’ll remain focused on fundamentals and strengthening our foundation to support organic growth and increased earnings.”

 

Carroll also noted, “We secured a talented mortgage team in 2015 which has allowed us to expand our mortgage capabilities franchise-wide. We are beginning to close loans with these new products, using this new channel. We have significant opportunity to serve more clients with even better solutions across our entire footprint while driving greater margins in residential lending. To leverage these capabilities, we continue to identify and recruit revenue producers for residential and other areas of the bank in every market we serve.”

 

SmartFinancial's Chairman Miller Welborn concluded: "This board could not be more enthusiastic about the brand, the vision and the talent of this team. We have a strong story to tell and have every confidence that we’ll achieve the ‘sweet spot’ for community banking which will include being a best place to work, a great place to bank and especially rewarding for our shareholders. "

 

Performance Highlights 

 

•

Net income available to common shareholders totaled $1.1 million or $0.20 per share during the first quarter of 2016.

•

Annualized return on average assets equaled 0.54 percent in the first quarter of 2016, up from 0.47 percent in the fourth quarter of 2015.

•

Annualized net loan growth was approximately 6.4 percent in the first quarter of 2016, with the growth coming from increases in owner occupied commercial real estate, residential real estate, and construction and development loans.

•

Gain on sale of assets increased to $222 thousand as results from the mortgage unit accelerated even in spite of what is a normally weak quarter due to seasonality.

•

Maintained outstanding asset quality with just 0.82 percent of nonperforming assets to total assets.

 

 

 

 

 

1Q 2016 compared to 4Q 2015

 

Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $780 thousand in the first quarter of 2016 compared to $584 thousand in the fourth quarter of 2015. Net income available to common shareholders totaled $1.1 million in the first quarter of 2016, or $0.19 per diluted share, compared to $1.2 million, or $0.19 per diluted share, in the fourth quarter of 2015.

 

Net interest income to average assets of 3.67 percent for the quarter was down from 3.79 percent in the fourth quarter of 2015. Net interest income totaled $9.1 million in the first quarter of 2016 compared to $9.5 million in the fourth quarter of 2015. Net interest income was negatively impacted during the quarter primarily by a reduction in purchased loan accounting adjustments. One fewer day and slightly lower yields on loan balances had a marginal impact. Net interest margin, taxable equivalent, decreased from 4.10 percent in the fourth quarter of 2015 to 4.00 percent in the first quarter of 2016 due to lower yields for the reasons mentioned above.

 

Provision for loan losses was $138 thousand in the first quarter of 2016 compared to $567 thousand in the fourth quarter of 2015. The decrease in provision for loan losses was primarily due a reduction in historical loss rates used in the Company's ALLL model due to improvement in charge-off levels. Annualized net charge-offs were (0.02) percent of average loans in the first quarter of 2016 compared to 0.02 percent of average loans in the fourth quarter of 2015.

 

The ALLL was $4.5 million, or 0.61 percent of total loans as of March 31, 2016 compared to $4.4 million, or 0.60 percent of total loans, as of December 31, 2015. Adjusted ALLL, which includes the ALLL as well as net acquisition accounting fair value adjustments for acquired loans, was 2.11 percent of total loans as of March 31, 2016, which was down from 2.18 percent as of December 31, 2015. The reduction in adjusted ALLL resulted from continued accretion of fair value discounts.

 

Nonperforming loans as a percentage of total loans was 0.43 percent as of March 31, 2016, which was up slightly from 0.38 percent as of December 31, 2015. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.82 percent as of March 31, 2016 compared to 0.79 percent as of December 31, 2015.

 

Non-interest income to average assets of 0.43 percent for the quarter was down from 0.46 percent in the fourth quarter of 2015. Non-interest income totaled $1.1 million in the first quarter of 2016, compared to $1.2 million in the fourth quarter of 2015. Merger related reclassification drove a $101 decline in service charges and fees and a $72 thousand increase in other non-interest income. Gain on securities totaled $83 thousand. Gain on sale of loans and other assets which includes both SBA and mortgage loan income was $222 thousand, compared to $86 thousand in the fourth quarter of 2015. Gains on the sale of foreclosed assets were $58 thousand for the quarter.

 

 

 

 

 

Non-interest expense to average assets of 3.19 percent for the quarter was down slightly from 3.20 percent in the fourth quarter of 2015. Non-interest expense totaled $8.0 million in the first quarter of 2016, which was down $100 thousand from the fourth quarter of 2015. Salaries and employee benefits increased by $287 thousand in the first quarter mainly due to additions to the mortgage staff and annual performance based salary increases. Occupancy expense of $990 thousand was up $80 thousand from the previous quarter. Data processing and professional expenses fell a combined $473 thousand compared to the fourth quarter primarily due to a reduction in merger related costs. Marketing expenses of $173 thousand were up from $100 thousand in the fourth quarter primarily due to rebranding initiatives related to merger integration.

 

Income tax expense was $764 thousand in the first quarter of 2016 compared to $901 thousand in the fourth quarter of 2015. The Company's effective tax rate was 36.2 percent in the first quarter of 2015 compared to 43.2 percent in the fourth quarter of 2015. The fourth quarter 2015 effective tax rate was negatively impacted by merger costs which were non-deductible.

 

1Q 2016 compared to 1Q 2015

 

Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $780 thousand in the first quarter of 2016 compared to $41 thousand in the first quarter of 2015. Net income available to common shareholders totaled $1.1 million in the first quarter of 2016, or $0.19 per diluted share, compared to $308 thousand, or $0.09 per diluted share, in the first quarter of 2015. The Company's operations and financial performance were significantly impacted in nearly every respect by the merger of SmartFinancial, Inc. and Cornerstone Bancshares, Inc. on August 31, 2015. Therefore, financial results in 1Q 2016 are not comparable to results reported for 1Q 2015.

 

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 twelve branches, two loan production offices, and one mortgage production office located in East Tennessee, the Florida Panhandle, and North Georgia. Recruiting the best people, delivering exceptional client service, strategic branching and a conservative and disciplined approach to lending have all given rise to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartbank.com.

 

This release contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: changes in management’s plans for the future, prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and other factors that may be described in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

 

 

 

  

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, SmartFinancial assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

 

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; (iii) adjusted allowance for loan losses to loans; and (iv) tangible common equity, in its analysis of the Company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger and conversion costs, OREO gain and losses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses, merger and conversion costs, and adjustment for OREO gains and losses from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. Tangible common equity excludes total preferred stock, preferred stock paid in capital, goodwill, and other intangible assets.

 

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial 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.

 

Source

SmartFinancial, Inc.

 

Investor Contacts

 

Billy Carroll

President & CEO

865.868.0613

 

Frank Hughes

Executive Vice President

Investor Relations

423.385.3009

 

Media Contact

 

Kelley Fowler

First Vice President, Public Relations & Marketing

SmartBank

865.868.0611

kfowler@smartbank.net

 

 

 

 

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
		As of and for the three months ending
		March 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015				March 31, 2015
Selected Performance Ratios (Annualized)
Return on average assets			0.54	%			0.47	%			-0.04	%			0.05	%			0.27	%
Net operating return on average assets (Non-GAAP)			0.40	%			0.24	%			0.10	%			0.17	%			0.06	%
Return on average shareholder equity			5.29	%			4.75	%			-0.44	%			0.47	%			2.42	%
Net operating return on average shareholder equity (Non-GAAP)			3.89	%			2.47	%			1.05	%			1.58	%			0.51	%
Net interest income / average assets			3.67	%			3.79	%			3.65	%			3.53	%			3.46	%
Yield on earning assets, TE			4.45	%			4.54	%			4.45	%			4.27	%			4.25	%
Cost of interest-bearing liabilities			0.54	%			0.52	%			0.53	%			0.49	%			0.51	%
Net interest margin, TE			4.00	%			4.10	%			4.00	%			3.85	%			3.74	%
Non interest income / average assets			0.43	%			0.46	%			0.10	%			0.08	%			0.63	%
Non interest expense / average assets			3.19	%			3.20	%			3.69	%			3.36	%			3.32	%
Efficiency ratio			76.93	%			74.29	%			97.45	%			88.67	%			71.68	%
Operating efficiency ratio (Non-GAAP)			82.09	%			85.73	%			90.96	%			80.41	%			81.75	%
Pre-tax pre-provision income / average assets			0.90	%			1.05	%			0.06	%			0.26	%			0.76	%
Per Common Share
Net income, basic			0.20				0.20				(0.03	)			0.01				0.10
Net income, diluted			0.19				0.19				(0.03	)			0.01				0.09
Net operating earnings, basic (Non-GAAP)			0.13				0.10				0.04				0.06				0.01
Net operating earnings, diluted (Non-GAAP)			0.13				0.10				0.04				0.06				0.01
Book value			15.47				15.19				15.07				14.88				15.07
Tangible book value (Non-GAAP)			14.29				13.99				13.84				14.82				15.00
Common shares outstanding			5,817,204				5,806,477				5,735,393				2,965,783				2,965,783
Composition Of Loans
Commercial & financial			83,197				85,526				81,107				37,507				34,285
Real estate construction & Development			113,028				105,132				97,050				52,634				64,180
Real estate commercial			370,922				369,263				365,607				208,937				190,214
owner occupied			166,364				161,698				153,496				82,860				89,225
non-owner occupied			204,558				207,565				212,111				126,077				100,989
Real estate residential			166,214				161,427				162,090				89,876				81,253
Other loans			7,578				6,368				4,585				1,770				1,478
Total loans			740,939				727,716				710,439				390,724				371,410
Asset Quality Data and Ratios
Nonperforming loans			3,171				2,754				1,715				4,067				4,156
Foreclosed assets			5,133				5,358				9,647				3,728				4,170
Total nonperforming assets			8,304				8,112				11,362				7,795				8,326
Restructured loans not included in nonperforming loans			3,677				3,693				3,731				1,831				1,849
Net charge-offs to average loans (annualized)			-0.02	%			0.02	%			0.03	%			0.13	%			0.00	%
Allowance for loan losses to loans			0.61	%			0.60	%			0.54	%			0.98	%			1.05	%
Adjusted allowance for loan losses to loans (Non-GAAP)			2.11	%			2.18	%			2.26	%			2.38	%			2.75	%
Nonperforming loans to total loans, gross			0.43	%			0.38	%			0.24	%			1.04	%			1.12	%
Nonperforming assets to total assets			0.82	%			0.79	%			1.13	%			1.43	%			1.57	%
Capital Ratios
Tangible equity to tangible assets			9.43	%			9.17	%			9.14	%			10.30	%			10.68	%
Tangible common equity to tangible assets			8.24	%			7.99	%			7.94	%			8.09	%			8.41	%
SmartFinancial Inc.:
Tier 1 leverage			9.74	%			9.45	%			9.31	%			*				*
Common equity Tier 1			10.61	%			10.30	%			10.25	%			*				*
Tier 1 risk-based capital			12.14	%			11.78	%			11.77	%			*				*
Total risk-based capital			12.70	%			12.32	%			12.25	%			*				*

 

* The Company was not required to report quarterly captial ratios prior to 9/30/15

 

 

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
		Ending Balances
		March 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015				March 31, 2015
Assets
Cash & cash equivalents			68,933				79,965				89,936				43,810				41,244
Securities available for sale			157,560				166,413				152,150				83,747				92,295
Other investments			4,451				4,451				4,451				2,128				2,090
Total investment securities			162,011				170,864				156,601				85,875				94,385
Total loans			740,939				727,716				710,439				390,724				371,410
Allowance for loan losses			(4,527	)			(4,355	)			(3,828	)			(3,834	)			(3,915	)
Loans net			736,412				723,361				706,611				386,890				367,495
Premises and equipment			25,680				25,038				25,266				16,405				16,383
Foreclosed assets			5,133				5,358				9,647				3,728				4,170
Goodwill and other intangibles			6,848				6,941				7,034				177				218
Other assets			11,207				12,436				11,962				6,478				5,257
Total assets			1,016,224				1,023,963				1,007,057				543,363				529,152
Liabilities
Non-interest demand			132,481				131,419				123,551				69,427				58,006
Interest-bearing demand			161,454				149,424				144,012				114,165				119,771
Money market and savings			241,500				236,901				231,477				131,810				120,147
Time deposits			323,676				340,739				347,951				167,344				168,636
Total deposits			859,111				858,483				846,992				482,745				466,560
Repurchase agreements			20,747				28,068				18,442				2,727				4,607
FHLB & other borrowings			29,675				34,187				39,278				-				-
Other liabilities			4,703				3,048				3,908				1,772				1,280
Total liabilities			914,236				923,786				908,621				487,245				472,447
Shareholders' Equity
Preferred stock			12				12				12				12				12
Common stock			5,817				5,806				5,732				2,966				2,966
Additional paid-in capital			82,717				82,616				81,628				42,516				42,512
Retained earnings			13,231				12,095				10,942				11,049				11,013
Accumulated other comprehensive loss			211				(352	)			122				(425	)			202
Total shareholders' equity			101,988				100,177				98,436				56,118				56,705
Total liabilities & shareholders' equity			1,016,224				1,023,963				1,007,057				543,363				529,152

 

 

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
INCOME STATEMENT
		Three months ending
		March 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015				March 31, 2015
Interest Income
Loans, including fees			9,374				9,875				6,660				4,677				4,518
Investment securities			752				603				446				386				442
Other interest income			28				89				47				5				4
Total interest income			10,154				10,567				7,153				5,068				4,964
Interest Expense
Deposits			961				937				688				498				503
Repurchase agreements			17				17				7				3				3
FHLB and other borrowings			45				66				32				3				0
Total interest expense			1,023				1,020				727				504				506
Net interest income			9,131				9,547				6,426				4,564				4,458
Provision for loan losses			138				567				32				40				284
Net interest income after provision for loan losses			8,993				8,980				6,394				4,524				4,174
Non-interest income
Service charges on deposit accounts			296				397				237				149				130
Other non-interest income			412				340				317				237				230
Gain on securites			83				-				-				52				-
Gain on sale of loans and other assets			222				86				(294	)			31				65
Gain (loss) on sale of foreclosed assets			58				332				(86	)			(363	)			383
Total non-interest income			1,071				1,155				174				106				808
Non-interest expense
Salaries and employee benefits			4,495				4,208				3,187				2,236				2,301
Occupancy expense			990				910				688				556				525
Data Processing			341				510				278				194				210
Professional expenses			455				760				908				334				352
Foreclosed asset expense			57				110				91				48				41
Marketing			173				100				142				111				111
Amortization of other intangibles			93				93				58				41				41
FDIC premiums			136				148				144				98				97
Service contracts			286				248				192				152				159
Other non-interest expense			926				965				805				570				444
Total non-interest expense			7,952				8,052				6,493				4,340				4,281
Earnings before income taxes			2,112				2,083				75				290				701
Income tax expense			764				901				152				225				363
Net income (loss)			1,348				1,182				(77	)			65				338
Dividends on preferred stock			212				30				30				30				30
Net income available to common shareholders			1,136				1,152				(107	)			35				308
NET INCOME PER COMMON SHARE
Basic			0.20				0.20				(0.03	)			0.01				0.10
Diluted			0.19				0.19				(0.03	)			0.01				0.09
Weighted average common shares outstanding
Basic			5,807				5,750				3,937				2,966				2,966
Diluted			6,108				6,037				4,244				3,293				3,293

 

 

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
		Three Months Ended												Three Months Ended												Three Months Ended
		March 31, 2016												Dec. 31, 2015												March 31, 2015
		Avg. Balance				Tax Equivalent Interest				Yield / Rate				Avg. Balance				Tax Equivalent Interest				Yield / Rate				Avg. Balance				Tax Equivalent Interest				Yield / Rate
ASSETS
Loans			734,941				9,374				5.12	%			719,140				9,875				5.45	%			366,209				4,518				5.00	%
Investment securities			164,337				765				1.87	%			157,243				624				1.57	%			98,540				443				1.82	%
Fed funds sold and other			17,310				28				0.65	%			49,488				89				0.72	%			9,178				4				0.19	%
Total interest earning assets			916,588				10,167				4.45	%			925,871				10,588				4.54	%			473,927				4,965				4.25	%
Non-interest earning assets			79,286												82,100												42,137
Total assets			995,874												1,007,971												516,064
LIABLITIES & EQUITY
Interest-bearing demand			155,080				66				0.17	%			138,156				53				0.15	%			105,456				36				0.14	%
Money market and savings			241,441				272				0.45	%			234,637				259				0.44	%			120,567				109				0.37	%
Time deposits			330,813				623				0.76	%			344,095				625				0.72	%			174,898				358				0.83	%
Total interest-bearing deposits			727,334				961				0.53	%			716,888				937				0.52	%			400,921				503				0.51	%
Repurchase agreements			18,943				17				0.36	%			22,528				17				0.30	%			4,661				3				0.26	%
FHLB and other borrowings			14,819				45				1.21	%			35,806				66				0.73	%			133				0				1.20	%
Total interest bearing liabilities			761,096				1,023				0.54	%			775,222				1,020				0.52	%			405,715				506				0.51	%
Non-interest bearing deposits			128,120												130,212												52,407
Other liabilities			4,449												3,830												1,223
Total liabilities			893,665												909,264												459,345
Shareholders' equity			102,209												98,707												56,719
Total liabilities and shareholders equity			995,874												1,007,971												516,064
Net interest income, taxable equivalent							9,144												9,568												4,459
Interest rate spread											3.91	%											4.02	%											3.74	%
Tax equivalent net interest margin											4.00	%											4.10	%											3.77	%
Percent of average interest-earnings assets to average interest-bearing liabilities											120.43	%											119.43	%											116.81	%

 

 

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
		Three months ending
		March 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015				March 31, 2015
Operating Earnings
Net income (loss) (GAAP)			1,348				1,182				(77	)			65				338
Purchased loan accounting adjustments*			(541	)			(818	)			(412	)			(161	)			(224	)
Securities (gains) losses			(83	)			-				-				(52	)			-
Merger and conversion costs			105				230				748				104				175
Foreclosed assets (gains) losses			(58	)			(332	)			86				363				(383	)
Income tax effect of adjustments			221				352				(161	)			(97	)			165
Net operating earnings (Non-GAAP)			992				614				184				222				71
Dividends on preferred stock			(212	)			(30	)			(30	)			(30	)			(30	)
Net operating earnings available to common shareholders (Non-GAAP)			780				584				154				192				41
Net operating earnings per common share:
Basic			0.13				0.10				0.04				0.06				0.01
Diluted			0.13				0.10				0.04				0.06				0.01
Operating Efficiency Ratio
Efficiency ratio (GAAP)			76.93	%			74.29	%			97.45	%			88.67	%			71.68	%
Adjustment for purchased loan accounting adjustments*			6.81	%			10.16	%			6.34	%			3.71	%			5.23	%
Adjustment for securities (gains) losses			-1.05	%			0.00	%			0.00	%			-1.20	%			0.00	%
Adjustment for merger and conversion costs			-1.33	%			-2.85	%			-11.51	%			-2.41	%			-4.10	%
Adjustment for OREO (gains) losses			0.73	%			4.13	%			-1.32	%			-8.36	%			8.94	%
Operating efficiency ratio (Non-GAAP)			82.09	%			85.73	%			90.96	%			80.41	%			81.75	%
Adjusted Allowance for Loan Losses
Allowance for loan losses (GAAP)			4,527				4,355				3,828				3,834				3,915
Net acquisition accounting fair value discounts to loans			11,381				11,781				12,520				5,599				6,467
Adjusted allowance for loan losses (Non-GAAP)			15,908				16,136				16,348				9,433				10,382
Loans (excluding acquisition accounting fair value discounts)			752,321				739,497				722,959				396,323				377,877
Adjusted allowance for loan losses to loans (Non-GAAP)			2.11	%			2.18	%			2.26	%			2.38	%			2.75	%
Tangible Common Equity
Shareholders' equity (GAAP)			101,988				100,177				98,436				56,118				56,705
Less preferred stock & preferred stock paid in capital			12,000				12,000				12,000				12,000				12,000
Less goodwill and other intangible assets			6,848				6,941				7,034				177				218
Tangible common equity (Non-GAAP)			83,140				81,236				79,402				43,941				44,487

 

^*Consists of ASC 310-30 accretion above (below) contractual loan income and ASC 310-20 accretion