SMARTFINANCIAL INC. [SMBK] Filings

10-Q 1 smbk-20230630x10q.htm 10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-37661

(Exact name of registrant as specified in its charter)



Tennessee		62-1173944
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5401 Kingston Pike, Suite 600 Knoxville, Tennessee		37919
(Address of principal executive offices)		(Zip Code)

865-437-5700		Not Applicable
(Registrant’s telephone number, including area code)		(Former name, former address and former fiscal
		year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of Exchange on which Registered
Common Stock, par value $1.00	SMBK	The Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or and emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 04, 2023, there were 17,004,092 shares of common stock, $1.00 par value per share, issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I –FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets at June 30, 2023 and December 31, 2022	3

	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022	4

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022	5

	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	63

PART II – OTHER INFORMATION		64

Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 3.	Defaults Upon Senior Securities	65

Item 4.	Mine Safety Disclosures	65

Item 5.	Other Information	65

Item 6.	Exhibits	66

Table of Contents

PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share data)


	(Unaudited)
	June 30,		December 31,
	2023		2022*
ASSETS:
Cash and due from banks	$	37,532	$	44,265
Interest-bearing deposits with banks		198,756		206,849
Federal funds sold		2,610		15,310
Total cash and cash equivalents		238,898		266,424
Securities available-for-sale, at fair value		540,308		483,893
Securities held-to-maturity, at amortized cost		283,564		285,949
Other investments		14,396		15,530
Loans held for sale		986		1,752
Loans and leases		3,337,790		3,253,627
Less: Allowance for credit losses		(32,747)		(23,334)
Loans and leases, net		3,305,043		3,230,293
Premises and equipment, net		92,351		92,511
Other real estate owned		1,708		1,436
Goodwill and other intangibles, net		108,439		109,772
Bank owned life insurance		82,419		81,470
Other assets		77,688		68,468
Total assets	$	4,745,800	$	4,637,498

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand	$	1,003,432	$	1,072,449
Interest-bearing demand		938,758		965,911
Money market and savings		1,720,202		1,583,481
Time deposits		537,192		455,259
Total deposits		4,199,584		4,077,100
Borrowings		15,496		41,860
Subordinated debt		42,057		42,015
Other liabilities		43,816		44,071
Total liabilities		4,300,953		4,205,046
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized; No shares issued and outstanding		—		—
Common stock, $1 par value; 40,000,000 shares authorized; 17,004,092 and 16,900,805 shares issued and outstanding, respectively		17,004		16,901
Additional paid-in capital		295,296		294,330
Retained earnings		167,564		156,545
Accumulated other comprehensive income (loss)		(35,017)		(35,324)
Total shareholders' equity		444,847		432,452
Total liabilities and shareholders' equity	$	4,745,800	$	4,637,498

* Derived from audited financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)


		Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Interest income:
Loans and leases, including fees	$	45,446	$	31,530	$	90,173	$	61,172
Securities:
Taxable		4,335		2,908		7,986		5,327
Tax-exempt		357		441		709		809
Federal funds sold and other earning assets		1,956		1,430		6,405		1,916
Total interest income		52,094		36,309		105,273		69,224
Interest expense:
Deposits		19,554		2,504		35,900		4,518
Borrowings		339		117		564		274
Subordinated debt		626		626		1,252		1,252
Total interest expense		20,519		3,247		37,716		6,044
Net interest income		31,575		33,062		67,557		63,180
Provision for credit losses		113		1,250		663		2,256
Net interest income after provision for credit losses		31,462		31,812		66,894		60,924
Noninterest income:
Service charges on deposit accounts		1,657		1,446		3,102		2,765
Mortgage banking		332		471		504		1,305
Investment services		1,300		1,065		2,305		2,135
Insurance commissions		1,139		598		2,398		1,499
Interchange and debit card transaction fees, net		1,347		1,467		2,730		2,751
Other		1,355		2,182		3,016		3,885
Total noninterest income		7,130		7,229		14,055		14,340
Noninterest expense:
Salaries and employee benefits		15,947		15,673		32,689		30,719
Occupancy and equipment		3,318		2,793		6,526		5,852
FDIC insurance		875		676		1,416		1,317
Other real estate and loan related expense		441		636		1,013		1,365
Advertising and marketing		305		327		660		697
Data processing and technology		2,235		1,728		4,398		3,314
Professional services		764		745		1,572		1,987
Amortization of intangibles		675		633		1,334		1,270
Merger related and restructuring expenses		—		81		—		520
Other		2,850		2,634		5,331		4,602
Total noninterest expense		27,410		25,926		54,939		51,643
Income before income tax expense		11,182		13,115		26,010		23,621
Income tax expense		2,346		2,900		5,674		5,146
Net income	$	8,836	$	10,215	$	20,336	$	18,475
Earnings per common share:
Basic	$	0.53	$	0.61	$	1.21	$	1.11
Diluted	$	0.52	$	0.61	$	1.20	$	1.10
Weighted average common shares outstanding:
Basic		16,806,389		16,734,930		16,798,939		16,726,696
Diluted		16,898,091		16,867,774		16,897,444		16,863,299

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	8,836	$	10,215	$	20,336	$	18,475
Other comprehensive income (loss):
Investment securities:
Unrealized holding gains (losses) on securities available-for-sale		(7,624)		(11,404)		652		(31,752)
Tax effect		1,970		2,945		(168)		8,201
Reclassification of unrealized gains (losses) on securities transferred from available-for-sale to held-to-maturity		—		—		—		(2,009)
Tax effect		—		—		—		519
Amortization of unrealized gains (losses) on investment securities transferred from available-for-sale to held-to-maturity		38		38		78		27
Tax effect		(10)		(9)		(20)		(6)
Unrealized gains (losses) on securities available-for-sale, net of tax		(5,626)		(8,430)		542		(25,020)
Fair value hedging activities:
Unrealized gains (losses) on fair value municipal security hedges		—		(892)		—		(1,443)
Tax effect		—		230		—		372
Unrealized gains (losses) on fair value municipal security hedge instruments arising during the period, net of tax		—		(662)		—		(1,071)
Cash flow hedging activities:
Unrealized gains (losses) on cash flow hedges		(1,039)		—		(317)		—
Tax effect		268		—		82		—
Unrealized gains (losses) on cash flow hedge instruments arising during the period, net of tax		(771)		—		(235)		—

Total other comprehensive income (loss)		(6,397)		(9,092)		307		(26,091)
Comprehensive income (loss)	$	2,439	$	1,123	$	20,643	$	(7,616)

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – (Unaudited)

For the Three and Six Months Ended June 30, 2023 and 2022

(Dollars in thousands, except for share data)


								Accumulated
								Other
	Common Stock			Additional		Retained		Comprehensive
	Shares	Amount		Paid-in Capital		Earnings		Income (Loss)		Total
Balance, December 31, 2021	16,802,990	$	16,803	$	292,937	$	118,247	$	1,443	$	429,430
Net income	—		—		—		18,475		—		18,475
Other comprehensive loss	—		—		—		—		(26,091)		(26,091)
Common stock issued pursuant to:
Stock options exercised	31,400		31		232		—		—		263
Restricted stock	64,015		64		(64)		—		—		—
Stock compensation expense	—		—		710		—		—		710
Common stock dividend ($0.14 per share)	—		—		—		(2,360)		—		(2,360)
Balance, June 30, 2022	16,898,405	$	16,898	$	293,815	$	134,362	$	(24,648)	$	420,427

Balance, December 31, 2022	16,900,805	$	16,901	$	294,330	$	156,545	$	(35,324)	$	432,452
Cumulative effect adjustment for adoption of ASU 2016-13, net of tax	—		—		—		(6,606)		—		(6,606)
Balance, January 1, 2023, adjusted	16,900,805		16,901		294,330		149,939		(35,324)		425,846
Net income	—		—		—		20,336		—		20,336
Other comprehensive income	—		—		—		—		307		307
Common stock issued pursuant to:
Stock options exercised	15,705		15		150		—		—		165
Restricted stock, net of forfeitures	87,582		88		(88)		—		—		—
Stock compensation expense	—		—		904		—		—		904
Common stock dividend ($0.16 per share)	—		—		—		(2,711)		—		(2,711)
Balance, June 30, 2023	17,004,092	$	17,004	$	295,296	$	167,564	$	(35,017)	$	444,847

Balance, March 31, 2022	16,893,282	$	16,893	$	293,376	$	125,329	$	(15,556)	$	420,042
Net income	—		—		—		10,215		—		10,215
Other comprehensive loss	—		—		—		—		(9,092)		(9,092)
Common stock issued pursuant to:
Stock options exercised	3,850		4		42		—		—		46
Restricted stock	1,273		1		(1)		—		—		—
Stock compensation expense	—		—		398		—		—		398
Common stock dividend ($0.07 per share)	—		—		—

SMARTFINANCIAL INC. [SMBK] Filings
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-03-16]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-14]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-16]
10-Q	[2020-11-06]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-12]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-10]
10-K	[2019-03-18]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-16]
10-Q	[2017-11-14]
10-Q	[2017-08-14]
10-Q	[2017-05-15]
10-K	[2017-03-31]
10-Q	[2016-11-14]
10-Q	[2016-08-12]
10-Q	[2016-05-16]
10-K	[2016-03-30]
10-Q	[2015-11-16]
10-Q	[2015-08-14]
10-Q	[2015-05-15]
10-K	[2015-03-30]
10-Q	[2014-11-14]
10-Q	[2014-08-14]
10-Q	[2014-05-13]
10-K	[2014-03-31]
10-Q	[2013-11-14]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
10-K	[2013-03-28]
10-Q	[2012-11-14]
10-Q	[2012-08-13]
10-Q	[2012-05-09]
10-K	[2012-03-29]