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.

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 March 31, 2022

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

Graphic

(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 May 4, 2022, there were 16,896,987 shares of common stock, $1.00 par value per share, issued and outstanding.

TABLE OF CONTENTS

PART I –FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited)

3

Consolidated Balance Sheets at March 31, 2022 and December 31, 2021

3

Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021

4

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021

5

Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021

6

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

55

Item 4.

Controls and Procedures

55

PART II – OTHER INFORMATION

56

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

56

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

2

PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share data)

    

(Unaudited)

    

    

March 31, 

    

December 31, 

2022

2021*

ASSETS:

 

  

 

  

Cash and due from banks

$

83,080

$

110,333

Interest-bearing deposits with banks

 

643,388

 

897,244

Federal funds sold

 

37,500

 

37,500

Total cash and cash equivalents

 

763,968

 

1,045,077

Securities available-for-sale, at fair value

 

540,483

 

482,453

Securities held-to-maturity, at amortized cost

289,532

76,969

Other investments

 

16,499

 

16,494

Loans held for sale

 

5,894

 

5,103

Loans and leases

 

2,806,026

 

2,693,397

Less: Allowance for loan and lease losses

 

(20,078)

 

(19,352)

Loans and leases, net

 

2,785,948

 

2,674,045

Premises and equipment, net

 

84,793

 

85,958

Other real estate owned

 

1,612

 

1,780

Goodwill and other intangibles, net

 

105,215

 

105,852

Bank owned life insurance

 

80,074

 

79,619

Other assets

 

44,561

 

38,229

Total assets

$

4,718,579

$

4,611,579

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

  

 

  

Deposits:

 

  

 

  

Noninterest-bearing demand

$

1,093,933

$

1,055,125

Interest-bearing demand

 

975,272

 

899,158

Money market and savings

 

1,573,101

 

1,493,007

Time deposits

 

549,047

 

574,648

Total deposits

 

4,191,353

 

4,021,938

Borrowings

 

36,713

 

87,585

Subordinated debt

 

41,952

 

41,930

Other liabilities

 

28,519

 

30,696

Total liabilities

 

4,298,537

 

4,182,149

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; 16,893,282 and 16,802,990 shares issued and outstanding, respectively

 

16,893

 

16,803

Additional paid-in capital

 

293,376

 

292,937

Retained earnings

 

125,329

 

118,247

Accumulated other comprehensive income (loss)

 

(15,556)

 

1,443

Total shareholders' equity

 

420,042

 

429,430

Total liabilities and shareholders' equity

$

4,718,579

$

4,611,579

* Derived from audited financial statements.

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

3

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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

Three Months Ended

March 31, 

    

2022

    

2021

Interest income:

 

  

 

  

Loans and leases, including fees

$

29,643

$

28,018

Securities:

 

 

  

Taxable

 

2,418

 

724

Tax-exempt

 

368

 

259

Federal funds sold and other earning assets

 

486

 

291

Total interest income

 

32,915

 

29,292

Interest expense:

 

  

 

  

Deposits

 

2,014

 

2,331

Borrowings

 

157

 

117

Subordinated debt

 

626

 

584

Total interest expense

 

2,797

 

3,032

Net interest income

 

30,118

 

26,260

Provision for loan and lease losses

 

1,006

 

67

Net interest income after provision for loan and lease losses

 

29,112

 

26,193

Noninterest income:

 

  

 

  

Service charges on deposit accounts

1,319

1,009

Mortgage banking

 

834

 

1,139

Investment services

 

1,070

 

531

Insurance commissions

901

1,466

Interchange and debit card transaction fees, net

1,284

839

Other

 

1,703

 

707

Total noninterest income

 

7,111

 

5,691

Noninterest expense:

 

  

 

  

Salaries and employee benefits

 

15,046

 

10,869

Occupancy and equipment

 

3,059

 

2,341

FDIC insurance

 

641

 

371

Other real estate and loan related expense

 

729

 

602

Advertising and marketing

 

369

 

190

Data processing and technology

 

1,586

 

1,379

Professional services

 

1,242

 

641

Amortization of intangibles

 

637

 

444

Merger related and restructuring expenses

 

439

 

103

Other

 

1,970

 

2,524

Total noninterest expense

 

25,718

 

19,464

Income before income tax expense

 

10,505

 

12,420

Income tax expense

 

2,246

 

2,664

Net income

$

8,259

$

9,756

Earnings per common share:

 

  

 

  

Basic

$

0.49

$

0.65

Diluted

$

0.49

$

0.65

Weighted average common shares outstanding:

 

  

 

  

Basic

 

16,718,371

 

15,011,573

Diluted

 

16,858,288

 

15,111,947

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

4

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)

    

Three Months Ended

March 31, 

2022

2021

Net income

$

8,259

$

9,756

Other comprehensive income (loss):

 

  

 

  

Investment securities:

Unrealized holding (losses) on securities available-for-sale

 

(20,348)

 

(2,808)

Tax effect

 

5,256

 

738

Reclassification of unrealized loss on securities transferred from available-for-sale to held-to-maturity

(2,009)

Tax effect

519

Amortization of unrealized gains on investment securities transferred from available-for-sale to held-to-maturity

(11)

Tax effect

3

Unrealized gains (losses) on securities available-for-sale, net of tax

 

(16,590)

 

(2,070)

Fair value hedging activities:

Unrealized gains (losses) on fair value municipal security hedges

 

(551)

 

1,313

Tax effect

 

142

 

(343)

Unrealized gains (losses) on fair value municipal security hedge instruments arising during the period, net of tax

 

(409)

 

970

Total other comprehensive income (loss)

 

(16,999)

 

(1,100)

Comprehensive income (loss)

$

(8,740)

$

8,656

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

5

SMARTFINANCIAL, INC. AND SUBSIDIARY

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

For the Three Months Ended March 31, 2022 and 2021

(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, 2020

 

15,107,214

$

15,107

$

252,693

$

87,185

$

2,183

$

357,168

Net income

 

 

 

 

9,756

 

 

9,756

Other comprehensive income (loss)

 

 

 

 

 

(1,100)

 

(1,100)

Common stock issued pursuant to:

 

 

  

 

  

 

  

 

  

 

Stock options exercised

 

15,965

 

16

 

131

 

 

 

147

Restricted stock

40,967

41

(41)

Stock compensation expense

 

 

 

201

 

 

 

201

Common stock dividend ($0.06 per share)

(907)

(907)

Repurchases of common stock

(59,610)

(59)

(1,148)

(1,207)

Balance, March 31, 2021

 

15,104,536

$

15,105

$

251,836

$

96,034

$

1,083

$

364,058

Balance, December 31, 2021

 

16,802,990

$

16,803

$

292,937

$

118,247

$

1,443

$

429,430

Net income

 

 

 

 

8,259

 

 

8,259

Other comprehensive income (loss)

 

 

 

 

 

(16,999)

 

(16,999)

Common stock issued pursuant to:

 

  

 

  

 

  

 

  

 

  

 

Stock options exercised

 

27,550

 

27

 

190

 

 

 

217

Restricted stock

 

62,742

 

63

 

(63)

 

 

 

Stock compensation expense

 

 

 

312

 

 

 

312

Common stock dividend ($0.07 per share)

 

 

 

 

(1,177)

 

 

(1,177)

Repurchases of common stock

Balance, March 31, 2022

 

16,893,282

$

16,893

$

293,376

$

125,329

$

(15,556)

$

420,042

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

6

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

    

Three Months Ended March 31, 

2022

2021

Cash flows from operating activities:

 

  

 

  

Net income

$

8,259

$

9,756

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

Depreciation and amortization

 

2,387

 

1,499

Accretion of fair value purchase accounting adjustments, net

 

(358)

 

(1,636)

Provision for loan and lease losses

 

1,006

 

67

Stock compensation expense

 

312

 

201

Deferred income tax expense

 

948

 

446

Increase in cash surrender value of bank owned life insurance

 

(455)

 

(370)

Net losses from sale and write downs of other real estate owned

 

59

 

151

Net gains from mortgage banking

 

(834)

 

(1,139)

Origination of loans held for sale

 

(30,916)

 

(35,229)

Proceeds from sales of loans held for sale

 

30,959

 

40,219

Net gain from sale of fixed assets

(348)

Net change in:

 

  

 

  

Accrued interest receivable

 

(452)

 

(86)

Accrued interest payable

 

352

 

367

Other assets

 

(5,244)

 

(1,234)

Other liabilities

 

5,019

 

3,078

Net cash provided by operating activities

 

10,694

 

16,090

Cash flows from investing activities:

 

  

 

  

Available-for-sale:

Proceeds from maturities, calls and paydowns

 

10,217

 

16,241

Purchases

(257,101)

(55,757)

Held-to-maturity:

Purchases

(50,575)

Proceeds from sales of other investments

147

Purchases of other investments

 

(5)

 

(80)

Purchases of bank owned life insurance

(40,000)

Net increase in loans and leases

 

(112,551)

 

(103,308)

Proceeds from sale of fixed assets

1,224

Purchases of premises and equipment

 

(879)

 

(1,009)

Proceeds from sale of other real estate owned

 

108

 

98

Net cash used in investing activities

 

(409,562)

 

(183,668)

Cash flows from financing activities:

 

  

 

  

Net increase in deposits

 

169,591

 

243,084

Net (decrease) increase in securities sold under agreements to repurchase

 

(872)

 

1,447

Repayment borrowings

(50,000)

(4)

Cash dividends paid

 

(1,177)

 

(907)

Issuance of common stock

 

217

 

147

Repurchases of common stock

 

 

(1,207)

Net cash provided by financing activities

 

117,759

 

242,560

Net change in cash and cash equivalents

 

(281,109)

 

74,982

Cash and cash equivalents, beginning of period

 

1,045,077

 

481,719

Cash and cash equivalents, end of period

$

763,968

$

556,701

Supplemental disclosures of cash flow information:

 

  

 

  

Cash paid during the period for interest

$

2,112

$

2,665

Cash paid during the period for income taxes

 

15

 

Cash received from income taxes refunds

 

50

 

Noncash investing and financing activities:

 

 

Acquisition of real estate through foreclosure

 

 

14

Transfer of securities from available-for-sale to held-to-maturity

162,378

Change in goodwill due to acquisitions and sale of a portfolio of loans

 

 

324

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

7

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Presentation of Financial Information

Nature of Business:

SmartFinancial, Inc. (the "Company," “SmartFinancial,” “we,” “our” or “us”) is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, SmartBank (the "Bank"). The Company provides a variety of financial services to individuals and corporate customers through its offices in East and Middle Tennessee, Alabama, and the Florida Panhandle. The Bank’s primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Basis of Presentation and Accounting Estimates:

The accounting and financial reporting policies of the Company and its wholly owned subsidiary conform to U.S. generally accepted accounting principles (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements for the Company and its wholly owned subsidiary have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan and lease losses, the valuation of foreclosed assets and deferred taxes, other than temporary impairments of securities, the fair value of financial instruments, goodwill, and the fair value of assets acquired, and liabilities assumed in acquisitions. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

Recently Issued and Adopted Accounting Pronouncements:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”). It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020, through December 31, 2022. The Company implemented a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. As of December 31, 2021, the Company ceased issuance of new LIBOR loans. Alternative reference rates at this time are predominantly Secured Overnight Funding Rate (“SOFR”) based.  Remaining LIBOR transition project activities include remediation of remaining LIBOR products by June of 2023. ASU 2020-04 will not have a material impact on the Company’s consolidated financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements:

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2021, as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission ("SEC"). The following is a summary of recent authoritative pronouncements issued but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In October 2019, the Financial Accounting Standards Board approved a delay for the implementation of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The Board decided that the Current Expected Credit Loss (“CECL”)

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

model will be effective for larger Public Business Entities ("PBEs") that are SEC filers, excluding Smaller Reporting Companies ("SRCs") as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies that are not SRCs, this will be January 1, 2020. The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations and the Company meets the regulations as an SRC. For SRCs and other entities, the Board decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies). The Company does not plan to adopt this standard early and being that the Company is an SRC, adoption is required for fiscal years beginning after December 15, 2022.

Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model currently required under GAAP, which delays recognition until it is probable a loss has been incurred. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to significantly increase our allowance. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

A cross-functional working group comprised of individuals from credit administration, risk management and accounting and finance are in place implementing and developing the data, forecast, processes, and portfolio segmentation that will be used in the models that will estimate the expected credit loss for each loan segment. The Company has contracted with a third party vendor solution to assist us in the application, analysis, and model development required with implementation of ASU 2016-13. The Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, and it will be influenced by the composition, characteristics and quality of our loan and securities portfolio, as well as the economic conditions and forecasts as of each reporting period. These economic conditions and forecasts could be significantly different in future periods.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method, which allows multiple hedged layers to be designated for a single closed portfolio of financial assets resulting in a greater portion of the interest rate risk in the closed portfolio being eligible to be hedged. The amendments allow the flexibility to use different types of derivatives or combinations of derivatives to better align with risk management strategies. Furthermore, among other things, the amendments clarify that basis adjustments of hedged items in the closed portfolio should be allocated at the portfolio level and not the individual assets within the portfolio. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted, including early adoption in an interim period. An entity should apply ASU 2022-01 prospectively. If an entity elects to early adopt ASU 2022-01 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The Company is assessing ASU 2022-01 and its impact on its accounting and disclosures.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which removes the accounting guidance for troubled debt restructurings and requires entities to evaluate whether a modification provided to a borrower results in a new loan or continuation of an existing loan. The amendments enhance existing disclosures and require new disclosures for receivables when there has been a modification in contractual cash flows due to a borrower experiencing financial difficulties. Additionally, the amendments require public business entities to disclose gross charge-off information by year of origination in the vintage disclosures. The guidance is effective for entities that have adopted ASU 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted, including early adoption in an interim period. An entity should apply ASU 2022-02 prospectively. If an entity elects to early adopt ASU 2022-02 in an

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The Company will adopt ASU 2022-02 when adopting ASU 2016-13 in January 2023 and will assess its impact on its accounting and disclosures.

Note 2. Business Combinations

Sevier County Bancshares, Inc.

On September 1, 2021, the Company completed the acquisition of Sevier County Bancshares, Inc., a Tennessee corporation (“SCB”), pursuant to an Agreement and Plan of Merger dated April 13, 2021 (the “Merger Agreement”).

In connection with the merger, the Company acquired $484.9 million of assets and assumed $443.1 million of liabilities. Pursuant to the Merger Agreement, at the effective time of the merger, SCB shareholders were entitled to receive for each share of SCB common stock, no par value per share, outstanding immediately prior to the Merger, either (i) $10.17 in cash (the “Per Share Cash Consideration”), or (ii) 0.4116 shares of Company common stock, par value $1.00 (the “Per Share Stock Consideration”). Pursuant to the terms of the Merger Agreement, (i) each SCB shareholder holding 20,000 shares or more of SCB common stock will receive the Per Share Stock Consideration and (ii) each SCB shareholder holding fewer than 20,000 shares of SCB common stock may elect to receive either the Per Share Stock Consideration or the Per Share Cash Consideration.  SmartFinancial issued 1,692,168 shares of SmartFinancial common stock and paid $9.6 million in cash as consideration for the Merger.  The fair value of consideration paid exceeded the fair value of the identifiable assets and liabilities acquired and resulted in the establishment of goodwill in the amount of $17.2 million, representing the intangible value of SCB’s business and reputation within the markets it served. None of the goodwill recognized is expected to be deductible for income tax purposes.  The Company is amortizing the related core deposit intangible of $1.6 million using the effective yield method over 120 months (10 years), which represents the expected useful life of the asset.  

The purchased assets and assumed liabilities were recorded at their acquisition date fair values (1) and are summarized in the table below (in thousands).

Initial

    

As recorded

    

Fair value

Subsequent

    

As recorded

by SCB

adjustments

Adjustments

by the Company

Assets:

 

  

 

  

 

  

Cash & cash equivalents

$

84,313

$

$

$

84,313

Investment securities available-for-sale

 

64,219

 

(614)

 

63,605

Restricted investments

 

533

 

 

533

Loans

 

304,620

 

(4,551)

(3,049)

 

297,020

Allowance for loan losses

 

(3,644)

 

3,644

 

Premises and equipment, net

 

15,579

 

(295)

(22)

 

15,262

Bank owned life insurance

 

7,116

 

 

7,116

Deferred tax asset, net

 

10,340

 

(4,007)

769

 

7,102

Core deposit intangible

 

 

1,550

 

1,550

Interest Receivable

 

884

 

 

884

Other assets

 

920

 

(272)

(533)

 

115

Total assets acquired

$

484,880

$

(4,545)

$

(2,835)

$

477,500

Liabilities:

 

  

 

  

 

  

Deposits

$

435,036

$

$

$

435,036

Time deposit premium

 

 

888

 

888

Subordinated debt

2,500

2,500

Payables and other liabilities

 

5,563

 

115

(1,254)

 

4,424

Total liabilities assumed

 

443,099

 

1,003

 

(1,254)

 

442,848

Excess of assets acquired over liabilities assumed

$