Company Quick10K Filing
Quick10K
Smartfinancial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$20.52 14 $286
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-24 Earnings, Regulation FD, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-05-06 Officers, Exhibits
8-K 2019-04-24 Earnings, Regulation FD, Exhibits
8-K 2019-04-23 Leave Agreement, Regulation FD, Exhibits
8-K 2019-02-05 Regulation FD, Exhibits
8-K 2019-01-23 Earnings, Regulation FD, Exhibits
8-K 2019-01-23 Earnings, Regulation FD, Exhibits
8-K 2019-01-15 Enter Agreement, Officers, Regulation FD, Exhibits
8-K 2018-11-20 Other Events, Exhibits
8-K 2018-11-01 M&A, Other Events, Exhibits
8-K 2018-10-24 Earnings, Regulation FD, Exhibits
8-K 2018-10-01 Enter Agreement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K 2018-07-30 Regulation FD, Exhibits
8-K 2018-07-24 Earnings, Regulation FD, Exhibits
8-K 2018-06-27 Enter Agreement, Regulation FD, Exhibits
8-K 2018-06-05 Regulation FD, Exhibits
8-K 2018-05-29 Officers, Shareholder Vote
8-K 2018-05-07 M&A, Other Events, Exhibits
8-K 2018-04-24 Earnings, Regulation FD, Exhibits
8-K 2018-03-27 Accountant, Exhibits
8-K 2018-01-31 Earnings, Regulation FD, Exhibits
8-K 2018-01-30 Officers
ZION Zions Bancorporation 7,443
CIT CIT Group 4,040
STL Sterling Bancorp 3,944
CHFC Chemical Financial 3,008
SASR Sandy Spring Bancorp 1,183
BDGE Bridge Bancorp 533
BWB Bridgewater Bancshares 390
RBNC Reliant Bancorp 276
INBK First Internet Bancorp 199
OVLY Oak Valley Bancorp 141
SMBK 2019-06-30
Part I -Financial Information
Item 1. Consolidated Financial Statements
Note 1. Presentation of Financial Information
Note 2. Earnings per Share
Note 3. Securities
Note 4. Loans and Allowance for Loan Losses
Note 5. Commitments and Contingent Liabilities
Note 6. Fair Value Disclosures
Note 7. Derivatives
Note 8. Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 smbk_063019xex311.htm
EX-31.2 smbk_063019xex312.htm
EX-32.1 smbk_063019xex321.htm
EX-32.2 smbk_063019xex322.htm

Smartfinancial Earnings 2019-06-30

SMBK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 smbk_063019x10qdocument.htm 10-Q SMARTFINANCIAL INC JUNE 30 2019 Document


United States Securities and Exchange Commission
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
¨
TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to               

Commission File Number:333-203449
tlogoa07.jpg 

(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)
 
 
 
865-453-2650
 
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 each 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  x   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  x    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  x
Non-accelerated filer  ¨
Smaller reporting company  x
Emerging growth company ¨
 

1



 
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  x

As of August 1, 2019 there were 13,953,209 shares of common stock, $1.00 par value per share, issued and outstanding.

2



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3



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,
2019
 
December 31,
2018
ASSETS
 
 

 
 

Cash and due from banks
 
$
44,500

 
$
40,015

Interest-bearing deposits with banks
 
75,371

 
75,807

Federal funds sold
 
79,663

 

Total cash and cash equivalents
 
199,534

 
115,822

Securities available-for-sale, at fair value
 
174,114

 
201,688

Other investments
 
12,905

 
11,499

Loans held for sale
 
4,087

 
1,979

Loans
 
1,832,902

 
1,775,260

  Less: Allowance for loan losses
 
(9,097
)
 
(8,275
)
    Loans, net
 
1,823,805

 
1,766,985

Premises and equipment, net
 
56,589

 
56,012

Other real estate owned
 
1,814

 
2,495

Goodwill and core deposit intangible, net
 
78,348

 
79,034

Bank owned life insurance
 
24,695

 
24,381

Other assets
 
15,366

 
14,514

Total assets
 
$
2,391,257

 
$
2,274,409

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 

 
 

Deposits:
 
 

 
 

Noninterest-bearing demand
 
$
357,220

 
$
319,861

Interest-bearing demand
 
333,705

 
311,482

Money market and savings
 
648,132

 
641,945

Time deposits
 
673,243

 
648,676

Total deposits
 
2,012,300

 
1,921,964

Securities sold under agreement to repurchase
 
8,219

 
11,756

Federal Home Loan Bank advances and other borrowings
 
15,460

 
11,243

Subordinated debt
 
39,219

 
39,177

Other liabilities
 
16,448

 
7,258

Total liabilities
 
2,091,646

 
1,991,398

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; 13,953,209 and 13,933,504 shares issued and outstanding, respectively
 
13,953

 
13,933

Additional paid-in capital
 
232,386

 
231,852

Retained earnings
 
53,843

 
39,991

Accumulated other comprehensive loss
 
(571
)
 
(2,765
)
Total shareholders' equity
 
299,611

 
283,011

Total liabilities and shareholders' equity
 
$
2,391,257

 
$
2,274,409


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

4



SMARTFINANCIAL, INC. AND SUBSIDIARY 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except for share data)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
INTEREST INCOME
 
 

 
 

 
 
 
 
Loans, including fees
 
$
25,278

 
$
21,652

 
$
50,253

 
$
39,880

Securities available-for-sale:
 
 
 
 
 
 
 
 
  Taxable
 
871

 
897

 
1,842

 
1,770

  Tax-exempt
 
411

 
76

 
836

 
112

Federal funds sold and other earning assets
 
743

 
368

 
1,315

 
609

Total interest income
 
27,303

 
22,993

 
54,246

 
42,371

INTEREST EXPENSE
 
 

 
 

 
 
 
 
Deposits
 
5,788

 
3,238

 
11,039

 
5,639

Securities sold under agreements to repurchase
 
6

 
11

 
14

 
23

Federal Home Loan Bank advances and other borrowings
 
117

 
206

 
221

 
360

Subordinated debt
 
590

 

 
1,173

 

Total interest expense
 
6,501

 
3,455

 
12,447

 
6,022

Net interest income
 
20,802

 
19,538

 
41,799

 
36,349

Provision for loan losses
 
393

 
617

 
1,190

 
1,305

Net interest income after provision for loan losses
 
20,409

 
18,921

 
40,609

 
35,044

NONINTEREST INCOME
 
 

 
 

 
 
 
 
Customer service fees
 
707

 
557

 
1,361

 
1,135

Gain (loss) on sale of securities, net
 
33

 
(1
)
 
33

 
(1
)
Mortgage banking
 
392

 
322

 
674

 
688

Interchange and debit card transaction fees
 
143

 
121

 
318

 
267

Merger termination fee
 
6,400

 

 
6,400

 

Other
 
741

 
578

 
1,328

 
984

Total noninterest income
 
8,416

 
1,577

 
10,114

 
3,073

NONINTEREST EXPENSE
 
 

 
 

 
 
 
 
Salaries and employee benefits
 
8,984

 
7,649

 
17,382

 
14,825

Occupancy and equipment
 
1,658

 
1,522

 
3,298

 
3,055

FDIC insurance
 
180

 
317

 
359

 
419

Other real estate and loan related expense
 
242

 
926

 
732

 
1,596

Advertising and marketing
 
259

 
215

 
554

 
399

Data processing
 
577

 
600

 
1,192

 
1,127

Professional services
 
489

 
587

 
1,151

 
1,259

Amortization of intangibles
 
342

 
229

 
686

 
417

Software as service contracts
 
568

 
492

 
1,136

 
970

Merger related and restructuring expenses
 
1,796

 
1,123

 
2,719

 
1,621

Other
 
1,714

 
1,611

 
3,179

 
2,848

Total noninterest expense
 
16,809

 
15,271

 
32,388

 
28,536

Income before income tax expense
 
12,016

 
5,227

 
18,335

 
9,581

Income tax expense
 
2,895

 
1,295

 
4,483

 
2,235

Net income
 
$
9,121

 
$
3,932

 
$
13,852

 
$
7,346

EARNINGS PER COMMON SHARE
 
 

 
 

 
 
 
 
Basic
 
$
0.65

 
$
0.32

 
$
0.99

 
$
0.63

Diluted
 
$
0.65

 
$
0.32

 
$
0.99

 
$
0.62

Weighted average common shares outstanding
 
 

 
 

 
 
 
 
Basic
 
13,951,643

 
12,201,185

 
13,946,856

 
11,708,746

Diluted
 
14,046,500

 
12,320,498

 
14,036,790

 
11,822,497


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

5



SMARTFINANCIAL, INC. AND SUBSIDIARY 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited) 
(Dollars in thousands)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
9,121

 
$
3,932

 
$
13,852

 
$
7,346

Other comprehensive income, net of tax:
 
 

 
 

 
 

 
 

Unrealized holding gains (losses) and hedge effects on securities available-for-sale arising during the period
 
(112
)
 
(397
)
 
2,219

 
(1,769
)
Reclassification adjustment for (gains) losses realized
 
(25
)
 
1

 
(25
)
 
1

Total other comprehensive income (loss)
 
(137
)
 
(396
)
 
2,194

 
(1,768
)
Comprehensive income
 
$
8,984

 
$
3,536

 
$
16,046

 
$
5,578


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


6



SMARTFINANCIAL, INC. AND SUBSIDIARY 
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - (Unaudited) 
For the Three and Six Months Ended June 30, 2019 and 2018
(Dollars in thousands, except for share data)

 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive (Loss) Gain
 
Total
Balance, December 31, 2017
11,152,561

 
$
11,153

 
$
174,009

 
$
21,889

 
$
(1,198
)
 
$
205,852

Net income

 

 

 
7,346

 

 
7,346

Other comprehensive loss

 

 

 

 
(1,768
)
 
(1,768
)
Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Stock awards
394

 

 
9

 

 

 
9

Exercise of stock options
92,645

 
93

 
978

 

 

 
1,071

   Shareholders of TN Bancshares, Inc.
1,458,981

 
1,459

 
33,273

 

 

 
34,732

Stock compensation expense

 

 
244

 

 

 
244

Balance, June 30, 2018
12,704,581

 
$
12,705

 
$
208,513

 
$
29,235

 
$
(2,966
)
 
$
247,487

Balance, December 31, 2018
13,933,504

 
$
13,934

 
$
231,852

 
$
39,991

 
$
(2,765
)
 
$
283,011

Net income

 

 

 
13,852

 

 
13,852

Other comprehensive income

 

 

 

 
2,194

 
2,194

Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Stock awards
3,298

 
3

 
61

 

 

 
65

Exercise of stock options
16,407

 
16

 
196

 

 

 
213

Stock compensation expense

 

 
276

 

 

 
276

Balance, June 30, 2019
13,953,209

 
$
13,953

 
$
232,386

 
$
53,843

 
$
(571
)
 
$
299,611

Balance, March 31, 2018
11,233,806

 
$
11,234

 
$
174,981

 
$
25,303

 
$
(2,569
)
 
$
208,949

Net income

 

 

 
3,932

 

 
3,932

Other comprehensive loss

 

 

 

 
(396
)
 
(396
)
Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Stock awards
394

 

 
9

 

 

 
9

Exercise of stock options
11,400

 
11

 
109

 

 

 
120

   Shareholders of TN Bancshares, Inc.
1,458,981

 
1,459

 
33,273

 

 

 
34,732

Stock compensation expense

 

 
141

 

 

 
141

Balance, June 30, 2018
12,704,581

 
$
12,705

 
$
208,513

 
$
29,235

 
$
(2,966
)
 
$
247,487

Balance, March 31, 2019
13,951,590

 
$
13,952

 
$
232,241

 
$
44,722

 
$
(434
)
 
$
290,481

Net income

 

 

 
9,121

 

 
9,121

Other comprehensive loss

 

 

 

 
(137
)
 
(137
)
Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options
1,619

 
2

 
12

 

 

 
14

Stock compensation expense

 

 
133

 

 

 
133

Balance, June 30, 2019
13,953,209

 
$
13,953

 
$
232,386

 
$
53,843

 
$
(571
)
 
$
299,611


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


7



SMARTFINANICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 
 
Six Months Ended June 30,
 
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
13,852

 
$
7,346

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
2,088

 
1,908

Accretion of fair value purchase accounting adjustments, net
 
(3,091
)
 
(4,205
)
Provision for loan losses
 
1,190

 
1,305

Stock compensation expense
 
276

 
244

(Gains) losses from redemption and sale on securities available-for-sale
 
(33
)
 
1

Deferred income tax expense
 
1,039

 
945

Increase in cash surrender value of bank owned life insurance
 
(314
)
 
(297
)
Loss on disposal of fixed assets
 
14

 
41

Net (gains) losses from sale of other real estate owned
 
(16
)
 
372

Net gains from sale of loans
 
(674
)
 
(688
)
Origination of loans held for sale
 
(33,491
)
 
(29,499
)
Proceeds from sales of loans held for sale
 
32,057

 
25,648

Net change in:
 
 
 
 
Accrued interest receivable
 
(612
)
 
(250
)
Accrued interest payable
 
454

 
48

Other assets
 
(593
)
 
2,546

Other liabilities
 
5,792

 
(1,324
)
Net cash provided by operating activities
 
17,938

 
4,141

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Proceeds from sales of securities available-for-sale
 
16,515

 
24,563

Proceeds from maturities and calls of securities available-for-sale
 
10,305

 
2,525

Proceeds from paydowns of securities available-for-sale
 
6,554

 
7,436

Purchases of securities available-for-sale
 
(1,054
)
 
(17,240
)
Purchases of other investments
 
(1,406
)
 
(1,378
)
Net cash and cash equivalents received in business combination
 

 
5,653

Net increase in loans
 
(55,323
)
 
(65,138
)
Purchases of premises and equipment
 
(2,011
)
 
(992
)
Proceeds from sale of other real estate owned
 
1,100

 
2,126

Net cash used in investing activities
 
(25,320
)
 
(42,445
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Net increase in deposits
 
90,136

 
75,410

Net decrease in securities sold under agreements to repurchase
 
(3,537
)
 
(5,420
)
Issuance of common stock
 
278

 
1,080

Proceeds from Federal Home Loan Bank advances and other borrowings
 
120,176

 
127,040

Repayment of Federal Home Loan Bank advances and other borrowings
 
(115,959
)
 
(102,600
)
Net cash provided by financing activities
 
91,094

 
95,510

NET INCREASE IN CASH AND CASH EQUIVALENTS
 
83,712

 
57,206

CASH AND CASH EQUIVALENTS, beginning of period
 
115,822

 
113,027

CASH AND CASH EQUIVALENTS, end of period
 
$
199,534

 
$
170,233

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
 
 
Cash paid during the period for interest
 
$
11,993

 
$
5,974

Cash paid during the period for income taxes
 
2,630

 
713

NONCASH INVESTING AND FINANCING ACTIVITIES
 
 
 
 
Change in unrealized (gains) losses on securities available-for-sale
 
$
(2,664
)
 
$
2,348

Acquisition of real estate through foreclosure
 
403

 
2,351

Financed sales of other real estate owned
 

 
257

Change in goodwill due to acquisition
 

 
15,739

   Initial recognition of operating lease right-of-use assets
 
2,344

 

   Initial recognition of operating lease liabilities
 
2,344

 

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

8

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Note 1. Presentation of Financial Information
  
Nature of Business:

SmartFinancial, Inc. (the "Company") 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 Tennessee, Alabama, Florida, and Georgia. 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 consolidated financial information in this report for June 30, 2019 and June 30, 2018 has not been audited by an independent registered public accounting firm. The consolidated financial statements presented herein conform to U.S. generally accepted accounting principles and to general industry practices. In the opinion of the Company’s management, the accompanying interim financial statements contain all material adjustments necessary to present fairly the Company's financial condition, the results of operations, and cash flows for the interim period. Results for interim periods are not necessarily indicative of the results to be expected for a full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the U.S, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan 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.
 
Recently Issued and Adopted Accounting Pronouncements:

As of January 1, 2019, the Company adopted certain accounting standard updates related to accounting for leases (Topic 842 - Leases), primarily Accounting Standards Update ASU 2016-02 and subsequent updates. Among other things, these updates require lessees to recognize a lease liability, measured on a discounted basis, related to the lessee's obligation to make lease payments arising under a lease contract; and a right-of-use asset related to the lessee's right to use, or control the use of, a specified asset for the lease term. The updates did not significantly change lease accounting requirements applicable to lessors and did not significantly impact the Company's consolidated financial statements in relation to contracts whereby the Company acts as a lessor. The Company adopted the updates using a modified-retrospective transition approach and recognized right-of-use lease assets and related lease liabilities as of January 1, 2019. See Note 8 Leases for more information.

In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): 1) a lease liability, which is the present value of a lessee’s obligation to make lease payments, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessor accounting under the new guidance remains largely unchanged as it is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. Leveraged leases have been eliminated, although lessors can continue to account for existing leveraged leases using the current accounting guidance. Other limited changes were made to align lessor accounting with the lessee accounting model and the new revenue recognition standard. All entities will classify leases to determine how to recognize lease-related revenue and expense. Quantitative and qualitative disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The intention is to require enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities. ASU No. 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. All entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. As the Company elected the transition option provided in ASU No. 2018-11 (see below), the modified retrospective approach was applied on January 1, 2019.

The Company also elected certain relief options offered in ASU 2016-02 including the package of practical expedients, the option not to separate lease and non-lease components and instead to account for them as a single lease component, and the option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less). We elected to apply certain practical adoption expedients provided under the updates whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial

9

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


direct costs for any existing leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of right-of-use assets. The Company has several lease agreements, such as branch locations or office space, which are considered operating leases, and therefore, were not previously recognized on the Company’s consolidated balance sheet. The new guidance requires these lease agreements to be recognized on the consolidated balance sheet as a right-of-use asset and a corresponding lease liability. The new guidance did not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 8 Leases for more information.
 
In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and (2) lessors may elect not to separate lease and non-lease components when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (January 1, 2019 for the Company). The Company adopted ASU 2018-11 on its required effective date of January 1, 2019 and elected both transition options mentioned above.

As of January 1, 2019, the Company adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASU expands the scope of Topic 718, Compensation-Stock Compensation (which previously only included payments to employees), to include share-based payment transactions for acquiring goods and services from non-employees. This required entities to apply the requirements of Topic 718 to non-employee awards, except for specific guidance on inputs to an option pricing model and the attribution of cost (i.e., the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). Additionally, the amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards, and clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer, or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

As of January 1, 2019, the Company adopted ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonably estimable. The adoption of this ASU did 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, 2018 as filed with the Securities and Exchange Commission. The following is a summary of recent authoritative pronouncements issued since December 31, 2018 but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In March 2019, the FASB issued ASU 2019-01, Leases: Codification Improvements (“ASU 2019-01”). ASU 2019-01 provides clarifications to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing essential information about leasing transactions. Specifically, ASU 2019-01 (i) allows the fair value of the underlying asset reported by lessors that are not manufacturers or dealers to continue to be its cost and not fair value as measured under the fair value definition, (ii) allows for the cash flows received for sales-type and direct financing leases to continue to be presented as results from investing, and (iii) clarifies that entities do not have to disclose the effect of the lease standard on adoption year interim amounts. ASU 2019-01 will be effective for us on January 1, 2020 and will not have any material impact on our consolidated financial statements.

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU changed the credit loss model on financial instruments measured at amortized cost, available for sale securities and certain purchased financial instruments. Credit losses on financial instruments measured at amortized cost will be determined using a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. Purchased financial assets with more-than-insignificant credit deterioration since origination ("PCD assets" which are currently named "PCI Loans") measured at amortized cost will have an allowance for credit losses established at acquisition as part of the purchase price. Subsequent increases or decreases to the allowance for credit losses on PCD assets will be recognized in the income statement. Interest income should be

10

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


recognized on PCD assets based on the effective interest rate, determined excluding the discount attributed to credit losses at acquisition. Credit losses relating to available-for-sale debt securities will be recognized through an allowance for credit losses. The amount of the credit loss is limited to the amount by which fair value is below amortized cost of the available-for-sale debt security. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years for the Company and other SEC filers. Early adoption is permitted and if early adopted, all provisions must be adopted in the same period. The amendments should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the period adopted. A prospective approach is required for securities with other than temporary impairment recognized prior to adoption. The Company is continuing its implementation efforts through its company-wide implementation team. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, conferences, and peer bank meetings. The team continues to evaluate and validate data resources and different loss methodologies. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular an increase to the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact. The guidance of ASU 2016-13 was recently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which changed the effective date for non-public companies and clarified that operating lease receivables are not within the scope of the standard.

On July 17, 2019 the Financial Accounting Standards Board unanimously voted to propose a delay for the implementation of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).  The Board decided that CECL will be effective for PBEs that are SEC Filers, excluding 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, 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.  For all 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 Board decided that the comment period for the proposed Update would be 30 days.

Reclassifications:

Certain captions and amounts in the 2018 consolidated financial statements were reclassified to conform to the 2019 financial statement presentation. These reclassifications had no impact on net income or shareholders' equity as previously reported.

 



11

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 2. Earnings Per Share

Basic earnings per common share represents net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance (excluding tax impact). Potential common shares that may be issued by the Company relate solely to outstanding stock options, determined using the treasury stock method, and restricted stock awards, determined by the fair value of the Company's stock on date of grant.
 
The following is a summary of the basic and diluted earnings per share computation (dollars in thousands, except for share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
9,121

 
$
3,932

 
$
13,852

 
$
7,346

 
 
 
 
 
 
 
 
Weighted average basic common shares outstanding
13,951,643

 
12,201,185

 
13,946,856

 
11,708,746

Effect of dilutive securities
94,857

 
119,313

 
89,934

 
113,751

Weighted average dilutive shares outstanding
14,046,500

 
12,320,498

 
14,036,790

 
11,822,497

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.65

 
$
0.32

 
$
0.99

 
$
0.63

Diluted earnings per common share
$
0.65

 
$
0.32

 
$
0.99

 
$
0.62


There were no antidilutive shares for the three and six month periods ended June 30, 2019 and 2018.

Note 3. Securities
 
The amortized cost and fair value of securities available-for-sale are summarized as follows (in thousands): 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
June 30, 2019:
 
 
 
 
 
 
 
 
U.S. Government-sponsored enterprises (GSEs)
 
$
24,031

 
$
22

 
$
(65
)
 
$
23,988

Municipal securities
 
56,251

 
492

 
(17
)
 
56,726

Other debt securities
 
979

 

 
(42
)
 
937

Mortgage-backed securities (GSEs)
 
92,718

 
154

 
(409
)
 
92,463

 
 
$
173,979

 
$
668

 
$
(533
)
 
$
174,114

December 31, 2018:
 
 
 
 
 
 
 
 
U.S. Government-sponsored enterprises (GSEs)
 
$
44,117

 
$
12

 
$
(626
)
 
$
43,503

Municipal securities
 
55,248

 
276

 
(363
)
 
55,161

Other debt securities
 
977

 

 
(67
)
 
910

Mortgage-backed securities (GSEs)
 
103,875

 
153

 
(1,914
)
 
102,114

 
 
$
204,217

 
$
441

 
$
(2,970
)
 
$
201,688

 
At June 30, 2019 and December 31, 2018, securities with a carrying value totaling approximately $102.0 million and $103.7 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

For the three and six months ended June 30, 2019, there were approximately $17 million available-for-sale securities sold which resulted in approximately $34 thousand gross gains and $1 thousand losses realized. For the three and six months ended June 30, 2018, there were approximately $25 million available-for-sale securities sold which resulted in no net gains or losses. For the three and six months ended June 30, 2019, there were approximately $5 million and $10 million available-for-sale securities redeemed, respectively. For the three and six months ended June 30, 2018, a security was called for less than the amortized cost resulting in a realized loss of $1 thousand.

12

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



The amortized cost and estimated fair value of securities at June 30, 2019, by contractual maturity for non-mortgage backed securities are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 
 
Amortized
Cost
 
Fair
Value
Due in one year or less
 
$
294

 
$
297

Due from one year to five years
 
16,000

 
15,935

Due from five years to ten years
 
13,302

 
13,283

Due after ten years
 
51,665

 
52,136

 
 
81,261

 
81,651

Mortgage-backed securities
 
92,718

 
92,463

 
 
$
173,979

 
$
174,114


The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities available-for-sale have been in a continuous unrealized loss position (in thousands): 
 
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government- sponsored enterprises (GSEs)
 
$

 
$

 
$
10,935

 
$
(65
)
 
$
10,935

 
$
(65
)
Municipal securities
 

 

 
2,021

 
(17
)
 
2,021

 
(17
)
Other debt securities
 

 

 
937

 
(42
)
 
937

 
(42
)
Mortgage-backed securities (GSEs)
 
5,165

 
(20
)
 
43,805

 
(389
)
 
48,970

 
(409
)
 
 
$
5,165

 
$
(20
)
 
$
57,698

 
$
(513
)
 
$
62,863

 
$
(533
)
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government- sponsored enterprises (GSEs)
 
$
14,763

 
$
(237
)
 
$
13,728

 
$
(389
)
 
$
28,491

 
$
(626
)
Municipal securities
 
16,455

 
(150
)
 
4,767

 
(213
)
 
21,222

 
(363
)
Other debt securities
 

 

 
910

 
(67
)
 
910

 
(67
)
Mortgage-backed securities (GSEs)
 
10,516

 
(155
)
 
69,884

 
(1,759
)
 
80,400

 
(1,914
)
 
 
$
41,734

 
$
(542
)
 
$
89,289

 
$
(2,428
)
 
$
131,023

 
$
(2,970
)


















13

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


At June 30, 2019, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):
 
 
Gross Unrealized Loss
 
Number of Securities
U.S. Government-sponsored enterprises (GSEs)
 
$
(65
)
 
3

Municipal securities
 
(17
)
 
4

Other debt securities
 
(42
)
 
1

Mortgage-backed securities (GSEs)
 
(389
)
 
47

 
 
$
(513
)
 
55


The Company reviews the securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. A determination as to whether a security's decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can very by security. Some factors the Company may consider in the other-than-temporary impairment analysis include the length of time and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions.

Based on this evaluation, the Company concluded that any unrealized losses at June 30, 2019 represented a temporary impairment, as these unrealized losses are primarily attributable to changes in interest rates and the current market condition, and not credit deterioration of the issuers. As of June 30, 2019, the Company does not intend to sell any of the securities, does not expect to be required to sell any of the securities, and expects to recover the entire amortized cost of all of the securities.

The following is the amortized cost and carrying value of other investments (in thousands):
 
June 30, 2019
 
December 31, 2018
Federal Reserve Bank stock
$
7,909

 
$
7,010

Federal Home Loan Bank stock
4,646

 
4,139

First National Bankers Bank stock
350

 
350

 
$
12,905

 
$
11,499

Our restricted investments consist of non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of June 30, 2019, the Company determined that there was no impairment on its other investment securities.








14

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Note 4. Loans and Allowance for Loan Losses
 
Portfolio Segmentation:
 
Major categories of loans are summarized as follows (in thousands):
 
 
 
June 30, 2019
 
December 31, 2018
 
 
PCI Loans1
 
All Other
Loans
2
 
Total
 
PCI Loans1
 
All Other
Loans
2
 
Total
Commercial real estate
 
$
17,040

 
$
861,547

 
$
878,587

 
$
17,682

 
$
842,345

 
$
860,027

Consumer real estate
 
7,412

 
398,844

 
406,256

 
8,712

 
398,542

 
407,254

Construction and land development
 
4,669

 
200,027

 
204,696

 
4,602

 
183,293

 
187,895

Commercial and industrial
 
2,137

 
333,361

 
335,498

 
2,557

 
305,697

 
308,254

Consumer and other
 
400

 
11,552

 
11,952

 
605

 
13,204

 
13,809

Total loans
 
31,658

 
1,805,331

 
1,836,989

 
34,158

 
1,743,081

 
1,777,239

Less:  Allowance for loan losses
 
(54
)
 
(9,043
)
 
(9,097
)
 

 
(8,275
)
 
(8,275
)
Loans, net
 
$
31,604

 
$
1,796,288

 
$
1,827,892

 
$
34,158

 
$
1,734,806

 
$
1,768,964

1 Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.
2 Includes loans held for sale.

For purposes of the disclosures required pursuant to the adoption of ASC 310, the loan portfolio was disaggregated into segments. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are five loan portfolio segments that include commercial real estate, consumer real estate, construction and land development, commercial and industrial, and consumer and other.

The composition of loans by loan classification for impaired and performing loan status is summarized in the tables below (in thousands):

 
 
Commercial
Real Estate
 
Consumer
Real Estate
 
Construction
and Land
Development
 
Commercial
and
Industrial
 
Consumer
and Other
 
Total
June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Performing loans
 
$
861,288

 
$
398,061

 
$
199,326

 
$
333,109

 
$
11,552

 
$
1,803,336

Impaired loans
 
259

 
783

 
701

 
252

 

 
1,995

 
 
861,547

 
398,844

 
200,027

 
333,361

 
11,552

 
1,805,331

PCI loans
 
17,040

 
7,412

 
4,669

 
2,137

 
400

 
31,658

Total
 
$
878,587

 
$
406,256

 
$
204,696

 
$
335,498

 
$
11,952

 
$
1,836,989

December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Performing loans
 
$
841,709

 
$
397,306

 
$
182,746

 
$
304,673

 
$
13,088

 
$
1,739,522

Impaired loans
 
636

 
1,236

 
547

 
1,024

 
116

 
3,559

 
 
842,345

 
398,542

 
183,293

 
305,697

 
13,204

 
1,743,081

PCI loans
 
17,682

 
8,712

 
4,602

 
2,557

 
605

 
34,158

Total loans
 
$
860,027

 
$
407,254

 
$
187,895

 
$
308,254

 
$
13,809

 
$
1,777,239









15

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


The following tables show the allowance for loan losses allocation by loan classification for impaired, PCI, and performing loans (in thousands):

 
 
Commercial
Real Estate
 
Consumer
Real Estate
 
Construction
and Land
Development
 
Commercial
and
Industrial
 
Consumer
and
Other
 
Total
June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Performing loans
 
$
4,062

 
$
1,935

 
$
946

 
$
1,641

 
$
114

 
$
8,698

PCI loans
 
40

 
14

 

 

 

 
54

Impaired loans
 

 
240

 

 
105

 

 
345

Total
 
$
4,102

 
$
2,189

 
$
946

 
$
1,746

 
$
114

 
$
9,097

December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Performing loans
 
$
3,639

 
$
1,763

 
$
795

 
$
1,304

 
$
240

 
$
7,741

PCI loans
 

 

 

 

 

 

Impaired loans
 

 
26

 

 
442

 
66

 
534

Total
 
$
3,639

 
$
1,789

 
$
795

 
$
1,746

 
$
306

 
$
8,275

 
The following tables detail the changes in the allowance for loan losses by loan classification (in thousands):

 
 
Commercial
Real Estate
 
Consumer
Real
Estate
 
Construction
and Land
Development
 
Commercial
and
Industrial
 
Consumer
and Other
 
Total
Three Months Ended June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
4,074

 
$
1,949

 
$
854

 
$
1,709

 
$
118

 
$
8,704

Loans charged off
 

 

 

 
(14
)
 
(80
)
 
(94
)
Recoveries of charge-offs
 
22

 
16

 
2

 
41

 
13

 
94

Provision (reallocation) charged to expense
 
6

 
224

 
90

 
10

 
63

 
393

Ending balance
 
$
4,102

 
$
2,189

 
$
946

 
$
1,746

 
$
114

 
$
9,097

Three Months Ended June 30, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
2,925

 
$
1,519

 
$
627

 
$
1,210

 
$
196

 
$
6,477

Loans charged off
 

 
(25
)
 

 

 
(59
)
 
(84
)
Recoveries of charge-offs
 

 
27

 
3

 
16

 
18

 
64

Provision (reallocation) charged to expense
 
210

 
7

 
114

 
141

 
145

 
617

Ending balance
 
$
3,135

 
$
1,528

 
$
744

 
$
1,367

 
$
300

 
$
7,074




16

SMARTFINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


 
 
Commercial
Real Estate
 
Consumer
Real
Estate
 
Construction
and Land
Development
 
Commercial
and
Industrial
 
Consumer
and Other
 
Total
Six Months Ended June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
3,639

 
$
1,789

 
$
795

 
$
1,746

 
$
306

 
$
8,275

Loans charged off
 

 
(2
)
 

 
(333
)
 
(210
)
 
(545
)
Recoveries of charge-offs
 
24

 
20

 
4

 
53

 
76

 
177

Provision (reallocation) charged to expense
 
439

 
382

 
147

 
280

 
(58
)
 
1,190

Ending balance
 
$
4,102

 
$
2,189

 
$
946

 
$
1,746

 
$
114

 
$
9,097

Six Months Ended June 30, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
2,465

 
$