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SmartFinancial shows $9.8 million net income for First Quarter 2021
April 22, 2021

KNOXVILLE - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $9.8 million, or $0.65 per diluted common share, for the first quarter of 2021, compared to net income of $9.0 million, or $0.59 per diluted common share for the fourth quarter of 2020. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.8 million, or $0.65 per diluted common share, in the first quarter of 2021, compared to $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020.

Highlights for the First Quarter of 2021

• Net income and operating earnings (non-GAAP) of $9.8 million, or $0.65 per diluted share
• Tangible book value per share (Non-GAAP) of $18.39, a 10.5% annualized quarter-over-quarter increase
• Organic loan growth of over $60 million, a 10.4% annualized quarter-over-quarter increase
• Originated 1,231 of Paycheck Protection Program (“PPP”) loans totaling $119.5 million
• Successfully completed a lift-out of an experienced banking team in the Gulf Coast Region
• Announced on April 14, 2021 the proposed acquisition of Sevier County Bancshares, Inc.

Billy Carroll, President & CEO, stated: “We had an outstanding first quarter. Our team continues to build a great franchise and this quarter highlights their efforts. Organic loan growth coupled with PPP production has been strong to start the year. We are also very excited about what our Gulf Coast Region lift-out and the Sevier County Bank acquisition will do for our company’s growth and profitability.”

SmartFinancial's Chairman, Miller Welborn, concluded: “We are incredibly excited about where we are as a company. Our team continues to execute with precision and our latest quarterly results is a perfect example of their commitment to continually raise the bar. The goals and targets of our Strategic Plan are very clear and the progress we made during the first quarter of 2021 is impressive.”


Net Interest Income and Net Interest Margin

Net interest income was $26.3 million for the first quarter of 2021, compared to $26.5 million for the fourth quarter of 2020. Average earning assets totaled $3.1 billion, an increase of $110.0 million, primarily driven by an increase in average cash and cash equivalents of $68.0 million, an increase in average securities of $17.2 million and an increase in average loans of $27.1 million. Average interest-bearing liabilities increased $94.5 million, directly related to continued deposit growth.

The tax equivalent net interest margin was 3.48% for the first quarter of 2021, compared to 3.57% for the fourth quarter of 2020. The tax equivalent net interest margin was negatively impacted by a 13 basis point decrease in the average yield on interest-earning assets and offset by a 6 basis point decline in the rate on interest-bearing liabilities over the prior quarter. Lower market interest rates continue to negatively impact earning asset yields, but these declines have been largely mitigated by a lower cost of funds. The primary drivers of the yield decrease on interest-earning assets during the first quarter of 2021 was an overall decline in loan yields and a decrease in loan fees. The decrease of $612 thousand in loan fees during the quarter is attributable to $2.4 million of the PPP fee accretion and $454 thousand of other loan fees compared to $2.2 million of PPP fee accretion, and $1.3 million of other loan fees recognized in the fourth quarter of 2020. The decrease was offset by an increase of $867 thousand in acquired loan discount accretion. The Company continues to carry excess liquidity on the balance sheet that resulted from significant deposit growth during the first quarter of 2021 and the fourth quarter of 2020.

The yield on interest-bearing liabilities decreased to 0.54% for the first quarter of 2021 when compared to 0.60% for the fourth quarter of 2020. The cost of average interest-bearing deposits was 0.44% for the first quarter of 2021 compared to 0.50% for the fourth quarter of 2020, a decrease of 6 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, with average costs decreasing 14 basis points. The cost of total deposits for the first quarter of 2021 was 0.33%.

The following table presents selected interest rates and yields for the periods indicated:

smart financial

Provision for Loan Loss and Credit Quality

The provision for loan losses during the first quarter of 2021 was $67 thousand, compared to no provision for the fourth quarter of 2020. At March 31, 2021, the allowance for loan losses was $18.4 million. The allowance for loan losses to total loans was 0.74% as of March 31, 2021, compared to 0.77% as of December 31, 2020. For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.93% as of March 31, 2021, compared to 0.96% as of December 31, 2020. The remaining discounts on the acquired loan portfolio totaled $13.0 million, or 3.60% of acquired loans as of March 31, 2021.

As of March 31, 2021, the Company had COVID related modified loans totaling $1.7 million, or 0.07%, of the loan portfolio, as compared to $17.2 million or 0.7%, of the loan portfolio on December 31, 2020.

The following table presents detailed information related to the provision for loan losses for the periods indicated (dollars in thousands):

smart financial provision for loan losses

The Company is not required to implement the provisions of the Current Expected Credit Losses (“CECL”) accounting standard until January 1, 2023 and is continuing to account for the allowance for loan losses under the incurred loss model.

Nonperforming loans as a percentage of total loans was 0.25% as of March 31, 2021, an increase of one basis point from the 0.24% reported in the fourth quarter of 2020. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.29% as of March 31, 2021, as compared to 0.31% as of December 31, 2020.

The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):

smart financical credit quality

Noninterest Income

Noninterest income increased $715 thousand to $5.7 million for the first quarter of 2021 compared to $5.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest income were as follows:

• Increase in investment services of $124 thousand, stemming from increased production;
• Increase in insurance commissions of $918 thousand, primarily due to commissions of $815 thousand from the placement of life insurance policies;
• Decrease in mortgage banking income of $192 thousand, related to continuing seasonality; and
• Decrease in other of $191 thousand, is primarily attributable to $465 thousand of non-recurring income recognized in the prior quarter, partially offset by an increase in the cash surrender value of bank owned life insurance income of $189 thousand.

The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):


smart financial noninterest income

Noninterest Expense

Noninterest expense was $19.5 million for the first quarter of 2021 compared to $20.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest expense were as follows:

• Salaries and employee benefits declined $647 thousand, primarily attributable to the deferral of salary cost related to the origination of PPP loans;
• Data processing and technology increased $197 thousand, primarily due to implementation of new contactless chip cards and tier pricing adjustments from our core system provider;
• Merger related and restructuring expense decreased $599 thousand: and
• Other increased $578 thousand, primarily from an investment in a start-up fintech company.

The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):

smart financial noninterest expense

Income Tax Expense

Income tax expense was $2.7 million for the first quarter of 2021, an increase of $165 thousand, compared to $2.5 million for the fourth quarter of 2020.

For the first quarter of 2021, the effective tax rate was 21.5% compared to 21.7% for the fourth quarter of 2020.


Balance Sheet Trends

Total assets at March 31, 2021 were $3.56 billion compared with $3.30 billion at December 31, 2020. The increase of $252.1 million is primarily attributable to increases in cash and cash equivalents of $75.0 million, securities available-for-sale of $35.3 million, loans of $104.9 million, which consisted of organic loan growth of $61.0 million and net increase in PPP loans of $49.3 million, and bank owned life insurance of $40.4 million.

Total liabilities increased to $3.19 billion at March 31, 2021 from $2.95 billion at December 31, 2020. The increase of $245.3 million was primarily from organic deposit growth of $243.0 million.

Shareholders' equity at March 31, 2021 totaled $364.1 million, an increase of $6.9 million, from December 31, 2020. The increase in shareholders' equity was primarily from net income of $9.8 million for the quarter ended March 31, 2021, which was offset by a net change in accumulated other comprehensive income of $1.1 million, repurchase of the Company's common stock of $1.2 million and $907 thousand of dividends paid. Tangible book value per share (Non-GAAP) was $18.39 at March 31, 2021, an increase from $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.00% at March 31, 2021, compared with 8.41% at December 31, 2020.

The following table presents selected balance sheet information for the periods indicated (dollars in thousands):

smart financical balance sheet

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with 35 branches across East and Middle Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source: SmartFinancial, Inc.








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