Smartfinancial, Inc. · NYSE:SMBK
Smartfinancial — Q3 2018 Earnings Presentation
25 slides from Smartfinancial's earnings presentation, Oct 24, 2018
Slide 1: Third Quarter 2018 Earnings Call
Third Quarter 2018 Earnings Call October 24, 2018
Slide 2: Legal Disclaimer
Legal Disclaimer Forward-Looking Statements Certain of the statements made in this presentation may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-look
Slide 3: Overview of SmartFinancial
Overview of SmartFinancial SmartFinancial, Inc. (Nasdaq: SMBK) is a $2.3 billion(1) asset bank holding company headquartered in Knoxville, Tennessee Nashville Branch FootprintKnoxville Greensboro Jonesboro 40 ARKANSAS Operates one subsidiary bank, SmartBank, which was founded TENNESSEE NORTH CAROLIN
Slide 4: Our History
Our History 1/8/07 8/20/15 2/29/16 5/19/17 11/1/17 6/27/18 Capstone SmartBank Announced ~$14.6mm Charter Cleveland,Completed TN / Bancshares,Completed acquisition Inc Announced opened first office private placement of combination of Acquisition of of proposed 10/19/12 8/31/15 Bradley County Foothill
Slide 5: Culture
Culture building a culture Associates thrive empowered leaders core values We are critical part of ourwhereculture and are to be . The that we have established as a company help us operate in unison and have becomeCorea Values . Our Associates are key to SmartBank’s success. A Delivering Exhibiting
Slide 6: Our Business Strategy
Our Business Strategy Create a valuable southeastern banking franchise through organic growth in strong markets, coupled with an acquisition model positioning our company as a partner of choice for banks in our region Continually improve earnings and efficiency metrics as we grow our franchise with
Slide 7: An Emerging Southeast Acquirer
An Emerging Southeast Acquirer SmartFinancial is transforming into an experienced and preferred Southeast acquirer, having completed five transactions that added low-cost core deposits in attractive markets across three states Nearly three-fourths of the total franchise’s assets and core deposits, i
Slide 8: Disciplined Acquisition Strategy
Disciplined Acquisition Strategy SmartFinancial has adhered to a disciplined set of merger criteria including: No more than 3 years of initial TBV-per-share dilution Meaningful EPS accretion in the first full year of operations Conservative loan marks Franchise additive SmartFinancial is committed t
Slide 9: Financial Highlights
Third Quarter 2018 Earnings Call FINANCIAL HIGHLIGHTS
Slide 10: Third Quarter 2018 Highlights
Third Quarter 2018 Highlights Net Income of $4.3 million for the quarter, up 157% from a year earlier, and Net Operating Earnings (Non-GAAP) of $5.0 million for the quarter, up 173% from a year earlier ROAA of 0.85% for the quarter and Net Operating ROAA (Non-GAAP) of 0.98% fully taxable equivalent
Slide 11: Profitability Metrics
Profitability Metrics ROAA (%) ROATCE (%) 11.0 % 10.8 % 1.20% 1.00 % 12.00% 0.98 % 9.4 % 0.89 % 9.0 % 9.0 % 0.85 % 0.81 % 8.1 % 0.77 % 0.80 % 10.00% 0.90% 6.9 %6.7 % 6.8 % 0.60 % 8.00% 0.57 % 0.42 % 0.60% 0.36 % 6.00% 3.9 % 2.7 % 0.22 % 4.00% 2.7 % 0.30% 2.00% 0.00% 0.00% Net Interest Margin (%) Eff
Slide 12: Earnings Profile – Third Quarter 2018
Earnings Profile – Third Quarter 2018 3Q18 2Q18 3Q17 EPS increased 70% year over Total Interest Income $23,068 $22,993 $12,317 year (“YoY”) Total Interest Expense 4,208 3,455 1,393 Net Interest Income 18,860 19,538 10,924 Earnings Before Income Provision for Loan Losses 302 617 30 Taxes increased 12
Slide 13: Net Interest Income
Net Interest Income Net Interest Margin (FTE) decreased quarter to quarter primarily due to lower accretion on acquired loans Compared to a year ago, Earning Asset Yields are up 33 basis points; the Average Cost of Interest- bearing Liabilities are up 47 basis points Excluding the effect of purchase
Slide 14: Noninterest Income
Noninterest Income 3Q18 Noninterest Income increased primarily due to increases in both service charge revenue and gain on sale of loans and other assets Quarterly Noninterest Income has trended higher over the last five quarters from approximately $1.2 million in 3Q17 to $1.9 million in 3Q18 Nonint
Slide 15: Noninterest Expense
Noninterest Expense Efficiency Ratio decreased to 71.4%, the lowest of any quarter since the Cornerstone merger in 2015. Operating Efficiency Ratio (Non-GAAP) was 67.2%. Salary increases are primarily due to the addition of associates from the Tennessee Bancshares acquisition during the quarter. Mer
Slide 16: Balance Sheet
Balance Sheet 3Q18 2Q18 3Q17 Cash & Cash Equivalents $ 130,104 $ 170,235 $ 84,098 Assets roughly flat compared to 2Q18 Securities Available for Sale 173,039 156,577 115,535 Other Investments 10,736 8,273 6,081 Cash & Cash Equivalents declined over Total Loans 1,585,194 1,575,435 871,679 Allowance fo
Slide 17: Attractive Deposit Mix
Attractive Deposit Mix Deposit Composition (9/30/18) Historical Deposit Composition ($mm) $2,000 $1,717 $1,707 $1,500 $1,500 $1,440 $536 $569 $453 $443 Cost of Interest- Bearing Deposits: $1,000 $908 $859 1.11% $633 $570 $491 $316 Historical Cost of Interest-Bearing Deposits $341 $544 $500 $275 $237
Slide 18: Overview of Loan Portfolio
Overview of Loan Portfolio Loan Composition (9/30/18) Historical Loan Composition ($mm) $1,575 $1,585 $1,800 $1,374 $13 $1,600 $1,323 $15 $12 $1,400 $14 $356 $352 $1,200 $299 $293 $813 $728 $1,000 $386 $400 $8 $375 $362 $800 $6 $188 $161 $600 $360 $364 $289 $233 $281 $208 $400 $179 $166 $143 Loan Po
Slide 19: SmartBank CRE Ratios
SmartBank CRE Ratios C&D levels (100 Ratio) are still well below regulatory guidance levels Total CRE levels (300 Ratio) remained relatively stable quarter to quarter Managing these ratios are part of our overall organic growth, merger opportunity and capital management strategies 300 Ratio 150% 350
Slide 20: Asset Quality
Asset Quality Excellent asset quality, with Nonperforming Assets at 0.27% of Total Assets Remaining fair value discounts on acquired loans are more than 2.7x the current Allowance For Loan Losses Acquisitions are marked conservatively for potential losses Nonperforming Assets Loan Discounts $6,000 0
Slide 21: Appendix
Alb, SmartFinancial, Inc. Appendix
Slide 22: Non-GAAP Reconciliations
Non-GAAP Reconciliations 3Q18 2Q18 1Q18 4Q17 3Q17 Net interest income - ex purchase acct. adj. Net interest income (GAAP) $ 18,860 $ 19,538 $ 16,811 $ 15,342 $ 10,924 Taxable equivalent adjustment 36 16 22 21 21 Net interest income TEY 18,896 19,554 16,833 15,363 10,945 Purchase accounting adjustmen
Slide 23: Non-GAAP Reconciliations
Non-GAAP Reconciliations 3Q18 2Q18 1Q18 4Q17 3Q17 Operating Earnings Net income (GAAP) $ 4,324 $ 3,931 $ 3,415 $ 38 $ 1,685 Securities (gains) losses - 1 - - (144) Merger costs 838 1,123 498 1,694 303 Revaluation of deferred tax assets due to change in tax law - - - 2,482 - Income tax effect of adju
Slide 24: SmartFinancial, Inc. Management
SmartFinancial, Inc. Management Over 26 years in banking Over 15 years in banking Over 23 years in banking and Over 20 years in financial Led company from start-up in Responsible for driving key financial services services 2007 to over $2.0 billion in strategic initiatives and Responsible for drivin
Slide 25: Investor Contacts
Investor Contacts Billy Carroll Miller Welborn President & CEO Chairman (865) 868-0613 (423) 385-3067 Billy.Carroll@SmartBank.com Miller.Welborn@SmartBank.com SmartFinancial, Inc. 5401 Kingston Pike, Suite 600 Knoxville, TN 37919