Smartfinancial, Inc. · NYSE:SMBK
Smartfinancial — Q3 2017 Earnings Presentation
24 slides from Smartfinancial's earnings presentation, Oct 30, 2017
Slide 1: Third Quarter 2017 Earnings Call
Third Quarter 2017 Earnings Call October 31, 2017
Slide 2: Important Information: Forward Looking Statements
Important Information Forward Looking Statements This presentation contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors inclu
Slide 3: SMBK at-a-glance
SMBK at-a-glance • Core franchise in East Tennessee – SmartBank founded in 2007 • Corporate Headquarters – Knoxville, Tennessee • 14 Branch Offices located in Knoxville, Pigeon Forge/Gatlinburg and Chattanooga/Cleveland regions in TN with FL offices in Pensacola, Destin and Panama City. • SmartBank
Slide 4: Pro Forma Branch Map
Pro Forma Branch Map 4 SMBK (14) Capstone (8) • Capstone brings the vibrant Tuscaloosa market to complement existing Tennessee and Florida markets. • Capstone’s CEO, Robert Kuhn, will be the Regional President for Alabama and the Florida Panhandle which will enhance SmartBank’s geographic profile. •
Slide 5: Deal Assumptions and Impact
Deal Assumptions and Impact 5 Cost Savings: 25%, with 85% phased-in in 2018 and 100% thereafter Merger Related Expenses: $5.0 million after-tax Significant Purch. Acct. Mark: $9.3 million loan credit mark down $2.3 million loan fair value adjustment Core Deposit Intangible: $4.2 million Earnings Acc
Slide 6: Third Quarter 2017 Highlights
Third Quarter 2017 Highlights • Net income available to common shareholders of $1.7 million during 3Q17 compared to $1.3 million during 3Q16. • Net operating earnings (Non-GAAP) available to common shareholders of $1.8 million increased over 40% year over year. • Increased net interest margin, taxab
Slide 7: Summary Results
Summary Results 0.40% 0.50% 0.60% 0.70% 0.80% ROAA 3.74% 3.76% 3.78% 3.80% 3.82% Net interest income / average assets 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% Noninterest income / average assets 2.90% 3.00% 3.10% 3.20% 3.30% 3.40% Noninterest expense / average assets 7
Slide 8: Earnings Profile – Third Quarter 2017
Earnings Profile –Third Quarter 2017 • Net income available to common increased 22% year over year. • Net interest income up over 13% year over year primarily due to average loan balances that were up 10%. • Increases in noninterest expense primarily driven by salaries from personnel additions as we
Slide 9: Net Interest Income
Net Interest Income • Net interest margin, taxable equivalent, increased quarter to quarter due higher average interest- earning assets to average interest-bearing liabilities and increases in the yields of loans and securities. • Compared to a year ago earning asset yields are up 22bps while cost o
Slide 10: Noninterest Income
Noninterest Income • 3Q17 Noninterest income down due to lower gains on sales of SBA and mortgage loans. • Quarterly recurring core noninterest income of service charges, gains on the sale of loans, and other noninterest income has trended higher over the last four quarters from approximately $1 mil
Slide 11: Noninterest Expense
Noninterest Expense • Salary increases are primarily due to the additions of revenue producing personnel along with operations additions to support the upcoming merger. • Increases in other noninterest expense compared to the prior year primarily due to merger expenses, loan expense, and reserves fo
Slide 12: Balance Sheet
Balance Sheet • Cash & cash equivalents were reduced slightly. • Securities were reduced as gains were recognized when interest rates fell in September. • Loans increased $6 million. • Demand deposits decreased while reductions in money markets and time deposits were concentrated in wholesale borrow
Slide 13: Loan Portfolio
Loan Portfolio • Loan growth of over $74 million year over year, about 9%. • Growth over the last year has been broad based with increases in C&I, CRE, and Consumer RE. • The bank’s Commercial Real Estate 100 & 300 ratios dropped even further. $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000
Slide 14: Asset Quality
Asset Quality • Excellent asset quality with nonperforming assets at just 0.37% of total assets. • Purchase accounting discounts are significantly higher than ALLL. 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% $0 $1,000 $2,000 $3,000 $4,000 $5,000 3Q16 4Q16 1Q17 2Q17 3Q17 Nonperforming Assets Foreclosed asse
Slide 15: Deposits
Deposits • Well diversified deposit mix with growth of money market, savings, and noninterest demand replacing mostly wholesale time deposits. • Cost of funds up just 7bps while Fed Funds has increased 75bps over the last year. 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% $- $200,000 $400,000 $600,000 $800,0
Slide 16: Conclusions
Conclusions • Net income available to common increased 26% compared to a year ago. • Fourth quarter acquisition of Capstone Bancshares. • Improved loan mix with less CRE which will allow continued growth. • SMBK continues focus on long-term shareholder value by: • Building the foundation for organic
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations 3Q17 2Q17 1Q17 4Q16 3Q16 Net interest income -ex purchase acct. adj. Net interest income (GAAP) 10,924$ 10,249$ 9,820$ 9,856$ 9,665$ Taxable equivalent adjustment 22 (371) (141) (225) (516) Net interest income TEY (Non-GAAP) 10,946 $9,878 $9,679 9,631 9,149 Purchase accounti
Slide 18: Non-GAAP Reconciliations
Non-GAAP Reconciliations 3Q17 2Q17 1Q17 4Q16 3Q16 Operating Earnings Net income (loss) (GAAP) 1,685$ 1,648$ 1,644$ 1,647$ 1,611$ Securities (gains) losses (144) — — — (18) Foreclosed assets (gains) losses 27 — 15 (6) (130) Merger and conversion costs 303 420 — — — Income tax effect of adjustments2 (
Slide 19: Third Quarter 2017 Supplemental Information
Third Quarter 2017 19 Supplemental Information
Slide 20: Loan & Deposit Composition
Loan & Deposit Composition 3Q17 C&I 13% C&D 11% CRE, owner occupied 25% CRE, non- owner occupied 27% Consumer RE 23% Other 1% Loans Noninterest demand 19% Interest- bearing demand 16% Money market and savings 32% Time deposits 33% Deposits 20
Slide 21: Loan Composition History
Loan Composition History 3Q17 2Q17 1Q17 4Q16 3Q16 Gross Loans C&I 119,782$ 105,129$ 90,649$ 85,696$ 83,471$ C&D 98,212 101,151 115,675 117,748 128,727 CRE, owner occupied 210,489 211,469 197,032 181,840 172,397 CRE, non-owner occupied 237,131 233,707 210,901 233,021 222,592 Consumer RE 199,704 206,6
Slide 22: Deposit Composition History
Deposit Composition History 3Q17 2Q17 1Q17 4Q16 3Q16 Deposits Noninterest demand 185,386$ 183,324$ 160,673$ 153,483$ 145,509$ Interest-bearing demand 156,953 156,150 167,433 162,702 152,216 Money market and savings 306,358 324,014 274,993 274,605 271,259 Time deposits 311,490 318,147 286,600 316,275
Slide 23: CRE Ratios
CRE Ratios • Declining trend in CRE ratios has been a result of targeted focus by lending teams across Bank’s geography to primarily prospect opportunities within the owner occupied CRE and Commercial and Industrial portfolio segments. • This strategy was implemented to further diversify the bank’s
Slide 24: Management Team
Management Team 24 Billy Carroll President & CEO Miller Welborn Chairman of the Board C. Bryan Johnson Chief Financial Officer Rhett Jordan Chief Credit Officer Gary Petty Chief Risk Officer Greg Davis Chief Lending Officer