ý | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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 | |
(Registrant’s telephone number, including area code) |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
Item No. | Page No. | |
• | weakness or a decline in the U.S. economy, in particular in Tennessee, and other markets in which we operate; |
• | the possibility that our asset quality would decline or that we experience greater loan losses than anticipated; |
• | the impact of liquidity needs on our results of operations and financial condition; |
• | competition from financial institutions and other financial service providers; |
• | the impact of negative developments in the financial industry and U.S. and global capital and credit markets; |
• | the impact of recently enacted and future legislation and regulation on our business; |
• | negative changes in the real estate markets in which we operate and have our primary lending activities, which may result in an unanticipated decline in real estate values in our market area; |
• | risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; |
• | claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; |
• | cyber attacks, computer viruses or other malware that may breach the security of our websites or other systems we operate or rely upon for services to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems and negatively impact our operations and our reputation in the market; |
• | results of examinations by our primary regulators, the Tennessee Department of Financial Institutions (the “TDFI”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, require us to reimburse customers, change the way we do business, or limit or eliminate certain other banking activities; |
• | government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve; |
• | our inability to pay dividends at current levels, or at all, because of inadequate future earnings, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements (including those resulting from the U.S. implementation of Basel III requirements); |
• | the relatively greater credit risk of commercial real estate loans and construction and land development loans in our loan portfolio; |
• | unanticipated credit deterioration in our loan portfolio or higher than expected loan losses within one or more segments of our loan portfolio; |
• | unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors; |
• | unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events; |
• | changes in expected income tax expense or tax rates, including changes resulting from revisions in tax laws, regulations and case law; |
• | our ability to retain the services of key personnel; |
• | the impact of Tennessee’s anti-takeover statutes and certain of our charter provisions on potential acquisitions of us; and |
• | our ability to use the net proceeds of this offering as currently contemplated. |
• | banking or managing or controlling banks; |
• | furnishing services to or performing services for its subsidiaries; and |
• | any activity that the Federal Reserve determines by regulation or order to be so closely related to banking as to be a proper incident to the business of banking, including, for example factoring accounts receivable, making, acquiring, brokering or servicing loans and usual related activities, leasing personal or real property, operating a nonbank depository institution, such as a savings association, performing trust company functions, conducting financial and investment advisory activities, underwriting and dealing in government obligations and money market instruments, performing selected insurance underwriting activities, issuing and selling money orders and similar consumer-type payment instruments, and engaging in certain community development activities. |
• | its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; |
• | its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or |
• | it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. |
• | Tier 1 capital treatment for “hybrid” capital items like trust preferred securities is eliminated, subject to various grandfathering and transition rules. |
• | The deposit insurance assessment base calculation now equals the depository institution’s average consolidated total assets minus its average tangible equity during the assessment period. Previously, the deposit insurance assessment was calculated based on the insured deposits held by the institution. |
• | The ceiling on the size of the Deposit Insurance Fund was removed and the minimum designated reserve ratio of the Deposit Insurance Fund increased 20 basis points to 1.35 percent of estimated annual insured deposits or assessment base. The FDIC also was directed to “offset the effect” of the increased reserve ratio for insured depository institutions with total consolidated assets of less than $10 billion. |
• | Bank holding companies and banks must be “well capitalized” and “well managed” in order to acquire banks located outside of their home state, which codified long-standing Federal Reserve policy. Any bank holding company electing to be treated as a financial holding company must be and remain “well capitalized” and “well managed.” |
• | Capital requirements for insured depository institutions are now countercyclical, such that capital requirements increase in times of economic expansion and decrease in times of economic contraction. |
• | The Federal Reserve established interchange transaction fees for electronic debit transactions under a restrictive “reasonable and proportional cost” per transaction standard. |
• | The “opt in” provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1997 have been eliminated, which allows state banks to establish de novo branches in states other than the bank’s home state if the law of such other state would permit a bank chartered in that state to open a branch at that location. |
• | The Durbin Amendment limits interchange fees payable on debit card transactions for financial institutions with more than $10 billion in assets. While the Durbin Amendment does not directly apply to SmartBank, competitive |
• | The prohibition on the payment of interest on demand deposit accounts was repealed effective one year after enactment, thereby permitting depository institutions to pay interest on business checking and other accounts. |
• | A new federal agency was created, the Consumer Financial Protection Bureau, or CFPB, which has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards. The CFPB is also responsible for examining large financial institutions (i.e., those with more than $10 billion in assets) and enforcing compliance with federal consumer financial protection. |
• | The regulation of consumer protections regarding mortgage originations, addressing loan originator compensation, minimum repayment standards including restrictions on variable-rate lending by requiring the ability to repay be determined based on the maximum rate that will apply during the first five years of a variable-rate loan term, prepayment consideration, and new disclosures, has been expanded. |
• | a new common equity Tier 1 risk-based capital ratio of 4.5 percent; |
• | a Tier 1 risk-based capital ratio of 6 percent (increased from the then-current 4 percent requirement); |
• | a total risk-based capital ratio of 8 percent (unchanged from the then-current requirements); |
• | a leverage ratio of 4 percent; and |
• | a new supplementary leverage ratio of 3 percent applicable to advanced approaches banking organizations, resulting in a leverage ratio requirement of 7 percent for such institutions. |
• | internal policies, procedures and controls designed to implement and maintain the bank's compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations; |
• | systems and procedures for monitoring and reporting of suspicious transactions and activities; |
• | designated compliance officer; |
• | employee training; |
• | an independent audit function to test the anti-money laundering program; |
• | procedures to verify the identity of each customer upon the opening of accounts; and |
• | heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships. |
• | annual on-site examinations by regulators (except for smaller, well-capitalized banks with high management ratings, which must be examined every 18 months); |
• | mandated annual independent audits by independent public accountants and an independent audit committee of outside directors for institutions with more than $500,000,000 in assets; |
• | uniform disclosure requirements for interest rates and terms of deposit accounts; |
• | a requirement that the FDIC establish a risk-based deposit insurance assessment system; |
• | authorization for the FDIC to impose one or more special assessments on its insured banks to recapitalize the bank insurance fund (now called the Deposit Insurance Fund); |
• | a requirement that each institution submit to its primary regulators an annual report on its financial condition and management, which report will be available to the public; |
• | a ban on the acceptance of brokered deposits except by well capitalized institutions and by adequately capitalized institutions with the permission of the FDIC, and the regulation of the brokered deposit market by the FDIC; |
• | restrictions on the activities engaged in by state banks and their subsidiaries as principal, including insurance underwriting, to the same activities permissible for national banks and their subsidiaries unless the state bank is well capitalized and a determination is made by the FDIC that the activities do not pose a significant risk to the insurance fund; |
• | a review by each regulatory agency of accounting principles applicable to reports or statements required to be filed with federal banking agencies and a mandate to devise uniform requirements for all such filings; |
• | the institution by each regulatory agency of noncapital safety and soundness standards for each institution it regulates which cover (1) internal controls, (2) loan documentation, (3) credit underwriting, (4) interest rate exposure, (5) asset growth, (6) compensation, fees and benefits paid to employees, officers and directors, (7) operational and managerial standards, and (8) asset quality, earnings and stock valuation standards for preserving a minimum ratio of market value to book value for publicly traded shares (if feasible); |
• | uniform regulations regarding real estate lending; and |
• | a review by each regulatory agency of the risk-based capital rules to ensure they take into account adequate interest rate risk, concentration of credit risk, and the risks of non-traditional activities. |
• | Construction concentration criterion: Loans for construction, land, and land development (CLD or “construction”) represent 100 percent or more of a banking institution’s total risk-based capital, commonly referred to as the "100 ratio" |
• | Total CRE concentration criterion: Total nonowner-occupied CRE loans (including CLD loans), as defined in the 2006 guidance (“total CRE”), represent 300 percent or more of the institution’s total risk-based capital, and growth in total CRE lending has increased by 50 percent or more during the previous 36 months, commonly referred to as the "300 ratio" |
• | incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in management's attention being diverted from the operation of our existing business; |
• | using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; |
• | incurring time and expense required to integrate the operations and personnel of the combined businesses, creating an adverse short-term effect on results of operations; and |
• | losing key employees and customers as a result of an acquisition that is poorly received. |
Owned | |
Banking Branches | 1011 Parkway, Sevierville, Tennessee 37862 |
570 East Parkway, Gatlinburg, Tennessee 37738 | |
202 Advantage Place, Knoxville, Tennessee 37922 | |
5401 Kingston Pike, #600, Knoxville, Tennessee 37919 | |
4154 Ringgold Road, East Ridge, Tennessee 37412 | |
5319 Highway 153, Hixson, Tennessee 37343 | |
2280 Gunbarrel Road, Chattanooga, Tennessee 37421 | |
8966 Old Lee Highway, Ooltewah, Tennessee 37363 | |
835 Georgia Avenue, Chattanooga, Tennessee 37402 | |
201 North Palafox Street, Pensacola, Florida 32502 | |
4405 Commons Drive East, Destin, Florida 32541 |
Leased | |
Banking Branch | 2430 Teaster Lane, #205, Pigeon Forge, Tennessee 37863 |
Loan Production Offices | 202 West Crawford Street, Dalton, Georgia 37020 |
2411 Jenks Avenue, Panama City, Florida 32405 | |
Mortgage Loan Production Office | 243 Southwood Drive, Panama City, Florida 32405 |
Service Centers | 6413 Lee Highway, #107, Chattanooga, Tennessee 37421 |
1732 Newport Highway, Suite 1, Sevierville, Tennessee 37876 |
Year | Total SBLF Preferred Stock Dividends | ||
2015 | $ | 120,000 | |
2016 | $ | 1,022,000 |
High and Low Common Stock Price for SmartFinancial | Cash Dividends | ||||||||||
2017 Fiscal Year | Low | High | Paid Per Share | ||||||||
First Quarter (through March 21, 2017) | $ | 18.55 | $ | 22.39 | — | ||||||
2016 Fiscal Year | |||||||||||
First Quarter | $ | 14.90 | $ | 18.50 | — | ||||||
Second Quarter | $ | 15.10 | $ | 18.75 | — | ||||||
Third Quarter | $ | 15.00 | $ | 17.02 | — | ||||||
Fourth Quarter | $ | 17.04 | $ | 20.00 | — | ||||||
2015 Fiscal Year | |||||||||||
First Quarter | $ | 12.08 | $ | 14.60 | — | ||||||
Second Quarter | $ | 12.24 | $ | 15.92 | — | ||||||
Third Quarter | $ | 14.92 | $ | 17.20 | — | ||||||
Fourth Quarter | $ | 15.00 | $ | 16.25 | — | ||||||
2014 Fiscal Year | |||||||||||
First Quarter | $ | 9.20 | $ | 10.00 | — | ||||||
Second Quarter | $ | 9.40 | $ | 10.48 | — | ||||||
Third Quarter | $ | 9.84 | $ | 12.20 | — | ||||||
Fourth Quarter | $ | 11.60 | $ | 14.80 | — |
• | The Company merged Cornerstone Community Bank into SmartBank in the first quarter of 2016. |
• | Earnings available to common shareholders were approximately $4.8 million, or $0.78 per diluted common share, in 2016, compared to $1.4 million, or $0.32 per diluted share, in 2015. |
• | Return on average assets was 0.57 percent for 2016, compared to 0.22 percent for 2015. |
• | Return on average equity was 5.59 percent in 2016, compared to 2.15 percent in 2015, and 3.41 percent in 2014. |
• | Non-performing assets to total assets in 2016 were 0.42 percent, an improvement from 0.79 percent in 2015. |
• | Net interest margin, fully taxable equivalent, remained above 4 percent at 4.06 percent for 2016. |
• | Efficiency ratio, fully taxable equivalent, of 75.7 percent in 2016 was down substantially from 85.0 percent in 2015. |
2016 | 2015 | 2014 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||
Balance | Interest * | Cost* | Balance | Interest * | Cost* | Balance | Interest * | Cost* | |||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||
Loans (1) | $ | 768,720 | $ | 39,779 | 5.17 | % | $ | 486,183 | $ | 25,739 | 5.29 | % | $ | 346,732 | $ | 18,745 | 5.42 | % | |||||||||||||||
Investment securities (2) | 167,352 | 2,609 | 1.56 | % | 113,281 | 1,877 | 1.66 | % | 95,307 | 1,919 | 2.01 | % | |||||||||||||||||||||
Federal funds and other | 8,568 | 247 | 2.88 | % | 15,853 | 161 | 1.02 | % | 13,427 | 126 | 0.94 | % | |||||||||||||||||||||
Total interest-earning assets | 944,640 | $ | 42,635 | 4.51 | % | 615,317 | $ | 27,777 | 4.51 | % | 455,466 | $ | 20,790 | 4.56 | % | ||||||||||||||||||
Non-interest-earning assets | 67,592 | 68,202 | 48,580 | ||||||||||||||||||||||||||||||
Total assets | $ | 1,012,232 | $ | 683,519 | $ | 504,046 | |||||||||||||||||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 150,649 | $ | 286 | 0.19 | % | $ | 117,036 | $ | 173 | 0.15 | % | $ | 83,809 | $ | 103 | 0.12 | % | |||||||||||||||
Money market and savings deposits | 258,092 | 1,172 | 0.45 | % | 161,405 | 656 | 0.41 | % | 126,303 | 462 | 0.37 | % | |||||||||||||||||||||
Time deposits | 316,046 | 2,647 | 0.84 | % | 227,317 | 1,797 | 0.79 | % | 177,921 | 1,460 | 0.82 | % | |||||||||||||||||||||
Total interest-bearing deposits | 724,787 | 4,105 | 0.57 | % | 505,758 | 2,626 | 0.52 | % | 388,033 | 2,025 | 0.52 | % | |||||||||||||||||||||
Securities sold under agreement to repurchase | 21,329 | 65 | 0.30 | % | 11,335 | 30 | 0.26 | % | 5,523 | 11 | 0.20 | % | |||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | 17,451 | 129 | 0.74 | % | 13,490 | 101 | 0.75 | % | 85 | 1 | 1.18 | % | |||||||||||||||||||||
Total interest-bearing liabilities | 763,567 | 4,299 | 0.56 | % | 530,583 | 2,757 | 0.52 | % | 393,641 | 2,037 | 0.52 | % | |||||||||||||||||||||
Net interest income, taxable equivalent | $ | 38,336 | $ | 25,020 | $ | 18,753 | |||||||||||||||||||||||||||
Noninterest-bearing deposits | 139,652 | 80,794 | 54,747 | ||||||||||||||||||||||||||||||
Other liabilities | 5,535 | 1,812 | 1,968 | ||||||||||||||||||||||||||||||
Total liabilities | 908,754 | 613,189 | 450,356 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 103,478 | 70,330 | 53,690 | ||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,012,232 | $ | 683,519 | $ | 504,046 | |||||||||||||||||||||||||||
Interest rate spread (3) | 3.95 | % | 3.99 | % | 4.04 | % | |||||||||||||||||||||||||||
Tax equivalent net interest margin (4) | 4.06 | % | 4.07 | % | 4.12 | % | |||||||||||||||||||||||||||
Percentage of average interest-earning assets to average interest-bearing liabilities | 123.7 | % | 116.0 | % | 115.7 | % | |||||||||||||||||||||||||||
Percentage of of average equity to average assets | 10.2 | % | 10.3 | % | 10.7 | % | |||||||||||||||||||||||||||
* Taxable equivalent basis |
(1) | Loans include nonaccrual loans. Yields related to loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 34.0 percent. The taxable-equivalent adjustment was $16 thousand for 2016, $8 thousand for 2015 and $0 for 2014. Loan fees included in loan income was $2.6 million, $1.3 million, and $646 thousand for 2016, 2015 and 2014, respectively. |
(2) | Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 34.0 percent. The taxable-equivalent adjustment was $55 thousand, $16 thousand and $100 thousand for 2016, 2015 and 2014, respectively. |
(3) | Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. |
(4) | Net interest margin represents net interest income divided by average interest-earning assets. |
2016 Compared to 2015 Increase (decrease) due to | 2015 Compared to 2014 Increase (decrease) due to | ||||||||||||||||||||||||||
Rate | Days | Volume | Net | Rate | Volume | Net | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||
Loans (1) | $ | (976 | ) | 70 | $ | 14,946 | $ | 14,040 | $ | (545 | ) | $ | 7,539 | $ | 6,994 | ||||||||||||
Investment securities (2) | (171 | ) | 5 | 898 | 732 | (404 | ) | 362 | (42 | ) | |||||||||||||||||
Federal funds and other | 160 | — | (74 | ) | 86 | 12 | 23 | 35 | |||||||||||||||||||
Total interest-earning assets | (987 | ) | 75 | 15,770 | 14,858 | (937 | ) | 7,924 | 6,987 | ||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||
Interest-bearing demand deposits | 63 | — | 50 | 113 | 29 | 41 | 70 | ||||||||||||||||||||
Money market and savings deposits | 118 | 2 | 396 | 516 | 66 | 128 | 194 | ||||||||||||||||||||
Time deposits | 144 | 5 | 701 | 850 | (68 | ) | 405 | 337 | |||||||||||||||||||
Total interest-bearing deposits | 325 | 7 | 1,147 | 1,479 | 27 | 574 | 601 | ||||||||||||||||||||
Securities sold under agreement to repurchase | 9 | — | 26 | 35 | 7 | 12 | 19 | ||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | (2 | ) | — | 30 | 28 | (58 | ) | 158 | 100 | ||||||||||||||||||
Total interest-bearing liabilities | 332 | 7 | 1,203 | 1,542 | (24 | ) | 744 | 720 | |||||||||||||||||||
Net interest income | $ | (1,319 | ) | 68 | $ | 14,567 | $ | 13,316 | $ | (913 | ) | $ | 7,180 | $ | 6,267 |
(1) | Loans include nonaccrual loans. Yields related to loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 34.0 percent. The taxable-equivalent adjustment was $16 thousand for 2016, $8 thousand for 2015 and $0 for 2014. |
(2) | Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 34.0 percent. The taxable-equivalent adjustment was $55 thousand, $16 thousand and $100 thousand for 2016 , 2015 and 2014, respectively. |
Year ended December 31, | ||||||||||||
(Dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Service charges and fees on deposit accounts | $ | 1,128 | $ | 913 | $ | 513 | ||||||
Gain on sale of securities | 199 | 52 | 116 | |||||||||
Gain (loss) on sale of loans and other assets | 948 | (112 | ) | 189 | ||||||||
Gain (loss) on sale of foreclosed assets | 191 | 266 | (625 | ) | ||||||||
Other noninterest income | 1,717 | 1,124 | 978 | |||||||||
Total non-interest income | $ | 4,183 | $ | 2,243 | $ | 1,171 |
Year ended December 31, | ||||||||||||
(Dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Salaries and employee benefits | $ | 17,715 | $ | 11,831 | $ | 9,141 | ||||||
Net occupancy and equipment expense | 3,996 | 2,682 | 2,176 | |||||||||
Depository insurance | 606 | 488 | 386 | |||||||||
Foreclosed assets | 236 | 290 | 178 | |||||||||
Advertising | 616 | 453 | 420 | |||||||||
Data processing1 | 1,893 | 1,197 | 671 | |||||||||
Professional services1 | 2,123 | 2,454 | 1,041 | |||||||||
Amortization of other intangible assets | 305 | 233 | 163 | |||||||||
Service contracts | 1,154 | 751 | 546 | |||||||||
Other operating expenses | 3,856 | 2,787 | 1,721 | |||||||||
Total non-interest expense | $ | 32,500 | $ | 23,166 | $ | 16,443 |
(1) | In 2015 Data processing and Professional services included $1.3 million of merger and conversion related expenses |
2016 | |||||||||||||||||||
Organic Loans | Purchased Non-Credit Impaired Loans | Purchased Credit Impaired Loans | Total Amount | % of Gross Total | |||||||||||||||
Commercial real estate-mortgage | $ | 297,689 | $ | 102,576 | $ | 14,943 | $ | 415,208 | 51.0 | % | |||||||||
Consumer real estate-mortgage | 135,923 | 42,875 | 9,004 | 187,802 | 23.1 | % | |||||||||||||
Construction and land development | 108,390 | 7,801 | 1,678 | 117,869 | 14.5 | % | |||||||||||||
Commercial and industrial | 68,235 | 15,219 | 1,568 | 85,022 | 10.5 | % | |||||||||||||
Consumer and other | 6,786 | 689 | — | 7,475 | 0.9 | % | |||||||||||||
Total gross loans receivable, net of deferred fees | 617,023 | 169,160 | 27,193 | 813,376 | 100.0 | % | |||||||||||||
Allowance for loan and lease losses | (5,105 | ) | — | — | (5,105 | ) | |||||||||||||
Total loans, net | $ | 611,918 | $ | 169,160 | $ | 27,193 | $ | 808,271 |
2015 | |||||||||||||||||||
Organic Loans | Purchased Non-Credit Impaired Loans | Purchased Credit Impaired Loans | Total Amount | % of Gross Total | |||||||||||||||
Commercial real estate-mortgage | $ | 229,203 | $ | 120,524 | $ | 20,050 | $ | 369,777 | 50.8 | % | |||||||||
Consumer real estate-mortgage | 95,233 | 53,697 | 12,764 | 161,694 | 22.2 | % | |||||||||||||
Construction and land development | 73,028 | 29,755 | 2,695 | 105,478 | 14.5 | % | |||||||||||||
Commercial and industrial | 53,761 | 28,422 | 2,768 | 84,951 | 11.7 | % | |||||||||||||
Consumer and other | 4,692 | 1,123 | — | 5,815 | 0.8 | % | |||||||||||||
Total gross loans receivable, net of deferred fees | 455,917 | 233,521 | 38,277 | 727,715 | 100.0 | % | |||||||||||||
Allowance for loan and lease losses | (4,354 | ) | — | — | (4,354 | ) | |||||||||||||
Total loans, net | $ | 451,563 | $ | 233,521 | $ | 38,277 | $ | 723,361 |
2014 | |||||||||||||||||||
Organic Loans | Purchased Non-Credit Impaired Loans | Purchased Credit Impaired Loans | Total Amount | % of Gross Total | |||||||||||||||
Commercial real estate-mortgage | $ | 186,444 | $ | 3,905 | $ | 3,102 | $ | 193,451 | 53.2 | % | |||||||||
Consumer real estate-mortgage | 75,066 | 1,968 | 4,380 | 81,414 | 22.4 | % | |||||||||||||
Construction and land development | 52,421 | 48 | 36 | 52,505 | 14.5 | % | |||||||||||||
Commercial and industrial | 33,716 | — | 3 | 33,719 | 9.3 | % | |||||||||||||
Consumer and other | 2,314 | — | — | 2,314 | 0.6 | % | |||||||||||||
Total gross loans receivable, net of deferred fees | 349,961 | 5,921 | 7,521 | 363,403 | 100.0 | % | |||||||||||||
Allowance for loan and lease losses | (3,880 | ) | — | — | (3,880 | ) | |||||||||||||
Total loans, net | $ | 346,081 | $ | 5,921 | $ | 7,521 | $ | 359,523 |
2013 | |||||||||||||||||||
Organic Loans | Purchased Non-Credit Impaired Loans | Purchased Credit Impaired Loans | Total Amount | % of Gross Total | |||||||||||||||
Commercial real estate-mortgage | $ | 150,849 | $ | 4,448 | $ | 3,969 | $ | 159,266 | 50.6 | % | |||||||||
Consumer real estate-mortgage | 69,588 | 6,966 | 5,276 | 81,830 | 26.0 | % | |||||||||||||
Construction and land development | 35,111 | 1,087 | 489 | 36,687 | 11.6 | % | |||||||||||||
Commercial and industrial | 33,763 | 28 | 15 | 33,806 | 10.7 | % | |||||||||||||
Consumer and other | 2,916 | 347 | 227 | 3,490 | 1.1 | % | |||||||||||||
Total gross loans receivable, net of deferred fees | 292,227 | 12,876 | 9,976 | 315,079 | 100.0 | % | |||||||||||||
Allowance for loan and lease losses | (3,755 | ) | — | (381 | ) | (4,136 | ) | ||||||||||||
Total loans, net | $ | 288,472 | $ | 12,876 | $ | 9,595 | $ | 310,943 |
2012 | |||||||||||||||||||
Organic Loans | Purchased Non-Credit Impaired Loans | Purchased Credit Impaired Loans | Total Amount | % of Gross Total | |||||||||||||||
Commercial real estate-mortgage | $ | 130,715 | $ | 7,250 | $ | 7,136 | $ | 145,101 | 46.4 | % | |||||||||
Consumer real estate-mortgage | 60,756 | 15,828 | 7,683 | 84,267 | 27.0 | % | |||||||||||||
Construction and land development | 29,910 | 9,098 | 6,625 | 45,633 | 14.6 | % | |||||||||||||
Commercial and industrial | 30,266 | 1,264 | 247 | 31,777 | 10.2 | % | |||||||||||||
Consumer and other | 2,858 | 1,427 | 1,453 | 5,738 | 1.8 | % | |||||||||||||
Total gross loans receivable, net of deferred fees | 254,505 | 34,867 | 23,144 | 312,516 | 100.0 | % | |||||||||||||
Allowance for loan and lease losses | (3,691 | ) | — | — | (3,691 | ) | |||||||||||||
Total loans, net | $ | 250,814 | $ | 34,867 | $ | 23,144 | $ | 308,825 |
Rate Structure for Loans | ||||||||||||||||||||||||
Maturing Over One Year | ||||||||||||||||||||||||
One Year or Less | One through Five Years | Over Five Years | Total | Fixed Rate | Floating Rate | |||||||||||||||||||
Commercial real estate-mortgage | $ | 35,678 | $ | 228,676 | $ | 150,854 | $ | 415,207 | $ | 242,175 | $ | 137,355 | ||||||||||||
Consumer real estate-mortgage | 23,965 | 92,088 | 71,749 | 187,802 | 99,565 | 64,272 | ||||||||||||||||||
Construction and land development | 42,756 | 47,493 | 27,620 | 117,869 | 34,932 | 40,181 | ||||||||||||||||||
Commercial and industrial | 26,377 | 42,212 | 16,433 | 85,022 | 45,873 | 12,772 | ||||||||||||||||||
Consumer and other | 4,634 | 2,530 | 311 | 7,475 | 2,302 | 539 | ||||||||||||||||||
Total Loans | $ | 133,410 | $ | 412,999 | $ | 266,967 | $ | 813,375 | $ | 424,847 | $ | 255,119 |
(Dollars in thousands) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Nonaccrual loans | $ | 1,415 | $ | 2,252 | $ | 5,067 | $ | 1,492 | $ | 5,752 | ||||||||||
Accruing loans past due 90 days or more (1) | 699 | 502 | — | — | 2,902 | |||||||||||||||
Total nonperforming loans | 2,114 | 2,754 | 5,067 | 1,492 | 8,654 | |||||||||||||||
Foreclosed assets | 2,386 | 5,358 | 4,983 | 5,221 | 5,812 | |||||||||||||||
Total nonperforming assets | $ | 4,500 | $ | 8,112 | $ | 10,050 | $ | 6,713 | $ | 14,466 | ||||||||||
Restructured loans not included above | $ | 166 | $ | 3,693 | $ | 1,937 | $ | 2,699 | $ | 907 |
(1) | Balances include PCI loans past due 90 days or more that are grouped in pools which accrue interest based on pool yields. |
December 31, | |||||||||||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Commercial real estate-mortgage | $ | 2,369 | 46.4 | % | $ | 1,906 | 43.8 | % | $ | 1,734 | 44.7 | % | $ | 1,608 | 38.8 | % | $ | 926 | 25.1 | % | |||||||||||||||
Consumer real estate-mortgage | 1,382 | 27.1 | % | 1,015 | 23.3 | % | 906 | 23.3 | % | 1,041 | 25.2 | % | 1,264 | 34.3 | % | ||||||||||||||||||||
Construction and land development | 717 | 14.0 | % | 627 | 14.4 | % | 690 | 17.8 | % | 727 | 17.6 | % | 833 | 22.6 | % | ||||||||||||||||||||
Commercial and industrial | 520 | 10.2 | % | 777 | 17.8 | % | 524 | 13.5 | % | 497 | 12.0 | % | 556 | 15.0 | % | ||||||||||||||||||||
Consumer and other | 117 | 2.3 | % | 29 | 0.7 | % | 26 | 0.7 | % | 263 | 6.4 | % | 112 | 3.0 | % | ||||||||||||||||||||
Total allowance for loan losses | $ | 5,105 | 100.0 | % | $ | 4,354 | 100.0 | % | $ | 3,880 | 100.0 | % | $ | 4,136 | 100.0 | % | $ | 3,691 | 100.0 | % |
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Balance at beginning of period | $ | 4,354 | $ | 3,880 | $ | 4,136 | $ | 3,691 | $ | 3,652 | ||||||||||
Provision for loan losses | 788 | 923 | 432 | 582 | 871 | |||||||||||||||
Charged-off loans: | ||||||||||||||||||||
Commercial real estate-mortgage | — | (95 | ) | — | (123 | ) | (118 | ) | ||||||||||||
Consumer real estate-mortgage | (102 | ) | (247 | ) | (623 | ) | — | (408 | ) | |||||||||||
Construction and land development | (14 | ) | (50 | ) | (7 | ) | (17 | ) | (234 | ) | ||||||||||
Commercial and industrial | (35 | ) | — | (118 | ) | — | (45 | ) | ||||||||||||
Consumer and other | (155 | ) | (114 | ) | (65 | ) | (30 | ) | (39 | ) | ||||||||||
Total charged-off loans | (306 | ) | (506 | ) | (813 | ) | (170 | ) | (844 | ) | ||||||||||
Recoveries of previously charged-off loans: | ||||||||||||||||||||
Commercial real estate-mortgage | 45 | — | 2 | — | — | |||||||||||||||
Consumer real estate-mortgage | 76 | — | — | — | — | |||||||||||||||
Construction and land development | 22 | 26 | — | 10 | — | |||||||||||||||
Commercial and industrial | 58 | 19 | — | — | — | |||||||||||||||
Consumer and other | 68 | 12 | 123 | 23 | 12 | |||||||||||||||
Total recoveries of previously charged-off loans | 269 | 57 | 125 | 33 | 12 | |||||||||||||||
Net charge-offs | (37 | ) | (449 | ) | (688 | ) | (137 | ) | (832 | ) | ||||||||||
Balance at end of period | $ | 5,105 | $ | 4,354 | $ | 3,880 | 4,136 | $ | 3,691 | |||||||||||
Ratio of allowance for loan losses to total loans outstanding at end of period | 0.63 | % | 0.60 | % | 1.07 | % | 1.31 | % | 1.18 | % | ||||||||||
Ratio of net charge-offs to average loans outstanding for the period | — | % | (0.09 | )% | (0.20 | )% | (0.04 | )% | (0.32 | )% |
2016 | 2015 | 2014 | ||||||||||
U.S. Government agencies | $ | 18,279 | $ | 22,745 | $ | 21,267 | ||||||
State and political subdivisions | 8,182 | 7,614 | 2,012 | |||||||||
Mortgage-backed securities | 104,585 | 136,625 | 76,089 | |||||||||
Total securities | $ | 131,046 | $ | 166,984 | $ | 99,368 |
Maturity By Years | ||||||||||||||||||||
1 or Less | 1 to 5 | 5 to 10 | Over 10 | Total | ||||||||||||||||
U.S. Government agencies | $ | 2,022 | $ | 12,987 | $ | 3,270 | $ | — | $ | 18,279 | ||||||||||
State and political subdivisions | — | 400 | 4,325 | 3,457 | 8,182 | |||||||||||||||
Mortgage-backed securities | — | 3,065 | 29,360 | 72,160 | 104,585 | |||||||||||||||
Total securities available for sale | $ | 2,022 | $ | 16,452 | $ | 36,955 | $ | 75,617 | $ | 131,046 | ||||||||||
Weighted average yield (1) | 1.05 | % | 1.76 | % | 1.88 | % | 1.85 | % | 1.82 | % |
2016 | 2015 | |||||||||||||||||||
Average | Average | |||||||||||||||||||
(Dollars in thousands) | Balance | % of Total | Average Rate | Balance | % of Total | Average Rate | ||||||||||||||
Non-interest demand | $ | 139,652 | 16.2 | % | — | $ | 80,794 | 13.8 | % | — | ||||||||||
Interest-bearing demand | 150,649 | 17.4 | % | 0.19 | % | 117,036 | 20.0 | % | 0.15 | % | ||||||||||
Money market and savings | 258,092 | 29.9 | % | 0.45 | % | 161,405 | 27.5 | % | 0.41 | % | ||||||||||
Time deposits | 316,046 | 36.5 | % | 0.84 | % | 227,317 | 38.7 | % | 0.79 | % | ||||||||||
Total average deposits | $ | 864,439 | 100.0 | % | 0.47 | % | $ | 586,552 | 100.0 | % | 0.45 | % |
December 31, | |||
(Dollars in thousands) | 2016 | ||
Remaining maturity: | |||
Three months or less | $ | 37,405 | |
Three to six months | 24,289 | ||
Six to twelve months | 57,685 | ||
More than twelve months | 90,133 | ||
Total | $ | 209,512 |
Maximum Percentage Decline in Net Interest Income from the Budgeted or Base Case Projection of Net Interest Income | ||||||
Next 12 Months | Next 24 Months | |||||
An instantaneous, parallel rate increase or decrease of the following at the beginning of the first quarter: | ||||||
± 100 basis points | 9 | % | 9 | % | ||
± 200 basis points | 14 | % | 14 | % | ||
± 300 basis points | 20 | % | 20 | % | ||
± 400 basis points | 25 | % | 25 | % |
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to | Maximum Percentage Decline in Economic Value of Equity from the Economic Value of Equity at Currently Prevailing Interest Rates | |
±100 basis points | 20 | % |
±200 basis points | 25 | % |
±300 basis points | 30 | % |
±400 basis points | 35 | % |
• | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of SmartFinancial’s assets; |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that SmartFinancial’s receipts and expenditures are being made only in accordance with authorizations of SmartFinancial’s management and directors; and |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of SmartFinancial’s assets that could have a material effect on the financial statements. |
2016 | 2015 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 34,290,617 | $ | 40,358,647 | ||||
Interest-bearing deposits at other financial institutions | 34,457,691 | 33,405,986 | ||||||
Federal funds sold | — | 6,200,000 | ||||||
Total cash and cash equivalents | 68,748,308 | 79,964,633 | ||||||
Securities available for sale | 129,421,914 | 166,413,218 | ||||||
Restricted investments, at cost | 5,627,950 | 4,451,050 | ||||||
Loans, net of allowance for loan losses of $5,105,255 in 2016 and $4,354,513 in 2015 | 808,271,003 | 723,360,786 | ||||||
Bank premises and equipment, net | 30,535,594 | 25,037,510 | ||||||
Foreclosed assets | 2,386,239 | 5,357,950 | ||||||
Goodwill and core deposit intangible, net | 6,635,655 | 6,941,107 | ||||||
Other assets | 10,829,622 | 12,436,625 | ||||||
Total assets | $ | 1,062,456,285 | $ | 1,023,962,879 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand deposits | $ | 153,482,650 | $ | 131,418,580 | ||||
Interest-bearing demand deposits | 162,702,457 | 149,423,954 | ||||||
Money market and savings deposits | 274,604,724 | 236,900,945 | ||||||
Time deposits | 316,275,340 | 340,739,072 | ||||||
Total deposits | 907,065,171 | 858,482,551 | ||||||
Securities sold under agreement to repurchase | 26,621,984 | 28,068,215 | ||||||
Federal Home Loan Bank advances and other borrowings | 18,505,390 | 34,187,462 | ||||||
Accrued expenses and other liabilities | 5,023,600 | 3,047,792 | ||||||
Total liabilities | 957,216,145 | 923,786,020 | ||||||
Stockholders' equity: | ||||||||
Preferred stock - $1 par value; 2,000,000 shares authorized; 12,000 issued and outstanding in 2016 and 2015 | 12,000 | 12,000 | ||||||
Common stock - $1 par value; 40,000,000 shares authorized; 5,896,033 and 5,806,477 shares issued and outstanding in 2016 and 2015, respectively | 5,896,033 | 5,806,477 | ||||||
Additional paid-in capital | 83,463,051 | 82,616,015 | ||||||
Retained earnings | 16,871,296 | 12,094,488 | ||||||
Accumulated other comprehensive loss | (1,002,240 | ) | (352,121 | ) | ||||
Total stockholders' equity | 105,240,140 | 100,176,859 | ||||||
Total liabilities and stockholders' equity | $ | 1,062,456,285 | $ | 1,023,962,879 |
2016 | 2015 | |||||||
INTEREST INCOME | ||||||||
Loans, including fees | $ | 39,763,582 | $ | 25,730,909 | ||||
Securities and interest bearing deposits at other financial institutions | 2,553,652 | 1,861,269 | ||||||
Federal funds sold and other earning assets | 247,157 | 161,055 | ||||||
Total interest income | 42,564,391 | 27,753,233 | ||||||
INTEREST EXPENSE | ||||||||
Deposits | 4,105,304 | 2,625,674 | ||||||
Securities sold under agreements to repurchase | 65,276 | 30,382 | ||||||
Federal Home Loan Bank advances and other borrowings | 129,102 | 101,086 | ||||||
Total interest expense | 4,299,682 | 2,757,142 | ||||||
Net interest income before provision for loan losses | 38,264,709 | 24,996,091 | ||||||
Provision for loan losses | 787,545 | 922,955 | ||||||
Net interest income after provision for loan losses | 37,477,164 | 24,073,136 | ||||||
NONINTEREST INCOME | ||||||||
Customer service fees | 1,127,814 | 912,806 | ||||||
Gain on sale of securities | 199,587 | 52,255 | ||||||
Gain (loss) on sale of loans and other assets | 948,080 | (112,319 | ) | |||||
Gain on sale of foreclosed assets | 191,050 | 266,487 | ||||||
Other noninterest income | 1,716,794 | 1,123,897 | ||||||
Total noninterest income | 4,183,325 | 2,243,126 | ||||||
NONINTEREST EXPENSES | ||||||||
Salaries and employee benefits | 17,715,222 | 11,831,234 | ||||||
Net occupancy and equipment expense | 3,995,631 | 2,682,370 | ||||||
Depository insurance | 605,917 | 487,686 | ||||||
Foreclosed assets | 236,148 | 289,624 | ||||||
Advertising | 615,751 | 452,849 | ||||||
Data processing | 1,893,386 | 1,196,484 | ||||||
Professional services | 2,122,845 | 2,454,339 | ||||||
Amortization of intangible assets | 305,452 | 233,204 | ||||||
Service contracts | 1,154,003 | 750,957 | ||||||
Other operating expenses | 3,855,246 | 2,787,059 | ||||||
Total noninterest expenses | 32,499,601 | 23,165,806 | ||||||
Income before income tax expense | 9,160,888 | 3,150,456 | ||||||
Income tax expense | 3,362,080 | 1,640,744 | ||||||
Net income | 5,798,808 | 1,509,712 | ||||||
Preferred stock dividends | 1,022,000 | 120,000 | ||||||
Net income available to common stockholders | $ | 4,776,808 | $ | 1,389,712 | ||||
EARNINGS PER COMMON SHARE | ||||||||
Basic | $ | 0.82 | $ | 0.35 | ||||
Diluted | 0.78 | 0.32 | ||||||
Weighted average common shares outstanding | ||||||||
Basic | 5,838,574 | 3,985,202 | ||||||
Diluted | 6,118,943 | 4,281,509 | ||||||
Dividends per share | N/A | N/A |
2016 | 2015 | |||||||
Net income | $ | 5,798,808 | $ | 1,509,712 | ||||
Other comprehensive loss, net of tax: | ||||||||
Unrealized holding losses arising during the year, net of tax benefit of $326,697 and $10,764 in 2016 and 2015, respectively | (526,954 | ) | (16,522 | ) | ||||
Reclassification adjustment for gains included in net income, net of tax expense of $76,422 and $19,857 in 2016 and 2015, respectively | (123,165 | ) | (32,398 | ) | ||||
Total other comprehensive loss | (650,119 | ) | (48,920 | ) | ||||
Comprehensive income | $ | 5,148,689 | $ | 1,460,792 |
Preferred Shares | Common Shares | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||
BALANCE, December 31, 2014 | 12,000 | 2,965,783 | $ | 12,000 | $ | 2,965,783 | $ | 42,508,429 | $ | 10,704,776 | $ | (303,201 | ) | $ | 55,887,787 | |||||||||||||||
Net income | — | — | — | — | — | 1,509,712 | — | 1,509,712 | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (48,920 | ) | (48,920 | ) | ||||||||||||||||||||
Issuance of common stock | — | 1,000,003 | — | 1,000,003 | 14,000,001 | — | — | 15,000,004 | ||||||||||||||||||||||
Issuance of stock grants | — | 6,659 | — | 6,659 | 93,557 | — | — | 100,216 | ||||||||||||||||||||||
Stock issuance costs | — | — | — | — | (840,418 | ) | — | — | (840,418 | ) | ||||||||||||||||||||
Exercise of stock options | — | 24,292 | — | 24,292 | 189,250 | — | — | 213,542 | ||||||||||||||||||||||
Shares retained by shareholders of Cornerstone Bancshares, Inc. | — | 1,660,836 | — | 1,660,836 | 26,774,239 | — | — | 28,435,075 | ||||||||||||||||||||||
Conversion shares issued to shareholders of SmartFinancial, Inc. | — | 148,904 | — | 148,904 | (148,904 | ) | — | — | — | |||||||||||||||||||||
Dividends on preferred stock | — | — | — | — | — | (120,000 | ) | — | (120,000 | ) | ||||||||||||||||||||
Stock option compensation expense | — | — | — | — | 39,861 | — | — | 39,861 | ||||||||||||||||||||||
BALANCE, December 31, 2015 | 12,000 | 5,806,477 | 12,000 | 5,806,477 | 82,616,015 | 12,094,488 | (352,121 | ) | 100,176,859 | |||||||||||||||||||||
Net income | — | — | — | — | — | 5,798,808 | — | 5,798,808 | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (650,119 | ) | (650,119 | ) | ||||||||||||||||||||
Exercise of stock options | — | 89,556 | — | 89,556 | 714,401 | — | — | 803,957 | ||||||||||||||||||||||
Dividends on preferred stock | — | — | — | — | — | (1,022,000 | ) | — | (1,022,000 | ) | ||||||||||||||||||||
Stock option compensation expense | — | — | — | — | 132,635 | — | — | 132,635 | ||||||||||||||||||||||
BALANCE, December 31, 2016 | 12,000 | 5,896,033 | $ | 12,000 | $ | 5,896,033 | $ | 83,463,051 | $ | 16,871,296 | $ | (1,002,240 | ) | $ | 105,240,140 |
2016 | 2015 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 5,798,808 | $ | 1,509,712 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,189,088 | 1,085,685 | ||||||
Provision for loan losses | 787,545 | 922,955 | ||||||
Stock compensation expense | 132,635 | 140,077 | ||||||
Gains from sale of securities | (199,587 | ) | (52,255 | ) | ||||
Net (gains) losses from sale of loans and other assets | (948,080 | ) | 112,319 | |||||
Gains from sale of foreclosed assets | (191,050 | ) | (266,487 | ) | ||||
Changes in other assets and liabilities: | ||||||||
Accrued interest receivable | 110,952 | 101,189 | ||||||
Accrued interest payable | (8,373 | ) | (11,218 | ) | ||||
Other assets and liabilities | 3,918,803 | (1,200,552 | ) | |||||
Net cash provided by operating activities | 11,590,741 | 2,341,425 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES, net of acquisition | ||||||||
Purchase of securities available for sale | (22,111,781 | ) | (23,180,643 | ) | ||||
Proceeds from security sales, maturities, and paydowns | 57,495,436 | 27,334,550 | ||||||
Purchase of restricted investments | (1,176,900 | ) | (38,000 | ) | ||||
Loan originations and principal collections, net | (82,804,921 | ) | (50,003,157 | ) | ||||
Purchase of bank premises and equipment | (6,994,729 | ) | (1,081,811 | ) | ||||
Proceeds from sale of foreclosed assets | 1,279,554 | 5,529,640 | ||||||
Cash and cash equivalents received in merger | — | 33,501,510 | ||||||
Net cash used in investing activities | (54,313,341 | ) | (7,937,911 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES, net of acquisition | ||||||||
Net increase in deposits | 48,582,620 | 54,213,883 | ||||||
Net increase (decrease) in securities sold under agreements to repurchase | (1,446,231 | ) | 687,811 | |||||
Issuance of common stock | 803,957 | 4,043,011 | ||||||
Payment of dividends on preferred stock | (752,000 | ) | (120,000 | ) | ||||
Repayment of Federal Home Loan Bank advances and other borrowings | (67,282,071 | ) | (20,000,000 | ) | ||||
Proceeds from Federal Home Loan Bank advances and other borrowings | 51,600,000 | — | ||||||
Net cash provided by financing activities | 31,506,275 | 38,824,705 | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (11,216,325 | ) | 33,228,219 | |||||
CASH AND CASH EQUIVALENTS, beginning of year | 79,964,633 | 46,736,414 | ||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 68,748,308 | $ | 79,964,633 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for interest | $ | 4,308,055 | $ | 2,610,476 | ||||
Cash paid during the period for taxes | 3,754,784 | 1,977,958 | ||||||
Cash received during the period from tax refunds | 1,592,224 | — | ||||||
NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Change in unrealized losses on securities available for sale | $ | 1,053,238 | $ | 79,542 | ||||
Acquisition of real estate through foreclosure | 1,431,857 | 864,669 | ||||||
Financed sales of foreclosed assets | 3,315,064 | 898,186 |
Buildings and leasehold improvements | 15 - 40 years |
Furniture and equipment | 3-7 years |
Calculation of Purchase Price | |||
Shares of CSBQ common stock outstanding as of August 31, 2015 | 6,643,341 | ||
Market price of CSBQ common stock on August 31, 2015 | $ | 3.85 | |
Estimated fair value of CSBQ common stock (in thousands) | 25,577 | ||
Estimated fair value of CSBQ stock options (in thousands) | 2,858 | ||
Total consideration (in thousands) | $ | 28,435 |
Allocation of Purchase Price (in thousands) | |||
Total consideration above | $ | 28,435 | |
Fair value of assets acquired and liabilities assumed: | |||
Cash and cash equivalents | 33,502 | ||
Investment securities available for sale | 74,254 | ||
Loans | 314,827 | ||
Premises and equipment | 9,019 | ||
Bank owned life insurance | 1,278 | ||
Core deposit intangible | 2,750 | ||
Other real estate owned | 5,672 | ||
Prepaid and other assets | 4,301 | ||
Deposits | (349,462 | ) | |
Securities sold under agreements to repurchase | (17,622 | ) | |
FHLB advances and other borrowings | (42,307 | ) | |
Payables and other liabilities | (11,943 | ) | |
Total fair value of net assets acquired | 24,269 | ||
Goodwill | $ | 4,166 |
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
U.S. Government-sponsored enterprises (GSEs) | $ | 18,279 | $ | 8 | $ | (564 | ) | $ | 17,723 | |||||||
Municipal securities | 8,182 | 16 | (179 | ) | 8,019 | |||||||||||
Mortgage-backed securities | 104,585 | 185 | (1,090 | ) | 103,680 | |||||||||||
Total | $ | 131,046 | $ | 209 | $ | (1,833 | ) | $ | 129,422 |
December 31, 2015 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
U.S. Government-sponsored enterprises (GSEs) | $ | 22,745 | $ | 48 | $ | (50 | ) | $ | 22,743 | |||||||
Municipal securities | 7,614 | 52 | (17 | ) | 7,649 | |||||||||||
Mortgage-backed securities | 136,625 | 375 | (979 | ) | 136,021 | |||||||||||
Total | $ | 166,984 | $ | 475 | $ | (1,046 | ) | $ | 166,413 |
Amortized Cost | Fair Value | |||||||
Due in one year or less | $ | 2,022 | $ | 2,025 | ||||
Due from one year to five years | 13,387 | 12,974 | ||||||
Due from five years to ten years | 7,595 | 7,351 | ||||||
Due after ten years | 3,457 | 3,392 | ||||||
26,461 | 25,742 | |||||||
Mortgage-backed securities | 104,585 | 103,680 | ||||||
Total | $ | 131,046 | $ | 129,422 |
As of December 31, 2016 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
U.S. Government- sponsored enterprises (GSEs) | $ | 14,702 | $ | (564 | ) | $ | — | $ | — | $ | 14,702 | $ | (564 | ) | ||||||||||
Municipal securities | 6,368 | (179 | ) | — | — | 6,368 | (179 | ) | ||||||||||||||||
Mortgage-backed securities | 67,063 | (690 | ) | 8,948 | (400 | ) | 76,011 | (1,090 | ) | |||||||||||||||
Total | $ | 88,133 | $ | (1,433 | ) | $ | 8,948 | $ | (400 | ) | $ | 97,081 | $ | (1,833 | ) |
As of December 31, 2015 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
U.S. Government- sponsored enterprises (GSEs) | $ | 8,464 | $ | (50 | ) | $ | — | $ | — | $ | 8,464 | $ | (50 | ) | ||||||||||
Municipal securities | 2,456 | (17 | ) | — | — | 2,456 | (17 | ) | ||||||||||||||||
Mortgage-backed securities | 72,641 | (470 | ) | 16,325 | (509 | ) | 88,966 | (979 | ) | |||||||||||||||
Total | $ | 83,561 | $ | (537 | ) | $ | 16,325 | $ | (509 | ) | $ | 99,886 | $ | (1,046 | ) |
2016 | 2015 | |||||||
Proceeds | $ | 31,599 | $ | 7,304 | ||||
Gains realized | 200 | 52 | ||||||
Losses realized | — | — |
December 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
PCI Loans | All Other Loans | Total | PCI Loans | All Other Loans | Total | |||||||||||||||||||
Commercial real estate | $ | 14,943 | $ | 400,265 | $ | 415,208 | $ | 20,050 | $ | 349,727 | $ | 369,777 | ||||||||||||
Consumer real estate | 9,004 | 178,798 | 187,802 | 12,764 | 148,930 | 161,694 | ||||||||||||||||||
Construction and land development | 1,678 | 116,191 | 117,869 | 2,695 | 102,783 | 105,478 | ||||||||||||||||||
Commercial and industrial | 1,568 | 83,454 | 85,022 | 2,768 | 82,183 | 84,951 | ||||||||||||||||||
Consumer and other | — | 7,475 | 7,475 | — | 5,815 | 5,815 | ||||||||||||||||||
Total loans | 27,193 | 786,183 | 813,376 | 38,277 | 689,438 | 727,715 | ||||||||||||||||||
Less: Allowance for loan losses | — | (5,105 | ) | (5,105 | ) | — | (4,354 | ) | (4,354 | ) | ||||||||||||||
Loans, net | $ | 27,193 | $ | 781,078 | $ | 808,271 | $ | 38,277 | $ | 685,084 | $ | 723,361 |
December 31, 2016 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Performing loans | $ | 400,146 | $ | 177,977 | $ | 115,326 | $ | 83,244 | $ | 7,475 | $ | 784,168 | ||||||||||||
Impaired loans | 119 | 821 | 865 | 210 | — | 2,015 | ||||||||||||||||||
400,265 | 178,798 | 116,191 | 83,454 | 7,475 | 786,183 | |||||||||||||||||||
PCI loans | 14,943 | 9,004 | 1,678 | 1,568 | — | 27,193 | ||||||||||||||||||
Total | $ | 415,208 | $ | 187,802 | $ | 117,869 | $ | 85,022 | $ | 7,475 | $ | 813,376 |
December 31, 2015 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Performing loans | $ | 347,775 | $ | 145,289 | $ | 101,751 | $ | 81,715 | $ | 5,815 | $ | 682,345 | ||||||||||||
Impaired loans | 1,952 | 3,641 | 1,032 | 468 | — | 7,093 | ||||||||||||||||||
349,727 | 148,930 | 102,783 | 82,183 | 5,815 | 689,438 | |||||||||||||||||||
PCI loans | 20,050 | 12,764 | 2,695 | 2,768 | — | 38,277 | ||||||||||||||||||
Total loans | $ | 369,777 | $ | 161,694 | $ | 105,478 | $ | 84,951 | $ | 5,815 | $ | 727,715 |
December 31, 2016 | ||||||||||||||||||||||||
Construction | Commercial | Consumer | ||||||||||||||||||||||
Commercial | Consumer | and Land | and | and | ||||||||||||||||||||
Real Estate | Real Estate | Development | Industrial | Other | Total | |||||||||||||||||||
Performing loans | $ | 2,369 | $ | 1,382 | $ | 717 | $ | 516 | $ | 117 | $ | 5,101 | ||||||||||||
Impaired loans | — | — | — | 4 | — | 4 | ||||||||||||||||||
Total | $ | 2,369 | $ | 1,382 | $ | 717 | $ | 520 | $ | 117 | $ | 5,105 |
December 31, 2015 | ||||||||||||||||||||||||
Construction | Commercial | Consumer | ||||||||||||||||||||||
Commercial | Consumer | and Land | and | and | ||||||||||||||||||||
Real Estate | Real Estate | Development | Industrial | Other | Total | |||||||||||||||||||
Performing loans | $ | 1,906 | $ | 1,015 | $ | 627 | $ | 519 | $ | 29 | $ | 4,096 | ||||||||||||
Impaired loans | — | — | — | 258 | — | 258 | ||||||||||||||||||
Total | $ | 1,906 | $ | 1,015 | $ | 627 | $ | 777 | $ | 29 | $ | 4,354 |
December 31, 2016 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Beginning balance | $ | 1,906 | $ | 1,015 | $ | 627 | $ | 777 | $ | 29 | $ | 4,354 | ||||||||||||
Loans charged off | — | (102 | ) | (14 | ) | (35 | ) | (155 | ) | (306 | ) | |||||||||||||
Recoveries of loans charged off | 45 | 76 | 22 | 58 | 68 | 269 | ||||||||||||||||||
Provision (reallocation) charged to operating expense | 418 | 393 | 82 | (280 | ) | 175 | 788 | |||||||||||||||||
Ending balance | $ | 2,369 | $ | 1,382 | $ | 717 | $ | 520 | $ | 117 | $ | 5,105 |
December 31, 2015 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Beginning balance | $ | 1,734 | $ | 906 | $ | 690 | $ | 524 | $ | 26 | $ | 3,880 | ||||||||||||
Loans charged off | (95 | ) | (247 | ) | (50 | ) | — | (114 | ) | (506 | ) | |||||||||||||
Recoveries of loans charged off | — | — | 26 | 19 | 12 | 57 | ||||||||||||||||||
Provision (reallocation) charged to operating expense | 267 | 356 | (39 | ) | 234 | 105 | 923 | |||||||||||||||||
Ending balance | $ | 1,906 | $ | 1,015 | $ | 627 | $ | 777 | $ | 29 | $ | 4,354 |
December 31, 2016 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Pass | $ | 399,505 | $ | 177,466 | $ | 115,237 | $ | 82,992 | $ | 7,238 | $ | 782,438 | ||||||||||||
Watch | 640 | 550 | 89 | 252 | — | 1,531 | ||||||||||||||||||
Special mention | — | 104 | — | — | 237 | 341 | ||||||||||||||||||
Substandard | 120 | 678 | 865 | 210 | — | 1,873 | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | 400,265 | $ | 178,798 | $ | 116,191 | $ | 83,454 | $ | 7,475 | $ | 786,183 |
December 31, 2016 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Pass | $ | 11,836 | $ | 6,811 | $ | 1,019 | $ | 1,507 | $ | — | $ | 21,173 | ||||||||||||
Watch | 1,045 | 1,577 | 645 | 22 | — | 3,289 | ||||||||||||||||||
Special mention | — | — | — | 12 | — | 12 | ||||||||||||||||||
Substandard | 2,062 | 616 | 14 | — | — | 2,692 | ||||||||||||||||||
Doubtful | — | — | — | 27 | — | 27 | ||||||||||||||||||
Total | $ | 14,943 | $ | 9,004 | $ | 1,678 | $ | 1,568 | $ | — | $ | 27,193 | ||||||||||||
Total loans | $ | 415,208 | $ | 187,802 | $ | 117,869 | $ | 85,022 | $ | 7,475 | $ | 813,376 |
December 31, 2015 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Pass | $ | 349,030 | $ | 146,645 | $ | 101,751 | $ | 81,683 | $ | 5,815 | $ | 684,924 | ||||||||||||
Watch | 184 | 327 | — | — | — | 511 | ||||||||||||||||||
Special mention | 387 | — | — | 32 | — | 419 | ||||||||||||||||||
Substandard | 126 | 1,958 | 1,032 | 468 | — | 3,584 | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | 349,727 | $ | 148,930 | $ | 102,783 | $ | 82,183 | $ | 5,815 | $ | 689,438 |
December 31, 2015 | ||||||||||||||||||||||||
Commercial Real Estate | Consumer Real Estate | Construction and Land Development | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||
Pass | $ | 17,127 | $ | 11,635 | $ | 1,947 | $ | 2,458 | $ | — | $ | 33,167 | ||||||||||||
Watch | — | 260 | — | — | — | 260 | ||||||||||||||||||
Special mention | 1,975 | — | 526 | 221 | — | 2,722 | ||||||||||||||||||
Substandard | 948 | 869 | 222 | 89 | — | 2,128 | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | 20,050 | $ | 12,764 | $ | 2,695 | $ | 2,768 | $ | — | $ | 38,277 | ||||||||||||
Total loans | $ | 369,777 | $ | 161,694 | $ | 105,478 | $ | 84,951 | $ | 5,815 | $ | 727,715 |
December 31, 2016 | ||||||||||||||||||||||||||||
30-89 Days Past Due and Accruing | Past Due 90 Days or More and Accruing | Nonaccrual | Total Past Due | PCI Loans | Current Loans | Total Loans | ||||||||||||||||||||||
Commercial real estate | $ | 395 | $ | — | $ | — | $ | 395 | $ | 14,943 | $ | 399,870 | $ | 415,208 | ||||||||||||||
Consumer real estate | 695 | 699 | 386 | 1,780 | 9,004 | 177,018 | 187,802 | |||||||||||||||||||||
Construction and land development | 690 | — | 865 | 1,555 | 1,678 | 114,636 | 117,869 | |||||||||||||||||||||
Commercial and industrial | 257 | — | 164 | 421 | 1,568 | 83,033 | 85,022 | |||||||||||||||||||||
Consumer and other | 17 | — | — | 17 | — | 7,458 | 7,475 | |||||||||||||||||||||
Total | $ | 2,054 | $ | 699 | $ | 1,415 | $ | 4,168 | $ | 27,193 | $ | 782,015 | $ | 813,376 |
December 31, 2015 | ||||||||||||||||||||||||||||
30-89 Days Past Due and Accruing | Past Due 90 Days or More and Accruing | Nonaccrual | Total Past Due | PCI Loans | Current Loans | Total Loans | ||||||||||||||||||||||
Commercial real estate | $ | 471 | $ | 258 | $ | — | $ | 729 | $ | 20,050 | $ | 348,998 | $ | 369,777 | ||||||||||||||
Consumer real estate | 581 | 232 | 1,351 | 2,164 | 12,764 | 146,766 | 161,694 | |||||||||||||||||||||
Construction and land development | 137 | — | 483 | 620 | 2,695 | 102,163 | 105,478 | |||||||||||||||||||||
Commercial and industrial | 207 | 12 | 418 | 637 | 2,768 | 81,546 | 84,951 | |||||||||||||||||||||
Consumer and other | 12 | — | — | 12 | — | 5,803 | 5,815 | |||||||||||||||||||||
Total | $ | 1,408 | $ | 502 | $ | 2,252 | $ | 4,162 | $ | 38,277 | $ | 685,276 | $ | 727,715 |
For the year ended | ||||||||||||||||||||
At December 31, 2016 | December 31, 2016 | |||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
Impaired loans without a valuation allowance: | ||||||||||||||||||||
Non PCI Loans: | ||||||||||||||||||||
Commercial real estate | $ | 119 | $ | 119 | $ | — | $ | 1,311 | $ | 73 | ||||||||||
Consumer real estate | 821 | 849 | — | 2,334 | 100 | |||||||||||||||
Construction and land development | 865 | 865 | — | 967 | 3 | |||||||||||||||
Commercial and industrial | 46 | 46 | — | 47 | 4 | |||||||||||||||
Consumer and other | — | — | — | — | — | |||||||||||||||
1,851 | 1,879 | — | 4,659 | 180 | ||||||||||||||||
PCI loans: None in 2016 | ||||||||||||||||||||
Impaired loans with a valuation allowance: | ||||||||||||||||||||
Non PCI Loans: | ||||||||||||||||||||
Commercial real estate | — | — | — | — | — | |||||||||||||||
Consumer real estate | — | — | — | — | — | |||||||||||||||
Construction and land development | — | — | — | — | — | |||||||||||||||
Commercial and industrial | 164 | 243 | 4 | 306 | 70 | |||||||||||||||
Consumer and other | — | — | — | — | — | |||||||||||||||
164 | 243 | 4 | 306 | 70 | ||||||||||||||||
PCI loans: None in 2016 | ||||||||||||||||||||
Total impaired loans | $ | 2,015 | $ | 2,122 | $ | 4 | $ | 4,965 | $ | 250 |
For the year ended | ||||||||||||||||||||
At December 31, 2015 | December 31, 2015 | |||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
Impaired loans without a valuation allowance: | ||||||||||||||||||||
Non PCI Loans: | ||||||||||||||||||||
Commercial real estate | $ | 1,952 | $ | 1,952 | $ | — | $ | 1,898 | $ | 73 | ||||||||||
Consumer real estate | 3,641 | 4,341 | — | 4,003 | 81 | |||||||||||||||
Construction and land development | 1,033 | 1,033 | — | 1,044 | 26 | |||||||||||||||
Commercial and industrial | 49 | 49 | — | 54 | 3 | |||||||||||||||
Consumer and other | — | — | — | — | — | |||||||||||||||
6,675 | 7,375 | — | 6,999 | 183 | ||||||||||||||||
PCI loans: None in 2015 | ||||||||||||||||||||
Impaired loans with a valuation allowance: | ||||||||||||||||||||
Non PCI Loans: | ||||||||||||||||||||
Commercial real estate | — | — | — | — | — | |||||||||||||||
Consumer real estate | — | — | — | — | — | |||||||||||||||
Construction and land development | — | — | — | — | — | |||||||||||||||
Commercial and industrial | 418 | 418 | 258 | 448 | — | |||||||||||||||
Consumer and other | — | — | — | — | — | |||||||||||||||
418 | 418 | 258 | 448 | — | ||||||||||||||||
PCI loans: None in 2015 | ||||||||||||||||||||
Total impaired loans | $ | 7,093 | $ | 7,793 | $ | 258 | $ | 7,447 | $ | 183 |
December 31, 2016 | Number of Contracts | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | |||||||
Construction and land development | 1 | $ | 278 | $ | 278 | |||||
Commercial and industrial | 1 | 164 | 164 |
2016 | 2015 | |||||
Commercial real estate | $ | 18,473 | $ | 22,995 | ||
Consumer real estate | 12,111 | 16,909 | ||||
Construction and land development | 2,553 | 3,553 | ||||
Commercial and industrial | 2,482 | 3,660 | ||||
Consumer and other | — | — | ||||
Total loans | $ | 35,619 | $ | 47,117 | ||
Less remaining purchase discount | (8,426 | ) | (8,840 | ) | ||
Total, gross | 27,193 | 38,277 | ||||
Less: Allowance for loan losses | — | — | ||||
Carrying amount, net of allowance | $ | 27,193 | $ | 38,277 |
2016 | 2015 | |||||||
Accretable yield, beginning of period | $ | 10,217 | $ | 7,983 | ||||
Additions | — | 4,282 | ||||||
Accretion income | (2,588 | ) | (1,805 | ) | ||||
Reclassification from nonaccretable | 1,585 | 151 | ||||||
Other changes, net | (264 | ) | (394 | ) | ||||
Accretable yield, end of period | $ | 8,950 | $ | 10,217 |
2016 | 2015 | |||||||
Balance, beginning of year | $ | 10,851 | $ | 14,813 | ||||
Disbursements | 855 | 548 | ||||||
Removal of credit lines | (1,153 | ) | — | |||||
Changes in ownership | 4,830 | — | ||||||
Repayments | (2,384 | ) | (4,510 | ) | ||||
Balance, end of year | $ | 12,999 | $ | 10,851 |
2016 | 2015 | |||||||
Land and land improvements | $ | 8,354 | $ | 7,012 | ||||
Building and leasehold improvements | 18,507 | 16,933 | ||||||
Furniture, fixtures and equipment | 7,043 | 5,701 | ||||||
Construction in progress | 2,789 | 188 | ||||||
Total, gross | 36,693 | 29,834 | ||||||
Accumulated depreciation | (6,157 | ) | (4,796 | ) | ||||
Total, net | $ | 30,536 | $ | 25,038 |
2017 | $ | 518 | |
2018 | 300 | ||
2019 | 292 | ||
2020 | 292 | ||
2021 | 173 |
2017 | $ | 193,389 | |
2018 | 82,529 | ||
2019 | 18,403 | ||
2020 | 14,713 | ||
2021 | 6,817 | ||
Thereafter | 120 | ||
Total | $ | 315,971 |
2016 | 2015 | |||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||
Amortized intangible asset: | ||||||||||||||||
Core deposit intangible | $ | 2,750 | $ | 280 | $ | 3,375 | $ | 600 |
2016 | 2015 | |||||||
Aggregate amortization expense of core deposit premium intangible | $ | 305 | $ | 233 |
2017 | $ | 210 | |
2018 | 210 | ||
2019 | 210 | ||
2020 | 210 | ||
2021 | 210 | ||
Thereafter | 1,420 | ||
Total | $ | 2,470 |
2016 | 2015 | |||||||
Current tax expense | ||||||||
Federal | $ | 2,503 | $ | 77 | ||||
State | 531 | 167 | ||||||
Deferred tax expense (benefit) related to: | ||||||||
Provision for loan losses | (320 | ) | (250 | ) | ||||
Depreciation | 203 | (12 | ) | |||||
Fair value adjustments | 356 | 469 | ||||||
Nonaccrual interest | (26 | ) | 121 | |||||
Foreclosed real estate | 117 | 1,008 | ||||||
Core deposit intangible | (117 | ) | (89 | ) | ||||
Other | 115 | 150 | ||||||
Total income tax expense | $ | 3,362 | $ | 1,641 |
2016 | 2015 | |||||||
Federal income tax expense computed at the statutory rate | $ | 3,115 | $ | 1,071 | ||||
State income taxes, net of federal tax benefit | 393 | 176 | ||||||
Nondeductible acquisition expenses | — | 295 | ||||||
Other | (146 | ) | 99 | |||||
Total income tax expense | $ | 3,362 | $ | 1,641 |
2016 | 2015 | |||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 1,932 | $ | 1,667 | ||||
Fair value adjustments | 3,744 | 4,219 | ||||||
Foreclosed real estate | 539 | 656 | ||||||
Deferred compensation | 415 | 253 | ||||||
State net operating loss carryforward | — | 339 | ||||||
Other | 561 | 618 | ||||||
Total deferred tax assets | 7,191 | 7,752 | ||||||
Deferred tax liabilities: | ||||||||
Accumulated depreciation | 1,903 | 1,699 | ||||||
Core deposit intangible | 946 | 1,063 | ||||||
Other | 639 | 743 | ||||||
Total deferred tax liabilities | 3,488 | 3,505 | ||||||
Net deferred tax asset | $ | 3,703 | $ | 4,247 |
Long-term advance dated January 10, 2007, requiring monthly interest payments, fixed at 4.25%, with a put option exercisable in January 2008 and then quarterly thereafter, principal due in January 2017 | $ | 5,000 |
Short-term advance dated January 28, 2015, requiring monthly interest payments, fixed at 0.63%, principal due in July 2016 | $ | 5,000 | |
Short-term advance dated January 28, 2015, requiring monthly interest payments, fixed at 0.43%, principal due in January 2016 | 8,000 | ||
Short-term advance dated August 31, 2015, requiring monthly interest payments, fixed at 0.41%, principal due in February 2016 | 5,000 | ||
Long-term advance dated January 20, 2006, requiring monthly interest payments, fixed at 4.18%, with a put option exercisable in January 2009 and then quarterly thereafter, principal due in January 2016 | 5,000 | ||
Long-term advance dated January 10, 2007, requiring monthly interest payments, fixed at 4.25%, with a put option exercisable in January 2008 and then quarterly thereafter, principal due in January 2017 | 5,000 | ||
Total | $ | 28,000 |
2017 | $18,500 |
Number | Weighted Average Exercisable Price | ||||||
Outstanding at December 31, 2015 | 817,414 | $ | 10.62 | ||||
Granted | — | — | |||||
Exercised | (89,556 | ) | 8.98 | ||||
Forfeited | (10,334 | ) | 28.49 | ||||
Outstanding at December 31, 2016 | 717,524 | $ | 10.57 |
Number | Weighted Average Exercisable Price | ||||||
Outstanding at December 31, 2014 | 483,629 | $ | 10.20 | ||||
Granted | 52,689 | 15.05 | |||||
Exercised | (24,292 | ) | 8.79 | ||||
Share conversion | 23,468 | 9.71 | |||||
Retained by Cornerstone shareholders in merger | 285,209 | 11.22 | |||||
Forfeited | (3,289 | ) | 10.83 | ||||
Outstanding at December 31, 2015 | 817,414 | $ | 10.62 |
Options Outstanding | Options Exercisable | ||||||||||||||
Weighted- Average Remaining | Weighted- Average | Weighted- Average | |||||||||||||
Exercise | Number | Contractual | Exercise | Number | Exercise | ||||||||||
Prices | Outstanding | Life | Price | Exercisable | Price | ||||||||||
6.20 | 750 | 4.3 years | 6.20 | 750 | 6.20 | ||||||||||
6.60 | 47,750 | 5.2 years | 6.60 | 47,750 | 6.60 | ||||||||||
6.80 | 24,375 | 4.2 years | 6.80 | 24,375 | 6.80 | ||||||||||
9.48 | 42,625 | 6.2 years | 9.48 | 42,625 | 9.48 | ||||||||||
9.52 | 380,100 | 0.2 years | 9.52 | 380,100 | 9.52 | ||||||||||
9.60 | 52,875 | 7.2 years | 9.60 | 52,875 | 9.60 | ||||||||||
10.00 | 1,250 | 6.6 years | 10.00 | 1,250 | 10.00 | ||||||||||
10.48 | 76,271 | 0.3 years | 10.48 | 76,271 | 10.48 | ||||||||||
11.67 | 3,250 | 4.1 years | 11.67 | 3,250 | 11.67 | ||||||||||
14.40 | 18,555 | 2.2 years | 14.40 | 18,555 | 14.40 | ||||||||||
15.05 | 52,074 | 8.8 years | 15.05 | 4,104 | 15.05 | ||||||||||
31.96 | 14,166 | 1.2 years | 31.96 | 14,166 | 31.96 | ||||||||||
60.80 | 688 | 0.3 years | 60.80 | 688 | 60.80 | ||||||||||
61.00 | 2,795 | 0.2 years | 61.00 | 2,795 | 61.00 | ||||||||||
Outstanding, end of year | 717,524 | 2.3 years | 10.57 | 669,554 | 10.25 |
Number | Weighted Average Grant-Date Fair Value | ||||||
Nonvested at December 31, 2015 | 53,739 | $ | 12.12 | ||||
Granted | — | — | |||||
Vested | (5,154 | ) | 10.25 | ||||
Forfeited/expired | (615 | ) | 12.31 | ||||
Nonvested at December 31, 2016 | 47,970 | $ | 12.31 |
Dividend yield | — | % |
Expected life | 10 Years | |
Expected volatility | 81.7 | % |
Risk-free interest rate | 1.54 | % |
Commitments to extend credit | 145.3 | million |
Standby letters of credit, issued by the Company | 3.2 | million |
• | common equity Tier 1 capital ratio (common equity Tier 1 capital to standardized total risk-weighted assets) of 4.5%; |
• | Tier 1 capital ratio (Tier 1 capital to standardized total risk-weighted assets) of 6%; |
• | total capital ratio (total capital to standardized total risk-weighted assets) of 8%; and |
• | leverage ratio (Tier 1 capital to average total consolidated assets) of 4%. |
Actual | Minimum for capital adequacy purposes | Minimum to be well capitalized under prompt corrective action provisions | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
December 31, 2016 | |||||||||||||||||||||
SmartFinancial, Inc. | |||||||||||||||||||||
Total Capital (to Risk-Weighted Assets) | $ | 105,756 | 11.99 | % | $ | 70,553 | 8.00 | % | $ | 88,191 | 10.00 | % | |||||||||
Tier 1 Capital (to Risk-Weighted Assets) | 100,651 | 11.42 | % | 52,915 | 6.00 | % | 70,553 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 88,651 | 10.05 | % | 39,686 | 4.50 | % | 57,324 | 6.50 | % | ||||||||||||
Tier 1 Capital (to Average Assets) | 100,651 | 9.81 | % | 41,052 | 4.00 | % | 51,315 | 5.00 | % | ||||||||||||
SmartBank | |||||||||||||||||||||
Total Capital (to Risk-Weighted Assets) | $ | 104,705 | 11.88 | % | $ | 70,535 | 8.00 | % | $ | 88,169 | 10.00 | % | |||||||||
Tier 1 Capital (to Risk-Weighted Assets) | 99,600 | 11.30 | % | 52,901 | 6.00 | % | 70,535 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 99,600 | 11.30 | % | 39,676 | 4.50 | % | 57,310 | 6.50 | % | ||||||||||||
Tier 1 Capital (to Average Assets) | 99,600 | 9.71 | % | 41,041 | 4.00 | % | 51,301 | 5.00 | % |
Actual | Minimum for capital adequacy purposes | Minimum to be well capitalized under prompt corrective action provisions | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
December 31, 2015 | |||||||||||||||||||||
SmartFinancial, Inc. | |||||||||||||||||||||
Total Capital (to Risk-Weighted Assets) | $ | 99,616 | 12.32 | % | $ | 64,668 | 8.00 | % | $ | 80,835 | 10.00 | % | |||||||||
Tier 1 Capital (to Risk-Weighted Assets) | 95,253 | 11.78 | % | 48,501 | 6.00 | % | 64,668 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 83,253 | 10.30 | % | 36,376 | 4.50 | % | 52,543 | 6.50 | % | ||||||||||||
Tier 1 Capital (to Average Assets) | 95,253 | 9.45 | % | 40,307 | 4.00 | % | 50,383 | 5.00 | % | ||||||||||||
Cornerstone Community Bank | |||||||||||||||||||||
Total Capital (to Risk-Weighted Assets) | $ | 40,227 | 11.69 | % | $ | 27,559 | 8.00 | % | $ | 34,449 | 10.00 | % | |||||||||
Tier 1 Capital (to Risk-Weighted Assets) | 39,717 | 11.53 | % | 20,669 | 6.00 | % | 27,559 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 39,717 | 11.53 | % | 15,502 | 4.50 | % | 22,392 | 6.50 | % | ||||||||||||
Tier 1 Capital (to Average Assets) | 39,717 | 9.05 | % | 17,550 | 4.00 | % | 21,938 | 5.00 | % | ||||||||||||
SmartBank | |||||||||||||||||||||
Total Capital (to Risk-Weighted Assets) | $ | 60,349 | 13.03 | % | $ | 37,057 | 8.00 | % | $ | 46,322 | 10.00 | % | |||||||||
Tier 1 Capital (to Risk-Weighted Assets) | 56,546 | 12.21 | % | 27,793 | 6.00 | % | 37,057 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 56,546 | 12.21 | % | 20,845 | 4.50 | % | 30,109 | 6.50 | % | ||||||||||||
Tier 1 Capital (to Average Assets) | 56,546 | 10.05 | % | 22,501 | 4.00 | % | 28,126 | 5.00 | % |
Balance as of December 31, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Government-sponsored enterprises (GSEs) | $ | 17,723 | $ | — | $ | 17,723 | $ | — | ||||||||
Municipal securities | 8,019 | — | 8,019 | — | ||||||||||||
Mortgage-backed securities | 103,680 | — | 103,680 | — | ||||||||||||
Total securities available-for-sale | $ | 129,422 | $ | — | $ | 129,422 | $ | — |
Balance as of December 31, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Government-sponsored enterprises (GSEs) | $ | 22,743 | $ | — | $ | 22,743 | $ | — | ||||||||
Municipal securities | 7,649 | — | 7,649 | — | ||||||||||||
Mortgage-backed securities | 136,021 | — | 136,021 | — | ||||||||||||
Total securities available-for-sale | $ | 166,413 | $ | — | $ | 166,413 | $ | — |
Balance as of December 31, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Impaired loans | $ | 239 | $ | — | $ | — | $ | 239 | ||||||||
Foreclosed assets | 2,386 | — | — | 2,386 |
Balance as of December 31, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
Impaired loans | $ | 160 | $ | — | $ | — | $ | 160 | ||||||||
Foreclosed assets | 5,358 | — | — | 5,358 |
Balance as of December 31, 2016 (in thousands) | Valuation Technique | Significant Other Unobservable Input | Weighted Average of Input | ||||||||
Impaired loans | $ | 239 | Cash Flow | Discounted Cash Flow / Appraisal Discounts | 2.4 | % | |||||
Foreclosed assets | 2,386 | Appraisal | Appraisal Discounts | 12.2 | % |
Balance as of December 31, 2015 (in thousands) | Valuation Technique | Significant Other Unobservable Input | Weighted Average of Input | ||||||||
Impaired loans | $ | 160 | Appraisal | Discounted Cash Flow / Appraisal Discounts | 6.0 | % | |||||
Foreclosed assets | 5,358 | Appraisal | Appraisal Discounts | 22.2 | % |
December 31, 2016 | December 31, 2015 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 68,748 | $ | 68,748 | $ | 79,965 | $ | 79,965 | ||||||||
Securities available for sale | 129,422 | 129,422 | 166,413 | 166,413 | ||||||||||||
Restricted investments | 5,628 | N/A | 4,451 | N/A | ||||||||||||
Loans, net | 808,271 | 803,057 | 723,361 | 721,338 | ||||||||||||
Liabilities: | ||||||||||||||||
Noninterest-bearing demand deposits | 153,483 | 153,483 | 131,419 | 131,419 | ||||||||||||
Interest-bearing demand deposits | 162,702 | 162,702 | 149,424 | 149,424 | ||||||||||||
Savings deposits | 274,605 | 274,605 | 236,901 | 236,901 | ||||||||||||
Time deposits | 316,275 | 316,734 | 340,739 | 342,873 | ||||||||||||
Securities sold under agreements to repurchase | 26,622 | 26,622 | 28,068 | 28,068 | ||||||||||||
Federal Home Loan Bank advances and other borrowings | 18,505 | 18,505 | 34,187 | 34,169 |
(Dollars in thousands, except share amounts) | 2016 | 2015 | ||||||
Basic earnings per share computation: | ||||||||
Net income available to common stockholders | $ | 4,777 | $ | 1,390 | ||||
Average common shares outstanding – basic | 5,838,574 | 3,985,202 | ||||||
Basic earnings per share | $ | 0.82 | $ | 0.35 | ||||
Diluted earnings per share computation: | ||||||||
Net income available to common stockholders | $ | 4,777 | $ | 1,390 | ||||
Average common shares outstanding – basic | 5,838,574 | 3,985,202 | ||||||
Incremental shares from assumed conversions: | ||||||||
Stock options | 280,369 | 296,307 | ||||||
Average common shares outstanding - diluted | 6,118,943 | 4,281,509 | ||||||
Diluted earnings per share | $ | 0.78 | $ | 0.32 |
CONDENSED BALANCE SHEETS | ||||||||
December 31, | December 31, | |||||||
2016 | 2015 | |||||||
ASSETS | ||||||||
Cash | $ | 2,068 | $ | 503 | ||||
Investment in subsidiaries | 100,023 | 97,020 | ||||||
Other assets | 4,392 | 4,817 | ||||||
Total assets | $ | 106,483 | $ | 102,340 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Other liabilities | $ | 1,243 | $ | 163 | ||||
Other borrowings | — | 2,000 | ||||||
Total liabilities | 1,243 | 2,163 | ||||||
Stockholders’ equity | 105,240 | 100,177 | ||||||
Total liabilities and stockholders’ equity | $ | 106,483 | $ | 102,340 |
CONDENSED STATEMENTS OF INCOME | ||||||||
Years Ended December 31, | ||||||||
2016 | 2015 | |||||||
INCOME | ||||||||
Dividends | $ | 3,000 | $ | — | ||||
Interest income | — | — | ||||||
3,000 | — | |||||||
EXPENSES | ||||||||
Interest expense | 17 | 40 | ||||||
Other operating expenses | 1,146 | 1,817 | ||||||
Income (loss) before equity in undistributed earnings of subsidiaries and income tax benefit | 1,837 | (1,857 | ) | |||||
Equity in undistributed earnings of subsidiaries | 3,520 | 2,993 | ||||||
Income tax benefit | 442 | 374 | ||||||
Net income | 5,799 | 1,510 | ||||||
Preferred stock dividend requirements | 1,022 | 120 | ||||||
Net income available to common stockholders | $ | 4,777 | $ | 1,390 |
STATEMENTS OF CASH FLOWS | ||||||||
2016 | 2015 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 5,799 | $ | 1,510 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Equity in undistributed income of subsidiary | (3,520 | ) | (2,993 | ) | ||||
Other | 1,234 | (247 | ) | |||||
Net cash provided by (used in) operating activities | 3,513 | (1,730 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of note payable | — | 6,000 | ||||||
Repayment of note payable | (2,000 | ) | (4,000 | ) | ||||
Proceeds from issuance of common stock | 804 | 4,043 | ||||||
Payment of dividends on preferred stock | (752 | ) | (120 | ) | ||||
Net cash (used in) provided by financing activities | (1,948 | ) | 5,923 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of Cornerstone Bancshares, Inc. | — | (4,166 | ) | |||||
Net cash used in investing activities | — | (4,166 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,565 | 27 | ||||||
CASH AND CASH EQUIVALENTS, beginning of year | 503 | 476 | ||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 2,068 | $ | 503 |
Plan category | Number of securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance | |||||||
Equity compensation plans approved by security holders: | ||||||||||
2002 Long-Term Incentive Plan | 109,079 | $ | 13.00 | — | ||||||
SmartBank Stock Option Plan | 456,371 | $ | 9.68 | 20,337 | ||||||
SmartFinancial 2010 Incentive Plan | 3,250 | $ | 11.67 | 519,750 | ||||||
2015 Stock Incentive Plan | 52,074 | $ | 15.05 | 1,947,926 | ||||||
Equity compensation plans not approved by shareholders | 96,750 | $ | 9.55 | — | ||||||
Total | 717,524 | $ | 10.57 | 2,488,013 |
The following documents are filed as part of this report: | |
(1) | Financial Statements |
The following report and consolidated financial statements of SmartFinancial and Subsidiary are included in Item 8: | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Balance Sheets as of December 31, 2016 and 2015 | |
Consolidated Statements of Income for the years ended December 31, 2016 and 2015 | |
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016 and 2015 | |
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2016 and 2015 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015 | |
Notes to Consolidated Financial Statements | |
(2) | Financial Statement Schedules: |
Schedule II: Valuation and Qualifying Accounts | |
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. | |
(3) | The following documents are filed, furnished or incorporated by reference as exhibits to this report: |
Exhibit No. | Description | Location | ||
2.1 | Agreement and Plan of Merger dated as of December 5, 2014 by and among SmartFinancial, Inc., SmartBank, Cornerstone Bancshares, Inc. and Cornerstone Community Bank | Incorporated by reference to Appendix A to Form S-4 filed April 16, 2015 | ||
2.2 | Loan Agreement, dated as of August 28, 2015, by and between Cornerstone Bancshares, Inc. (renamed SmartFinancial, Inc.) and CapStar Bank | Incorporated by reference to Exhibit 2.2 to Form 8-K filed September 2, 2015 | ||
2.3 | Line of Credit Note, dated as of August 28, 2015 | Incorporated by reference to Exhibit 2.3 to Form 8-K filed September 2, 2015 | ||
2.4 | Stock Pledge and Security Agreement, effective as of September 1, 2015, by and between SmartFinancial, Inc. and CapStar Bank | Incorporated by reference to Exhibit 2.5 to Form 8-K filed September 2, 2015 | ||
3.1 | Second Amended and Restated Charter of SmartFinancial, Inc. | Incorporated by reference to Exhibit 3.3 to Form 8-K filed September 2, 2015 | ||
3.2 | Second Amended and Restated Bylaws of SmartFinancial, Inc. | Incorporated by reference to Exhibit 3.1 to Form 8-K filed October 26, 2015 | ||
4.1 | The right of securities holders are defined in the Charter and Bylaws provided in exhibits 3.1 and 3.2 | |||
4.2 | Specimen Common Stock Certificate | Incorporated by reference to Exhibit 2 to From 10-K filed March 30, 2016 | ||
10.1* | SmartFinancial, Inc. 2015 Stock Incentive Plan | Incorporated by reference to Exhibit H to the Form S-4 filed April 16, 2015 | ||
10.2* | Form of 2015 Stock Incentive Agreement | Incorporated by reference to Exhibit 10.2 to From 10-K filed March 30, 2016 | ||
10.3* | SmartFinancial, Inc. 2010 Incentive Plan and Form of Option Agreement, assumed by SmartFinancial | Incorporated by reference to Exhibit 10.5 to Form 8-K filed September 2, 2015 | ||
10.4* | SmartBank Stock Option Plan and Form of Option Agreement, assumed by SmartFinancial | Incorporated by reference to Exhibit 10.5 to Form 8-K filed September 2, 2015 | ||
10.5* | Employment Agreement, dated as of February 1, 2015, by and among William Y. Carroll, Jr., SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.2 to Form 8-K filed September 2, 2015 | ||
10.6* | Employment Agreement, dated as of February 1, 2015, by and among William Y. Carroll, Sr., SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.3 to Form 8-K filed September 2, 2015 | ||
10.7* | Employment Agreement, dated as of April 15, 2015, by and among C. Bryan Johnson, SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.4 to Form 8-K filed September 2, 2015 | ||
10.8* | Employment Agreement by and between John H. Coxwell, Sr., Cornerstone Bancshares, Inc. and Cornerstone Community Bank dated December 5, 2014 | Incorporated by reference to Exhibit 10.4 to Form 8-K filed December 9, 2015 | ||
10.9* | First Amendment to Employment Agreement by and between John H. Coxwell, Sr., SmartFinancial, Inc. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.3 to Form 8-K filed December 9, 2015 | ||
10.10* | First Amendment to Employment Agreement by and between James R. Vercoe, Jr. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.1 to Form 8-K filed December 9, 2015 | ||
10.11* | First Amendment to Employment Agreement by and between Gary W. Petty, Jr., SmartFinancial, Inc. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.2 to Form 8-K filed December 9, 2015 | ||
10.12* | Employment Agreement, dated as of December 5, 2014, by and between Felicia F. Barbee and Cornerstone Community Bank | Incorporated by reference to Exhibit 10.1 to Form 8-K filed March 2, 2016 | ||
10.13* | First Amendment to Employment Agreement, dated as of February 27, 2016, by and between SmartBank and Felicia F. Barbee | Incorporated by reference to Exhibit 10.2 to Form 8-K filed March 2, 2016 | ||
10.14* | First Amendment to Employment Agreement, dated as of February 27, 2016, by and between SmartBank and Robert B. Watson | Incorporated by reference to Exhibit 10.3 to Form 8-K filed March 2, 2016 | ||
10.15 | Form of Subscription Agreement for 2015 Equity Financing | Incorporated by reference to Exhibit 10.1 to Form 8-K filed August 20, 2015 | ||
10.16 | Form of Registration Rights Agreement for 2015 Equity Financing | Incorporated by reference to Exhibit 10.2 to Form 8-K filed August 20, 2015 | ||
10.17* | Employment Agreement with Nathaniel F. Hughes, dated as of December 5, 2014, by and between Cornerstone Bancshares, Inc. and Nathaniel F. Hughes | Incorporated by reference to Exhibit 10.2 to Form 8-K filed December 10, 2014 | ||
10.18* | Employment Agreement with Gary W. Petty, Jr. dated as of December 5, 2014, by and between Cornerstone Bancshares, Inc., Cornerstone Community Bank, and Gary W. Petty, Jr. | Incorporated by reference to Exhibit 10.3 to Form 8-K filed December 10, 2014 | ||
10.19* | Employment Agreement with Robert B. Watson, dated as of December 5, 2014, by and between Cornerstone Community Bank and Robert B. Watson | Incorporated by reference to Exhibit 10.4 to Form 8-K filed December 10, 2014 | ||
10.20* | Employment Agreement with James R. Vercoe, Jr., dated as of December 5, 2014, by and between Cornerstone Community Bank and James R Vercoe, Jr. | Incorporated by reference to Exhibit 10.5 to Form 8-K filed December 10, 2014 | ||
10.21* | Cornerstone Bancshares, Inc. 2002 Long-Term Incentive Plan | Incorporated by reference to Exhibit 99.1 to Form S-8 filed on March 5, 2004 | ||
10.22* | Form of Incentive Agreement under 2002 Long-Term Incentive Plan | Incorporated by reference to Exhibit 10.22 to From 10-K filed March 30, 2016 | ||
21.1 | Subsidiary of the registrant | Filed herewith | ||
23.1 | Consent of Mauldin & Jenkins, LLC | Filed herewith | ||
31.1 | Certification of principal executive officer | Filed herewith | ||
31.2 | Certification of principal financial officer | Filed herewith | ||
32.1 | Section 906 certifications of chief executive officer and chief financial officer | Filed herewith | ||
101.INS | XBRL Instance Document | Filed herewith | ||
101.SCH | XBRL Taxonomy Extension Schema | Filed herewith | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | Filed herewith | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | Filed herewith | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith |
SMARTFINANCIAL, INC. | |||
Date: March 31, 2017 | By: | /s/ William Y. Carroll, Jr. | |
William Y. Carroll, Jr. | |||
President and Chief Executive Officer and Director | |||
(principal executive officer) |
By: | /s/ C. Bryan Johnson | ||
C. Bryan Johnson | |||
Executive Vice President and Chief Financial Officer | |||
(principal financial officer and accounting officer) |
Signature | Title | |
/s/ William Y. Carroll, Jr. | President and Chief Executive Officer and Director | |
William Y. Carroll, Jr. | ||
(Principal Executive Officer) | ||
/s/ C. Bryan Johnson | Executive Vice President and Chief Financial Officer | |
C. Bryan Johnson | ||
(Principal Financial Officer and Principal Accounting Officer) | ||
/s/ Victor L. Barrett | Director | |
Victor L. Barrett | ||
/s/ Monique P. Berke | Director | |
Monique P. Berke | ||
/s/ William Y. Carroll, Sr. | Director | |
William Y. Carroll, Sr. | ||
/s/ Frank S. McDonald | Director | |
Frank S. McDonald | ||
/s/ Ted C. Miller | Director | |
Ted C. Miller | ||
/s/ David A. Ogle | Director | |
David A. Ogle | ||
/s/ Doyce Payne | Director | |
Doyce Payne | ||
/s/ Miller Welborn | Director | |
Miller Welborn | ||
/s/ Keith E. Whaley | Director | |
Keith E. Whaley | ||
/s/ Geoffrey A. Wolpert | Director | |
Geoffrey A. Wolpert |
Exhibit No. | Description | Location | ||
2.1 | Agreement and Plan of Merger dated as of December 5, 2014 by and among SmartFinancial, Inc., SmartBank, Cornerstone Bancshares, Inc. and Cornerstone Community Bank | Incorporated by reference to Appendix A to Form S-4 filed April 16, 2015 | ||
2.2 | Loan Agreement, dated as of August 28, 2015, by and between Cornerstone Bancshares, Inc. (renamed SmartFinancial, Inc.) and CapStar Bank | Incorporated by reference to Exhibit 2.2 to Form 8-K filed September 2, 2015 | ||
2.3 | Line of Credit Note, dated as of August 28, 2015 | Incorporated by reference to Exhibit 2.3 to Form 8-K filed September 2, 2015 | ||
2.4 | Stock Pledge and Security Agreement, effective as of September 1, 2015, by and between SmartFinancial, Inc. and CapStar Bank | Incorporated by reference to Exhibit 2.5 to Form 8-K filed September 2, 2015 | ||
3.1 | Second Amended and Restated Charter of SmartFinancial, Inc. | Incorporated by reference to Exhibit 3.3 to Form 8-K filed September 2, 2015 | ||
3.2 | Second Amended and Restated Bylaws of SmartFinancial, Inc. | Incorporated by reference to Exhibit 3.1 to Form 8-K filed October 26, 2015 | ||
4.1 | The right of securities holders are defined in the Charter and Bylaws provided in exhibits 3.1 and 3.2 | |||
4.2 | Specimen Common Stock Certificate | Incorporated by reference to Exhibit 2 to From 10-K filed March 30, 2016 | ||
10.1* | SmartFinancial, Inc. 2015 Stock Incentive Plan | Incorporated by reference to Exhibit H to the Form S-4 filed April 16, 2015 | ||
10.2* | Form of 2015 Stock Incentive Agreement | Incorporated by reference to Exhibit 10.2 to From 10-K filed March 30, 2016 | ||
10.3* | SmartFinancial, Inc. 2010 Incentive Plan and Form of Option Agreement, assumed by SmartFinancial | Incorporated by reference to Exhibit 10.5 to Form 8-K filed September 2, 2015 | ||
10.4* | SmartBank Stock Option Plan and Form of Option Agreement, assumed by SmartFinancial | Incorporated by reference to Exhibit 10.5 to Form 8-K filed September 2, 2015 | ||
10.5* | Employment Agreement, dated as of February 1, 2015, by and among William Y. Carroll, Jr., SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.2 to Form 8-K filed September 2, 2015 | ||
10.6* | Employment Agreement, dated as of February 1, 2015, by and among William Y. Carroll, Sr., SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.3 to Form 8-K filed September 2, 2015 | ||
10.7* | Employment Agreement, dated as of April 15, 2015, by and among C. Bryan Johnson, SmartFinancial, Inc. and SmartBank | Incorporated by reference to Exhibit 10.4 to Form 8-K filed September 2, 2015 | ||
10.8* | Employment Agreement by and between John H. Coxwell, Sr., Cornerstone Bancshares, Inc. and Cornerstone Community Bank dated December 5, 2014 | Incorporated by reference to Exhibit 10.4 to Form 8-K filed December 9, 2015 | ||
10.9* | First Amendment to Employment Agreement by and between John H. Coxwell, Sr., SmartFinancial, Inc. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.3 to Form 8-K filed December 9, 2015 | ||
10.10* | First Amendment to Employment Agreement by and between James R. Vercoe, Jr. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.1 to Form 8-K filed December 9, 2015 | ||
10.11* | First Amendment to Employment Agreement by and between Gary W. Petty, Jr., SmartFinancial, Inc. and Cornerstone Community Bank dated December 8, 2015 | Incorporated by reference to Exhibit 10.2 to Form 8-K filed December 9, 2015 | ||
10.12* | Employment Agreement, dated as of December 5, 2014, by and between Felicia F. Barbee and Cornerstone Community Bank | Incorporated by reference to Exhibit 10.1 to Form 8-K filed March 2, 2016 | ||
10.13* | First Amendment to Employment Agreement, dated as of February 27, 2016, by and between SmartBank and Felicia F. Barbee | Incorporated by reference to Exhibit 10.2 to Form 8-K filed March 2, 2016 | ||
10.14* | First Amendment to Employment Agreement, dated as of February 27, 2016, by and between SmartBank and Robert B. Watson | Incorporated by reference to Exhibit 10.3 to Form 8-K filed March 2, 2016 | ||
10.15 | Form of Subscription Agreement for 2015 Equity Financing | Incorporated by reference to Exhibit 10.1 to Form 8-K filed August 20, 2015 | ||
10.16 | Form of Registration Rights Agreement for 2015 Equity Financing | Incorporated by reference to Exhibit 10.2 to Form 8-K filed August 20, 2015 | ||
10.17* | Employment Agreement with Nathaniel F. Hughes, dated as of December 5, 2014, by and between Cornerstone Bancshares, Inc. and Nathaniel F. Hughes | Incorporated by reference to Exhibit 10.2 to Form 8-K filed December 10, 2014 | ||
10.18* | Employment Agreement with Gary W. Petty, Jr. dated as of December 5, 2014, by and between Cornerstone Bancshares, Inc., Cornerstone Community Bank, and Gary W. Petty, Jr. | Incorporated by reference to Exhibit 10.3 to Form 8-K filed December 10, 2014 | ||
10.19* | Employment Agreement with Robert B. Watson, dated as of December 5, 2014, by and between Cornerstone Community Bank and Robert B. Watson | Incorporated by reference to Exhibit 10.4 to Form 8-K filed December 10, 2014 | ||
10.20* | Employment Agreement with James R. Vercoe, Jr., dated as of December 5, 2014, by and between Cornerstone Community Bank and James R Vercoe, Jr. | Incorporated by reference to Exhibit 10.5 to Form 8-K filed December 10, 2014 | ||
10.21* | Cornerstone Bancshares, Inc. 2002 Long-Term Incentive Plan | Incorporated by reference to Exhibit 99.1 to Form S-8 filed on March 5, 2004 | ||
10.22* | Form of Incentive Agreement under 2002 Long-Term Incentive Plan | Incorporated by reference to Exhibit 10.22 to From 10-K filed March 30, 2016 | ||
21.1 | Subsidiary of the registrant | Filed herewith | ||
23.1 | Consent of Mauldin & Jenkins, LLC | Filed herewith | ||
31.1 | Certification of principal executive officer | Filed herewith | ||
31.2 | Certification of principal financial officer | Filed herewith | ||
32.1 | Section 906 certifications of chief executive officer and chief financial officer | Filed herewith | ||
101.INS | XBRL Instance Document | Filed herewith | ||
101.SCH | XBRL Taxonomy Extension Schema | Filed herewith | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | Filed herewith | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | Filed herewith | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith |
Name of Subsidiary | State of Incorporation | |
SmartBank | Tennessee |
• | Registration Statement on Form S-3 (No. 333-214802) |
• | Registration Statement on Form S-3 (No. 333-208700) |
• | Registration Statement on Form S-8 POS (No. 333-203449) |
• | Registration Statement on Form S-8 (No. 333-208819) |
• | Registration Statement on Form S-8 (No. 333-131006) |
• | Registration Statement on Form S-8 (No. 333-113314) |
Date: March 31, 2017 | /s/ William Y. Carroll, Jr. |
William Y. Carroll, Jr., President and Chief Executive Officer | |
and Director | |
(principal executive officer) |
Date: March 31, 2017 | /s/ C. Bryan Johnson |
C. Bryan Johnson, Executive Vice President and | |
Chief Financial Officer | |
(principal financial officer and accounting officer) |
/ s/ William Y. Carroll, Jr. | |
William Y. Carroll, Jr. | |
President & Chief Executive Officer & Director | |
(principal executive officer) | |
Date: March 31, 2017 |
/ s/ C. Bryan Johnson | |
C. Bryan Johnson | |
Executive Vice President and Chief Financial Officer | |
(principal financial officer and accounting officer) | |
Date: March 31, 2017 |
Document And Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Mar. 21, 2017 |
Jun. 30, 2016 |
|
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | SMARTFINANCIAL INC. | ||
Entity Central Index Key | 0001038773 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 74.6 | ||
Trading Symbol | SMBK | ||
Entity Common Stock, Shares Outstanding | 8,207,091 |
Consolidated Balance Sheets [Parenthetical] - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for loan losses (in dollars) | $ 5,105 | $ 4,354 |
Preferred Stock, Par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 12,000 | 12,000 |
Preferred stock, shares outstanding | 12,000 | 12,000 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 5,896,033 | 5,806,477 |
Common stock, shares outstanding | 5,896,033 | 5,806,477 |
Consolidated Statements of Comprehensive Income - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 5,798,808 | $ 1,509,712 |
Other comprehensive loss, net of tax: | ||
Unrealized holding losses arising during the year, net of tax benefit of $326,697 and $10,764 in 2016 and 2015, respectively | (526,954) | (16,522) |
Reclassification adjustment for gains included in net income, net of tax expense of $76,422 and $19,857 in 2016 and 2015, respectively | (123,165) | (32,398) |
Total other comprehensive loss | (650,119) | (48,920) |
Comprehensive income | $ 5,148,689 | $ 1,460,792 |
Consolidated Statements of Comprehensive Income [Parenthetical] - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Unrealized holding losses arising during the year, tax benefit | $ 326,697 | $ 10,764 |
Reclassification adjustment for gains included in net income, tax expense | $ 76,422 | $ 19,857 |
Consolidated Statements of Changes in Stockholders' Equity - USD ($) |
Total |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive Loss [Member] |
---|---|---|---|---|---|---|
BALANCE at Dec. 31, 2014 | $ 55,887,787 | $ 12,000 | $ 2,965,783 | $ 42,508,429 | $ 10,704,776 | $ (303,201) |
BALANCE (in shares) at Dec. 31, 2014 | 12,000 | 2,965,783 | ||||
Net income | 1,509,712 | $ 0 | $ 0 | 0 | 1,509,712 | 0 |
Other comprehensive loss | (48,920) | 0 | 0 | 0 | 0 | (48,920) |
Issuance of common stock | 15,000,004 | $ 0 | $ 1,000,003 | 14,000,001 | 0 | 0 |
Issuance of common stock (in shares) | 0 | 1,000,003 | ||||
Issuance of stock grants | 100,216 | $ 6,659 | 93,557 | |||
Issuance of stock grants (in shares) | 6,659 | |||||
Stock issuance costs | (840,418) | (840,418) | ||||
Exercise of stock options | 213,542 | $ 24,292 | 189,250 | |||
Exercise of stock options (in shares) | 24,292 | |||||
Shares retained by shareholders of Cornerstone Bancshares, Inc. | 28,435,075 | $ 1,660,836 | 26,774,239 | |||
Shares retained by shareholders of Cornerstone Bancshares, Inc. (in shares) | 1,660,836 | |||||
Conversion shares issued to shareholders of SmartFinancial, Inc. | 0 | $ 148,904 | (148,904) | |||
Conversion shares issued to shareholders of SmartFinancial, Inc. (in shares) | 148,904 | |||||
Dividends on preferred stock | (120,000) | $ 0 | $ 0 | 0 | (120,000) | 0 |
Stock option compensation expense | 39,861 | 0 | 0 | 39,861 | 0 | 0 |
BALANCE at Dec. 31, 2015 | 100,176,859 | $ 12,000 | $ 5,806,477 | 82,616,015 | 12,094,488 | (352,121) |
BALANCE (in shares) at Dec. 31, 2015 | 12,000 | 5,806,477 | ||||
Net income | 5,798,808 | $ 0 | $ 0 | 0 | 5,798,808 | 0 |
Other comprehensive loss | (650,119) | 0 | 0 | 0 | 0 | (650,119) |
Exercise of stock options | 803,957 | $ 0 | $ 89,556 | 714,401 | 0 | 0 |
Exercise of stock options (in shares) | 0 | 89,556 | ||||
Dividends on preferred stock | (1,022,000) | $ 0 | $ 0 | 0 | (1,022,000) | 0 |
Stock option compensation expense | 132,635 | 0 | 0 | 132,635 | 0 | 0 |
BALANCE at Dec. 31, 2016 | $ 105,240,140 | $ 12,000 | $ 5,896,033 | $ 83,463,051 | $ 16,871,296 | $ (1,002,240) |
BALANCE (in shares) at Dec. 31, 2016 | 12,000 | 5,896,033 |
Summary of Significant Accounting Policies |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||
Accounting Policies [Abstract] | |||||||||
Summary of Significant Accounting Policies | 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"). Prior to their merger on February 26, 2016 the Company operated two wholly-owned subsidiaries; SmartBank and Cornerstone Community Bank. The Company provides a variety of financial services to individuals and corporate customers through its offices in eastern Tennessee, northeast Florida, and north Georgia. The Company's primary deposit products are interest-bearing demand deposits and certificates of deposit. Its primary lending products are commercial, residential, and consumer loans. Basis of Presentation and Accounting Estimates: 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 United States of America, 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, and the fair value of financial instruments. The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral. The Company's loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent on local economic conditions. While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. The Company has evaluated subsequent events for potential recognition and/or disclosure in the consolidated financial statements and accompanying notes included in this Annual Report. Cash and Cash Equivalents: For purposes of reporting consolidated cash flows, cash and due from banks includes cash on hand, cash items in process of collection and amounts due from banks. Cash and cash equivalents also includes interest-bearing deposits in banks and federal funds sold. Cash flows from loans, federal funds sold, securities sold under agreements to repurchase and deposits are reported net. Cash and Cash Equivalents (continued): The Bank is required to maintain average balances in cash or on deposit with the Federal Reserve Bank. The reserve requirement was $15,208 and $1,031 at December 31, 2016 and 2015, respectively. The Company places its cash and cash equivalents with other financial institutions and limits the amount of credit exposure to any one financial institution. From time to time, the balances at these financial institutions exceed the amount insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on these accounts and management considers this to be a normal business risk. Securities: Management has classified all securities as available for sale. Securities available for sale are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. The Company evaluates investment securities for other than temporary impairment using relevant accounting guidance specifying that (a) if the Company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other than temporarily impaired unless a credit loss has occurred in the security. If management does not intend to sell the security and it is more likely than not that they will not have to sell the security before recovery of the cost basis, management will recognize the credit component of an other-than- temporary impairment of a debt security in earnings and the remaining portion in other comprehensive loss. Securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase are treated as collateralized financial transactions. These agreements are recorded at the amount at which the securities were acquired or sold plus accrued interest. It is the Company's policy to take possession of securities purchased under resale agreements. The market value of these securities is monitored, and additional securities are obtained when deemed appropriate to ensure such transactions are adequately collateralized. The Company also monitors its exposure with respect to securities sold under repurchase agreements, and a request for the return of excess securities held by the counterparty is made when deemed appropriate. Restricted - Investments: The Company is required to maintain an investment in capital stock of various entities. Based on redemption provisions of these entities, the stock has no quoted market value and is carried at cost. At their discretion, these entities may declare dividends on the stock. Management reviews for impairment based on the ultimate recoverability of the cost basis in these stocks. Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balances less deferred fees and costs on originated loans and the allowance for loan losses. Interest income is accrued on the outstanding principal balance. Loan origination fees, net of certain direct origination costs of consumer and installment loans are recognized at the time the loan is placed on the books. Loan origination fees for all other loans are deferred and recognized as an adjustment of the yield over the life of the loan using the straight-line method without anticipating prepayments. The accrual of interest on loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due, or at the time the loan is 90 days past due, unless the loan is well-secured and in the process of collection. Unsecured loans are typically charged off no later than 120 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal and interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income or charged to the allowance, unless management believes that the accrual of interest is recoverable through the liquidation of collateral. Interest income on nonaccrual loans is recognized on the cash basis, until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and the loan has been performing according to the contractual terms for a period of not less than six months. Acquired Loans: Acquired loans are those that were acquired when SmartBank assumed all the deposits and certain assets of the former GulfSouth Private Bank (“GulfSouth transaction”) on October 19, 2012 and the former Cornerstone Bancshares, Inc. (“Cornerstone”) on August 31, 2015. The fair values of acquired loans with evidence of credit deterioration, purchased credit impaired loans (“PCI loans”), are recorded net of a nonaccretable discount and accretable discount. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized in interest income over the remaining life of the loan when there is reasonable expectation about the amount and timing of such cash flows. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is the nonaccretable discount, which is included in the carrying amount of acquired loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from nonaccretable to accretable with a positive impact on the accretable discount. Acquired loans are initially recorded at fair value at acquisition date. Accretable discounts related to certain fair value adjustments are accreted into income over the estimated lives of the loans. The Company accounts for performing loans acquired in the acquisition using the expected cash flows method of recognizing discount accretion based on the acquired loans' expected cash flows. Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment. Purchased performing loans are recorded at fair value, including a credit discount. Credit losses on acquired performing loans are estimated based on analysis of the performing portfolio. Such estimated credit losses are recorded as nonaccretable discounts in a manner similar to purchased impaired loans. The fair value discount other than for credit loss is accreted as an adjustment to yield over the estimated lives of the loans. A provision for loan losses is recorded for any deterioration in these loans subsequent to the acquisition. Allowance for Loan Losses: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Confirmed losses are charged off immediately. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the uncollectibility of loans in light of historical experience, the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions that may affect the borrower's ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations. The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. For impaired loans, an allowance is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on the Company's historical loss experience adjusted for other qualitative factors. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. Allowance for Loan Losses (continued): An unallocated component may be maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. As part of the risk management program, an independent review is performed on the loan portfolio, which supplements management’s assessment of the loan portfolio and the allowance for loan losses. The result of the independent review is reported directly to the Audit Committee of the Board of Directors. Loans, for which the terms have been modified at the borrower's request, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. A loan is considered impaired when it is probable, based on current information and events, the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. Loans that experience insignificant payment delays and payment shortfalls are not classified as impaired. Impaired loans are measured by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. The Company's homogeneous loan pools include consumer real estate loans, commercial real estate loans, construction and land development loans, commercial and industrial loans, and consumer and other loans. The general allocations to these loan pools are based on the historical loss rates for specific loan types and the internal risk grade, if applicable, adjusted for both internal and external qualitative risk factors. The qualitative factors considered by management include, among other factors, (1) changes in local and national economic conditions; (2) changes in asset quality; (3) changes in loan portfolio volume; (4) the composition and concentrations of credit; (5) the impact of competition on loan structuring and pricing; (6) the impact of interest rate changes on portfolio risk and (7) effectiveness of the Company's loan policies, procedures and internal controls. The total allowance established for each homogeneous loan pool represents the product of the historical loss ratio adjusted for qualitative factors and the total dollar amount of the loans in the pool. Troubled Debt Restructurings: The Company designates loan modifications as troubled debt restructurings ("TDRs") when for economic and legal reasons related to the borrower's financial difficulties, it grants a concession to the borrower that it would not otherwise consider. TDRs can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. In circumstances where the TDR involves charging off a portion of the loan balance, the Company typically classifies these restructurings as nonaccrual. In connection with restructurings, the decision to maintain a loan that has been restructured on accrual status is based on a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms. This evaluation includes consideration of the borrower's current capacity to pay, which among other things may include a review of the borrower's current financial statements, an analysis of global cash flow sufficient to pay all debt obligations, a debt to income analysis, and an evaluation of secondary sources of payment from the borrower and any guarantors. This evaluation also includes an evaluation of the borrower's current willingness to pay, which may include a review of past payment history, an evaluation of the borrower's willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support. The credit evaluation also reflects consideration of the borrower's future capacity and willingness to pay, which may include evaluation of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest, and trends indicating improving profitability and collectability of receivables. Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms. This evaluation must include consideration of the borrower's sustained historical repayment for a reasonable period, generally a minimum of six months, prior to the date on which the loan is returned to accrual status. Foreclosed Assets: Foreclosed assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less selling costs. Any write-down to fair value at the time of transfer to foreclosed assets is charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell. Costs of improvements are capitalized, whereas costs relating to holding foreclosed assets and subsequent write-downs to the value are expensed. The amount of residential real estate where physical possession had been obtained included within foreclosed assets at December 31, 2016 and 2015 was $1,500 and $227,000, respectively. The amount of residential real estate in process of foreclosure at December 31, 2016 was $0. The amount of residential real estate in process of foreclosure at December 31, 2015 was $61,000. Premises and Equipment: Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets or the expected terms of the leases, if shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.
Goodwill and Intangible Assets: Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business combinations. Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired. FASB ASC 350, Goodwill and Other, regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity does a qualitative assessment and determines that this is the case, or if a qualitative assessment is not performed, it is required to perform additional goodwill impairment testing to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). Based on a qualitative assessment, if an entity determines that the fair value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The Company performs its annual goodwill impairment test as of December 31 of each year. For 2016, the results of the qualitative assessment provided no indication of potential impairment. Goodwill will continue to be monitored for triggering events that may indicate impairment prior to the next scheduled annual impairment test. Intangible assets consist of core deposit premiums acquired in connection with the Gulf South and Cornerstone transactions. The core deposit premium is initially recognized based on a valuation performed as of the consummation date. The core deposit premium is amortized over the average remaining life of the acquired customer deposits. Amortization expense relating to these intangible assets was $305,452 and $233,204 for the years ended December 31, 2016 and 2015, respectively. The intangible assets were evaluated for impairment as of December 31, 2016, and based on that evaluation it was determined that there was no impairment. Transfer of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Advertising Costs: The Company expenses all advertising costs as incurred. Advertising expense was $615,751 and $452,849 for the years ended December 31, 2016 and 2015, respectively. Income Taxes: The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment. Deferred tax assets may be reduced by deferred tax liabilities and a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Stock Compensation Plans: At December 31, 2016, the Company had options outstanding under stock-based compensation plans, which are described in more detail in Note 10. The plans have been accounted for under the accounting guidance (FASB ASC 718, Compensation - Stock Compensation) which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and stock or other stock based awards. The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market value of the Company's common stock at the date of grant is used for restrictive stock awards and stock grants. Employee Benefit Plan: Employee benefit plan costs are based on the percentage of individual employee's salary, not to exceed the amount that can be deducted for federal income tax purposes. Variable interest entities: An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in ASC Topic 810, which are: (1) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or (2) the entity has equity investors that cannot make significant decisions about the entity's operations or that do not absorb the expected losses or receive the expected returns of the entity. A VIE must be consolidated by the Company if it is deemed to be the primary beneficiary of the VIE, which is the party involved with the VIE that has a majority of the expected losses, expected residual returns, or both. At December 31, 2016, the Company had an investment in Community Advantage Fund, LLC that qualified as an unconsolidated VIE. Variable interest entities (continued): The Company’s investment in a partnership consists of an equity interest in a lending partnership for the purposes of loaning funds to an unrelated entity. This entity will use the funds to make loans through the SBA Community Advantage loan Initiative. The Company uses the equity method when it owns an interest in a partnership and can exert significant influence over the partnership’s operations. Under the equity method, the Company’s ownership interest in the partnership’s capital is reported as an investment on its consolidated balance sheets in other assets and the Company’s allocable share of the income or loss from the partnership is reported in noninterest income or expense in the consolidated statements of income. The Company ceases recording losses on an investment in partnership when the cumulative losses and distributions from the partnership exceed the carrying amount of the investment and any advances made by the Company. After the Company’s investment in such partnership reaches zero, cash distributions received from these investments are recorded as income. Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Fair Value of Financial Instruments: Fair values of financial instruments are estimates using relevant market information and other assumptions, as more fully disclosed in Note 15. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates. Business Combinations: Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, acquired assets and assumed liabilities are included with the acquirer's accounts as of the date of acquisition at estimated fair value, with any excess of purchase price over the fair value of the net assets acquired (including identifiable intangible assets) capitalized as goodwill. In the event that the fair value of the net assets acquired exceeds the purchase price, an acquisition gain is recorded for the difference in consolidated statements of income for the period in which the acquisition occurred. An intangible asset is recognized as an asset apart from goodwill when it arises from contractual or other legal rights or if it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged. In addition, acquisition-related costs and restructuring costs are recognized as period expenses as incurred. Estimates of fair value are subject to refinement for a period not to exceed one year from acquisition date as information relative to acquisition date fair values becomes available. Earnings per common share: Basic earnings per common share represents income available to common stockholders 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. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method Segment reporting: ASC Topic 280, “Segment Reporting,” provides for the identification of reportable segments on the basis of distinct business units and their financial information to the extent such units are reviewed by an entity’s chief decision maker (which can be an individual or group of management persons). ASC Topic 280 permits aggregation or combination of segments that have similar characteristics. In the Company’s operations, each bank branch is viewed by management as being a separately identifiable business or segment from the perspective of monitoring performance and allocation of financial resources. Although the branches operate independently and are managed and monitored separately, each is substantially similar in terms of business focus, type of customers, products, and services. Accordingly, the Company’s consolidated financial statements reflect the presentation of segment information on an aggregated basis in one reportable segment. Recently Issued Not Yet Effective Accounting Pronouncements: The following is a summary of recent authoritative pronouncements not yet in effect that could impact the accounting, reporting, and/or disclosure of financial information by the Company. In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers in ASU No. 2014-9, Revenue from Contracts with Customers (Topic 606). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for annual periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In January 2016, the FASB issued guidance that primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments in ASU No. 2016-1 -Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance will be effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of this update on its financial statements. In February 2016, the FASB issued guidance that requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability in ASU 2016-2: Leases (Topic 842). For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 including interim periods within those fiscal years. The Company is evaluating the impact of this update on its financial statements. In March 2016, FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU simplify several aspects of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement in the period exercise or vesting occurs. In the statement of cash flows, excess tax benefits should be classified with other income tax cash flows as an operating activity. Cash paid by an employer for tax withholding when directly withholding shares should be classified as a financing activity. An entity can make an entity-wide policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The threshold for determining whether an award is classified as equity or a liability is raised to permit withholding up to the maximum statutory tax rate in the applicable jurisdiction. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted and if early adopted, all provisions must be adopted in the same period. The Company does not expect these amendments to have a material effect on its financial statements. Recently Issued Not Yet Effective Accounting Pronouncements (continued): 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 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 still reviewing the impact the adoption of this guidance will have on its financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU intends to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. The guidance is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In January 2017, FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU clarifies the definition of a business to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements. |
Business Combination |
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Business Combination | 18, 2015, the shareholders of the SmartFinancial, Inc (“Legacy SmartFinancial”) approved a merger with Cornerstone Bancshares, Inc. ticker symbol CSBQ, the one bank holding company of Cornerstone Community Bank, which became effective August 31, 2015 at which time Cornerstone Bancshares changed its name to SmartFinancial. Legacy SmartFinancial shareholders received 1.05 shares of Cornerstone common stock in exchange for each share of Legacy SmartFinancial common stock. After the merger, shareholders of Legacy SmartFinancial owned approximately 56% of the outstanding common stock of the combined entity on a fully diluted basis, after taking into account the exchange ratio and new shares issued as part of a capital raise through a private placement. While Cornerstone was the acquiring entity for legal purposes, the merger is being accounted for as a reverse merger using the acquisition method of accounting, in accordance with the provisions of FASB ASC 805-10 Business Combinations. Under this guidance, for accounting purposes, Legacy SmartFinancial is considered the acquirer in the merger, and as a result the historical financial statements of the combined entity will be the historical financial statements of Legacy SmartFinancial. The merger was effected by the issuance of shares of Cornerstone stock to shareholders of Legacy SmartFinancial. The assets and liabilities of Cornerstone as of the effective date of the merger were recorded at their respective estimated fair values and combined with those of Legacy SmartFinancial. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. Goodwill from the transaction was $4.2 million, none of which is deductible for income tax purposes. In periods following the merger, the financial statements of the combined entity will include the results attributable to Cornerstone Community Bank beginning on the date the merger was completed. In the period ended December 31, 2015, the revenues and net income attributable to Cornerstone Community bank were $7.0 million and $1.6 million, respectively. The pro-forma impact to 2015 revenues and net income if the merger had occurred on December 31, 2014 would have been $19.6 million and $67 thousand, respectively. The following table details the financial impact of the merger, including the calculation of the purchase price, the allocation of the purchase price to the fair values of net assets assumed, and goodwill recognized:
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Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | rtized cost and fair value of securities available-for-sale at December 31, 2016 and 2015 are summarized as follow (in thousands):
The amortized cost and estimated market value of securities at December 31, 2016, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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, as of December 31, 2016 and 2015 (in thousands):
At December 31, 2016, the categories of temporarily impaired securities, and management’s evaluation of those securities, are as follows: U.S. Government-sponsored enterprises: At December 31, 2016, seven investments in U.S. GSE securities had unrealized losses. These unrealized losses related principally to changes in market interest rates. The contractual terms of the investments does not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Bank does not intend to sell the investments and it is more likely than not that the Bank will not be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Bank does not consider these investments to be other-than temporarily impaired at December 31, 2016. Municipal securities: At December 31, 2016, fifteen investments in obligations of municipal securities had unrealized losses. The Bank believes the unrealized losses on those investments were caused by the interest rate environment and do not relate to the underlying credit quality of the issuers. Because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Bank does not consider these investments to be other than temporarily impaired at December 31, 2016. Mortgage-backed securities: At December 31, 2016, fifty-five investments in residential mortgage-backed securities had unrealized losses. This impairment is believed to be caused by the current interest rate environment. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Because the decline in market value is attributable to the current interest rate environment and not credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Bank does not consider these investments to be other than temporarily impaired at December 31, 2016. Sales of available for sale securities for the years ended December 31, 2016 and 2015, were as follows (in thousands):
Securities with a carrying value of approximately $86,351,000 and $124,517,000 at December 31, 2016 and 2015, respectively, were pledged to secure various deposits, securities sold under agreements to repurchase, as collateral for federal funds purchased from other financial institutions and serve as collateral for borrowings at the Federal Home Loan Bank. |
Loans and Allowance for Loan Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and Allowance for Loan Losses | io Segmentation: At December 31, 2016 and 2015, loans consisted of the following (in thousands):
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 following describe risk characteristics relevant to each of the portfolio segments: Commercial Real Estate: Commercial real estate loans include owner-occupied commercial real estate loans and loans secured by income-producing properties. Owner-occupied commercial real estate loans to operating businesses are long-term financing of land and buildings. These loans are repaid by cash flow generated from the business operation. Real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans within this portfolio segment are particularly sensitive to the valuation of real estate. Consumer Real Estate: Consumer real estate loans include real estate loans secured by first liens, second liens, or open end real estate loans, such as home equity lines. These are repaid by various means such as a borrower's income, sale of the property, or rental income derived from the property. One to four family first mortgage loans are repaid by various means such as a borrower's income, sale of the property, or rental income derived from the property. Loans within this portfolio segment are particularly sensitive to the valuation of real estate. Construction and Land Development: Loans for real estate construction and development are repaid through cash flow related to the operations, sale or refinance of the underlying property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral. Loans within this portfolio segment are particularly sensitive to the valuation of real estate. Commercial and Industrial: The commercial and industrial loan portfolio segment includes commercial, financial, and agricultural loans. These loans include those loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or expansion projects. Loans are repaid by business cash flows. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the customers' business operations. Consumer and Other: The consumer loan portfolio segment includes direct consumer installment loans, overdrafts and other revolving credit loans, and educational loans. Loans in this portfolio are sensitive to unemployment and other key consumer economic measures. Credit Risk Management: The Company employs a credit risk management process with defined policies, accountability and routine reporting to manage credit risk in the loan portfolio segments. Credit risk management is guided by credit policies that provide for a consistent and prudent approach to underwriting and approvals of credits. Within the Credit Policy, procedures exist that elevate the approval requirements as credits become larger and more complex. All loans are individually underwritten, risk-rated, approved, and monitored. Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in each portfolio segment. For the consumer real estate and consumer and other portfolio segments, the risk management process focuses on managing customers who become delinquent in their payments. For the other portfolio segments, the risk management process focuses on underwriting new business and, on an ongoing basis, monitoring the credit of the portfolios, including a third party review of the largest credits on an annual basis or more frequently as needed. To ensure problem credits are identified on a timely basis, several specific portfolio reviews occur periodically to assess the larger adversely rated credits for proper risk rating and accrual status. Credit quality and trends in the loan portfolio segments are measured and monitored regularly. Detailed reports, by product, collateral, accrual status, etc., are reviewed by the Senior Credit Officer and the Directors Loan Committee. The allowance for loan losses is a valuation reserve allowance established through provisions for loan losses charged against income. The allowance for loan losses, which is evaluated quarterly, is maintained at a level that management deems sufficient to absorb probable losses inherent in the loan portfolio. Loans deemed to be uncollectible are charged against the allowance for loan losses, while recoveries of previously charged-off amounts are credited to the allowance for loan losses. The allowance for loan losses is comprised of specific valuation allowances for loans evaluated individually for impairment and general allocations for pools of homogeneous loans with similar risk characteristics and trends. The allowance for loan losses related to specific loans is based on management's estimate of potential losses on impaired loans as determined by (1) the present value of expected future cash flows; (2) the fair value of collateral if the loan is determined to be collateral dependent or (3) the loan's observable market price. The Company's homogeneous loan pools include commercial real estate loans, consumer real estate loans, construction and land development loans, commercial and industrial loans, and consumer and other loans. The general allocations to these loan pools are based on the historical loss rates for specific loan types and the internal risk grade, if applicable, adjusted for both internal and external qualitative risk factors. The qualitative factors considered by management include, among other factors, (1) changes in local and national economic conditions; (2) changes in asset quality; (3) changes in loan portfolio volume; (4) the composition and concentrations of credit; (5) the impact of competition on loan structuring and pricing; (6) the impact of interest rate changes on portfolio risk and (7) effectiveness of the Company's loan policies, procedures and internal controls. The total allowance established for each homogeneous loan pool represents the product of the historical loss ratio adjusted for qualitative factors and the total dollar amount of the loans in the pool. Credit Risk Management (continued): The composition of loans by loan classification for impaired and performing loan status at December 31, 2016 and 2015, is summarized in the tables below (amounts in thousands):
The following tables show the allowance for loan losses allocation by loan classification for impaired and performing loans as of December 31, 2016 and 2015 (amounts in thousands):
Credit Risk Management (continued):
The following tables detail the changes in the allowance for loan losses for the year ending December 31, 2016 and December 31, 2015, by loan classification (amounts in thousands):
Credit Risk Management (continued): A description of the general characteristics of the risk grades used by the Company is as follows: Pass: Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the debt if required, for any weakness that may exist. Watch: Loans in this risk category involve borrowers that exhibit characteristics, or are operating under conditions that, if not successfully mitigated as planned, have a reasonable risk of resulting in a downgrade within the next six to twelve months. Loans may remain in this risk category for six months and then are either upgraded or downgraded upon subsequent evaluation. Special Mention: Loans in this risk grade are the equivalent of the regulatory definition of "Other Assets Especially Mentioned" classification. Loans in this category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and /or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the asset or in the Company's credit position. Substandard: Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined. Uncollectible: Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan losses are taken in the period in which the loan becomes uncollectible. Consequently, the Company typically does not maintain a recorded investment in loans within this category. The following tables outline the amount of each loan classification and the amount categorized into each risk rating as of December 31, 2016 and 2015 (amounts in thousands): Non PCI Loans
Credit Risk Management (continued): PCI Loans
Non PCI Loans
PCI Loans
Past Due Loans: A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. Generally, management places a loan on nonaccrual when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. The following tables present the aging of the recorded investment in loans and leases as of December 31, 2016 and 2015 (amounts in thousands):
Impaired Loans: A loan held for investment is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both principal and interest) according to the terms of the loan agreement. The following is an analysis of the impaired loan portfolio detailing the related allowance recorded as of and for the years ended December 31, 2016 and 2015 (amounts in thousands):
Impaired Loans (continued):
Troubled Debt Restructurings: At December 31, 2016 and 2015, impaired loans included loans that were classified as Troubled Debt Restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. In assessing whether or not a borrower is experiencing financial difficulties, the Company considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy; and (iv) the debtor's projected cash flow is sufficient to satisfy contractual payments due under the original terms of the loan without a modification. The Company considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Company include the debtor's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. Troubled Debt Restructurings (continued): The most common concessions granted by the Company generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt; (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk; (iii) a temporary period of interest-only payments; and (iv) a reduction in the contractual payment amount for either a short period or remaining term of the loan. As of December 31, 2016 and 2015, management had approximately $608,000 and $4,990,000, respectively, in loans that met the criteria for restructured, which included approximately $442,000 and $1,297,000, respectively, of loans on nonaccrual. A loan is placed back on accrual status when both principal and interest are current and it is probable that management will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement. The following table presents a summary of loans that were modified as troubled debt restructurings during the year ended December 31, 2016 (amounts in thousands):
There were no loans modified as troubled debt restructurings during the year ended December 31, 2015. There were no loans that were modified as troubled debt restructurings during the past twelve months and for which there was a subsequent payment default. Purchased Credit Impaired Loans: The Company has acquired loans which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans at for the years ended December 31, 2016 and 2015 is as follows (in thousands):
The following is a summary of the accretable discount on acquired loans for the years ended December 31, 2016 and 2015 (in thousands):
The Company did not increase the allowance for loan losses on purchase credit impaired loans during the years ended December 31, 2016 and 2015. Related Party Loans: In the ordinary course of business, the Company has granted loans to certain related parties, including directors, executive officers, and their affiliates. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan. A summary of activity in loans to related parties is as follows (in thousands):
At December 31, 2016, the Company had pre-approved but unused lines of credit totaling approximately $2,247,000 to related parties. |
Premises and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Premises and Equipment | Premises and Equipment A summary of premises and equipment at December 31, 2016 and 2015, is as follows (in thousands):
At December 31, 2016 management estimates the cost necessary to complete the construction in progress will be approximately $890 thousand. Note 5. Premises and Equipment, Continued The Company leases several branch locations and also has one ground lease under non-cancelable operating lease agreements. The leases expire between May 2017 and August 2021. Lease expense under the leases was $728,004 and $565,667 in 2016 and 2015, respectively. At December 31, 2016, the remaining minimum lease payments relating to these leases were as follows (in thousands):
Depreciation expense was $1,435,090 and $992,746 for the years ended December 31, 2016 and 2015, respectively. Related party transaction: On September 25, 2014, the board of directors voted to approve the purchase of the Cornerstone Community Bank Miller Plaza Branch facility located at 835 Georgia Avenue, Chattanooga, Tennessee in the form of a condominium from Lamp Post Properties. The chairman of the board, Miller Welborn, previously owned 20% of Lamp Post Properties and, therefore, Mr. Welborn abstained from the September 25, 2014 vote. The purchase price of the building was $1.4 million and included two full floors and one partial floor of the building, parking, naming rights and signage privileges for the building, among certain other property rights. The transaction closed on February 24, 2015. As of October 1, 2015, Mr. Welborn has no ownership in Lamp Post Properties. |
Deposits |
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Deposits [Abstract] | |||||||||||||||||||||||||||||||||||||
Deposits | Deposits The aggregate amount of time deposits in denominations of $250,000 or more was approximately $123,053,000 and $102,694,000 at December 31, 2016 and 2015, respectively. At December 31, 2016, the scheduled maturities of time deposits are as follows (in thousands):
As of December 31, 2016 there was a fair value adjustment of $303,981 to time deposits as a result of the business combination discussed in Note 2. At December 31, 2016 and 2015, the Company had $76,380 and $81,859, respectively, of deposit accounts in overdraft status that have been reclassified to loans on the accompanying consolidated balance sheets. From time to time, the Company engages in deposit transactions with its directors, executive officers and their related interests (collectively referred to as "related parties"). Such deposits are made in the ordinary course of business and on substantially the same terms as those for comparable transactions prevailing at the time and do not present other unfavorable features. The total amount of related party deposits was $15.1 million and $5.6 million at December 31, 2016 and 2015, respectively. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill Goodwill represents the excess of the purchase price over the fair value of acquired net assets under the acquisition method of accounting. The merger with Cornerstone discussed in Note 2 generated $4,166,069 in goodwill on August 31, 2015. Goodwill is reviewed for potential impairment at least annually at the reporting unit level. FASB ASC 350, Goodwill and Other, regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity does a qualitative assessment and determines that this is the case, or if a qualitative assessment is not performed, it is required to perform additional goodwill impairment testing to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). Based on a qualitative assessment, if an entity determines that the fair value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. Intangible Assets Finite lived intangible assets of the Company represent a core deposit premium recorded upon the purchase of certain assets and liabilities from other financial institutions. The Company reviews the carrying value of this intangible on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have been incurred. Management has determined that no impairment has occurred on this asset. The following table presents information about our core deposit premium intangible asset at December 31 (in thousands):
The following table presents information about aggregate amortization expense for 2016 and 2015 and for the succeeding fiscal years as follows (in thousands):
Estimated aggregate amortization expense of the core deposit premium intangible for the year ending December 31 (in thousands):
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income tax expense in the consolidated statements of income for the years ended December 31, 2016 and 2015, includes the following (in thousands):
The income tax expense is different from the expected tax expense computed by multiplying income before income tax expense by the statutory income tax rates. The reasons for this difference are as follows (in thousands):
The components of the net deferred tax asset as of December 31, 2016 and 2015, were as follows (in thousands):
The income tax returns of the Company for 2015, 2014, and 2013 are subject to examination by the federal and state taxing authorities, generally for three years after they were filed. |
Federal Home Loan Bank Advances and Other Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank Advances and Other Borrowings | dit: On August 28, 2015, the Company entered into a loan agreement (the “Loan Agreement”) with CapStar Bank (the “Lender”) providing for a revolving line of credit of up to $8,000,000. The Company may borrow and reborrow under the revolving line of credit until February 28, 2017, after which no advances under the revolving line of credit may be reborrowed. During the first 90 days of the revolving line of credit or at any time during which the Bank maintains daily settlement accounts at the Lender, borrowings accrue interest at the Lender’s prime rate, subject to a 3.00% floor. Beginning 90 days after the effective date of the revolving line of credit, the Company is required to pay quarterly payments of interest. In addition, commencing on April 15, 2017, the Company must pay quarterly principal amortization payments of $125,000 for each fiscal quarter in 2017, $190,000 for each fiscal quarter in 2018 and $210,000 for each fiscal quarter in 2019 and 2020 until and including the maturity date. The scheduled principal amortization payments are based upon the assumption that the revolving line of credit is fully drawn, and the required payments will be reduced on a pro-rata basis relative to the amount borrowed if the revolving line of credit is not fully drawn. The loan will mature on August 28, 2020, at which time all outstanding amounts under the loan agreement will become due and payable. In connection with entering into the Loan Agreement, the Company issued to the Lender a line of credit note dated as of August 28, 2015. The Loan Agreement contains typical representations, warranties and covenants for a revolving line of credit, and the loan agreement has certain financial covenants and capital ratio requirements. Pursuant to the Loan Agreement, the Bank may not permit non-performing assets to be greater than 3.25% of total assets. The Bank must not permit its Texas ratio (nonperforming assets divided by the sum of tangible equity plus the allowance for loan and lease losses) to be greater than 35.00%, and must not permit its liquidity ratio to be less than 9.00% (or less than 10.00% for two consecutive quarters). In addition, the Company will not permit its debt service coverage ratio to be less than 1.25:1.00 or its interest coverage ratio to be less than 2:50:1.00. As of December 31, 2016, the Company and the Bank were in compliance with all of the loan covenants. The Loan Agreement has standard and commercially reasonable events of default, such as non-payment, failure to perform any covenant or agreement, breach of any representation or warranty, failure to pay other material indebtedness, bankruptcy, insolvency, any ERISA event, any material judgment, any material adverse effect, any change in control, any failure to be insured by the FDIC or any action by a governmental or regulatory authority, etc. The Lender has the right to accelerate the indebtedness upon an event of default. The obligations of the Company under the Loan Agreement are secured by a pledge of all of the capital stock of the Bank pursuant to stock pledge and security agreements. In the event of a default by the Company under the loan Agreement, the lender may terminate the commitments made under the loan agreement, declare all amounts outstanding to be payable immediately, and exercise or pursue any other remedy permitted under the loan agreement or the pledge agreements, or conferred to the lender by operation of law. As of December 31, 2015, the outstanding borrowings under the line of credit were $2,000,000 and the rate was 3.50%. The line of credit was paid in full in March 2016 and there have been no advances during 2016. The primary source of liquidity for the Company is the payment of dividends from the Bank. As of December 31, 2016, the Bank was under no dividend restrictions that requires regulatory approval prior to the payment of a dividend from the Bank to the Company. FHLB borrowings: The Bank has agreements with the Federal Home Loan Bank of Cincinnati (FHLB) that can provide advances to the Bank in an amount up to $52,550,939. All of the loans are secured by first mortgages on 1-4 family residential, multi-family properties and commercial properties and are pledged as collateral for these advances. Additionally, the Bank pledged securities to FHLB with a carrying amount of $14,844,441 at December 31, 2016 and $23,853,366 at December 31, 2015. At December 31, 2016, FHLB advances consist of the following (amounts in thousands):
At December 31, 2015, FHLB advances consist of the following (amounts in thousands):
As of December 31, 2016 and December 31, 2015, there was a fair value adjustment of $5,765 and $187,462 , respectively, to FHLB borrowings as a result of the business combination discussed in Note 2. During the fixed rate term, the advances may be prepaid subject to a prepayment penalty as defined in the agreements. On agreements with put options, the FHLB has the right, at its discretion, to terminate the entire advance prior to the stated maturity date. The termination option may only be exercised on the expiration date of the predetermined lockout period and on a quarterly basis thereafter. At December 31, 2016, scheduled maturities of the Federal Home Loan Bank advances, federal funds purchased of $13,499,625, and other borrowings are as follows (amounts in thousands):
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Employee Benefit Plans |
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Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Plan: The Company provides a deferred salary reduction plan (“Plan”) under Section 401 (k) of the Internal Revenue Code covering substantially all employees. After one year of service the Company matches 100 percent of employee contributions up to 3 percent of compensation and 50 percent of employee contributions on the next 2 percent of compensation. The Company's contribution to the Plan was $403,309 in 2016 and $219,017 in 2015. Stock Option Plans: The Company has one currently active equity incentive plan administered by the Board of Directors, and four plans or programs, pursuant to which the Company has outstanding prior grants. These plans are described below: Legacy Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan – The plan provided Cornerstone Bancshares, Inc. officers and employees incentive stock options or non-qualified stock options to purchase shares of common stock. The exercise price for incentive stock options was not less than 100 percent of the fair market value of the common stock on the date of the grant. The exercise price of the non-qualified stock options was equal to or more or less than the fair market value of the common stock on the date of the grant. This plan expired in 2012. Legacy Cornerstone Non-Qualified Plan Options — During 2013 and 2014, Cornerstone issued non-qualified options to employees and directors. The options were originally documented in 2013 as being issued out of the Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan but that plan expired in 2012. The non-qualified options are governed by the grant document issued to the holders which incorporate the terms of the plan by reference. Legacy SmartBank Stock Option Plan – This plan was assumed by the Company on August 31, 2015. The plan provides for incentive stock options and nonqualified stock options. The maximum number of common shares that could be sold or optioned under the plan is 525,000 shares. Under the plan, the exercise price of each option could not be less than 100 percent of the fair market value of the common stock on the date of grant. Legacy SmartFinancial, Inc. 2010 Incentive Plan - This plan was assumed by the Company on August 31, 2015. This plan provides for incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, performance awards, dividend equivalents and stock or other stock-based awards. The maximum number of common shares that could be sold or optioned under the plan is 525,000 shares. Under the plan, the exercise price of each option could not be less than 100 percent of the fair market value of the common stock on the date of grant. 2015 Stock Incentive Plan – This plan provides for incentive stock options, nonqualified stock options, and restricted stock. The maximum number of shares of common stock that can be sold or optioned under the plan is 2,000,000 shares. The term of each option shall be no more than ten years from the date of grant. In the case of an incentive stock option granted to a participant who, at the time the option is granted, owns stock representing more than ten percent of the voting power of all classes of stock of the Company or any parent or subsidiary thereof, the term of the option shall be five years from the date of grant or such shorter term as may be provided in the award agreement. The per share exercise price for the shares to be issued upon exercise of an option shall be such price as is determined by the plan administrator, subject to the following: In the case of an incentive stock option: (1) granted to an employee who, at the time of grant of such option, owns stock representing more than ten percent of the voting power of all classes of stock of the company or any parent or subsidiary thereof, the exercise price shall be no less than one hundred and ten percent of the fair market value per share on the date of grant; or (2) granted to any other employee, the per share exercise price shall be no less than one hundred percent of the fair market value per share on the date of grant. In the case of a nonstatutory stock option, the per share exercise price shall be no less than one hundred percent of the fair market value per share on the date of grant, unless otherwise determined by the Administrator. The incentive stock options vest 30 percent on the second anniversary of the grant date, 30 percent on the third anniversary of the grant date and 40 percent on the fourth anniversary of the grant date. Director non-qualified stock options vest 50 percent on the first anniversary of the grant date and 50 percent on the second anniversary of the grant date. Stock Option Plans (continued): A summary of the status of these stock option plans is presented in the following table:
Information pertaining to options outstanding at December 31, 2016, is as follows:
Stock Option Plans (continued): The Company recognized stock-based compensation expense of $132,635 and $140,077 for the periods ended December 31, 2016 and 2015, respectively. There was no direct grant stock grant expense for the period ended December 31, 2016. For the period ended December 31, 2015 direct stock grant expense issued to Directors of $100,216 was included in the stock-based compensation. The total fair value of shares underlying the options which vested during the periods ended December 31, 2016 and 2015, was $95,658 and $103,604, respectively. The income tax benefit recognized for the exercise of options for the periods ended December 31, 2016 and 2015 was $660,567 and $27,738 respectively. The intrinsic value of options exercised during the periods ended December 31, 2016 and 2015 was $660,476 and $171,574, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at December 31, 2016 was $6,074,252 and $5,905,718, respectively. Cash received from options exercised under all share-based payment arrangements for the period ended December 31, 2016 was $803,957. Information related to non-vested options for the period ended December 31, 2016, is as follows:
As of December 31, 2016, there was approximately $365,000 of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the Plans. The cost is expected to be recognized over a weighted-average period of 4.0 years. There were no stock options granted during the twelve months period ended December 31, 2016. The weighted average grant date fair value of all stock options granted during the twelve months ended December 31, 2015 was $12.31. This was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions:
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Securities Sold Under Agreements to Repurchase |
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Dec. 31, 2016 | |
Securities Sold Under Agreement to Repurchase [Abstract] | |
Securities Sold Under Agreements to Repurchase | Securities Sold Under Agreements to Repurchase Securities sold under repurchase agreements, which are secured borrowings, generally mature within one to four days from the transaction date. Securities sold under repurchase agreements are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. The Company monitors the fair value of the underlying securities on a daily basis. At December 31, 2016 and 2015, the Company had securities sold under agreements to repurchase of $26,621,984 and $28,068,215, respectively, with commercial checking customers. |
Commitments and Contingencies |
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Dec. 31, 2016 | |||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||
Commitments and Contingencies | Commitments and Contingencies Loan Commitments: The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing and depository needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets. The majority of all commitments to extend credit are variable rate instruments while the standby letters of credit are primarily fixed rate instruments. The Company's exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. A summary of the Company's total contractual amount for all off-balance sheet commitments at December 31, 2016 is as follows:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial properties. Standby letters of credit issued by the Company are conditional commitments to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral held varies and is required in instances which the Company deems necessary. At December 31, 2016 and 2015, the carrying amount of liabilities related to the Company's obligation to perform under standby letters of credit was insignificant. The Company has not been required to perform on any standby letters of credit, and the Company has not incurred any losses on standby letters of credit for the years ended December 31, 2016 and 2015. Contingencies: In the normal course of business, the Company may become involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material effect on the Company's financial statements. |
Regulatory Matters |
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Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Matters | ry Capital Requirements: The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Effective January 1, 2015, the Company and the Bank are subject to the new regulatory risk-based capital rules adopted by the federal banking agencies implementing Basel III. Under the new capital guidelines, Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010 will no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15 billion in total assets at that date, trust preferred securities issued prior to that date, will continue to count as Tier 1 capital subject to certain limitations. Tier 2 capital consists of the allowance for loan and lease losses in an amount not exceeding 1.25 percent of standardized risk-weighted assets, plus qualifying preferred stock, qualifying subordinated debt and qualifying total capital minority interest, net of Tier 2 investments in financial institutions. Total Tier 1 capital, plus Tier 2 capital, constitutes total risk-based capital. The required minimum ratios are as follows:
The new capital guidelines also provide that all covered banking organizations must maintain a new capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The capital conservation buffer requirement phasing in began on January 1, 2015 at the 0.625% level and will be increased by that same amount on each subsequent January 1 until it reaches 2.5% on January 1, 2019. When fully phased in, the capital conservation buffer effectively will result in a required minimum common equity Tier 1 capital ratio of at least 7.0%, Tier 1 capital ratio of at least 8.5% and total capital ratio of at least 10.5%. The capital guidelines also provide for a “countercyclical capital buffer” that is applicable only to certain covered institutions and does not have any current applicability to the Company and the Bank. Failure to satisfy the capital buffer requirements will result in increasingly stringent limitations on various types of capital distributions, including dividends, share buybacks and discretionary payments on Tier 1 instruments, and discretionary bonus payments. The final regulatory capital rules also incorporate these changes in regulatory capital into the prompt corrective action framework, under which the thresholds for “adequately capitalized” banking organizations are equal to the new minimum capital requirements. Under this framework, in order to be considered “well capitalized”, insured depository institutions are required to maintain a Tier 1 leverage ratio of 5%, a common equity Tier 1 risk-based capital measure of 6.5%, a Tier 1 risked-based capital ratio of 8% and a total risk-based capital ratio of 10%. As permitted for regulated institutions that are not designated as ”advanced approach” banking organizations (those with assets greater than $250 billion or with foreign exposures greater than $10 billion), the Company and the Bank made a one-time, permanent election to opt out of the requirement to include most components of accumulated other comprehensive income in regulatory capital. At December 31, 2016, both the Company and the Bank were well capitalized. At December 31, 2015, the Company and the Banks were well capitalized under the standards in effect at that time. Regulatory Restrictions on Dividends: Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (TDFI), pay any dividends to the Company in a calendar year in excess of the total of the Bank's retained net income for that year plus the retained net income for the preceding two years. During the year ended December 31, 2016, SmartBank paid $3,000,000 in dividends to the Company. As of December 31, 2016, the Bank could pay approximately $6.6 million of additional dividends to the Company without prior approval of the Commissioner of the TDFI. Regulatory Capital Levels: Actual and required capital levels at December 31, 2016 and 2015 are presented below (dollars in thousands):
Regulatory Capital Levels (continued):
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Concentrations of Credit Risk |
12 Months Ended |
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Dec. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | Concentrations of Credit Risk The Company originates primarily commercial, residential, and consumer loans to customers in eastern Tennessee, northwest Florida and north Georgia. The ability of the majority of the Company's customers to honor their contractual loan obligations is dependent on the economy in these areas. Eighty-nine percent of the Company's loan portfolio is concentrated in loans secured by real estate, of which a substantial portion is secured by real estate in the Company's primary market areas. Commercial real estate, including commercial construction loans, represented 61 percent of the loan portfolio at December 31, 2016, and 65 percent of the loan portfolio at December 31, 2015. Accordingly, the ultimate collectability of the loan portfolio and recovery of the carrying amount of foreclosed assets is susceptible to changes in real estate conditions in the Company's primary market areas. The other concentrations of credit by type of loan are set forth in Note 4. The Bank, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 25% of statutory capital, or approximately $25,256,000. |
Fair Value of Assets and Liabilities |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities | ation of Fair Value: The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with Fair Value Measurements and Disclosures topic (FASB ASC 820), the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Fair Value Hierarchy: In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuation is based on inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Fair Value Hierarchy (continued): The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: Cash and Cash Equivalents: For cash and due from banks, interest-bearing deposits, and federal funds sold, the carrying amount is a reasonable estimate of fair value based on the short-term nature of the assets and are considered Level 1 inputs. Securities Available for Sale: Where quoted prices are available in an active market, management classifies the securities within Level 1 of the valuation hierarchy. If quoted market prices are not available, management estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, including GSE obligations, corporate bonds, and other securities. Mortgage-backed securities are included in Level 2 if observable inputs are available. In certain cases where there is limited activity or less transparency around inputs to the valuation, management classifies those securities in Level 3. Restricted Investments: It is not practicable to determine the fair value of restricted investments due the restrictions placed on its transferability. Loans:For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair value for fixed rate loans are estimated using discounted cash flow analyses, using market interest rates for comparable loans. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. These methods are considered Level 3 inputs. Deposits:The fair values disclosed for demand deposits (for example, interest and noninterest checking, savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts) and are considered Level 1 inputs. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits, and are considered Level 2 inputs. Securities Sold Under Agreement to Repurchase: The carrying value of these liabilities approximates their fair value, and are considered Level 1 inputs. Federal Home Loan Bank Advances and Other Borrowings: The fair value of the FHLB fixed rate borrowings are estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements, and are considered Level 2 inputs. Commitments to Extend Credit and Standby Letters of Credit: Because commitments to extend credit and standby letters of credit are made using variable rates and have short maturities, the carrying value and the fair value are immaterial for disclosure. Assets Measured at Fair Value on a Recurring Basis: Assets recorded at fair value on a recurring basis are as follows, in thousands
The Company has no assets or liabilities whose fair values are measured on a recurring basis using Level 3 inputs. Additionally, there were no transfers between Level 1 and Level 2 in the fair value hierarchy. Assets Measured at Fair Value on a Nonrecurring Basis: Under certain circumstances management makes adjustments to fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The following tables present the financial instruments carried on the consolidated balance sheets by caption and by level in the fair value hierarchy, for which a nonrecurring change in fair value has been recorded (in thousands):
Assets Measured at Fair Value on a Nonrecurring Basis (continued):
For Level 3 assets measured at fair value on a non-recurring basis as of December 31, 2016 and 2015, the significant unobservable inputs used in the fair value measurements are presented below.
Impaired Loans: Loans considered impaired under ASC 310-10-35, Receivables, are loans for which, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans can be measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral less selling costs if the loan is collateral dependent. The fair value of impaired loans were measured based on the value of the collateral securing these loans or the discounted cash flows of the loans, as applicable. Impaired loans are classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. The Company determines the value of the collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors discussed above. Assets Measured at Fair Value on a Nonrecurring Basis (continued): Foreclosed assets: Foreclosed assets, consisting of properties obtained through foreclosure or in satisfaction of loans, are initially recorded at fair value less estimated costs to sell upon transfer of the loans to other real estate. Subsequently, other real estate is carried at the lower of carrying value or fair value less costs to sell. Fair values are generally based on third party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes further discounted based on management’s historical knowledge, and/or changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts are typically significant unobservable inputs for determining fair value. In cases where the carrying amount exceeds the fair value, less estimated costs to sell, a loss is recognized in noninterest expense. Carrying value and estimated fair value: The carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2016 and December 31, 2015 are as follows (in thousands):
Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. |
Small Business Lending Fund |
12 Months Ended |
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Dec. 31, 2016 | |
Small Business Lending Fund [Abstract] | |
Small Business Lending Fund | Small Business Lending Fund During 2011, the Company issued to the Secretary of the Treasury 12,000 shares of preferred stock at $1,000 per share under the Small Business Lending Fund Program (the "SBLF Program"). Subject to regulatory approval, the Company may redeem the preferred stock for $1,000 per share, plus accrued and unpaid dividends, in whole or in part at any time. The SBLF Program is a voluntary program authorized under the Business Jobs Acts of 2010, whereby the United States Treasury can make capital investments in eligible institutions; the capital investments, in turn, are designed to increase the availability of credit for small businesses and promote economic growth by providing capital to qualified community banks at favorable rates. The Company paid cash dividends at a one percent rate or $120,000 for the year ended December 31, 2015. On February 4, 2016 the dividend rate for the preferred shares increased to nine percent and as a result the company incurred preferred stock dividends of $1,022,000 for the year ended December 31, 2016 . On January 30, 2017, the Company completed a public offering of 2,010,084 million shares of its common stock, par value $1.00 per share, with the net proceeds to the Company of approximately $33.2 million. Subsequent to the public offering the Company used $12 million of the proceeds to redeem the preferred stock on March 6, 2017. |
Concentration in Deposits |
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Dec. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentration In Deposits | Concentration in Deposits The Company had a concentration in its deposits of one customer totaling approximately $28,527,000 at December 31, 2015 and two customers totaling approximately $60,153,000 concentration of deposits at December 31, 2016. |
Earnings Per Share |
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Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options. The effect from the stock options on incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are presented below. There were antidilutive shares of 17,649 and 22,300 for the years ended December 31, 2016 and 2015, respectively.
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Condensed Parent Information |
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Parent Information | in thousands)
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Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2016 | |||||||||
Accounting Policies [Abstract] | |||||||||
Nature of Business | 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"). Prior to their merger on February 26, 2016 the Company operated two wholly-owned subsidiaries; SmartBank and Cornerstone Community Bank. The Company provides a variety of financial services to individuals and corporate customers through its offices in eastern Tennessee, northeast Florida, and north Georgia. The Company's primary deposit products are interest-bearing demand deposits and certificates of deposit. Its primary lending products are commercial, residential, and consumer loans. |
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Basis of Presentation and Accounting Estimates | Basis of Presentation and Accounting Estimates: 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 United States of America, 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, and the fair value of financial instruments. The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral. The Company's loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent on local economic conditions. While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. The Company has evaluated subsequent events for potential recognition and/or disclosure in the consolidated financial statements and accompanying notes included in this Annual Report. |
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Cash and Cash Equivalents | Cash and Cash Equivalents: For purposes of reporting consolidated cash flows, cash and due from banks includes cash on hand, cash items in process of collection and amounts due from banks. Cash and cash equivalents also includes interest-bearing deposits in banks and federal funds sold. Cash flows from loans, federal funds sold, securities sold under agreements to repurchase and deposits are reported net. Cash and Cash Equivalents (continued): The Bank is required to maintain average balances in cash or on deposit with the Federal Reserve Bank. The reserve requirement was $15,208 and $1,031 at December 31, 2016 and 2015, respectively. The Company places its cash and cash equivalents with other financial institutions and limits the amount of credit exposure to any one financial institution. From time to time, the balances at these financial institutions exceed the amount insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on these accounts and management considers this to be a normal business risk. |
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Securities | Securities: Management has classified all securities as available for sale. Securities available for sale are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. The Company evaluates investment securities for other than temporary impairment using relevant accounting guidance specifying that (a) if the Company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other than temporarily impaired unless a credit loss has occurred in the security. If management does not intend to sell the security and it is more likely than not that they will not have to sell the security before recovery of the cost basis, management will recognize the credit component of an other-than- temporary impairment of a debt security in earnings and the remaining portion in other comprehensive loss. Securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase are treated as collateralized financial transactions. These agreements are recorded at the amount at which the securities were acquired or sold plus accrued interest. It is the Company's policy to take possession of securities purchased under resale agreements. The market value of these securities is monitored, and additional securities are obtained when deemed appropriate to ensure such transactions are adequately collateralized. The Company also monitors its exposure with respect to securities sold under repurchase agreements, and a request for the return of excess securities held by the counterparty is made when deemed appropriate. |
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Restricted-Investments | Restricted - Investments: The Company is required to maintain an investment in capital stock of various entities. Based on redemption provisions of these entities, the stock has no quoted market value and is carried at cost. At their discretion, these entities may declare dividends on the stock. Management reviews for impairment based on the ultimate recoverability of the cost basis in these stocks. |
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Loans | Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balances less deferred fees and costs on originated loans and the allowance for loan losses. Interest income is accrued on the outstanding principal balance. Loan origination fees, net of certain direct origination costs of consumer and installment loans are recognized at the time the loan is placed on the books. Loan origination fees for all other loans are deferred and recognized as an adjustment of the yield over the life of the loan using the straight-line method without anticipating prepayments. The accrual of interest on loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due, or at the time the loan is 90 days past due, unless the loan is well-secured and in the process of collection. Unsecured loans are typically charged off no later than 120 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal and interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income or charged to the allowance, unless management believes that the accrual of interest is recoverable through the liquidation of collateral. Interest income on nonaccrual loans is recognized on the cash basis, until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and the loan has been performing according to the contractual terms for a period of not less than six months. |
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Acquired Loans | Acquired Loans: Acquired loans are those that were acquired when SmartBank assumed all the deposits and certain assets of the former GulfSouth Private Bank (“GulfSouth transaction”) on October 19, 2012 and the former Cornerstone Bancshares, Inc. (“Cornerstone”) on August 31, 2015. The fair values of acquired loans with evidence of credit deterioration, purchased credit impaired loans (“PCI loans”), are recorded net of a nonaccretable discount and accretable discount. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized in interest income over the remaining life of the loan when there is reasonable expectation about the amount and timing of such cash flows. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is the nonaccretable discount, which is included in the carrying amount of acquired loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from nonaccretable to accretable with a positive impact on the accretable discount. Acquired loans are initially recorded at fair value at acquisition date. Accretable discounts related to certain fair value adjustments are accreted into income over the estimated lives of the loans. The Company accounts for performing loans acquired in the acquisition using the expected cash flows method of recognizing discount accretion based on the acquired loans' expected cash flows. Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment. Purchased performing loans are recorded at fair value, including a credit discount. Credit losses on acquired performing loans are estimated based on analysis of the performing portfolio. Such estimated credit losses are recorded as nonaccretable discounts in a manner similar to purchased impaired loans. The fair value discount other than for credit loss is accreted as an adjustment to yield over the estimated lives of the loans. A provision for loan losses is recorded for any deterioration in these loans subsequent to the acquisition. |
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Allowance for Loan Losses | Allowance for Loan Losses: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Confirmed losses are charged off immediately. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the uncollectibility of loans in light of historical experience, the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions that may affect the borrower's ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations. The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. For impaired loans, an allowance is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on the Company's historical loss experience adjusted for other qualitative factors. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. Allowance for Loan Losses (continued): An unallocated component may be maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. As part of the risk management program, an independent review is performed on the loan portfolio, which supplements management’s assessment of the loan portfolio and the allowance for loan losses. The result of the independent review is reported directly to the Audit Committee of the Board of Directors. Loans, for which the terms have been modified at the borrower's request, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. A loan is considered impaired when it is probable, based on current information and events, the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. Loans that experience insignificant payment delays and payment shortfalls are not classified as impaired. Impaired loans are measured by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. The Company's homogeneous loan pools include consumer real estate loans, commercial real estate loans, construction and land development loans, commercial and industrial loans, and consumer and other loans. The general allocations to these loan pools are based on the historical loss rates for specific loan types and the internal risk grade, if applicable, adjusted for both internal and external qualitative risk factors. The qualitative factors considered by management include, among other factors, (1) changes in local and national economic conditions; (2) changes in asset quality; (3) changes in loan portfolio volume; (4) the composition and concentrations of credit; (5) the impact of competition on loan structuring and pricing; (6) the impact of interest rate changes on portfolio risk and (7) effectiveness of the Company's loan policies, procedures and internal controls. The total allowance established for each homogeneous loan pool represents the product of the historical loss ratio adjusted for qualitative factors and the total dollar amount of the loans in the pool. |
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Troubled Debt Restructurings | Troubled Debt Restructurings: The Company designates loan modifications as troubled debt restructurings ("TDRs") when for economic and legal reasons related to the borrower's financial difficulties, it grants a concession to the borrower that it would not otherwise consider. TDRs can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. In circumstances where the TDR involves charging off a portion of the loan balance, the Company typically classifies these restructurings as nonaccrual. In connection with restructurings, the decision to maintain a loan that has been restructured on accrual status is based on a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms. This evaluation includes consideration of the borrower's current capacity to pay, which among other things may include a review of the borrower's current financial statements, an analysis of global cash flow sufficient to pay all debt obligations, a debt to income analysis, and an evaluation of secondary sources of payment from the borrower and any guarantors. This evaluation also includes an evaluation of the borrower's current willingness to pay, which may include a review of past payment history, an evaluation of the borrower's willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support. The credit evaluation also reflects consideration of the borrower's future capacity and willingness to pay, which may include evaluation of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest, and trends indicating improving profitability and collectability of receivables. Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms. This evaluation must include consideration of the borrower's sustained historical repayment for a reasonable period, generally a minimum of six months, prior to the date on which the loan is returned to accrual status. |
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Foreclosed Assets | Foreclosed Assets: Foreclosed assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less selling costs. Any write-down to fair value at the time of transfer to foreclosed assets is charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell. Costs of improvements are capitalized, whereas costs relating to holding foreclosed assets and subsequent write-downs to the value are expensed. The amount of residential real estate where physical possession had been obtained included within foreclosed assets at December 31, 2016 and 2015 was $1,500 and $227,000, respectively. The amount of residential real estate in process of foreclosure at December 31, 2016 was $0. The amount of residential real estate in process of foreclosure at December 31, 2015 was $61,000. |
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Premises and Equipment | Premises and Equipment: Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets or the expected terms of the leases, if shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.
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Goodwill and Intangible Assets | Goodwill and Intangible Assets: Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business combinations. Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired. FASB ASC 350, Goodwill and Other, regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity does a qualitative assessment and determines that this is the case, or if a qualitative assessment is not performed, it is required to perform additional goodwill impairment testing to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). Based on a qualitative assessment, if an entity determines that the fair value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The Company performs its annual goodwill impairment test as of December 31 of each year. For 2016, the results of the qualitative assessment provided no indication of potential impairment. Goodwill will continue to be monitored for triggering events that may indicate impairment prior to the next scheduled annual impairment test. Intangible assets consist of core deposit premiums acquired in connection with the Gulf South and Cornerstone transactions. The core deposit premium is initially recognized based on a valuation performed as of the consummation date. The core deposit premium is amortized over the average remaining life of the acquired customer deposits. Amortization expense relating to these intangible assets was $305,452 and $233,204 for the years ended December 31, 2016 and 2015, respectively. The intangible assets were evaluated for impairment as of December 31, 2016, and based on that evaluation it was determined that there was no impairment. |
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Transfer of Financial Assets | Transfer of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. |
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Advertising Costs | Advertising Costs: The Company expenses all advertising costs as incurred. Advertising expense was $615,751 and $452,849 for the years ended December 31, 2016 and 2015, respectively. |
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Income Taxes | Income Taxes: The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment. Deferred tax assets may be reduced by deferred tax liabilities and a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. |
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Stock Compensation Plans | Stock Compensation Plans: At December 31, 2016, the Company had options outstanding under stock-based compensation plans, which are described in more detail in Note 10. The plans have been accounted for under the accounting guidance (FASB ASC 718, Compensation - Stock Compensation) which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and stock or other stock based awards. The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market value of the Company's common stock at the date of grant is used for restrictive stock awards and stock grants. |
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Employee Benefit Plan | Employee Benefit Plan: Employee benefit plan costs are based on the percentage of individual employee's salary, not to exceed the amount that can be deducted for federal income tax purposes. |
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Variable Interest Entities | Variable interest entities: An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in ASC Topic 810, which are: (1) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or (2) the entity has equity investors that cannot make significant decisions about the entity's operations or that do not absorb the expected losses or receive the expected returns of the entity. A VIE must be consolidated by the Company if it is deemed to be the primary beneficiary of the VIE, which is the party involved with the VIE that has a majority of the expected losses, expected residual returns, or both. At December 31, 2016, the Company had an investment in Community Advantage Fund, LLC that qualified as an unconsolidated VIE. Variable interest entities (continued): The Company’s investment in a partnership consists of an equity interest in a lending partnership for the purposes of loaning funds to an unrelated entity. This entity will use the funds to make loans through the SBA Community Advantage loan Initiative. The Company uses the equity method when it owns an interest in a partnership and can exert significant influence over the partnership’s operations. Under the equity method, the Company’s ownership interest in the partnership’s capital is reported as an investment on its consolidated balance sheets in other assets and the Company’s allocable share of the income or loss from the partnership is reported in noninterest income or expense in the consolidated statements of income. The Company ceases recording losses on an investment in partnership when the cumulative losses and distributions from the partnership exceed the carrying amount of the investment and any advances made by the Company. After the Company’s investment in such partnership reaches zero, cash distributions received from these investments are recorded as income. |
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Comprehensive Income | Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments: Fair values of financial instruments are estimates using relevant market information and other assumptions, as more fully disclosed in Note 15. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates. |
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Business Combinations | Business Combinations: Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, acquired assets and assumed liabilities are included with the acquirer's accounts as of the date of acquisition at estimated fair value, with any excess of purchase price over the fair value of the net assets acquired (including identifiable intangible assets) capitalized as goodwill. In the event that the fair value of the net assets acquired exceeds the purchase price, an acquisition gain is recorded for the difference in consolidated statements of income for the period in which the acquisition occurred. An intangible asset is recognized as an asset apart from goodwill when it arises from contractual or other legal rights or if it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged. In addition, acquisition-related costs and restructuring costs are recognized as period expenses as incurred. Estimates of fair value are subject to refinement for a period not to exceed one year from acquisition date as information relative to acquisition date fair values becomes available. |
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Earnings Per Common Share | Earnings per common share: Basic earnings per common share represents income available to common stockholders 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. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method |
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Segment Reporting | Segment reporting: ASC Topic 280, “Segment Reporting,” provides for the identification of reportable segments on the basis of distinct business units and their financial information to the extent such units are reviewed by an entity’s chief decision maker (which can be an individual or group of management persons). ASC Topic 280 permits aggregation or combination of segments that have similar characteristics. In the Company’s operations, each bank branch is viewed by management as being a separately identifiable business or segment from the perspective of monitoring performance and allocation of financial resources. Although the branches operate independently and are managed and monitored separately, each is substantially similar in terms of business focus, type of customers, products, and services. Accordingly, the Company’s consolidated financial statements reflect the presentation of segment information on an aggregated basis in one reportable segment. |
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Recently Issued Not Yet Effective Accounting Pronouncements | Recently Issued Not Yet Effective Accounting Pronouncements: The following is a summary of recent authoritative pronouncements not yet in effect that could impact the accounting, reporting, and/or disclosure of financial information by the Company. In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers in ASU No. 2014-9, Revenue from Contracts with Customers (Topic 606). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for annual periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In January 2016, the FASB issued guidance that primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments in ASU No. 2016-1 -Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance will be effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of this update on its financial statements. In February 2016, the FASB issued guidance that requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability in ASU 2016-2: Leases (Topic 842). For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 including interim periods within those fiscal years. The Company is evaluating the impact of this update on its financial statements. In March 2016, FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU simplify several aspects of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement in the period exercise or vesting occurs. In the statement of cash flows, excess tax benefits should be classified with other income tax cash flows as an operating activity. Cash paid by an employer for tax withholding when directly withholding shares should be classified as a financing activity. An entity can make an entity-wide policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The threshold for determining whether an award is classified as equity or a liability is raised to permit withholding up to the maximum statutory tax rate in the applicable jurisdiction. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted and if early adopted, all provisions must be adopted in the same period. The Company does not expect these amendments to have a material effect on its financial statements. Recently Issued Not Yet Effective Accounting Pronouncements (continued): 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 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 still reviewing the impact the adoption of this guidance will have on its financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU intends to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. The guidance is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In January 2017, FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU clarifies the definition of a business to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements. |
Business Combination (Tables) |
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Schedule of Business Acquisitions, by Acquisition | The following table details the financial impact of the merger, including the calculation of the purchase price, the allocation of the purchase price to the fair values of net assets assumed, and goodwill recognized:
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Securities (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale Securities | The amortized cost and fair value of securities available-for-sale at December 31, 2016 and 2015 are summarized as follow (in thousands):
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Schedule Of Available For Sale Securities and Held To Maturity Reconciliation | The amortized cost and estimated market value of securities at December 31, 2016, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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Investments Classified by Contractual Maturity Date | 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, as of December 31, 2016 and 2015 (in thousands):
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Schedule of Unrealized Loss on Investments | Sales of available for sale securities for the years ended December 31, 2016 and 2015, were as follows (in thousands):
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Loans and Allowance for Loan Losses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Financing Receivables | At December 31, 2016 and 2015, loans consisted of the following (in thousands):
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Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period, Carrying Amount of Loans | The composition of loans by loan classification for impaired and performing loan status at December 31, 2016 and 2015, is summarized in the tables below (amounts in thousands):
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Past Due Financing Receivables | The following tables show the allowance for loan losses allocation by loan classification for impaired and performing loans as of December 31, 2016 and 2015 (amounts in thousands):
Credit Risk Management (continued):
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Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period | The following tables detail the changes in the allowance for loan losses for the year ending December 31, 2016 and December 31, 2015, by loan classification (amounts in thousands):
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Troubled Debt Restructurings on Financing Receivables | The following tables outline the amount of each loan classification and the amount categorized into each risk rating as of December 31, 2016 and 2015 (amounts in thousands): Non PCI Loans
Credit Risk Management (continued): PCI Loans
Non PCI Loans
PCI Loans
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Schedule of Accounts, Notes, Loans and Financing Receivable | The following tables present the aging of the recorded investment in loans and leases as of December 31, 2016 and 2015 (amounts in thousands):
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Schedule of Allowance for Loan Losses for Impaired and Performing Loans Receivable | The following is an analysis of the impaired loan portfolio detailing the related allowance recorded as of and for the years ended December 31, 2016 and 2015 (amounts in thousands):
Impaired Loans (continued):
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Financing Receivable Credit Quality Indicators | The following table presents a summary of loans that were modified as troubled debt restructurings during the year ended December 31, 2016 (amounts in thousands):
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Schedule of Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement | The Company has acquired loans which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans at for the years ended December 31, 2016 and 2015 is as follows (in thousands):
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Schedule of Financing Receivable Allowance For Credit Losses | The following is a summary of the accretable discount on acquired loans for the years ended December 31, 2016 and 2015 (in thousands):
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Schedule of Loan to Directors, Officers and Affiliated Parties | A summary of activity in loans to related parties is as follows (in thousands):
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Premises and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | A summary of premises and equipment at December 31, 2016 and 2015, is as follows (in thousands):
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Property, Plant and Equipment | At December 31, 2016, the remaining minimum lease payments relating to these leases were as follows (in thousands):
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Deposits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||
Deposits [Abstract] | |||||||||||||||||||||||||||||||||||||
Scheduled Maturities Of Time Deposit | The aggregate amount of time deposits in denominations of $250,000 or more was approximately $123,053,000 and $102,694,000 at December 31, 2016 and 2015, respectively. At December 31, 2016, the scheduled maturities of time deposits are as follows (in thousands):
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Goodwill and Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-lived Intangible Assets Amortization Expense | The following table presents information about our core deposit premium intangible asset at December 31 (in thousands):
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The following table presents information about aggregate amortization expense for 2016 and 2015 and for the succeeding fiscal years as follows (in thousands):
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Schedule of Intangible Assets and Goodwill | Estimated aggregate amortization expense of the core deposit premium intangible for the year ending December 31 (in thousands):
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Income Taxes (Table) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | Income tax expense in the consolidated statements of income for the years ended December 31, 2016 and 2015, includes the following (in thousands):
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Schedule of Deferred Tax Assets and Liabilities | The income tax expense is different from the expected tax expense computed by multiplying income before income tax expense by the statutory income tax rates. The reasons for this difference are as follows (in thousands):
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Schedule of Components of Income Tax Expense (Benefit) | The components of the net deferred tax asset as of December 31, 2016 and 2015, were as follows (in thousands):
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Federal Home Loan Bank Advances and Other Borrowings (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank | At December 31, 2016, FHLB advances consist of the following (amounts in thousands):
At December 31, 2015, FHLB advances consist of the following (amounts in thousands):
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Scheduled Maturities Of Federal Home Loan Bank Advances and Other Borrowings | At December 31, 2016, scheduled maturities of the Federal Home Loan Bank advances, federal funds purchased of $13,499,625, and other borrowings are as follows (amounts in thousands):
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Employee Benefit Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Stock Options, Activity | A summary of the status of these stock option plans is presented in the following table:
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Schedule Of Share Based Compensation Arrangement By Share Based Payment Award Options Non Vested | Information pertaining to options outstanding at December 31, 2016, is as follows:
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Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity | Information related to non-vested options for the period ended December 31, 2016, is as follows:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The weighted average grant date fair value of all stock options granted during the twelve months ended December 31, 2015 was $12.31. This was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||
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Dec. 31, 2016 | |||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||
Other Commitments | A summary of the Company's total contractual amount for all off-balance sheet commitments at December 31, 2016 is as follows:
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Regulatory Matters (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations | Actual and required capital levels at December 31, 2016 and 2015 are presented below (dollars in thousands):
Regulatory Capital Levels (continued):
|
Fair Value of Assets and Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, by Balance Sheet Grouping | Assets recorded at fair value on a recurring basis are as follows, in thousands
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Fair Value Assets Measured On Non Recurring Basis Unobservable Input Reconciliation | The following tables present the financial instruments carried on the consolidated balance sheets by caption and by level in the fair value hierarchy, for which a nonrecurring change in fair value has been recorded (in thousands):
Assets Measured at Fair Value on a Nonrecurring Basis (continued):
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | For Level 3 assets measured at fair value on a non-recurring basis as of December 31, 2016 and 2015, the significant unobservable inputs used in the fair value measurements are presented below.
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Fair Value, Assets and Liabilities Measured on Nonrecurring Basis | The carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2016 and December 31, 2015 are as follows (in thousands):
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Earnings Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The effect from the stock options on incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are presented below. There were antidilutive shares of 17,649 and 22,300 for the years ended December 31, 2016 and 2015, respectively.
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Condensed Parent Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Balance Sheet |
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Condensed Income Statement |
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Condensed Cash Flow Statement |
|
Business Combination (Details) |
Aug. 31, 2015
USD ($)
$ / shares
|
---|---|
Business Combinations [Abstract] | |
Shares of CSBQ common stock outstanding | $ 6,643,341 |
Market price of CSBQ common stock | $ / shares | $ 3.85 |
Estimated fair value of CSBQ common stock | $ 25,577,000 |
Estimated fair value of CSBQ stock options | 2,858,000 |
Total consideration | 28,435,000 |
Fair value of assets acquired and liabilities assumed: | |
Cash and cash equivalents | 33,502,000 |
Investment securities available for sale | 74,254,000 |
Loans | 314,827,000 |
Premises and equipment | 9,019,000 |
Bank owned life insurance | 1,278,000 |
Core deposit intangible | 2,750,000 |
Other real estate owned | 5,672,000 |
Prepaid and other assets | 4,301,000 |
Deposits | (349,462,000) |
Securities sold under agreements to repurchase | (17,622,000) |
FHLB advances and other borrowings | (42,307,000) |
Payables and other liabilities | (11,943,000) |
Total fair value of net assets acquired | 24,269,000 |
Goodwill | $ 4,166,069 |
Business Combination (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Aug. 31, 2015 |
|
Business Combinations [Abstract] | |||
Exchange of shares | 1.05 | ||
Ownership interest (as a percent) | 56.00% | ||
Pro forma, nonrecurring costs | $ 4,200 | ||
Pro forma, revenue of acquiree since acquisition date, actual | 7,000 | ||
Pro forma information, earnings (loss) since acquisition date, actual | $ 1,600 | ||
Pro forma revenue | $ 19,600 | ||
Pro forma net income (loss) | $ 67 |
Securities (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt securities available-for-sale: | ||
Amortized Cost | $ 131,046 | $ 166,984 |
Gross Unrealized Gains | 209 | 475 |
Gross Unrealized Losses | (1,833) | (1,046) |
Fair Value | 129,422 | 166,413 |
U.S. Government-sponsored enterprises (GSEs) [Member] | ||
Debt securities available-for-sale: | ||
Amortized Cost | 18,279 | 22,745 |
Gross Unrealized Gains | 8 | 48 |
Gross Unrealized Losses | (564) | (50) |
Fair Value | 17,723 | 22,743 |
Muncipal Securities [Member] | ||
Debt securities available-for-sale: | ||
Amortized Cost | 8,182 | 7,614 |
Gross Unrealized Gains | 16 | 52 |
Gross Unrealized Losses | (179) | (17) |
Fair Value | 8,019 | 7,649 |
Mortgage Backed Securities [Member] | ||
Debt securities available-for-sale: | ||
Amortized Cost | 104,585 | 136,625 |
Gross Unrealized Gains | 185 | 375 |
Gross Unrealized Losses | (1,090) | (979) |
Fair Value | $ 103,680 | $ 136,021 |
Securities (Details 1) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Due in one year or less, Amortized Cost | $ 2,022,000 | |
Due from one year to five years, Amortized Cost | 13,387,000 | |
Due from five years to ten years, Amortized Cost | 7,595,000 | |
Due after ten years, Amortized Cost | 3,457,000 | |
Debt Securities, Amortized Cost | 26,461,000 | |
Mortgage-backed securities, Amortized Cost | 104,585,000 | |
Amortized Cost | 131,046,000 | $ 166,984,000 |
Due in one year or less, Fair Value | 2,025,000 | |
Due from one year to five years, Fair Value | 12,974,000 | |
Due from five years to ten years, Fair Value | 7,351,000 | |
Due after ten years, Fair Value | 3,392,000 | |
Debt securities, Fair Value | 25,742,000 | |
Mortgage-backed securities, Fair Value | 103,680,000 | |
Fair Value | $ 129,421,914 | $ 166,413,218 |
Securities (Details 3) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Proceeds | $ 31,599 | $ 7,304 |
Gains realized | 200 | 52 |
Losses realized | $ 0 | $ 0 |
Loans and Allowance for Loan Losses (Details 7) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016
USD ($)
contract
|
Dec. 31, 2015
contract
|
|
Financing Receivable, Modifications [Line Items] | ||
Number of Contracts | contract | 0 | |
Construction and Land Development [Member] | ||
Financing Receivable, Modifications [Line Items] | ||
Number of Contracts | contract | 1 | |
Pre-Modification Outstanding Recorded Investment | $ 278 | |
Post-Modification Outstanding Recorded Investment | $ 278 | |
Commercial and Industrial [Member] | ||
Financing Receivable, Modifications [Line Items] | ||
Number of Contracts | contract | 1 | |
Pre-Modification Outstanding Recorded Investment | $ 164 | |
Post-Modification Outstanding Recorded Investment | $ 164 |
Loans and Allowance for Loan Losses (Details 9) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | ||
Accretable yield, beginning of period | $ 10,217 | $ 7,983 |
Additions | 0 | 4,282 |
Accretion income | (2,588) | (1,805) |
Reclassification from nonaccretable | 1,585 | 151 |
Other changes, net | (264) | (394) |
Accretable yield, end of period | $ 8,950 | $ 10,217 |
Loans and Allowance for Loan Losses (Details 10) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Loans and Leases Receivable, Related Parties [Roll Forward] | ||
Balance, beginning of year | $ 10,851 | $ 14,813 |
Disbursements | 855 | 548 |
Removal of credit lines | (1,153) | 0 |
Changes in ownership | 4,830 | 0 |
Repayments | (2,384) | (4,510) |
Balance, end of year | $ 12,999 | $ 10,851 |
Loans and Allowance for Loan Losses (Details Textual) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016
USD ($)
contract
|
Dec. 31, 2015
USD ($)
|
|
Financing Receivable, Modifications [Line Items] | ||
Nonaccrual | $ 1,415 | $ 2,252 |
Number of loans modified as troubled debt restructurings with subsequent default | contract | 0 | |
Pre-approved unused lines of credit with related parties | $ 2,247 | |
Trouble Debt Restructuring [Member] | ||
Financing Receivable, Modifications [Line Items] | ||
Troubled debt restructuring | 608 | 4,990 |
Nonaccrual | $ 442 | $ 1,297 |
Premises and Equipment (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Land and land improvements | $ 8,354,000 | $ 7,012,000 |
Building and leasehold improvements | 18,507,000 | 16,933,000 |
Furniture, fixtures and equipment | 7,043,000 | 5,701,000 |
Construction in progress | 2,789,000 | 188,000 |
Total, gross | 36,693,000 | 29,834,000 |
Accumulated depreciation | (6,157,000) | (4,796,000) |
Total, net | $ 30,535,594 | $ 25,037,510 |
Premises and Equipment (Details 1) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Property, Plant and Equipment [Abstract] | |
2017 | $ 518 |
2018 | 300 |
2019 | 292 |
2020 | 292 |
2021 | $ 173 |
Premises and Equipment (Details Textual) - USD ($) |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 25, 2014 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Aug. 31, 2015 |
|
Property, Plant and Equipment [Line Items] | ||||
Estimated costs to complete construction in progress | $ 890,000 | |||
Depreciation | 1,435,090 | $ 992,746 | ||
Operating Leases, Rent Expense | $ 728,004 | $ 565,667 | ||
Ownership interest (as a percent) | 56.00% | |||
Board of Directors Chairman [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, Plant and Equipment, Additions | $ 1,400,000 | |||
Lamp Post Properties [Member] | Board of Directors Chairman [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Ownership interest (as a percent) | 20.00% |
Deposits (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Deposits [Abstract] | |
2017 | $ 193,389 |
2018 | 82,529 |
2019 | 18,403 |
2020 | 14,713 |
2021 | 6,817 |
Thereafter | 120 |
Total | $ 315,971 |
Deposits (Details Textual) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Time Deposits Maturity [Line Items] | ||
Time deposits of 250,000 or more | $ 123,053,000 | $ 102,694,000 |
Fair value adjustments to time deposits | 303,981 | |
Deposit liabilities reclassified as loans receivable | 76,380 | 81,859 |
Related Party [Member] | ||
Time Deposits Maturity [Line Items] | ||
Related party deposit liabilities | $ 15,100,000 | $ 5,600,000 |
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Amortized intangible asset: | ||
Core deposit intangible, Gross Carrying Amount | $ 2,750 | $ 3,375 |
Core deposit intangible, Accumulated Amortization | $ 280 | $ 600 |
Goodwill and Intangible Assets (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Aggregate amortization expense of core deposit premium intangible | $ 305,452 | $ 233,204 |
Goodwill and Intangible Assets (Details 2) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2017 | $ 210 |
2018 | 210 |
2019 | 210 |
2020 | 210 |
2021 | 210 |
Thereafter | 1,420 |
Total | $ 2,470 |
Goodwill and Intangible Assets (Details Textual) |
Aug. 31, 2015
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | $ 4,166,069 |
Income Taxes (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Current tax expense | ||
Federal | $ 2,503,000 | $ 77,000 |
State | 531,000 | 167,000 |
Deferred tax expense (benefit) related to: | ||
Provision for loan losses | (320,000) | (250,000) |
Depreciation | 203,000 | (12,000) |
Fair value adjustments | 356,000 | 469,000 |
Nonaccrual interest | (26,000) | 121,000 |
Foreclosed real estate | 117,000 | 1,008,000 |
Core deposit intangible | (117,000) | (89,000) |
Other | 115,000 | 150,000 |
Total income tax expense | $ 3,362,080 | $ 1,640,744 |
Income Taxes (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Federal income tax expense computed at the statutory rate | $ 3,115,000 | $ 1,071,000 |
State income taxes, net of federal tax benefit | 393,000 | 176,000 |
Nondeductible acquisition expenses | 0 | 295,000 |
Other | (146,000) | 99,000 |
Total income tax expense | $ 3,362,080 | $ 1,640,744 |
Income Taxes (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred tax assets: | ||
Allowance for loan losses | $ 1,932 | $ 1,667 |
Fair value adjustments | 3,744 | 4,219 |
Foreclosed real estate | 539 | 656 |
Deferred compensation | 415 | 253 |
State net operating loss carryforward | 0 | 339 |
Other | 561 | 618 |
Total deferred tax assets | 7,191 | 7,752 |
Deferred tax liabilities: | ||
Accumulated depreciation | 1,903 | 1,699 |
Core deposit intangible | 946 | 1,063 |
Other | 639 | 743 |
Total deferred tax liabilities | 3,488 | 3,505 |
Net deferred tax asset | $ 3,703 | $ 4,247 |
Federal Home Loan Bank Advances and Other Borrowings (Details 1) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2017 | $ 18,500 |
Employee Benefit Plans (Details 3) - Stock Options [Member] |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Dividend yield | 0.00% |
Expected life | 10 years |
Expected volatility | 81.70% |
Risk-free interest rate | 1.54% |
Securities Sold Under Agreements to Repurchase (Details Textual) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Securities sold under agreements to repurchase | $ 26,621,984 | $ 28,068,215 |
Minimum [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Securities sold under agreement to repurchase, maturity of agreement | 1 day | |
Maximum [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Securities sold under agreement to repurchase, maturity of agreement | 4 days |
Commitments and Contingencies (Details) $ in Millions |
Dec. 31, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Commitments to extend credit | $ 145.3 |
Standby letters of credit, issued by the Company | $ 3.2 |
Concentrations of Credit Risk (Details Textual) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Concentration Risk [Line Items] | ||
Credit extending terms to borrowers | The Bank, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 25% of statutory capital, or approximately $25,256,000. | |
Commercial Real Estate [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk (as a percent) | 61.00% | 65.00% |
Loan Portfolio Secured by Real Estate [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk (as a percent) | 89.00% |
Fair Value of Assets and Liabilities (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Impaired loans | $ 239 | $ 160 |
Foreclosed assets | 2,386 | 5,358 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Impaired loans | 0 | 0 |
Foreclosed assets | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Impaired loans | 0 | 0 |
Foreclosed assets | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Impaired loans | 239 | 160 |
Foreclosed assets | $ 2,386 | $ 5,358 |
Fair Value of Assets and Liabilities (Details 2) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Impaired loans | $ 239,000 | $ 160,000 |
Foreclosed assets | $ 2,386,239 | $ 5,357,950 |
Impaired Loans [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Valuation Technique | Cash Flow | Appraisal |
Significant Other Unobservable Input | Discounted Cash Flow / Appraisal Discounts | Discounted Cash Flow / Appraisal Discounts |
Weighted Average of Input (as a percent) | 2.40% | 6.00% |
Foreclosed assets [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Valuation Technique | Appraisal | Appraisal |
Significant Other Unobservable Input | Appraisal Discounts | Appraisal Discounts |
Weighted Average of Input (as a percent) | 12.20% | 22.20% |
Small Business Lending Fund (Details Textual) - USD ($) |
12 Months Ended | ||||
---|---|---|---|---|---|
Mar. 06, 2017 |
Jan. 30, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2011 |
|
Class of Stock [Line Items] | |||||
Preferred stock, shares issued | 12,000 | 12,000 | |||
Preferred stock, dividend rate (as a percent) | 9.00% | 1.00% | |||
Preferred stock dividends | $ 1,022,000 | $ 120,000 | |||
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |||
Proceeds from issuance of common stock | $ 803,957 | $ 4,043,011 | |||
SBLF Program [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, shares issued | 12,000 | ||||
Share price (in dollars per share) | $ 1,000 | ||||
Preferred stock, redemption price (in dollars per share) | $ 1,000 | ||||
Subsequent Event [Member] | |||||
Class of Stock [Line Items] | |||||
Payments for redemption of preferred stock | $ 12,000,000 | ||||
Common Stock [Member] | Subsequent Event [Member] | |||||
Class of Stock [Line Items] | |||||
Issuance of common stock in public offering (in shares) | 2,010,084 | ||||
Common stock, par value (in dollars per share) | $ 1.00 | ||||
Proceeds from issuance of common stock | $ 33,200,000 |
Concentration in Deposits (Details Textual) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Concentration Risk [Line Items] | ||
Deposits | $ 907,065,171 | $ 858,482,551 |
Customer Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Deposits | $ 60,153,000 | $ 28,527,000 |
Earnings per Share (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Basic earnings per share computation: | ||
Net income available to common stockholders | $ 4,776,808 | $ 1,389,712 |
Average common shares outstanding - basic | 5,838,574 | 3,985,202 |
Basic earnings per share (in dollars per share) | $ 0.82 | $ 0.35 |
Diluted earnings per share computation: | ||
Net income available to common stockholders | $ 4,777,000 | $ 1,390,000 |
Average common shares outstanding - basic | 5,838,574 | 3,985,202 |
Incremental shares from assumed conversions: | ||
Stock options | 280,369 | 296,307 |
Average common shares outstanding - diluted | 6,118,943 | 4,281,509 |
Diluted earnings per share (in dollars per share) | $ 0.78 | $ 0.32 |
Condensed Parent Information (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|
ASSETS | |||
Cash | $ 68,748,308 | $ 79,964,633 | $ 46,736,414 |
Other assets | 10,829,622 | 12,436,625 | |
Total assets | 1,062,456,285 | 1,023,962,879 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
Total liabilities | 957,216,145 | 923,786,020 | |
Stockholders’ equity | 105,240,140 | 100,176,859 | 55,887,787 |
Total liabilities and stockholders’ equity | 1,062,456,285 | 1,023,962,879 | |
Parent [Member] | |||
ASSETS | |||
Cash | 2,068,000 | 503,000 | $ 476,000 |
Investment in subsidiaries | 100,023,000 | 97,020,000 | |
Other assets | 4,392,000 | 4,817,000 | |
Total assets | 106,483,000 | 102,340,000 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
Other liabilities | 1,243,000 | 163,000 | |
Other borrowings | 0 | 2,000,000 | |
Total liabilities | 1,243,000 | 2,163,000 | |
Stockholders’ equity | 105,240,000 | 100,177,000 | |
Total liabilities and stockholders’ equity | $ 106,483,000 | $ 102,340,000 |
Condensed Parent Information (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
INCOME | ||
Interest income | $ 42,564,391 | $ 27,753,233 |
EXPENSES | ||
Interest expense | 4,299,682 | 2,757,142 |
Income tax benefit | (3,362,080) | (1,640,744) |
Net income | 5,798,808 | 1,509,712 |
Preferred stock dividend requirements | 1,022,000 | 120,000 |
Net income available to common stockholders | 4,776,808 | 1,389,712 |
Parent [Member] | ||
INCOME | ||
Dividends | 3,000,000 | 0 |
Interest income | 0 | 0 |
Interest and dividend income | 3,000,000 | 0 |
EXPENSES | ||
Interest expense | 17,000 | 40,000 |
Other operating expenses | 1,146,000 | 1,817,000 |
Loss before equity in undistributed earnings of subsidiaries and income tax benefit | 1,837,000 | (1,857,000) |
Equity in undistributed earnings of subsidiaries | 3,520,000 | 2,993,000 |
Income tax benefit | 442,000 | 374,000 |
Net income | 5,799,000 | 1,510,000 |
Preferred stock dividend requirements | 1,022,000 | 120,000 |
Net income available to common stockholders | $ 4,777,000 | $ 1,390,000 |
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