10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One) 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

¨ TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to

Commission File Number:333-203449

(Exact name of registrant as specified in its charter) 

Tennessee	62-1173944
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5401 Kingston Pike, Suite 600 Knoxville, Tennessee	37919
(Address of principal executive offices)	(Zip Code)
865-453-2650	Not Applicable
(Registrant’s telephone number, including area code)	(Former name, former address and former fiscal
	year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00	SMBK	The Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit such files).

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or and emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨ Smaller reporting company  x Emerging growth company ¨

1

If an emerging growth company, indicate by check market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

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

2

TABLE OF CONTENTS

PART I –FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	4
	Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	4
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018	6
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43

3

PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY 

CONSOLIDATED BALANCE SHEETS 

(Dollars in thousands, except for share data)

	(Unaudited) June 30, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	44,500		$	40,015
Interest-bearing deposits with banks	75,371			75,807
Federal funds sold	79,663			—
Total cash and cash equivalents	199,534			115,822
Securities available-for-sale, at fair value	174,114			201,688
Other investments	12,905			11,499
Loans held for sale	4,087			1,979
Loans	1,832,902			1,775,260
Less: Allowance for loan losses	(9,097		)	(8,275		)
Loans, net	1,823,805			1,766,985
Premises and equipment, net	56,589			56,012
Other real estate owned	1,814			2,495
Goodwill and core deposit intangible, net	78,348			79,034
Bank owned life insurance	24,695			24,381
Other assets	15,366			14,514
Total assets	$	2,391,257		$	2,274,409
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	357,220		$	319,861
Interest-bearing demand	333,705			311,482
Money market and savings	648,132			641,945
Time deposits	673,243			648,676
Total deposits	2,012,300			1,921,964
Securities sold under agreement to repurchase	8,219			11,756
Federal Home Loan Bank advances and other borrowings	15,460			11,243
Subordinated debt	39,219			39,177
Other liabilities	16,448			7,258
Total liabilities	2,091,646			1,991,398
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized; No shares issued and outstanding	—			—
Common stock, $1 par value; 40,000,000 shares authorized; 13,953,209 and 13,933,504 shares issued and outstanding, respectively	13,953			13,933
Additional paid-in capital	232,386			231,852
Retained earnings	53,843			39,991
Accumulated other comprehensive loss	(571		)	(2,765		)
Total shareholders' equity	299,611			283,011
Total liabilities and shareholders' equity	$	2,391,257		$	2,274,409

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

4

SMARTFINANCIAL, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except for share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
INTEREST INCOME
Loans, including fees	$	25,278	$	21,652		$	50,253	$	39,880
Securities available-for-sale:
Taxable	871		897			1,842		1,770
Tax-exempt	411		76			836		112
Federal funds sold and other earning assets	743		368			1,315		609
Total interest income	27,303		22,993			54,246		42,371
INTEREST EXPENSE
Deposits	5,788		3,238			11,039		5,639
Securities sold under agreements to repurchase	6		11			14		23
Federal Home Loan Bank advances and other borrowings	117		206			221		360
Subordinated debt	590		—			1,173		—
Total interest expense	6,501		3,455			12,447		6,022
Net interest income	20,802		19,538			41,799		36,349
Provision for loan losses	393		617			1,190		1,305
Net interest income after provision for loan losses	20,409		18,921			40,609		35,044
NONINTEREST INCOME
Customer service fees	707		557			1,361		1,135
Gain (loss) on sale of securities, net	33		(1		)	33		(1		)
Mortgage banking	392		322			674		688
Interchange and debit card transaction fees	143		121			318		267
Merger termination fee	6,400		—			6,400		—
Other	741		578			1,328		984
Total noninterest income	8,416		1,577			10,114		3,073
NONINTEREST EXPENSE
Salaries and employee benefits	8,984		7,649			17,382		14,825
Occupancy and equipment	1,658		1,522			3,298		3,055
FDIC insurance	180		317			359		419
Other real estate and loan related expense	242		926			732		1,596
Advertising and marketing	259		215			554		399
Data processing	577		600			1,192		1,127
Professional services	489		587			1,151		1,259
Amortization of intangibles	342		229			686		417
Software as service contracts	568		492			1,136		970
Merger related and restructuring expenses	1,796		1,123			2,719		1,621
Other	1,714		1,611			3,179		2,848
Total noninterest expense	16,809		15,271			32,388		28,536
Income before income tax expense	12,016		5,227			18,335		9,581
Income tax expense	2,895		1,295			4,483		2,235
Net income	$	9,121	$	3,932		$	13,852	$	7,346
EARNINGS PER COMMON SHARE
Basic	$	0.65	$	0.32		$	0.99	$	0.63
Diluted	$	0.65	$	0.32		$	0.99	$	0.62
Weighted average common shares outstanding
Basic	13,951,643		12,201,185			13,946,856		11,708,746
Diluted	14,046,500		12,320,498			14,036,790		11,822,497

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

5

SMARTFINANCIAL, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (Unaudited) 

(Dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	9,121		$	3,932		$	13,852		$	7,346
Other comprehensive income, net of tax:
Unrealized holding gains (losses) and hedge effects on securities available-for-sale arising during the period	(112		)	(397		)	2,219			(1,769		)
Reclassification adjustment for (gains) losses realized	(25		)	1			(25		)	1
Total other comprehensive income (loss)	(137		)	(396		)	2,194			(1,768		)
Comprehensive income	$	8,984		$	3,536		$	16,046		$	5,578

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

6

SMARTFINANCIAL, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - (Unaudited) 

For the Three and Six Months Ended June 30, 2019 and 2018

(Dollars in thousands, except for share data)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Gain			Total
Balance, December 31, 2017	11,152,561	$	11,153	$	174,009	$	21,889	$	(1,198	)	$	205,852
Net income	—	—		—		7,346		—			7,346
Other comprehensive loss	—	—		—		—		(1,768		)	(1,768		)
Common stock issued pursuant to:
Stock awards	394	—		9		—		—			9
Exercise of stock options	92,645	93		978		—		—			1,071
Shareholders of TN Bancshares, Inc.	1,458,981	1,459		33,273		—		—			34,732
Stock compensation expense	—	—		244		—		—			244
Balance, June 30, 2018	12,704,581	$	12,705	$	208,513	$	29,235	$	(2,966	)	$	247,487

Balance, December 31, 2018	13,933,504	$	13,934	$	231,852	$	39,991	$	(2,765	)	$	283,011
Net income	—	—		—		13,852		—			13,852
Other comprehensive income	—	—		—		—		2,194			2,194
Common stock issued pursuant to:
Stock awards	3,298	3		61		—		—			65
Exercise of stock options	16,407	16		196		—		—			213
Stock compensation expense	—	—		276		—		—			276
Balance, June 30, 2019	13,953,209	$	13,953	$	232,386	$	53,843	$	(571	)	$	299,611

Balance, March 31, 2018	11,233,806	$	11,234	$	174,981	$	25,303	$	(2,569	)	$	208,949
Net income	—	—		—		3,932		—			3,932
Other comprehensive loss	—	—		—		—		(396		)	(396		)
Common stock issued pursuant to:
Stock awards	394	—		9		—		—			9
Exercise of stock options	11,400	11		109		—		—			120
Shareholders of TN Bancshares, Inc.	1,458,981	1,459		33,273		—		—			34,732
Stock compensation expense	—	—		141		—		—			141
Balance, June 30, 2018	12,704,581	$	12,705	$	208,513	$	29,235	$	(2,966	)	$	247,487

Balance, March 31, 2019	13,951,590	$	13,952	$	232,241	$	44,722	$	(434	)	$	290,481
Net income	—	—		—		9,121		—			9,121
Other comprehensive loss	—	—		—		—		(137		)	(137		)
Common stock issued pursuant to:
Exercise of stock options	1,619	2		12		—		—			14
Stock compensation expense	—	—		133		—		—			133
Balance, June 30, 2019	13,953,209	$	13,953	$	232,386	$	53,843	$	(571	)	$	299,611

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

7

SMARTFINANICAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	13,852		$	7,346
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,088			1,908
Accretion of fair value purchase accounting adjustments, net	(3,091		)	(4,205		)
Provision for loan losses	1,190			1,305
Stock compensation expense	276			244
(Gains) losses from redemption and sale on securities available-for-sale	(33		)	1
Deferred income tax expense	1,039			945
Increase in cash surrender value of bank owned life insurance	(314		)	(297		)
Loss on disposal of fixed assets	14			41
Net (gains) losses from sale of other real estate owned	(16		)	372
Net gains from sale of loans	(674		)	(688		)
Origination of loans held for sale	(33,491		)	(29,499		)
Proceeds from sales of loans held for sale	32,057			25,648
Net change in:
Accrued interest receivable	(612		)	(250		)
Accrued interest payable	454			48
Other assets	(593		)	2,546
Other liabilities	5,792			(1,324		)
Net cash provided by operating activities	17,938			4,141
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale	16,515			24,563
Proceeds from maturities and calls of securities available-for-sale	10,305			2,525
Proceeds from paydowns of securities available-for-sale	6,554			7,436
Purchases of securities available-for-sale	(1,054		)	(17,240		)
Purchases of other investments	(1,406		)	(1,378		)
Net cash and cash equivalents received in business combination	—			5,653
Net increase in loans	(55,323		)	(65,138		)
Purchases of premises and equipment	(2,011		)	(992		)
Proceeds from sale of other real estate owned	1,100			2,126
Net cash used in investing activities	(25,320		)	(42,445		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	90,136			75,410
Net decrease in securities sold under agreements to repurchase	(3,537		)	(5,420		)
Issuance of common stock	278			1,080
Proceeds from Federal Home Loan Bank advances and other borrowings	120,176			127,040
Repayment of Federal Home Loan Bank advances and other borrowings	(115,959		)	(102,600		)
Net cash provided by financing activities	91,094			95,510
NET INCREASE IN CASH AND CASH EQUIVALENTS	83,712			57,206
CASH AND CASH EQUIVALENTS, beginning of period	115,822			113,027
CASH AND CASH EQUIVALENTS, end of period	$	199,534		$	170,233
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	11,993		$	5,974
Cash paid during the period for income taxes	2,630			713
NONCASH INVESTING AND FINANCING ACTIVITIES
Change in unrealized (gains) losses on securities available-for-sale	$	(2,664	)	$	2,348
Acquisition of real estate through foreclosure	403			2,351
Financed sales of other real estate owned	—			257
Change in goodwill due to acquisition	—			15,739
Initial recognition of operating lease right-of-use assets	2,344			—
Initial recognition of operating lease liabilities	2,344			—

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

8

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Presentation of Financial Information

Nature of Business:

SmartFinancial, Inc. (the "Company") is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, SmartBank (the "Bank"). The Company provides a variety of financial services to individuals and corporate customers through its offices in Tennessee, Alabama, Florida, and Georgia. The Bank's primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Basis of Presentation and Accounting Estimates:

The consolidated financial information in this report for June 30, 2019 and June 30, 2018 has not been audited by an independent registered public accounting firm. The consolidated financial statements presented herein conform to U.S. generally accepted accounting principles and to general industry practices. In the opinion of the Company’s management, the accompanying interim financial statements contain all material adjustments necessary to present fairly the Company's financial condition, the results of operations, and cash flows for the interim period. Results for interim periods are not necessarily indicative of the results to be expected for a full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the U.S, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of foreclosed assets and deferred taxes, other than temporary impairments of securities, the fair value of financial instruments, goodwill, and the fair value of assets acquired and liabilities assumed in acquisitions.

Recently Issued and Adopted Accounting Pronouncements:

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

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

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

9

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

direct costs for any existing leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of right-of-use assets. The Company has several lease agreements, such as branch locations or office space, which are considered operating leases, and therefore, were not previously recognized on the Company’s consolidated balance sheet. The new guidance requires these lease agreements to be recognized on the consolidated balance sheet as a right-of-use asset and a corresponding lease liability. The new guidance did not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 8 Leases for more information.

In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and (2) lessors may elect not to separate lease and non-lease components when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (January 1, 2019 for the Company). The Company adopted ASU 2018-11 on its required effective date of January 1, 2019 and elected both transition options mentioned above.

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

As of January 1, 2019, the Company adopted ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonably estimable. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements:

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2018 as filed with the Securities and Exchange Commission. The following is a summary of recent authoritative pronouncements issued since December 31, 2018 but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

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

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

10

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

On July 17, 2019 the Financial Accounting Standards Board unanimously voted to propose a delay for the implementation of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).  The Board decided that CECL will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies, this will be January 1, 2020.  The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the Board decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies).  The Board decided that the comment period for the proposed Update would be 30 days.

Reclassifications:

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Earnings Per Share

Basic earnings per common share represents net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance (excluding tax impact). Potential common shares that may be issued by the Company relate solely to outstanding stock options, determined using the treasury stock method, and restricted stock awards, determined by the fair value of the Company's stock on date of grant.

The following is a summary of the basic and diluted earnings per share computation (dollars in thousands, except for share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net income	$	9,121	$	3,932	$	13,852	$	7,346
Weighted average basic common shares outstanding	13,951,643		12,201,185		13,946,856		11,708,746
Effect of dilutive securities	94,857		119,313		89,934		113,751
Weighted average dilutive shares outstanding	14,046,500		12,320,498		14,036,790		11,822,497
Basic earnings per common share	$	0.65	$	0.32	$	0.99	$	0.63
Diluted earnings per common share	$	0.65	$	0.32	$	0.99	$	0.62

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

Note 3. Securities

The amortized cost and fair value of securities available-for-sale are summarized as follows (in thousands): 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	24,031	$	22	$	(65	)	$	23,988
Municipal securities	56,251		492		(17		)	56,726
Other debt securities	979		—		(42		)	937
Mortgage-backed securities (GSEs)	92,718		154		(409		)	92,463
	$	173,979	$	668	$	(533	)	$	174,114

December 31, 2018:
U.S. Government-sponsored enterprises (GSEs)	$	44,117	$	12	$	(626	)	$	43,503
Municipal securities	55,248		276		(363		)	55,161
Other debt securities	977		—		(67		)	910
Mortgage-backed securities (GSEs)	103,875		153		(1,914		)	102,114
	$	204,217	$	441	$	(2,970	)	$	201,688

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

	Amortized Cost		Fair Value
Due in one year or less	$	294	$	297
Due from one year to five years	16,000		15,935
Due from five years to ten years	13,302		13,283
Due after ten years	51,665		52,136
	81,261		81,651
Mortgage-backed securities	92,718		92,463
	$	173,979	$	174,114

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities available-for-sale have been in a continuous unrealized loss position (in thousands): 

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
June 30, 2019:
U.S. Government- sponsored enterprises (GSEs)	$	—	$	—		$	10,935	$	(65	)	$	10,935	$	(65	)
Municipal securities	—		—			2,021		(17		)	2,021		(17		)
Other debt securities	—		—			937		(42		)	937		(42		)
Mortgage-backed securities (GSEs)	5,165		(20		)	43,805		(389		)	48,970		(409		)
	$	5,165	$	(20	)	$	57,698	$	(513	)	$	62,863	$	(533	)

December 31, 2018:
U.S. Government- sponsored enterprises (GSEs)	$	14,763	$	(237	)	$	13,728	$	(389	)	$	28,491	$	(626	)
Municipal securities	16,455		(150		)	4,767		(213		)	21,222		(363		)
Other debt securities	—		—			910		(67		)	910		(67		)
Mortgage-backed securities (GSEs)	10,516		(155		)	69,884		(1,759		)	80,400		(1,914		)
	$	41,734	$	(542	)	$	89,289	$	(2,428	)	$	131,023	$	(2,970	)

13

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

At June 30, 2019, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross Unrealized Loss			Number of Securities
U.S. Government-sponsored enterprises (GSEs)	$	(65	)	3
Municipal securities	(17		)	4
Other debt securities	(42		)	1
Mortgage-backed securities (GSEs)	(389		)	47
	$	(513	)	55

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

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

The following is the amortized cost and carrying value of other investments (in thousands):

	June 30, 2019		December 31, 2018
Federal Reserve Bank stock	$	7,909	$	7,010
Federal Home Loan Bank stock	4,646		4,139
First National Bankers Bank stock	350		350
	$	12,905	$	11,499

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

14

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4. Loans and Allowance for Loan Losses

Portfolio Segmentation:

Major categories of loans are summarized as follows (in thousands):

	June 30, 2019									December 31, 2018
	PCI Loans1			All Other Loans2			Total			PCI Loans1		All Other Loans2			Total
Commercial real estate	$	17,040		$	861,547		$	878,587		$	17,682	$	842,345		$	860,027
Consumer real estate	7,412			398,844			406,256			8,712		398,542			407,254
Construction and land development	4,669			200,027			204,696			4,602		183,293			187,895
Commercial and industrial	2,137			333,361			335,498			2,557		305,697			308,254
Consumer and other	400			11,552			11,952			605		13,204			13,809
Total loans	31,658			1,805,331			1,836,989			34,158		1,743,081			1,777,239
Less:  Allowance for loan losses	(54		)	(9,043		)	(9,097		)	—		(8,275		)	(8,275		)
Loans, net	$	31,604		$	1,796,288		$	1,827,892		$	34,158	$	1,734,806		$	1,768,964

¹Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

² Includes loans held for sale.

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

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	861,288	$	398,061	$	199,326	$	333,109	$	11,552	$	1,803,336
Impaired loans	259		783		701		252		—		1,995
	861,547		398,844		200,027		333,361		11,552		1,805,331
PCI loans	17,040		7,412		4,669		2,137		400		31,658
Total	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

December 31, 2018:
Performing loans	$	841,709	$	397,306	$	182,746	$	304,673	$	13,088	$	1,739,522
Impaired loans	636		1,236		547		1,024		116		3,559
	842,345		398,542		183,293		305,697		13,204		1,743,081
PCI loans	17,682		8,712		4,602		2,557		605		34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

15

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	4,062	$	1,935	$	946	$	1,641	$	114	$	8,698
PCI loans	40		14		—		—		—		54
Impaired loans	—		240		—		105		—		345
Total	$	4,102	$	2,189	$	946	$	1,746	$	114	$	9,097

December 31, 2018:
Performing loans	$	3,639	$	1,763	$	795	$	1,304	$	240	$	7,741
PCI loans	—		—		—		—		—		—
Impaired loans	—		26		—		442		66		534
Total	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Three Months Ended June 30, 2019:
Beginning balance	$	4,074	$	1,949	$	854	$	1,709		$	118		$	8,704
Loans charged off	—		—		—		(14		)	(80		)	(94		)
Recoveries of charge-offs	22		16		2		41			13			94
Provision (reallocation) charged to expense	6		224		90		10			63			393
Ending balance	$	4,102	$	2,189	$	946	$	1,746		$	114		$	9,097

Three Months Ended June 30, 2018:
Beginning balance	$	2,925	$	1,519		$	627	$	1,210	$	196		$	6,477
Loans charged off	—		(25		)	—		—		(59		)	(84		)
Recoveries of charge-offs	—		27			3		16		18			64
Provision (reallocation) charged to expense	210		7			114		141		145			617
Ending balance	$	3,135	$	1,528		$	744	$	1,367	$	300		$	7,074

16

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Commercial Real Estate		Consumer Real Estate			Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Six Months Ended June 30, 2019:
Beginning balance	$	3,639	$	1,789		$	795	$	1,746		$	306		$	8,275
Loans charged off	—		(2		)	—		(333		)	(210		)	(545		)
Recoveries of charge-offs	24		20			4		53			76			177
Provision (reallocation) charged to expense	439		382			147		280			(58		)	1,190
Ending balance	$	4,102	$	2,189		$	946	$	1,746		$	114		$	9,097

Six Months Ended June 30, 2018:
Beginning balance	$	2,465		$	1,596		$	521	$	1,062		$	216		$	5,860
Loans charged off	(38		)	(25		)	—		(78		)	(101		)	(242		)
Recoveries of charge-offs	—			50			5		56			40			151
Provision (reallocation) charged to expense	708			(93		)	218		327			145			1,305
Ending balance	$	3,135		$	1,528		$	744	$	1,367		$	300		$	7,074

The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands):

	June 30, 2019
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	848,287	$	395,438	$	198,469	$	326,328	$	11,459	$	1,779,981
Watch	12,387		2,353		624		5,492		44		20,900
Special mention	500		8		156		1,181		—		1,845
Substandard	373		875		778		352		25		2,403
Doubtful	—		170		—		8		24		202
Total	$	861,547	$	398,844	$	200,027	$	333,361	$	11,552	$	1,805,331

PCI Loans:
Pass	$	12,795	$	5,050	$	3,576	$	2,039	$	354	$	23,814
Watch	2,463		453		1,093		3		14		4,026
Special mention	920		434		—		—		7		1,361
Substandard	862		1,475		—		95		25		2,457
Doubtful	—		—		—		—		—		—
Total	$	17,040	$	7,412	$	4,669	$	2,137	$	400	$	31,658
Total loans	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

17

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	December 31, 2018
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	834,912	$	394,728	$	182,524	$	303,805	$	12,927	$	1,728,896
Watch	6,791		2,678		64		1,090		135		10,758
Special mention	—		14		158		137		—		309
Substandard	642		1,122		547		462		142		2,915
Doubtful	—		—		—		203		—		203
Total	$	842,345	$	398,542	$	183,293	$	305,697	$	13,204	$	1,743,081

PCI Loans:
Pass	$	14,050	$	5,617	$	4,033	$	2,382	$	541	$	26,623
Watch	1,805		756		569		—		17		3,147
Special mention	1,030		446		—		50		10		1,536
Substandard	797		1,893		—		125		37		2,852
Doubtful	—		—		—		—		—		—
Total	$	17,682	$	8,712	$	4,602	$	2,557	$	605	$	34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

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 indicator 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 an aging analysis of our loan portfolio (in thousands): 

	June 30, 2019
	30-60 Days  Past Due and Accruing		61-89 Days  Past Due and Accruing		Past Due 90  Days or More and Accruing		Nonaccrual		Total  Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	133	$	—	$	139	$	124	$	396	$	17,040	$	861,151	$	878,587
Consumer real estate	1,026		226		441		1,024		2,717		7,412		396,127		406,256
Construction and land development	838		112		—		624		1,574		4,669		198,453		204,696
Commercial and industrial	417		30		95		336		878		2,137		332,483		335,498
Consumer and other	131		—		15		40		186		400		11,366		11,952
Total	$	2,545	$	368	$	690	$	2,148	$	5,751	$	31,658	$	1,799,580	$	1,836,989

18

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	December 31, 2018
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	377	$	19	$	—	$	272	$	668	$	17,682	$	841,677	$	860,027
Consumer real estate	1,168		462		454		844		2,928		8,712		395,614		407,254
Construction and land development	343		—		—		547		890		4,602		182,403		187,895
Commercial and industrial	155		—		101		909		1,165		2,557		304,532		308,254
Consumer and other	117		—		29		124		270		605		12,934		13,809
Total	$	2,160	$	481	$	584	$	2,696	$	5,921	$	34,158	$	1,737,160	$	1,777,239

Impaired Loans:

The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded (in thousands):  

	June 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	259	$	263	$	—	$	636	$	648	$	—
Consumer real estate	385		386		—		1,073		1,089		—
Construction and land development	701		701		—		547		547		—
Commercial and industrial	—		—		—		69		70		—
Consumer and other	—		—		—		29		33		—
	1,345		1,350		—		2,354		2,387		—
Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		—		—		—
Consumer real estate	398		399		240		163		205		26
Construction and land development	—		—		—		—		—		—
Commercial and industrial	252		267		105		955		973		442
Consumer and other	—		—		—		87		87		66
	650		666		345		1,205		1,265		534
PCI loans:
Commercial real estate	2,523		2,834		40		—		—		—
Consumer real estate	1,096		1,261		14		—		—		—
	3,619		4,095		54		—		—		—
Total impaired loans	$	5,614	$	6,111	$	399	$	3,559	$	3,652	$	534

19

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	424	$	5	$	793	$	8
Consumer real estate	624		—		841		7
Construction and land development	650		2		547		—
Commercial and industrial	16		—		67		2
Consumer and other	14		—		8		—
	1,728		7		2,256		17
Impaired loans with a valuation allowance:
Commercial real estate	24		—		—		—
Consumer real estate	217		2		460		—
Construction and land development	28		—		—		—
Commercial and industrial	293		—		300		3
Consumer and other	13		—		103		1
	575		2		863		4
PCI loans:
Commercial real estate	2,529		—		14		—
Consumer real estate	1,099		—		—		—
	3,628		—		14		—
Total impaired loans	$	5,931	$	9	$	3,133	$	21

	Six Months Ended June 30,
	2019					2018
	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	495	$	25		$	670	$	15
Consumer real estate	774		4			699		12
Construction and land development	616		1			547		—
Commercial and industrial	33		1			58		3
Consumer and other	19		—			5		—
	1,937		31			1,979		30
Impaired loans with a valuation allowance:
Commercial real estate	16		—			8		—
Consumer real estate	199		9			642		11
Construction and land development	19		—			—		—
Commercial and industrial	514		9			257		5
Consumer and other	38		—			72		2
	786		18			979		18
PCI loans:
Commercial real estate	1,686		(9		)	5		3
Consumer real estate	732		2			—		—
	2,418		(7		)	5		3
Total impaired loans	$	5,141	$	42		$	2,963	$	51

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Troubled Debt Restructurings:

At June 30, 2019 and December 31, 2018, 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.

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 June 30, 2019 and December 31, 2018, management had approximately $62 thousand and $116 thousand, respectively, in loans that met the criteria for restructured, none of which were on nonaccrual.

There were no loans that were modified as troubled debt restructurings during the six month period ended June 30, 2019. There was one commercial real estate loan for approximately $622 thousand modified as troubled debt restructurings during the six month period ended June 30, 2018.

There were no loans that were modified as troubled debt restructurings during the past six months and for which there was a subsequent payment default.

Foreclosure Proceedings and Balances:

As of June 30, 2019, there was $257 thousand residential real estate included in other real estate owned and there were no consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure.

Purchased Credit Impaired Loans:

The Company has acquired loans where 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 are as follows (in thousands):

	June 30, 2019			December 31, 2018
Commercial real estate	$	23,895		$	24,849
Consumer real estate	9,556			11,108
Construction and land development	5,700			5,731
Commercial and industrial	5,125			5,824
Consumer and other	612			892
Total loans	44,888			48,404
Less: Remaining purchase discount	(13,230		)	(14,246		)
Total loans, net of purchase discount	31,658			34,158
Less: Allowance for loan losses	(54		)	—
Carrying amount, net of allowance	$	31,604		$	34,158

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Accretable yield, beginning of period	$	8,644		$	7,780		$	7,052		$	9,287
Additions	—			1,292			—			1,292
Accretion income	(1,026		)	(1,928		)	(2,280		)	(3,029		)
Reclassification	323			120			1,358			382
Other changes, net	339			(58		)	2,150			(726		)
Accretable yield, end of period	$	8,280		$	7,206		$	8,280		$	7,206

Note 5. Commitments and Contingent Liabilities

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 on the balance sheet. 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 are as follows (in thousands):

	June 30, 2019		December 31, 2018
Commitments to extend credit	$	376,037	$	333,900
Standby letters of credit	15,090		12,200

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 June 30, 2019 and December 31, 2018, the carrying amount of liabilities related to the Company's obligation to perform under standby letters of credit was insignificant.

The Company is subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company will be material to the Company's consolidated financial position. On an on-going basis the Company assesses any potential liabilities or contingencies in connection with such legal proceedings. For those matters where it is deemed probable that the Company will incur losses and the amount of the losses can be reasonably estimated, the Company would record an expense and corresponding liability in its consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6. Fair Value Disclosures

Determination 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 the “Fair Value Measurements and Disclosures” ASC Topic 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. 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.

ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction 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 business 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.

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 1 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.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis are as follows (in thousands): 

Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	23,988	$	—	$	23,988	$	—
Municipal securities	56,726		—		56,726		—
Other debt securities	937		—		937		—
Mortgage-backed securities (GSEs)	92,463		—		92,463		—
Total securities available-for-sale	$	174,114	$	—	$	174,114	$	—
Liabilities:
Derivative financial instruments	$	3,411	$	—	$	3,411	$	—

December 31, 2018:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	43,503	$	—	$	43,503	$	—
Municipal securities	55,161		—		55,161		—
Other debt securities	910		—		910		—
Mortgage-backed securities (GSEs)	102,114		—		102,114		—
Total securities available-for-sale	$	201,688	$	—	$	201,688	$	—
Liabilities:
Derivative financial instruments	$	1,174	—		$	1,174	—

In the periods presented, 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):

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Impaired loans	$	3,870	$	—	$	—	$	3,870
Other real estate owned	1,814		—		—		1,814
December 31, 2018:
Impaired loans	$	671	$	—	$	—	$	671
Other real estate owned	2,495		—		—		2,495

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For Level 3 assets measured at fair value on a non-recurring basis, the significant unobservable inputs used in the fair value measurements are presented below (in thousands).

	Fair Value		Valuation Technique	Significant Other Unobservable Input	Weighted Average of Input
June 30, 2019:
Impaired loans	$	3,870	Appraisal and cashflow	Appraisal and cashflow discounts	9	%
Other real estate owned	1,814		Appraisal	Appraisal discounts	12	%
December 31, 2018:
Impaired loans	$	671	Appraisal	Appraisal Discounts	44	%
Other real estate owned	2,495		Appraisal	Appraisal Discounts	23	%

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. An impaired loan 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 was 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.

Other real estate owned: Other real estate owned, 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.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Carrying value and estimated fair value:

The carrying amount and estimated fair value of the Company’s financial instruments are as follows (in thousands):

			Fair Value Measurements Using
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
June 30, 2019:
Assets:
Cash and cash equivalents	$	199,534	$	199,534	$	—	$	—	$	199,534
Securities available-for-sale	174,114		—		174,114		—		174,114
Other investments	12,905		N/A		N/A		N/A		N/A
Loans, net	1,827,892		—		—		1,822,099		1,822,099
Liabilities:
Noninterest-bearing demand deposits	357,220		—		357,220		—		357,220
Interest-bearing demand deposits	333,705		—		333,705		—		333,705
Money market and savings deposits	648,132		—		648,132		—		648,132
Time deposits	673,243		—		674,278		—		674,278
Securities sold under agreements to repurchase	8,219		—		8,219		—		8,219
Federal Home Loan Bank advances and other borrowings	15,460		—		15,460		—		15,460
Subordinated debt	39,219		—		—		37,618		37,618
Derivative financial instruments	3,411		—		3,411		—		3,411

26

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

December 31, 2018:
Assets:
Cash and cash equivalents	$	115,822	$	115,822	$	—	$	—	$	115,822
Securities available-for-sale	201,688		—		201,688		—		201,688
Other investments	11,499		N/A		N/A		N/A		N/A
Loans, net	1,768,964		—		—		1,766,838		1,766,838
Liabilities:
Noninterest-bearing demand deposits	319,861		—		319,861		—		319,861
Interest-bearing demand deposits	311,482		—		311,482		—		311,482
Money market and savings deposits	641,945		—		641,945		—		641,945
Time deposits	648,676		—		649,169		—		649,169
Securities sold under agreements to repurchase	11,756		—		11,756		—		11,756
Federal Home Loan Bank advances and other borrowings	11,243		—		11,243		—		11,243
Subordinated debt	39,177		—		—		39,190		39,190
Derivative financial instruments	1,174		—		1,174		—		1,174

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. 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 unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Note 7.     Derivatives

Financial derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative net investment hedge instrument as well as the offsetting gain or loss on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate tax-exempt callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to LIBOR-based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. The Company has elected early adoption of ASU 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities, which allows such partial term hedge designations.

27

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A summary of the Company's fair value hedge relationships for the periods presented are as follows (in thousands):

Liability derivatives	Balance Sheet Location	Weighted Average Remaining Maturity (In Years)	Weighted Average Pay Rate	Receive Rate	Notional Amount		Estimated Fair Value
June 30, 2019:
Interest rate swap agreements - securities	Other liabilities	8.70	3.09%	3 month LIBOR	$	36,000	$	(3,411	)
December 31, 2018:
Interest rate swap agreements - securities	Other liabilities	9.23	3.10%	3 month LIBOR	$	35,000	$	(1,174	)

The effects of the Company's fair value hedge relationships reported in interest income on tax-exempt available-for-sale securities

on the consolidated income statement were as follows (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Interest income on tax-exempt securities	$	449		$	—	$	906		$	—
Effects of fair value hedge relationships	(38		)	—		(70		)	—
Reported interest income on tax-exempt securities	$	411		$	—	$	836		$	—
	Three Months Ended June 30,					Six Months Ended June 30,
Gain (loss) on fair value hedging relationship	2019			2018		2019			2018
Interest rate swap agreements - securities:
Hedged items	$	1,348		—		$	2,237		—
Derivative designated as hedging instruments	(1,348		)	—		(2,237		)	—

There were no hedging relationships for the three and six months ending June 30, 2018.

The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges (in thousands):

Line item on the balance sheet	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
June 30, 2019:
Securities available-for-sale	$	42,850	$	3,411
December 31, 2018:
Securities available-for-sale	$	39,730	$	1,174

Note 8. Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02 and all subsequent ASUs that modified this topic (collectively referred to as "Topic 842"). For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2033. All of our leases are classified as operating leases, and therefore, were previously not recognized

28

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (dollars in thousands):

	Classification	June 30, 2019
Assets:
Operating lease right-of-use assets	Other assets	$	2,085
Liabilities:
Operating lease liabilities	Other liabilities	$	2,099

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.

As of June 30, 2019, the weighted average remaining lease term was 7.49 years and the weighted average discount rate was 3.23%.

The following table represents lease costs and other lease information, in thousands. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance (in thousands).

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease costs:
Operating lease costs	$	157	$	315
Short-term lease costs	5		11
Variable lease costs	23		46
Total	$	185	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	150	$	302

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

	Amounts
June 30, 2020	$	466
June 30, 2021	486
June 30, 2022	222
June 30, 2023	152
June 30, 2024	74
Thereafter	699
Total future minimum lease payments	2,099
Amounts representing interest	(319		)
Present value of net future minimum lease payments	$	1,780

29

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SmartFinancial, Inc. (the "Company") is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, SmartBank (the "Bank"). The Company provides a variety of financial services to individuals and corporate customers through its offices in Tennessee, Alabama, Florida, and Georgia. The Bank's primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk of litigation related to the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (2) reputational risk resulting from the termination of the Entegra Merger Agreement; (3) potential changes to, or the risk that we may not be able to execute on, our business strategy as a result of the termination of the Entegra Merger Agreement; (4) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize, (5) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships, (6) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank, (7) changes in management’s plans for the future, (8) prevailing, or changes in, economic or political conditions, particularly in our market areas, (9) credit risk associated with our lending activities, (10) changes in interest rates, loan demand, real estate values, or competition, (11) changes in accounting principles, policies, or guidelines, (12) changes in applicable laws, rules, or regulations, and (13) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure. The SEC has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that are not based on GAAP. However, two non-GAAP financial measures commonly used by financial institutions, namely tax-equivalent net interest income and tax-equivalent net interest margin (as presented in the tables in the section labeled “Net Interest Income and Yield Analysis”), have not been specifically exempted by the SEC, and may therefore constitute non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would regard those measures as subject to Regulation G. Management believes that these non-GAAP financial measures are useful in evaluating the company’s financial performance and facilitate comparisons with the performance of other financial institutions. However, that information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.

Certain captions and amounts in the prior periods presented were reclassified to conform to the current presentation. Such reclassifications had no effect on net income or shareholders' equity.

Executive Summary

The following is a summary of the Company’s financial highlights and significant events during the second quarter and the first six months of 2019:

30

• Net income totaled $9.1 million during the second quarter of 2019 compared to $3.9 million for the same period in 2018.

• Net income totaled $13.9 million during the first six months of 2019 compared to $7.3 million for the same period in 2018.

• Recorded a $6.4 million merger termination fee.

• Earnings per diluted common share was $0.65 during the second quarter of 2019, compared to $0.32 for the same period in 2018. Earnings per diluted common share was $0.99 during the first six months of 2019 compared to $0.62 for the same period in 2018.

• Annualized return on average assets was 1.56% for the second quarter of 2019 compared to 0.82% for the same period in 2018. For the first six months of 2019 the annualized return on average assets was 1.21% compared to 0.84% for the same period in 2018.

Analysis of Results of Operations

Second quarter of 2019 compared to 2018

Net income was $9.1 million, or $0.65 per diluted common share, for the second quarter of 2019, compared to $3.9 million, or $0.32 per diluted common share, for the second quarter of 2018. The tax equivalent net interest margin was 3.94% for the second quarter of 2019 compared to 4.57% for the second quarter of 2018. Noninterest income to average assets was 1.44% for second quarter of 2019, increasing from 0.33% for the second quarter of 2018. Noninterest expense to average assets was 2.88% for second quarter of 2019, decreasing from 3.15% for the second quarter of 2018. The results above include a $6.4 million termination fee received for the merger termination of Entegra Financial Corp. during the second quarter of 2019, and the operating effects of the Tennessee Bancshares, Inc. and Foothills Bancorp, Inc. acquisitions which were completed in the second and fourth quarters of 2018, respectively.

First six months of 2019 compared to 2018

Net income was $13.9 million, or $0.99 per diluted common share, for the first six months of 2019, compared to $7.3 million, or $0.62 per diluted common share, for the first six months of 2018. The tax equivalent net interest margin was 4.04% for the first six months of 2019 compared to 4.48% for the first six months of 2018. Noninterest income to average assets was 0.88% for the first six months of 2019, increasing from 0.33% for the first six months of 2018. Noninterest expense to average assets was 2.82% for the first six months of 2019, decreasing from 3.14% for the first six months of 2018. The results above include a $6.4 million termination fee received for the merger termination of Entegra Financial Corp. during the second quarter of 2019, and the operating effects of the Tennessee Bancshares, Inc. and Foothills Bancorp, Inc. acquisitions which were completed in the second and fourth quarters of 2018, respectively.

Net Interest Income and Yield Analysis

Second quarter of 2019 compared to 2018

Net interest income, taxable equivalent, increased to $20.9 million for the second quarter of 2019 from $19.6 million for the second quarter of 2018. Net interest income was positively impacted compared to the prior year due to increases in average loan and securities balances and increases in the yields of the securities portfolios. Average earning assets increased from $1.72 billion for the second quarter of 2018 to $2.13 billion for the second quarter of 2019 primarily as a result of the acquisitions completed during 2018, and to a lesser extent, continued organic growth. Over this period, average loan balances increased by $331.6 million, average interest-bearing deposits increased by $280.5 million, and average noninterest-bearing deposits increased $53.5 million. The tax equivalent net interest margin decreased to 3.94% for the second quarter of 2019, compared to 4.57% for the second quarter of 2018, primarily resulting from increases in the cost of interest-bearing deposits. The yield on earning assets decreased from 5.37% for the second quarter of 2018 to 5.17% for the second quarter of 2019, primarily due to lower loan yields stemming from decreased accretion income on acquired loans. The cost of average interest-bearing deposits increased from 0.96% for the second quarter of 2018 to 1.42% for the second quarter of 2019 due to increases in deposit rates from federal rate increases and increased competition.

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The following table summarizes the major components of net interest income and the related yields and costs for the periods presented (dollars in thousands): 

	Three Months Ended June 30,
	2019						2018
	Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets
Loans1	$	1,832,639	$	25,278	5.53	%	$	1,501,008	$	21,654	5.79	%
Taxable securities	136,859		871		2.55	%	149,169		898		2.41	%
Tax-exempt securities2	56,475		527		3.75	%	11,698		96		3.29	%
Federal funds sold and other earning assets	102,253		743		2.91	%	56,287		368		2.62	%
Total interest-earning assets	2,128,226		27,419		5.17	%	1,718,162		23,016		5.37	%
Noninterest-earning assets	215,010						205,909
Total assets	$	2,343,236					$	1,924,071
Liabilities and Stockholders’ Equity
Interest-bearing demand deposits	$	329,556	$	464	0.57	%	$	244,208	$	265	0.44	%
Money market and savings deposits	673,502		2,272		1.35	%	597,353		1,418		0.95	%
Time deposits	629,480		3,052		1.94	%	510,445		1,555		1.22	%
Total interest-bearing deposits	1,632,538		5,788		1.42	%	1,352,006		3,238		0.96	%
Securities sold under agreement to repurchase	7,249		6		0.33	%	15,643		11		0.28	%
Federal funds purchased and other borrowings	16,436		117		2.87	%	22,780		206		3.64	%
Subordinated debt	39,205		590		6.03	%	—		—		0.00	%
Total interest-bearing liabilities	1,695,428		6,501		1.54	%	1,390,429		3,455		1.00	%
Noninterest-bearing deposits	336,871						283,413
Other liabilities	14,367						16,944
Total liabilities	2,046,666						1,690,786
Stockholders’ equity	296,570						233,285
Total liabilities and stockholders’ equity	$	2,343,236					$	1,924,071
Net interest income, taxable equivalent			$	20,918					$	19,561
Interest rate spread					3.63	%					4.38	%
Tax equivalent net interest margin					3.94	%					4.57	%
Percentage of average interest-earning assets to average interest-bearing liabilities					125.53	%					123.53	%
Percentage of  average equity to average assets					12.66	%					12.00	%

(1) Includes nonaccrual loans and accretion income on acquired loans included was $1.4 million and $2.6 million for the quarters ended June 30, 2019 and 2018, 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 21.0 percent. The taxable-equivalent adjustment was $116 thousand for the period ended June 30, 2019 and $20 thousand for the period ended June 30, 2018.

First six months of 2019 compared to 2018

Net interest income, taxable equivalent, increased to $42 million for the first six months of 2019 from $36.4 million for the first six months of 2018. Net interest income was positively impacted compared to the prior year due to increases in average loan and securities balances and increases in the yields of the securities portfolios. Average earning assets increased from $1.64 billion for the first six months of 2018 to $2.10 billion for the first six months of 2019 primarily as a result of the acquisitions completed during 2018, and to a lesser extent, continued organic growth. Over this period, average loan balances increased by $393.4 million, average interest-bearing deposits increased by $329.1 million, and average noninterest-bearing deposits increased $71.0 million. The tax equivalent net interest margin decreased to 4.04% for the first six months of 2019, compared to 4.48% for the first six months of 2018, primarily resulting from increases in the cost of interest-bearing deposits. The yield on loans decreased from 5.65% for the first six months of 2018 to 5.58% for the first six months of 2019, primarily due to lower loan yields stemming from decreased accretion income from acquired loans. The cost of average interest-bearing deposits increased from 0.88% for the first six months of 2018 to 1.37% for the first six months of 2019 due to increases in deposit rates from federal rate increases and increased competition.

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The following table summarizes the major components of net interest income and the related yields and costs for the periods

presented (dollars in thousands):

	Six Months Ended June 30,
	2019						2018
	Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets
Loans1	$	1,817,411	$	50,253	5.58	%	$	1,424,021	$	39,884	5.65	%
Taxable securities	141,994		1,842		2.62	%	150,365		1,770		2.37	%
Tax-exempt securities2	55,070		1,065		3.90	%	9,046		142		3.17	%
Federal funds sold and other earning assets	85,798		1,315		3.09	%	55,349		610		2.22	%
Total interest-earning assets	2,100,273		54,475		5.23	%	1,638,781		42,406		5.22	%
Noninterest-earning assets	213,122						191,358
Total assets	$	2,313,395					$	1,830,139
Liabilities and Stockholders’ Equity
Interest-bearing demand deposits	$	318,091	$	887	0.56	%	$	247,011	$	585	0.48	%
Money market and savings deposits	669,067		4,302		1.30	%	561,920		2,288		0.82	%
Time deposits	633,601		5,850		1.86	%	482,707		2,766		1.16	%
Total interest-bearing deposits	1,620,759		11,039		1.37	%	1,291,638		5,639		0.88	%
Securities sold under agreement to repurchase	7,608		14		0.37	%	15,913		24		0.30	%
Federal funds purchased and other borrowings	13,343		221		3.34	%	24,707		360		2.94	%
Subordinated debt	39,195		1,173		6.04	%	—		—		0.00	%
Total interest-bearing liabilities	1,680,905		12,447		1.49	%	1,332,258		6,023		0.91	%
Noninterest-bearing deposits	328,549						257,528
Other liabilities	12,589						12,823
Total liabilities	2,022,043						1,602,609
Stockholders’ equity	291,352						227,530
Total liabilities and stockholders’ equity	$	2,313,395					$	1,830,139
Net interest income, taxable equivalent			$	42,028					$	36,383
Interest rate spread					3.74	%					4.31	%
Tax equivalent net interest margin					4.04	%					4.48	%
Percentage of average interest-earning assets to average interest-bearing liabilities					124.95	%					123.01	%
Percentage of  average equity to average assets					12.59	%					12.43	%

(1) Includes nonaccrual loans and accretion income on acquired loans included was $3.3 million and $3.9 million for the six months ended June 30, 2019 and 2018, 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 21.0 percent. The taxable-equivalent adjustment was $229 thousand for the period ended June 30, 2019 and $34 thousand for the period ended June 30, 2018.

Noninterest Income

Second quarter of 2019 compared to 2018

Noninterest income totaled $8.4 million in the second quarter of 2019, compared to $1.6 million in the second quarter of 2018. Noninterest income to average assets of 1.44% for the quarter decreased from 0.33% in 2018. Noninterest income increased primarily due to the $6.4 million merger termination fee received in the second quarter of 2019. Other increases were due to customer service fees as a result of greater deposit account volumes from the acquisition in the fourth quarter of 2018, increased income from mortgage banking and wealth investment commissions.

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First six months of 2019 compared to 2018

Noninterest income totaled $10.1 million for the first six months of 2019, compared to $3.1 million first six months of 2018. Noninterest income to average assets of 0.88% for the period increased from 0.33% percent in 2018 . Noninterest income increased primarily due to the merger termination fee received in the second quarter of 2019 and due to customer service fees increasing due to the merger in the fourth quarter of 2018. The following table summarizes noninterest income by category (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Customer service fees	$	707	$	557		1,361		$	1,135
Gain (loss) on sale of securities, net	33		(1		)	33		(1		)
Mortgage banking	392		322			674		688
Interchange and debit card transaction fees	143		121			318		267
Merger termination fee	6,400		—			6,400		—
Other	741		578			1,328		984
Total noninterest income	$	8,416	$	1,577		$	10,114	$	3,073

Noninterest Expense

Second quarter of 2019 compared to 2018

Noninterest expense totaled $16.8 million in the second quarter of 2019 compared to $15.3 million in the second quarter of 2018. Noninterest expense to average assets decreased from 3.18% a year ago to 2.88% in the quarter. The increase in noninterest expense compared to the prior year was primarily due to the acquisition of Tennessee Bancshares, Inc. in May 2018 and Foothills Bancorp, Inc. in the fourth quarter of 2018 which resulted in higher salary and employee benefit expenses, higher occupancy expenses, and higher amortization of intangibles. Merger and restructuring expenses in 2019 were higher than 2018 due to the planned merger with Entegra Financial, which was subsequently terminated.

First six months of 2019 compared to 2018

Noninterest expense totaled $32.4 million first six months of 2019 compared to $28.5 million for the first six months of 2018.

Noninterest expense to average assets decreased from 3.14% a year ago to 2.82% in the quarter. The increase in noninterest expense compared to the prior year was primarily due to the acquisition of Tennessee Bancshares, Inc. in May 2018 and Foothills Bancorp, Inc. in the fourth quarter of 2018 which resulted in higher salary and employee benefit expenses, higher occupancy expenses, higher advertising and marketing expense, and higher data processing expenses. Merger and restructuring expenses of $2.7 million in 2019 were higher than 2018 due to the planned merger with Entegra Financial, which was subsequently terminated.

The following table summarizes noninterest expense by category (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Salaries and employee benefits	$	8,984	$	7,649	$	17,382	$	14,825
Occupancy and equipment	1,658		1,522		3,298		3,055
FDIC insurance	180		317		359		419
Other real estate and loan related expense	242		926		732		1,596
Advertising and marketing	259		215		554		399
Data processing	577		600		1,192		1,127
Professional services	489		587		1,151		1,259
Amortization of intangibles	343		229		686		417
Software as service contracts	568		492		1,136		970
Merger related and restructuring expenses	1,796		1,123		2,719		1,621
Other	1,714		1,611		3,179		2,848
Total noninterest expense	$	16,809	$	15,271	$	32,388	$	28,536

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Taxes

Second quarter of 2019 compared to 2018

In the second quarter of 2019 income tax expense totaled $2.9 million compared to $1.3 million a year ago. The effective tax rate was approximately 24.1% in the second quarter of 2019 compared to 24.8% a year ago.

First six months of 2019 compared to 2018

In the first six months of 2019 income tax expense totaled $4.5 million compared to $2.2 million. The effective tax rate was approximately 23.33% a year ago compared to approximately 24.45% percent in the first six months of 2019.

Loan Portfolio Composition

The Company had total net loans outstanding, including organic and purchased loans, of approximately $1.83 billion at June 30, 2019 compared to $1.77 billion at December 31, 2018. Loans secured by real estate, consisting of commercial or residential property, are the principal component of our loan portfolio. We do not generally originate traditional long-term residential fixed rate mortgages for our portfolio but we do originate and hold traditional second mortgage residential real estate loans, adjustable rate mortgages and home equity lines of credit. Even if the principal purpose of the loan is not to finance real estate, when reasonable, we attempt to obtain a security interest in the real estate in addition to any other available collateral to increase the likelihood of ultimate repayment or collection of the loan.

Organic Loans

Our organic net loans increased by $194.3 million, or 16.9%, from December 31, 2018, to $1.34 billion at June 30, 2019. Our goal of streamlining the credit process has improved our efficiency and is a competitive advantage in many of our markets. In addition, the overall business environment continues to rebound from recessionary conditions. Organic loans include loans which were originally purchased non-credit impaired loans but have been renewed since purchase.

Purchased Loans

Purchased non-credit impaired loans of $451.6 million at June 30, 2019 decreased from $584.5 million at December 31, 2018. Since December 31, 2018, our net purchased credit impaired (“PCI”) loans decreased by $2.6 million to $31.6 million at June 30, 2019. The activity within the purchased credit impaired loans will be impacted by how quickly these loans are resolved and/or future acquisition activity.

The following tables summarize the composition of our loan portfolio for the periods presented (in thousands):

	June 30, 2019
	Organic Loans			Purchased Non-Credit Impaired Loans		Purchased Credit Impaired Loans			Total Amount			% of Gross Total
Commercial real estate-mortgage	$	626,399		$	235,148	$	17,040		$	878,587		47.8	%
Consumer real estate-mortgage	255,191			143,653		7,412			406,256			22.1	%
Construction and land development	179,793			20,234		4,669			204,696			11.1	%
Commercial and industrial	283,534			49,827		2,137			335,498			18.3	%
Consumer and other	8,802			2,750		400			11,952			0.7	%
Total gross loans receivable, net of deferred fees	1,353,719			451,612		31,658			1,836,989			100.0	%
Allowance for loan losses	(9,043		)	$	—	(54		)	(9,097		)
Total loans, net	$	1,344,676		$	451,612	$	31,604		$	1,827,892

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	December 31, 2018
	Organic Loans			Purchased Non-Credit Impaired Loans		Purchased Credit Impaired Loans		Total Amount			% of Gross Total
Commercial real estate-mortgage	$	555,915		$	286,430	$	17,682	$	860,027		48.4	%
Consumer real estate-mortgage	224,958			173,584		8,712		407,254			22.9	%
Construction and land development	134,232			49,061		4,602		187,895			10.6	%
Commercial and industrial	234,877			70,820		2,557		308,254			17.3	%
Consumer and other	8,627			4,577		605		13,809			0.8	%
Total gross loans receivable, net of deferred fees	1,158,609			584,472		34,158		1,777,239			100.0	%
Allowance for loan losses	(8,275		)	—		—		(8,275		)
Total loans, net	$	1,150,334		$	584,472	$	34,158	$	1,768,964

Loan Portfolio Maturities

The following table sets forth the maturity distribution of our loans, including the interest rate sensitivity for loans maturing after one year (in thousands).

									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	$	110,936	$	447,516	$	320,135	$	878,587	$	492,311	$	275,339
Consumer real estate-mortgage	44,559		171,054		190,643		406,256		164,810		196,887
Construction and land development	72,340		81,967		50,389		204,696		21,957		110,399
Commercial and industrial	108,429		168,293		58,776		335,498		120,572		106,497
Consumer and other	5,145		6,111		696		11,952		5,333		1,475
Total Loans	$	341,409	$	874,941	$	620,639	$	1,836,989	$	804,983	$	690,597

Nonaccrual, Past Due, and Restructured Loans

Nonperforming loans as a percentage of total gross loans, net of deferred fees, was 0.15% as of June 30, 2019, which decreased from 0.18% as of December 31, 2018. Total nonperforming assets as a percentage of total assets as of June 30, 2019 totaled 0.19% compared to 0.25% as of December 31, 2018. Acquired PCI loans that are included in loan pools are reclassified at acquisition to accrual status and thus are not included as nonperforming assets unless the pools are 90 days or greater past due.

The following table summarizes the Company's nonperforming assets for the periods presented (in thousands).

	June 30, 2019		December 31, 2018
Nonaccrual loans	$	2,148	$	2,696
Accruing loans past due 90 days or more (1)	690		584
Total nonperforming loans	2,838		3,280
Other real estate owned	1,814		2,495
Total nonperforming assets	$	4,652	$	5,775
Restructured loans not included above	$	62	$	116

(1)    Balances include PCI loans past due 90 days or more that are grouped in pools which accrue interest based on pool yields. 

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Potential Problem Loans

At June 30, 2019 potential problem loans amounted to approximately $457 thousand or 0.02% of total loans outstanding. Potential problem loans, which are not included in nonperforming loans, represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have doubts about the borrower's ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by the Bank’s primary regulators for loans classified as substandard or worse, but not considered nonperforming loans.

Allocation of the Allowance for Loan Losses

We maintain the allowance at a level that we deem appropriate to adequately cover the probable losses inherent in the loan portfolio. As of June 30, 2019 and December 31, 2018, our allowance for loan losses was $9.1 million and $8.3 million, respectively, which we deemed to be adequate at each of the respective dates. The increase in the allowance for loan losses at June 30, 2019, as compared to December 31, 2018 is primarily due to increased balances of our organic loan portfolio. Our allowance for loan loss as a percentage of total loans was 0.50% at June 30, 2019 and 0.47% at December 31, 2018.

Our purchased loans were recorded at fair value upon acquisition. The fair value adjustments on the performing purchased loans will be accreted into income over the life of the loans. A provision for loan losses is recorded for any deterioration in these loans subsequent to the acquisition. As of June 30, 2019 the notional balances on PCI loans was $44.9 million while the carrying value was $31.6 million. At June 30, 2019, there were $54 thousand of allowances on PCI loans.

The following table sets forth, based on our best estimate, the allocation of the allowance to types of loans for the periods presented and the percentage of loans in each category to total loans (dollars in thousands):

	June 30, 2019				December 31, 2018
	Amount		Percent		Amount		Percent
Commercial real estate-mortgage	$	4,102	45.1	%	$	3,639	44.0	%
Consumer real estate-mortgage	2,189		24.1	%	1,789		21.6	%
Construction and land development	946		10.4	%	795		9.6	%
Commercial and industrial	1,746		19.2	%	1,746		21.1	%
Consumer and other	114		1.2	%	306		3.7	%
Total allowance for loan losses	$	9,097	100.0	%	$	8,275	100.0	%

The increase in the overall allowance for loan losses is due to the increased balance of organic loans. The allocation by category is determined based on the assigned risk rating, if applicable, and environmental factors applicable to each category of loans. For impaired loans, those loans are reviewed for a specific allowance allocation. Specific valuation allowances related to impaired, non PCI, loans were approximately $534 thousand at December 31, 2018 compared to $345 thousand at June 30, 2019.

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Analysis of the Allowance for Loan Losses

The following is a summary of changes in the allowance for loan losses for the periods presented including the ratio of the allowance for loan losses to total loans as of the end of each period (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Balance at beginning of period	$	8,704		$	6,477		$	8,275		$	5,860
Provision for loan losses	393			617			1,190			1,305
Charged-off loans:
Commercial real estate-mortgage	—			—			—			(38		)
Consumer real estate-mortgage	—			(25		)	(2		)	(25		)
Construction and land development	—			—			—			—
Commercial and industrial	(14		)	—			(333		)	(78		)
Consumer and other	(80		)	(59		)	(210		)	(101		)
Total charged-off loans	(94		)	(84		)	(545		)	(242		)
Recoveries of previously charged-off loans:
Commercial real estate-mortgage	22			—			24			—
Consumer real estate-mortgage	16			27			20			50
Construction and land development	2			3			4			5
Commercial and industrial	41			16			53			56
Consumer and other	13			18			76			40
Total recoveries of previously charged-off loans	94			64			177			151
Net charge-offs	—			(20		)	(368		)	(91		)
Balance at end of period	$	9,097		$	7,074		$	9,097		$	7,074
Ratio of allowance for loan losses to total loans outstanding at end of period	0.50		%	0.45		%	0.50		%	0.45		%
Ratio of net charge-offs (recoveries) to average loans outstanding for the period (annualized)	—		%	0.01		%	0.04		%	0.01		%

We assess the adequacy of the allowance at the end of each calendar quarter. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon our evaluation of the loan portfolio, past loan loss experience, known and inherent risks in the portfolio, the views of the Bank’s regulators, adverse situations that may affect borrowers' ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.

Securities Portfolio

Our securities portfolio, consisting primarily of Federal agency bonds, state and municipal securities, and mortgage-backed securities amounted to fair values of $174.1 million and $201.7 million at June 30, 2019 and December 31, 2018, respectively. Our investments to assets ratio decreased slightly from 8.9 percent at December 31, 2018 to 7.3 percent at June 30, 2019. Our investment portfolio serves many purposes including serving as a potential liquidity source, collateral for public funds, and as a stable source of income.

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The following table shows the amortized cost of the Company’s securities. In the periods presented, all investment securities were classified as available-for-sale (in thousands).

	June 30, 2019		December 31, 2018
U.S. Government agencies	$	24,031	$	44,117
State and political subdivisions	56,251		55,248
Other debt securities	979		977
Mortgage-backed securities	92,718		103,875
Total securities	$	173,979	$	204,217

The following table presents the contractual maturity of the Company's securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at June 30, 2019 (in thousands).  The composition and maturity / repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.

	Maturity By Years
	1 or Less			1 to 5			5 to 10			Over 10			Total
U.S. Government agencies	$	—		$	16,000		$	8,031		$	—		$	24,031
State and political subdivisions	294			—			4,292			51,665			56,251
Other debt securities	—			—			979			—			979
Mortgage-backed securities	—			4,316			16,788			71,614			92,718
Total securities available for sale	$	294		$	20,316		$	30,090		$	123,279		$	173,979
Weighted average yield (1)	2.94		%	1.70		%	2.24		%	3.04		%	3.01		%

(1)  Based on amortized cost, taxable equivalent basis

Deposits

Deposits are the primary source of funds for the Company's lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts, IRAs and CDs. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company's primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of June 30, 2019, brokered deposits represented approximately 11.9% of total deposits.

The Company believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of interest-bearing deposits for the three months ended June 30, 2019 was 1.42% compared to 0.96% for the same period in 2018 and 1.37% and 0.88% for the six months ended June 30, 2019 and June 30, 2018, respectively. The increase in cost was due to increased competition and increases in deposit rates from federal rate increases and higher rates on interest-bearing deposit accounts.

Total deposits as of June 30, 2019 were $2.0 billion, which was an increase of $90.3 million from December 31, 2018. As of June 30, 2019 the Company had outstanding time deposits under $250,000 with balances of $329.7 million and time deposits over $250,000 with balances of $343.5 million.

39

The following table summarizes the maturities of time deposits $250,000 or more (in thousands).

	June 30, 2019
Three months or less	$	110,876
Three to six months	119,698
Six to twelve months	76,529
More than twelve months	36,403
Total	$	343,506

Borrowings

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be downstreamed as Tier 1 capital to the Bank. Short-term borrowings totaled $15.5 million at June 30, 2019 and $11.2 million at December 31, 2018, and consisted primarily of federal funds purchased. Long-term debt totaled $39.2 million at June 30, 2019 and December 31, 2018 and consisted of subordinated debt.

Capital Resources

The Company uses leverage analysis to examine the potential of the institution to increase assets and liabilities using the current capital base. The key measurements included in this analysis are the Bank’s Common Equity Tier 1 capital, Tier 1 capital, leverage and total capital ratios. At June 30, 2019 and December 31, 2018, our capital ratios, including our Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time we may be required to support the capital needs of our bank subsidiary. We believe we have various capital raising techniques available to us to provide for the capital needs of our bank, if necessary.

Liquidity and Off-Balance Sheet Arrangements

At June 30, 2019, we had $376.0 million of pre-approved but unused lines of credit and $15.1 million of standby letters of credit. These commitments generally have fixed expiration dates and many will expire without being drawn upon. The total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to liquidate Federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase Federal funds from other financial institutions.

Market Risk and Liquidity Risk Management

The Bank’s Asset Liability Management Committee (“ALCO”) is responsible for making decisions regarding liquidity and funding solutions based upon approved liquidity, loan, capital and investment policies. The ALCO must consider interest rate sensitivity and liquidity risk management when rendering a decision on funding solutions and loan pricing. To assist in this process the Bank has contracted with an independent third party to prepare quarterly reports that summarize several key asset-liability measurements. In addition, the third party will also provide recommendations to the Bank’s ALCO regarding future balance sheet structure, earnings and liquidity strategies. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management.

Interest Rate Sensitivity

Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. In the normal course of business, we are exposed to market risk arising from fluctuations in interest rates. ALCO measures and evaluates the interest rate risk so that we can meet customer demands for various types of loans and deposits. ALCO determines the most appropriate amounts of on-balance sheet and off-balance sheet items. The primary measurements we use to help us manage interest rate sensitivity are an earnings simulation model and an economic value of equity model. As of March 31, 2019, the model simulations projected that 100 and 200 basis point increases in interest rates would result in positive variances in net interest income of 2.47% and 3.07%, respectively, relative to the current financial statement structure over the next twelve months, while a decrease in interest rates of 100 basis points would result in a negative variance in net interest income of (3.07)% relative to the current financial statement structure over the next twelve months. We do not believe there have been any material changes to the Company’s interest rate sensitivity from March 31, 2019 to the period ended June 30, 2019.

40

Liquidity Risk Management

The purpose of liquidity risk management is to ensure that there are sufficient cash flows to satisfy loan demand, deposit withdrawals, and our other needs. Traditional sources of liquidity for a bank include asset maturities and growth in core deposits. A bank may achieve its desired liquidity objectives from the management of its assets and liabilities and by internally generated funding through its operations. Funds invested in marketable instruments that can be readily sold and the continuous maturing of other earning assets are sources of liquidity from an asset perspective. The liability base provides sources of liquidity through attraction of increased deposits and borrowing funds from various other institutions.

Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and intend to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.

Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows fluctuate significantly, being influenced by interest rates, general economic conditions and competition. Additionally, debt security investments are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.

The Company has no significant investments that mature throughout the next 12 months. The Company also anticipates $13.1 million of principal payments from mortgage-backed securities over the same period. The Company also has unused borrowing capacity available with the Federal Home Loan Bank of Cincinatti, the Federal Reserve, and several correspondent banks. With these sources of funds, the Company currently anticipates adequate liquidity to meet the expected obligations of its customers.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is not required for a Smaller Reporting Company.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including SmartFinancial’s Chief Executive Officer and Chief Financial Officer, SmartFinancial has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2019 (the “Evaluation Date”). Based on such evaluation, SmartFinancial's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, SmartFinancial’s disclosure controls and procedures were effective to ensure that information required to be disclosed by SmartFinancial in the reports that it files or submits under the Exchange Act is (i) accumulated and communicated to SmartFinancial's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decision regarding the required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There were no changes in SmartFinancial’s internal control over financial reporting during SmartFinancial’s fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, SmartFinancial’s internal control over financial reporting.

41

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

SmartFinancial, Inc. and its wholly owned subsidiary, SmartBank, are periodically involved as a plaintiff or a defendant in various legal actions in the ordinary course of business. While the outcome of these matters is not currently determinable,  management does not expect the disposition of any of these matters to have a material adverse impact on the Company’s financial condition, financial statements or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Part I--Item 1A--Risk Factors” in our Form 10-K for the year ended December 31, 2018. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes from the risk factors described in our Form 10-K for the year ended December 31, 2018.

.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

42

Item 6. Exhibits

Exhibit No.	Description	Location
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	Specimen Common Stock Certificate	Incorporated by reference to Exhibit 4.2 to Form 10-K filed March 30, 2016
4.2	The rights of securities holders are defined in the Charter and Bylaws provided in Exhibits 3.1 and 3.2
10.1	Executive Severance Agreement and Release of Claims dated May 2, 2019, by and among SmartFinancial, Inc., SmartBank, and C. Bryan Johnson	Incorporated by reference to Exhibit 10.2 Form 8-K filed May 6, 2019
31.1	Certification pursuant to Rule 13a -14(a)/15d-14(a)	Filed herewith.
31.2	Certification pursuant to Rule 13a -14(a)/15d-14(a)	Filed herewith.
32.1	Certification pursuant to 18 USC Section 1350 -Sarbanes-Oxley Act of 2002	Furnished herewith.
32.2	Certification pursuant to 18 USC Section 1350 -Sarbanes-Oxley Act of 2002	Furnished herewith.
101	Interactive Data Files	Filed herewith.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		SmartFinancial, Inc.
Date:	August 8, 2019		/s/ William Y. Carroll, Jr.
			William Y. Carroll, Jr.
			President and Chief Executive Officer
			(principal executive officer)
Date:	August 8, 2019		/s/ Ronald J. Gorczynski
			Ronald J. Gorczynski
			Executive Vice President and Chief Financial Officer
			(principal financial officer and accounting officer)

43

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William Y. Carroll, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of SmartFinancial, Inc. (the “Registrant”);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this period report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervisions, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 8, 2019	/s/ William Y. Carroll, Jr.
	William Y. Carroll, Jr.
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Ronald J. Gorczynski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SmartFinancial, Inc. (the “Registrant”);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this period report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervisions, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant's board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 8, 2019	/s/ Ronald J. Gorczynski
	Ronald J. Gorczynski
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SmartFinancial, Inc., (the “Company”), on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Y. Carroll, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William Y. Carroll, Jr.

William Y. Carroll, Jr.

President and Chief Executive Officer

August 8, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SmartFinancial, Inc., (the “Company”), on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald J. Gorczynski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald J. Gorczynski

Ronald J. Gorczynski

Chief Financial Officer

August 8, 2019

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	SMARTFINANCIAL INC.
Entity Central Index Key	0001038773
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		13,953,209
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Shell Company	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 44,500	$ 40,015
Interest-bearing deposits with banks	75,371	75,807
Federal funds sold	79,663	0
Total cash and cash equivalents	199,534	115,822
Securities available-for-sale, at fair value	174,114	201,688
Other investments	12,905	11,499
Loans held for sale	4,087	1,979
Loans	1,832,902	1,775,260
Less: Allowance for loan losses	(9,097)	(8,275)
Loans, net	1,823,805	1,766,985
Premises and equipment, net	56,589	56,012
Other real estate owned	1,814	2,495
Goodwill and core deposit intangible, net	78,348	79,034
Bank owned life insurance	24,695	24,381
Other assets	15,366	14,514
Total assets	2,391,257	2,274,409
Deposits:
Noninterest-bearing demand	357,220	319,861
Interest-bearing demand	333,705	311,482
Money market and savings	648,132	641,945
Time deposits	673,243	648,676
Total deposits	2,012,300	1,921,964
Securities sold under agreement to repurchase	8,219	11,756
Federal Home Loan Bank advances and other borrowings	15,460	11,243
Subordinated debt	39,219	39,177
Other liabilities	16,448	7,258
Total liabilities	2,091,646	1,991,398
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized; No shares issued and outstanding	0	0
Common stock, $1 par value; 40,000,000 shares authorized; 13,953,209 and 13,933,504 shares issued and outstanding, respectively	13,953	13,933
Additional paid-in capital	232,386	231,852
Retained earnings	53,843	39,991
Accumulated other comprehensive loss	(571)	(2,765)
Total shareholders' equity	299,611	283,011
Total liabilities and shareholders' equity	$ 2,391,257	$ 2,274,409

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	13,953,209	13,933,504
Common stock, shares outstanding (in shares)	13,953,209	13,933,504

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
INTEREST INCOME
Loans, including fees	$ 25,278	$ 21,652	$ 50,253	$ 39,880
Securities available-for-sale:
Taxable	871	897	1,842	1,770
Tax-exempt	411	76	836	112
Federal funds sold and other earning assets	743	368	1,315	609
Total interest income	27,303	22,993	54,246	42,371
INTEREST EXPENSE
Deposits	5,788	3,238	11,039	5,639
Securities sold under agreements to repurchase	6	11	14	23
Federal Home Loan Bank advances and other borrowings	117	206	221	360
Subordinated debt	590	0	1,173	0
Total interest expense	6,501	3,455	12,447	6,022
Net interest income	20,802	19,538	41,799	36,349
Provision for loan losses	393	617	1,190	1,305
Net interest income after provision for loan losses	20,409	18,921	40,609	35,044
NONINTEREST INCOME
Customer service fees	707	557	1,361	1,135
Gain (loss) on sale of securities, net	33	(1)	33	(1)
Mortgage banking	392	322	674	688
Interchange and debit card transaction fees	143	121	318	267
Merger termination fee	6,400	0	6,400	0
Other	741	578	1,328	984
Total noninterest income	8,416	1,577	10,114	3,073
NONINTEREST EXPENSE
Salaries and employee benefits	8,984	7,649	17,382	14,825
Occupancy and equipment	1,658	1,522	3,298	3,055
FDIC insurance	180	317	359	419
Other real estate and loan related expense	242	926	732	1,596
Advertising and marketing	259	215	554	399
Data processing	577	600	1,192	1,127
Professional services	489	587	1,151	1,259
Amortization of intangibles	342	229	686	417
Software as service contracts	568	492	1,136	970
Merger related and restructuring expenses	1,796	1,123	2,719	1,621
Other	1,714	1,611	3,179	2,848
Total noninterest expense	16,809	15,271	32,388	28,536
Income before income tax expense	12,016	5,227	18,335	9,581
Income tax expense	2,895	1,295	4,483	2,235
Net income	$ 9,121	$ 3,932	$ 13,852	$ 7,346
EARNINGS PER COMMON SHARE
Basic (in dollars per share)	$ 0.65	$ 0.32	$ 0.99	$ 0.63
Diluted (in dollars per share)	$ 0.65	$ 0.32	$ 0.99	$ 0.62
Weighted average common shares outstanding
Basic (in shares)	13,951,643	12,201,185	13,946,856	11,708,746
Diluted (in shares)	14,046,500	12,320,498	14,036,790	11,822,497

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 9,121	$ 3,932	$ 13,852	$ 7,346
Other comprehensive income, net of tax:
Unrealized holding gains (losses) and hedge effects on securities available-for-sale arising during the period	(112)	(397)	2,219	(1,769)
Reclassification adjustment for (gains) losses realized	(25)	1	(25)	1
Total other comprehensive income (loss)	(137)	(396)	2,194	(1,768)
Comprehensive income	$ 8,984	$ 3,536	$ 16,046	$ 5,578

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
BALANCE (in shares) at Dec. 31, 2017		11,152,561
BALANCE at Dec. 31, 2017	$ 205,852	$ 11,153	$ 174,009	$ 21,889	$ (1,198)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	7,346			7,346
Other comprehensive income (loss)	(1,768)				(1,768)
Stock awards (in shares)		394
Stock awards	9	$ 0	9
Exercise of stock options (in shares)		92,645
Exercise of stock options	1,071	$ 93	978
Shareholders of TN Bancshares, Inc. (in shares)		1,458,981
Shareholders of TN Bancshares, Inc.	34,732	$ 1,459	33,273
Stock compensation expense	244		244
BALANCE (in shares) at Jun. 30, 2018		12,704,581
BALANCE at Jun. 30, 2018	247,487	$ 12,705	208,513	29,235	(2,966)
BALANCE (in shares) at Mar. 31, 2018		11,233,806
BALANCE at Mar. 31, 2018	208,949	$ 11,234	174,981	25,303	(2,569)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	3,932			3,932
Other comprehensive income (loss)	(396)
Stock awards (in shares)		394
Stock awards	9	$ 0	9
Exercise of stock options (in shares)		11,400
Exercise of stock options	120	$ 11	109
Shareholders of TN Bancshares, Inc. (in shares)		1,458,981
Shareholders of TN Bancshares, Inc.	34,732	$ 1,459	33,273
Stock compensation expense	141		141
BALANCE (in shares) at Jun. 30, 2018		12,704,581
BALANCE at Jun. 30, 2018	247,487	$ 12,705	208,513	29,235	(2,966)
BALANCE (in shares) at Dec. 31, 2018		13,933,504
BALANCE at Dec. 31, 2018	283,011	$ 13,934	231,852	39,991	(2,765)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	13,852			13,852
Other comprehensive income (loss)	2,194				2,194
Stock awards (in shares)		3,298
Stock awards	65	$ 3	61
Exercise of stock options (in shares)		16,407
Exercise of stock options	213	$ 16	196
Stock compensation expense	276		276
BALANCE (in shares) at Jun. 30, 2019		13,953,209
BALANCE at Jun. 30, 2019	299,611	$ 13,953	232,386	53,843	(571)
BALANCE (in shares) at Mar. 31, 2019		13,951,590
BALANCE at Mar. 31, 2019	290,481	$ 13,952	232,241	44,722	(434)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	9,121			9,121
Other comprehensive income (loss)	(137)				(137)
Exercise of stock options (in shares)		1,619
Exercise of stock options	14	$ 2	12
Stock compensation expense	133		133
BALANCE (in shares) at Jun. 30, 2019		13,953,209
BALANCE at Jun. 30, 2019	$ 299,611	$ 13,953	$ 232,386	$ 53,843	$ (571)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 13,852	$ 7,346
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,088	1,908
Accretion of fair value purchase accounting adjustments, net	(3,091)	(4,205)
Provision for loan losses	1,190	1,305
Stock compensation expense	276	244
(Gains) losses from redemption and sale on securities available-for-sale	(33)	1
Deferred income tax expense	1,039	945
Increase in cash surrender value of bank owned life insurance	(314)	(297)
Loss on disposal of fixed assets	14	41
Net (gains) losses from sale of other real estate owned	(16)	372
Net gains from sale of loans	(674)	(688)
Origination of loans held for sale	(33,491)	(29,499)
Proceeds from sales of loans held for sale	32,057	25,648
Net change in:
Accrued interest receivable	(612)	(250)
Accrued interest payable	454	48
Other assets	(593)	2,546
Other liabilities	5,792	(1,324)
Net cash provided by operating activities	17,938	4,141
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale	16,515	24,563
Proceeds from maturities and calls of securities available-for-sale	10,305	2,525
Proceeds from paydowns of securities available-for-sale	6,554	7,436
Purchases of securities available-for-sale	(1,054)	(17,240)
Purchases of other investments	(1,406)	(1,378)
Net cash and cash equivalents received in business combination	0	5,653
Net increase in loans	(55,323)	(65,138)
Purchases of premises and equipment	(2,011)	(992)
Proceeds from sale of other real estate owned	1,100	2,126
Net cash used in investing activities	(25,320)	(42,445)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	90,136	75,410
Net decrease in securities sold under agreements to repurchase	(3,537)	(5,420)
Issuance of common stock	278	1,080
Proceeds from Federal Home Loan Bank advances and other borrowings	120,176	127,040
Repayment of Federal Home Loan Bank advances and other borrowings	(115,959)	(102,600)
Net cash provided by financing activities	91,094	95,510
NET INCREASE IN CASH AND CASH EQUIVALENTS	83,712	57,206
CASH AND CASH EQUIVALENTS, beginning of period	115,822	113,027
CASH AND CASH EQUIVALENTS, end of period	199,534	170,233
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest	11,993	5,974
Cash paid during the period for income taxes	2,630	713
NONCASH INVESTING AND FINANCING ACTIVITIES
Change in unrealized (gains) losses on securities available-for-sale	(2,664)	2,348
Acquisition of real estate through foreclosure	403	2,351
Financed sales of other real estate owned	0	257
Change in goodwill due to acquisition	0	15,739
Initial recognition of operating lease right-of-use assets	2,344	0
Initial recognition of operating lease liabilities	$ 2,344	$ 0

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Presentation of Financial Information

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Presentation of Financial Information

Presentation of Financial Information

Nature of Business:

SmartFinancial, Inc. (the "Company") is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, SmartBank (the "Bank"). The Company provides a variety of financial services to individuals and corporate customers through its offices in Tennessee, Alabama, Florida, and Georgia. The Bank's primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Basis of Presentation and Accounting Estimates:

The consolidated financial information in this report for June 30, 2019 and June 30, 2018 has not been audited by an independent registered public accounting firm. The consolidated financial statements presented herein conform to U.S. generally accepted accounting principles and to general industry practices. In the opinion of the Company’s management, the accompanying interim financial statements contain all material adjustments necessary to present fairly the Company's financial condition, the results of operations, and cash flows for the interim period. Results for interim periods are not necessarily indicative of the results to be expected for a full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the U.S, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of foreclosed assets and deferred taxes, other than temporary impairments of securities, the fair value of financial instruments, goodwill, and the fair value of assets acquired and liabilities assumed in acquisitions.

Recently Issued and Adopted Accounting Pronouncements:

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

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

The Company also elected certain relief options offered in ASU 2016-02 including the package of practical expedients, the option not to separate lease and non-lease components and instead to account for them as a single lease component, and the option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less). We elected to apply certain practical adoption expedients provided under the updates whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of right-of-use assets. The Company has several lease agreements, such as branch locations or office space, which are considered operating leases, and therefore, were not previously recognized on the Company’s consolidated balance sheet. The new guidance requires these lease agreements to be recognized on the consolidated balance sheet as a right-of-use asset and a corresponding lease liability. The new guidance did not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 8 Leases for more information.

In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and (2) lessors may elect not to separate lease and non-lease components when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (January 1, 2019 for the Company). The Company adopted ASU 2018-11 on its required effective date of January 1, 2019 and elected both transition options mentioned above.

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

As of January 1, 2019, the Company adopted ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonably estimable. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements:

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2018 as filed with the Securities and Exchange Commission. The following is a summary of recent authoritative pronouncements issued since December 31, 2018 but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

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

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU changed the credit loss model on financial instruments measured at amortized cost, available for sale securities and certain purchased financial instruments. Credit losses on financial instruments measured at amortized cost will be determined using a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. Purchased financial assets with more-than-insignificant credit deterioration since origination ("PCD assets" which are currently named "PCI Loans") measured at amortized cost will have an allowance for credit losses established at acquisition as part of the purchase price. Subsequent increases or decreases to the allowance for credit losses on PCD assets will be recognized in the income statement. Interest income should be recognized on PCD assets based on the effective interest rate, determined excluding the discount attributed to credit losses at acquisition. Credit losses relating to available-for-sale debt securities will be recognized through an allowance for credit losses. The amount of the credit loss is limited to the amount by which fair value is below amortized cost of the available-for-sale debt security. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years for the Company and other SEC filers. Early adoption is permitted and if early adopted, all provisions must be adopted in the same period. The amendments should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the period adopted. A prospective approach is required for securities with other than temporary impairment recognized prior to adoption. The Company is continuing its implementation efforts through its company-wide implementation team. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, conferences, and peer bank meetings. The team continues to evaluate and validate data resources and different loss methodologies. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular an increase to the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact. The guidance of ASU 2016-13 was recently amended by ASU 2018-19, Codification Improvements to Topic 326, FinancialInstruments - Credit Losses, which changed the effective date for non-public companies and clarified that operating lease receivables are not within the scope of the standard.

On July 17, 2019 the Financial Accounting Standards Board unanimously voted to propose a delay for the implementation of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).  The Board decided that CECL will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies, this will be January 1, 2020.  The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the Board decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies).  The Board decided that the comment period for the proposed Update would be 30 days.

Reclassifications:

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

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Earnings per share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per share

Earnings Per Share

Basic earnings per common share represents net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance (excluding tax impact). Potential common shares that may be issued by the Company relate solely to outstanding stock options, determined using the treasury stock method, and restricted stock awards, determined by the fair value of the Company's stock on date of grant.

The following is a summary of the basic and diluted earnings per share computation (dollars in thousands, except for share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net income	$	9,121	$	3,932	$	13,852	$	7,346
Weighted average basic common shares outstanding	13,951,643		12,201,185		13,946,856		11,708,746
Effect of dilutive securities	94,857		119,313		89,934		113,751
Weighted average dilutive shares outstanding	14,046,500		12,320,498		14,036,790		11,822,497
Basic earnings per common share	$	0.65	$	0.32	$	0.99	$	0.63
Diluted earnings per common share	$	0.65	$	0.32	$	0.99	$	0.62

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

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Securities

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

The amortized cost and fair value of securities available-for-sale are summarized as follows (in thousands): 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	24,031	$	22	$	(65	)	$	23,988
Municipal securities	56,251		492		(17		)	56,726
Other debt securities	979		—		(42		)	937
Mortgage-backed securities (GSEs)	92,718		154		(409		)	92,463
	$	173,979	$	668	$	(533	)	$	174,114

December 31, 2018:
U.S. Government-sponsored enterprises (GSEs)	$	44,117	$	12	$	(626	)	$	43,503
Municipal securities	55,248		276		(363		)	55,161
Other debt securities	977		—		(67		)	910
Mortgage-backed securities (GSEs)	103,875		153		(1,914		)	102,114
	$	204,217	$	441	$	(2,970	)	$	201,688

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

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

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

	Amortized Cost		Fair Value
Due in one year or less	$	294	$	297
Due from one year to five years	16,000		15,935
Due from five years to ten years	13,302		13,283
Due after ten years	51,665		52,136
	81,261		81,651
Mortgage-backed securities	92,718		92,463
	$	173,979	$	174,114

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities available-for-sale have been in a continuous unrealized loss position (in thousands): 

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
June 30, 2019:
U.S. Government- sponsored enterprises (GSEs)	$	—	$	—		$	10,935	$	(65	)	$	10,935	$	(65	)
Municipal securities	—		—			2,021		(17		)	2,021		(17		)
Other debt securities	—		—			937		(42		)	937		(42		)
Mortgage-backed securities (GSEs)	5,165		(20		)	43,805		(389		)	48,970		(409		)
	$	5,165	$	(20	)	$	57,698	$	(513	)	$	62,863	$	(533	)

December 31, 2018:
U.S. Government- sponsored enterprises (GSEs)	$	14,763	$	(237	)	$	13,728	$	(389	)	$	28,491	$	(626	)
Municipal securities	16,455		(150		)	4,767		(213		)	21,222		(363		)
Other debt securities	—		—			910		(67		)	910		(67		)
Mortgage-backed securities (GSEs)	10,516		(155		)	69,884		(1,759		)	80,400		(1,914		)
	$	41,734	$	(542	)	$	89,289	$	(2,428	)	$	131,023	$	(2,970	)

At June 30, 2019, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross Unrealized Loss			Number of Securities
U.S. Government-sponsored enterprises (GSEs)	$	(65	)	3
Municipal securities	(17		)	4
Other debt securities	(42		)	1
Mortgage-backed securities (GSEs)	(389		)	47
	$	(513	)	55

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

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

The following is the amortized cost and carrying value of other investments (in thousands):

	June 30, 2019		December 31, 2018
Federal Reserve Bank stock	$	7,909	$	7,010
Federal Home Loan Bank stock	4,646		4,139
First National Bankers Bank stock	350		350
	$	12,905	$	11,499

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

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

Portfolio Segmentation:

Major categories of loans are summarized as follows (in thousands):

	June 30, 2019									December 31, 2018
	PCI Loans1			All Other Loans2			Total			PCI Loans1		All Other Loans2			Total
Commercial real estate	$	17,040		$	861,547		$	878,587		$	17,682	$	842,345		$	860,027
Consumer real estate	7,412			398,844			406,256			8,712		398,542			407,254
Construction and land development	4,669			200,027			204,696			4,602		183,293			187,895
Commercial and industrial	2,137			333,361			335,498			2,557		305,697			308,254
Consumer and other	400			11,552			11,952			605		13,204			13,809
Total loans	31,658			1,805,331			1,836,989			34,158		1,743,081			1,777,239
Less:  Allowance for loan losses	(54		)	(9,043		)	(9,097		)	—		(8,275		)	(8,275		)
Loans, net	$	31,604		$	1,796,288		$	1,827,892		$	34,158	$	1,734,806		$	1,768,964

¹Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

² Includes loans held for sale.

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

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	861,288	$	398,061	$	199,326	$	333,109	$	11,552	$	1,803,336
Impaired loans	259		783		701		252		—		1,995
	861,547		398,844		200,027		333,361		11,552		1,805,331
PCI loans	17,040		7,412		4,669		2,137		400		31,658
Total	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

December 31, 2018:
Performing loans	$	841,709	$	397,306	$	182,746	$	304,673	$	13,088	$	1,739,522
Impaired loans	636		1,236		547		1,024		116		3,559
	842,345		398,542		183,293		305,697		13,204		1,743,081
PCI loans	17,682		8,712		4,602		2,557		605		34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	4,062	$	1,935	$	946	$	1,641	$	114	$	8,698
PCI loans	40		14		—		—		—		54
Impaired loans	—		240		—		105		—		345
Total	$	4,102	$	2,189	$	946	$	1,746	$	114	$	9,097

December 31, 2018:
Performing loans	$	3,639	$	1,763	$	795	$	1,304	$	240	$	7,741
PCI loans	—		—		—		—		—		—
Impaired loans	—		26		—		442		66		534
Total	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Three Months Ended June 30, 2019:
Beginning balance	$	4,074	$	1,949	$	854	$	1,709		$	118		$	8,704
Loans charged off	—		—		—		(14		)	(80		)	(94		)
Recoveries of charge-offs	22		16		2		41			13			94
Provision (reallocation) charged to expense	6		224		90		10			63			393
Ending balance	$	4,102	$	2,189	$	946	$	1,746		$	114		$	9,097

Three Months Ended June 30, 2018:
Beginning balance	$	2,925	$	1,519		$	627	$	1,210	$	196		$	6,477
Loans charged off	—		(25		)	—		—		(59		)	(84		)
Recoveries of charge-offs	—		27			3		16		18			64
Provision (reallocation) charged to expense	210		7			114		141		145			617
Ending balance	$	3,135	$	1,528		$	744	$	1,367	$	300		$	7,074

	Commercial Real Estate		Consumer Real Estate			Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Six Months Ended June 30, 2019:
Beginning balance	$	3,639	$	1,789		$	795	$	1,746		$	306		$	8,275
Loans charged off	—		(2		)	—		(333		)	(210		)	(545		)
Recoveries of charge-offs	24		20			4		53			76			177
Provision (reallocation) charged to expense	439		382			147		280			(58		)	1,190
Ending balance	$	4,102	$	2,189		$	946	$	1,746		$	114		$	9,097

Six Months Ended June 30, 2018:
Beginning balance	$	2,465		$	1,596		$	521	$	1,062		$	216		$	5,860
Loans charged off	(38		)	(25		)	—		(78		)	(101		)	(242		)
Recoveries of charge-offs	—			50			5		56			40			151
Provision (reallocation) charged to expense	708			(93		)	218		327			145			1,305
Ending balance	$	3,135		$	1,528		$	744	$	1,367		$	300		$	7,074

The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands):

	June 30, 2019
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	848,287	$	395,438	$	198,469	$	326,328	$	11,459	$	1,779,981
Watch	12,387		2,353		624		5,492		44		20,900
Special mention	500		8		156		1,181		—		1,845
Substandard	373		875		778		352		25		2,403
Doubtful	—		170		—		8		24		202
Total	$	861,547	$	398,844	$	200,027	$	333,361	$	11,552	$	1,805,331

PCI Loans:
Pass	$	12,795	$	5,050	$	3,576	$	2,039	$	354	$	23,814
Watch	2,463		453		1,093		3		14		4,026
Special mention	920		434		—		—		7		1,361
Substandard	862		1,475		—		95		25		2,457
Doubtful	—		—		—		—		—		—
Total	$	17,040	$	7,412	$	4,669	$	2,137	$	400	$	31,658
Total loans	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

	December 31, 2018
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	834,912	$	394,728	$	182,524	$	303,805	$	12,927	$	1,728,896
Watch	6,791		2,678		64		1,090		135		10,758
Special mention	—		14		158		137		—		309
Substandard	642		1,122		547		462		142		2,915
Doubtful	—		—		—		203		—		203
Total	$	842,345	$	398,542	$	183,293	$	305,697	$	13,204	$	1,743,081

PCI Loans:
Pass	$	14,050	$	5,617	$	4,033	$	2,382	$	541	$	26,623
Watch	1,805		756		569		—		17		3,147
Special mention	1,030		446		—		50		10		1,536
Substandard	797		1,893		—		125		37		2,852
Doubtful	—		—		—		—		—		—
Total	$	17,682	$	8,712	$	4,602	$	2,557	$	605	$	34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

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 indicator 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 an aging analysis of our loan portfolio (in thousands): 

	June 30, 2019
	30-60 Days  Past Due and Accruing		61-89 Days  Past Due and Accruing		Past Due 90  Days or More and Accruing		Nonaccrual		Total  Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	133	$	—	$	139	$	124	$	396	$	17,040	$	861,151	$	878,587
Consumer real estate	1,026		226		441		1,024		2,717		7,412		396,127		406,256
Construction and land development	838		112		—		624		1,574		4,669		198,453		204,696
Commercial and industrial	417		30		95		336		878		2,137		332,483		335,498
Consumer and other	131		—		15		40		186		400		11,366		11,952
Total	$	2,545	$	368	$	690	$	2,148	$	5,751	$	31,658	$	1,799,580	$	1,836,989

	December 31, 2018
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	377	$	19	$	—	$	272	$	668	$	17,682	$	841,677	$	860,027
Consumer real estate	1,168		462		454		844		2,928		8,712		395,614		407,254
Construction and land development	343		—		—		547		890		4,602		182,403		187,895
Commercial and industrial	155		—		101		909		1,165		2,557		304,532		308,254
Consumer and other	117		—		29		124		270		605		12,934		13,809
Total	$	2,160	$	481	$	584	$	2,696	$	5,921	$	34,158	$	1,737,160	$	1,777,239

Impaired Loans:

The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded (in thousands):  

	June 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	259	$	263	$	—	$	636	$	648	$	—
Consumer real estate	385		386		—		1,073		1,089		—
Construction and land development	701		701		—		547		547		—
Commercial and industrial	—		—		—		69		70		—
Consumer and other	—		—		—		29		33		—
	1,345		1,350		—		2,354		2,387		—
Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		—		—		—
Consumer real estate	398		399		240		163		205		26
Construction and land development	—		—		—		—		—		—
Commercial and industrial	252		267		105		955		973		442
Consumer and other	—		—		—		87		87		66
	650		666		345		1,205		1,265		534
PCI loans:
Commercial real estate	2,523		2,834		40		—		—		—
Consumer real estate	1,096		1,261		14		—		—		—
	3,619		4,095		54		—		—		—
Total impaired loans	$	5,614	$	6,111	$	399	$	3,559	$	3,652	$	534

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	424	$	5	$	793	$	8
Consumer real estate	624		—		841		7
Construction and land development	650		2		547		—
Commercial and industrial	16		—		67		2
Consumer and other	14		—		8		—
	1,728		7		2,256		17
Impaired loans with a valuation allowance:
Commercial real estate	24		—		—		—
Consumer real estate	217		2		460		—
Construction and land development	28		—		—		—
Commercial and industrial	293		—		300		3
Consumer and other	13		—		103		1
	575		2		863		4
PCI loans:
Commercial real estate	2,529		—		14		—
Consumer real estate	1,099		—		—		—
	3,628		—		14		—
Total impaired loans	$	5,931	$	9	$	3,133	$	21

	Six Months Ended June 30,
	2019					2018
	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	495	$	25		$	670	$	15
Consumer real estate	774		4			699		12
Construction and land development	616		1			547		—
Commercial and industrial	33		1			58		3
Consumer and other	19		—			5		—
	1,937		31			1,979		30
Impaired loans with a valuation allowance:
Commercial real estate	16		—			8		—
Consumer real estate	199		9			642		11
Construction and land development	19		—			—		—
Commercial and industrial	514		9			257		5
Consumer and other	38		—			72		2
	786		18			979		18
PCI loans:
Commercial real estate	1,686		(9		)	5		3
Consumer real estate	732		2			—		—
	2,418		(7		)	5		3
Total impaired loans	$	5,141	$	42		$	2,963	$	51

Troubled Debt Restructurings:

At June 30, 2019 and December 31, 2018, 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.

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 June 30, 2019 and December 31, 2018, management had approximately $62 thousand and $116 thousand, respectively, in loans that met the criteria for restructured, none of which were on nonaccrual.

There were no loans that were modified as troubled debt restructurings during the six month period ended June 30, 2019. There was one commercial real estate loan for approximately $622 thousand modified as troubled debt restructurings during the six month period ended June 30, 2018.

There were no loans that were modified as troubled debt restructurings during the past six months and for which there was a subsequent payment default.

Foreclosure Proceedings and Balances:

As of June 30, 2019, there was $257 thousand residential real estate included in other real estate owned and there were no consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure.

Purchased Credit Impaired Loans:

The Company has acquired loans where 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 are as follows (in thousands):

	June 30, 2019			December 31, 2018
Commercial real estate	$	23,895		$	24,849
Consumer real estate	9,556			11,108
Construction and land development	5,700			5,731
Commercial and industrial	5,125			5,824
Consumer and other	612			892
Total loans	44,888			48,404
Less: Remaining purchase discount	(13,230		)	(14,246		)
Total loans, net of purchase discount	31,658			34,158
Less: Allowance for loan losses	(54		)	—
Carrying amount, net of allowance	$	31,604		$	34,158

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Accretable yield, beginning of period	$	8,644		$	7,780		$	7,052		$	9,287
Additions	—			1,292			—			1,292
Accretion income	(1,026		)	(1,928		)	(2,280		)	(3,029		)
Reclassification	323			120			1,358			382
Other changes, net	339			(58		)	2,150			(726		)
Accretable yield, end of period	$	8,280		$	7,206		$	8,280		$	7,206

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Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

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 on the balance sheet. 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 are as follows (in thousands):

	June 30, 2019		December 31, 2018
Commitments to extend credit	$	376,037	$	333,900
Standby letters of credit	15,090		12,200

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 June 30, 2019 and December 31, 2018, the carrying amount of liabilities related to the Company's obligation to perform under standby letters of credit was insignificant.

The Company is subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company will be material to the Company's consolidated financial position. On an on-going basis the Company assesses any potential liabilities or contingencies in connection with such legal proceedings. For those matters where it is deemed probable that the Company will incur losses and the amount of the losses can be reasonably estimated, the Company would record an expense and corresponding liability in its consolidated financial statements.

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Fair Value Disclosures

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

Determination 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 the “Fair Value Measurements and Disclosures” ASC Topic 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. 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.

ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction 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 business 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.

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 1 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.

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis are as follows (in thousands): 

Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	23,988	$	—	$	23,988	$	—
Municipal securities	56,726		—		56,726		—
Other debt securities	937		—		937		—
Mortgage-backed securities (GSEs)	92,463		—		92,463		—
Total securities available-for-sale	$	174,114	$	—	$	174,114	$	—
Liabilities:
Derivative financial instruments	$	3,411	$	—	$	3,411	$	—

December 31, 2018:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	43,503	$	—	$	43,503	$	—
Municipal securities	55,161		—		55,161		—
Other debt securities	910		—		910		—
Mortgage-backed securities (GSEs)	102,114		—		102,114		—
Total securities available-for-sale	$	201,688	$	—	$	201,688	$	—
Liabilities:
Derivative financial instruments	$	1,174	—		$	1,174	—

In the periods presented, 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):

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Impaired loans	$	3,870	$	—	$	—	$	3,870
Other real estate owned	1,814		—		—		1,814
December 31, 2018:
Impaired loans	$	671	$	—	$	—	$	671
Other real estate owned	2,495		—		—		2,495

For Level 3 assets measured at fair value on a non-recurring basis, the significant unobservable inputs used in the fair value measurements are presented below (in thousands).

	Fair Value		Valuation Technique	Significant Other Unobservable Input	Weighted Average of Input
June 30, 2019:
Impaired loans	$	3,870	Appraisal and cashflow	Appraisal and cashflow discounts	9	%
Other real estate owned	1,814		Appraisal	Appraisal discounts	12	%
December 31, 2018:
Impaired loans	$	671	Appraisal	Appraisal Discounts	44	%
Other real estate owned	2,495		Appraisal	Appraisal Discounts	23	%

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. An impaired loan 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 was 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.

Other real estate owned: Other real estate owned, 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 are as follows (in thousands):

			Fair Value Measurements Using
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
June 30, 2019:
Assets:
Cash and cash equivalents	$	199,534	$	199,534	$	—	$	—	$	199,534
Securities available-for-sale	174,114		—		174,114		—		174,114
Other investments	12,905		N/A		N/A		N/A		N/A
Loans, net	1,827,892		—		—		1,822,099		1,822,099
Liabilities:
Noninterest-bearing demand deposits	357,220		—		357,220		—		357,220
Interest-bearing demand deposits	333,705		—		333,705		—		333,705
Money market and savings deposits	648,132		—		648,132		—		648,132
Time deposits	673,243		—		674,278		—		674,278
Securities sold under agreements to repurchase	8,219		—		8,219		—		8,219
Federal Home Loan Bank advances and other borrowings	15,460		—		15,460		—		15,460
Subordinated debt	39,219		—		—		37,618		37,618
Derivative financial instruments	3,411		—		3,411		—		3,411

December 31, 2018:
Assets:
Cash and cash equivalents	$	115,822	$	115,822	$	—	$	—	$	115,822
Securities available-for-sale	201,688		—		201,688		—		201,688
Other investments	11,499		N/A		N/A		N/A		N/A
Loans, net	1,768,964		—		—		1,766,838		1,766,838
Liabilities:
Noninterest-bearing demand deposits	319,861		—		319,861		—		319,861
Interest-bearing demand deposits	311,482		—		311,482		—		311,482
Money market and savings deposits	641,945		—		641,945		—		641,945
Time deposits	648,676		—		649,169		—		649,169
Securities sold under agreements to repurchase	11,756		—		11,756		—		11,756
Federal Home Loan Bank advances and other borrowings	11,243		—		11,243		—		11,243
Subordinated debt	39,177		—		—		39,190		39,190
Derivative financial instruments	1,174		—		1,174		—		1,174

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. 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 unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Derivatives

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Financial derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative net investment hedge instrument as well as the offsetting gain or loss on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate tax-exempt callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to LIBOR-based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. The Company has elected early adoption of ASU 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities, which allows such partial term hedge designations.

A summary of the Company's fair value hedge relationships for the periods presented are as follows (in thousands):

Liability derivatives	Balance Sheet Location	Weighted Average Remaining Maturity (In Years)	Weighted Average Pay Rate	Receive Rate	Notional Amount		Estimated Fair Value
June 30, 2019:
Interest rate swap agreements - securities	Other liabilities	8.70	3.09%	3 month LIBOR	$	36,000	$	(3,411	)
December 31, 2018:
Interest rate swap agreements - securities	Other liabilities	9.23	3.10%	3 month LIBOR	$	35,000	$	(1,174	)

The effects of the Company's fair value hedge relationships reported in interest income on tax-exempt available-for-sale securities

on the consolidated income statement were as follows (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Interest income on tax-exempt securities	$	449		$	—	$	906		$	—
Effects of fair value hedge relationships	(38		)	—		(70		)	—
Reported interest income on tax-exempt securities	$	411		$	—	$	836		$	—
	Three Months Ended June 30,					Six Months Ended June 30,
Gain (loss) on fair value hedging relationship	2019			2018		2019			2018
Interest rate swap agreements - securities:
Hedged items	$	1,348		—		$	2,237		—
Derivative designated as hedging instruments	(1,348		)	—		(2,237		)	—

There were no hedging relationships for the three and six months ending June 30, 2018.

The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges (in thousands):

Line item on the balance sheet	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
June 30, 2019:
Securities available-for-sale	$	42,850	$	3,411
December 31, 2018:
Securities available-for-sale	$	39,730	$	1,174

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02 and all subsequent ASUs that modified this topic (collectively referred to as "Topic 842"). For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2033. All of our leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (dollars in thousands):

	Classification	June 30, 2019
Assets:
Operating lease right-of-use assets	Other assets	$	2,085
Liabilities:
Operating lease liabilities	Other liabilities	$	2,099

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.

As of June 30, 2019, the weighted average remaining lease term was 7.49 years and the weighted average discount rate was 3.23%.

The following table represents lease costs and other lease information, in thousands. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance (in thousands).

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease costs:
Operating lease costs	$	157	$	315
Short-term lease costs	5		11
Variable lease costs	23		46
Total	$	185	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	150	$	302

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

	Amounts
June 30, 2020	$	466
June 30, 2021	486
June 30, 2022	222
June 30, 2023	152
June 30, 2024	74
Thereafter	699
Total future minimum lease payments	2,099
Amounts representing interest	(319		)
Present value of net future minimum lease payments	$	1,780

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Presentation of Financial Information (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [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"). The Company provides a variety of financial services to individuals and corporate customers through its offices in Tennessee, Alabama, Florida, and Georgia. The Bank's primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Basis of Presentation and Accounting Estimates

Basis of Presentation and Accounting Estimates:

The consolidated financial information in this report for June 30, 2019 and June 30, 2018 has not been audited by an independent registered public accounting firm. The consolidated financial statements presented herein conform to U.S. generally accepted accounting principles and to general industry practices. In the opinion of the Company’s management, the accompanying interim financial statements contain all material adjustments necessary to present fairly the Company's financial condition, the results of operations, and cash flows for the interim period. Results for interim periods are not necessarily indicative of the results to be expected for a full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the U.S, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of foreclosed assets and deferred taxes, other than temporary impairments of securities, the fair value of financial instruments, goodwill, and the fair value of assets acquired and liabilities assumed in acquisitions.

Recently Issued and Adopted Accounting Pronouncements; Recently Issued Not Yet Effective Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements:

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

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

The Company also elected certain relief options offered in ASU 2016-02 including the package of practical expedients, the option not to separate lease and non-lease components and instead to account for them as a single lease component, and the option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less). We elected to apply certain practical adoption expedients provided under the updates whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of right-of-use assets. The Company has several lease agreements, such as branch locations or office space, which are considered operating leases, and therefore, were not previously recognized on the Company’s consolidated balance sheet. The new guidance requires these lease agreements to be recognized on the consolidated balance sheet as a right-of-use asset and a corresponding lease liability. The new guidance did not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 8 Leases for more information.

In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and (2) lessors may elect not to separate lease and non-lease components when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (January 1, 2019 for the Company). The Company adopted ASU 2018-11 on its required effective date of January 1, 2019 and elected both transition options mentioned above.

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

As of January 1, 2019, the Company adopted ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonably estimable. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements:

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2018 as filed with the Securities and Exchange Commission. The following is a summary of recent authoritative pronouncements issued since December 31, 2018 but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

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

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU changed the credit loss model on financial instruments measured at amortized cost, available for sale securities and certain purchased financial instruments. Credit losses on financial instruments measured at amortized cost will be determined using a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. Purchased financial assets with more-than-insignificant credit deterioration since origination ("PCD assets" which are currently named "PCI Loans") measured at amortized cost will have an allowance for credit losses established at acquisition as part of the purchase price. Subsequent increases or decreases to the allowance for credit losses on PCD assets will be recognized in the income statement. Interest income should be recognized on PCD assets based on the effective interest rate, determined excluding the discount attributed to credit losses at acquisition. Credit losses relating to available-for-sale debt securities will be recognized through an allowance for credit losses. The amount of the credit loss is limited to the amount by which fair value is below amortized cost of the available-for-sale debt security. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years for the Company and other SEC filers. Early adoption is permitted and if early adopted, all provisions must be adopted in the same period. The amendments should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the period adopted. A prospective approach is required for securities with other than temporary impairment recognized prior to adoption. The Company is continuing its implementation efforts through its company-wide implementation team. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, conferences, and peer bank meetings. The team continues to evaluate and validate data resources and different loss methodologies. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular an increase to the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact. The guidance of ASU 2016-13 was recently amended by ASU 2018-19, Codification Improvements to Topic 326, FinancialInstruments - Credit Losses, which changed the effective date for non-public companies and clarified that operating lease receivables are not within the scope of the standard.

On July 17, 2019 the Financial Accounting Standards Board unanimously voted to propose a delay for the implementation of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).  The Board decided that CECL will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies, this will be January 1, 2020.  The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the Board decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies).  The Board decided that the comment period for the proposed Update would be 30 days.

Reclassifications

Reclassifications:

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

Earnings Per Common Share

Basic earnings per common share represents net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance (excluding tax impact). Potential common shares that may be issued by the Company relate solely to outstanding stock options, determined using the treasury stock method, and restricted stock awards, determined by the fair value of the Company's stock on date of grant.

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Earnings per share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following is a summary of the basic and diluted earnings per share computation (dollars in thousands, except for share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net income	$	9,121	$	3,932	$	13,852	$	7,346
Weighted average basic common shares outstanding	13,951,643		12,201,185		13,946,856		11,708,746
Effect of dilutive securities	94,857		119,313		89,934		113,751
Weighted average dilutive shares outstanding	14,046,500		12,320,498		14,036,790		11,822,497
Basic earnings per common share	$	0.65	$	0.32	$	0.99	$	0.63
Diluted earnings per common share	$	0.65	$	0.32	$	0.99	$	0.62

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Securities (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-For-Sale Securities Reconciliation

The amortized cost and fair value of securities available-for-sale are summarized as follows (in thousands): 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	24,031	$	22	$	(65	)	$	23,988
Municipal securities	56,251		492		(17		)	56,726
Other debt securities	979		—		(42		)	937
Mortgage-backed securities (GSEs)	92,718		154		(409		)	92,463
	$	173,979	$	668	$	(533	)	$	174,114

December 31, 2018:
U.S. Government-sponsored enterprises (GSEs)	$	44,117	$	12	$	(626	)	$	43,503
Municipal securities	55,248		276		(363		)	55,161
Other debt securities	977		—		(67		)	910
Mortgage-backed securities (GSEs)	103,875		153		(1,914		)	102,114
	$	204,217	$	441	$	(2,970	)	$	201,688

Investments Classified by Contractual Maturity Date

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

	Amortized Cost		Fair Value
Due in one year or less	$	294	$	297
Due from one year to five years	16,000		15,935
Due from five years to ten years	13,302		13,283
Due after ten years	51,665		52,136
	81,261		81,651
Mortgage-backed securities	92,718		92,463
	$	173,979	$	174,114

Schedule of Unrealized Loss on Investments

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities available-for-sale have been in a continuous unrealized loss position (in thousands): 

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
June 30, 2019:
U.S. Government- sponsored enterprises (GSEs)	$	—	$	—		$	10,935	$	(65	)	$	10,935	$	(65	)
Municipal securities	—		—			2,021		(17		)	2,021		(17		)
Other debt securities	—		—			937		(42		)	937		(42		)
Mortgage-backed securities (GSEs)	5,165		(20		)	43,805		(389		)	48,970		(409		)
	$	5,165	$	(20	)	$	57,698	$	(513	)	$	62,863	$	(533	)

December 31, 2018:
U.S. Government- sponsored enterprises (GSEs)	$	14,763	$	(237	)	$	13,728	$	(389	)	$	28,491	$	(626	)
Municipal securities	16,455		(150		)	4,767		(213		)	21,222		(363		)
Other debt securities	—		—			910		(67		)	910		(67		)
Mortgage-backed securities (GSEs)	10,516		(155		)	69,884		(1,759		)	80,400		(1,914		)
	$	41,734	$	(542	)	$	89,289	$	(2,428	)	$	131,023	$	(2,970	)

Schedule of Temporarily Impaired Securities

At June 30, 2019, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross Unrealized Loss			Number of Securities
U.S. Government-sponsored enterprises (GSEs)	$	(65	)	3
Municipal securities	(17		)	4
Other debt securities	(42		)	1
Mortgage-backed securities (GSEs)	(389		)	47
	$	(513	)	55

Schedule of Other Investments

The following is the amortized cost and carrying value of other investments (in thousands):

	June 30, 2019		December 31, 2018
Federal Reserve Bank stock	$	7,909	$	7,010
Federal Home Loan Bank stock	4,646		4,139
First National Bankers Bank stock	350		350
	$	12,905	$	11,499

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Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Major categories of loans are summarized as follows (in thousands):

	June 30, 2019									December 31, 2018
	PCI Loans1			All Other Loans2			Total			PCI Loans1		All Other Loans2			Total
Commercial real estate	$	17,040		$	861,547		$	878,587		$	17,682	$	842,345		$	860,027
Consumer real estate	7,412			398,844			406,256			8,712		398,542			407,254
Construction and land development	4,669			200,027			204,696			4,602		183,293			187,895
Commercial and industrial	2,137			333,361			335,498			2,557		305,697			308,254
Consumer and other	400			11,552			11,952			605		13,204			13,809
Total loans	31,658			1,805,331			1,836,989			34,158		1,743,081			1,777,239
Less:  Allowance for loan losses	(54		)	(9,043		)	(9,097		)	—		(8,275		)	(8,275		)
Loans, net	$	31,604		$	1,796,288		$	1,827,892		$	34,158	$	1,734,806		$	1,768,964

¹Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

² Includes loans held for sale.

Schedule of Impaired and Performing Loans Receivable

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	861,288	$	398,061	$	199,326	$	333,109	$	11,552	$	1,803,336
Impaired loans	259		783		701		252		—		1,995
	861,547		398,844		200,027		333,361		11,552		1,805,331
PCI loans	17,040		7,412		4,669		2,137		400		31,658
Total	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

December 31, 2018:
Performing loans	$	841,709	$	397,306	$	182,746	$	304,673	$	13,088	$	1,739,522
Impaired loans	636		1,236		547		1,024		116		3,559
	842,345		398,542		183,293		305,697		13,204		1,743,081
PCI loans	17,682		8,712		4,602		2,557		605		34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

Schedule of Allowance for Loan Losses for Impaired and Performing Loans Receivable

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
June 30, 2019:
Performing loans	$	4,062	$	1,935	$	946	$	1,641	$	114	$	8,698
PCI loans	40		14		—		—		—		54
Impaired loans	—		240		—		105		—		345
Total	$	4,102	$	2,189	$	946	$	1,746	$	114	$	9,097

December 31, 2018:
Performing loans	$	3,639	$	1,763	$	795	$	1,304	$	240	$	7,741
PCI loans	—		—		—		—		—		—
Impaired loans	—		26		—		442		66		534
Total	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275

Schedule of Financing Receivable Allowance for Credit Losses

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

	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Three Months Ended June 30, 2019:
Beginning balance	$	4,074	$	1,949	$	854	$	1,709		$	118		$	8,704
Loans charged off	—		—		—		(14		)	(80		)	(94		)
Recoveries of charge-offs	22		16		2		41			13			94
Provision (reallocation) charged to expense	6		224		90		10			63			393
Ending balance	$	4,102	$	2,189	$	946	$	1,746		$	114		$	9,097

Three Months Ended June 30, 2018:
Beginning balance	$	2,925	$	1,519		$	627	$	1,210	$	196		$	6,477
Loans charged off	—		(25		)	—		—		(59		)	(84		)
Recoveries of charge-offs	—		27			3		16		18			64
Provision (reallocation) charged to expense	210		7			114		141		145			617
Ending balance	$	3,135	$	1,528		$	744	$	1,367	$	300		$	7,074

	Commercial Real Estate		Consumer Real Estate			Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Six Months Ended June 30, 2019:
Beginning balance	$	3,639	$	1,789		$	795	$	1,746		$	306		$	8,275
Loans charged off	—		(2		)	—		(333		)	(210		)	(545		)
Recoveries of charge-offs	24		20			4		53			76			177
Provision (reallocation) charged to expense	439		382			147		280			(58		)	1,190
Ending balance	$	4,102	$	2,189		$	946	$	1,746		$	114		$	9,097

Six Months Ended June 30, 2018:
Beginning balance	$	2,465		$	1,596		$	521	$	1,062		$	216		$	5,860
Loans charged off	(38		)	(25		)	—		(78		)	(101		)	(242		)
Recoveries of charge-offs	—			50			5		56			40			151
Provision (reallocation) charged to expense	708			(93		)	218		327			145			1,305
Ending balance	$	3,135		$	1,528		$	744	$	1,367		$	300		$	7,074

Financing Receivable Credit Quality Indicators

The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands):

	June 30, 2019
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	848,287	$	395,438	$	198,469	$	326,328	$	11,459	$	1,779,981
Watch	12,387		2,353		624		5,492		44		20,900
Special mention	500		8		156		1,181		—		1,845
Substandard	373		875		778		352		25		2,403
Doubtful	—		170		—		8		24		202
Total	$	861,547	$	398,844	$	200,027	$	333,361	$	11,552	$	1,805,331

PCI Loans:
Pass	$	12,795	$	5,050	$	3,576	$	2,039	$	354	$	23,814
Watch	2,463		453		1,093		3		14		4,026
Special mention	920		434		—		—		7		1,361
Substandard	862		1,475		—		95		25		2,457
Doubtful	—		—		—		—		—		—
Total	$	17,040	$	7,412	$	4,669	$	2,137	$	400	$	31,658
Total loans	$	878,587	$	406,256	$	204,696	$	335,498	$	11,952	$	1,836,989

	December 31, 2018
Non PCI Loans:	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	834,912	$	394,728	$	182,524	$	303,805	$	12,927	$	1,728,896
Watch	6,791		2,678		64		1,090		135		10,758
Special mention	—		14		158		137		—		309
Substandard	642		1,122		547		462		142		2,915
Doubtful	—		—		—		203		—		203
Total	$	842,345	$	398,542	$	183,293	$	305,697	$	13,204	$	1,743,081

PCI Loans:
Pass	$	14,050	$	5,617	$	4,033	$	2,382	$	541	$	26,623
Watch	1,805		756		569		—		17		3,147
Special mention	1,030		446		—		50		10		1,536
Substandard	797		1,893		—		125		37		2,852
Doubtful	—		—		—		—		—		—
Total	$	17,682	$	8,712	$	4,602	$	2,557	$	605	$	34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

Past Due Financing Receivables

The following tables present an aging analysis of our loan portfolio (in thousands): 

	June 30, 2019
	30-60 Days  Past Due and Accruing		61-89 Days  Past Due and Accruing		Past Due 90  Days or More and Accruing		Nonaccrual		Total  Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	133	$	—	$	139	$	124	$	396	$	17,040	$	861,151	$	878,587
Consumer real estate	1,026		226		441		1,024		2,717		7,412		396,127		406,256
Construction and land development	838		112		—		624		1,574		4,669		198,453		204,696
Commercial and industrial	417		30		95		336		878		2,137		332,483		335,498
Consumer and other	131		—		15		40		186		400		11,366		11,952
Total	$	2,545	$	368	$	690	$	2,148	$	5,751	$	31,658	$	1,799,580	$	1,836,989

	December 31, 2018
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	377	$	19	$	—	$	272	$	668	$	17,682	$	841,677	$	860,027
Consumer real estate	1,168		462		454		844		2,928		8,712		395,614		407,254
Construction and land development	343		—		—		547		890		4,602		182,403		187,895
Commercial and industrial	155		—		101		909		1,165		2,557		304,532		308,254
Consumer and other	117		—		29		124		270		605		12,934		13,809
Total	$	2,160	$	481	$	584	$	2,696	$	5,921	$	34,158	$	1,737,160	$	1,777,239

Impaired Financing Receivables

The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded (in thousands):  

	June 30, 2019						December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	259	$	263	$	—	$	636	$	648	$	—
Consumer real estate	385		386		—		1,073		1,089		—
Construction and land development	701		701		—		547		547		—
Commercial and industrial	—		—		—		69		70		—
Consumer and other	—		—		—		29		33		—
	1,345		1,350		—		2,354		2,387		—
Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		—		—		—
Consumer real estate	398		399		240		163		205		26
Construction and land development	—		—		—		—		—		—
Commercial and industrial	252		267		105		955		973		442
Consumer and other	—		—		—		87		87		66
	650		666		345		1,205		1,265		534
PCI loans:
Commercial real estate	2,523		2,834		40		—		—		—
Consumer real estate	1,096		1,261		14		—		—		—
	3,619		4,095		54		—		—		—
Total impaired loans	$	5,614	$	6,111	$	399	$	3,559	$	3,652	$	534

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	424	$	5	$	793	$	8
Consumer real estate	624		—		841		7
Construction and land development	650		2		547		—
Commercial and industrial	16		—		67		2
Consumer and other	14		—		8		—
	1,728		7		2,256		17
Impaired loans with a valuation allowance:
Commercial real estate	24		—		—		—
Consumer real estate	217		2		460		—
Construction and land development	28		—		—		—
Commercial and industrial	293		—		300		3
Consumer and other	13		—		103		1
	575		2		863		4
PCI loans:
Commercial real estate	2,529		—		14		—
Consumer real estate	1,099		—		—		—
	3,628		—		14		—
Total impaired loans	$	5,931	$	9	$	3,133	$	21

	Six Months Ended June 30,
	2019					2018
	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	495	$	25		$	670	$	15
Consumer real estate	774		4			699		12
Construction and land development	616		1			547		—
Commercial and industrial	33		1			58		3
Consumer and other	19		—			5		—
	1,937		31			1,979		30
Impaired loans with a valuation allowance:
Commercial real estate	16		—			8		—
Consumer real estate	199		9			642		11
Construction and land development	19		—			—		—
Commercial and industrial	514		9			257		5
Consumer and other	38		—			72		2
	786		18			979		18
PCI loans:
Commercial real estate	1,686		(9		)	5		3
Consumer real estate	732		2			—		—
	2,418		(7		)	5		3
Total impaired loans	$	5,141	$	42		$	2,963	$	51

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period, Carrying Amount of Loans

The Company has acquired loans where 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 are as follows (in thousands):

	June 30, 2019			December 31, 2018
Commercial real estate	$	23,895		$	24,849
Consumer real estate	9,556			11,108
Construction and land development	5,700			5,731
Commercial and industrial	5,125			5,824
Consumer and other	612			892
Total loans	44,888			48,404
Less: Remaining purchase discount	(13,230		)	(14,246		)
Total loans, net of purchase discount	31,658			34,158
Less: Allowance for loan losses	(54		)	—
Carrying amount, net of allowance	$	31,604		$	34,158

Schedule of Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Accretable yield, beginning of period	$	8,644		$	7,780		$	7,052		$	9,287
Additions	—			1,292			—			1,292
Accretion income	(1,026		)	(1,928		)	(2,280		)	(3,029		)
Reclassification	323			120			1,358			382
Other changes, net	339			(58		)	2,150			(726		)
Accretable yield, end of period	$	8,280		$	7,206		$	8,280		$	7,206

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Commitments and Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Other Commitments

A summary of the Company’s total contractual amount for all off-balance sheet commitments are as follows (in thousands):

	June 30, 2019		December 31, 2018
Commitments to extend credit	$	376,037	$	333,900
Standby letters of credit	15,090		12,200

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Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis are as follows (in thousands): 

Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	23,988	$	—	$	23,988	$	—
Municipal securities	56,726		—		56,726		—
Other debt securities	937		—		937		—
Mortgage-backed securities (GSEs)	92,463		—		92,463		—
Total securities available-for-sale	$	174,114	$	—	$	174,114	$	—
Liabilities:
Derivative financial instruments	$	3,411	$	—	$	3,411	$	—

December 31, 2018:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	43,503	$	—	$	43,503	$	—
Municipal securities	55,161		—		55,161		—
Other debt securities	910		—		910		—
Mortgage-backed securities (GSEs)	102,114		—		102,114		—
Total securities available-for-sale	$	201,688	$	—	$	201,688	$	—
Liabilities:
Derivative financial instruments	$	1,174	—		$	1,174	—

Fair Value, Assets and Liabilities Measured on Non-Recurring 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):

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2019:
Impaired loans	$	3,870	$	—	$	—	$	3,870
Other real estate owned	1,814		—		—		1,814
December 31, 2018:
Impaired loans	$	671	$	—	$	—	$	671
Other real estate owned	2,495		—		—		2,495

Fair Value Measurement Inputs and Valuation Techniques

For Level 3 assets measured at fair value on a non-recurring basis, the significant unobservable inputs used in the fair value measurements are presented below (in thousands).

	Fair Value		Valuation Technique	Significant Other Unobservable Input	Weighted Average of Input
June 30, 2019:
Impaired loans	$	3,870	Appraisal and cashflow	Appraisal and cashflow discounts	9	%
Other real estate owned	1,814		Appraisal	Appraisal discounts	12	%
December 31, 2018:
Impaired loans	$	671	Appraisal	Appraisal Discounts	44	%
Other real estate owned	2,495		Appraisal	Appraisal Discounts	23	%

Fair Value, by Balance Sheet Grouping

The carrying amount and estimated fair value of the Company’s financial instruments are as follows (in thousands):

			Fair Value Measurements Using
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
June 30, 2019:
Assets:
Cash and cash equivalents	$	199,534	$	199,534	$	—	$	—	$	199,534
Securities available-for-sale	174,114		—		174,114		—		174,114
Other investments	12,905		N/A		N/A		N/A		N/A
Loans, net	1,827,892		—		—		1,822,099		1,822,099
Liabilities:
Noninterest-bearing demand deposits	357,220		—		357,220		—		357,220
Interest-bearing demand deposits	333,705		—		333,705		—		333,705
Money market and savings deposits	648,132		—		648,132		—		648,132
Time deposits	673,243		—		674,278		—		674,278
Securities sold under agreements to repurchase	8,219		—		8,219		—		8,219
Federal Home Loan Bank advances and other borrowings	15,460		—		15,460		—		15,460
Subordinated debt	39,219		—		—		37,618		37,618
Derivative financial instruments	3,411		—		3,411		—		3,411

December 31, 2018:
Assets:
Cash and cash equivalents	$	115,822	$	115,822	$	—	$	—	$	115,822
Securities available-for-sale	201,688		—		201,688		—		201,688
Other investments	11,499		N/A		N/A		N/A		N/A
Loans, net	1,768,964		—		—		1,766,838		1,766,838
Liabilities:
Noninterest-bearing demand deposits	319,861		—		319,861		—		319,861
Interest-bearing demand deposits	311,482		—		311,482		—		311,482
Money market and savings deposits	641,945		—		641,945		—		641,945
Time deposits	648,676		—		649,169		—		649,169
Securities sold under agreements to repurchase	11,756		—		11,756		—		11,756
Federal Home Loan Bank advances and other borrowings	11,243		—		11,243		—		11,243
Subordinated debt	39,177		—		—		39,190		39,190
Derivative financial instruments	1,174		—		1,174		—		1,174

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Fair Value Hedge Relationships in Balance Sheet

A summary of the Company's fair value hedge relationships for the periods presented are as follows (in thousands):

Liability derivatives	Balance Sheet Location	Weighted Average Remaining Maturity (In Years)	Weighted Average Pay Rate	Receive Rate	Notional Amount		Estimated Fair Value
June 30, 2019:
Interest rate swap agreements - securities	Other liabilities	8.70	3.09%	3 month LIBOR	$	36,000	$	(3,411	)
December 31, 2018:
Interest rate swap agreements - securities	Other liabilities	9.23	3.10%	3 month LIBOR	$	35,000	$	(1,174	)

Schedule of Fair Value Hedge Relationships on Income Statement

The effects of the Company's fair value hedge relationships reported in interest income on tax-exempt available-for-sale securities

on the consolidated income statement were as follows (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Interest income on tax-exempt securities	$	449		$	—	$	906		$	—
Effects of fair value hedge relationships	(38		)	—		(70		)	—
Reported interest income on tax-exempt securities	$	411		$	—	$	836		$	—
	Three Months Ended June 30,					Six Months Ended June 30,
Gain (loss) on fair value hedging relationship	2019			2018		2019			2018
Interest rate swap agreements - securities:
Hedged items	$	1,348		—		$	2,237		—
Derivative designated as hedging instruments	(1,348		)	—		(2,237		)	—

Schedule of Fair Value Hedges

The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges (in thousands):

Line item on the balance sheet	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
June 30, 2019:
Securities available-for-sale	$	42,850	$	3,411
December 31, 2018:
Securities available-for-sale	$	39,730	$	1,174

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Summary of Lease Assets and Liabilities

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (dollars in thousands):

	Classification	June 30, 2019
Assets:
Operating lease right-of-use assets	Other assets	$	2,085
Liabilities:
Operating lease liabilities	Other liabilities	$	2,099

Summary of Lease Costs and Other Information

The following table represents lease costs and other lease information, in thousands. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance (in thousands).

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease costs:
Operating lease costs	$	157	$	315
Short-term lease costs	5		11
Variable lease costs	23		46
Total	$	185	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	150	$	302

Summary of Future Minimum Payments

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

	Amounts
June 30, 2020	$	466
June 30, 2021	486
June 30, 2022	222
June 30, 2023	152
June 30, 2024	74
Thereafter	699
Total future minimum lease payments	2,099
Amounts representing interest	(319		)
Present value of net future minimum lease payments	$	1,780

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Earnings per share - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net income	$ 9,121	$ 3,932	$ 13,852	$ 7,346
Weighted average basic common shares outstanding (in shares)	13,951,643	12,201,185	13,946,856	11,708,746
Effect of dilutive stock options (in shares)	94,857	119,313	89,934	113,751
Weighted average dilutive shares outstanding (in shares)	14,046,500	12,320,498	14,036,790	11,822,497
Basic earnings per common share (in dollars per share)	$ 0.65	$ 0.32	$ 0.99	$ 0.63
Diluted earnings per common share (in dollars per share)	$ 0.65	$ 0.32	$ 0.99	$ 0.62

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Earnings per share - Narrative (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	0	0	0

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Securities - Amortized Cost and Fair Value of Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 173,979	$ 204,217
Gross Unrealized Gains	668	441
Gross Unrealized Losses	(533)	(2,970)
Fair Value	174,114	201,688
U.S. Government-sponsored enterprises (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	24,031	44,117
Gross Unrealized Gains	22	12
Gross Unrealized Losses	(65)	(626)
Fair Value	23,988	43,503
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	56,251	55,248
Gross Unrealized Gains	492	276
Gross Unrealized Losses	(17)	(363)
Fair Value	56,726	55,161
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	979	977
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(42)	(67)
Fair Value	937	910
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	92,718	103,875
Gross Unrealized Gains	154	153
Gross Unrealized Losses	(409)	(1,914)
Fair Value	$ 92,463	$ 102,114

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Securities - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Proceeds from sales of securities available-for-sale	$ 17,000,000	$ 25,000,000	$ 16,515,000	$ 24,563,000
Realized gains	34,000	0		0
Realized losses		0	1,000	0
Proceeds from available-for-sale securities redeemed	5,000,000		10,000,000
Called debt security, realized loss		$ 1,000		$ 1,000
Collateral Pledged [Member]
Loans and Leases Receivable Disclosure [Line Items]
Restricted securities	$ 102,000,000		$ 102,000,000		$ 103,700,000

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Securities - Available-for-sale Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Securities Available for Sale, Due in one year or less, Amortized Cost	$ 294
Securities Available for Sale, Due from one year to five years, Amortized Cost	16,000
Securities Available for Sale, Due from five years to ten years, Amortized Cost	13,302
Securities Available for Sale, Due after ten years, Amortized Cost	51,665
Securities Available for Sale, Amortized Cost	81,261
Amortized Cost	173,979	$ 204,217
Securities Available for Sale, Due in one year or less, Fair Value	297
Securities Available for Sale, Due from one year to five years, Fair Value	15,935
Securities Available for Sale, Due from five years to ten years, Fair Value	13,283
Securities Available for Sale, Due after ten years, Fair Value	52,136
Securities Available for Sale, Fair Value	81,651
Securities available for sale	174,114	$ 201,688
Mortgage-backed securities [Member]
Debt Securities, Available-for-sale [Line Items]
Mortgage-backed securities, Amortized Cost	92,718
Mortgage-backed securities, Fair Value	$ 92,463

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Securities - Available-for-sale Securities in Continuous Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	$ 5,165	$ 41,734
Available-for-sale, gross unrealized losses, less than 12 months	(20)	(542)
Available-for-sale, fair value, 12 months or greater	57,698	89,289
Available-for-sale, gross unrealized losses, 12 months or greater	(513)	(2,428)
Securities available for sale	62,863	131,023
Available-for-sale, gross unrealized losses, total	(533)	(2,970)
U.S. Government-sponsored enterprises (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	0	14,763
Available-for-sale, gross unrealized losses, less than 12 months	0	(237)
Available-for-sale, fair value, 12 months or greater	10,935	13,728
Available-for-sale, gross unrealized losses, 12 months or greater	(65)	(389)
Securities available for sale	10,935	28,491
Available-for-sale, gross unrealized losses, total	(65)	(626)
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	0	16,455
Available-for-sale, gross unrealized losses, less than 12 months	0	(150)
Available-for-sale, fair value, 12 months or greater	2,021	4,767
Available-for-sale, gross unrealized losses, 12 months or greater	(17)	(213)
Securities available for sale	2,021	21,222
Available-for-sale, gross unrealized losses, total	(17)	(363)
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	0	0
Available-for-sale, gross unrealized losses, less than 12 months	0	0
Available-for-sale, fair value, 12 months or greater	937	910
Available-for-sale, gross unrealized losses, 12 months or greater	(42)	(67)
Securities available for sale	937	910
Available-for-sale, gross unrealized losses, total	(42)	(67)
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	5,165	10,516
Available-for-sale, gross unrealized losses, less than 12 months	(20)	(155)
Available-for-sale, fair value, 12 months or greater	43,805	69,884
Available-for-sale, gross unrealized losses, 12 months or greater	(389)	(1,759)
Securities available for sale	48,970	80,400
Available-for-sale, gross unrealized losses, total	$ (409)	$ (1,914)

XML

Securities - Temporarily Impaired Securities (Details) $ in Thousands	Jun. 30, 2019 USD ($) investment	Dec. 31, 2018 USD ($)
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (513)	$ (2,428)
Number of Securities | investment	55
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (65)	(389)
Number of Securities | investment	3
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (17)	(213)
Number of Securities | investment	4
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (42)	(67)
Number of Securities | investment	1
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (389)	$ (1,759)
Number of Securities | investment	47

XML

Securities - Other Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt and Equity Securities, FV-NI [Line Items]
Other investments	$ 12,905	$ 11,499
Federal Reserve Bank Stock [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other investments	7,909	7,010
Federal Home Loan Bank Stock [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other investments	4,646	4,139
First National Bankers Bank Stock [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other investments	$ 350	$ 350

XML

Loans and Allowance for Loan Losses - Loan Summary (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 1,836,989		$ 1,777,239
Less: Allowance for loan losses	(9,097)	$ (8,704)	(8,275)	$ (7,074)	$ (6,477)	$ (5,860)
Loans, net	1,827,892		1,768,964
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	31,658		34,158
Less: Allowance for loan losses	(54)		0
Loans, net	31,604		34,158
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,805,331		1,743,081
Less: Allowance for loan losses	(9,043)		(8,275)
Loans, net	1,796,288		1,734,806
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	878,587		860,027
Less: Allowance for loan losses	(4,102)	(4,074)	(3,639)	(3,135)	(2,925)	(2,465)
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	17,040		17,682
Less: Allowance for loan losses	(40)		0
Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	861,547		842,345
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	406,256		407,254
Less: Allowance for loan losses	(2,189)	(1,949)	(1,789)	(1,528)	(1,519)	(1,596)
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	7,412		8,712
Less: Allowance for loan losses	(14)		0
Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	398,844		398,542
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	204,696		187,895
Less: Allowance for loan losses	(946)	(854)	(795)	(744)	(627)	(521)
Construction and Land Development [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	4,669		4,602
Less: Allowance for loan losses	0		0
Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	200,027		183,293
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	335,498		308,254
Less: Allowance for loan losses	(1,746)	(1,709)	(1,746)	(1,367)	(1,210)	(1,062)
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,137		2,557
Less: Allowance for loan losses	0		0
Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	333,361		305,697
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,952		13,809
Less: Allowance for loan losses	(114)	$ (118)	(306)	$ (300)	$ (196)	$ (216)
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	400		605
Less: Allowance for loan losses	0		0
Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 11,552		$ 13,204

XML

Loans and Allowance for Loan Losses - Narrative (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) loan segment	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loan portfolio segments | segment	5
Number of contracts | loan	0
Number of contracts, subsequent payment default | loan	0
Other real estate owned | $	$ 1,814	$ 2,495
Trouble Debt Restructuring [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loans that met criteria for restructured | $	$ 62	$ 116
Number of contracts, nonaccrual | loan	0
Commercial Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loans that met criteria for restructured | $			$ 622
Number of contracts | loan	1
Residential Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Other real estate owned | $	$ 257

XML

Loans and Allowance for Loan Losses - Performing and Impaired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 1,836,989	$ 1,777,239
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,805,331	1,743,081
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	31,658	34,158
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	878,587	860,027
Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	861,547	842,345
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	17,040	17,682
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	406,256	407,254
Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	398,844	398,542
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	7,412	8,712
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	204,696	187,895
Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	200,027	183,293
Construction and Land Development [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	4,669	4,602
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	335,498	308,254
Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	333,361	305,697
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,137	2,557
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,952	13,809
Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,552	13,204
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	400	605
Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,803,336	1,739,522
Performing [Member] | Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	861,288	841,709
Performing [Member] | Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	398,061	397,306
Performing [Member] | Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	199,326	182,746
Performing [Member] | Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	333,109	304,673
Performing [Member] | Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,552	13,088
Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,995	3,559
Impaired Loans [Member] | Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	259	636
Impaired Loans [Member] | Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	783	1,236
Impaired Loans [Member] | Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	701	547
Impaired Loans [Member] | Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	252	1,024
Impaired Loans [Member] | Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 0	$ 116

XML

Loans and Allowance for Loan Losses - ALL by Loan Classification (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	$ 9,097	$ 8,704	$ 8,275	$ 7,074	$ 6,477	$ 5,860
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	9,043		8,275
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	54		0
Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	8,698		7,741
Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	345		534
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	4,102	4,074	3,639	3,135	2,925	2,465
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	40		0
Commercial Real Estate [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	4,062		3,639
Commercial Real Estate [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		0
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	2,189	1,949	1,789	1,528	1,519	1,596
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	14		0
Consumer Real Estate [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	1,935		1,763
Consumer Real Estate [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	240		26
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	946	854	795	744	627	521
Construction and Land Development [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		0
Construction and Land Development [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	946		795
Construction and Land Development [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		0
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	1,746	1,709	1,746	1,367	1,210	1,062
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		0
Commercial and Industrial [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	1,641		1,304
Commercial and Industrial [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	105		442
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	114	$ 118	306	$ 300	$ 196	$ 216
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		0
Consumer and Other [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	114		240
Consumer and Other [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	$ 0		$ 66

XML

Loans and Allowance for Loan Losses - ALL Roll Forward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 8,704	$ 6,477	$ 8,275	$ 5,860
Loans charged off	(94)	(84)	(545)	(242)
Recoveries of charge-offs	94	64	177	151
Provision (reallocation) charged to expense	393	617	1,190	1,305
Ending balance	9,097	7,074	9,097	7,074
Commercial Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	4,074	2,925	3,639	2,465
Loans charged off	0	0	0	(38)
Recoveries of charge-offs	22	0	24	0
Provision (reallocation) charged to expense	6	210	439	708
Ending balance	4,102	3,135	4,102	3,135
Consumer Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,949	1,519	1,789	1,596
Loans charged off	0	(25)	(2)	(25)
Recoveries of charge-offs	16	27	20	50
Provision (reallocation) charged to expense	224	7	382	(93)
Ending balance	2,189	1,528	2,189	1,528
Construction and Land Development [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	854	627	795	521
Loans charged off	0	0	0	0
Recoveries of charge-offs	2	3	4	5
Provision (reallocation) charged to expense	90	114	147	218
Ending balance	946	744	946	744
Commercial and Industrial [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,709	1,210	1,746	1,062
Loans charged off	(14)	0	(333)	(78)
Recoveries of charge-offs	41	16	53	56
Provision (reallocation) charged to expense	10	141	280	327
Ending balance	1,746	1,367	1,746	1,367
Consumer and Other [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	118	196	306	216
Loans charged off	(80)	(59)	(210)	(101)
Recoveries of charge-offs	13	18	76	40
Provision (reallocation) charged to expense	63	145	(58)	145
Ending balance	$ 114	$ 300	$ 114	$ 300

XML

Loans and Allowance for Loan Losses - Loan Risk Rating (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	$ 1,836,989	$ 1,777,239
Commercial Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	878,587	860,027
Consumer Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	406,256	407,254
Construction and Land Development [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	204,696	187,895
Commercial and Industrial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	335,498	308,254
Consumer and Other [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	11,952	13,809
Non PCI Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,805,331	1,743,081
Non PCI Loans [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,779,981	1,728,896
Non PCI Loans [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	20,900	10,758
Non PCI Loans [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,845	309
Non PCI Loans [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,403	2,915
Non PCI Loans [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	202	203
Non PCI Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	861,547	842,345
Non PCI Loans [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	848,287	834,912
Non PCI Loans [Member] | Commercial Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	12,387	6,791
Non PCI Loans [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	500	0
Non PCI Loans [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	373	642
Non PCI Loans [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Non PCI Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	398,844	398,542
Non PCI Loans [Member] | Consumer Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	395,438	394,728
Non PCI Loans [Member] | Consumer Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,353	2,678
Non PCI Loans [Member] | Consumer Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	8	14
Non PCI Loans [Member] | Consumer Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	875	1,122
Non PCI Loans [Member] | Consumer Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	170	0
Non PCI Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	200,027	183,293
Non PCI Loans [Member] | Construction and Land Development [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	198,469	182,524
Non PCI Loans [Member] | Construction and Land Development [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	624	64
Non PCI Loans [Member] | Construction and Land Development [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	156	158
Non PCI Loans [Member] | Construction and Land Development [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	778	547
Non PCI Loans [Member] | Construction and Land Development [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Non PCI Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	333,361	305,697
Non PCI Loans [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	326,328	303,805
Non PCI Loans [Member] | Commercial and Industrial [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	5,492	1,090
Non PCI Loans [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,181	137
Non PCI Loans [Member] | Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	352	462
Non PCI Loans [Member] | Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	8	203
Non PCI Loans [Member] | Consumer and Other [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	11,552	13,204
Non PCI Loans [Member] | Consumer and Other [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	11,459	12,927
Non PCI Loans [Member] | Consumer and Other [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	44	135
Non PCI Loans [Member] | Consumer and Other [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Non PCI Loans [Member] | Consumer and Other [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	25	142
Non PCI Loans [Member] | Consumer and Other [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	24	0
Purchased Credit Impaired Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	31,658	34,158
Purchased Credit Impaired Loans [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	23,814	26,623
Purchased Credit Impaired Loans [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	4,026	3,147
Purchased Credit Impaired Loans [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,361	1,536
Purchased Credit Impaired Loans [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,457	2,852
Purchased Credit Impaired Loans [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	17,040	17,682
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	12,795	14,050
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,463	1,805
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	920	1,030
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	862	797
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	7,412	8,712
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	5,050	5,617
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	453	756
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	434	446
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,475	1,893
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	4,669	4,602
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	3,576	4,033
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,093	569
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,137	2,557
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,039	2,382
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	3	0
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	50
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	95	125
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	400	605
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	354	541
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	14	17
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	7	10
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	25	37
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Past Due [Line Items]
Nonaccrual	$ 2,148	$ 2,696
Total Past Due and NonAccrual	5,751	5,921
Current Loans	1,799,580	1,737,160
Total loans	1,836,989	1,777,239
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Nonaccrual	124	272
Total Past Due and NonAccrual	396	668
Current Loans	861,151	841,677
Total loans	878,587	860,027
Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Nonaccrual	1,024	844
Total Past Due and NonAccrual	2,717	2,928
Current Loans	396,127	395,614
Total loans	406,256	407,254
Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Nonaccrual	624	547
Total Past Due and NonAccrual	1,574	890
Current Loans	198,453	182,403
Total loans	204,696	187,895
Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Nonaccrual	336	909
Total Past Due and NonAccrual	878	1,165
Current Loans	332,483	304,532
Total loans	335,498	308,254
Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Nonaccrual	40	124
Total Past Due and NonAccrual	186	270
Current Loans	11,366	12,934
Total loans	11,952	13,809
Purchased Credit Impaired Loans [Member]
Financing Receivable, Past Due [Line Items]
Total loans	31,658	34,158
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total loans	17,040	17,682
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total loans	7,412	8,712
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Total loans	4,669	4,602
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Total loans	2,137	2,557
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Total loans	400	605
30 to 60 Days Past Due and Accruing [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	2,545	2,160
30 to 60 Days Past Due and Accruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	133	377
30 to 60 Days Past Due and Accruing [Member] | Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	1,026	1,168
30 to 60 Days Past Due and Accruing [Member] | Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	838	343
30 to 60 Days Past Due and Accruing [Member] | Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	417	155
30 to 60 Days Past Due and Accruing [Member] | Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	131	117
61 to 89 Days Past Due and Accruing [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	368	481
61 to 89 Days Past Due and Accruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	0	19
61 to 89 Days Past Due and Accruing [Member] | Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	226	462
61 to 89 Days Past Due and Accruing [Member] | Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	112	0
61 to 89 Days Past Due and Accruing [Member] | Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	30	0
61 to 89 Days Past Due and Accruing [Member] | Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	0	0
Past Due 90 Days or More and Accruing [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	690	584
Past Due 90 Days or More and Accruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	139	0
Past Due 90 Days or More and Accruing [Member] | Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	441	454
Past Due 90 Days or More and Accruing [Member] | Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	0	0
Past Due 90 Days or More and Accruing [Member] | Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	95	101
Past Due 90 Days or More and Accruing [Member] | Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Recorded investment, past due	$ 15	$ 29

XML

Loans and Allowance for Loan Losses - Impaired Loan Portfolio (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Related Allowance	$ 399		$ 399		$ 534
Total impaired loans, Recorded Investment	5,614		5,614		3,559
Total impaired loans, Unpaid Principal Balance	6,111		6,111		3,652
Total impaired loans, Average Recorded Investment	5,931	$ 3,133	5,141	$ 2,963
Total impaired loans, Interest Income Recognized	9	21	42	51
Non PCI Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	1,345		1,345		2,354
Impaired loans without a valuation allowance, Unpaid Principal Balance	1,350		1,350		2,387
Impaired loans without a valuation allowance, Average Recorded Investment	1,728	2,256	1,937	1,979
Impaired loans without a valuation allowance, Interest Income Recognized	7	17	31	30
Impaired loans with a valuation allowance, Recorded Investment	650		650		1,205
Impaired loans with a valuation allowance, Unpaid Principal Balance	666		666		1,265
Impaired loans with a valuation allowance, Related Allowance	345		345		534
Impaired loans with a valuation allowance, Average Recorded Investment	575	863	786	979
Impaired loans with a valuation allowance, Interest Income Recognized	2	4	18	18
Non PCI Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	259		259		636
Impaired loans without a valuation allowance, Unpaid Principal Balance	263		263		648
Impaired loans without a valuation allowance, Average Recorded Investment	424	793	495	670
Impaired loans without a valuation allowance, Interest Income Recognized	5	8	25	15
Impaired loans with a valuation allowance, Recorded Investment	0		0		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	0		0		0
Impaired loans with a valuation allowance, Related Allowance	0		0		0
Impaired loans with a valuation allowance, Average Recorded Investment	24	0	16	8
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	0	0
Non PCI Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	385		385		1,073
Impaired loans without a valuation allowance, Unpaid Principal Balance	386		386		1,089
Impaired loans without a valuation allowance, Average Recorded Investment	624	841	774	699
Impaired loans without a valuation allowance, Interest Income Recognized	0	7	4	12
Impaired loans with a valuation allowance, Recorded Investment	398		398		163
Impaired loans with a valuation allowance, Unpaid Principal Balance	399		399		205
Impaired loans with a valuation allowance, Related Allowance	240		240		26
Impaired loans with a valuation allowance, Average Recorded Investment	217	460	199	642
Impaired loans with a valuation allowance, Interest Income Recognized	2	0	9	11
Non PCI Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	701		701		547
Impaired loans without a valuation allowance, Unpaid Principal Balance	701		701		547
Impaired loans without a valuation allowance, Average Recorded Investment	650	547	616	547
Impaired loans without a valuation allowance, Interest Income Recognized	2	0	1	0
Impaired loans with a valuation allowance, Recorded Investment	0		0		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	0		0		0
Impaired loans with a valuation allowance, Related Allowance	0		0		0
Impaired loans with a valuation allowance, Average Recorded Investment	28	0	19	0
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	0	0
Non PCI Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	0		0		69
Impaired loans without a valuation allowance, Unpaid Principal Balance	0		0		70
Impaired loans without a valuation allowance, Average Recorded Investment	16	67	33	58
Impaired loans without a valuation allowance, Interest Income Recognized	0	2	1	3
Impaired loans with a valuation allowance, Recorded Investment	252		252		955
Impaired loans with a valuation allowance, Unpaid Principal Balance	267		267		973
Impaired loans with a valuation allowance, Related Allowance	105		105		442
Impaired loans with a valuation allowance, Average Recorded Investment	293	300	514	257
Impaired loans with a valuation allowance, Interest Income Recognized	0	3	9	5
Non PCI Loans [Member] | Consumer and Other [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	0		0		29
Impaired loans without a valuation allowance, Unpaid Principal Balance	0		0		33
Impaired loans without a valuation allowance, Average Recorded Investment	14	8	19	5
Impaired loans without a valuation allowance, Interest Income Recognized	0	0	0	0
Impaired loans with a valuation allowance, Recorded Investment	0		0		87
Impaired loans with a valuation allowance, Unpaid Principal Balance	0		0		87
Impaired loans with a valuation allowance, Related Allowance	0		0		66
Impaired loans with a valuation allowance, Average Recorded Investment	13	103	38	72
Impaired loans with a valuation allowance, Interest Income Recognized	0	1	0	2
Purchased Credit Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	3,619		3,619		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	4,095		4,095		0
Impaired loans with a valuation allowance, Related Allowance	54		54		0
Impaired loans with a valuation allowance, Average Recorded Investment	3,628	14	2,418	5
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	(7)	3
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	2,523		2,523		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	2,834		2,834		0
Impaired loans with a valuation allowance, Related Allowance	40		40		0
Impaired loans with a valuation allowance, Average Recorded Investment	2,529	14	1,686	5
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	(9)	3
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	1,096		1,096		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	1,261		1,261		0
Impaired loans with a valuation allowance, Related Allowance	14		14		$ 0
Impaired loans with a valuation allowance, Average Recorded Investment	1,099	0	732	0
Impaired loans with a valuation allowance, Interest Income Recognized	$ 0	$ 0	$ 2	$ 0

XML

Loans and Allowance for Loan Losses - Purchased Credit Impaired Loans (Details) - Purchased Credit Impaired Loans [Member] - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	$ 44,888	$ 48,404
Less: Remaining purchase discount	(13,230)	(14,246)
Total loans, net of purchase discount	31,658	34,158
Less: Allowance for loan losses	(54)	0
Carrying amount, net of allowance	31,604	34,158
Commercial Real Estate [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	23,895	24,849
Consumer Real Estate [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	9,556	11,108
Construction and Land Development [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	5,700	5,731
Commercial and Industrial [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	5,125	5,824
Consumer and Other [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	$ 612	$ 892

XML

Loans and Allowance for Loan Losses - Accretable Yield Roll Forward (Details) - Purchased Credit Impaired Loans [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Accretable yield, beginning of period	$ 8,644	$ 7,780	$ 7,052	$ 9,287
Additions	0	1,292	0	1,292
Accretion income	(1,026)	(1,928)	(2,280)	(3,029)
Reclassification	323	120	1,358	382
Other changes, net	339	(58)	2,150	(726)
Accretable yield, end of period	$ 8,280	$ 7,206	$ 8,280	$ 7,206

XML

Commitments and Contingent Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Commitments to extend credit	$ 376,037	$ 333,900
Standby letters of credit	$ 15,090	$ 12,200

XML

Fair Value Disclosures - Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 174,114	$ 201,688
Derivative financial instruments	3,411
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	174,114	201,688
Derivative financial instruments	3,411	1,174
U.S. Government-sponsored enterprises (GSEs) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	23,988	43,503
Municipal securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	56,726	55,161
Other debt securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	937	910
Fair Value, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	174,114	201,688
Derivative financial instruments	3,411	1,174
Fair Value, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Derivative financial instruments	0	0
Fair Value, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	174,114	201,688
Derivative financial instruments	3,411	1,174
Fair Value, Recurring [Member] | Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Derivative financial instruments	0	0
Fair Value, Recurring [Member] | U.S. Government-sponsored enterprises (GSEs) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	23,988	43,503
Fair Value, Recurring [Member] | U.S. Government-sponsored enterprises (GSEs) [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | U.S. Government-sponsored enterprises (GSEs) [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	23,988	43,503
Fair Value, Recurring [Member] | U.S. Government-sponsored enterprises (GSEs) [Member] | Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Municipal securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	56,726	55,161
Fair Value, Recurring [Member] | Municipal securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Municipal securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	56,726	55,161
Fair Value, Recurring [Member] | Municipal securities [Member] | Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Other debt securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	937	910
Fair Value, Recurring [Member] | Other debt securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Other debt securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	937	910
Fair Value, Recurring [Member] | Other debt securities [Member] | Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	92,463	102,114
Fair Value, Recurring [Member] | Mortgage-backed securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Recurring [Member] | Mortgage-backed securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	92,463	102,114
Fair Value, Recurring [Member] | Mortgage-backed securities [Member] | Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 0	$ 0

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Fair Value Disclosures - Assets and Liabilities Measured on Nonrecurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	$ 3,870	$ 671
Other real estate owned	1,814	2,495
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Significant Other Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	3,870	671
Other real estate owned	$ 1,814	$ 2,495

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Fair Value Disclosures Fair Value Disclosures - Unobservable Inputs (Details) - Fair Value, Nonrecurring [Member] $ in Thousands	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 3,870	$ 671
Other real estate owned	1,814	2,495
Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	3,870	671
Other real estate owned	1,814	$ 2,495
Appraisal And Discounted Cash Flow [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 3,870
Appraisal And Discounted Cash Flow [Member] | Measurement Input, Discount Rate [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans, measurement input	0.09
Appraisal [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	$ 1,814
Appraisal [Member] | Measurement Input, Discount Rate [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans, measurement input		0.44
Other real estate owned, measurement input	0.12	0.23

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Fair Value Disclosures - Carrying Amount and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Securities available-for-sale, at fair value	$ 174,114	$ 201,688
Liabilities:
Noninterest-bearing demand deposits	357,220	319,861
Interest-bearing demand deposits	333,705	311,482
Time deposits	673,243	648,676
Derivative financial instruments	3,411
Level 1 [Member]
Assets:
Cash and cash equivalents	199,534	115,822
Level 2 [Member]
Assets:
Securities available-for-sale, at fair value	174,114	201,688
Liabilities:
Noninterest-bearing demand deposits	357,220	319,861
Interest-bearing demand deposits	333,705	311,482
Money market and savings deposits	648,132	641,945
Time deposits	674,278	649,169
Securities sold under agreements to repurchase	8,219	11,756
Federal Home Loan Bank advances and other borrowings	15,460	11,243
Derivative financial instruments	3,411	1,174
Level 3 [Member]
Assets:
Loans, net	1,822,099	1,766,838
Liabilities:
Subordinated debt	37,618	39,190
Carrying Amount [Member]
Assets:
Cash and cash equivalents	199,534	115,822
Securities available-for-sale, at fair value	174,114	201,688
Other investments	12,905	11,499
Loans, net	1,827,892	1,768,964
Liabilities:
Noninterest-bearing demand deposits	357,220	319,861
Interest-bearing demand deposits	333,705	311,482
Money market and savings deposits	648,132	641,945
Time deposits	673,243	648,676
Securities sold under agreements to repurchase	8,219	11,756
Federal Home Loan Bank advances and other borrowings	15,460	11,243
Subordinated debt	39,219	39,177
Derivative financial instruments		1,174
Estimated Fair Value [Member]
Assets:
Cash and cash equivalents	199,534	115,822
Securities available-for-sale, at fair value	174,114	201,688
Loans, net	1,822,099	1,766,838
Liabilities:
Noninterest-bearing demand deposits	357,220	319,861
Interest-bearing demand deposits	333,705	311,482
Money market and savings deposits	648,132	641,945
Time deposits	674,278	649,169
Securities sold under agreements to repurchase	8,219	11,756
Federal Home Loan Bank advances and other borrowings	15,460	11,243
Subordinated debt	37,618	39,190
Derivative financial instruments	$ 3,411	$ 1,174

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Derivatives - Fair Value Hedges on Balance Sheet (Details) - Interest Rate Swap, Liability [Member] - Designated as Hedging Instrument [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Weighted average remaining maturity	8 years 8 months 12 days	9 years 2 months 23 days
Weighted Average Pay Rate	3.09%	3.10%
Derivative liability, notional amount	$ 36,000,000	$ 35,000,000
Hedged liability, fair value	$ (3,411,000)	$ (1,174,000)

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Derivatives - Fair Value Hedges on Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Reported interest income on tax-exempt securities	$ 411	$ 76	$ 836	$ 112
Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest rate swap agreements - securities:	1,348	0	2,237	0
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest rate swap agreements - securities:	(1,348)	0	(2,237)	0
Fair Value Hedging [Member] | Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest income on tax-exempt securities	449	0	906	0
Effects of fair value hedge relationships	(38)	0	(70)	0
Reported interest income on tax-exempt securities	$ 411	$ 0	$ 836	$ 0

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Derivatives - Fair Value Hedges in Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Carrying Amount of the Hedged Assets	$ 42,850	$ 39,730
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets	$ 3,411	$ 1,174

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Leases - Lease Assets and Liabilities (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating lease right-of-use assets	$ 2,085
Operating lease liabilities	$ 2,099

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Leases - Narrative (Details)	Jun. 30, 2019
Leases [Abstract]
Weighted average remaining lease term	7 years 5 months 27 days
Weighted average discount rate	3.23%

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Leases - Lease Costs and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Lease Costs
Operating lease costs	$ 157	$ 315
Short-term lease costs	5	11
Variable lease costs	23	46
Total	185	372
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 150	$ 302

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Leases - Future Minimum Payments (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
June 30, 2020	$ 466
June 30, 2021	486
June 30, 2022	222
June 30, 2023	152
June 30, 2024	74
Thereafter	699
Total future minimum lease payments	2,099
Amounts representing interest	(319)
Present value of net future minimum lease payments	$ 1,780