8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of earliest event reported: February 1, 2016

SMARTFINANCIAL, INC.

(Exact Name of Registrant as Specified in its Charter)

Tennessee	333-203449		62-1173944
(State or Other Jurisdiction of Incorporation)	(Commission File Number)		(IRS Employer Identification No.)
5401 Kingston Pike, Suite 600 Knoxville, Tennessee		37919
(Address of Principal Executive Offices)		(Zip Code)

(865) 437-5700

(Registrant’s telephone number, including area code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 1, 2016, SmartFinancial, Inc. issued a press release reporting earnings results for its fourth quarter ending December 31, 2015. The press release is attached as Exhibit 99.1 to this Form 8-K and is furnished to, but not filed with, the Commission.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release issued by SmartFinancial, Inc. dated February 1, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SMARTFINANCIAL, INC.
Date: February 1, 2016
	/s/ William Y. Carroll, Jr.
	William Y. Carroll, Jr.
	President & Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated February 1, 2016

EX-99.1

Exhibit 99.1

4Q 2015

SmartFinancial, Inc. Reports Fourth Quarter Results

KNOXVILLE, TN - February 1, 2016 - SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), announced today earnings of $1.2 million or $0.20 per share for its fourth quarter. This quarter is the first with a full three months’ results from each subsidiary bank, as in the third quarter 2015, SmartFinancial successfully completed the merger of two holding companies, legacy SmartFinancial, Inc. and Cornerstone Bancshares, Inc., and carried forward the name "SmartFinancial, Inc.".

Billy Carroll, President & CEO stated: "We enjoyed a favorable final quarter, but look forward to completing the combination of our two banks slated for late February, at which time we'll begin realizing greater efficiencies. As we unite as SmartBank, spanning East Tennessee and Northwest Florida, 2016 will be our year to focus on fundamentals, reinforce the foundation of an innovative, forward-looking brand and execute on our disciplined growth strategy."

SmartFinancial's Chairman Miller Welborn added: "It's exciting to be on the eve of unveiling SmartBank in Chattanooga, which encompasses a region that has tremendous prospects for growth and will remain a significant market for SmartBank for years to come. The banking industry is ready for re-envisioning and this company's energetic, entrepreneurial leadership and talented team of associates poise us perfectly to deliver a new experience in banking which we anticipate will reward clients, associates and shareholders alike."

Performance Highlights 

• Annualized loan growth of 9.5% in the quarter, as net loans finished the year at $723.4 million compared to $706.6 million for the third quarter.

• Outstanding asset quality as estimated Nonperforming Assets to Total Assets fell to 0.75% compared to 1.17% at the end of the third quarter.

• Net income available to common shareholders accelerated to $1.2 million, or $0.19 per diluted share, in Q4 2015 compared to a loss of ($0.1) million or ($0.03) per diluted share in Q3 2015. The loss in prior quarter was primarily due to one-time merger expenses at the holding company.

• Net operating earnings available to common shareholders, which excludes certain non-operating items, improved to $1.1 million, or $0.18 per diluted share, in Q4 2015 from $0.10 per diluted share in Q3 2015.

Billy Carroll concluded: “We’re optimistic about the synergies our banks will generate once combined. While we’ve been focused on the merger, we have a newly established mortgage unit with experienced personnel which is already driving revenue and will serve the entire franchise beginning in March. This specialty group will allow us to better serve clients, offer a wider range of products and complement a focus on servicing high-net worth clientele. We look forward to reporting on the results of this investment in coming quarters.”

  

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank and Cornerstone Community Bank. SmartBank is a full-service commercial bank founded in 2007, with seven branches and one loan production office spanning East Tennessee and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching and a conservative and disciplined approach to lending have all given rise to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartbank.com. Cornerstone Community Bank is a full-service commercial bank founded in 1996, with five branches throughout the Chattanooga MSA and one loan production office in Dalton, Georgia. Cornerstone Community Bank specializes in providing customized financial solutions for businesses and consumers, by offering a comprehensive range of products and services designed to help companies and individuals build strong financial foundations. More information about Cornerstone Community Bank can be found on its website: www.cscbank.com.

This release contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: changes in management’s plans for the future, prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and other factors that may be described in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

In addition to these risks, acquisitions and business combinations present risks other than those presented by the nature of the business acquired. Acquisitions and business combinations may be substantially more expensive to complete than originally anticipated, and the anticipated benefits may be significantly harder—or take longer—to achieve than expected. As regulated financial institutions, our pursuit of attractive acquisition and business combination opportunities could be negatively impacted by regulatory delays or other regulatory issues. Regulatory and/or legal issues related to the pre-acquisition operations of an acquired or combined business may cause reputational harm to SmartFinancial following the acquisition or combination, and integration of the acquired or combined business with ours may result in additional future costs arising as a result of those issues.

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, SmartFinancial assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; and (iii) adjusted allowance for loan losses to loans, in its analysis of the Company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger and conversion costs, OREO gain and losses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses, merger and conversion costs, and adjustment for OREO gains and losses from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses.

  

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Source

SmartFinancial, Inc.

Investor Contacts

SmartFinancial, Inc.

Billy Carroll

President & CEO

865.868.0613

Frank Hughes

Executive Vice President

Investor Relations

423.385.3009

Media Contact

Kelley Fowler

First Vice President, Public Relations & Marketing

SmartBank

865.868.0611

kfowler@smartbank.net

  

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
	As of and for the three months ending
	Dec. 31, 2015			Sept. 30, 2015			June 30, 2015			March 31, 2015			Dec. 31, 2014
Selected Performance Ratios (Annualized)
Return on average assets		0.47	%		-0.04	%		0.05	%		0.27	%		0.28	%
Net operating return on average assets (Non-GAAP)		0.44	%		0.25	%		0.25	%		0.17	%		0.56	%
Return on average shareholder equity		4.75	%		-0.44	%		0.47	%		2.44	%		2.53	%
Net operating return on average shareholder equity (Non-GAAP)		4.49	%		2.51	%		2.30	%		1.51	%		5.13	%
Yield on earning assets, TE		4.54	%		4.47	%		4.27	%		4.21	%		4.62	%
Cost of interest-bearing liabilities		0.52	%		0.53	%		0.49	%		0.48	%		0.49	%
Net interest margin, TE		4.11	%		4.02	%		3.85	%		3.77	%		4.07	%
Efficiency ratio		74.30	%		97.44	%		88.67	%		71.68	%		81.45	%
Operating efficiency ratio (Non-GAAP)		75.57	%		84.60	%		76.70	%		76.51	%		67.55	%
Per Common Share
Net income, basic		0.20			(0.03	)		0.01			0.10			0.11
Net income, diluted		0.19			(0.03	)		0.01			0.09			0.10
Net operating earnings, basic (Non-GAAP)		0.19			0.10			0.10			0.06			0.23
Net operating earnings, diluted (Non-GAAP)		0.18			0.10			0.09			0.05			0.21
Book value		17.25			17.16			18.92			19.12			18.84
Common shares outstanding		5,806			5,735			2,966			2,966			2,966
Composition Of Loans
Commercial, financial & agriculture		85,526			81,107			37,507			34,285			33,719
Real estate construction & Development		105,132			97,050			52,634			64,180			52,505
Real estate commercial		369,263			365,607			208,937			190,214			193,451
Real estate residential		161,427			162,090			89,876			81,253			81,414
Other loans		6,368			4,585			1,770			1,478			2,314
Total loans		727,716			710,439			390,724			371,410			363,403
Asset Quality Data and Ratios
Nonperforming loans		2,359			1,715			4,067			4,156			5,067
Foreclosed assets		5,358			9,647			3,728			4,170			4,983
Total nonperforming assets		7,717			11,362			7,795			8,326			10,050
Restructured loans not included in nonperforming loans		3,693			3,731			1,831			1,849			1,937
Net charge-offs to average loans (annualized)		0.02	%		0.03	%		0.13	%		0.00	%		0.46	%
Allowance for loan losses to loans		0.60	%		0.54	%		0.98	%		1.05	%		1.07	%
Adjusted allowance for loan losses to loans (Non-GAAP)		2.18	%		2.26	%		2.38	%		2.75	%		2.84	%
Nonperforming loans to loans		0.32	%		0.24	%		1.04	%		1.12	%		1.39	%
Nonperforming assets to total assets		0.75	%		1.13	%		1.43	%		1.57	%		1.88	%
Capital Ratios
Tangible equity to tangible assets		9.17	%		9.14	%		10.30	%		10.68	%		10.43	%
Tangible common equity to tangible assets		9.17	%		9.14	%		10.30	%		10.68	%		10.43	%
SmartFinancial Inc.:
Tier 1 leverage		9.32	%		9.31	%		10.92	%		10.88	%		10.74	%
Common equity Tier 1		10.26	%		10.25	%		12.97	%		13.59	%		13.71	%
Tier 1 risk-based capital		11.78	%		11.77	%		12.97	%		13.59	%		13.71	%
Total risk-based capital		12.26	%		12.25	%		13.86	%		14.54	%		14.60	%

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
	Ending Balances
	Dec. 31, 2015			Sept. 30, 2015			June 30, 2015			March 31, 2015			Dec. 31, 2014
Assets
Cash & cash equivalents		79,965			89,936			43,810			41,244			46,739
Securities available for sale		166,413			152,150			83,747			92,295			98,876
Other investments		4,451			4,451			2,128			2,090			2,090
Total investment securities		170,864			156,601			85,875			94,385			100,967
Total loans		727,716			710,439			390,724			371,410			363,403
Allowance for loan losses		(4,355	)		(3,828	)		(3,834	)		(3,915	)		(3,880	)
Loans net		723,361			706,611			386,890			367,495			359,523
Premises and equipment		25,038			25,266			16,405			16,383			15,939
Foreclosed assets		5,358			9,647			3,728			4,170			4,983
Goodwill and other intangibles		6,941			7,034			177			217			258
Other assets		12,436			11,962			6,478			5,257			5,304
Total assets		1,023,963			1,007,057			543,363			529,153			533,714
Liabilities
Non-interest demand		131,419			123,551			69,427			58,006			53,640
Interest-bearing demand		149,424			144,012			114,165			119,771			102,113
Money market and savings		236,901			231,477			131,810			120,147			120,091
Time deposits		340,739			347,951			167,344			168,636			178,963
Total deposits		858,483			846,992			482,745			466,560			454,807
Repurchase agreements		28,068			18,442			2,727			4,607			9,758
FHLB & other borrowings		34,187			39,278			-			-			12,000
Other liabilities		3,048			3,908			1,772			1,280			1,261
Total liabilities		923,786			908,621			487,245			472,447			477,826
Shareholders' Equity
Preferred stock		12			12			12			12			12
Common stock		5,806			5,732			2,966			2,966			2,966
Additional paid-in capital		82,616			81,628			42,516			42,512			42,508
Retained earnings		12,095			10,942			11,049			11,013			10,705
Accumulated other comprehensive loss		(352	)		122			(425	)		202			(303	)
Total shareholders' equity		100,177			98,436			56,118			56,705			55,888
Total liabilities & shareholders' equity		1,023,963			1,007,057			543,363			529,153			533,714

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
INCOME STATEMENT
	Three months ending
	Dec. 31, 2015		Sept. 30, 2015			June 30, 2015			March 31, 2015		Dec. 31, 2014
Interest Income
Loans, including fees		9,875		6,660			4,677			4,519		4,725
Investment securities and interest bearing deposits		628		458			363			418		585
Other interest income		64		35			28			28		29
Total interest income		10,567		7,153			5,068			4,965		5,339
Interest Expense
Deposits		938		688			498			503		507
Repurchase agreements		17		7			3			3		3
FHLB and other borrowings		66		31			3			0		0
Total interest expense		1,021		726			504			506		510
Net interest income		9,546		6,427			4,564			4,459		4,829
Provision for loan losses		567		32			40			284		133
Net interest income after provision for loan losses		8,979		6,395			4,524			4,175		4,696
Non-interest income
Service charges on deposit accounts		397		237			149			130		147
Other non-interest income		340		317			237			230		243
Gain on securites		-		-			52			-		-
Gain on sale of loans and other assets		86		(294	)		31			65		81
Gain (loss) on sale of foreclosed assets		332		(86	)		(363	)		383		(340	)
Total non-interest income		1,155		174			106			808		131
Non-interest expense
Salaries and employee benefits		4,208		3,187			2,236			2,301		2,312
Occupancy expense		910		688			575			544		534
Data Processing		510		278			194			210		171
Professional expenses		761		908			334			352		430
Foreclosed asset expense		110		91			48			41		51
Marketing		100		142			111			111		78
Amortization of other intangibles		93		58			41			41		41
FDIC premiums		148		144			98			97		103
Other non-interest expense		1,213		997			704			585		553
Total non-interest expense		8,052		6,493			4,340			4,281		4,273
Earnings before income taxes		2,082		75			290			702		554
Income tax expense		901		152			225			363		198
Net income (loss)		1,182		(77	)		66			339		356
Dividends on preferred stock		30		30			30			30		30
Net income available to common shareholders		1,152		(107	)		36			309		326
NET INCOME PER COMMON SHARE
Basic		0.20		(0.03	)		0.01			0.10		0.11
Diluted		0.19		(0.03	)		0.01			0.09		0.10
Weighted average common shares outstanding
Basic		5,750		3,937			2,966			2,966		2,964
Diluted		6,037		4,244			3,293			3,293		3,293

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
	Three Months Ended							Three Months Ended							Twelve Months Ended
	Dec. 31, 2015							Sept. 30, 2015							Dec. 31, 2015
	Avg. Balance		Tax Equivalent Interest		Yield / Rate			Avg. Balance		Tax Equivalent Interest		Yield / Rate			Avg. Balance		Tax Equivalent Interest		Yield / Rate
ASSETS
Loans		719,140		9,875		5.45	%		493,730		6,660		5.35	%		490,262		25,731		5.15	%
Investment securities		152,142		628		1.64	%		107,061		458		1.70	%		109,808		1,867		1.69	%
Fed funds sold and other		52,461		64		0.48	%		33,539		35		0.42	%		24,904		155		0.44	%
Total interest earning assets		923,743		10,567		4.54	%		634,330		7,153		4.47	%		624,974		27,753		4.44	%
Non-interest earning assets		84,228							69,094							59,602
Total assets		1,007,971							703,424							685,626
LIABLITIES & EQUITY
Interest-bearing demand		138,156		119		0.34	%		114,727		45		0.15	%		117,185		239		0.19	%
Money market and savings		234,637		194		0.33	%		169,916		176		0.41	%		161,742		589		0.36	%
Time deposits		344,095		625		0.72	%		234,018		467		0.79	%		229,537		1,799		1.26	%
Total interest-bearing deposits		716,888		938		0.52	%		518,661		688		0.53	%		508,464		2,627		0.52	%
Repurchase agreements		22,528		17		0.30	%		11,095		7		0.25	%		11,042		30		0.29	%
FHLB and other borrowings		35,806		66		0.73	%		13,806		31		0.90	%		12,403		100		0.41	%
Total interest bearing liabilities		775,222		1,021		0.52	%		543,562		726		0.53	%		531,909		2,757		0.52	%
Non-interest bearing deposits		130,212							88,468							83,378
Other liabilities		3,830							2,141							234
Total liabilities		909,264							634,171							615,521
Shareholders' equity		98,707							69,253							70,105
Total liabilities and shareholders equity		1,007,971							703,424							685,626
Net interest income, taxable equivalent				9,546							6,427							24,996
Interest rate spread						4.02	%						3.94	%						3.92	%
Tax equivalent net interest margin						4.11	%						4.02	%						4.00	%
Percent of average interest-earnings assets to average interest-bearing liabilities						119.16	%						116.70	%						117.50	%
Tax equivalent adjustment
Loans				0							0
Investment securities				21							1
Total				21							1

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
	Three months ending
	Dec. 31, 2015			Sept. 30, 2015			June 30, 2015			March 31, 2015			Dec. 31, 2014
Operating Earnings
Net income (loss) (GAAP)		1,182			(77	)		66			339			356
Securities (gains) losses		-			-			(52	)		-			-
Merger and conversion costs		230			748			104			175			254
Foreclosed assets (gains) losses		(332	)		86			363			(383	)		340
Income tax effect of adjustments		39			(319	)		(159	)		79			(227	)
Net operating earnings (Non-GAAP)		1,118			438			322			210			723
Dividends on preferred stock		(30	)		(30	)		(30	)		(30	)		(30	)
Net operating earnings available to common shareholders (Non-GAAP)		1,088			408			292			180			693
Net operating earnings per common share:
Basic		0.19			0.10			0.10			0.06			0.23
Diluted		0.18			0.10			0.09			0.05			0.21
Operating Efficiency Ratio
Efficiency ratio (GAAP)		74.30	%		97.44	%		88.67	%		71.68	%		81.45	%
Adjustment for securities (gains) losses		0.00	%		0.00	%		-1.20	%		0.00	%		0.00	%
Adjustment for merger and conversion costs		-2.85	%		-11.51	%		-2.41	%		-4.10	%		-5.94	%
Adjustment for OREO (gains) losses		4.13	%		-1.32	%		-8.36	%		8.94	%		-7.97	%
Operating efficiency ratio (Non-GAAP)		75.57	%		84.60	%		76.70	%		76.51	%		67.55	%
Allowance for loan losses (GAAP)		4,355			3,828			3,834			3,915			3,880
Net acquisition accounting fair value discounts to loans		11,781			12,520			5,599			6,467			6,630
Adjusted allowance for loan losses (Non-GAAP)		16,136			16,348			9,433			10,382			10,510
Loans (excluding acquisition accounting fair value discounts)		739,497			722,959			396,323			377,877			370,033
Adjusted allowance for loan losses to loans (Non-GAAP)		2.18	%		2.26	%		2.38	%		2.75	%		2.84	%