10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020

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

For the transition period from __________ to __________

Commission File Number: 001-37661

(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)
865-437-5700	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 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  ☒   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  ☒    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  ☒ Non-accelerated filer  ☐ Smaller reporting company  ☒ Emerging growth company ☐ 

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  ☒

As of August 03, 2020, there were 15,216,932 shares of common stock, $1.00 par value per share, issued and outstanding.

TABLE OF CONTENTS

PART I –FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at June 30, 2020 and December 31, 2019	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II – OTHER INFORMATION		52
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54

2

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,		December 31,
	2020		2019
ASSETS:
Cash and due from banks	$	57,045	$	33,205
Interest-bearing deposits with banks		258,271		127,329
Federal funds sold		84,151		23,437
Total cash and cash equivalents		399,467		183,971
Securities available-for-sale, at fair value		219,631		178,348
Other investments		14,829		12,913
Loans held for sale		6,330		5,856
Loans		2,408,284		1,897,392
Less: Allowance for loan losses		(16,254)		(10,243)
Loans, net		2,392,030		1,887,149
Premises and equipment, net		73,868		59,433
Other real estate owned		5,524		1,757
Goodwill and core deposit intangible, net		86,327		77,193
Bank owned life insurance		30,853		24,949
Other assets		37,126		17,554
Total assets	$	3,265,985	$	2,449,123
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand	$	645,650	$	364,155
Interest-bearing demand		479,212		380,234
Money market and savings		762,246		623,284
Time deposits		652,581		679,541
Total deposits		2,539,689		2,047,214
Borrowings		318,855		31,623
Subordinated debt		39,304		39,261
Other liabilities		24,649		18,278
Total liabilities		2,922,497		2,136,376
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; 15,216,932 and 14,008,233 shares issued and outstanding, respectively		15,217		14,008
Additional paid-in capital		254,396		232,732
Retained earnings		73,283		65,839
Accumulated other comprehensive income		592		168
Total shareholders' equity		343,488		312,747
Total liabilities and shareholders' equity	$	3,265,985	$	2,449,123

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

3

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)

		Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest income:
Loans, including fees	$	28,663	$	25,278	$	55,097	$	50,253
Securities available-for-sale:
Taxable		589		871		1,268		1,842
Tax-exempt		416		411		699		836
Federal funds sold and other earning assets		277		743		879		1,315
Total interest income		29,945		27,303		57,943		54,246
Interest expense:
Deposits		3,366		5,788		8,120		11,039
Borrowings		249		123		339		235
Subordinated debt		584		590		1,167		1,173
Total interest expense		4,199		6,501		9,626		12,447
Net interest income		25,746		20,802		48,317		41,799
Provision for loan losses		2,850		393		6,049		1,190
Net interest income after provision for loan losses		22,896		20,409		42,268		40,609
Noninterest income:
Service charges on deposit accounts		709		707		1,479		1,361
Gain on sale of securities		16		33		16		33
Mortgage banking		931		392		1,515		674
Investment services		363		255		801		424
Insurance commissions		473		—		742		—
Interchange and debit card transaction fees		508		143		784		318
Merger termination fee		—		6,400		—		6,400
Other		511		486		993		904
Total noninterest income		3,511		8,416		6,330		10,114
Noninterest expense:
Salaries and employee benefits		10,357		8,984		20,363		17,382
Occupancy and equipment		1,996		1,658		3,906		3,298
FDIC insurance		180		180		360		359
Other real estate and loan related expense		346		242		892		732
Advertising and marketing		202		259		400		554
Data processing		594		577		1,132		1,192
Professional services		868		489		1,578		1,151
Amortization of intangibles		405		342		767		686
Software as service contracts		561		568		1,031		1,136
Merger related and restructuring expenses		1,477		1,796		3,573		2,719
Other		1,820		1,714		3,598		3,179
Total noninterest expense		18,806		16,809		37,600		32,388
Income before income tax expense		7,601		12,016		10,998		18,335
Income tax expense		1,427		2,895		2,091		4,483
Net income	$	6,174	$	9,121	$	8,907	$	13,852
Earnings per common share:
Basic	$	0.41	$	0.65	$	0.60	$	0.99
Diluted		0.41		0.65	$	0.60	$	0.99
Weighted average common shares outstanding:
Basic		15,152,768		13,951,643		14,773,935		13,946,856
Diluted		15,202,335		14,046,500		14,842,486		14,036,790

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

4

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2020		2019	2020		2019
Net income	$	6,174	$	9,121	$	8,907	$	13,852
Other comprehensive income:
Unrealized holding gains and hedge effects on securities available-for-sale arising during the period		1,808		2,610		2,903		5,461
Tax effect		(394)		(683)		(638)		(1,431)
Reclassification adjustment for realized gains included in net income		16		33		16		33
Tax effect		(4)		(9)		(4)		(9)
Unrealized gains on securities available-for-sale arising during the period, net of tax		1,426		1,951		2,277		4,054
Unrealized gains (losses) on fair value municipal security hedges		691		(2,830)		(2,381)		(2,521)
Tax effect		(278)		742		528		661
Unrealized gains (losses) on fair value municipal security hedge instruments arising during the period, net of tax		413		(2,088)		(1,853)		(1,860)
Total other comprehensive income (loss)		1,839		(137)		424		2,194
Comprehensive income	$	8,013	$	8,984	$	9,331	$	16,046

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

5

SMARTFINANCIAL, INC. AND SUBSIDIARY

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

For the Three and Six Months Ended June 30, 2020 and 2019

(Dollars in thousands, except for share data)

								Accumulated
								Other
	Common Stock			Additional		Retained		Comprehensive
	Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Total
Balance, December 31, 2018	13,933,504	$	13,933	$	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, December 31, 2019	14,008,233	$	14,008	$	232,732	$	65,839	$	168	$	312,747
Net income	—		—		—		8,907		—		8,907
Other comprehensive loss	—		—		—		—		424		424
Common stock issued pursuant to:
Exercise of stock options	15,358		16		162		—		—		178
Restricted stock, net of forfeitures	32,318		32		(32)		—		—		—
Shareholders of Progressive Financial Group, Inc.	1,292,578		1,293		23,254		—		—		24,547
Stock compensation expense	—		—		223		—		—		223
Common stock dividend ($0.10 per share)	—		—		—		(1,463)		—		(1,463)
Repurchase of common stock	(131,555)		(132)		(1,943)		—		—		(2,075)
Balance, June 30, 2020	15,216,932	$	15,217	$	254,396	$	73,283	$	592	$	343,488
Balance, March 31, 2019	13,951,590	$	13,952	$	232,241	$	44,722	$	(434)	$	290,481
Net income	—		—		—		9,121		—		9,121
Other comprehensive gain	—		—		—		—		(137)		(137)
Common stock issued pursuant to:
Exercise of stock options	1,619		2		12		—		—		14
Restricted stock	—		—		—		—		—		—
Stock compensation expense	—		—		133		—		—		133
Balance, June 30, 2019	13,953,209	$	13,953	$	232,386	$	53,843	$	(571)	$	299,611
Balance, March 31, 2020	15,221,990	$	15,222	$	254,356	$	67,869	$	(1,247)	$	336,200
Net income	—		—		—		6,174		—		6,174
Other comprehensive gain	—		—		—		—		1,839		1,839
Common stock issued pursuant to:
Exercise of stock options	500		1		4		—		—		5
Restricted stock	418		—		—		—		—		—
Stock compensation expense	—		—		113		—		—		113
Common stock dividends ($0.05 per share)	—		—		—		(760)		—		(760)
Repurchase of common stock	(5,976)		(6)		(77)		—		—		(83)
Balance, June 30, 2020	15,216,932	$	15,217	$	254,396	$	73,283	$	592	$	343,488

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

6

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	8,907	$	13,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,788		2,088
Accretion of fair value purchase accounting adjustments, net		(2,729)		(3,091)
Provision for loan losses		6,049		1,190
Stock compensation expense		223		276
Gain from redemption and sale of securities available-for-sale		(16)		(33)
Deferred income tax expense		209		1,039
Increase in cash surrender value of bank owned life insurance		(345)		(314)
Loss on disposal of fixed assets		—		14
Net (gains) losses from sale of other real estate owned		81		(16)
Net gains from sale of loans		(1,515)		(674)
Origination of loans held for sale		(49,888)		(33,491)
Proceeds from sales of loans held for sale		50,929		32,057
Net change in:
Accrued interest receivable		(5,236)		(612)
Accrued interest payable		318		454
Other assets		(10,018)		(593)
Other liabilities		1,523		5,792
Net cash provided by operating activities		1,280		17,938
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale		6,875		16,515
Proceeds from maturities and calls of securities available-for-sale		15,450		10,305
Proceeds from paydowns of securities available-for-sale		9,144		6,554
Purchases of securities available-for-sale		(41,958)		(1,054)
Purchases of other investments		(1,223)		(1,406)
Net increase in loans		(321,192)		(55,323)
Purchases of premises and equipment		(3,417)		(2,011)
Proceeds from sale of other real estate owned		406		1,100
Net cash and cash equivalents received from business combination		46,132		—
Net cash used in investing activities		(289,783)		(25,320)
Cash flows from financing activities:
Net increase in deposits		220,128		90,136
Net decrease in securities sold under agreements to repurchase		(527)		(3,537)
Proceeds from borrowings		338,340		120,176
Repayment borrowings		(50,581)		(115,959)
Cash dividends paid		(1,463)		—
Issuance of common stock		178		278
Purchase of common stock		(2,075)		—
Net cash provided by financing activities		504,000		91,094
Net change in cash and cash equivalents		215,497		83,712
Cash and cash equivalents, beginning of period		183,970		115,822
Cash and cash equivalents, end of period	$	399,467	$	199,534
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	9,308	$	11,993
Cash paid during the period for income taxes		2,948		2,630
Noncash investing and financing activities:
Acquisition of real estate through foreclosure		971		403
Change in goodwill due to acquisitions		8,532		—
Initial recognition of operating lease right-of-use assets		484		2,344
Initial recognition of operating lease liabilities		484		2,344

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

7

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 East and Middle Tennessee, Alabama, and the Florida Panhandle. 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 accounting and financial reporting policies of the Company and its wholly-owned subsidiary conform to U.S. generally accepted accounting principles (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements for the Company and its wholly-owned subsidiary have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. 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. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Recently Issued and Adopted Accounting Pronouncements:

As of January 1, 2020, the Company adopted ASU 2019-01, Leases: Codification Improvements (“ASU 2019-01”). ASU 2019-01 provides clarification 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. The adoption of ASU 2019-01 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, 2019 as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission ("SEC"). The following is a summary of recent authoritative pronouncements issued but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In October 2019, the Financial Accounting Standards Board approved a delay for the implementation of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The Board decided that CECL will be effective for larger Public Business Entities ("PBEs") that are SEC filers, excluding Smaller Reporting Companies ("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 and the Company meets the regulations as an SRC.

8

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 Company does not plan to adopt this standard early and being that the Company is an SRC, adoption is required for fiscal years beginning after December 15, 2022.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify various aspects of the current guidance to promote consistent application of the standard among reporting entities by moving certain exceptions to the general principles. The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not plan to adopt this standard early and adoption should not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”). It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the transition away from LIBOR for its loan and other financial instruments.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. Under Accounting Standards Codification 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” (“ASC 310-40”), a restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. In regard to nonaccrual and charge-offs of loans, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or classified.

Reclassifications:

Certain captions and amounts in the 2019 consolidated financial statements were reclassified to conform to the 2020 financial statement presentation. These reclassifications had no impact on net income or shareholders’ equity as previously reported.

9

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Business Combinations

Acquisition of Progressive Financial Inc.

On March 1, 2020, the Company completed the merger of Progressive Financial Group, Inc., a Tennessee corporation (“PFG”), pursuant to an Agreement and Plan of Merger dated October 29, 2019 (the “Merger Agreement”).

In connection with the merger, the Company acquired $301 million of assets and assumed $272 million of liabilities. Pursuant to the Merger Agreement, each outstanding share of Progressive common stock was converted into and cancelled in exchange to the right to receive $474.82 in cash, and 62.3808 shares of SmartFinancial common stock. SmartFinancial issued 1,292,578 shares of SmartFinancial common stock and paid $9.8 million in cash as consideration for the Merger. The fair value of consideration paid exceeded the fair value of the identifiable assets and liabilities acquired and resulted in the establishment of goodwill in the amount of $8.5 million, representing the intangible value of Progressive’s business and reputation within the markets it served. None of the goodwill recognized is expected to be deductible for income tax purposes. The Company is amortizing the related core deposit intangible of $1.4 million using the effective yield method over 120 months (10 years), which represents the expected useful life of the asset.

The Company’s operating results for the three and six month periods ended June 30, 2020, include the operating results of the acquired business for the period subsequent to the merger date of March 1, 2020.

The purchased assets and assumed liabilities were recorded at their acquisition date fair values ⁽¹⁾ and are summarized in the table below (in thousands).

	As recorded		Fair value		As recorded
	by PFG		adjustments (1)		by the Company
Assets:
Cash & cash equivalents	$	55,971	$	—	$	55,971
Investment securities available-for-sale		27,054		203		27,257
Restricted investments		692		—		692
Loans		191,672		(3,691)		187,981
Allowance for loan losses		(2,832)		2,832		—
Premises and equipment, net		15,681		(2,919)		12,762
Bank owned life insurance		5,560		—		5,560
Deferred tax asset, net		—		813		813
Intangibles		—		1,370		1,370
Other real estate owned		3,695		(329)		3,366
Interest Receivable		1,061		(280)		781
Prepaids		375		(174)		201
Goodwill		231		(231)		—
Other assets		1,881		—		1,881
Total assets acquired	$	301,041	$	(2,406)	$	298,635
Liabilities:
Deposits	$	271,276	$	—	$	271,276
Time deposit premium		—		729		729
Payables and other liabilities		776		—		776
Total liabilities assumed		272,052		729		272,781
Excess of assets assumed over liabilities assumed	$	28,989
Aggregate fair value adjustments			$	(3,135)
Total identifiable net assets						25,854
Consideration transferred:
Cash						9,838
Common stock issued (1,292,578 shares)						24,547
Total fair value of consideration transferred						34,385
Goodwill					$	8,531

⁽¹⁾ Fair values are preliminary and are subject to refinement for a period of one year after the closing date of an acquisition as information relative to the closing date fair value becomes available.

10

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents additional information related to the purchased credit impaired loans of the acquired loan portfolio at the acquisition date (in thousands):

	March 1, 2020
Accounted for pursuant to ASC 310-30:
Contractually required principal and interest	$	21,107
Non-accretable differences		4,706
Cash flows expected to be collected		16,401
Accretable yield		2,515
Fair value	$	13,886

The following table discloses the impact of the merger with PFG since the acquisition date through the three and six month periods ended June 30, 2020. The table also presents certain pro-forma information (net interest income and noninterest income (“Revenue”) and net income) as if the PFG acquisition had occurred on January 1, 2019. The pro-forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of these dates.

Merger-related costs from the PFG acquisition for the three and six month periods ended June 30, 2020, were $1.5 million and $3.6 million, respectively, have been excluded from the pro-forma information presented below. Merger related costs for the same periods of 2019 are included in pro-forma information.  The actual results and pro-forma information were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Revenue		Net Income		Revenue		Net Income
2020:
Actual PFG results included in statement of income since acquisition date	$	3,655	$	1,362	$	4,160	$	1,478
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019		29,639		7,265		57,689		11,278
2019:
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019	$	33,289	$	8,366	$	60,055	$	11,879

Note 3. Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options and restricted stock. The effect from the stock options and restricted stock on incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are

11

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

presented below. There were 116 thousand and 85 thousand antidilutive shares for the three and six month periods ended June 30, 2020, respectively, and none for the three and six month periods ended June 30, 2019.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Basic earnings per share	$	0.41	$	0.65	$	0.60	$	0.99
Diluted earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Incremental shares from assumed conversions:
Stock options and restricted stock		49,567		94,857		68,551		89,934
Average common shares outstanding - diluted		15,202,335		14,046,500		14,842,486		14,036,790
Diluted earnings per common share	$	0.41	$	0.65	$	0.60	$	0.99

Note 4. Securities

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	31,337	$	82	$	(8)	$	31,411
Municipal securities		86,469		1,716		(16)		88,169
Other debt securities		9,463		38		(44)		9,457
Mortgage-backed securities (GSEs)		88,913		2,034		(353)		90,594
Total	$	216,182	$	3,870	$	(421)	$	219,631

December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	19,015	$	41	$	(56)	$	19,000
Municipal securities		63,792		618		(19)		64,391
Other debt securities		3,481		22		(33)		3,470
Mortgage-backed securities (GSEs)		91,531		382		(426)		91,487
Total	$	177,819	$	1,063	$	(534)	$	178,348

At June 30, 2020, and December 31, 2019, securities with a carrying value totaling approximately $79.5 million and $92.3 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

12

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Proceeds from sale of securities available for sale, gross gains and gross losses on sales and redemptions for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Proceeds from sales	$	4,760	$	13,342	$	6,875	$	16,515
Gross gains	$	16	$	34	$	16	$	34
Gross losses	$	-	$	(1)	$	-	$	(1)
Proceeds from redemptions	$	12,200	$	5,000	$	15,450	$	10,305

The amortized cost and estimated fair value of securities at June 30, 2020, 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		Fair
	Cost		Value
Due in one year or less	$	440	$	443
Due from one year to five years		3,874		3,872
Due from five years to ten years		32,291		32,540
Due after ten years		90,664		92,182
		127,269		129,037
Mortgage-backed securities		88,913		90,594
Total	$	216,182	$	219,631

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
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	6,583	$	(8)	$	—	$	—	$	6,583	$	(8)
Municipal securities		3,546		(16)		—		—		3,546		(16)
Other debt securities		1,966		(14)		953		(30)		2,919		(44)
Mortgage-backed securities (GSEs)		14,209		(143)		11,222		(210)		25,431		(353)
Total	$	26,304	$	(181)	$	12,175	$	(240)	$	38,479	$	(421)
December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	2,972	$	(43)	$	5,987	$	(13)	$	8,959	$	(56)
Municipal securities		3,656		(16)		527		(3)		4,183		(19)
Other debt securities		—		—		947		(33)		947		(33)
Mortgage-backed securities (GSEs)		13,208		(194)		19,988		(232)		33,196		(426)
Total	$	19,836	$	(253)	$	27,449	$	(281)	$	47,285	$	(534)

13

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

At June 30, 2020, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross
	Unrealized		Number of
	Loss		Securities
U.S. Government- sponsored enterprises (GSEs)	$	—	—
Municipal securities		—	—
Other debt securities		(30)	1
Mortgage-backed securities (GSEs)		(210)	10
Total	$	(240)	11

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 vary 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, 2020, represented a temporary impairment, as these unrealized losses are primarily attributable to changes in interest rates and current market conditions, and not credit deterioration of the issuers. As of June 30, 2020, 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,		December 31,
	2020		2019
Federal Reserve Bank stock	$	8,641	$	7,917
Federal Home Loan Bank stock		5,838		4,646
First National Bankers Bank stock		350		350
Total	$	14,829	$	12,913

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, 2020, the Company determined that there was no impairment on its other investments.

14

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5. Loans and Allowance for Loan Losses

Portfolio Segmentation:

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

	June 30, 2020						December 31, 2019
	PCI		All Other				PCI		All Other
	Loans1		Loans		Total		Loans1		Loans		Total
Commercial real estate	$	16,517	$	1,000,516	$	1,017,033	$	15,255	$	890,051	$	905,306
Consumer real estate		11,568		448,292		459,860		6,541		410,941		417,482
Construction and land development		6,427		272,789		279,216		4,458		223,168		227,626
Commercial and industrial		341		637,109		637,450		407		336,668		337,075
Consumer and other		106		14,619		14,725		326		9,577		9,903
Total loans		34,959		2,373,325		2,408,284		26,987		1,870,405		1,897,392
Less: Allowance for loan losses		—		(16,254)		(16,254)		(156)		(10,087)		(10,243)
Loans, net	$	34,959	$	2,357,071	$	2,392,030	$	26,831	$	1,860,318	$	1,887,149

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

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):

					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
	Real Estate		Real Estate		Development		Industrial		and Other		Total
June 30, 2020:
Performing loans	$	999,567	$	446,892	$	272,789	$	636,952	$	14,619	$	2,370,819
Impaired loans		949		1,400		—		157		—		2,506
		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI loans		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284
December 31, 2019:
Performing loans	$	889,795	$	409,394	$	222,621	$	336,508	$	9,577	$	1,867,895
Impaired loans		256		1,547		547		160		—		2,510
		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI loans		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

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):

					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
June 30, 2020:
Performing loans	$	6,551	$	3,021	$	1,795	$	4,314	$	108	$	15,789
Impaired loans		44		292		—		129		—		465
		6,595		3,313		1,795		4,443		108		16,254
PCI loans		—		—		—		—		—		—
Total loans	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254
December 31, 2019:
Performing loans	$	4,491	$	2,159	$	1,127	$	1,766	$	69	$	9,612
Impaired loans		—		343		—		132		—		475
		4,491		2,502		1,127		1,898		69		10,087
PCI loans		17		74		—		59		6		156
Total loans	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243

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

	Three Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	5,963	$	3,301	$	1,484	$	2,557	$	126	$	13,431
Charged off loans		—		—		—		(9)		(66)		(75)
Recoveries of charge-offs		3		11		—		6		28		48
Provision (reallocation) charged to expense		629		1		311		1,889		20		2,850
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

	Three Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,074	$	1,949	$	854	$	1,709	$	118	$	8,704
Charged off loans		—		—		—		(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

	Six Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243
Loans charged off		—		(2)		—		(17)		(142)		(161)
Recoveries of loans charged off		5		17		2		49		50		123
Provision (reallocation) charged to expense		2,082		722		666		2,454		125		6,049
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

16

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Six Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275
Loans charged off		—		(2)		—		(333)		(210)		(545)
Recoveries of loans charged off		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

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

	June 30, 2020
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	526,141	$	390,787	$	227,302	$	573,989	$	14,259	$	1,732,478
Watch		462,734		55,210		45,416		61,888		288		625,536
Special mention		10,586		599		—		892		—		12,077
Substandard		1,055		1,534		71		207		48		2,915
Doubtful		—		162		—		133		24		319
Total		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI Loans:
Pass		8,082		9,028		1,353		249		83		18,795
Watch		7,314		922		4,520		—		16		12,772
Special mention		20		57		—		—		—		77
Substandard		1,101		1,561		554		92		7		3,315
Doubtful		—		—		—		—		—		—
Total		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284

	December 31, 2019
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	860,447	$	407,336	$	216,459	$	328,564	$	9,462	$	1,822,268
Watch		25,180		989		6,089		6,786		40		39,084
Special mention		4,057		738		—		1,033		—		5,828
Substandard		367		1,713		620		228		51		2,979
Doubtful		—		165		—		57		24		246
Total		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI Loans:
Pass		12,473		5,258		902		41		300		18,974
Watch		2,234		38		3,556		—		13		5,841
Special mention		139		60		—		—		—		199
Substandard		409		1,185		—		366		13		1,973
Doubtful		—		—		—		—		—		—
Total		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

17

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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, 2020
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	1,019	$	188	$	1	$	815	$	2,023	$	16,517	$	998,493	$	1,017,033
Consumer real estate		1,726		457		138		1,891		4,212		11,568		444,080		459,860
Construction and land development		602		—		265		—		867		6,427		271,922		279,216
Commercial and industrial		84		93		465		121		763		341		636,346		637,450
Consumer and other		134		2		8		72		216		106		14,403		14,725
Total	$	3,565	$	740	$	877	$	2,899	$	8,081	$	34,959	$	2,365,244	$	2,408,284

	December 31, 2019
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	466	$	22	$	—	$	124	$	612	$	15,255	$	889,439	$	905,306
Consumer real estate		1,564		30		—		1,872		3,466		6,541		407,475		417,482
Construction and land development		507		—		607		620		1,734		4,458		221,434		227,626
Commercial and industrial		559		53		—		57		669		407		335,999		337,075
Consumer and other		86		14		—		70		170		326		9,407		9,903
Total	$	3,182	$	119	$	607	$	2,743	$	6,651	$	26,987	$	1,863,754	$	1,897,392

18

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Impaired Loans:

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

	June 30, 2020						December 31, 2019
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	553	$	553	$	—	$	256	$	261	$	—
Consumer real estate		720		721		—		553		553		—
Construction and land development		—		—		—		547		547		—
Commercial and industrial		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—
		1,273		1,274		—		1,356		1,361		—
Impaired loans with a valuation allowance:
Commercial real estate		396		402		44		—		—		—
Consumer real estate		680		680		292		994		994		343
Construction and land development		—		—		—		—		—		—
Commercial and industrial		157		157		129		160		160		132
Consumer and other		—		—		—		—		—		—
		1,233		1,239		465		1,154		1,154		475
PCI loans:
Commercial real estate		16		99		—		17		99		17
Consumer real estate		1,870		2,138		—		1,205		1,371		74
Construction and land development		—		—		—		—		—		—
Commercial and industrial		303		445		—		396		534		59
Consumer and other		30		35		—		45		51		6
		2,219		2,717		—		1,663		2,055		156
Total impaired loans	$	4,725	$	5,230	$	465	$	4,173	$	4,570	$	631

19

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Three Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	345	$	1	$	424	$	5
Consumer real estate		633		10		624		—
Construction and land development		304		—		650		2
Commercial and industrial		—		—		16		—
Consumer and other		—		—		14		—
		1,282		11		1,728		7
Impaired loans with a valuation allowance:
Commercial real estate		396		—		24		—
Consumer real estate		827		5		217		2
Construction and land development		—		—		28		—
Commercial and industrial		158		3		293		—
Consumer and other		—		—		13		—
		1,381		8		575		2
PCI loans:
Commercial real estate		490		—		2,529		—
Consumer real estate		1,168		38		1,099		—
Construction and land development		116		—		—		—
Commercial and industrial		338		3		—		—
Consumer real estate		22		—		—		—
		2,134		41		3,628		—
Total impaired loans	$	4,797	$	60	$	5,931	$	9

	Six Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	315	$	4	$	495	$	25
Consumer real estate		606		14		774		4
Construction and land development		385		—		616		1
Commercial and industrial		—		—		33		1
Consumer and other		—		—		19		—
		1,306		18		1,937		31
Impaired loans with a valuation allowance:
Commercial real estate		264		2		16		—
Consumer real estate		882		14		199		9
Construction and land development		—		—		19		—
Commercial and industrial		158		5		514		9
Consumer and other		—		—		38		—
		1,304		21		786		18
PCI loans:
Commercial real estate		333		1		1,686		(9)
Consumer real estate		1,174		39		732		2
Construction and land development		77		—		—		—
Commercial and industrial		361		3		—		—
Consumer and other		31		—		—		—
		1,976		43		2,418		(7)
Total impaired loans	$	4,586	$	82	$	5,141	$	42

20

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Troubled Debt Restructurings:

At June 30, 2020, and December 31, 2019, impaired loans included loans that were classified as 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, 2020, and December 31, 2019, management had approximately $9 thousand and $61 thousand, respectively, in loans that met the criteria for TDR, none of which were on nonaccrual. A loan is placed back on accrual status when both principal and interest are current and it is probable that the Company will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

There was one loan that was modified as a TDR during the six month period ended June 30, 2020, and no loans were modified during the six month period ended June 30, 2019. There were no loans that were modified as TDRs during the past six months and for which there was a subsequent payment default.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. The Coronavirus Aid Relief and Economic Security (“CARES”) Act along with a joint agency statement issued by banking agencies, provides that short-term modifications made in response to COVID-19 does not need to be accounted for as a TDR. Accordingly, the Company does not account for such loan modifications as TDRs. See Note 1 Summary of Significant Accounting Policies for more information.

Foreclosure Proceedings and Balances:

As of June 30, 2020, there were five residential properties secured by 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.

21

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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,		December 31,
	2020		2019
Commercial real estate	$	24,551	$	21,570
Consumer real estate		14,191		8,411
Construction and land development		7,610		5,394
Commercial and industrial		2,212		2,540
Consumer and other		240		504
Total loans		48,804		38,419
Less: Remaining purchase discount		(13,845)		(11,432)
Total loans, net of purchase discount		34,959		26,987
Less: Allowance for loan losses		—		(156)
Carrying amount, net of allowance	$	34,959	$	26,831

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Accretable yield, beginning of period	$	10,979	$	8,644	$	8,454	$	7,052
Additions		—		—		2,515		—
Accretion income		(1,057)		(1,026)		(3,134)		(2,280)
Reclassification		247		323		2,163		1,358
Other changes, net		1,608		339		1,779		2,150
Accretable yield, end of period	$	11,777	$	8,280	$	11,777	$	8,280

Note 6. Goodwill and Intangible Assets

In accordance with FASB ASC 350, Goodwill and Other, regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs its annual goodwill impairment test as of December 31 of each year and at December 31, 2019, the results of the qualitative assessment provided no indication of potential impairment. Goodwill will continue to be monitored for triggering events that may indicate impairment prior to the next scheduled annual impairment test. Considering the recent economic conditions resulting from the COVID-19 pandemic, as of June 30, 2020, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  The results indicated that there was no impairment as of June 30, 2020. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

The Company’s other intangible assets consist of core deposit intangibles, and is initially recognized based on a valuation performed as of the consummation date. The core deposit intangible is amortized over the average remaining life of the acquired customer deposits.

22

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The carrying amount of goodwill and other intangible assets as of the dates indicated is summarized below (in thousands):

	June 30,		December 31,
	2020		2019
Goodwill:
Balance, beginning of period	$	65,614	$	66,087
Adjustment to values initially recorded for Acquisition of Foothills Bancorp, Inc.		—		(473)
Acquisition of PFG		8,302		—
Adjustment to values initially recorded for Acquisition of PFG		229		—
Balance, end of the period	$	74,145	$	65,614

	June 30,		December 31,
	2020		2019
Core deposit intangible:
Balance, beginning of period	$	14,550	$	14,550
Acquisition of PFG		1,370		—
Balance, gross core deposit intangible		15,920		14,550
Less: accumulated amortization		(3,738)		(2,971)
Net core deposit intangible, net	$	12,182	$	11,579

The aggregate amortization of core deposit intangibles expense for the three and six month periods ended June 30, 2020, was $405 thousand and $767 thousand, respectively, and for the three and six months ended June 30, 2019, was $342 thousand and $686 thousand, respectively.

The estimated aggregate amortization expense for future periods for core deposit intangibles is as follows (in thousands):

Remainder of 2020	$	802
2021		1,570
2022		1,526
2023		1,485
2024		1,456
Thereafter		5,343
Total	$	12,182

Note 7. Borrowings and Line of Credit

Borrowings:

At June 30, 2020, total borrowings were $318.9 million compared to $31.6 million at December 31, 2020.  The $287.3 million increase was primarily due to borrowings from the Federal Reserve Bank Payroll Protection Program Liquidity Facility (“PPPLF”) of $237.8 million in the second quarter of 2020 and an increase in Federal Home Loan Bank (“FHLB”) borrowings of $50.0 million. Borrowings consist of the following (dollars in thousands):

	June 30,		December 31,
	2020		2019
Securities sold under customer repurchase agreements	$	5,659	$	6,184
FHLB borrowings		75,000		25,000
PPPLF borrowings		237,778		—
Other borrowings		418		439
Total	$	318,855	$	31,623

23

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Line of Credit:

The Company has a Loan and Security Agreement and revolving note with ServisFirst Bank, pursuant to which ServisFirst Bank has made a $25.0 million revolving line of credit available to the Company. The maturity of the line of credit is September 24, 2021. At June 30, 2020, there was no outstanding balance under the line of credit, and the entire amount of the line of credit remained available to the Company.

Note 8. Employee Benefit Plans

401(k) Plan:

The Company provides a deferred salary reduction plan (“Plan”) under Section 401(k) of the Internal Revenue Code covering substantially all employees. After 90 days of service the Company matches 100% of employee contributions up to 3% of compensation and 50% of employee contributions on the next 2% of compensation. The Company’s contribution to the Plan for the three and six month periods ending June 30, 2020, was $307 thousand and $558 thousand, respectively.  The Company’s contribution to the Plan for the three and six months periods ending June 30, 2019, was $217 thousand and $415 thousand, respectively.

Equity Incentive Plans:

The Compensation Committee of the Company’s Board of Directors may grant or award eligible participants stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards or any combination of awards (collectively referred to herein as "Rights"). At June 30, 2020, the Company had one active equity incentive plan available for future grants, the 2015 Stock Incentive Plan, which had 30,599 Rights issued and 1,882,689 Rights available for future grants or awards.

In addition, the Company has 38,250 Rights issued from the Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan, 48,750 Rights issued from the Cornerstone Non-Qualified Plan Options, and 2,266 Rights issued from the Capstone Stock Option Plan. These plans do not have any Rights available for future grants or awards.

Stock Options:

A summary of the status of stock option plans is presented in the following table:

		Weighted
		Average
		Exercisable
	Number	Price
Outstanding at December 31, 2019	136,658	$	10.29
Granted	—		—
Exercised	(15,358)		11.56
Forfeited	(1,435)		15.05
Outstanding at June 30, 2020	119,865	$	10.08

24

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Information pertaining to stock options outstanding at June 30, 2020, is as follows:

		Options Outstanding				Options Exercisable
			Weighted-
			Average	Weighted-			Weighted-
			Remaining	Average			Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life	Price		Exercisable	Price
$	6.60	25,000	1.4 years	$	6.60	25,000	$	6.60
	6.80	13,250	0.7 years		6.80	13,250		6.80
	9.48	21,000	2.4 years		9.48	21,000		9.48
	9.60	27,750	2.9 years		9.60	27,750		9.60
	11.76	2,266	2.0 years		11.76	2,266		11.76
	15.05	30,599	4.8 years		15.05	30,599		15.05
Outstanding, end of period		119,865	2.7 years	$	10.08	119,865	$	10.08

The Company did not recognize any stock option-based compensation expense during the three and six months ended June 30, 2020, as all stock options issued are fully vested. During the three and six month periods ended June 30, 2019, stock option-based compensation expense was $31 thousand and $62 thousand, respectively.

The intrinsic value of options exercised during the three and six month periods ended June 30, 2020 was $2 thousand and $66 thousand, respectively. The intrinsic value of options exercised during the three and six month periods ended June 30, 2019 was $32 thousand and $112 thousand, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at June 30, 2020, was $732 thousand. Cash received from options exercised under all share-based payment arrangements for the six month period ended June 30, 2020 was $178 thousand.

No options vested during the periods ended June 30, 2020, and 2019, respectively. The income tax expense/benefit recognized for the exercise of options during the three and six months ended June 30, 2020, was an expense of $2 thousand and a benefit of $22, thousand, respectively, and for the three and six months ended June 30, 2019, a benefit of $5 thousand and $27 thousand, respectively.

As of June 30, 2020, all options were fully vested and currently no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plans.

Stock Appreciation Rights ("SARs"):

A summary of the status of SARs plans is presented in the following table:

		Weighted
		Average
	Number	Exercisable Price
Outstanding at December 31, 2019	67,000	$	20.54
Granted	18,000		15.19
Exercised	—		—
Forfeited	—		—
Outstanding at June 30, 2020	85,000	$	19.40

25

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Information pertaining to SARs outstanding at June 30, 2020, is as follows:

		SARs Outstanding				SARs Exercisable
			Weighted-
			Average	Weighted-
			Remaining	Average			Weighted- Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life		Price	Exercisable	Price
$	15.19	18,000	3.50 years	$	15.19	—	$	—
	18.12	21,000	2.50 years		18.12	—		—
	21.61	34,000	1.50 years		21.61	—		—
	21.72	12,000	0.50 years		21.72	12,000		21.72
	Outstanding, end of period	85,000	2.03 years	$	19.40	12,000	$	21.72

SARs compensation expense of $92 thousand and ($26) thousand was recognized for the three and six month periods ended June 30, 2020, respectively, and $60 thousand and $80 thousand for three and six month periods ended June 30, 2019, respectively. The credit in expense for the six month period ended June 30, 2020, was due to adjustments related to the fair value evaluation of SARs.

Restricted Stock Awards:

A summary of the activity of the Company’s unvested restricted stock awards for the period ended June 30, 2020 is presented below:

		Weighted
		Average
		Grant-Date
	Number	Fair Value
Balance at December 31, 2019	65,400	$	21.04
Granted	37,818		16.16
Vested	(5,500)		19.12
Forfeited/expired	(1,500)		18.12
Balance at June 30, 2020	96,218	$	19.28

The Company measures the fair value of restricted stock awards based on the price of the Company’s common stock on the grant date, and compensation expense is recorded over the vesting period. The compensation expense for restricted stock awards during the three and six months ended June 30, 2020, was $114 thousand and $223 thousand, respectively, and was $102 thousand and $214 thousand, during the three and six month periods ended June 30, 2019, respectively. As of June 30, 2020, there was $1.2 million, respectively, of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. The cost is expected to be recognized over a weighted average period of 3.36 years. The grant-date fair value of restricted stock awards vested was $105 thousand for the period ended June 30, 2020.

Note 9. 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.

26

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

	June 30,		December 31,
	2020		2019
Commitments to extend credit	$	506,720	$	384,411
Standby letters of credit		6,543		11,727

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, 2020, and December 31, 2019, 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.

Note 10. 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.

27

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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):

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
Description	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	31,411	$	—	$	31,411	$	—
Municipal securities		88,169		—		88,169		—
Other debt securities		9,457		—		9,457		—
Mortgage-backed securities (GSEs)		90,594		—		90,594		—
Total securities available-for-sale	$	219,631	$	—	$	219,631	$	—
Liabilities:
Derivative financial instruments	$	7,090	$	—	$	7,090	$	—
December 31, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	19,000	$	—	$	19,000	$	—
Municipal securities		64,391		—		64,391		—
Other debt securities		3,470		—		3,470		—
Mortgage-backed securities (GSEs)		91,487		—		91,487		—
Total securities available-for-sale	$	178,348	$	—	$	178,348	$	—
Liabilities:
Derivative financial instruments	$	3,446		—	$	3,446		—

During the six month period ending June 30, 2020, there were no transfers between Level 1 and Level 2 in the fair value hierarchy.

28

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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):

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Impaired loans	$	4,260	$	—	$	—	$	4,260
Other real estate owned		5,524		—		—		5,524
December 31, 2019:
Impaired loans	$	2,185	$	—	$	—	$	2,185
Other real estate owned		1,757		—		—		1,757

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 (dollars in thousands):

					Weighted
			Valuation	Significant Other	Average of
	Fair Value		Technique	Unobservable Input	Input
June 30, 2020:
Impaired loans	$	4,260	Appraisal and cashflow	Appraisal and cashflow discounts	10	%
Other real estate owned		5,524	Appraisal	Appraisal discounts	28	%
December 31, 2019:
Impaired loans	$	2,185	Appraisal	Appraisal and cashflow discounts	22	%
Other real estate owned		1,757	Appraisal	Appraisal discounts	29	%

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.

29

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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								Estimated
	Amount		Level 1		Level 2		Level 3		Fair Value
June 30, 2020:
Assets:
Cash and cash equivalents	$	399,467	$	399,467	$	—	$	—	$	399,467
Securities available-for-sale		219,631		—		219,631		—		219,631
Other investments		14,829		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		2,398,360		—		—		2,385,657		2,385,657
Liabilities:
Noninterest-bearing demand deposits		645,650		—		645,650		—		645,650
Interest-bearing demand deposits		479,212		—		497,212		—		497,212
Money market and savings deposits		762,246		—		762,246		—		762,246
Time deposits		652,581		—		656,885		—		656,885
Borrowings		318,855		—		319,666		—		319,666
Subordinated debt		39,304		—		—		31,547		31,547
Derivative financial instruments		7,090		—		7,090		—		7,090
December 31, 2019:
Assets:
Cash and cash equivalents	$	183,971	$	183,971	$	—	$	—	$	183,971
Securities available-for-sale		178,348		—		178,348		—		178,348
Other investments		12,913		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		1,893,005		—		—		1,879,825		1,879,825
Liabilities:
Noninterest-bearing demand deposits		364,155		—		364,155		—		364,155
Interest-bearing demand deposits		380,234		—		380,234		—		380,234
Money market and savings deposits		623,284		—		623,284		—		623,284
Time deposits		679,541		—		681,902		—		681,902
Borrowings		31,623		—		31,029		—		31,029
Subordinated debt		39,261		—		—		35,868		35,868
Derivative financial instruments		3,446		—		3,446		—		3,446

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.

30

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 11.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 (dollars in thousands):

		Weighted
		Average
	Balance	Remaining	Weighted
	Sheet	Maturity	Average		Receive	Notional		Estimated
Liability derivatives	Location	(In Years)	Pay Rate		Rate	Amount		Fair Value
June 30, 2020:
Interest rate swap agreements - securities	Other liabilities	7.63	3.08	%	3 month LIBOR	$	36,000	$	(7,090)
December 31, 2019:
Interest rate swap agreements - securities	Other liabilities	8.20	3.09	%	3 month LIBOR	$	36,000	$	(3,446)

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest income on tax-exempt securities	$	580	$	449	$	1,020	$	906
Effects of fair value hedge relationships		(164)		(38)		(321)		(70)
Reported interest income on tax-exempt securities	$	416	$	411	$	699	$	836

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Gain (loss) on fair value hedging relationship	2020		2019		2020		2019
Interest rate swap agreements - securities:
Hedged items	$	205	$	1,348	$	3,644	$	2,237
Derivative designated as hedging instruments	$	(205)	$	(1,348)	$	(3,644)	$	(2,237)

31

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

			Cumulative Amount of Fair
			Value Hedging Adjustment
	Carrying Amount		Included in the Carrying Amount
Line item on the balance sheet	of the Hedged Assets		of the Hedged Assets
June 30, 2020:
Securities available-for-sale	$	46,177	$	7,090
December 31, 2019:
Securities available-for-sale	$	42,710	$	3,446

Note 12. 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 2034. 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 (in thousands):

		June 30,		December 31,
	Classification	2020		2019
Assets:
Operating lease right-of-use assets	Other assets	$	5,522	$	5,470
Liabilities:
Operating lease liabilities	Other liabilities	$	5,543	$	5,479

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, 2020, the weighted average remaining lease term was 10.78 years and the weighted average discount rate was 2.71%.

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

32

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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,				June 30,
	2020		2019		2020		2019
Lease costs:
Operating lease costs	$	270	$	157	$	507	$	315
Short-term lease costs		—		5		—		11
Variable lease costs		29		23		55		46
Total	$	299	$	185	$	562	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	265	$	150	$	495	$	302

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2020, were as follows (in thousands):

	Amounts
June 30, 2021	$	529
June 30, 2022		932
June 30, 2023		754
June 30, 2024		492
June 30, 2025		366
Thereafter		3,381
Total future minimum lease payments		6,454
Amounts representing interest		(911)
Present value of net future minimum lease payments	$	5,543

Note 13. Regulatory Matters

Regulatory Capital Requirements:

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgements by regulators. Failure to meet capital requirements can initiate regulatory action. Under the standards initially adopted by the Basel Committee on Banking Supervision in December 2010, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. At June 30, 2020, the Company and the Bank exceeded the minimum regulatory requirements and exceeded the threshold for the "well capitalized" regulatory classification.

Regulatory Restrictions on Dividends:

Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (the “TDFI”), pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years.  Because this test involves a measure of net income, any charge on the Bank’s income statement, such as an impairment of goodwill, could impair the Bank’s ability to pay dividends to the Company. Under Tennessee corporate law, the Company is not permitted to pay dividends if, after giving effect to such payment, it would not be able to pay its debts as they become due in the usual course of business or its total assets would be less than the sum of its total liabilities plus any amounts needed

33

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

to satisfy any preferential rights if it were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, the Company’s board of directors must consider its and the Bank’s current and prospective capital, liquidity, and other needs. In addition to state law limitations on the Company’s ability to pay dividends, the Federal Reserve imposes limitations on the Company’s ability to pay dividends. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if the Company’s regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer.

During the three months ended June 30, 2020, the Bank did not pay dividends to the Company. During the six months ended June 30, 2020, the Bank paid $7.5 million in dividends to the Company. Since the fourth quarter of 2019, the Company has paid a quarterly common stock dividend of $0.05 per share. The amount and timing of all future dividend payments by the Company, if any, is subject to discretion of the Company’s board of directors and will depend on the Company’s earnings, capital position, financial condition and other factors, including new regulatory capital requirements, as they become known to the Company.

Regulatory Capital Levels:

Actual and required capital levels at June 30, 2020, and December 31, 2019 are presented below (dollars in thousands):

									Minimum to be
									well
									capitalized under
					Minimum for				prompt
					capital				corrective action
		Actual			adequacy purposes				provisions1
	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2020
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	315,306	13.25	%	$	190,305	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		142,729	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		107,047	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)2		259,748	8.83	%		117,636	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	304,993	12.82	%	$	190,259	8.00	%	$	237,824	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		142,694	6.00	%		190,259	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		107,021	4.50	%		154,586	6.50	%
Tier 1 Capital (to Average Assets)2		288,739	9.82	%		117,619	4.00	%		147,024	5.00	%
December 31, 2019
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	287,937	14.02	%	$	164,313	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		123,235	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		92,426	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)		238,433	10.34	%		92,258	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	273,432	13.31	%	$	164,305	8.00	%	$	205,382	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		123,229	6.00	%		164,305	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		92,422	4.50	%		133,498	6.50	%
Tier 1 Capital (to Average Assets)		263,189	11.41	%		92,254	4.00	%		115,317	5.00	%

¹The prompt corrective action provisions are applicable at the Bank level only.

²Average assets for the above calculations were based on the most recent quarter.

34

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14. Other Comprehensive (Loss) Income.

The changes in each component of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands):

	Three Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2020	$	1,242	$	(2,489)	$	(1,247)
Other comprehensive income (loss)		1,414		413		1,827
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		1,426		413		1,839
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Three Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2019	$	124	$	(558)	$	(434)
Other comprehensive income (loss)		1,927		(2,088)		(161)
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		1,951		(2,088)		(137)
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

	Six Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2020	$	391	$	(223)	$	168
Other comprehensive income (loss)		2,265		(1,853)		412
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		2,277		(1,853)		424
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Six Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2019	$	(1,979)	$	(786)	$	(2,765)
Other comprehensive income (loss)		4,030		(1,860)		2,170
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		4,054		(1,860)		2,194
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

35

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"). SmartBank provides a comprehensive suite of commercial and consumer banking services to clients through 36 full-service bank branches and two loan production offices in select markets in East and Middle Tennessee, Alabama and the Florida Panhandle.

While we offer a wide range of commercial banking services, we focus on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in a number of industries, as well as loans to individuals for a variety of purposes. Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. We offer a broad range of deposit products, including checking (“NOW”), savings, money market accounts and certificates of deposit. We actively pursue business relationships by utilizing the business contacts of our senior management, other bank officers and our directors, thereby capitalizing on our knowledge of our local market areas.

Forward-Looking Statement

SmartFinancial, Inc. (“SmartFinancial”) may from time to time make written or oral statements, including statements contained in this report and information incorporated by reference herein (including, without limitation, certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2), that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are based on assumptions and estimates and are not guarantees of future performance. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words (and their derivatives), such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, the negatives of such expressions, or the use of the future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of a current condition. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, financial condition, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to:

● weakness or a decline in the U.S. economy, in particular in Tennessee, and other markets in which we operate;

● the possibility that our asset quality would decline or that we experience greater loan losses than anticipated;

● the impact of liquidity needs on our results of operations and financial condition;

● competition from financial institutions and other financial service providers;

● the impact of negative developments in the financial industry and U.S. and global capital and credit markets;

● the impact of recently enacted and future legislation and regulation on our business, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19 pandemic;

● negative changes in the real estate markets in which we operate and have our primary lending activities, which may result in an unanticipated decline in real estate values in our market area;

● risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively;

● claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters;

● expected revenue synergies and cost savings from our recently completed acquisition of Progressive Financial Group, Inc ("PFG") may not be fully realized or may take longer than anticipated to be realized;

● disruption from the merger with customers, suppliers or employees or other business partners’ relationships;

● the risk of successful integration of the PFG’s businesses with our business;

● lower than expected revenue following these mergers;

● SmartFinancial’s ability to manage the combined company’s growth following the mergers;

36

● the dilution caused by SmartFinancial’s issuance of additional shares of its common stock in connection with the PFG merger;

● cyber attacks, computer viruses or other malware that may breach the security of our websites or other systems we operate or rely upon for services to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems and negatively impact our operations and our reputation in the market;

● results of examinations by our primary regulators, the TDFI, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, require us to reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;

● government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve;

● our inability to pay dividends at current levels, or at all, because of inadequate future earnings, impairments to goodwill, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements;

● the relatively greater credit risk of commercial real estate loans and construction and land development loans in our loan portfolio;

● unanticipated credit deterioration in our loan portfolio or higher than expected loan losses within one or more segments of our loan portfolio;

● unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors;

● unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events;

● changes in expected income tax expense or tax rates, including changes resulting from revisions in tax laws, regulations and case law;

● our ability to retain the services of key personnel;

● adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic;

● the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations;

● potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and

● the impact of Tennessee’s anti-takeover statutes and certain of our charter provisions on potential acquisitions of us.

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, 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

37

would regard those measures as subject to Regulation G. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors’ ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. 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’s 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.

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 first six months of 2020:

● Completed the acquisition and integration of Progressive Financial Group, Inc. ("PFG").

● Originated approximately 2,800 Paycheck Protection Program (“PPP”) loans totaling $292.8 million during the second quarter of 2020.

● Net income totaled $6.2 million, or $0.41 per diluted common share, during the second quarter of 2020 compared to $9.1 million, or $0.65 per diluted common share, for the same period in 2019.  

● Net income totaled $8.9 million, or $0.60 per diluted common share, during the first six months of 2020 compared to $13.9 million, or $0.99 per diluted common share, for the same period in 2019.

● Return on average assets was 0.79% at June 30, 2020 compared to 1.56% at June 30, 2019.

● Allowance for loan losses increased to $16.3 million, an increase of 21.0% from the first quarter of 2020, in response to the current economic conditions related to COVID-19.

● The COVID-19 pandemic has caused economic and social disruption on an unprecedented scale. Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout.  On March 27, 2020, the CARES Act was signed into law. It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act included the PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. The initial $350 billion program was supplemented in late April 2020 with $310 billion in additional funding. On June 5, 2020, the Paycheck Protection Program Flexibility Act (the “new Act”) was signed into law and made significant changes to the PPP to provide additional relief for small businesses. The new Act increased flexibility for small businesses that have been unable to rehire employees due to lack of employee availability or have been unable to operate as normal due to COVID-19 related restrictions. It extended the period that businesses have to use PPP funds to qualify for loan forgiveness to 24 weeks, up from 8 weeks under the original rules. The new Act also relaxed the requirements that loan recipients must adhere to in order to qualify for loan forgiveness. In addition, the new Act extended the payment deferral period for PPP loans until the date when the amount of loan forgiveness is determined and remitted to the lender. For PPP recipients who do not apply for forgiveness, the loan deferral period is 10 months after the applicable forgiveness period ends. The new Act did not extend the period for new applicants to seek PPP loans, which closed on June 30, 2020.

Analysis of Results of Operations

Second quarter of 2020 compared to 2019

Net income was $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, compared to $9.1 million, or $0.65 per diluted common share, for the second quarter of 2019.  The decrease in net income for this period was primarily from the $6.4 million termination fee recognized in the second quarter of 2019. The tax equivalent net interest margin was 3.63% for the second quarter of 2020 compared to 3.94% for the second quarter of 2019. Noninterest income to average assets was 0.45% for the second quarter of 2020, decreasing from 1.44% for the second quarter of 2019.

38

Noninterest expense to average assets decreased to 2.41% in the second quarter of 2020, from 2.88% in the second quarter of 2019. The results above include a full-quarters of operating effects of the PFG acquisition, which was completed on March 1, 2020.

First six months of 2020 compared to 2019

Net income was $8.9 million, or $0.60 per diluted common share, for the first six months of 2020, compared to $13.9 million, or $0.99 per diluted common share, for the first six months of 2019. The decrease in net income for this period was primarily from the $6.4 million termination fee recognized in the second quarter of 2019. The tax equivalent net interest margin was 3.75% for the first six months of 2020 compared to 4.04% for the first six months of 2019. Noninterest income to average assets was 0.45% for the first six months of 2020, decreasing from 0.88% for the first six months of 2019. Noninterest expense to average assets decreased to 2.66% in the first six months of 2020, from 2.82% in the first six months of 2019. The results above include a full-quarters of operating effects of the PFG acquisition, which was completed on March 1, 2020.

Net Interest Income and Yield Analysis

Second quarter of 2020 compared to 2019

Net interest income, taxable equivalent, increased to $25.9 million for the second quarter of 2020, up from $20.9 million for the second quarter of 2019. Net interest income was positively impacted, compared to the prior year, primarily by the full-quarters effects of the Company’s March 1, 2020 acquisition of PFG, the increase in loan balances and the reduction in interest expense on interest bearing liabilities. Average interest-earning assets increased from $2.13 billion for the second quarter of 2019, to $2.87 billion for the second quarter of 2020, primarily as a result of the acquisition of PFG being completed on March 1, 2020, and the Company’s participation in the PPP. Over this period, average loan balances increased by $530.2 million, average interest-bearing deposits increased by $271.3 million, average noninterest-bearing deposits increased $250.5 million and average borrowings increased $213.5 million. The tax equivalent net interest margin decreased to 3.63% for the second quarter of 2020, compared to 3.94% for the second quarter of 2019. The yield on earning assets decreased from 5.17% for the second quarter of 2019, to 4.22% for the second quarter of 2020, primarily due to rate cuts by the Federal Reserve over the past year and, to a lesser extent loan yields declining from market competition. The cost of average interest-bearing deposits decreased from 1.42% for the second quarter of 2019, to 0.71% for the second quarter of 2020, primarily due to a lower interest rate environment during the period.

39

The following tables 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,
	2020						2019
	Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets:
Loans, including fees1	$	2,359,101		28,590	4.87	%	$	1,828,884		25,233	5.53	%
Loans held for sale		6,868		73	4.28	%		3,755		45	4.81	%
Taxable securities		122,135		589	1.94	%		136,859		871	2.55	%
Tax-exempt securities2		86,227		570	2.66	%		56,475		527	3.75	%
Federal funds sold and other earning assets		297,696		277	0.37	%		102,253		743	2.91	%
Total interest-earning assets		2,872,027		30,099	4.22	%		2,128,226		27,419	5.17	%
Noninterest-earning assets		260,089						215,010
Total assets	$	3,132,116					$	2,343,236
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits	$	453,795	$	148	0.13	%	$	329,556	$	464	0.57	%
Money market and savings deposits		748,673		614	0.33	%		673,502		2,272	1.35	%
Time deposits		701,390		2,604	1.49	%		629,480		3,052	1.94	%
Total interest-bearing deposits		1,903,858		3,366	0.71	%		1,632,538		5,788	1.42	%
Borrowings		237,143		249	0.42	%		23,685		123	2.08	%
Subordinated debt		39,290		584	5.98	%		39,205		590	6.03	%
Total interest-bearing liabilities		2,180,291		4,199	0.77	%		1,695,428		6,501	1.54	%
Noninterest-bearing deposits		587,322						336,871
Other liabilities		24,642						14,367
Total liabilities		2,792,255						2,046,666
Stockholders’ equity		339,861						296,570
Total liabilities and stockholders’ equity	$	3,132,116					$	2,343,236
Net interest income, taxable equivalent			$	25,900					$	20,918
Interest rate spread					3.44	%					3.63	%
Tax equivalent net interest margin					3.63	%					3.94	%
Percentage of average interest-earning assets to average interest-bearing liabilities					131.73	%					125.53	%
Percentage of average equity to average assets					10.85	%					12.66	%

¹Includes nonaccrual loans and accretion income on acquired loans of $888 thousand and $1.4 million for the quarters ended June 30, 2020 and 2019, respectively.

²Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $154 thousand for the three month period ended June 30, 2020 and $116 thousand for the three month period ended June 30, 2019.

First six months of 2020 compared to 2019

Net interest income, taxable equivalent, increased to $48.6 million for the first six months of 2020, up from $42.0 million for the first six months of 2019. Net interest income was positively impacted, compared to the prior year, primarily due to increases in loan balances.  Average interest-earning assets increased from $2.10 billion for the first six months of 2019, to $2.60 billion for the first six months of 2020, primarily as a result of the acquisition of PFG completed March 1, 2020, and continued organic growth. Over this period, average loan balances increased by $358.0 million, average interest-bearing deposits increased by $200.9 million, average noninterest-bearing deposits increased $152.9 million and average borrowings increased $123.6 million. The tax equivalent net interest margin decreased to 3.75% for the first six months of 2020, compared to 4.04% for the first six months of 2019. The yield on earning assets decreased from 5.23% for the first six months of 2019, to 4.50% for the first six months of 2020, primarily due to rate cuts by the Federal Reserve over the past year and, to a lesser extent loan yields declining from market competition. The cost of average interest-bearing deposits decreased from 1.37% for the first six months of 2019, to 0.90% for the first six months of 2020, primarily due to a lower interest rate environment during the period.

40

	Six Months Ended June 30,
	2020						2019
	Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost
Assets:
Loans, including fees1	$	2,172,158	$	54,979	5.09	%	$	1,814,127	$	50,174	5.58	%
Loans held for sale		5,581		118	4.26	%		3,284		79	4.85	%
Taxable Securities		119,474		1,268	2.13	%		141,994		1,842	2.62	%
Tax-exempt securities2		78,306		970	2.49	%		55,070		1,065	3.90	%
Federal funds and other earning assets		226,726		879	0.78	%		85,798		1,315	3.09	%
Total interest-earning assets		2,602,245		58,214	4.50	%		2,100,273		54,475	5.23	%
Noninterest-earning assets		238,749						213,122
Total assets	$	2,840,994					$	2,313,395
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits	$	421,288		583	0.28	%	$	318,091		887	0.56	%
Money market and savings deposits		707,003		2,003	0.57	%		669,067		4,302	1.30	%
Time deposits		693,382		5,534	1.61	%		633,601		5,850	1.86	%
Total interest-bearing deposits		1,821,673		8,120	0.90	%		1,620,759		11,039	1.37	%
Borrowings		144,532		339	0.47	%		20,951		235	2.26	%
Subordinated debt		39,279		1,167	5.97	%		39,195		1,173	6.04	%
Total interest-bearing liabilities		2,005,484		9,626	0.97	%		1,680,905		12,447	1.49	%
Noninterest-bearing deposits		481,432						328,549
Other liabilities		22,812						12,589
Total liabilities		2,509,728						2,022,043
Stockholders’ equity		331,266						291,352
Total liabilities and stockholders’ equity	$	2,840,994					$	2,313,395
Net interest income, taxable equivalent			$	48,588					$	42,028
Interest rate spread					3.53	%					3.74	%
Tax equivalent net interest margin					3.75	%					4.04	%
Percentage of average interest-earning assets to average interest-bearing liabilities					129.76	%					124.95	%
Percentage of  average equity to average assets					11.66	%					12.59	%

¹Includes nonaccrual loans and accretion income on acquired loans of $2.7 million and $3.3 million for the six months ended June 30, 2020 and 2019, respectively.

²Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $271 thousand for the six month period ended June 30, 2020 and $229 thousand for the six month period ended June 30, 2019.

Noninterest Income

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Service charges on deposit accounts	$	709	$	707	$	1,479	$	1,361
Gain on sale of securities, net		16		33		16		33
Mortgage banking		931		392		1,515		674
Investment services		363		255		801		424
Insurance commissions		473		—		742		—
Interchange and debit card transaction fees		508		143		784		318
Merger termination fee		—		6,400		—		6,400
Other		511		486		993		904
Total noninterest income	$	3,511	$	8,416	$	6,330	$	10,114

41

Second quarter of 2020 compared to 2019

Noninterest income decreased by $4.9 million, or 58.3%, during the second quarter of 2020 compared to the same period in 2019. This quarterly change in total noninterest income primarily resulted from the following:

● Increase in mortgage banking, from increased volume;

● Increase in investment services, stemming from increased production from personnel hires in 2019;

● Increase in interchange and debit card transaction fees, related to the PFG acquisition;

● Addition of insurance commissions from the PFG acquisition; and

● Increases offset by merger termination fee in the second quarter of 2019.

First six months of 2020 compared to 2019

Noninterest income decreased by $3.8 million, or 37.4%, during the first six months of 2020 compared to the same period in 2019. This change in total noninterest income primarily resulted from the following:

● Increase in mortgage banking, from increased volume;

● Increase in investment services, stemming from increased production from personnel hires in 2019;

● Increase in interchange and debit card transaction fees, related to the PFG acquisition;

● Addition of insurance commissions from the PFG acquisition; and

● Increases offset by merger termination fee in the second quarter of 2019.

Noninterest Expense

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Salaries and employee benefits	$	10,357	$	8,984	$	20,363	$	17,382
Occupancy and equipment		1,996		1,658		3,906		3,298
FDIC insurance		180		180		360		359
Other real estate and loan related expense		346		242		892		732
Advertising and marketing		202		259		400		554
Data processing		594		577		1,132		1,192
Professional services		868		489		1,578		1,151
Amortization of intangibles		405		342		767		686
Software as service contracts		561		568		1,031		1,136
Merger related and restructuring expenses		1,477		1,796		3,573		2,719
Other		1,820		1,714		3,598		3,179
Total noninterest expense	$	18,806	$	16,809	$	37,600	$	32,388

Second quarter of 2020 compared to 2019

Noninterest expense increased by $2.0 million, or 11.9%, in the second quarter of 2020 as compared to the same period in 2019. The quarterly increase in total noninterest expense primarily resulted from the following:

● Increase is salary and employee benefits from the acquisition of PFG and the addition of staff throughout 2019;

● Increase in occupancy and equipment associated with ongoing infrastructure and facilities added to accommodate our growth in operations and the additional branches of the PFG acquisition;

● Increase in professional services from increases in legal and auditing services; and

● Offset by a decrease in merger related and restructuring expenses.

42

First six months of 2020 compared to 2019

Noninterest expense increased by $5.2 million, or 16.1%, in the first six months of 2020 as compared to the same period in 2019. The quarterly increase in total noninterest expense primarily resulted from the following:

● Increase is salary and employee benefits from the acquisition of PFG and the addition of staff throughout 2019;

● Increase in occupancy and equipment associated with ongoing infrastructure and facilities added to accommodate our growth in operations and the additional branches of the PFG acquisition; and

● Increase in merger related and restructuring expenses from the PFG acquisition.

Taxes

Second quarter of 2020 compared to 2019

In the second quarter of 2020 income tax expense totaled $1.4 million compared to $2.9 million a year ago. The effective tax rate was approximately 18.8% in the second quarter of 2020 compared to 24.1% a year ago. The lower effective tax rate for the second quarter of 2020 compared to same quarter in 2019 was due to having a proportionately higher amount of non-taxable income in relation to income before taxes, as well as tax benefit derived from the reconciliation of our tax rates from operations.

First six months of 2020 compared to 2019

In the first six months of 2020 income tax expense totaled $2.1 million compared to $4.5 million a year ago. The effective tax rate was approximately 19.0% for first six months of 2020 compared to 24.5% a year ago. The lower effective tax rate for the first six months of 2020 compared to same period in 2019 was due to having a proportionately higher amount of non-taxable income in relation to income before taxes and, as part of the CARES Act legislation, a tax benefit realized from the recognition of net operating loss carryforwards from past acquisitions.

Loan Portfolio

The Company had total net loans outstanding, including organic and purchased loans, of approximately $2.39 billion at June 30, 2020 compared to $1.89 billion at December 31, 2019. Loans secured by real estate, consisting of commercial or residential property, are the principal component of our loan portfolio.

Organic Loans

Our organic net loans, which excludes loans purchased through acquisitions, increased by $406.7 million, or 26.9%, from December 31, 2019, to $1.92 billion at June 30, 2020.  Included in the growth was $292.8 of PPP loans that were funded/originated during the second quarter of 2020.  Total deferred fees associated with the PPP loans was approximately $11.0 million and $1.9 million was accreted into income during the quarter ending June 30, 2020.      

Purchased Loans

Purchased non-credit impaired loans of $439.1 million at June 30, 2020 increased by $90.0 million from December 31, 2019. Since December 31, 2019, our net purchased credit impaired (“PCI”) loans increased by $8.1 million to $35.0 million at June 30, 2020. The increase in purchased non-credit impaired loans and PCI loans is related to the acquisition of PFG and offset by maturities, paydowns and payoffs.

43

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

	June 30, 2020
			Purchased		Purchased
			Non-Credit		Credit				% of
	Organic		Impaired		Impaired		Total		Gross
	Loans		Loans		Loans		Amount		Total
Commercial real estate-mortgage	$	779,131	$	221,385	$	16,517	$	1,017,033	42.2	%
Consumer real estate-mortgage		296,548		151,744		11,568		459,860	19.1	%
Construction and land development		247,383		25,406		6,427		279,216	11.6	%
Commercial and industrial		600,270		36,839		341		637,450	26.5	%
Consumer and other		9,247		5,372		106		14,725	0.6	%
Total gross loans receivable, net of deferred fees		1,932,579		440,746		34,959		2,408,284	100.0	%
Allowance for loan losses		(14,590)	$	(1,664)		—		(16,254)
Total loans, net	$	1,917,989	$	439,082	$	34,959	$	2,392,030
	December 31, 2019
			Purchased		Purchased
			Non-Credit		Credit				% of
	Organic		Impaired		Impaired		Total		Gross
	Loans		Loans		Loans		Amount		Total
Commercial real estate-mortgage	$	705,691	$	184,360	$	15,255	$	905,306	47.7	%
Consumer real estate-mortgage		295,915		115,026		6,541		417,482	22.0	%
Construction and land development		210,421		12,747		4,458		227,626	12.0	%
Commercial and industrial		306,521		30,147		407		337,075	17.8	%
Consumer and other		2,817		6,760		326		9,903	0.5	%
Total gross loans receivable, net of deferred fees		1,521,365		349,040		26,987		1,897,392	100.0	%
Allowance for loan losses		(10,087)		—		(156)		(10,243)
Total loans, net	$	1,511,278	$	349,040	$	26,831	$	1,887,149

Loan Portfolio Maturities

The following table sets forth the maturity distribution of our loans at June 30, 2020, including the interest rate sensitivity for loans maturing after one year (in thousands):

									Rate Structure for Loans
									Maturing Over One Year
	One Year		One through		Over Five				Fixed		Floating
	or Less		Five Years		Years		Total		Rate		Rate
Commercial real estate-mortgage	$	111,355	$	409,592	$	496,779	$	1,017,726	$	667,884	$	238,487
Consumer real estate-mortgage		33,994		175,642		250,224		459,860		209,176		216,690
Construction and land development		73,826		108,435		96,955		279,216		101,257		104,133
Commercial and industrial		68,536		481,552		88,940		639,028		526,982		43,510
Consumer and other		4,601		7,710		143		12,454		7,479		374
Total Loans	$	292,312	$	1,182,931	$	933,041	$	2,408,284	$	1,512,778	$	603,194

Nonaccrual, Past Due, and Restructured Loans

Nonperforming loans as a percentage of total gross loans, net of deferred fees, was 0.16% as of June 30, 2020, which decreased from 0.18% as of December 31, 2019. Total nonperforming assets as a percentage of total assets as of June 30, 2020 totaled 0.28% compared to 0.21% as of December 31, 2019. The increase was primarily the result of the addition of other real estate owned from the PFG acquisition. Acquired PCI loans that are included in loan pools are reclassified at acquisition to accrual status and thus are not included as nonperforming assets.

44

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

	June 30,		December 31,
	2020		2019
Nonaccrual loans	$	2,899	$	2,743
Accruing loans past due 90 days or more		877		607
Total nonperforming loans		3,776		3,350
Other real estate owned		5,524		1,757
Total nonperforming assets	$	9,300	$	5,107
Restructured loans not included above	$	9	$	61

Potential Problem Loans

At June 30, 2020 potential problem loans amounted to approximately $551 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.

COVID-19 Loan Modifications

As a result of the CARES Act, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic.  At June 30, 2020, COVID-19 modified loans amounted to $616.7 million, or 25.6% of the total loans outstanding. 

The Company offered deferrals options of: 1) three months deferral of payment and then three months of interest only, 2) three months of interest only, 3) three months deferral of payment, 4) six months of interest only, and expects $340.6 million to mature during the third quarter of 2020, with the remainder of the balance maturing during the fourth quarter of 2020.

Included in the COVID-19 modified loans were $145.4 million and $69.3 million of hospitality and restaurant loans, respectively. These sectors had increased vulnerability from COVID-19. At June 30, 2020, the short-term loan modifications were still expected to mature on the original maturity schedule.  All of the COVID-19 modified loans were transitioned into watchlist categories internally.

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. Our provision for loan losses for the six months ended June 30, 2020, is $6.1 million compared to $1.2 million in the same period of 2019, an increase of $4.9 million.  As of June 30, 2020, and December 31, 2019, our allowance for loan losses was $16.3 million and $10.2 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, 2020, as compared to December 31, 2019, is primarily due to the deterioration in the qualitative factors, such as unemployment and GDP, in our loan loss allowance methodology caused by the economic conditions related to the challenges being faced with the world wide COVID-19 pandemic. Our allowance for loan loss as a percentage of total loans was 0.67% at June 30, 2020 and 0.54% at December 31, 2019.

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, 2020, the notional balances on PCI loans was $48.8 million while the carrying value was $35.0 million. At June 30, 2020, there were no loan loss allowances on PCI loans.

45

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, 2020				December 31, 2019
	Amount		Percent		Amount		Percent
Commercial real estate-mortgage	$	6,595	42.2	%	$	4,508	47.7	%
Consumer real estate-mortgage		3,313	19.1	%		2,576	22.0	%
Construction and land development		1,795	11.6	%		1,127	12.0	%
Commercial and industrial		4,443	26.5	%		1,957	17.8	%
Consumer and other		108	0.6	%		75	0.5	%
Total allowance for loan losses	$	16,254	100.0	%	$	10,243	100.0	%

The allocation by category is determined based on the loans individually 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 $475 thousand at December 31, 2019 compared to $465 thousand at June 30, 2020.

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 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Balance at beginning of period	$	13,431		$	8,704		$	10,243		$	8,275
Provision for loan losses		2,850			393			6,049			1,190
Charged-off loans:
Commercial real estate-mortgage		—			—			—			—
Consumer real estate-mortgage		—			—			(2)			(2)
Construction and land development		—			—			—			—
Commercial and industrial		(9)			(14)			(17)			(333)
Consumer and other		(66)			(80)			(142)			(210)
Total charged-off loans		(75)			(94)			(161)			(545)
Recoveries of previously charged-off loans:
Commercial real estate-mortgage		3			22			5			24
Consumer real estate-mortgage		11			16			17			20
Construction and land development		—			2			2			4
Commercial and industrial		6			41			49			53
Consumer and other		28			13			50			76
Total recoveries of previously charged-off loans		48			94			123			177
Net loan charge-offs		(27)			—			(38)			(368)
Balance at end of period	$	16,254		$	9,097		$	16,254		$	9,097
Ratio of allowance for loan losses to total loans outstanding at end of period		0.67	%		0.50	%		0.67	%		0.50	%
Ratio of net loan charge-offs to average loans outstanding for the period (annualized)		—	%		—	%		—	%		0.04	%

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.

46

Securities Portfolio

Our securities portfolio, consisting primarily of Federal agency bonds, state and municipal securities, and mortgage-backed securities, amounted to fair values of $219.6 million and $178.3 million at June 30, 2020 and December 31, 2019, respectively. Our investments to assets ratio decreased from 7.3% at December 31, 2019 to 6.7% at June 30, 2020. Our securities portfolio serves many purposes including serving as a potential liquidity source, collateral for public funds, and as a stable source of income. All of the Company’s securities are designated as available-for-sale.

The following table shows the amortized cost of the Company’s securities by investment categories (in thousands):

	June 30,		December 31,
	2020		2019
U.S. Government-sponsored enterprises (GSEs)	$	31,337	$	19,015
Municipal securities		86,469		63,792
Other debt securities		9,463		3,481
Mortgage-backed securities		88,913		91,531
Total securities	$	216,182	$	177,819

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, 2020. The composition and maturity / repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs (dollars in thousands):

	Maturity By Years
	1 or Less			1 to 5			5 to 10			Over 10			Total
U.S. Government agencies	$	—		$	149		$	17,473		$	13,715		$	31,337
State and political subdivisions		440			2,743			6,338			76,950			86,471
Other debt securities		—			982			8,480			—			9,462
Mortgage-backed securities		—			4,156			13,340			71,416			88,912
Total securities	$	440		$	8,030		$	45,631		$	162,081		$	216,182
Weighted average yield (1)		1.65	%		1.50	%		2.58	%		2.53	%		2.50	%

(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, 2020, brokered deposits represented approximately 7.7% 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, 2020 was 0.71% compared to 1.42% for the same period in 2019 and 0.90% and 1.37% for the six months ended June 30,2020 and June 2019, respectively. The decreased cost of interest-bearing deposits was due to changes in rates caused by federal rate-changes during the periods.

Total deposits as of June 30, 2020 were $2.5 billion, which was an increase of $492.5 million from December 31, 2019. This increase was primarily from the completed acquisition of PFG and deposits related to the PPP loans. As of June 30,

47

2020, the Company had outstanding time deposits under $250,000 with balances of $512.1 million and time deposits over $250,000 with balances of $140.5 million.

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

	June 30,
	2020
Three months or less	$	28,580
Three to six months		28,847
Six to twelve months		46,897
More than twelve months		36,128
Total	$	140,452

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. Borrowings totaled $318.9 million at June 30, 2020, and primarily consisted of $75.0 million in FHLB borrowings, $237.8 million from the PPPLF and short-term borrowings totaled $5.7 million and consisted entirely of securities sold under repurchase agreements. Long-term debt totaled $39.3 million at June 30, 2020 and December 31, 2019, respectively and consisted entirely of subordinated debt.  For more information regarding our borrowings, see "Part I - Item 1. Consolidated Financial Statements - Note 7 – Borrowings and Line of Credit."

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, 2020 and December 31, 2019, 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.. For more information regarding our capital, leverage and total capital ratios, see “Part I - Item 1. Consolidated Financial Statements - Note 13 - Regulatory Matters.”

Liquidity and Off-Balance Sheet Arrangements

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. At June 30, 2020, we had $506.7 million of pre-approved but unused lines of credit and $6.5 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.  For more information regarding our off-balance sheet arrangements, see “Part I - Item 1. Consolidated Financial Statements - Note 9 – Commitments and Contingent Liabilities.”

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.

48

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. These measurements are used in conjunction with competitive pricing analysis and are further described below.

Earnings Simulation Model We believe interest rate risk is effectively measured by our earnings simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with simulated forecasts of interest rates for the next 12 months and 24 months. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the variance of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time. For changes up or down in rates from our dynamic interest rate forecast over the next 12 and 24 months, limits in the decline in net interest income are as follows:

			Maximum Percentage Decline
			in Net Interest
			Income from the Budgeted
	Estimated % Change in Net		or Base Case
	Interest Income Over 12		Projection of Net Interest
	Months		Income
June 30, 2020:	Increase +	Decrease -	Next 12 Months
An instantaneous, parallel rate increase or decrease of the following at the beginning of the second quarter:
± 100 basis points	3.13%	0.50%	8%
± 200 basis points	4.86%	0.65%	14%

Economic Value of Equity Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity.

To help monitor our related risk, we’ve established the following policy limits regarding simulated changes in our economic value of equity:

			Maximum
			Percentage
			Decline in
			Economic Value
			of Equity from
			the Economic
			Value of Equity
	Current Estimated Instantaneous		at Currently
	Rate Change		Prevailing
June 30, 2020:	Increase +	Decrease -	Interest Rates
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to:
±100 basis points	4.85%	(4.27)%	10%
±200 basis points	5.20%	13.51%	15%

At June 30, 2020, our model results indicated that we were within these policy limits.

49

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 $440 thousand in investments that mature throughout the next 12 months. The Company also anticipates $22.7 million of principal payments from mortgage-backed securities over the same period. The Company also has unused borrowing capacity in the amount of $312.2 million available with the Federal Reserve, FHLB, several correspondent banks and a line of credit. With these sources of funds, the Company currently anticipates adequate liquidity to meet the expected obligations of its customers.

50

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, 2020 (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, 2020 that have materially affected, or are reasonably likely to materially affect, SmartFinancial’s internal control over financial reporting.

51

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.

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2019. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factors have been included in this Quarterly Report on Form 10-Q in response to the global market disruptions that have resulted from the COVID-19 pandemic.

The ongoing COVID-19 pandemic and measures implemented to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Global health concerns relating to the COVID-19 outbreak and related government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty and reduced economic activity. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The outbreak has adversely impacted and is likely to further adversely impact our workforce and operations and the operations of our borrowers, customers and business partners. In particular, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners, including but not limited to:

● credit losses resulting from financial stress being experienced by our borrowers as a result of the outbreak and related governmental actions, particularly in the hospitality, energy, retail and restaurant industries;

● declines in collateral values;

● third party disruptions, including outages at network providers and other suppliers;

● increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;

● risk of litigation or other third-party claims, including with respect to our participation in the Payroll Protection Program and any other government-sponsored stimulus programs; and

● operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions.

These factors may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.

The spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, and developing work from home and social distancing plans for our employees), and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.

52

The extent to which the coronavirus outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.

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

(a) Not applicable

(b) Not applicable

(c) Issuer Purchases of Registered Equity Securities

On November 20, 2018, the Company announced that its board of directors has authorized a stock repurchase plan pursuant to which the Company may purchase up to $10.0 million in shares of the Company’s outstanding common stock. Stock repurchases under the plan will be made from time to time in the open market, at the discretion of the management of the Company, and in accordance with applicable legal requirements. The stock repurchase plan does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, amended, suspended, or discontinued at any time. As of June 30, 2020, we have purchased $2.1 million of the authorized $10.0 million and may purchase up to an additional $7.9 million in the Company’s outstanding common stock.

The following table summarizes the Company’s repurchase activity during the three months ended June 30, 2020.

					Maximum
					Number (or
					Approximate
					Dollar Value) of
					Shares That May
				Total Number of Shares	Yet Be Purchased
	Total Number of			Purchased as Part of	Under the Plans
	Shares	Average Price Paid		Publicly Announced	or Programs (in
Period	Repurchased	Per Share		Plans or Programs	thousands)
April 1, 2020 to April 30, 2020	5,976	$	13.99	5,976	$	7,925
May 1, 2020 to May 31, 2020	—		—	—		7,925
June 1, 2020 to June 30, 2020	—		—	—		7,925
Total	5,976	$	13.99	5,976	$	7,925

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

53

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
10.1	Loan and Security Agreement, dated as of March 30, 2020, by and between SmartFinancial, Inc., as Borrower, and ServisFirst Bank, as Lender	Incorporated by reference to Exhibit 10.1 to Form 8-K filed April 3, 2020
10.2	Revolving Note, dated as of March 30, 2020, by and between SmartFinancial, Inc., as Borrower, and ServisFirst Bank, as Lender	Incorporated by reference to Exhibit 10.2 to Form 8-K filed April 3, 2020
10.3	Pledge Agreement, dated as of March 30, 2020, by and between SmartFinancial, Inc., as Borrower, and ServisFirst Bank, as Lender	Incorporated by reference to Exhibit 10.3 to Form 8-K filed April 3, 2020
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 (formatted as Inline XBRL)	Filed herewith.
104	Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101	Filed herewith

*     Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant will furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

54

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, thereunto duly authorized.

		SmartFinancial, Inc.
Date:	August 10, 2020	/s/ William Y. Carroll, Jr.
		William Y. Carroll, Jr.
		President and Chief Executive Officer
		(principal executive officer)
Date:	August 10, 2020	/s/ Ronald J. Gorczynski
		Ronald J. Gorczynski
		Executive Vice President and Chief Financial Officer
		(principal financial officer and accounting officer)

55

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William Y. Carroll, certify that:

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

2.     Based on my knowledge, this 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 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 supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, 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 Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) 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 the Registrant’s board of directors (or persons performing the equivalent functions):

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 10, 2020

/s/ William Y. Carroll

William Y, Carroll

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 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 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 supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, 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 Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) 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 the Registrant’s board of directors (or persons performing the equivalent functions):

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 10, 2020

/s/ Ronald J. Gorczynski

Ronald J. Gorczynski

Executive Vice President and 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, 2020, 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 to the best of my knowledge:

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.

Date: August 10, 2020

/s/ William Y. Carroll, Jr.

William Y. Carroll, Jr.

President and Chief Executive Officer

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, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald J. Gorczynski, Executive Vice President and 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 to the best of my knowledge:

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.

Date: August 10, 2020

/s/ Ronald J. Gorczynski

Ronald J. Gorczynski

Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2020	Aug. 03, 2020
Cover [Abstract]
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-37661
Entity Registrant Name	SMARTFINANCIAL INC.
Entity Incorporation, State or Country Code	TN
Entity Tax Identification Number	62-1173944
Entity Address, Address Line One	5401 Kingston Pike, Suite 600
Entity Address, City or Town	Knoxville
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37919
City Area Code	865
Local Phone Number	437-5700
Title of 12(b) Security	Common Stock, par value $1.00
Trading Symbol	SMBK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		15,216,932
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001038773
Current Fiscal Year End Date	--12-31

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
ASSETS:
Cash and due from banks	$ 57,045	$ 33,205
Interest-bearing deposits with banks	258,271	127,329
Federal funds sold	84,151	23,437
Total cash and cash equivalents	399,467	183,971
Securities available-for-sale, at fair value	219,631	178,348
Other investments	14,829	12,913
Loans held for sale	6,330	5,856
Loans	2,408,284	1,897,392
Less: Allowance for loan losses	(16,254)	(10,243)
Loans, net	2,392,030	1,887,149
Premises and equipment, net	73,868	59,433
Other real estate owned	5,524	1,757
Goodwill and core deposit intangible, net	86,327	77,193
Bank owned life insurance	30,853	24,949
Other assets	37,126	17,554
Total assets	3,265,985	2,449,123
Deposits:
Noninterest-bearing demand	645,650	364,155
Interest-bearing demand	479,212	380,234
Money market and savings	762,246	623,284
Time deposits	652,581	679,541
Total deposits	2,539,689	2,047,214
Borrowings	318,855	31,623
Subordinated debt	39,304	39,261
Other Liabilities	24,649	18,278
Total liabilities	2,922,497	2,136,376
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; 15,216,932 and 14,008,233 shares issued and outstanding, respectively	15,217	14,008
Additional paid-in capital	254,396	232,732
Retained earnings	73,283	65,839
Accumulated other comprehensive income	592	168
Total shareholders' equity	343,488	312,747
Total liabilities and shareholders' equity	$ 3,265,985	$ 2,449,123

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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)	15,216,932	14,008,233
Common stock, shares outstanding (in shares)	15,216,932	14,008,233

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Interest income:
Loans, including fees	$ 28,663	$ 25,278	$ 55,097	$ 50,253
Securities available-for-sale:
Taxable	589	871	1,268	1,842
Tax-exempt	416	411	699	836
Federal funds sold and other earning assets	277	743	879	1,315
Total interest income	29,945	27,303	57,943	54,246
Interest expense:
Deposits	3,366	5,788	8,120	11,039
Borrowings	249	123	339	235
Subordinated debt	584	590	1,167	1,173
Total interest expense	4,199	6,501	9,626	12,447
Net interest income	25,746	20,802	48,317	41,799
Provision for loan losses	2,850	393	6,049	1,190
Net interest income after provision for loan losses	22,896	20,409	42,268	40,609
Noninterest income:
Service charges on deposit accounts	709	707	1,479	1,361
Gain on sale of securities	16	33	16	33
Mortgage banking	931	392	1,515	674
Investment services	363	255	801	424
Insurance commissions	473	0	742	0
Interchange and debit card transaction fees	508	143	784	318
Merger termination fee	0	6,400	0	6,400
Other	511	486	993	904
Total noninterest income	3,511	8,416	6,330	10,114
Noninterest expense:
Salaries and employee benefits	10,357	8,984	20,363	17,382
Occupancy and equipment	1,996	1,658	3,906	3,298
FDIC insurance	180	180	360	359
Other real estate and loan related expense	346	242	892	732
Advertising and marketing	202	259	400	554
Data processing	594	577	1,132	1,192
Professional services	868	489	1,578	1,151
Amortization of intangibles	405	342	767	686
Software as service contracts	561	568	1,031	1,136
Merger related and restructuring expenses	1,477	1,796	3,573	2,719
Other	1,820	1,714	3,598	3,179
Total noninterest expense	18,806	16,809	37,600	32,388
Income before income tax expense	7,601	12,016	10,998	18,335
Income tax expense	1,427	2,895	2,091	4,483
Net income	$ 6,174	$ 9,121	$ 8,907	$ 13,852
Earnings per common share:
Basic (in dollars per share)	$ 0.41	$ 0.65	$ 0.60	$ 0.99
Diluted (in dollars per share)	$ 0.41	$ 0.65	$ 0.60	$ 0.99
Weighted average common shares outstanding:
Basic (in shares)	15,152,768	13,951,643	14,773,935	13,946,856
Diluted (in shares)	15,202,335	14,046,500	14,842,486	14,036,790

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 6,174	$ 9,121	$ 8,907	$ 13,852
Other comprehensive income:
Unrealized holding gains and hedge effects on securities available-for-sale arising during the period	1,808	2,610	2,903	5,461
Tax effect	(394)	(683)	(638)	(1,431)
Reclassification adjustment for realized gains included in net income	16	33	16	33
Tax effect	(4)	(9)	(4)	(9)
Unrealized gains on securities available-for-sale arising during the period, net of tax	1,426	1,951	2,277	4,054
Unrealized gains (losses) on fair value municipal security hedges	691	(2,830)	(2,381)	(2,521)
Tax effect	(278)	742	528	661
Unrealized gains (losses) on fair value municipal security hedge instruments arising during the period, net of tax	413	(2,088)	(1,853)	(1,860)
Total other comprehensive income (loss)	1,839	(137)	424	2,194
Comprehensive income	$ 8,013	$ 8,984	$ 9,331	$ 16,046

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)	Common Stock	Additional Paid-in Capital	Retained Earnings	AOCI Attributable to Parent [Member]	Total
BALANCE (in shares) at Dec. 31, 2018	13,933,504
BALANCE at Dec. 31, 2018	$ 13,933,000	$ 231,852,000	$ 39,991,000	$ (2,765,000)	$ 283,011,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	13,852,000	0	13,852,000
Other comprehensive income (loss)	0	0	0	2,194,000	2,194,000
Stock awards	$ 3,000	61,000	0	0	65,000
Stock awards (in shares)	3,298
Exercise of stock options	$ 16,000	196,000	0	0	213,000
Exercise of stock options (in shares)	16,407
Stock compensation expense	$ 0	276,000	0	0	276,000
BALANCE (in shares) at Jun. 30, 2019	13,953,209
BALANCE at Jun. 30, 2019	$ 13,953,000	232,386,000	53,843,000	(571,000)	299,611,000
BALANCE (in shares) at Mar. 31, 2019	13,951,590
BALANCE at Mar. 31, 2019	$ 13,952,000	232,241,000	44,722,000	(434,000)	290,481,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	9,121,000	0	9,121,000
Other comprehensive income (loss)	0	0	0	(137,000)	(137,000)
Exercise of stock options	$ 2,000	12,000	0	0	14,000
Exercise of stock options (in shares)	1,619
Restricted stock, net of forfeitures	$ 0	0	0	0	0
Restricted stock, net of forfeitures (in shares)	0
Stock compensation expense	$ 0	133,000	0	0	133,000
BALANCE (in shares) at Jun. 30, 2019	13,953,209
BALANCE at Jun. 30, 2019	$ 13,953,000	232,386,000	53,843,000	(571,000)	299,611,000
BALANCE (in shares) at Dec. 31, 2019	14,008,233
BALANCE at Dec. 31, 2019	$ 14,008,000	232,732,000	65,839,000	168,000	312,747,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	8,907,000	0	8,907,000
Other comprehensive income (loss)	0	0	0	424,000	424,000
Exercise of stock options	$ 16,000	162,000	0	0	178,000
Exercise of stock options (in shares)	15,358
Restricted stock, net of forfeitures	$ 32,000	(32,000)	0	0	0
Restricted stock, net of forfeitures (in shares)	32,318
Shareholders of Progressive Financial Group, Inc.	$ 1,293,000	23,254,000	0	0	24,547,000
Shareholders of Progressive Financial Group, Inc. (in shares)	1,292,578
Stock compensation expense	$ 0	223,000	0	0	223,000
Common stock dividend	0	0	(1,463,000)	0	(1,463,000)
Repurchase of common stock	$ (132,000)	(1,943,000)	0	0	(2,075,000)
Repurchase of common stock (in shares)	(131,555)
BALANCE (in shares) at Jun. 30, 2020	15,216,932
BALANCE at Jun. 30, 2020	$ 15,217,000	254,396,000	73,283,000	592,000	343,488,000
BALANCE (in shares) at Mar. 31, 2020	15,221,990
BALANCE at Mar. 31, 2020	$ 15,222,000	254,356,000	67,869,000	(1,247,000)	336,200,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	6,174,000	0	6,174,000
Other comprehensive income (loss)	0	0	0	1,839,000	1,839,000
Exercise of stock options	$ 1,000	4,000	0	0	5,000
Exercise of stock options (in shares)	500
Restricted stock, net of forfeitures	$ 0	0	0	0	0
Restricted stock, net of forfeitures (in shares)	418
Stock compensation expense	$ 0	113,000	0	0	113,000
Common stock dividend	0	0	(760,000)	0	(760,000)
Repurchase of common stock	$ (6,000)	(77,000)	0	0	(83,000)
Repurchase of common stock (in shares)	(5,976)
BALANCE (in shares) at Jun. 30, 2020	15,216,932
BALANCE at Jun. 30, 2020	$ 15,217,000	$ 254,396,000	$ 73,283,000	$ 592,000	$ 343,488,000

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2020
Statement of Stockholders' Equity [Abstract]
Common stock dividend (in dollars per share)	$ (0.05)	$ 0.05	$ (0.10)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Cash flows from operating activities:
Net income	$ 6,174	$ 9,121	$ 8,907	$ 13,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,788	2,088
Accretion of fair value purchase accounting adjustments, net			(2,729)	(3,091)
Provision for loan losses	2,850	393	6,049	1,190
Stock compensation expense			223	276
Gain from redemption and sale of securities available-for-sale	(16)	(33)	(16)	(33)
Deferred income tax expense			209	1,039
Increase in cash surrender value of bank owned life insurance			(345)	(314)
Loss on disposal of fixed assets			0	14
Net (gains) losses from sale of other real estate owned			81	(16)
Net gains from sale of loans			(1,515)	(674)
Origination of loans held for sale			(49,888)	(33,491)
Proceeds from sales of loans held for sale			50,929	32,057
Net change in:
Accrued interest receivable			(5,236)	(612)
Accrued interest payable			318	454
Other assets			(10,018)	(593)
Other liabilities			1,523	5,792
Net cash provided by operating activities			1,280	17,938
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale	4,760	13,342	6,875	16,515
Proceeds from maturities and calls of securities available-for-sale			15,450	10,305
Proceeds from paydowns of securities available-for-sale			9,144	6,554
Purchases of securities available-for-sale			(41,958)	(1,054)
Purchases of other investments			(1,223)	(1,406)
Net increase in loans			(321,192)	(55,323)
Purchases of premises and equipment			(3,417)	(2,011)
Proceeds from sale of other real estate owned			406	1,100
Net cash and cash equivalents received from business combination			46,132	0
Net cash used in investing activities			(289,783)	(25,320)
Cash flows from financing activities:
Net increase in deposits			220,128	90,136
Net decrease in securities sold under agreements to repurchase			(527)	(3,537)
Proceeds from borrowings			338,340	120,176
Repayment borrowings			(50,581)	(115,959)
Cash dividends paid			(1,463)	0
Issuance of common stock			178	278
Purchase of common stock			(2,075)	0
Net cash provided by financing activities			504,000	91,094
Net change in cash and cash equivalents			215,497	83,712
Cash and cash equivalents, beginning of period			183,970	115,822	$ 115,822
Cash and cash equivalents, end of period	$ 399,467	$ 199,534	399,467	199,534	$ 183,970
Supplemental disclosures of cash flow information:
Cash paid during the period for interest			9,308	11,993
Cash paid during the period for income taxes			2,948	2,630
Noncash investing and financing activities:
Acquisition of real estate through foreclosure			971	403
Change in goodwill due to acquisitions			8,532	0
Initial recognition of operating lease right-of-use assets			484	2,344
Initial recognition of operating lease liabilities			$ 484	$ 2,344

XML

Presentation of Financial Information

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Presentation of Financial Information

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 East and Middle Tennessee, Alabama, and the Florida Panhandle. 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 accounting and financial reporting policies of the Company and its wholly-owned subsidiary conform to U.S. generally accepted accounting principles (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements for the Company and its wholly-owned subsidiary have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. 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. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Recently Issued and Adopted Accounting Pronouncements:

As of January 1, 2020, the Company adopted ASU 2019-01, Leases: Codification Improvements (“ASU 2019-01”). ASU 2019-01 provides clarification 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. The adoption of ASU 2019-01 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, 2019 as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission ("SEC"). The following is a summary of recent authoritative pronouncements issued but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In October 2019, the Financial Accounting Standards Board approved a delay for the implementation of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The Board decided that CECL will be effective for larger Public Business Entities ("PBEs") that are SEC filers, excluding Smaller Reporting Companies ("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 and the Company meets the regulations as an SRC.

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 Company does not plan to adopt this standard early and being that the Company is an SRC, adoption is required for fiscal years beginning after December 15, 2022.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify various aspects of the current guidance to promote consistent application of the standard among reporting entities by moving certain exceptions to the general principles. The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not plan to adopt this standard early and adoption should not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”). It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the transition away from LIBOR for its loan and other financial instruments.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. Under Accounting Standards Codification 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” (“ASC 310-40”), a restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. In regard to nonaccrual and charge-offs of loans, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or classified.

Reclassifications:

Certain captions and amounts in the 2019 consolidated financial statements were reclassified to conform to the 2020 financial statement presentation. These reclassifications had no impact on net income or shareholders’ equity as previously reported.

XML

Business Combinations

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combinations

Note 2. Business Combinations

Acquisition of Progressive Financial Inc.

On March 1, 2020, the Company completed the merger of Progressive Financial Group, Inc., a Tennessee corporation (“PFG”), pursuant to an Agreement and Plan of Merger dated October 29, 2019 (the “Merger Agreement”).

In connection with the merger, the Company acquired $301 million of assets and assumed $272 million of liabilities. Pursuant to the Merger Agreement, each outstanding share of Progressive common stock was converted into and cancelled in exchange to the right to receive $474.82 in cash, and 62.3808 shares of SmartFinancial common stock. SmartFinancial issued 1,292,578 shares of SmartFinancial common stock and paid $9.8 million in cash as consideration for the Merger. The fair value of consideration paid exceeded the fair value of the identifiable assets and liabilities acquired and resulted in the establishment of goodwill in the amount of $8.5 million, representing the intangible value of Progressive’s business and reputation within the markets it served. None of the goodwill recognized is expected to be deductible for income tax purposes. The Company is amortizing the related core deposit intangible of $1.4 million using the effective yield method over 120 months (10 years), which represents the expected useful life of the asset.

The Company’s operating results for the three and six month periods ended June 30, 2020, include the operating results of the acquired business for the period subsequent to the merger date of March 1, 2020.

The purchased assets and assumed liabilities were recorded at their acquisition date fair values ⁽¹⁾ and are summarized in the table below (in thousands).

	As recorded		Fair value		As recorded
	by PFG		adjustments (1)		by the Company
Assets:
Cash & cash equivalents	$	55,971	$	—	$	55,971
Investment securities available-for-sale		27,054		203		27,257
Restricted investments		692		—		692
Loans		191,672		(3,691)		187,981
Allowance for loan losses		(2,832)		2,832		—
Premises and equipment, net		15,681		(2,919)		12,762
Bank owned life insurance		5,560		—		5,560
Deferred tax asset, net		—		813		813
Intangibles		—		1,370		1,370
Other real estate owned		3,695		(329)		3,366
Interest Receivable		1,061		(280)		781
Prepaids		375		(174)		201
Goodwill		231		(231)		—
Other assets		1,881		—		1,881
Total assets acquired	$	301,041	$	(2,406)	$	298,635
Liabilities:
Deposits	$	271,276	$	—	$	271,276
Time deposit premium		—		729		729
Payables and other liabilities		776		—		776
Total liabilities assumed		272,052		729		272,781
Excess of assets assumed over liabilities assumed	$	28,989
Aggregate fair value adjustments			$	(3,135)
Total identifiable net assets						25,854
Consideration transferred:
Cash						9,838
Common stock issued (1,292,578 shares)						24,547
Total fair value of consideration transferred						34,385
Goodwill					$	8,531

⁽¹⁾ Fair values are preliminary and are subject to refinement for a period of one year after the closing date of an acquisition as information relative to the closing date fair value becomes available.

The following table presents additional information related to the purchased credit impaired loans of the acquired loan portfolio at the acquisition date (in thousands):

	March 1, 2020
Accounted for pursuant to ASC 310-30:
Contractually required principal and interest	$	21,107
Non-accretable differences		4,706
Cash flows expected to be collected		16,401
Accretable yield		2,515
Fair value	$	13,886

The following table discloses the impact of the merger with PFG since the acquisition date through the three and six month periods ended June 30, 2020. The table also presents certain pro-forma information (net interest income and noninterest income (“Revenue”) and net income) as if the PFG acquisition had occurred on January 1, 2019. The pro-forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of these dates.

Merger-related costs from the PFG acquisition for the three and six month periods ended June 30, 2020, were $1.5 million and $3.6 million, respectively, have been excluded from the pro-forma information presented below. Merger related costs for the same periods of 2019 are included in pro-forma information.  The actual results and pro-forma information were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Revenue		Net Income		Revenue		Net Income
2020:
Actual PFG results included in statement of income since acquisition date	$	3,655	$	1,362	$	4,160	$	1,478
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019		29,639		7,265		57,689		11,278
2019:
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019	$	33,289	$	8,366	$	60,055	$	11,879

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Note 3. Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options and restricted stock. The effect from the stock options and restricted stock on incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are

presented below. There were 116 thousand and 85 thousand antidilutive shares for the three and six month periods ended June 30, 2020, respectively, and none for the three and six month periods ended June 30, 2019.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Basic earnings per share	$	0.41	$	0.65	$	0.60	$	0.99
Diluted earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Incremental shares from assumed conversions:
Stock options and restricted stock		49,567		94,857		68,551		89,934
Average common shares outstanding - diluted		15,202,335		14,046,500		14,842,486		14,036,790
Diluted earnings per common share	$	0.41	$	0.65	$	0.60	$	0.99

XML

Securities

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Securities

Note 4. Securities

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	31,337	$	82	$	(8)	$	31,411
Municipal securities		86,469		1,716		(16)		88,169
Other debt securities		9,463		38		(44)		9,457
Mortgage-backed securities (GSEs)		88,913		2,034		(353)		90,594
Total	$	216,182	$	3,870	$	(421)	$	219,631

December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	19,015	$	41	$	(56)	$	19,000
Municipal securities		63,792		618		(19)		64,391
Other debt securities		3,481		22		(33)		3,470
Mortgage-backed securities (GSEs)		91,531		382		(426)		91,487
Total	$	177,819	$	1,063	$	(534)	$	178,348

At June 30, 2020, and December 31, 2019, securities with a carrying value totaling approximately $79.5 million and $92.3 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

Proceeds from sale of securities available for sale, gross gains and gross losses on sales and redemptions for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Proceeds from sales	$	4,760	$	13,342	$	6,875	$	16,515
Gross gains	$	16	$	34	$	16	$	34
Gross losses	$	-	$	(1)	$	-	$	(1)
Proceeds from redemptions	$	12,200	$	5,000	$	15,450	$	10,305

The amortized cost and estimated fair value of securities at June 30, 2020, 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		Fair
	Cost		Value
Due in one year or less	$	440	$	443
Due from one year to five years		3,874		3,872
Due from five years to ten years		32,291		32,540
Due after ten years		90,664		92,182
		127,269		129,037
Mortgage-backed securities		88,913		90,594
Total	$	216,182	$	219,631

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
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	6,583	$	(8)	$	—	$	—	$	6,583	$	(8)
Municipal securities		3,546		(16)		—		—		3,546		(16)
Other debt securities		1,966		(14)		953		(30)		2,919		(44)
Mortgage-backed securities (GSEs)		14,209		(143)		11,222		(210)		25,431		(353)
Total	$	26,304	$	(181)	$	12,175	$	(240)	$	38,479	$	(421)
December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	2,972	$	(43)	$	5,987	$	(13)	$	8,959	$	(56)
Municipal securities		3,656		(16)		527		(3)		4,183		(19)
Other debt securities		—		—		947		(33)		947		(33)
Mortgage-backed securities (GSEs)		13,208		(194)		19,988		(232)		33,196		(426)
Total	$	19,836	$	(253)	$	27,449	$	(281)	$	47,285	$	(534)

At June 30, 2020, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross
	Unrealized		Number of
	Loss		Securities
U.S. Government- sponsored enterprises (GSEs)	$	—	—
Municipal securities		—	—
Other debt securities		(30)	1
Mortgage-backed securities (GSEs)		(210)	10
Total	$	(240)	11

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 vary 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, 2020, represented a temporary impairment, as these unrealized losses are primarily attributable to changes in interest rates and current market conditions, and not credit deterioration of the issuers. As of June 30, 2020, 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,		December 31,
	2020		2019
Federal Reserve Bank stock	$	8,641	$	7,917
Federal Home Loan Bank stock		5,838		4,646
First National Bankers Bank stock		350		350
Total	$	14,829	$	12,913

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, 2020, the Company determined that there was no impairment on its other investments.

XML

Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Loans and Allowance for Loan Losses

Note 5. Loans and Allowance for Loan Losses

Portfolio Segmentation:

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

	June 30, 2020						December 31, 2019
	PCI		All Other				PCI		All Other
	Loans1		Loans		Total		Loans1		Loans		Total
Commercial real estate	$	16,517	$	1,000,516	$	1,017,033	$	15,255	$	890,051	$	905,306
Consumer real estate		11,568		448,292		459,860		6,541		410,941		417,482
Construction and land development		6,427		272,789		279,216		4,458		223,168		227,626
Commercial and industrial		341		637,109		637,450		407		336,668		337,075
Consumer and other		106		14,619		14,725		326		9,577		9,903
Total loans		34,959		2,373,325		2,408,284		26,987		1,870,405		1,897,392
Less: Allowance for loan losses		—		(16,254)		(16,254)		(156)		(10,087)		(10,243)
Loans, net	$	34,959	$	2,357,071	$	2,392,030	$	26,831	$	1,860,318	$	1,887,149

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

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):

					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
	Real Estate		Real Estate		Development		Industrial		and Other		Total
June 30, 2020:
Performing loans	$	999,567	$	446,892	$	272,789	$	636,952	$	14,619	$	2,370,819
Impaired loans		949		1,400		—		157		—		2,506
		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI loans		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284
December 31, 2019:
Performing loans	$	889,795	$	409,394	$	222,621	$	336,508	$	9,577	$	1,867,895
Impaired loans		256		1,547		547		160		—		2,510
		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI loans		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

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

					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
June 30, 2020:
Performing loans	$	6,551	$	3,021	$	1,795	$	4,314	$	108	$	15,789
Impaired loans		44		292		—		129		—		465
		6,595		3,313		1,795		4,443		108		16,254
PCI loans		—		—		—		—		—		—
Total loans	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254
December 31, 2019:
Performing loans	$	4,491	$	2,159	$	1,127	$	1,766	$	69	$	9,612
Impaired loans		—		343		—		132		—		475
		4,491		2,502		1,127		1,898		69		10,087
PCI loans		17		74		—		59		6		156
Total loans	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243

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

	Three Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	5,963	$	3,301	$	1,484	$	2,557	$	126	$	13,431
Charged off loans		—		—		—		(9)		(66)		(75)
Recoveries of charge-offs		3		11		—		6		28		48
Provision (reallocation) charged to expense		629		1		311		1,889		20		2,850
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

	Three Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,074	$	1,949	$	854	$	1,709	$	118	$	8,704
Charged off loans		—		—		—		(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

	Six Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243
Loans charged off		—		(2)		—		(17)		(142)		(161)
Recoveries of loans charged off		5		17		2		49		50		123
Provision (reallocation) charged to expense		2,082		722		666		2,454		125		6,049
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

	Six Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275
Loans charged off		—		(2)		—		(333)		(210)		(545)
Recoveries of loans charged off		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

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

	June 30, 2020
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	526,141	$	390,787	$	227,302	$	573,989	$	14,259	$	1,732,478
Watch		462,734		55,210		45,416		61,888		288		625,536
Special mention		10,586		599		—		892		—		12,077
Substandard		1,055		1,534		71		207		48		2,915
Doubtful		—		162		—		133		24		319
Total		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI Loans:
Pass		8,082		9,028		1,353		249		83		18,795
Watch		7,314		922		4,520		—		16		12,772
Special mention		20		57		—		—		—		77
Substandard		1,101		1,561		554		92		7		3,315
Doubtful		—		—		—		—		—		—
Total		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284

	December 31, 2019
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	860,447	$	407,336	$	216,459	$	328,564	$	9,462	$	1,822,268
Watch		25,180		989		6,089		6,786		40		39,084
Special mention		4,057		738		—		1,033		—		5,828
Substandard		367		1,713		620		228		51		2,979
Doubtful		—		165		—		57		24		246
Total		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI Loans:
Pass		12,473		5,258		902		41		300		18,974
Watch		2,234		38		3,556		—		13		5,841
Special mention		139		60		—		—		—		199
Substandard		409		1,185		—		366		13		1,973
Doubtful		—		—		—		—		—		—
Total		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

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, 2020
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	1,019	$	188	$	1	$	815	$	2,023	$	16,517	$	998,493	$	1,017,033
Consumer real estate		1,726		457		138		1,891		4,212		11,568		444,080		459,860
Construction and land development		602		—		265		—		867		6,427		271,922		279,216
Commercial and industrial		84		93		465		121		763		341		636,346		637,450
Consumer and other		134		2		8		72		216		106		14,403		14,725
Total	$	3,565	$	740	$	877	$	2,899	$	8,081	$	34,959	$	2,365,244	$	2,408,284

	December 31, 2019
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	466	$	22	$	—	$	124	$	612	$	15,255	$	889,439	$	905,306
Consumer real estate		1,564		30		—		1,872		3,466		6,541		407,475		417,482
Construction and land development		507		—		607		620		1,734		4,458		221,434		227,626
Commercial and industrial		559		53		—		57		669		407		335,999		337,075
Consumer and other		86		14		—		70		170		326		9,407		9,903
Total	$	3,182	$	119	$	607	$	2,743	$	6,651	$	26,987	$	1,863,754	$	1,897,392

Impaired Loans:

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

	June 30, 2020						December 31, 2019
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	553	$	553	$	—	$	256	$	261	$	—
Consumer real estate		720		721		—		553		553		—
Construction and land development		—		—		—		547		547		—
Commercial and industrial		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—
		1,273		1,274		—		1,356		1,361		—
Impaired loans with a valuation allowance:
Commercial real estate		396		402		44		—		—		—
Consumer real estate		680		680		292		994		994		343
Construction and land development		—		—		—		—		—		—
Commercial and industrial		157		157		129		160		160		132
Consumer and other		—		—		—		—		—		—
		1,233		1,239		465		1,154		1,154		475
PCI loans:
Commercial real estate		16		99		—		17		99		17
Consumer real estate		1,870		2,138		—		1,205		1,371		74
Construction and land development		—		—		—		—		—		—
Commercial and industrial		303		445		—		396		534		59
Consumer and other		30		35		—		45		51		6
		2,219		2,717		—		1,663		2,055		156
Total impaired loans	$	4,725	$	5,230	$	465	$	4,173	$	4,570	$	631

	Three Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	345	$	1	$	424	$	5
Consumer real estate		633		10		624		—
Construction and land development		304		—		650		2
Commercial and industrial		—		—		16		—
Consumer and other		—		—		14		—
		1,282		11		1,728		7
Impaired loans with a valuation allowance:
Commercial real estate		396		—		24		—
Consumer real estate		827		5		217		2
Construction and land development		—		—		28		—
Commercial and industrial		158		3		293		—
Consumer and other		—		—		13		—
		1,381		8		575		2
PCI loans:
Commercial real estate		490		—		2,529		—
Consumer real estate		1,168		38		1,099		—
Construction and land development		116		—		—		—
Commercial and industrial		338		3		—		—
Consumer real estate		22		—		—		—
		2,134		41		3,628		—
Total impaired loans	$	4,797	$	60	$	5,931	$	9

	Six Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	315	$	4	$	495	$	25
Consumer real estate		606		14		774		4
Construction and land development		385		—		616		1
Commercial and industrial		—		—		33		1
Consumer and other		—		—		19		—
		1,306		18		1,937		31
Impaired loans with a valuation allowance:
Commercial real estate		264		2		16		—
Consumer real estate		882		14		199		9
Construction and land development		—		—		19		—
Commercial and industrial		158		5		514		9
Consumer and other		—		—		38		—
		1,304		21		786		18
PCI loans:
Commercial real estate		333		1		1,686		(9)
Consumer real estate		1,174		39		732		2
Construction and land development		77		—		—		—
Commercial and industrial		361		3		—		—
Consumer and other		31		—		—		—
		1,976		43		2,418		(7)
Total impaired loans	$	4,586	$	82	$	5,141	$	42

Troubled Debt Restructurings:

At June 30, 2020, and December 31, 2019, impaired loans included loans that were classified as 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, 2020, and December 31, 2019, management had approximately $9 thousand and $61 thousand, respectively, in loans that met the criteria for TDR, none of which were on nonaccrual. A loan is placed back on accrual status when both principal and interest are current and it is probable that the Company will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

There was one loan that was modified as a TDR during the six month period ended June 30, 2020, and no loans were modified during the six month period ended June 30, 2019. There were no loans that were modified as TDRs during the past six months and for which there was a subsequent payment default.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. The Coronavirus Aid Relief and Economic Security (“CARES”) Act along with a joint agency statement issued by banking agencies, provides that short-term modifications made in response to COVID-19 does not need to be accounted for as a TDR. Accordingly, the Company does not account for such loan modifications as TDRs. See Note 1 Summary of Significant Accounting Policies for more information.

Foreclosure Proceedings and Balances:

As of June 30, 2020, there were five residential properties secured by 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,		December 31,
	2020		2019
Commercial real estate	$	24,551	$	21,570
Consumer real estate		14,191		8,411
Construction and land development		7,610		5,394
Commercial and industrial		2,212		2,540
Consumer and other		240		504
Total loans		48,804		38,419
Less: Remaining purchase discount		(13,845)		(11,432)
Total loans, net of purchase discount		34,959		26,987
Less: Allowance for loan losses		—		(156)
Carrying amount, net of allowance	$	34,959	$	26,831

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Accretable yield, beginning of period	$	10,979	$	8,644	$	8,454	$	7,052
Additions		—		—		2,515		—
Accretion income		(1,057)		(1,026)		(3,134)		(2,280)
Reclassification		247		323		2,163		1,358
Other changes, net		1,608		339		1,779		2,150
Accretable yield, end of period	$	11,777	$	8,280	$	11,777	$	8,280

XML

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6. Goodwill and Intangible Assets

In accordance with FASB ASC 350, Goodwill and Other, regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs its annual goodwill impairment test as of December 31 of each year and at December 31, 2019, the results of the qualitative assessment provided no indication of potential impairment. Goodwill will continue to be monitored for triggering events that may indicate impairment prior to the next scheduled annual impairment test. Considering the recent economic conditions resulting from the COVID-19 pandemic, as of June 30, 2020, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  The results indicated that there was no impairment as of June 30, 2020. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

The Company’s other intangible assets consist of core deposit intangibles, and is initially recognized based on a valuation performed as of the consummation date. The core deposit intangible is amortized over the average remaining life of the acquired customer deposits.

The carrying amount of goodwill and other intangible assets as of the dates indicated is summarized below (in thousands):

	June 30,		December 31,
	2020		2019
Goodwill:
Balance, beginning of period	$	65,614	$	66,087
Adjustment to values initially recorded for Acquisition of Foothills Bancorp, Inc.		—		(473)
Acquisition of PFG		8,302		—
Adjustment to values initially recorded for Acquisition of PFG		229		—
Balance, end of the period	$	74,145	$	65,614

	June 30,		December 31,
	2020		2019
Core deposit intangible:
Balance, beginning of period	$	14,550	$	14,550
Acquisition of PFG		1,370		—
Balance, gross core deposit intangible		15,920		14,550
Less: accumulated amortization		(3,738)		(2,971)
Net core deposit intangible, net	$	12,182	$	11,579

The aggregate amortization of core deposit intangibles expense for the three and six month periods ended June 30, 2020, was $405 thousand and $767 thousand, respectively, and for the three and six months ended June 30, 2019, was $342 thousand and $686 thousand, respectively.

The estimated aggregate amortization expense for future periods for core deposit intangibles is as follows (in thousands):

Remainder of 2020	$	802
2021		1,570
2022		1,526
2023		1,485
2024		1,456
Thereafter		5,343
Total	$	12,182

XML

Borrowings and Line of Credit

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Borrowings and Line of Credit

Note 7. Borrowings and Line of Credit

Borrowings:

At June 30, 2020, total borrowings were $318.9 million compared to $31.6 million at December 31, 2020.  The $287.3 million increase was primarily due to borrowings from the Federal Reserve Bank Payroll Protection Program Liquidity Facility (“PPPLF”) of $237.8 million in the second quarter of 2020 and an increase in Federal Home Loan Bank (“FHLB”) borrowings of $50.0 million. Borrowings consist of the following (dollars in thousands):

	June 30,		December 31,
	2020		2019
Securities sold under customer repurchase agreements	$	5,659	$	6,184
FHLB borrowings		75,000		25,000
PPPLF borrowings		237,778		—
Other borrowings		418		439
Total	$	318,855	$	31,623

Line of Credit:

The Company has a Loan and Security Agreement and revolving note with ServisFirst Bank, pursuant to which ServisFirst Bank has made a $25.0 million revolving line of credit available to the Company. The maturity of the line of credit is September 24, 2021. At June 30, 2020, there was no outstanding balance under the line of credit, and the entire amount of the line of credit remained available to the Company.

XML

Employee Benefit Plans

6 Months Ended

Jun. 30, 2020

Defined Benefit Plan [Abstract]

Employee Benefit Plans

Note 8. Employee Benefit Plans

401(k) Plan:

The Company provides a deferred salary reduction plan (“Plan”) under Section 401(k) of the Internal Revenue Code covering substantially all employees. After 90 days of service the Company matches 100% of employee contributions up to 3% of compensation and 50% of employee contributions on the next 2% of compensation. The Company’s contribution to the Plan for the three and six month periods ending June 30, 2020, was $307 thousand and $558 thousand, respectively.  The Company’s contribution to the Plan for the three and six months periods ending June 30, 2019, was $217 thousand and $415 thousand, respectively.

Equity Incentive Plans:

The Compensation Committee of the Company’s Board of Directors may grant or award eligible participants stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards or any combination of awards (collectively referred to herein as "Rights"). At June 30, 2020, the Company had one active equity incentive plan available for future grants, the 2015 Stock Incentive Plan, which had 30,599 Rights issued and 1,882,689 Rights available for future grants or awards.

In addition, the Company has 38,250 Rights issued from the Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan, 48,750 Rights issued from the Cornerstone Non-Qualified Plan Options, and 2,266 Rights issued from the Capstone Stock Option Plan. These plans do not have any Rights available for future grants or awards.

Stock Options:

A summary of the status of stock option plans is presented in the following table:

		Weighted
		Average
		Exercisable
	Number	Price
Outstanding at December 31, 2019	136,658	$	10.29
Granted	—		—
Exercised	(15,358)		11.56
Forfeited	(1,435)		15.05
Outstanding at June 30, 2020	119,865	$	10.08

Information pertaining to stock options outstanding at June 30, 2020, is as follows:

		Options Outstanding				Options Exercisable
			Weighted-
			Average	Weighted-			Weighted-
			Remaining	Average			Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life	Price		Exercisable	Price
$	6.60	25,000	1.4 years	$	6.60	25,000	$	6.60
	6.80	13,250	0.7 years		6.80	13,250		6.80
	9.48	21,000	2.4 years		9.48	21,000		9.48
	9.60	27,750	2.9 years		9.60	27,750		9.60
	11.76	2,266	2.0 years		11.76	2,266		11.76
	15.05	30,599	4.8 years		15.05	30,599		15.05
Outstanding, end of period		119,865	2.7 years	$	10.08	119,865	$	10.08

The Company did not recognize any stock option-based compensation expense during the three and six months ended June 30, 2020, as all stock options issued are fully vested. During the three and six month periods ended June 30, 2019, stock option-based compensation expense was $31 thousand and $62 thousand, respectively.

The intrinsic value of options exercised during the three and six month periods ended June 30, 2020 was $2 thousand and $66 thousand, respectively. The intrinsic value of options exercised during the three and six month periods ended June 30, 2019 was $32 thousand and $112 thousand, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at June 30, 2020, was $732 thousand. Cash received from options exercised under all share-based payment arrangements for the six month period ended June 30, 2020 was $178 thousand.

No options vested during the periods ended June 30, 2020, and 2019, respectively. The income tax expense/benefit recognized for the exercise of options during the three and six months ended June 30, 2020, was an expense of $2 thousand and a benefit of $22, thousand, respectively, and for the three and six months ended June 30, 2019, a benefit of $5 thousand and $27 thousand, respectively.

As of June 30, 2020, all options were fully vested and currently no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plans.

Stock Appreciation Rights ("SARs"):

A summary of the status of SARs plans is presented in the following table:

		Weighted
		Average
	Number	Exercisable Price
Outstanding at December 31, 2019	67,000	$	20.54
Granted	18,000		15.19
Exercised	—		—
Forfeited	—		—
Outstanding at June 30, 2020	85,000	$	19.40

Information pertaining to SARs outstanding at June 30, 2020, is as follows:

		SARs Outstanding				SARs Exercisable
			Weighted-
			Average	Weighted-
			Remaining	Average			Weighted- Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life		Price	Exercisable	Price
$	15.19	18,000	3.50 years	$	15.19	—	$	—
	18.12	21,000	2.50 years		18.12	—		—
	21.61	34,000	1.50 years		21.61	—		—
	21.72	12,000	0.50 years		21.72	12,000		21.72
	Outstanding, end of period	85,000	2.03 years	$	19.40	12,000	$	21.72

SARs compensation expense of $92 thousand and ($26) thousand was recognized for the three and six month periods ended June 30, 2020, respectively, and $60 thousand and $80 thousand for three and six month periods ended June 30, 2019, respectively. The credit in expense for the six month period ended June 30, 2020, was due to adjustments related to the fair value evaluation of SARs.

Restricted Stock Awards:

A summary of the activity of the Company’s unvested restricted stock awards for the period ended June 30, 2020 is presented below:

		Weighted
		Average
		Grant-Date
	Number	Fair Value
Balance at December 31, 2019	65,400	$	21.04
Granted	37,818		16.16
Vested	(5,500)		19.12
Forfeited/expired	(1,500)		18.12
Balance at June 30, 2020	96,218	$	19.28

The Company measures the fair value of restricted stock awards based on the price of the Company’s common stock on the grant date, and compensation expense is recorded over the vesting period. The compensation expense for restricted stock awards during the three and six months ended June 30, 2020, was $114 thousand and $223 thousand, respectively, and was $102 thousand and $214 thousand, during the three and six month periods ended June 30, 2019, respectively. As of June 30, 2020, there was $1.2 million, respectively, of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. The cost is expected to be recognized over a weighted average period of 3.36 years. The grant-date fair value of restricted stock awards vested was $105 thousand for the period ended June 30, 2020.

XML

Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Note 9. 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,		December 31,
	2020		2019
Commitments to extend credit	$	506,720	$	384,411
Standby letters of credit		6,543		11,727

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, 2020, and December 31, 2019, 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.

XML

Fair Value Disclosures

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Note 10. 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):

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
Description	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	31,411	$	—	$	31,411	$	—
Municipal securities		88,169		—		88,169		—
Other debt securities		9,457		—		9,457		—
Mortgage-backed securities (GSEs)		90,594		—		90,594		—
Total securities available-for-sale	$	219,631	$	—	$	219,631	$	—
Liabilities:
Derivative financial instruments	$	7,090	$	—	$	7,090	$	—
December 31, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	19,000	$	—	$	19,000	$	—
Municipal securities		64,391		—		64,391		—
Other debt securities		3,470		—		3,470		—
Mortgage-backed securities (GSEs)		91,487		—		91,487		—
Total securities available-for-sale	$	178,348	$	—	$	178,348	$	—
Liabilities:
Derivative financial instruments	$	3,446		—	$	3,446		—

During the six month period ending June 30, 2020, 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):

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Impaired loans	$	4,260	$	—	$	—	$	4,260
Other real estate owned		5,524		—		—		5,524
December 31, 2019:
Impaired loans	$	2,185	$	—	$	—	$	2,185
Other real estate owned		1,757		—		—		1,757

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 (dollars in thousands):

					Weighted
			Valuation	Significant Other	Average of
	Fair Value		Technique	Unobservable Input	Input
June 30, 2020:
Impaired loans	$	4,260	Appraisal and cashflow	Appraisal and cashflow discounts	10	%
Other real estate owned		5,524	Appraisal	Appraisal discounts	28	%
December 31, 2019:
Impaired loans	$	2,185	Appraisal	Appraisal and cashflow discounts	22	%
Other real estate owned		1,757	Appraisal	Appraisal discounts	29	%

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								Estimated
	Amount		Level 1		Level 2		Level 3		Fair Value
June 30, 2020:
Assets:
Cash and cash equivalents	$	399,467	$	399,467	$	—	$	—	$	399,467
Securities available-for-sale		219,631		—		219,631		—		219,631
Other investments		14,829		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		2,398,360		—		—		2,385,657		2,385,657
Liabilities:
Noninterest-bearing demand deposits		645,650		—		645,650		—		645,650
Interest-bearing demand deposits		479,212		—		497,212		—		497,212
Money market and savings deposits		762,246		—		762,246		—		762,246
Time deposits		652,581		—		656,885		—		656,885
Borrowings		318,855		—		319,666		—		319,666
Subordinated debt		39,304		—		—		31,547		31,547
Derivative financial instruments		7,090		—		7,090		—		7,090
December 31, 2019:
Assets:
Cash and cash equivalents	$	183,971	$	183,971	$	—	$	—	$	183,971
Securities available-for-sale		178,348		—		178,348		—		178,348
Other investments		12,913		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		1,893,005		—		—		1,879,825		1,879,825
Liabilities:
Noninterest-bearing demand deposits		364,155		—		364,155		—		364,155
Interest-bearing demand deposits		380,234		—		380,234		—		380,234
Money market and savings deposits		623,284		—		623,284		—		623,284
Time deposits		679,541		—		681,902		—		681,902
Borrowings		31,623		—		31,029		—		31,029
Subordinated debt		39,261		—		—		35,868		35,868
Derivative financial instruments		3,446		—		3,446		—		3,446

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.

XML

Derivatives

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Note 11.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 (dollars in thousands):

		Weighted
		Average
	Balance	Remaining	Weighted
	Sheet	Maturity	Average		Receive	Notional		Estimated
Liability derivatives	Location	(In Years)	Pay Rate		Rate	Amount		Fair Value
June 30, 2020:
Interest rate swap agreements - securities	Other liabilities	7.63	3.08	%	3 month LIBOR	$	36,000	$	(7,090)
December 31, 2019:
Interest rate swap agreements - securities	Other liabilities	8.20	3.09	%	3 month LIBOR	$	36,000	$	(3,446)

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest income on tax-exempt securities	$	580	$	449	$	1,020	$	906
Effects of fair value hedge relationships		(164)		(38)		(321)		(70)
Reported interest income on tax-exempt securities	$	416	$	411	$	699	$	836

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Gain (loss) on fair value hedging relationship	2020		2019		2020		2019
Interest rate swap agreements - securities:
Hedged items	$	205	$	1,348	$	3,644	$	2,237
Derivative designated as hedging instruments	$	(205)	$	(1,348)	$	(3,644)	$	(2,237)

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

			Cumulative Amount of Fair
			Value Hedging Adjustment
	Carrying Amount		Included in the Carrying Amount
Line item on the balance sheet	of the Hedged Assets		of the Hedged Assets
June 30, 2020:
Securities available-for-sale	$	46,177	$	7,090
December 31, 2019:
Securities available-for-sale	$	42,710	$	3,446

XML

Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

Note 12. 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 2034. 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 (in thousands):

		June 30,		December 31,
	Classification	2020		2019
Assets:
Operating lease right-of-use assets	Other assets	$	5,522	$	5,470
Liabilities:
Operating lease liabilities	Other liabilities	$	5,543	$	5,479

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, 2020, the weighted average remaining lease term was 10.78 years and the weighted average discount rate was 2.71%.

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,				June 30,
	2020		2019		2020		2019
Lease costs:
Operating lease costs	$	270	$	157	$	507	$	315
Short-term lease costs		—		5		—		11
Variable lease costs		29		23		55		46
Total	$	299	$	185	$	562	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	265	$	150	$	495	$	302

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2020, were as follows (in thousands):

	Amounts
June 30, 2021	$	529
June 30, 2022		932
June 30, 2023		754
June 30, 2024		492
June 30, 2025		366
Thereafter		3,381
Total future minimum lease payments		6,454
Amounts representing interest		(911)
Present value of net future minimum lease payments	$	5,543

XML

Regulatory Matters

6 Months Ended

Jun. 30, 2020

Banking and Thrift [Abstract]

Regulatory Matters

Note 13. Regulatory Matters

Regulatory Capital Requirements:

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgements by regulators. Failure to meet capital requirements can initiate regulatory action. Under the standards initially adopted by the Basel Committee on Banking Supervision in December 2010, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. At June 30, 2020, the Company and the Bank exceeded the minimum regulatory requirements and exceeded the threshold for the "well capitalized" regulatory classification.

Regulatory Restrictions on Dividends:

Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (the “TDFI”), pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years.  Because this test involves a measure of net income, any charge on the Bank’s income statement, such as an impairment of goodwill, could impair the Bank’s ability to pay dividends to the Company. Under Tennessee corporate law, the Company is not permitted to pay dividends if, after giving effect to such payment, it would not be able to pay its debts as they become due in the usual course of business or its total assets would be less than the sum of its total liabilities plus any amounts needed

to satisfy any preferential rights if it were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, the Company’s board of directors must consider its and the Bank’s current and prospective capital, liquidity, and other needs. In addition to state law limitations on the Company’s ability to pay dividends, the Federal Reserve imposes limitations on the Company’s ability to pay dividends. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if the Company’s regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer.

During the three months ended June 30, 2020, the Bank did not pay dividends to the Company. During the six months ended June 30, 2020, the Bank paid $7.5 million in dividends to the Company. Since the fourth quarter of 2019, the Company has paid a quarterly common stock dividend of $0.05 per share. The amount and timing of all future dividend payments by the Company, if any, is subject to discretion of the Company’s board of directors and will depend on the Company’s earnings, capital position, financial condition and other factors, including new regulatory capital requirements, as they become known to the Company.

Regulatory Capital Levels:

Actual and required capital levels at June 30, 2020, and December 31, 2019 are presented below (dollars in thousands):

									Minimum to be
									well
									capitalized under
					Minimum for				prompt
					capital				corrective action
		Actual			adequacy purposes				provisions1
	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2020
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	315,306	13.25	%	$	190,305	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		142,729	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		107,047	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)2		259,748	8.83	%		117,636	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	304,993	12.82	%	$	190,259	8.00	%	$	237,824	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		142,694	6.00	%		190,259	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		107,021	4.50	%		154,586	6.50	%
Tier 1 Capital (to Average Assets)2		288,739	9.82	%		117,619	4.00	%		147,024	5.00	%
December 31, 2019
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	287,937	14.02	%	$	164,313	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		123,235	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		92,426	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)		238,433	10.34	%		92,258	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	273,432	13.31	%	$	164,305	8.00	%	$	205,382	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		123,229	6.00	%		164,305	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		92,422	4.50	%		133,498	6.50	%
Tier 1 Capital (to Average Assets)		263,189	11.41	%		92,254	4.00	%		115,317	5.00	%

¹The prompt corrective action provisions are applicable at the Bank level only.

²Average assets for the above calculations were based on the most recent quarter.

XML

Other Comprehensive (Loss) Income

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Other Comprehensive (Loss) Income

Note 14. Other Comprehensive (Loss) Income.

The changes in each component of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands):

	Three Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2020	$	1,242	$	(2,489)	$	(1,247)
Other comprehensive income (loss)		1,414		413		1,827
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		1,426		413		1,839
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Three Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2019	$	124	$	(558)	$	(434)
Other comprehensive income (loss)		1,927		(2,088)		(161)
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		1,951		(2,088)		(137)
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

	Six Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2020	$	391	$	(223)	$	168
Other comprehensive income (loss)		2,265		(1,853)		412
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		2,277		(1,853)		424
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Six Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2019	$	(1,979)	$	(786)	$	(2,765)
Other comprehensive income (loss)		4,030		(1,860)		2,170
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		4,054		(1,860)		2,194
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

XML

Presentation of Financial Information (Policies)

6 Months Ended

Jun. 30, 2020

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 East and Middle Tennessee, Alabama, and the Florida Panhandle. 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 accounting and financial reporting policies of the Company and its wholly-owned subsidiary conform to U.S. generally accepted accounting principles (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements for the Company and its wholly-owned subsidiary have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. 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. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

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

Recently Issued and Adopted Accounting Pronouncements:

As of January 1, 2020, the Company adopted ASU 2019-01, Leases: Codification Improvements (“ASU 2019-01”). ASU 2019-01 provides clarification 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. The adoption of ASU 2019-01 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, 2019 as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission ("SEC"). The following is a summary of recent authoritative pronouncements issued but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In October 2019, the Financial Accounting Standards Board approved a delay for the implementation of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The Board decided that CECL will be effective for larger Public Business Entities ("PBEs") that are SEC filers, excluding Smaller Reporting Companies ("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 and the Company meets the regulations as an SRC.

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 Company does not plan to adopt this standard early and being that the Company is an SRC, adoption is required for fiscal years beginning after December 15, 2022.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify various aspects of the current guidance to promote consistent application of the standard among reporting entities by moving certain exceptions to the general principles. The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not plan to adopt this standard early and adoption should not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”). It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the transition away from LIBOR for its loan and other financial instruments.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. Under Accounting Standards Codification 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” (“ASC 310-40”), a restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. In regard to nonaccrual and charge-offs of loans, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or classified.

Reclassifications

Reclassifications:

Certain captions and amounts in the 2019 consolidated financial statements were reclassified to conform to the 2020 financial statement presentation. These reclassifications had no impact on net income or shareholders’ equity as previously reported.

Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options and restricted stock.

XML

Business Combinations (Tables)

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Schedule of Allocation of Purchase Price to Fair Value of Net Assets Acquired

The purchased assets and assumed liabilities were recorded at their acquisition date fair values ⁽¹⁾ and are summarized in the table below (in thousands).

	As recorded		Fair value		As recorded
	by PFG		adjustments (1)		by the Company
Assets:
Cash & cash equivalents	$	55,971	$	—	$	55,971
Investment securities available-for-sale		27,054		203		27,257
Restricted investments		692		—		692
Loans		191,672		(3,691)		187,981
Allowance for loan losses		(2,832)		2,832		—
Premises and equipment, net		15,681		(2,919)		12,762
Bank owned life insurance		5,560		—		5,560
Deferred tax asset, net		—		813		813
Intangibles		—		1,370		1,370
Other real estate owned		3,695		(329)		3,366
Interest Receivable		1,061		(280)		781
Prepaids		375		(174)		201
Goodwill		231		(231)		—
Other assets		1,881		—		1,881
Total assets acquired	$	301,041	$	(2,406)	$	298,635
Liabilities:
Deposits	$	271,276	$	—	$	271,276
Time deposit premium		—		729		729
Payables and other liabilities		776		—		776
Total liabilities assumed		272,052		729		272,781
Excess of assets assumed over liabilities assumed	$	28,989
Aggregate fair value adjustments			$	(3,135)
Total identifiable net assets						25,854
Consideration transferred:
Cash						9,838
Common stock issued (1,292,578 shares)						24,547
Total fair value of consideration transferred						34,385
Goodwill					$	8,531

⁽¹⁾ Fair values are preliminary and are subject to refinement for a period of one year after the closing date of an acquisition as information relative to the closing date fair value becomes available.

Loans Acquired in Acquisition

The following table presents additional information related to the purchased credit impaired loans of the acquired loan portfolio at the acquisition date (in thousands):

	March 1, 2020
Accounted for pursuant to ASC 310-30:
Contractually required principal and interest	$	21,107
Non-accretable differences		4,706
Cash flows expected to be collected		16,401
Accretable yield		2,515
Fair value	$	13,886

Business Acquisition, Pro Forma Information

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Revenue		Net Income		Revenue		Net Income
2020:
Actual PFG results included in statement of income since acquisition date	$	3,655	$	1,362	$	4,160	$	1,478
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019		29,639		7,265		57,689		11,278
2019:
Supplemental consolidation pro-forma as if PFG had been acquired January 1, 2019	$	33,289	$	8,366	$	60,055	$	11,879

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Basic earnings per share	$	0.41	$	0.65	$	0.60	$	0.99
Diluted earnings per share computation:
Net income available to common stockholders	$	6,174	$	9,121	$	8,907	$	13,852
Average common shares outstanding – basic		15,152,768		13,951,643		14,773,935		13,946,856
Incremental shares from assumed conversions:
Stock options and restricted stock		49,567		94,857		68,551		89,934
Average common shares outstanding - diluted		15,202,335		14,046,500		14,842,486		14,036,790
Diluted earnings per common share	$	0.41	$	0.65	$	0.60	$	0.99

XML

Securities (Tables)

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-For-Sale Securities Reconciliation

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	31,337	$	82	$	(8)	$	31,411
Municipal securities		86,469		1,716		(16)		88,169
Other debt securities		9,463		38		(44)		9,457
Mortgage-backed securities (GSEs)		88,913		2,034		(353)		90,594
Total	$	216,182	$	3,870	$	(421)	$	219,631

December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	19,015	$	41	$	(56)	$	19,000
Municipal securities		63,792		618		(19)		64,391
Other debt securities		3,481		22		(33)		3,470
Mortgage-backed securities (GSEs)		91,531		382		(426)		91,487
Total	$	177,819	$	1,063	$	(534)	$	178,348

Proceeds from sale of securities available for sale, gains losses and proceeds from redemption

Proceeds from sale of securities available for sale, gross gains and gross losses on sales and redemptions for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Proceeds from sales	$	4,760	$	13,342	$	6,875	$	16,515
Gross gains	$	16	$	34	$	16	$	34
Gross losses	$	-	$	(1)	$	-	$	(1)
Proceeds from redemptions	$	12,200	$	5,000	$	15,450	$	10,305

Investments Classified by Contractual Maturity Date

The amortized cost and estimated fair value of securities at June 30, 2020, 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		Fair
	Cost		Value
Due in one year or less	$	440	$	443
Due from one year to five years		3,874		3,872
Due from five years to ten years		32,291		32,540
Due after ten years		90,664		92,182
		127,269		129,037
Mortgage-backed securities		88,913		90,594
Total	$	216,182	$	219,631

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
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
June 30, 2020:
U.S. Government-sponsored enterprises (GSEs)	$	6,583	$	(8)	$	—	$	—	$	6,583	$	(8)
Municipal securities		3,546		(16)		—		—		3,546		(16)
Other debt securities		1,966		(14)		953		(30)		2,919		(44)
Mortgage-backed securities (GSEs)		14,209		(143)		11,222		(210)		25,431		(353)
Total	$	26,304	$	(181)	$	12,175	$	(240)	$	38,479	$	(421)
December 31, 2019:
U.S. Government-sponsored enterprises (GSEs)	$	2,972	$	(43)	$	5,987	$	(13)	$	8,959	$	(56)
Municipal securities		3,656		(16)		527		(3)		4,183		(19)
Other debt securities		—		—		947		(33)		947		(33)
Mortgage-backed securities (GSEs)		13,208		(194)		19,988		(232)		33,196		(426)
Total	$	19,836	$	(253)	$	27,449	$	(281)	$	47,285	$	(534)

Schedule of Temporarily Impaired Securities

At June 30, 2020, the categories of temporarily impaired securities in an unrealized loss position twelve months or greater are as follows (dollars in thousands):

	Gross
	Unrealized		Number of
	Loss		Securities
U.S. Government- sponsored enterprises (GSEs)	$	—	—
Municipal securities		—	—
Other debt securities		(30)	1
Mortgage-backed securities (GSEs)		(210)	10
Total	$	(240)	11

Schedule of Other Investments

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

	June 30,		December 31,
	2020		2019
Federal Reserve Bank stock	$	8,641	$	7,917
Federal Home Loan Bank stock		5,838		4,646
First National Bankers Bank stock		350		350
Total	$	14,829	$	12,913

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

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

	June 30, 2020						December 31, 2019
	PCI		All Other				PCI		All Other
	Loans1		Loans		Total		Loans1		Loans		Total
Commercial real estate	$	16,517	$	1,000,516	$	1,017,033	$	15,255	$	890,051	$	905,306
Consumer real estate		11,568		448,292		459,860		6,541		410,941		417,482
Construction and land development		6,427		272,789		279,216		4,458		223,168		227,626
Commercial and industrial		341		637,109		637,450		407		336,668		337,075
Consumer and other		106		14,619		14,725		326		9,577		9,903
Total loans		34,959		2,373,325		2,408,284		26,987		1,870,405		1,897,392
Less: Allowance for loan losses		—		(16,254)		(16,254)		(156)		(10,087)		(10,243)
Loans, net	$	34,959	$	2,357,071	$	2,392,030	$	26,831	$	1,860,318	$	1,887,149

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

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):

					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
	Real Estate		Real Estate		Development		Industrial		and Other		Total
June 30, 2020:
Performing loans	$	999,567	$	446,892	$	272,789	$	636,952	$	14,619	$	2,370,819
Impaired loans		949		1,400		—		157		—		2,506
		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI loans		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284
December 31, 2019:
Performing loans	$	889,795	$	409,394	$	222,621	$	336,508	$	9,577	$	1,867,895
Impaired loans		256		1,547		547		160		—		2,510
		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI loans		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

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):

					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
June 30, 2020:
Performing loans	$	6,551	$	3,021	$	1,795	$	4,314	$	108	$	15,789
Impaired loans		44		292		—		129		—		465
		6,595		3,313		1,795		4,443		108		16,254
PCI loans		—		—		—		—		—		—
Total loans	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254
December 31, 2019:
Performing loans	$	4,491	$	2,159	$	1,127	$	1,766	$	69	$	9,612
Impaired loans		—		343		—		132		—		475
		4,491		2,502		1,127		1,898		69		10,087
PCI loans		17		74		—		59		6		156
Total loans	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243

Schedule of Allowance for Loan Losses

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

	Three Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	5,963	$	3,301	$	1,484	$	2,557	$	126	$	13,431
Charged off loans		—		—		—		(9)		(66)		(75)
Recoveries of charge-offs		3		11		—		6		28		48
Provision (reallocation) charged to expense		629		1		311		1,889		20		2,850
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

	Three Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,074	$	1,949	$	854	$	1,709	$	118	$	8,704
Charged off loans		—		—		—		(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

	Six Months Ended June 30, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243
Loans charged off		—		(2)		—		(17)		(142)		(161)
Recoveries of loans charged off		5		17		2		49		50		123
Provision (reallocation) charged to expense		2,082		722		666		2,454		125		6,049
Ending balance	$	6,595	$	3,313	$	1,795	$	4,443	$	108	$	16,254

	Six Months Ended June 30, 2019
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275
Loans charged off		—		(2)		—		(333)		(210)		(545)
Recoveries of loans charged off		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

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, 2020
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	526,141	$	390,787	$	227,302	$	573,989	$	14,259	$	1,732,478
Watch		462,734		55,210		45,416		61,888		288		625,536
Special mention		10,586		599		—		892		—		12,077
Substandard		1,055		1,534		71		207		48		2,915
Doubtful		—		162		—		133		24		319
Total		1,000,516		448,292		272,789		637,109		14,619		2,373,325
PCI Loans:
Pass		8,082		9,028		1,353		249		83		18,795
Watch		7,314		922		4,520		—		16		12,772
Special mention		20		57		—		—		—		77
Substandard		1,101		1,561		554		92		7		3,315
Doubtful		—		—		—		—		—		—
Total		16,517		11,568		6,427		341		106		34,959
Total loans	$	1,017,033	$	459,860	$	279,216	$	637,450	$	14,725	$	2,408,284

	December 31, 2019
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	860,447	$	407,336	$	216,459	$	328,564	$	9,462	$	1,822,268
Watch		25,180		989		6,089		6,786		40		39,084
Special mention		4,057		738		—		1,033		—		5,828
Substandard		367		1,713		620		228		51		2,979
Doubtful		—		165		—		57		24		246
Total		890,051		410,941		223,168		336,668		9,577		1,870,405
PCI Loans:
Pass		12,473		5,258		902		41		300		18,974
Watch		2,234		38		3,556		—		13		5,841
Special mention		139		60		—		—		—		199
Substandard		409		1,185		—		366		13		1,973
Doubtful		—		—		—		—		—		—
Total		15,255		6,541		4,458		407		326		26,987
Total loans	$	905,306	$	417,482	$	227,626	$	337,075	$	9,903	$	1,897,392

Past Due Financing Receivables

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

	June 30, 2020
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	1,019	$	188	$	1	$	815	$	2,023	$	16,517	$	998,493	$	1,017,033
Consumer real estate		1,726		457		138		1,891		4,212		11,568		444,080		459,860
Construction and land development		602		—		265		—		867		6,427		271,922		279,216
Commercial and industrial		84		93		465		121		763		341		636,346		637,450
Consumer and other		134		2		8		72		216		106		14,403		14,725
Total	$	3,565	$	740	$	877	$	2,899	$	8,081	$	34,959	$	2,365,244	$	2,408,284

	December 31, 2019
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	466	$	22	$	—	$	124	$	612	$	15,255	$	889,439	$	905,306
Consumer real estate		1,564		30		—		1,872		3,466		6,541		407,475		417,482
Construction and land development		507		—		607		620		1,734		4,458		221,434		227,626
Commercial and industrial		559		53		—		57		669		407		335,999		337,075
Consumer and other		86		14		—		70		170		326		9,407		9,903
Total	$	3,182	$	119	$	607	$	2,743	$	6,651	$	26,987	$	1,863,754	$	1,897,392

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, 2020						December 31, 2019
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	553	$	553	$	—	$	256	$	261	$	—
Consumer real estate		720		721		—		553		553		—
Construction and land development		—		—		—		547		547		—
Commercial and industrial		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—
		1,273		1,274		—		1,356		1,361		—
Impaired loans with a valuation allowance:
Commercial real estate		396		402		44		—		—		—
Consumer real estate		680		680		292		994		994		343
Construction and land development		—		—		—		—		—		—
Commercial and industrial		157		157		129		160		160		132
Consumer and other		—		—		—		—		—		—
		1,233		1,239		465		1,154		1,154		475
PCI loans:
Commercial real estate		16		99		—		17		99		17
Consumer real estate		1,870		2,138		—		1,205		1,371		74
Construction and land development		—		—		—		—		—		—
Commercial and industrial		303		445		—		396		534		59
Consumer and other		30		35		—		45		51		6
		2,219		2,717		—		1,663		2,055		156
Total impaired loans	$	4,725	$	5,230	$	465	$	4,173	$	4,570	$	631

	Three Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	345	$	1	$	424	$	5
Consumer real estate		633		10		624		—
Construction and land development		304		—		650		2
Commercial and industrial		—		—		16		—
Consumer and other		—		—		14		—
		1,282		11		1,728		7
Impaired loans with a valuation allowance:
Commercial real estate		396		—		24		—
Consumer real estate		827		5		217		2
Construction and land development		—		—		28		—
Commercial and industrial		158		3		293		—
Consumer and other		—		—		13		—
		1,381		8		575		2
PCI loans:
Commercial real estate		490		—		2,529		—
Consumer real estate		1,168		38		1,099		—
Construction and land development		116		—		—		—
Commercial and industrial		338		3		—		—
Consumer real estate		22		—		—		—
		2,134		41		3,628		—
Total impaired loans	$	4,797	$	60	$	5,931	$	9

	Six Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	315	$	4	$	495	$	25
Consumer real estate		606		14		774		4
Construction and land development		385		—		616		1
Commercial and industrial		—		—		33		1
Consumer and other		—		—		19		—
		1,306		18		1,937		31
Impaired loans with a valuation allowance:
Commercial real estate		264		2		16		—
Consumer real estate		882		14		199		9
Construction and land development		—		—		19		—
Commercial and industrial		158		5		514		9
Consumer and other		—		—		38		—
		1,304		21		786		18
PCI loans:
Commercial real estate		333		1		1,686		(9)
Consumer real estate		1,174		39		732		2
Construction and land development		77		—		—		—
Commercial and industrial		361		3		—		—
Consumer and other		31		—		—		—
		1,976		43		2,418		(7)
Total impaired loans	$	4,586	$	82	$	5,141	$	42

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,		December 31,
	2020		2019
Commercial real estate	$	24,551	$	21,570
Consumer real estate		14,191		8,411
Construction and land development		7,610		5,394
Commercial and industrial		2,212		2,540
Consumer and other		240		504
Total loans		48,804		38,419
Less: Remaining purchase discount		(13,845)		(11,432)
Total loans, net of purchase discount		34,959		26,987
Less: Allowance for loan losses		—		(156)
Carrying amount, net of allowance	$	34,959	$	26,831

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Accretable yield, beginning of period	$	10,979	$	8,644	$	8,454	$	7,052
Additions		—		—		2,515		—
Accretion income		(1,057)		(1,026)		(3,134)		(2,280)
Reclassification		247		323		2,163		1,358
Other changes, net		1,608		339		1,779		2,150
Accretable yield, end of period	$	11,777	$	8,280	$	11,777	$	8,280

XML

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amount of goodwill and other intangible assets as of the dates indicated is summarized below (in thousands):

	June 30,		December 31,
	2020		2019
Goodwill:
Balance, beginning of period	$	65,614	$	66,087
Adjustment to values initially recorded for Acquisition of Foothills Bancorp, Inc.		—		(473)
Acquisition of PFG		8,302		—
Adjustment to values initially recorded for Acquisition of PFG		229		—
Balance, end of the period	$	74,145	$	65,614

Schedule of Intangible Assets

	June 30,		December 31,
	2020		2019
Core deposit intangible:
Balance, beginning of period	$	14,550	$	14,550
Acquisition of PFG		1,370		—
Balance, gross core deposit intangible		15,920		14,550
Less: accumulated amortization		(3,738)		(2,971)
Net core deposit intangible, net	$	12,182	$	11,579

Schedule of Future Amortization Expense

The estimated aggregate amortization expense for future periods for core deposit intangibles is as follows (in thousands):

Remainder of 2020	$	802
2021		1,570
2022		1,526
2023		1,485
2024		1,456
Thereafter		5,343
Total	$	12,182

XML

Borrowings and Line of Credit (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of debt

	June 30,		December 31,
	2020		2019
Securities sold under customer repurchase agreements	$	5,659	$	6,184
FHLB borrowings		75,000		25,000
PPPLF borrowings		237,778		—
Other borrowings		418		439
Total	$	318,855	$	31,623

XML

Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2020

Defined Benefit Plan [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

A summary of the status of stock option plans is presented in the following table:

		Weighted
		Average
		Exercisable
	Number	Price
Outstanding at December 31, 2019	136,658	$	10.29
Granted	—		—
Exercised	(15,358)		11.56
Forfeited	(1,435)		15.05
Outstanding at June 30, 2020	119,865	$	10.08

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

Information pertaining to stock options outstanding at June 30, 2020, is as follows:

		Options Outstanding				Options Exercisable
			Weighted-
			Average	Weighted-			Weighted-
			Remaining	Average			Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life	Price		Exercisable	Price
$	6.60	25,000	1.4 years	$	6.60	25,000	$	6.60
	6.80	13,250	0.7 years		6.80	13,250		6.80
	9.48	21,000	2.4 years		9.48	21,000		9.48
	9.60	27,750	2.9 years		9.60	27,750		9.60
	11.76	2,266	2.0 years		11.76	2,266		11.76
	15.05	30,599	4.8 years		15.05	30,599		15.05
Outstanding, end of period		119,865	2.7 years	$	10.08	119,865	$	10.08

Information pertaining to SARs outstanding at June 30, 2020, is as follows:

		SARs Outstanding				SARs Exercisable
			Weighted-
			Average	Weighted-
			Remaining	Average			Weighted- Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life		Price	Exercisable	Price
$	15.19	18,000	3.50 years	$	15.19	—	$	—
	18.12	21,000	2.50 years		18.12	—		—
	21.61	34,000	1.50 years		21.61	—		—
	21.72	12,000	0.50 years		21.72	12,000		21.72
	Outstanding, end of period	85,000	2.03 years	$	19.40	12,000	$	21.72

Schedule of Share-based Compensation, Restricted Stock Activity

A summary of the activity of the Company’s unvested restricted stock awards for the period ended June 30, 2020 is presented below:

		Weighted
		Average
		Grant-Date
	Number	Fair Value
Balance at December 31, 2019	65,400	$	21.04
Granted	37,818		16.16
Vested	(5,500)		19.12
Forfeited/expired	(1,500)		18.12
Balance at June 30, 2020	96,218	$	19.28

Share-based Payment Arrangement, Stock Appreciation Right, Activity

A summary of the status of SARs plans is presented in the following table:

		Weighted
		Average
	Number	Exercisable Price
Outstanding at December 31, 2019	67,000	$	20.54
Granted	18,000		15.19
Exercised	—		—
Forfeited	—		—
Outstanding at June 30, 2020	85,000	$	19.40

XML

Commitments and Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

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,		December 31,
	2020		2019
Commitments to extend credit	$	506,720	$	384,411
Standby letters of credit		6,543		11,727

XML

Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2020

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):

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
Description	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	31,411	$	—	$	31,411	$	—
Municipal securities		88,169		—		88,169		—
Other debt securities		9,457		—		9,457		—
Mortgage-backed securities (GSEs)		90,594		—		90,594		—
Total securities available-for-sale	$	219,631	$	—	$	219,631	$	—
Liabilities:
Derivative financial instruments	$	7,090	$	—	$	7,090	$	—
December 31, 2019:
Assets:
Securities available-for-sale:
U.S. Government-sponsored enterprises (GSEs)	$	19,000	$	—	$	19,000	$	—
Municipal securities		64,391		—		64,391		—
Other debt securities		3,470		—		3,470		—
Mortgage-backed securities (GSEs)		91,487		—		91,487		—
Total securities available-for-sale	$	178,348	$	—	$	178,348	$	—
Liabilities:
Derivative financial instruments	$	3,446		—	$	3,446		—

Fair Value, Assets and Liabilities Measured on Non-Recurring Basis

			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Impaired loans	$	4,260	$	—	$	—	$	4,260
Other real estate owned		5,524		—		—		5,524
December 31, 2019:
Impaired loans	$	2,185	$	—	$	—	$	2,185
Other real estate owned		1,757		—		—		1,757

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 (dollars in thousands):

					Weighted
			Valuation	Significant Other	Average of
	Fair Value		Technique	Unobservable Input	Input
June 30, 2020:
Impaired loans	$	4,260	Appraisal and cashflow	Appraisal and cashflow discounts	10	%
Other real estate owned		5,524	Appraisal	Appraisal discounts	28	%
December 31, 2019:
Impaired loans	$	2,185	Appraisal	Appraisal and cashflow discounts	22	%
Other real estate owned		1,757	Appraisal	Appraisal discounts	29	%

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								Estimated
	Amount		Level 1		Level 2		Level 3		Fair Value
June 30, 2020:
Assets:
Cash and cash equivalents	$	399,467	$	399,467	$	—	$	—	$	399,467
Securities available-for-sale		219,631		—		219,631		—		219,631
Other investments		14,829		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		2,398,360		—		—		2,385,657		2,385,657
Liabilities:
Noninterest-bearing demand deposits		645,650		—		645,650		—		645,650
Interest-bearing demand deposits		479,212		—		497,212		—		497,212
Money market and savings deposits		762,246		—		762,246		—		762,246
Time deposits		652,581		—		656,885		—		656,885
Borrowings		318,855		—		319,666		—		319,666
Subordinated debt		39,304		—		—		31,547		31,547
Derivative financial instruments		7,090		—		7,090		—		7,090
December 31, 2019:
Assets:
Cash and cash equivalents	$	183,971	$	183,971	$	—	$	—	$	183,971
Securities available-for-sale		178,348		—		178,348		—		178,348
Other investments		12,913		N/A		N/A		N/A		N/A
Loans, net and loans held for sale		1,893,005		—		—		1,879,825		1,879,825
Liabilities:
Noninterest-bearing demand deposits		364,155		—		364,155		—		364,155
Interest-bearing demand deposits		380,234		—		380,234		—		380,234
Money market and savings deposits		623,284		—		623,284		—		623,284
Time deposits		679,541		—		681,902		—		681,902
Borrowings		31,623		—		31,029		—		31,029
Subordinated debt		39,261		—		—		35,868		35,868
Derivative financial instruments		3,446		—		3,446		—		3,446

XML

Derivatives (Tables)

6 Months Ended

Jun. 30, 2020

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 (dollars in thousands):

		Weighted
		Average
	Balance	Remaining	Weighted
	Sheet	Maturity	Average		Receive	Notional		Estimated
Liability derivatives	Location	(In Years)	Pay Rate		Rate	Amount		Fair Value
June 30, 2020:
Interest rate swap agreements - securities	Other liabilities	7.63	3.08	%	3 month LIBOR	$	36,000	$	(7,090)
December 31, 2019:
Interest rate swap agreements - securities	Other liabilities	8.20	3.09	%	3 month LIBOR	$	36,000	$	(3,446)

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest income on tax-exempt securities	$	580	$	449	$	1,020	$	906
Effects of fair value hedge relationships		(164)		(38)		(321)		(70)
Reported interest income on tax-exempt securities	$	416	$	411	$	699	$	836

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Gain (loss) on fair value hedging relationship	2020		2019		2020		2019
Interest rate swap agreements - securities:
Hedged items	$	205	$	1,348	$	3,644	$	2,237
Derivative designated as hedging instruments	$	(205)	$	(1,348)	$	(3,644)	$	(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):

			Cumulative Amount of Fair
			Value Hedging Adjustment
	Carrying Amount		Included in the Carrying Amount
Line item on the balance sheet	of the Hedged Assets		of the Hedged Assets
June 30, 2020:
Securities available-for-sale	$	46,177	$	7,090
December 31, 2019:
Securities available-for-sale	$	42,710	$	3,446

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2020

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 (in thousands):

		June 30,		December 31,
	Classification	2020		2019
Assets:
Operating lease right-of-use assets	Other assets	$	5,522	$	5,470
Liabilities:
Operating lease liabilities	Other liabilities	$	5,543	$	5,479

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,				June 30,
	2020		2019		2020		2019
Lease costs:
Operating lease costs	$	270	$	157	$	507	$	315
Short-term lease costs		—		5		—		11
Variable lease costs		29		23		55		46
Total	$	299	$	185	$	562	$	372
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	265	$	150	$	495	$	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, 2020, were as follows (in thousands):

	Amounts
June 30, 2021	$	529
June 30, 2022		932
June 30, 2023		754
June 30, 2024		492
June 30, 2025		366
Thereafter		3,381
Total future minimum lease payments		6,454
Amounts representing interest		(911)
Present value of net future minimum lease payments	$	5,543

XML

Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2020

Banking and Thrift [Abstract]

Schedule of Regulatory Matters

Actual and required capital levels at June 30, 2020, and December 31, 2019 are presented below (dollars in thousands):

									Minimum to be
									well
									capitalized under
					Minimum for				prompt
					capital				corrective action
		Actual			adequacy purposes				provisions1
	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2020
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	315,306	13.25	%	$	190,305	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		142,729	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		259,748	10.92	%		107,047	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)2		259,748	8.83	%		117,636	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	304,993	12.82	%	$	190,259	8.00	%	$	237,824	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		142,694	6.00	%		190,259	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		288,739	12.14	%		107,021	4.50	%		154,586	6.50	%
Tier 1 Capital (to Average Assets)2		288,739	9.82	%		117,619	4.00	%		147,024	5.00	%
December 31, 2019
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	287,937	14.02	%	$	164,313	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		123,235	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		238,433	11.61	%		92,426	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)		238,433	10.34	%		92,258	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	273,432	13.31	%	$	164,305	8.00	%	$	205,382	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		123,229	6.00	%		164,305	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		263,189	12.81	%		92,422	4.50	%		133,498	6.50	%
Tier 1 Capital (to Average Assets)		263,189	11.41	%		92,254	4.00	%		115,317	5.00	%

¹The prompt corrective action provisions are applicable at the Bank level only.

²Average assets for the above calculations were based on the most recent quarter.

XML

Other Comprehensive (Loss) Income (Tables)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The changes in each component of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands):

	Three Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2020	$	1,242	$	(2,489)	$	(1,247)
Other comprehensive income (loss)		1,414		413		1,827
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		1,426		413		1,839
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Three Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income (Loss)
Beginning balance, April 1, 2019	$	124	$	(558)	$	(434)
Other comprehensive income (loss)		1,927		(2,088)		(161)
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		1,951		(2,088)		(137)
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

	Six Months Ended June 30, 2020
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2020	$	391	$	(223)	$	168
Other comprehensive income (loss)		2,265		(1,853)		412
Reclassification of amounts included in net income		12		—		12
Net other comprehensive income (loss) during period		2,277		(1,853)		424
Ending balance, June 30, 2020	$	2,668	$	(2,076)	$	592
	Six Months Ended June 30, 2019
					Accumulated
	Securities		Fair Value		Other
	Available-for-		Municipal		Comprehensive
	Sale		Security Hedges		Income
Beginning balance, January 1, 2019	$	(1,979)	$	(786)	$	(2,765)
Other comprehensive income (loss)		4,030		(1,860)		2,170
Reclassification of amounts included in net income		24		—		24
Net other comprehensive income (loss) during period		4,054		(1,860)		2,194
Ending balance, June 30, 2019	$	2,075	$	(2,646)	$	(571)

XML

Business Combinations - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		4 Months Ended	6 Months Ended
	Mar. 01, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill		$ 74,145		$ 74,145	$ 74,145		$ 65,614	$ 66,087
Merger-related costs		1,477	$ 1,796		3,573	$ 2,719
Progressive Financial Group Inc. [Member]
Business Acquisition [Line Items]
Assets acquired	$ 301,041	298,635		298,635	298,635
Liabilities assumed	$ 272,052	272,781		272,781	272,781
Cash to be paid upon conversion (in dollars per share)	$ 474.82
Common shares to be converted (in shares)	62.3808
Common stock issued (in shares)	1,292,578
Cash	$ 9,800			9,838
Goodwill	8,500	8,531		$ 8,531	$ 8,531
Intangible assets acquried	$ 1,400
Useful life	10 years
Merger-related costs		$ 1,500

XML

Business Combinations - Allocation of Purchase Price (Details) - USD ($) $ in Thousands		4 Months Ended	6 Months Ended	12 Months Ended
	Mar. 01, 2020	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Dec. 31, 2018
Consideration transferred:
Goodwill		$ 74,145	$ 74,145	$ 65,614	$ 66,087
Progressive Financial Group Inc. [Member]
Assets:
Cash & cash equivalents	$ 55,971	55,971	55,971
Investment securities available-for-sale	27,054	27,257	27,257
Restricted investments	692	692	692
Loans	191,672	187,981	187,981
Allowance for loan losses	(2,832)	0	0
Premises and equipment, net	15,681	12,762	12,762
Bank owned life insurance	5,560	5,560	5,560
Deferred tax asset, net	0	813	813
Intangibles	0	1,370	1,370
Other real estate owned	3,695	3,366	3,366
Interest Receivable	1,061	781	781
Prepaids	375	201	201
Goodwill	231	0	0
Other assets	1,881	1,881	1,881
Total assets acquired	301,041	298,635	298,635
Liabilities:
Deposits	271,276	271,276	271,276
Time deposit premium	0	729	729
Payables and other liabilities	776	776	776
Total liabilities assumed	272,052	272,781	272,781
Excess of assets assumed over liabilities assumed	28,989	25,854	25,854
Consideration transferred:
Cash	$ 9,800	9,838
Common stock issued (1,292,578 shares)		24,547
Common stock issued (in shares)	1,292,578
Total fair value of consideration transferred	$ 34,385
Goodwill	$ 8,500	8,531	8,531
Assets:
Cash & cash equivalents		0
Investment securities available-for-sale		203
Restricted investments		0
Loans		(3,691)
Allowance for loan losses		2,832
Premises and equipment, net		(2,919)
Bank owned life insurance		0
Deferred tax asset, net		813
Intangibles		1,370
Other real estate owned		(329)
Interest Receivable		(280)
Prepaids		(174)
Goodwill		(231)	$ 229	$ 0
Other assets		0
Total assets acquired		(2,406)
Liabilities:
Deposits		0
Time deposit premium		729
Payables and other liabilities		0
Total liabilities assumed		729
Aggregate fair value adjustments		$ (3,135)

XML

Business Combinations - Schedule of Goodwill (Details) - USD ($) $ in Thousands	4 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Mar. 01, 2020	Dec. 31, 2018
Goodwill	$ 74,145	$ 74,145	$ 65,614		$ 66,087
Progressive Financial Group Inc. [Member]
Goodwill	8,531	8,531		$ 8,500
Goodwill, Purchase Accounting Adjustments	$ (231)	$ 229	$ 0

XML

Business Combinations - Loans Acquired (Details) - Progressive Financial Group Inc. [Member] - Purchased Credit Impaired Loans [Member] $ in Thousands	Mar. 01, 2020 USD ($)
Business Acquisition [Line Items]
Contractually required principal and interest	$ 21,107
Non-accretable differences	4,706
Cash flows expected to be collected	16,401
Accretable yield	2,515
Fair value	$ 13,886

XML

Business Combinations - Pro Forma Information (Details) - Progressive Financial Group Inc. [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Business Acquisition [Line Items]
Revenue since acquisition	$ 3,655		$ 4,160
Pro forma revenue	29,639	$ 33,289	57,689	$ 60,055
Net income since acquisition	1,362		1,478
Pro forma net income (loss)	$ 7,265	$ 8,366	$ 11,278	$ 11,879

XML

Earnings per share - Narrative (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)	116,000	0	85,000	0

XML

Earnings Per Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Basic earnings per share computation:
Net income available to common stockholders	$ 6,174	$ 9,121	$ 8,907	$ 13,852
Average common shares outstanding - basic (in shares)	15,152,768	13,951,643	14,773,935	13,946,856
Basic earnings per share (in dollars per share)	$ 0.41	$ 0.65	$ 0.60	$ 0.99
Diluted earnings per share computation:
Stock options and restricted stock (in shares)	49,567	94,857	68,551	89,934
Average common shares outstanding - diluted (in shares)	15,202,335	14,046,500	14,842,486	14,036,790
Diluted earnings per common share (in dollars per share)	$ 0.41	$ 0.65	$ 0.60	$ 0.99

XML

Securities - Amortized Cost and Fair Value of Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 216,182	$ 177,819
Gross Unrealized Gains	3,870	1,063
Gross Unrealized Losses	(421)	(534)
Fair Value	219,631	178,348
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	31,337	19,015
Gross Unrealized Gains	82	41
Gross Unrealized Losses	(8)	(56)
Fair Value	31,411	19,000
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	86,469	63,792
Gross Unrealized Gains	1,716	618
Gross Unrealized Losses	(16)	(19)
Fair Value	88,169	64,391
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	9,463	3,481
Gross Unrealized Gains	38	22
Gross Unrealized Losses	(44)	(33)
Fair Value	9,457	3,470
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	88,913	91,531
Gross Unrealized Gains	2,034	382
Gross Unrealized Losses	(353)	(426)
Fair Value	$ 90,594	$ 91,487

XML

Securities - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Collateral Pledged [Member]
Loans and Leases Receivable Disclosure [Line Items]
Restricted securities	$ 79.5	$ 92.3

XML

Securities - Proceeds from sale of securities available for sale, gains losses and proceeds from redemption (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales of securities available-for-sale	$ 4,760	$ 13,342	$ 6,875	$ 16,515
Gross gains	16	34	16	34
Gross losses		(1)		(1)
Proceeds from redemptions	$ 12,200	$ 5,000	$ 15,450	$ 10,305

XML

Securities - Available-for-sale Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Amortized Cost
Securities Available for Sale, Due in one year or less, Amortized Cost	$ 440
Securities Available for Sale, Due from one year to five years, Amortized Cost	3,874
Securities Available for Sale, Due from five years to ten years, Amortized Cost	32,291
Securities Available for Sale, Due after ten years, Amortized Cost	90,664
Securities Available for Sale, Amortized Cost	127,269
Amortized Cost	216,182	$ 177,819
Fair Value
Securities Available for Sale, Due in one year or less, Fair Value	443
Securities Available for Sale, Due from one year to five years, Fair Value	3,872
Securities Available for Sale, Due from five years to ten years, Fair Value	32,540
Securities Available for Sale, Due after ten years, Fair Value	92,182
Securities Available for Sale, Fair Value	129,037
Securities available for sale	219,631	$ 178,348
Mortgage-backed securities [Member]
Amortized Cost
Mortgage-backed securities, Amortized Cost	88,913
Fair Value
Mortgage-backed securities, Fair Value	$ 90,594

XML

Securities - Available-for-sale Securities in Continuous Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	$ 26,304	$ 19,836
Available-for-sale, gross unrealized losses, less than 12 months	(181)	(253)
Available-for-sale, fair value, 12 months or greater	12,175	27,449
Available-for-sale, gross unrealized losses, 12 months or greater	(240)	(281)
Securities available for sale	38,479	47,285
Available-for-sale, gross unrealized losses, total	(421)	(534)
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	6,583	2,972
Available-for-sale, gross unrealized losses, less than 12 months	(8)	(43)
Available-for-sale, fair value, 12 months or greater	0	5,987
Available-for-sale, gross unrealized losses, 12 months or greater	0	(13)
Securities available for sale	6,583	8,959
Available-for-sale, gross unrealized losses, total	(8)	(56)
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	3,546	3,656
Available-for-sale, gross unrealized losses, less than 12 months	(16)	(16)
Available-for-sale, fair value, 12 months or greater	0	527
Available-for-sale, gross unrealized losses, 12 months or greater	0	(3)
Securities available for sale	3,546	4,183
Available-for-sale, gross unrealized losses, total	(16)	(19)
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	1,966	0
Available-for-sale, gross unrealized losses, less than 12 months	(14)	0
Available-for-sale, fair value, 12 months or greater	953	947
Available-for-sale, gross unrealized losses, 12 months or greater	(30)	(33)
Securities available for sale	2,919	947
Available-for-sale, gross unrealized losses, total	(44)	(33)
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale, fair value, less than 12 months	14,209	13,208
Available-for-sale, gross unrealized losses, less than 12 months	(143)	(194)
Available-for-sale, fair value, 12 months or greater	11,222	19,988
Available-for-sale, gross unrealized losses, 12 months or greater	(210)	(232)
Securities available for sale	25,431	33,196
Available-for-sale, gross unrealized losses, total	$ (353)	$ (426)

XML

Securities - Temporarily Impaired Securities (Details) $ in Thousands	Jun. 30, 2020 USD ($) contract	Dec. 31, 2019 USD ($)
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (240)	$ (281)
Number of Securities | contract	11
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ 0	(13)
Number of Securities | contract	0
Municipal securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ 0	(3)
Number of Securities | contract	0
Other debt securities [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (30)	(33)
Number of Securities | contract	1
Mortgage-backed securities (GSEs) [Member]
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Loss | $	$ (210)	$ (232)
Number of Securities | contract	10

XML

Securities - Other Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt and Equity Securities, FV-NI [Line Items]
Other investments	$ 14,829	$ 12,913
Federal Reserve Bank Stock [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other investments	8,641	7,917
Federal Home Loan Bank Stock [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other investments	5,838	4,646
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, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 2,408,284		$ 1,897,392
Less: Allowance for loan losses	(16,254)	$ (13,431)	(10,243)	$ (9,097)	$ (8,704)	$ (8,275)
Loans, net	2,392,030		1,887,149
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	34,959		26,987
Less: Allowance for loan losses	0		(156)
Loans, net	34,959		26,831
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,373,325		1,870,405
Less: Allowance for loan losses	(16,254)		(10,087)
Loans, net	2,357,071		1,860,318
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,017,033		905,306
Less: Allowance for loan losses	(6,595)	(5,963)	(4,508)	(4,102)	(4,074)	(3,639)
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	16,517		15,255
Less: Allowance for loan losses	0		(17)
Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,000,516		890,051
Less: Allowance for loan losses	(6,595)		(4,491)
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	459,860		417,482
Less: Allowance for loan losses	(3,313)	(3,301)	(2,576)	(2,189)	(1,949)	(1,789)
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,568		6,541
Less: Allowance for loan losses	0		(74)
Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	448,292		410,941
Less: Allowance for loan losses	(3,313)		(2,502)
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	279,216		227,626
Less: Allowance for loan losses	(1,795)	(1,484)	(1,127)	(946)	(854)	(795)
Construction and Land Development [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	6,427		4,458
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	272,789		223,168
Less: Allowance for loan losses	(1,795)		(1,127)
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	637,450		337,075
Less: Allowance for loan losses	(4,443)	(2,557)	(1,957)	(1,746)	(1,709)	(1,746)
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	341		407
Less: Allowance for loan losses	0		(59)
Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	637,109		336,668
Less: Allowance for loan losses	(4,443)		(1,898)
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	14,725		9,903
Less: Allowance for loan losses	(108)	$ (126)	(75)	$ (114)	$ (118)	$ (306)
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	106		326
Less: Allowance for loan losses	0		(6)
Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	14,619		9,577
Less: Allowance for loan losses	$ (108)		$ (69)

XML

Loans and Allowance for Loan Losses - Narrative (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) segment property loan	Jun. 30, 2019 loan	Dec. 31, 2019 USD ($) loan
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loan portfolio segments | segment	5
Number of contracts	1	0
Number of contracts, subsequent payment default	0
Number of properties in other real estate owned | property	5
Trouble Debt Restructuring [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loans that met criteria for restructured | $	$ 9		$ 61
Number of contracts, nonaccrual	0		0

XML

Loans and Allowance for Loan Losses - Performing and Impaired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 2,408,284	$ 1,897,392
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,373,325	1,870,405
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	34,959	26,987
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,017,033	905,306
Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,000,516	890,051
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	16,517	15,255
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	459,860	417,482
Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	448,292	410,941
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,568	6,541
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	279,216	227,626
Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	272,789	223,168
Construction and Land Development [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	6,427	4,458
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	637,450	337,075
Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	637,109	336,668
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	341	407
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	14,725	9,903
Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	14,619	9,577
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	106	326
Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,370,819	1,867,895
Performing [Member] | Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	999,567	889,795
Performing [Member] | Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	446,892	409,394
Performing [Member] | Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	272,789	222,621
Performing [Member] | Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	636,952	336,508
Performing [Member] | Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	14,619	9,577
Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,506	2,510
Impaired Loans [Member] | Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	949	256
Impaired Loans [Member] | Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,400	1,547
Impaired Loans [Member] | Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	547
Impaired Loans [Member] | Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	157	160
Impaired Loans [Member] | Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - ALL by Loan Classification (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	$ 16,254	$ 13,431	$ 10,243	$ 9,097	$ 8,704	$ 8,275
All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	16,254		10,087
Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		156
Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	15,789		9,612
Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	465		475
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	6,595	5,963	4,508	4,102	4,074	3,639
Commercial Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	6,595		4,491
Commercial Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		17
Commercial Real Estate [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	6,551		4,491
Commercial Real Estate [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	44		0
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	3,313	3,301	2,576	2,189	1,949	1,789
Consumer Real Estate [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	3,313		2,502
Consumer Real Estate [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		74
Consumer Real Estate [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	3,021		2,159
Consumer Real Estate [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	292		343
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	1,795	1,484	1,127	946	854	795
Construction and Land Development [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	1,795		1,127
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	1,795		1,127
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	4,443	2,557	1,957	1,746	1,709	1,746
Commercial and Industrial [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	4,443		1,898
Commercial and Industrial [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		59
Commercial and Industrial [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	4,314		1,766
Commercial and Industrial [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	129		132
Consumer and Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	108	$ 126	75	$ 114	$ 118	$ 306
Consumer and Other [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	108		69
Consumer and Other [Member] | Purchased Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	0		6
Consumer and Other [Member] | Performing [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	108		69
Consumer and Other [Member] | Impaired Loans [Member] | All Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	$ 0		$ 0

XML

Loans and Allowance for Loan Losses - ALL Roll Forward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 13,431	$ 8,704	$ 10,243	$ 8,275
Charged off loans	(75)	(94)	(161)	(545)
Recoveries of charge-offs	48	94	123	177
Provision (reallocation) charged to expense	2,850	393	6,049	1,190
Ending balance	16,254	9,097	16,254	9,097
Commercial Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	5,963	4,074	4,508	3,639
Charged off loans	0	0	0	0
Recoveries of charge-offs	3	22	5	24
Provision (reallocation) charged to expense	629	6	2,082	439
Ending balance	6,595	4,102	6,595	4,102
Consumer Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	3,301	1,949	2,576	1,789
Charged off loans	0	0	(2)	(2)
Recoveries of charge-offs	11	16	17	20
Provision (reallocation) charged to expense	1	224	722	382
Ending balance	3,313	2,189	3,313	2,189
Construction and Land Development [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,484	854	1,127	795
Charged off loans	0	0	0	0
Recoveries of charge-offs	0	2	2	4
Provision (reallocation) charged to expense	311	90	666	147
Ending balance	1,795	946	1,795	946
Commercial and Industrial [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	2,557	1,709	1,957	1,746
Charged off loans	(9)	(14)	(17)	(333)
Recoveries of charge-offs	6	41	49	53
Provision (reallocation) charged to expense	1,889	10	2,454	280
Ending balance	4,443	1,746	4,443	1,746
Consumer and Other [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	126	118	75	306
Charged off loans	(66)	(80)	(142)	(210)
Recoveries of charge-offs	28	13	50	76
Provision (reallocation) charged to expense	20	63	125	(58)
Ending balance	$ 108	$ 114	$ 108	$ 114

XML

Loans and Allowance for Loan Losses - Loan Risk Rating (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	$ 2,408,284	$ 1,897,392
Commercial Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,017,033	905,306
Consumer Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	459,860	417,482
Construction and Land Development [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	279,216	227,626
Commercial and Industrial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	637,450	337,075
Consumer and Other [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	14,725	9,903
All Other Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,373,325	1,870,405
All Other Loans [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,732,478	1,822,268
All Other Loans [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	625,536	39,084
All Other Loans [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	12,077	5,828
All Other Loans [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	2,915	2,979
All Other Loans [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	319	246
All Other Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,000,516	890,051
All Other Loans [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	526,141	860,447
All Other Loans [Member] | Commercial Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	462,734	25,180
All Other Loans [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	10,586	4,057
All Other Loans [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,055	367
All Other Loans [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
All Other Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	448,292	410,941
All Other Loans [Member] | Consumer Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	390,787	407,336
All Other Loans [Member] | Consumer Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	55,210	989
All Other Loans [Member] | Consumer Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	599	738
All Other Loans [Member] | Consumer Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,534	1,713
All Other Loans [Member] | Consumer Real Estate [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	162	165
All Other Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	272,789	223,168
All Other Loans [Member] | Construction and Land Development [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	227,302	216,459
All Other Loans [Member] | Construction and Land Development [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	45,416	6,089
All Other Loans [Member] | Construction and Land Development [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
All Other Loans [Member] | Construction and Land Development [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	71	620
All Other Loans [Member] | Construction and Land Development [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
All Other Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	637,109	336,668
All Other Loans [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	573,989	328,564
All Other Loans [Member] | Commercial and Industrial [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	61,888	6,786
All Other Loans [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	892	1,033
All Other Loans [Member] | Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	207	228
All Other Loans [Member] | Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	133	57
All Other Loans [Member] | Consumer and Other [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	14,619	9,577
All Other Loans [Member] | Consumer and Other [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	14,259	9,462
All Other Loans [Member] | Consumer and Other [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	288	40
All Other Loans [Member] | Consumer and Other [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
All Other Loans [Member] | Consumer and Other [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	48	51
All Other Loans [Member] | Consumer and Other [Member] | Doubtful [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	24	24
Purchased Credit Impaired Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	34,959	26,987
Purchased Credit Impaired Loans [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	18,795	18,974
Purchased Credit Impaired Loans [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	12,772	5,841
Purchased Credit Impaired Loans [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	77	199
Purchased Credit Impaired Loans [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	3,315	1,973
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	16,517	15,255
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	8,082	12,473
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	7,314	2,234
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	20	139
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,101	409
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	11,568	6,541
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	9,028	5,258
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	922	38
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	57	60
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,561	1,185
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	6,427	4,458
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	1,353	902
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	4,520	3,556
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	554	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	341	407
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	249	41
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	92	366
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	106	326
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Pass [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	83	300
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Watch [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	16	13
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Special Mention [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	0	0
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member] | Substandard [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total loans	7	13
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, 2020	Dec. 31, 2019
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	$ 877	$ 607
Nonaccrual	2,899	2,743
Total Past Due and Nonaccrual	8,081	6,651
Current Loans	2,365,244	1,863,754
Total loans	2,408,284	1,897,392
Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	3,565	3,182
Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	740	119
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	1	0
Nonaccrual	815	124
Total Past Due and Nonaccrual	2,023	612
Current Loans	998,493	889,439
Total loans	1,017,033	905,306
Commercial Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	1,019	466
Commercial Real Estate [Member] | Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	188	22
Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	138	0
Nonaccrual	1,891	1,872
Total Past Due and Nonaccrual	4,212	3,466
Current Loans	444,080	407,475
Total loans	459,860	417,482
Consumer Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	1,726	1,564
Consumer Real Estate [Member] | Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	457	30
Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	265	607
Nonaccrual	0	620
Total Past Due and Nonaccrual	867	1,734
Current Loans	271,922	221,434
Total loans	279,216	227,626
Construction and Land Development [Member] | Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	602	507
Construction and Land Development [Member] | Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	0	0
Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	465	0
Nonaccrual	121	57
Total Past Due and Nonaccrual	763	669
Current Loans	636,346	335,999
Total loans	637,450	337,075
Commercial and Industrial [Member] | Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	84	559
Commercial and Industrial [Member] | Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	93	53
Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Past Due 90 Days or More and Accruing	8	0
Nonaccrual	72	70
Total Past Due and Nonaccrual	216	170
Current Loans	14,403	9,407
Total loans	14,725	9,903
Consumer and Other [Member] | Financial Asset, 30 to 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	134	86
Consumer and Other [Member] | Financial Asset, 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Past due and accruing	2	14
Purchased Credit Impaired Loans [Member]
Financing Receivable, Past Due [Line Items]
Total loans	34,959	26,987
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total loans	16,517	15,255
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total loans	11,568	6,541
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
Total loans	6,427	4,458
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
Total loans	341	407
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
Total loans	$ 106	$ 326

XML

Loans and Allowance for Loan Losses - Impaired Loan Portfolio (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Related Allowance	$ 465		$ 465		$ 631
Total impaired loans, Recorded Investment	4,725		4,725		4,173
Total impaired loans, Unpaid Principal Balance	5,230		5,230		4,570
Total impaired loans, Average Recorded Investment	4,797	$ 5,931	4,586	$ 5,141
Total impaired loans, Interest Income Recognized	60	9	82	42
All Other Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	1,273		1,273		1,356
Impaired loans without a valuation allowance, Unpaid Principal Balance	1,274		1,274		1,361
Impaired loans with a valuation allowance, Recorded Investment	1,233		1,233		1,154
Impaired loans with a valuation allowance, Unpaid Principal Balance	1,239		1,239		1,154
Impaired loans with a valuation allowance, Related Allowance	465		465		475
Impaired loans without a valuation allowance, Average Recorded Investment	1,282	1,728	1,306	1,937
Impaired loans without a valuation allowance, Interest Income Recognized	11	7	18	31
Impaired loans with a valuation allowance, Average Recorded Investment	1,381	575	1,304	786
Impaired loans with a valuation allowance, Interest Income Recognized	8	2	21	18
All Other Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	553		553		256
Impaired loans without a valuation allowance, Unpaid Principal Balance	553		553		261
Impaired loans with a valuation allowance, Recorded Investment	396		396		0
Impaired loans with a valuation allowance, Unpaid Principal Balance	402		402		0
Impaired loans with a valuation allowance, Related Allowance	44		44		0
Impaired loans without a valuation allowance, Average Recorded Investment	345	424	315	495
Impaired loans without a valuation allowance, Interest Income Recognized	1	5	4	25
Impaired loans with a valuation allowance, Average Recorded Investment	396	24	264	16
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	2	0
All Other Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	720		720		553
Impaired loans without a valuation allowance, Unpaid Principal Balance	721		721		553
Impaired loans with a valuation allowance, Recorded Investment	680		680		994
Impaired loans with a valuation allowance, Unpaid Principal Balance	680		680		994
Impaired loans with a valuation allowance, Related Allowance	292		292		343
Impaired loans without a valuation allowance, Average Recorded Investment	633	624	606	774
Impaired loans without a valuation allowance, Interest Income Recognized	10	0	14	4
Impaired loans with a valuation allowance, Average Recorded Investment	827	217	882	199
Impaired loans with a valuation allowance, Interest Income Recognized	5	2	14	9
All Other Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	0		0		547
Impaired loans without a valuation allowance, Unpaid Principal Balance	0		0		547
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 without a valuation allowance, Average Recorded Investment	304	650	385	616
Impaired loans without a valuation allowance, Interest Income Recognized	0	2	0	1
Impaired loans with a valuation allowance, Average Recorded Investment	0	28	0	19
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	0	0
All Other Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	0		0		0
Impaired loans without a valuation allowance, Unpaid Principal Balance	0		0		0
Impaired loans with a valuation allowance, Recorded Investment	157		157		160
Impaired loans with a valuation allowance, Unpaid Principal Balance	157		157		160
Impaired loans with a valuation allowance, Related Allowance	129		129		132
Impaired loans without a valuation allowance, Average Recorded Investment	0	16	0	33
Impaired loans without a valuation allowance, Interest Income Recognized	0	0	0	1
Impaired loans with a valuation allowance, Average Recorded Investment	158	293	158	514
Impaired loans with a valuation allowance, Interest Income Recognized	3	0	5	9
All Other Loans [Member] | Consumer and Other [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans without a valuation allowance, Recorded Investment	0		0		0
Impaired loans without a valuation allowance, Unpaid Principal Balance	0		0		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 without a valuation allowance, Average Recorded Investment	0	14	0	19
Impaired loans without a valuation allowance, Interest Income Recognized	0	0	0	0
Impaired loans with a valuation allowance, Average Recorded Investment	0	13	0	38
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	0	0
Purchased Credit Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	2,219		2,219		1,663
Impaired loans with a valuation allowance, Unpaid Principal Balance	2,717		2,717		2,055
Impaired loans with a valuation allowance, Related Allowance	0		0		156
Impaired loans with a valuation allowance, Average Recorded Investment	2,134	3,628	1,976	2,418
Impaired loans with a valuation allowance, Interest Income Recognized	41	0	43
Impaired loans with a valuation allowance, Interest Income (Expense) Recognized				(7)
Purchased Credit Impaired Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	16		16		17
Impaired loans with a valuation allowance, Unpaid Principal Balance	99		99		99
Impaired loans with a valuation allowance, Related Allowance	0		0		17
Impaired loans with a valuation allowance, Average Recorded Investment	490	2,529	333	1,686
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	1
Impaired loans with a valuation allowance, Interest Income (Expense) Recognized				(9)
Purchased Credit Impaired Loans [Member] | Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	1,870		1,870		1,205
Impaired loans with a valuation allowance, Unpaid Principal Balance	2,138		2,138		1,371
Impaired loans with a valuation allowance, Related Allowance	0		0		74
Impaired loans with a valuation allowance, Average Recorded Investment	1,168	1,099	1,174	732
Impaired loans with a valuation allowance, Interest Income Recognized	38	0	39	2
Purchased Credit Impaired Loans [Member] | Construction and Land Development [Member]
Financing Receivable, Impaired [Line Items]
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	116	0	77	0
Impaired loans with a valuation allowance, Interest Income Recognized	0	0	0	0
Purchased Credit Impaired Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	303		303		396
Impaired loans with a valuation allowance, Unpaid Principal Balance	445		445		534
Impaired loans with a valuation allowance, Related Allowance	0		0		59
Impaired loans with a valuation allowance, Average Recorded Investment	338	0	361	0
Impaired loans with a valuation allowance, Interest Income Recognized	3	0	3	0
Purchased Credit Impaired Loans [Member] | Consumer and Other [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans with a valuation allowance, Recorded Investment	30		30		45
Impaired loans with a valuation allowance, Unpaid Principal Balance	35		35		51
Impaired loans with a valuation allowance, Related Allowance	0		0		$ 6
Impaired loans with a valuation allowance, Average Recorded Investment	22	0	31	0
Impaired loans with a valuation allowance, Interest Income Recognized	$ 0	$ 0	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Purchased Credit Impaired Loans (Details) - Purchased Credit Impaired Loans [Member] - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	$ 48,804	$ 38,419
Less: Remaining purchase discount	(13,845)	(11,432)
Total loans, net of purchase discount	34,959	26,987
Less: Allowance for loan losses	0	(156)
Carrying amount, net of allowance	34,959	26,831
Commercial Real Estate [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	24,551	21,570
Consumer Real Estate [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	14,191	8,411
Construction and Land Development [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	7,610	5,394
Commercial and Industrial [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	2,212	2,540
Consumer and Other [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Total loans	$ 240	$ 504

XML

Loans and Allowance for Loan Losses - Accretable Yield Roll Forward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Accretable yield, beginning of period	$ 10,979	$ 8,644	$ 8,454	$ 7,052
Additions	0	0	2,515	0
Accretion income	(1,057)	(1,026)	(3,134)	(2,280)
Reclassification	247	323	2,163	1,358
Other changes, net	1,608	339	1,779	2,150
Accretable yield, end of period	$ 11,777	$ 8,280	$ 11,777	$ 8,280

XML

Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Aggregate amortization expense	$ 405	$ 342	$ 767	$ 686

XML

Goodwill and Intangible Assets - Change in Goodwill (Details) - USD ($) $ in Thousands	4 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Goodwill [Roll Forward]
Balance, beginning of period		$ 65,614	$ 66,087	$ 66,087
Acquisition of PFG		8,532	$ 0
Balance, end of the period	$ 74,145	74,145		65,614
Foothills Bancorp, Inc. [Member]
Goodwill [Roll Forward]
Adjustment to values initially recorded for acquisitions		0		(473)
Progressive Financial Group Inc. [Member]
Goodwill [Roll Forward]
Adjustment to values initially recorded for acquisitions	(231)	229		0
Acquisition of PFG		8,302		$ 0
Balance, end of the period	$ 8,531	$ 8,531

XML

Goodwill and Intangible Assets - Carrying Amount (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Finite-lived Intangible Assets [Roll Forward]
Balance, beginning of period	$ 14,550	$ 14,550
Acquisition of PFG	1,370	0
Balance, gross core deposit intangible	15,920	14,550
Less: accumulated amortization	(3,738)	(2,971)
Total	$ 12,182	$ 11,579

XML

Goodwill and Intangible Assets - Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2020	$ 802
2021	1,570
2022	1,526
2023	1,485
2024	1,456
Thereafter	5,343
Total	$ 12,182	$ 11,579

XML

Borrowings and Line of Credit - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Borrowings	$ 318,900		$ 31,600
Increase in borrowings	287,300
Outstanding principal balance	418		$ 439
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 25,000
Outstanding borrowings	0
Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	50,000
Federal Reserve Bank Advances Payroll Protection Program Liquidity Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 237,800

XML

Borrowings and Line of Credit - Schedule of debt (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
Securities sold under customer repurchase agreements	$ 5,659	$ 6,184
FHLB borrowings	75,000	25,000
PPPLF borrowings	237,778
Other Borrowings	418	439
Total	$ 318,855	$ 31,623

XML

Employee Benefit Plans - Narrative (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) plan shares	Jun. 30, 2019 USD ($)	Dec. 31, 2019 shares
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, cost recognized	$ 307	$ 217	$ 558	$ 415
Number of stock option plans | plan			1
Shares vested (in shares) | shares			0		0
Deferred tax expense from stock options exercised	2	5	$ 22	27
Unrecognized compensation costs for non-vested restricted stock	0		0
Stock Options [Member]
Defined Benefit Plan Disclosure [Line Items]
Share-based compensation expense		31	0	62
Options, exercises in period, intrinsic value	2	32	66	112
Options, outstanding, intrinsic value	732		732
Proceeds from stock options exercised			178
Stock Appreciation Rights (SARs) [Member]
Defined Benefit Plan Disclosure [Line Items]
Share-based compensation expense	92	60	(26)	80
Restricted Stock [Member]
Defined Benefit Plan Disclosure [Line Items]
Share-based compensation expense	114	$ 102	223	$ 214
Unrecognized compensation costs for non-vested restricted stock	$ 1,200		$ 1,200
Unrecognized compensation costs, period for recognition			3 years 4 months 9 days
Grant date fair value of vested restricted stock			$ 105
Restricted stock vested (in shares) | shares			5,500
2015 Stock Incentive Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Shares issued (in shares) | shares			30,599
Number of shares available for grant (in shares) | shares	1,882,689		1,882,689
Legacy Cornerstone Bancshares, Inc. Long-Term Incentive Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Shares issued (in shares) | shares			38,250
Cornerstone Non-Qualified Plan Options [Member]
Defined Benefit Plan Disclosure [Line Items]
Shares issued (in shares) | shares			48,750
Legacy Capstone Stock Option Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Shares issued (in shares) | shares			2,266
401 (k) Matching Range One [Member] | Deferred Salary Reduction Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer matching contribution, percent of match			100.00%
Employer matching contribution, percent of employees gross pay			3.00%
401 (k) Matching Range Two [Member] | Deferred Salary Reduction Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer matching contribution, percent of match			50.00%
Employer matching contribution, percent of employees gross pay			2.00%

XML

Employee Benefit Plans - Stock Option Activity (Details) - Officer and Employee Plans [Member]	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Number
Outstanding at December 31, 2019 (in shares) | shares	136,658
Granted (in shares) | shares	0
Exercised (in shares) | shares	(15,358)
Forfeited (in shares) | shares	(1,435)
Outstanding at June 30, 2020 (in shares) | shares	119,865
Weighted Average Exercisable Price
Outstanding at December 31, 2019 (in dollars per share) | $ / shares	$ 10.29
Granted (in dollars per share) | $ / shares	0
Exercised (in dollars per share) | $ / shares	11.56
Forfeited (in dollars per share) | $ / shares	15.05
Outstanding at June 30, 2020 (in dollars per share) | $ / shares	$ 10.08

XML

Employee Benefit Plans - Options Outstanding by Exercise Price Range (Details) - Officer and Employee Plans [Member] - $ / shares	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 10.08	$ 10.29
Number Outstanding (in shares)	119,865	136,658
Options Outstanding, Weighted Average Remaining Life	2 years 8 months 12 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 10.08
Options Exercisable, Number Exercisable (in shares)	119,865
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 10.08
6.60 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 6.60
Number Outstanding (in shares)	25,000
Options Outstanding, Weighted Average Remaining Life	1 year 4 months 24 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 6.60
Options Exercisable, Number Exercisable (in shares)	25,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 6.60
6.80 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 6.80
Number Outstanding (in shares)	13,250
Options Outstanding, Weighted Average Remaining Life	8 months 12 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 6.80
Options Exercisable, Number Exercisable (in shares)	13,250
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 6.80
9.48 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 9.48
Number Outstanding (in shares)	21,000
Options Outstanding, Weighted Average Remaining Life	2 years 4 months 24 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 9.48
Options Exercisable, Number Exercisable (in shares)	21,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 9.48
9.60 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 9.60
Number Outstanding (in shares)	27,750
Options Outstanding, Weighted Average Remaining Life	2 years 10 months 24 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 9.60
Options Exercisable, Number Exercisable (in shares)	27,750
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 9.60
11.67 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 11.76
Number Outstanding (in shares)	2,266
Options Outstanding, Weighted Average Remaining Life	2 years
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 11.76
Options Exercisable, Number Exercisable (in shares)	2,266
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 11.76
15.05 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 15.05
Number Outstanding (in shares)	30,599
Options Outstanding, Weighted Average Remaining Life	4 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 15.05
Options Exercisable, Number Exercisable (in shares)	30,599
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 15.05

XML

Employee Benefit Plans - SARs Outstanding by Exercise Price Range (Details) - Stock Appreciation Rights (SARs) [Member] - $ / shares	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 19.40	$ 20.54
Number Outstanding (in shares)	85,000	67,000
SARs Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 19.40
SARs Exercisable, Number Exercisable (in shares)	12,000
SARs Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 21.72
15.19 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 15.19
Number Outstanding (in shares)	18,000
SARs Outstanding, Weighted Average Remaining Life	3 years 6 months
SARs Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 15.19
18.12 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 18.12
Number Outstanding (in shares)	21,000
SARs Outstanding, Weighted Average Remaining Life	2 years 6 months
SARs Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 18.12
21.61 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 21.61
Number Outstanding (in shares)	34,000
SARs Outstanding, Weighted Average Remaining Life	1 year 6 months
SARs Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 21.61
21.72 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Prices (in dollars per share)	$ 21.72
Number Outstanding (in shares)	12,000
SARs Outstanding, Weighted Average Remaining Life	6 months
SARs Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 21.72
SARs Exercisable, Number Exercisable (in shares)	12,000
SARs Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 21.72

XML

Employee Benefit Plans - Stock Appreciation Right Activity (Details) - Stock Appreciation Rights (SARs) [Member]	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Number
Outstanding at December 31, 2019 (in shares) | shares	67,000
Granted (in shares) | shares	18,000
Exercised (in shares) | shares	0
Forfeited (in shares) | shares	0
Outstanding at June 30, 2020 (in shares) | shares	85,000
Weighted Average Exercisable Price
Outstanding at December 31, 2019 (in dollars per share) | $ / shares	$ 20.54
Granted (in dollars per share) | $ / shares	15.19
Exercised (in dollars per share) | $ / shares	0
Forfeited (in dollars per share) | $ / shares	0
Outstanding at June 30, 2020 (in dollars per share) | $ / shares	$ 19.40

XML

Employee Benefit Plans - Restricted Stock Activity (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Number
Balance at December 31, 2019 (in shares) | shares	65,400
Granted (in shares) | shares	37,818
Vested (in shares) | shares	(5,500)
Forfeited/expired (in shares) | shares	(1,500)
Balance at June 30, 2020 (in shares) | shares	96,218
Weighted Average Grant-Date Fair Value
Balance at December 31, 2019 (in dollars per share) | $ / shares	$ 21.04
Granted (in dollars per share) | $ / shares	16.16
Vested (in dollars per share) | $ / shares	19.12
Forfeited/expired (in dollars per share) | $ / shares	18.12
Balance at June 30, 2020 (in dollars per share) | $ / shares	$ 19.28

XML

Commitments and Contingent Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments to extend credit	$ 506,720	$ 384,411
Standby letters of credit	$ 6,543	$ 11,727

XML

Fair Value Disclosures - Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 219,631	$ 178,348
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0
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
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	219,631	178,348
Derivative financial instruments	7,090	3,446
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
US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	31,411	19,000
Municipal securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	88,169	64,391
Other debt securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	9,457	3,470
Mortgage-backed securities (GSEs) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	90,594	91,487
Fair Value, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	219,631	178,348
Derivative financial instruments	7,090	3,446
Fair Value, Recurring [Member] | 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] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	219,631	178,348
Derivative financial instruments	7,090	3,446
Fair Value, Recurring [Member] | 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] | US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	31,411	19,000
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | 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] | US Government-sponsored Enterprises Debt Securities [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	31,411	19,000
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | 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	88,169	64,391
Fair Value, Recurring [Member] | Municipal securities [Member] | 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] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	88,169	64,391
Fair Value, Recurring [Member] | Municipal securities [Member] | 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	9,457	3,470
Fair Value, Recurring [Member] | Other debt securities [Member] | 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] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	9,457	3,470
Fair Value, Recurring [Member] | Other debt securities [Member] | 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 (GSEs) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	90,594	91,487
Fair Value, Recurring [Member] | Mortgage-backed securities (GSEs) [Member] | 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 (GSEs) [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	90,594	91,487
Fair Value, Recurring [Member] | Mortgage-backed securities (GSEs) [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 0	$ 0

XML

Fair Value Disclosures - Assets and Liabilities Measured on Nonrecurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	$ 4,260	$ 2,185
Other real estate owned	5,524	1,757
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	4,260	2,185
Other real estate owned	$ 5,524	$ 1,757

XML

Fair Value Disclosures Fair Value Disclosures - Unobservable Inputs (Details) - Fair Value, Nonrecurring [Member] $ in Thousands	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 4,260	$ 2,185
Other real estate owned	5,524	1,757
Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	4,260	2,185
Other real estate owned	5,524	1,757
Appraisal And Discounted Cash Flow [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 4,260	$ 2,185
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	10	22
Appraisal [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	$ 5,524	$ 1,757
Appraisal [Member] | Measurement Input, Discount Rate [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned, measurement input	28	29

XML

Fair Value Disclosures - Carrying Amount and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets:
Securities available-for-sale, at fair value	$ 219,631	$ 178,348
Liabilities:
Noninterest-bearing demand deposits	645,650	364,155
Interest-bearing demand deposits	479,212	380,234
Time deposits	652,581	679,541
Carrying Amount [Member]
Assets:
Cash and cash equivalents	399,467	183,971
Securities available-for-sale, at fair value	219,631	178,348
Other investments	14,829	12,913
Loans, net and loans held for sale	2,398,360	1,893,005
Liabilities:
Noninterest-bearing demand deposits	645,650	364,155
Interest-bearing demand deposits	479,212	380,234
Money market and savings deposits	762,246	623,284
Time deposits	652,581	679,541
Borrowings	318,855	31,623
Subordinated debt	39,304	39,261
Derivative financial instruments	7,090	3,446
Estimated Fair Value [Member]
Assets:
Cash and cash equivalents	399,467	183,971
Securities available-for-sale, at fair value	219,631	178,348
Loans, net and loans held for sale	2,385,657	1,879,825
Liabilities:
Noninterest-bearing demand deposits	645,650	364,155
Interest-bearing demand deposits	497,212	380,234
Money market and savings deposits	762,246	623,284
Time deposits	656,885	681,902
Borrowings	319,666	31,029
Subordinated debt	31,547	35,868
Derivative financial instruments	7,090	3,446
Level 1 [Member]
Assets:
Cash and cash equivalents	399,467	183,971
Securities available-for-sale, at fair value	0	0
Loans, net and loans held for sale	0	0
Liabilities:
Noninterest-bearing demand deposits	0	0
Interest-bearing demand deposits	0	0
Money market and savings deposits	0	0
Time deposits	0	0
Borrowings	0	0
Subordinated debt	0	0
Derivative financial instruments	0	0
Level 2 [Member]
Assets:
Cash and cash equivalents	0	0
Securities available-for-sale, at fair value	219,631	178,348
Loans, net and loans held for sale	0	0
Liabilities:
Noninterest-bearing demand deposits	645,650	364,155
Interest-bearing demand deposits	497,212	380,234
Money market and savings deposits	762,246	623,284
Time deposits	656,885	681,902
Borrowings	319,666	31,029
Subordinated debt	0	0
Derivative financial instruments	7,090	3,446
Level 3 [Member]
Assets:
Cash and cash equivalents	0	0
Securities available-for-sale, at fair value	0	0
Loans, net and loans held for sale	2,385,657	1,879,825
Liabilities:
Noninterest-bearing demand deposits	0	0
Interest-bearing demand deposits	0	0
Money market and savings deposits	0	0
Time deposits	0	0
Borrowings	0	0
Subordinated debt	31,547	35,868
Derivative financial instruments	$ 0	$ 0

XML

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, 2020	Dec. 31, 2019
Derivatives, Fair Value [Line Items]
Weighted average remaining maturity	7 years 7 months 17 days	8 years 2 months 12 days
Weighted Average Pay Rate	3.08%	3.09%
Notional Amount	$ 36,000,000	$ 36,000,000
Eatimated Fair Value	$ (7,090,000)	$ (3,446,000)

XML

Derivatives - Fair Value Hedges on Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Reported interest income on tax-exempt securities	$ 416	$ 411	$ 699	$ 836
Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest rate swap agreements - securities:	205	1,348	3,644	2,237
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest income on tax-exempt securities	580	449	1,020	906
Effects of fair value hedge relationships	(164)	(38)	(321)	(70)
Reported interest income on tax-exempt securities	416	411	699	836
Interest rate swap agreements - securities:	$ (205)	$ (1,348)	$ (3,644)	$ (2,237)

XML

Derivatives - Fair Value Hedges in Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Carrying Amount of the Hedged Assets	$ 46,177	$ 42,710
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets	$ 7,090	$ 3,446

XML

Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease right-of-use assets	$ 5,522	$ 5,470
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other Assets
Operating lease liabilities	$ 5,543	$ 5,479
Operating Lease, Liability, Statement of Financial Position [Extensible List]	Other Liabilities
Lessee, Operating Lease, Existence of Option to Extend [true false]	true

XML

Leases - Narrative (Details)	Jun. 30, 2020
Leases [Abstract]
Weighted average remaining lease term	10 years 9 months 10 days
Weighted average discount rate	2.71%

XML

Leases - Lease Costs and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lease costs:
Operating lease costs	$ 270	$ 157	$ 507	$ 315
Short-term lease costs	0	5	0	11
Variable lease costs	29	23	55	46
Total	299	185	562	372
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 265	$ 150	$ 495	$ 302

XML

Leases - Future Minimum Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
June 30, 2021	$ 529
June 30, 2022	932
June 30, 2023	754
June 30, 2024	492
June 30, 2025	366
Thereafter	3,381
Total future minimum lease payments	6,454
Amounts representing interest	(911)
Present value of net future minimum lease payments	$ 5,543	$ 5,479

XML

Regulatory Matters (Textual) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2020
Banking and Thrift [Abstract]
Dividends			$ 7.5
Common stock dividend (in dollars per share)	$ (0.05)	$ 0.05	$ (0.10)

XML

Regulatory Matters (Regulatory Capital Levels) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
SmartFinancial, Inc. [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital (to Risk-Weighted Assets), Actual Amount	$ 315,306	$ 287,937
Tier 1 Capital (to Risk-Weighted Assets), Actual Amount	259,748	238,433
Common Equity Tier 1 Capital (to Risk-Weighted Assets, Actual Amount	259,748	238,433
Tier 1 Capital (to Average Assets, Actual Amount	$ 259,748	$ 238,433
Total Capital (to Risk-Weighted Assets), Actual Ratio (as a percent)	13.25%	14.02%
Tier 1 Capital (to Risk-Weighted Assets, Actual Ratio (as a percent)	10.92%	11.61%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Actual Ratio (as a percent)	10.92%	11.61%
Tier 1 Capital (to Average Assets), Actual Ratio (as a percent)	8.83%	10.34%
Total Capital (to risk-Weighted Assets), Minimum capital adequacy purposes amount	$ 190,305	$ 164,313
Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes, amount	142,729	123,235
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes, amount	107,047	92,426
Tier 1 Capital (to Average Assets), Minimum for capital adequacy purposes, amount	$ 117,636	$ 92,258
Total Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	8.00%	8.00%
Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	6.00%	6.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	4.50%	4.50%
Tier 1 Capital (to Average Assets), Minimum for capital adequacy purposes ratio (as a percent)	4.00%	4.00%
Smart Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital (to Risk-Weighted Assets), Actual Amount	$ 304,993	$ 273,432
Tier 1 Capital (to Risk-Weighted Assets), Actual Amount	288,739	263,189
Common Equity Tier 1 Capital (to Risk-Weighted Assets, Actual Amount	288,739	263,189
Tier 1 Capital (to Average Assets, Actual Amount	$ 288,739	$ 263,189
Total Capital (to Risk-Weighted Assets), Actual Ratio (as a percent)	12.82%	13.31%
Tier 1 Capital (to Risk-Weighted Assets, Actual Ratio (as a percent)	12.14%	12.81%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Actual Ratio (as a percent)	12.14%	12.81%
Tier 1 Capital (to Average Assets), Actual Ratio (as a percent)	9.82%	11.41%
Total Capital (to risk-Weighted Assets), Minimum capital adequacy purposes amount	$ 190,259	$ 164,305
Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes, amount	142,694	123,229
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes, amount	107,021	92,422
Tier 1 Capital (to Average Assets), Minimum for capital adequacy purposes, amount	$ 117,619	$ 92,254
Total Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	8.00%	8.00%
Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	6.00%	6.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum for capital adequacy purposes ratio (as a percent)	4.50%	4.50%
Tier 1 Capital (to Average Assets), Minimum for capital adequacy purposes ratio (as a percent)	4.00%	4.00%
Total Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions, amount	$ 237,824	$ 205,382
Tier 1 Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions, amount	190,259	164,305
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions, amount	154,586	133,498
Tier 1 Capital (to Average Assets), Minimum to be well capitalized under prompt corrective action provisions, amount	$ 147,024	$ 115,317
Total Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions ratio (as a percent)	10.00%	10.00%
Tier 1 Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions ratio (as a percent)	8.00%	8.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Minimum to be well capitalized under prompt corrective action provisions ratio (as a percent)	6.50%	6.50%
Tier 1 Capital (to Average Assets), Minimum to be well capitalized under prompt corrective action provisions ratio (as a percent)	5.00%	5.00%

XML

Other Comprehensive (Loss) Income (Activity in Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
AOCI Attributable to Parent, Net of Tax [Roll Forward]
BALANCE	$ 336,200	$ 290,481	$ 312,747	$ 283,011
Other comprehensive income (loss)	1,827	(161)
Reclassification of amounts included in net income	12	24
Net other comprehensive income (loss) during period	1,839	(137)
BALANCE	343,488	299,611	343,488	299,611
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
BALANCE	1,242	124	391	(1,979)
Other comprehensive income (loss)	1,414	1,927	2,265	4,030
Reclassification of amounts included in net income	12	24	12	24
Net other comprehensive income (loss) during period	1,426	1,951	2,277	4,054
BALANCE	2,668	2,075	2,668	2,075
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
BALANCE	(2,489)	(558)	(223)	(786)
Other comprehensive income (loss)	413	(2,088)	(1,853)	(1,860)
Reclassification of amounts included in net income	0	0	0	0
Net other comprehensive income (loss) during period	413	(2,088)	(1,853)	(1,860)
BALANCE	(2,076)	(2,646)	(2,076)	(2,646)
AOCI Attributable to Parent [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
BALANCE	(1,247)	(434)	168	(2,765)
Other comprehensive income (loss)			412	2,170
Reclassification of amounts included in net income			12	24
Net other comprehensive income (loss) during period			424	2,194
BALANCE	$ 592	$ (571)	$ 592	$ (571)