The parent company of SmartBank boosted its adjusted earnings in the fourth quarter by more than 50 percent after the Knoxville-based banking firm acquired a former FSG Bank branch in Cleveland, Tenn., and completed its purchase of Capstone Community Bank in Alabama.
SmartFinancial Inc., said Wednesday its net operating earnings in the fourth quarter rose from 23 cents per share a year ago to 35 cents per share this year.
But net income at the end of 2017 dropped due to the bank's revaluation of its deferred tax assets in the fourth quarter because of the new tax overhaul package. As a result, fourth quarter net income for Smart Financial at the end of 2017 was only $38,000 compared with $1.4 million a year ago.
The quarter included $1.7 million in pre-tax merger-related charges and a $2.5 million after-tax charge to reduce the value of the firm's deferred tax assets as a result of the tax law signed in December.
Billy Carroll, president and CEO of SmartFinancial, speaks during an interview in the offices of Cornerstone Bank on Tuesday, Sept. 1, 2015, in Chattanooga, Tenn. SmartBank, which acquired the former Cornerstone Bank in Chattanooga in 2015, completed its $84.8 million acquisition of Capstone Bank in Tuscaloosa, Ala., on Nov. 1 and announced in December it will pay $31.8 million to acquire Southern Community Bank, which is based in Tullahoma, Tenn.
Smart Financial CEO Billy Carroll said last year "was a transformative year" that should position the bank for better results in 2018.
"We completed a branch acquisition in Cleveland in the second quarter, announced and closed our Capstone Bancshares deal (on Nov. 1) and in the fourth quarter announced the Tennessee Bancshares acquisition to expand our footprint in Middle Tennessee and Huntsville, Ala," Carroll said. "The passage of the tax reform legislation will have a very positive impact on our earnings stream as we move into 2018."
Carroll said all of SmartBank's markets in Tennessee, Alabama and Florida are doing well "and our credit metrics show no deterioration."
Miller Welborn, the former chairman of Cornerstone Bank who is now chairman of Smart Financial, said the five mergers and acquisitions by Smart Bank over the past three years are positioning the bank to grow in key markets of the Southeast.
"We've now positioned the company to capitalize on the foundation we've built over the last two years," Welborn said. "Our management has been working to make sure we have a successful integration of Capstone and of Southern Community Bank in 2018."