Attached files
| file | filename |
|---|---|
| 8-K - 8-K SMARTFINANCIAL ANNOUNCES MERGER WITH TENNESSEE BANCSHARES - SMARTFINANCIAL INC. | form8-k_39714173x1.htm |
| EX-99.1 - EXHIBIT 99.1 - SMARTFINANCIAL INC. | pressrelease-exhibit991tof.htm |
| EX-2.1 - EXHIBIT 2.1 - SMARTFINANCIAL INC. | atlasagreementandplanofmer.htm |
SmartFinancial Inc. Announces
Acquisition of Tennessee
Bancshares, Inc.
December 12, 2017
Exhibit 99.2
Important Information for Investors and Shareholders
In connection with the proposed merger, SmartFinancial, Inc. (“SmartFinancial”) will file a registration statement on Form S-4 with
the Securities and Exchange Commission (the “SEC”), which will contain the proxy statement of Tennessee Bancshares, Inc.
(“Tennessee Bancshares”) and a prospectus of SmartFinancial. Shareholders of Tennessee Bancshares are encouraged to read
the registration statement, including the proxy statement/prospectus that will be part of the registration statement, because it will
contain important information about the merger, Tennessee Bancshares, and SmartFinancial. After the registration statement is
filed with the SEC, the proxy statement/prospectus and other relevant documents will be mailed to all Tennessee Bancshares
shareholders and will be available for free on the SEC’s website (www.sec.gov). The proxy statement/prospectus will also be made
available for free by contacting Billy Carroll at 865.868.0613. This presentation shall not constitute an offer to sell, the solicitation of
an offer to sell, or the solicitation of an offer to buy any securities or the solicitation of any vote or approval, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
SmartFinancial, Tennessee Bancshares, their directors and executive officers, and other members of management and employees
may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the
directors and executive officers of SmartFinancial is set forth in SmartFinancial’s proxy statement for its 2017 annual shareholders
meeting. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
Important Information
2
Important Information
3
Forward Looking Statement Disclosure
Certain of the statements made in this presentation may constitute forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including
statements regarding the intent, belief, or current expectations of SmartFinancial’s management regarding the company’s strategic
direction, prospects, future results, and benefits of the merger, are subject to numerous risks and uncertainties. Such factors
include, among others, (1) the risk that the cost savings and any revenue synergies from the merger may not be realized or take
longer than anticipated to be realized, (2) disruption from the merger with customers, suppliers or employee relationships, (3) the
occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (4) the
risk of successful integration of the two companies’ businesses, (5) the failure of Tennessee Bancshares’s shareholders to approve
the merger, (6) the amount of the costs, fees, expenses and charges related to the merger, (7) the ability to obtain required
governmental approvals of the proposed terms of the merger, (8) reputational risk and the reaction of the parties’ customers to the
merger, (9) the failure of the closing conditions to be satisfied, (10) the risk that the integration of Tennessee Bancshares’s
operations with SmartFinancial will be materially delayed or will be more costly or difficult than expected, (11) the possibility that
the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (12) the
dilution caused by SmartFinancial’s issuance of additional shares of its common stock in the merger and (13) general competitive,
economic, politics of and market conditions. Additional factors which could affect the forward looking statements can be found in
SmartFinancial’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed with or
furnished to the SEC and available on the SEC’s website at http://www.sec.gov. 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.
Transactio
n
Overview
Acquisition Overview
Company Overview
Transaction Rationale
Transaction Terms
Key Transaction Assumptions
4
Acquisition Overview
Source: S&P Global Market Intelligence
By closing, the combined company is expected to be approximately $2B
in total assets
Accelerates the company towards a 1%+ ROAA target in 2019
Positioned to add deposit market share in several Southeast growth
markets, with additional nearby attractive markets remaining
This transaction marks the management team’s fifth consolidation,
making the company one of the most experienced acquirers in its asset
size range
Strong step forward in the quest to become “The Southeast’s next
great community banking franchise”
5
Company Overview
Source: S&P Global Market Intelligence
ALABAMA
Nashville
Huntsville
Chattanooga
Knoxville
TENNESSEE
6
Solid base in home Tullahoma market that
has supported recent expansion into three
growth markets (Chattanooga, Huntsville and
Murfreesboro)
Near 1% ROAA and solid credit quality =
strong operator
Consolidated financials are SMBK estimates based on the 9/30/17 call
report data of Southern Community Bank and the 6/30/17 FRY-9SP of
Tennessee Bancshares
Tennessee Bancshares, Inc.
Headquarters Tullahoma, TN
CEO William L. Yoder
Number of Directors 7
Dollars in Thousands (Consolidated as of 9/ 30/ 17)
Total Assets 243,950
Net Loans 193,642
Total Deposits 210,107
Equity 22,919
Tangible Common Equity 21,348
Net Income, 2016 1,729
Net Income, YTD 1,889
Percentages (Bank Level, Twelve Months Ended 9/ 30/ 17)
ROAA 0.94
ROAE 9.25
Net Interest Margin 3.88
Noninterest Income/Avg Assets 0.52
Efficiency Ratio 58.98
NPAs/Assets 0.59
TCE Ratio 10.36
Bank Leverage Ratio 9.93
Bank Total Risk-Based Capital 12.69
Key management of Tennessee Bancshares will remain with SMBK
Conservative credit culture
Complementary business lines that are easily integrated
Attractive financial transaction with strong geographic fit
Good mix of consolidation opportunities and growth market expansion
Assists company in achievement of 1%+ ROAA run rate target
Transaction Rationale
7
10% EPS accretion projected in 2019
Less than 2.5 years to earn back TBV dilution (crossover method)
Preservation of strong capital position and balance sheet
Extends footprint further into Tennessee and Alabama
Improves market share position in Chattanooga
Entry into the Nashville-Davidson-Murfreesboro-Franklin, TN and Huntsville, AL MSAs
Financially Attractive
Low Risk
Strategic
Markets & Growth
Sources: Definitive Agreement, SMBK
Transaction Terms(1)
8
Consideration 100% stock
Exchange Ratio 0.8065 fixed exchange ratio
Implied Announced Price per Share2 $17.57
Aggregate Announced Transaction Value2 $31.8 million
Board Representation Clifton N. Miller (Tennessee Bancshares director) to be appointed to SMBK board
Management Retention
Tennessee Bancshares CEO and other key executives to maintain senior
positions with SMBK
Required Approvals Tennessee Bancshares shareholders and customary regulatory approvals
Estimated Transaction Multiples3
Price/LTM EPS: 13.8x
Price/ TBVPS: 149.1%
TBV Dilution Earn Back: < 2.5 Years (crossover method)
Expected Closing 2nd Quarter 2018
Termination Fee $1.3 million
Sources: Definitive Agreement, SMBK
(2) Based on SMBK’s stock price of $21.79 as of 12/11/17
(3) Based on SMBK estimates of unaudited consolidated financials of
Tennessee Bancshares as of 9/30/17
(1) Exclusive of contingent one-time, special dividend of up to $0.70 per share (approximately $1.27 million in the
aggregate) to be paid to Tennessee Bancshares shareholders subject to the satisfaction of certain conditions
Key Transaction Assumptions
9
Expected Savings
Merger & Integration Costs
Purchase Accounting & Other
Adjustments
Pro Forma Capital
Approximately $2.3 million in pre-tax merger expenses
1.75% pre-tax opportunity cost of cash
Day 1 Total Equity of $238 million
9.7% Day 1 TCE Ratio
Total credit mark of $9.0 million(1)
20.0% on adjusted nonperforming loans
4.3% on performing loans
20.0% on OREO
1.15% mark on FHLB advances
Cost savings target = 30% of seller’s annual expense base
50% realized in 2018
100% realized thereafter
Sources: Definitive Agreement, SMBK
(1)$9.0mm credit mark may be lower if certain assets are disposed of prior to
closing, with a dividend paid to Tennessee Bancshares shareholders (footnote
on slide 8) that would be neutral to slightly positive to transaction metrics
Market
Highlights
Chattanooga, TN
Huntsville, AL
Murfreesboro, TN
Tullahoma, TN
10
Chattanooga Major Employers
Selected Data: Chattanooga, TN MSA
Market Highlights
In 2011, Volkswagen Group of America
opened an auto manufacturing plant in
Chattanooga. The plant employs 3,200 and
supports more than 9,500 indirect supplier
employees
In 2017, Volkswagen announced that it is
spending $600 million to expand its
Chattanooga factory increasing their
workforce by 4,500 employees
McKee Foods Corp. plans to invest $102
million in its manufacturing plant
Whirlpool Corp. opened a new $120 million
plant in the Chattanooga area in 2012
Chattanooga has a 10-gigabit network that is
making it one of America’s most tech start-up
friendly cities, according to Fortune
Total Population: (Actual) 552,944
Proj. 5 Year Population Growth: 3.81%
Median HH Income: $49,405
Proj. HH 5 Year Income Growth: 7.57%
Total Market Deposits: ($B) $9.4
Market YoY Deposit Growth: 3.98%
Financial data as of 2016; Demographic data as of 2017
Sources: Chattanooga Times Free Press, Volkswagen Group of
America, Olin Corporation, Wacker Chemie AG, Hamilton County
Chamber of Commerce, S&P Global Market Intelligence
11
Huntsville Major Employers
Selected Data: Huntsville, AL MSA
Market Highlights
Huntsville is nicknamed “Rocket City”
because of its long and significant role in the
U.S. space and missile programs, with the city
at the forefront in developing space
technology
Huntsville is one of the 40 fastest growing
metropolitan areas in the United States
Huntsville GDP growth is among the Top 10
major metropolitan areas in the country
Huntsville GDP accounts for 25% of
Alabama’s total GDP, and the 33,700 added
new net jobs accounts for 88% of Alabama’s
total growth
Total Population: (Actual) 451,892
Proj. 5 Year Population Growth: 4.44%
Median HH Income: $59,376
Proj. HH 5 Year Income Growth: 4.34%
Total Market Deposits: ($B) $7.5
Market YoY Deposit Growth: 7.80%
Financial data as of 2016; Demographic data as of 2017
Sources: Huntsville Chamber of Commerce, S&P Global Market
Intelligence
12
Murfreesboro
Total Population: (Actual) 310,750
Proj. 5 Year Population Growth: 9.01%
Median HH Income: $56,936
Proj. HH 5 Year Income Growth: 2.89%
Total Market Deposits: ($B) $3.7
Market YoY Deposit Growth: 6.27%
Major Employers
Selected Data: Rutherford County
Top 10 fastest-growing large cities in the U.S.
according to the U.S. Census Bureau, 2016
Rutherford County is projected to be the
second fastest growing county in TN and has
the third lowest unemployment rate
Nissan owns a six million square foot auto
and battery manufacturing plant in nearby
Smyrna, TN that employs 8,400
Home to Middle Tennessee State University,
one of the largest undergraduate universities
in the state with approximately 23,000
students
General Mills is investing $250 million to
expand its operations in Murfreesboro,
creating 117 jobs in Rutherford county
Market Highlights
Deposit data as of 2016; Demographic data as of 2017
Sources: Rutherford County Chamber of Commerce, Nissan Group, The
Nashville Area Chamber of Commerce, WalletHub.com, S&P Global Market
Intelligence
13
14
Tullahoma
Selected Data: Tullahoma-Manchester, TN MSA
Major Employers
Tullahoma is a leader in the aerospace and
technology industries and serves as a hub for
medical and retail services
Tullahoma is ranked as the #1 “Micropolitan”
city in the state of TN
Among the 20 Micropolitan Statistical Areas in
TN, Tullahoma ties for the state’s second
lowest unemployment rate
Presence of Arnold Air Force Base, University
of Tennessee’s Space Institute, and a variety
of aerospace companies broadens
Tullahoma’s employment base
Located in close proximity to the Jack Daniel’s
and George Dickel distilleries
Market Highlights
Total Population: (Actual) 102,873
Proj. 5 Year Population Growth: 3.09%
Median HH Income: $44,044
Proj. HH 5 Year Income Growth: 7.47%
Total Market Deposits: ($B) $1.5
Market YoY Deposit Growth: 4.23%
Deposit data as of 2016; Demographic data as of 2017
Sources: Tullahoma Chamber of Commerce, S&P Global Market
Intelligence
Pro Forma
Company
Pro Forma Footprint & Highlights
Combined Leadership Team
Pro Forma Loan Composition
Pro Forma Deposit Composition
15
Pro Forma Footprint and Highlights
TENNESSEE
ALABAMA
FLORIDA
Tuscaloosa
Birmingham
Nashville
Tallahassee
Huntsville
Montgomery
Chattanooga
Knoxville
Pensacola SMBK Branches (including Capstone)
Tennessee Bancshares Branches
Pro forma balance sheet based on unaudited consolidated
financials of SmartFinancial as of 9/30/17, call report for
Capstone Bank as of 9/30/17, FRY-9SP for Capstone
Bancshares as of 6/30/17, and SMBK estimates of unaudited
consolidated financials of Tennessee Bancshares as of
9/30/17. Numbers exclude purchase accounting adjustments
Source: S&P Global Market Intelligence
16 Pricing data as of 12/11/17 close
Assets ($mm) 1,891
Net Loans ($mm) 1,479
Deposits ($mm) 1,608
TCE ($mm) 203
Branches 26
Loans/Deposits 92%
Market Cap ($mm) 273.8
Pro Forma Highlights
Combined Leadership Team
13 SMBK Directors
1 Tennessee
Bancshares
Director
Billy Carroll
(Chief Executive Officer)
C. Bryan Johnson
(Chief Financial Officer)
Rhett Jordan
(Chief Credit Officer)
Gary Petty
(Chief Risk Officer)
Greg Davis
(Chief Lending Officer)
Diane Short
(Chief HR Officer)
Bill Yoder
(Chief Banking Officer)
Miller Welborn
(Chairman of the Board)
Board of Directors
Executive Leadership
17
Pro Forma Loan Composition
Source: S&P Global Market Intelligence
18
All data is bank level for the quarter ended September 30, 2017
SmartBank balances are pro forma for Capstone Bank acquisition
Numbers exclude purchase accounting adjustments
Dollars in Thousands (Bank Level)
ADC 133,675 10.3% 34,118 17.4% 167,793 11.2%
1-4 Family 287,519 22.2% 51,911 26.5% 339,430 22.7%
Owner-Occupied CRE 268,042 20.7% 36,252 18.5% 304,294 20.4%
Other CRE 287,572 22.2% 30,377 15.5% 317,949 21.3%
Commercial & Industrial 207,263 16.0% 29,498 15.1% 236,761 15.9%
Other 112,450 8.7% 13,645 7.0% 126,095 8.4%
Gross Loans 1,296,521 100.0% 195,801 100.0% 1,492,322 100.0%
Southern Community Bank
Avg. Yield on Loans:
5.10%
SmartBank + Capstone Bank Southern Community Bank Combined
SmartBank + Capstone Bank Combined
Avg. Yield on Loans:
5.15%
Avg. Yield on Loans:
5.11%
ADC
10%
1-4
22%
Owner CRE
21%
Other CRE
22%
C& I
16%
Other
9% ADC
17%
1-4
26%
Owner CRE
19%
Other CRE
16%
C& I
15%
Other
7% ADC
11%
1-4
23%
Owner CRE
20%
Other CRE
21%
C& I
16%
Other
9%
Pro Forma Deposit Composition
Source: S&P Global Market Intelligence
19
All data is bank level for the quarter ended September 30, 2017
SmartBank balances are pro forma for Capstone Bank acquisition
Numbers exclude purchase accounting adjustments
Dollars in Thousands (Bank Level)
Demand Deposits 233,632 16.5% 23,865 11.4% 257,497 15.9%
NOW and Other Transaction 221,179 15.7% 16,789 8.0% 237,968 14.7%
MMDA & Savings 498,419 35.3% 52,118 24.8% 550,537 33.9%
Retail CDs 351,456 24.9% 88,446 42.1% 439,902 27.1%
Jumbo CDs 107,949 7.6% 28,889 13.7% 136,838 8.4%
Total Deposits 1,412,635 100.0% 210,107 100.0% 1,622,742 100.0%
Southern Community Bank
Avg. Cost of Deposits:
0.59%
CombinedSmartBank + Capstone Bank
Avg. Cost of Deposits:
0.79%
Avg. Cost of Deposits:
0.62%
SmartBank + Capstone Bank Southern Community Bank Combined
Demand
16%
Other
Transaction
16%
MMDA &
Savings
35%
Retail CD
25%
Jumbo
CD
8%
Demand
11%
Other
Transaction
8%
MMDA &
Savings
25%
Retail CD
42%
Jumbo CD
14%
Demand
16%
Other
Transaction
15%
MMDA &
Savings
34%
Retail CD
27%
Jumbo CD
8%
Appendix
Comprehensive Due Diligence Overview
Investor Contacts
20
Comprehensive Due Diligence Overview
Broad due diligence process
Thorough review of credit files, underwriting methodology, process and
policy
Reviewed 71% of the total dollar amount of Tennessee Bancshares
loans outstanding (all loans >$350,000)
In-depth review of cost savings items
Credit diligence resulted in a gross $9 million credit mark
21
Investor Contacts
Billy Carroll
President & CEO
865.868.0613
billy.carroll@smartbank.com
Miller Welborn
SmartFinancial, Inc.
5401 Kingston Pike, Suite 600
Knoxville, TN 37919
Chairman
423.385.3067
miller.welborn@smartbank.com
22