XML 28 R16.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Business Combination | 3 Months Ended
--- | ---
Mar. 31, 2018
Business Combinations [Abstract] |
Business Combination | Business Combination On December 8, 2016, the Bank entered into a purchase and assumption agreement with Atlantic Capital Bank, N.A. that provided for the acquisition and assumption by the Bank of certain assets and liabilities associated with Atlantic Capital Bank’s branch office located at 3200 Keith Street NW, Cleveland, Tennessee 37312. The purchase was completed on May 19, 2017 for total cash consideration of $1.2 million. The assets and liabilities as of the effective date of the transaction were recorded at their respective estimated fair values. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. In the periods following the acquisition, the financial statements will include the results attributable to the Cleveland branch purchase beginning on the date of purchase. For the three months period ended March 31, 2018, the revenues and net income attributable to the Cleveland branch were $309 thousand. It is impracticable to determine the pro-forma impact to the 2017 revenues and net income if the acquisition had occurred on January 1, 2017 as the Company does not have access to those records for a single branch. The following table details the financial impact of the transaction, including the allocation of the purchase price to the fair values of net assets assumed and goodwill recognized:
Allocation of Purchase Price (in thousands) |
Total consideration in cash | $ | 1,183 |
Fair value of assets acquired and liabilities assumed: |  |
Cash and cash equivalents | 133 |
Loans | 24,073 |
Premises and equipment | 2,839 |
Core deposit intangible | 310 |
Prepaid and other assets | 77 |
Deposits | (26,888 | )
Payables and other liabilities | (21 | )
Total fair value of net assets acquired | 523 |
Goodwill | $ | 660 |
As of March 31, 2018 there have not been any changes to the initial fair values recorded as part of the business combination. On May 22, 2017, the shareholders of the Company approved a merger with Capstone Bancshares, Inc. ("Capstone"), the one bank holding company of Capstone Bank, which became effective November 1, 2017. Capstone shareholders received either: (a) 0.85 shares of common stock, (b) $18.50 in cash, or (c) a combination of 80% common stock and 20% cash. Elections were limited by the requirement that 80% of the total shares of Capstone common stock be exchanged for common stock and 20% be exchanged for cash. Therefore, the allocation of common stock and cash that a Capstone shareholder received depended on the elections of other Capstone shareholders, and were allocated in accordance with the procedures set forth in the merger agreement. Capstone shareholders also received cash instead of any fractional shares they would have otherwise received in the merger. After the merger, shareholders of SmartFinancial owned approximately 74% of the outstanding common stock of the combined entity on a fully diluted basis, after taking into account the exchange ratio. The merger is being accounted for using the acquisition method of accounting, in accordance with the provisions of FASB ASC 805-10 Business Combinations. Under this guidance, for accounting purposes, the Company is considered the acquirer in the merger, and as a result the historical financial statements of the combined entity are the historical consolidated financial statements of the Company. The merger was effected by the issuance of shares of SmartFinancial stock along with cash consideration to shareholders of Capstone. The assets and liabilities of Capstone as of the effective date of the merger were recorded at their respective estimated fair values and combined with those of SmartFinancial. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. Goodwill from the transaction was $38.0 million, none of which is deductible for income tax purposes. Note 8. Business Combination, Continued In periods following the merger, the financial statements of the combined entity will include the results attributable to Capstone beginning on the date the merger was completed. In the period ended March 31, 2018, the revenues and net income attributable to Capstone were $6.8 million and $2.5 million, respectively. The pro-forma impact to 2017 revenues and net income if the merger had occurred on December 31, 2016 would have been $25.2 million and $1.3 million, respectively. While certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the merger taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of Capstone's provision for credit losses for the first three months of 2017 that may not have been necessary had the acquired loans been recorded at fair value as of the beginning of 2017. There were no material, nonrecurring pro forma adjustments included in the reported proforma revenue and earnings. The fair value estimates of Capstone’s assets and liabilities recorded are preliminary and subject to refinement as additional information becomes available. Under current accounting principles, the Company’s estimates of fair values may be adjusted for a period of up to one year from the acquisition date. As of March 31, 2018 there was a $11 thousand adjustment to reduce fair values initially recorded as part of the business combination. The following table details the financial impact of the merger, including the calculation of the purchase price, the allocation of the purchase price to the fair values of net assets assumed, and goodwill recognized:
Calculation of Purchase Price |
Shares of SMBK common stock issued to Capstone shareholders as of November 1, 2017 | 2,908,094 |
Market price of SMBK common stock on November 1, 2017 | $ | 23.49 |
Estimated fair value of SMBK common stock issued (in thousands) | 68,311 |
Estimated fair value of Capstone stock options (in thousands) | 1,585 |
Cash consideration paid | 15,826 |
Total consideration (in thousands) | $ | 85,722 |
Allocation of Purchase Price (in thousands) |
Total consideration above | $ | 85,722 |
Fair value of assets acquired and liabilities assumed: |  |
Cash and cash equivalents | 16,810 |
Investment securities available for sale | 51,638 |
Restricted investments | 1,049 |
Loans | 413,023 |
Premises and equipment | 8,668 |
Bank owned life insurance | 10,031 |
Core deposit intangible | 5,530 |
Other real estate owned | 410 |
Prepaid and other assets | 6,360 |
Deposits | (454,154 | )
FHLB advances and other borrowings | (4,887 | )
Payables and other liabilities | (6,803 | )
Total fair value of net assets acquired | 47,675 |
Goodwill | $ | 38,047 |
The initial accounting for Tennessee Bancshares, Inc. acquired on May 1, 2018 has not been completed. As a result the pro-forma impact to 2017 revenues and net income with certain fair value adjustments as if the merger had occurred on December 31, 2016 could not be made.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration