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Business Combinations | 6 Months Ended
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Jun. 30, 2021
Business Combinations [Abstract] |
Business Combinations | Note 2. Business Combinations Fountain Leasing, LLC On May 3, 2021, the Company completed the acquisition of Fountain Leasing, LLC, a Tennessee limited liability company, pursuant to the Purchase Agreement (the “Purchase Agreement”), dated May 2, 2021, by and among the Bank and the members of Fountain Leasing, LLC. Following the closing of the acquisition, on May 4, 2021, the Company changed the name of Fountain Leasing, LLC to Fountain Equipment Finance, LLC (“Fountain”). In connection with the acquisition, the Company acquired $54.1 million of assets and assumed $683 thousand of liabilities. Pursuant to the Purchase Agreement, the Company paid an aggregate amount of consideration to the Fountain members of $14.0 million in cash at closing, and the Company repaid approximately $45.8 million of Fountain’s indebtedness. In addition to the closing consideration, the Purchase Agreement contains a performance-based earnout, pursuant to which the former members of Fountain could be entitled to up to $6.0 million, which is excluded from consideration pursuant to ASC 805, in future cash payments from the Company based on future results of the acquired business over various periods through December 31, 2026. 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 $2.4 million, representing the intangible value of Fountains business and reputation within the markets it served. The goodwill recognized is expected to be deductible for income tax purposes. The Company established an intangible asset related to customer relationships of $2.7 million, amortizing sum-of-the-years digits over 96 months (8 years). 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 | ​ | Subsequent |  | As recorded
​ | ​ | by Fountain | ​ | adjustments | ​ | Adjustments | ​ | by the Company
Assets: |  | ​ |  |  | ​ |  | ​ | ​ | ​ |  | ​ |
Cash & cash equivalents | ​ | $ | 413 | ​ | $ | — | ​ | $ | — | ​ | $ | 413
Leases | ​ |  | 54,945 | ​ |  | (720) | ​ | ​ | — | ​ |  | 54,225
Allowance for lease losses | ​ |  | (1,796) | ​ |  | 1,796 | ​ | ​ | — | ​ |  | —
Customer list intangible | ​ |  | — | ​ |  | 2,658 | ​ | ​ | — | ​ |  | 2,658
Other repossessed assets | ​ |  | 319 | ​ |  | — | ​ | ​ | — | ​ |  | 319
Other assets | ​ |  | 233 | ​ |  | — | ​ | ​ | — | ​ |  | 233
Total assets acquired | ​ | $ | 54,114 | ​ | $ | 3,734 | ​ | $ | — | ​ | $ | 57,848
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  |
Payables and other liabilities | ​ |  | 683 | ​ |  | (229) | ​ | ​ | — | ​ |  | 454
Total liabilities assumed | ​ |  | 683 | ​ |  | (229) | ​ |  | — | ​ |  | 454
Excess of assets acquired over liabilities assumed | ​ | $ | 53,431 | ​ |  |  | ​ | ​ | ​ | ​ |  |
Aggregate fair value adjustments | ​ |  |  | ​ | $ | 3,963 | ​ | $ | — | ​ |  |
Total identifiable net assets | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 57,394
Consideration transferred: | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  |
Cash | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 59,794
Total fair value of consideration transferred | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 59,794
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Goodwill | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ | $ | 2,400
(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 financing leases (ASC 310-30) of the acquired lease portfolio at the acquisition date (in thousands):
​ | ​ | ​ | ​
​ |  | May 3, 2021
Accounted for pursuant to ASC 310-30: |  | ​ |
Contractually required principal and interest | ​ | $ | 6,018
Non-accretable differences | ​ |  | 447
Cash flows expected to be collected | ​ |  | 5,571
Accretable yield | ​ |  | 649
Fair value | ​ | $ | 4,922
​ The following table discloses the impact of the merger with Fountain since the acquisition date through the three and six months June 30, 2021. The table also presents certain pro-forma information (net interest income plus total noninterest income (“Revenue”) and net income) as if the Fountain acquisition had occurred on January 1, 2020. 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 three and six months ended June 30, 2021, were $140 thousand for both periods and have been excluded from the pro-forma information presented below. 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
2021: | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Actual Fountain results included in statement of income since acquisition date | ​ | $ | 1,137 | ​ | $ | 345 | ​ | $ | 1,137 | ​ | $ | 345
Supplemental consolidation pro-forma as if Fountain had been acquired January 1, 2021 | ​ |  | 32,487 | ​ |  | 8,844 | ​ |  | 65,780 | ​ |  | 18,487
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2020: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Supplemental consolidation pro-forma as if Fountain had been acquired January 1, 2020 | ​ | $ | 30,659 | ​ | $ | 6,434 | ​ | $ | 57,451 | ​ | $ | 9,530
​ 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 $301.0 million of assets and assumed $272.1 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 $8.8 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 also established two intangible assets related to the insurance agency acquired as part of the PFG acquisition; 1.) Customer relationships of $1.1 million, amortizing sum-of-the-years digits over 120 months (10 years), 2.) Tradename of $63 thousand, amortizing straight-line over 60 months (5 years). ​ The purchased assets and assumed liabilities were recorded at their acquisition date fair values (1) and are summarized in the table below (in thousands).
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Initial | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As recorded |  | Fair value | ​ | Subsequent |  | As recorded
​ | ​ | by PFG | ​ | adjustments | ​ | Adjustments | ​ | 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 | ​ | ​ | 193 | ​ |  | 1,006
Intangibles | ​ |  | — | ​ |  | 1,370 | ​ | ​ | 1,127 | ​ |  | 2,497
Other real estate owned | ​ |  | 3,695 | ​ |  | (100) | ​ | ​ | (1,862) | ​ |  | 1,733
Interest Receivable | ​ |  | 1,061 | ​ |  | (280) | ​ | ​ | — | ​ |  | 781
Prepaids | ​ |  | 375 | ​ |  | (174) | ​ | ​ | — | ​ |  | 201
Goodwill | ​ |  | 231 | ​ |  | (231) | ​ | ​ | — | ​ |  | —
Other assets | ​ |  | 1,881 | ​ |  | — | ​ | ​ | — | ​ |  | 1,881
Total assets acquired | ​ | $ | 301,041 | ​ | $ | (2,177) | ​ | $ | (542) | ​ | $ | 298,322
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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 acquired over liabilities assumed | ​ | $ | 28,989 | ​ |  |  | ​ | ​ | ​ | ​ |  |
Aggregate fair value adjustments | ​ |  |  | ​ | $ | (2,906) | ​ | $ | (542) | ​ |  |
Total identifiable net assets | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 25,541
Consideration transferred: | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  |
Cash | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 9,838
Common stock issued (1,292,578 shares) | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 24,547
Total fair value of consideration transferred | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ |  | 34,385
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Goodwill | ​ |  |  | ​ |  |  | ​ | ​ | ​ | ​ | $ | 8,844
(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 (ASC 310-30) 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
​ ​

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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