Sevier County Bank Main Branch Location

SCB | First Quarter 2021 Report

For Immediate Release

Contact:

John M. Presley
Executive Chairman
(865) 774-4772
jpresley@bankscb.com

or

Bobby R. Stoffle
President and CEO
(865) 774-4813
bstoffle@bankscb.com


Sevier County Bancshares, Inc.

Reports Consolidated Net Income of $1,407,551 and Core Earnings of $1,378,882 for the First Quarter of 2021


May 5, 2021, Sevierville, Tennessee – Sevier County Bancshares, Inc. (the “Company”) (Pink Sheets: SVRH) parent company to Sevier County Bank (the “Bank”) reported today its financial results for the first quarter of 2021.  For the three months ended March 31, 2021, the Company had a consolidated net income of $1,407,551, or $0.34 per share (wt. avg. outstanding (“WAO”)), compared to a consolidated net income of $99,004, or $0.02 per share for the same period in 2020, representing a 1,322% increase in net income available to common shareholders in the first quarter of 2021 compared to the first quarter of 2020. Consolidated core earnings (after-tax net income, excluding legacy OREO expenses, loan loss provision (net of actual charge-offs) and other non-recurring expenses, including vesting of certain executive benefits) for the three months ended March 31, 2021 were $1,378,882, or $0.33 per WAO share.


Earnings


Consolidated year-to-date income for the three months ended March 31, 2021 was $1,407,551, or $0.34 per WAO share compared to consolidated net income of $99,004, or $0.02 per share for the same period of 2020; additionally, after-tax core earnings for the three months ended March 31, 2021 are $1,378,882, or $0.33 per WAO share compared to $430,311, or $0.11 per share of core earnings for the same period of 2020.

Factors contributing to the Company’s consolidated net income for the three months ended March 31, 2021 include:


  • Holding and other costs net of income related to legacy OREO for the three months ended March 31, 2021 resulted in a loss of $1,261, compared to a $21,220 loss for the same period of 2020, primarily from the year over year cost savings from the $720,400 decrease in foreclosed asset holdings. No disposition gains or losses have been recognized as of the three months ended March 31, 2021 compared to a $23,380 disposition gain during the same period of 2020. One property remains on the books as of March 31, 2021.
  • Total Bank income (excluding legacy OREO Charges), which includes interest income and fee income, of $4,255,193, compared to $3,471,520 for the same period last year, a $783,673 or 23% increase.
  • Total Bank operating expenses (excluding loan provision, non-recurring executive benefits and OREO-related items) for the three months ended March 31, 2021 of $2,325,463, compared to $2,952,595 for the same period of 2020, a $627,132 or 21% decrease.
  • Bad debt provision of $364,000 for the three months ended March 31, 2021, compared to $360,000 for the same period of 2020.
  • Deferred tax benefit recognition of $967,335 for the three months ended March 31, 2021, compared to $0 for the same period of 2020.

 

Balance Sheet

Total Assets at the Bank as of March 31, 2021, were $452,405,688 compared to $333,311,927 at March 31, 2020, an increase of $119.1 million or 36%.

Factors contributing to the growth of the Bank and Company and other items of interest include:

  • Total Deposits increased to $409,790,255 at March 31, 2021, compared to $299,050,898 at March 31, 2020, a $110.7 million or 37% increase.
  • Total Company Equity Capital increased to $31,225,071 at March 31, 2021, compared to $27,256,415 at March 31, 2020, a $4.0 million or 15% increase.
  • Total Bank Equity Capital increased to $39,679,868 at March 31, 2021, compared to $31,132,729 at March 31, 2020, an $8.5 million or 27% increase.
  • Total Loans increased to $276,384,160 at March 31, 2021, from $226,176,980 at March 31, 2020, a $50.2 million or 22% increase. $2.9 million of the increase consisted of SBA PPP funded loans yet to be forgiven.
  • Investment securities increased to $62,490,825 at March 31, 2021, compared to $37,767,525 at March 31, 2020, a $24.7 million or 65% increase.
  • Cash and due from Banks increased to $88,236,748 at March 31, 2021, compared to $54,437,485 at March 31, 2020, a $33.8 million or 62% increase.

Asset Quality

Total OREO balance at March 31, 2021 decreased to $256,800 compared to $977,200 at March 31, 2020 due to dispositions. Total past due loans at March 31, 2021 were $2,323.807, or 0.89% of total loans, primarily due to one lending relationship.

The following table reflects details related to asset quality and the allowance for loan losses (in thousands):


Equity

The following tables illustrate graphically the Equity Capital narrative in the Balance Sheet discussion above.


As of March 31, 2021, the Bank is well-capitalized for all regulatory capital ratios. Unaudited book value per share of Company stock is $7.52 as of March 31, 2021.

 

Other Significant Events

1. Sevier County, TN has experienced a phenomenal economic recovery from the pandemic impact, especially in the performance of overnight rental cabins and campgrounds, but increasingly in near or above month-over-prior year month performance across most sectors. Most recent unemployment (February) rate is 6.6%, housing market is hot, delinquency and foreclosure rates statewide strong and several commercial development projects and expansions back underway.

2. During and especially near the end of March 2020, the local economy was increasingly negatively impacted by the global COVID-19 pandemic, as all non-essential businesses were closed and people encouraged to quarantine at home to slow the spread of the disease. Many businesses furloughed employees, at least temporarily offsetting years of positive employment trends and both fixed income and equity markets incurred volatility. The government issued safeguards to lessen any permanent impact to the economy, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. While businesses began to reopen at the beginning of June, continuous Bank evaluation and monitoring of the impact of the pandemic is Steps taken by Bank leadership in regard to COVID-19 include:

  • Implementation of customer and employee safety measures, including remote employment where feasible and internal distancing of mission critical employees in conjunction with our Business Continuity Plan.
  • Various sanitization and distancing measures, including hand sanitizer stations at key areas throughout facilities, separation of operational areas and following CDC protocols.
  • Implementation of employee face mask requirements in the presence of customers and in all situations not conducive to social distancing. Customers entering SCB are also requested to wear a face mask, provided if necessary, when inside the lobbies.
  • Customer and community support consistent with regulatory and treasury guidelines, including temporary loan relief concessions and assisting customers applying for Paycheck Protection Program loans.
  • President Stoffle and Lead Director Wade participated on Governor Lee’s Economic Recovery Bank Working Group.

3. The Bank originated 144 SBA Paycheck Protection Program (PPP) loans totaling $7,552,851 during the first round of the program. Deferred fee income from these loans totaled $377,643, accreted over 24 months or until loan forgiveness, with $212,470 recognized as of March 31, 2021. The Bank originated another 44 loans during the second round of the program totaling $2,683,402. Deferred fee income for these loans total $158,394 accreted over 24 months or until loan forgiveness.

4. As of June 30, 2020, the Bank provided COVID-19 related relief on 89 loans totaling $89,342,000. The relief was in the form of interest-only payments for 120 days on $69,482,000 or 77.8% of the modifications granted. As of December 31, 2020, only five loans covering one relationships and totaling $4,572,306 continued under COVID-19 related relief, all in the form of full interest-only payments through February 2021 and have since returned to a regular payment schedule in March 2021; the other loans returned to regular payment schedules during 2020. Additionally, four (4) USDA fully-guaranteed loan participations totaling $2,050,736 have received COVID-related relief.

5. On October 21, 2020, the Bank received regulatory permission to open a Loan Production Office (LPO) in Glen Allen, Virginia (Richmond market). On October 26, 2020, the Bank signed a lease on banking space in the Richmond market. The LPO (“Southern Community Bank”) opened in early November. The Bank received final regulatory approval for a Richmond market branch in early January; plans are to launch full-service banking services by early 2nd Quarter 2021. As of March 31, 2021, approximately $37,278,637 of loans were funded in the Richmond market.

6. On December 22, 2020, the Company issued $5,000,000 in additional subordinated debt. As of March 31, 2021, $4,000,000 was funded downstream to the Bank as a capital infusion.

 

Subsequent Events

1. On April 13, 2021, SmartFinancial, Inc., (Nasdaq: SMBK) parent company of SmartBank, and Sevier County Bancshares, Inc., parent company of Sevier County Bank, jointly announced their entry into an agreement and plan of merger pursuant to which SmartFinancial will acquire SCB. The acquisition is subject to customary closing conditions including the approval of SCB shareholders and regulatory approvals and is expected to be completed in 3rd Quarter 2021.

2. The Company engaged an independent third-party firm to conduct a stock valuation analysis as of December 31, 2020. The analysis resulted in a valuation of $5.30 per share. The valuation is not intended to represent and should not be interpreted as a recommendation of any kind as to the desirability of purchasing or selling Company shares at a given price.

3. On April 21, 2021, the Bank auctioned its final parcel of foreclosed property at an approximate gain to book value of $175,000, with a closing set for early June.

 

Readers are cautioned that this press release contains unaudited financial information and may include forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current knowledge, assumptions, and analyses, which it believes are appropriate in the circumstances regarding future events, and may address issues that involve significant risks including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in general economic, competitive, and business conditions; significant changes in or additions to laws and regulatory requirements; and significant changes in securities markets. Additionally, such aforementioned uncertainties, assumptions, and estimates, may cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.


About Sevier County Bank

Sevier County Bank, the oldest continuously operating business in Sevier County, is a full- service community bank that has served Sevierville and the surrounding area since 1909. Currently at $350 million in assets and with six branch locations, Sevier County Bank offers a full array of banking products and services geared towards the needs of the businesses and citizens in our markets. For more information, visit bankscb.com.