Business Combinations

6 Months Ended

Jun. 30, 2023

Business Combinations [Abstract]

Business Combinations

Note 2. Business Combinations

Sunbelt Group, LLC

On September 1, 2022, Rains Agency Inc. (“Rains Agency”), an indirect wholly-owned subsidiary of SmartFinancial, Inc., completed the acquisition of substantially all the assets of Sunbelt Group, LLC (“Sunbelt”), a Tennessee limited liability company, pursuant to the Asset Purchase Agreement (the “Purchase Agreement”), dated September 1, 2022, by and among Rains Agency, Sunbelt, and A. Mark Slater, the sole member of Sunbelt.

In connection with the acquisition, Rains Agency acquired $349 thousand of assets and assumed $364 thousand of liabilities from Sunbelt. Pursuant to the Purchase Agreement, Rains Agency paid an aggregate amount of consideration to Sunbelt of $6.5 million, of which $5.2 million was paid in cash at the closing and the remainder of which will be payable in equal cash installments on September 1, 2023, and September 1, 2024 (the “Deferred Payments”).  The Deferred Payments are subject to acceleration in certain circumstances involving a change in control of Rains Agency and are subject to set-off for any indemnification or other obligations of the Sunbelt and its sole member to Rains Agency under the terms of the Purchase Agreement.

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 $4.6 million, representing the intangible value of Sunbelt’s 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 $1.9 million, amortizing sum-of-the-years digits over 168 months (14 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 Sunbelt		adjustments		Adjustments		by the Company
Assets:
Cash & cash equivalents	$	319	$	—	$	—	$	319
Customer list intangible		—		1,948		—		1,948
Equipment, net		13		(13)		—		—
Other assets		17		—		—		17
Total assets acquired	$	349	$	1,935	$	—	$	2,284
Liabilities:
Payables and other liabilities	$	364	$	—	$	—	$	364
Total liabilities assumed		364		—		—		364
Excess of liabilities acquired over assets assumed	$	(15)
Aggregate fair value adjustments			$	1,935	$	—
Total identifiable net assets								1,920
Consideration transferred:
Purchase price								6,500
Total fair value of consideration transferred								6,500
Goodwill							$	4,580

⁽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.