Business Combination

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Business Combination

Business Combination

On August 31, 2015 the Company, at the time named Cornerstone Bancshares, Inc., completed its merger with SmartFinancial, Inc (“Legacy SmartFinancial”), after which the Company changed its name to SmartFinancial, Inc. While Cornerstone was the acquiring entity for legal purposes, the merger was accounted for as a reverse merger using the acquisition method of accounting, in accordance with the provisions of FASB ASC 805-10 Business Combinations. Under this guidance, for accounting purposes, Legacy SmartFinancial is considered the acquirer in the merger, and as a result the historical financial statements of the combined entity are the historical financial statements of Legacy SmartFinancial.

The merger was effected by the issuance of shares of Cornerstone stock to shareholders of Legacy SmartFinancial. The assets and liabilities of Cornerstone as of the effective date of the merger were recorded at their respective estimated fair values and combined with those of Legacy 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.

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 CSBQ common stock outstanding as of August 31, 2015	6,643,341
Market price of CSBQ common stock on August 31, 2015	$	3.85
Estimated fair value of CSBQ common stock (in thousands)	25,577
Estimated fair value of CSBQ stock options (in thousands)	2,858
Total consideration (in thousands)	$	28,435

Note 2. Business Combination, Continued

Allocation of Purchase Price (in thousands)
Total consideration above	$	28,435
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	33,502
Investment securities available for sale	74,254
Loans	314,827
Premises and equipment	9,019
Bank owned life insurance	1,278
Core deposit intangible	2,750
Other real estate owned	5,672
Prepaid and other assets	4,301
Deposits	(349,462		)
Securities sold under agreements to repurchase	(17,622		)
FHLB advances and other borrowings	(42,307		)
Payables and other liabilities	(11,943		)
Total fair value of net assets acquired	24,269
Goodwill	$	4,166

The measurement period for the merger concluded on August 31, 2016 and there were no adjustments to the initial fair values recorded as part of the business combination.