On March 31, 2020, SmartFinancial, Inc. (the “Company”), a Tennessee corporation and the sole shareholder of SmartBank, a Tenneesse state-chartered bank (the “Bank”), entered into a Loan and Security Agreement (the “Agreement”) and related revolving note (the “Revolving Note”) with ServisFirst Bank (the “Lender”). The Agreement provides for the Lender to make available to the Company a revolving line of credit in a maximum principal amount of up to $25.0 million (the “Line of Credit”). The maturity of the Line of Credit is September 24, 2021 (the “Maturity Date”).

The Agreement provides for a variable interest rate equal to The Wall Street Journal Prime Rate minus 0.50% (50 bps) with a floor of 4.0% and no prepayment penalty. The Company is also required to pay a non-use fee of 0.10% (10 bps) per annum on the unused portion of the principal amount of the Line of Credit (provided, however, that the non-use fee will be waived if the Company has an outstanding balance for more than six calendar months of the loan term).

Under the terms of the Agreement, the Company is required to pay quarterly payments of interest on the unpaid principal balance of the Line of Credit. Principal payments may be made at any time prior to the Maturity Date, on which date all unpaid principal of and accrued interest on the Line of Credit are due and payable.

The obligations of the Company under the Agreement are secured by a first priority security interest in all of the capital stock of the Bank to a Pledge Agreement, dated as of March 31, 2020, between the Company and the Lender (the “Pledge Agreement”).

The Agreement, the Revolving Note, and Pledged Agreement contain customary representations, warranties, and covenants for a revolving line of credit, including certain financial covenants and capital ratio requirements. The financial covenants in the Agreement include covenants requiring that (a) the Bank maintain (i) a return on assets ratio of at least 0.25%, (ii) a Tier 1 leverage capital ratio of at least 8.0%, and (iii) a non-performing assets to capital and loan and lease loss reserves ratio of less than 15.0%, and (b) the Company (i) not incur new indebtedness greater than $5.0 million without the Lender’s prior approval and (ii) maintain an interest reserve, held in cash at bank, of at least $1.0 million during the term of the Line of Credit. The Agreement, the Revolving Note, and the Pledge Agreement also provide for certain events of default, including,among other things, payment defaults, breaches of representations and warranties and bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Agreement and the Note, as applicable, and to exercise its remedies with respect to the shares of capital stock of the Bank subject to the Pledge Agreement, including the sale of such shares.

The foregoing descriptions of the Agreement, the Revolving Note, and the Pledge Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Agreement, the Revolving Note, and the Pledge Agreement, which are filed as Exhibits 10.1, 10.2, and 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

*Certain schedules and similar attachments have been omitted to Item 601(a)(5) of Regulation S-K. The registrant will furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

SMARTFINANCIAL INC. Exhibit
EX-10.1 2 loanandsecurityagreeme.htm EX-10.1 Document═══════════════════════════════════════════════════════ LOAN AND SECURITY AGREEMENTBy and BetweenSMARTFINANCIAL,…
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About SMARTFINANCIAL, INC. (NASDAQ:SMBK)

SmartFinancial, Inc., formerly Cornerstone Bancshares, Inc., is a bank holding company. The Company operates through its SmartBank subsidiary (The Bank). The principal business of the Bank consists of attracting deposits from the public and investing those funds, together with funds generated from operations and from principal and interest payments on loans. It offers commercial real estate-mortgage, consumer real estate-mortgage, construction and land development, commercial and industrial, and consumer and other loans. The Bank’s investment portfolio consists of Federal agency bonds, mortgage-backed securities, and state and municipal securities. The Bank provides a range of deposit services to businesses and individuals, including non-interest bearing checking accounts, interest bearing checking accounts, savings accounts, money market accounts, individual retirement accounts (IRAs) and certificates of deposit (CDs). SmartBank operates in approximately seven banking offices.