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SmartFinancial Reports Second Quarter Diluted Earnings Per Share of $0.20, up 33% Year over Year

KNOXVILLE, Tenn., July 25, 2017 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), announced today net income of $1.6 million in its second quarter of 2017, compared to $1.2 million a year ago. Net income available to common shareholders totaled $1.6 million for second quarter of 2017 compared to $0.9 million during the second quarter of 2016.

Billy Carroll, President & CEO, stated: "In the second quarter net income was up over thirty-eight percent from a year ago as we continue to leverage capital while controlling expenses to increase profitability. Compared to last year we grew net interest income by seven percent while limiting noninterest expense increases to four percent. We increased net interest income not only by growing gross loans, twelve percent year over year, but also by increasing asset yields and thus keeping our net interest margin above four percent. Over the same period we were able to reduce the efficiency ratio by over three percentage points, in spite of $420 thousand merger and conversion costs during the current quarter. We look forward to the second half of 2017 which we believe will be even stronger than the first.”

SmartFinancial's Chairman, Miller Welborn, concluded: "During the last quarter we continued to achieve our goal of increasing the value of our franchise by expanding the footprint with strategic accretive acquisitions, prudently growing organically in great markets, and increasing our efficiencies every single day. We completed the acquisition of our branch in Cleveland, Tennessee, and announced our pending acquisition of Capstone Bancshares in Alabama, which we expect to close the fourth quarter this year. At the same time we organically grew loans by over $35 million and were able to increase net interest margin even with a slight increase in deposit costs. Perhaps most importantly, we have done all of this while controlling expense growth by reducing operational headcount while increasing the number of client facing associates. Finally we are proud that our company was recognized as a 'Top place to work 2017' by the Knoxville News Sentinel, which truly illustrates what a great culture we have created."

Performance Highlights

  • Net income available to common shareholders totaled $1.6 million during the second quarter of 2017 compared to $0.9 million during the second quarter of 2016 while net operating earnings available to common shareholders increased to $1.6 million from $0.6 million over the same period.
  • Closed acquisition of Cleveland, Tennessee, branch purchasing approximately $24.4 million in loans and assuming $24.8 million in deposits, in book value, resulting in approximately $1.0 million in intangible assets.
  • Gross loan growth of $58 million for the quarter driven by over $35 million in organic growth.
  • Increased net interest margin, taxable equivalent, compared to the prior the quarter to 4.15 percent due to higher average loan balances and increases the yields of the securities portfolio.
  • Asset quality was outstanding with nonperforming assets to total assets dropping to just 0.31 percent.

Second Quarter 2017 compared to Second Quarter 2016
Net income available to common shareholders totaled $1.6 million in the second quarter of 2017, or $0.20 per diluted share, compared to $0.9 million, or $0.15 per diluted share, in the second quarter of 2016. Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $1.6 million in the second quarter of 2017 compared to $0.6 million in the second quarter of 2016.

Net interest income to average assets of 3.81 percent for the quarter decreased from 3.88 percent in the second quarter of 2016 as the percentage of non-earning assets increased compared to the prior year. Net interest income totaled $10.2 million in the second quarter of 2017 compared to $9.6 million in the second quarter of 2016. Net interest income was positively impacted compared to the prior year primarily due to increases in loan balances. Net interest margin, taxable equivalent, decreased slightly from 4.16 percent in the second quarter of 2016 to 4.15 percent in the second quarter of 2017 as a result of higher costs on interest-bearing deposits.

Provision for loan losses was $298 thousand in the second quarter of 2017, compared to $218 thousand in the second quarter of 2016. The increase in provision for loan losses was due to higher loan growth. Annualized net charge-offs (recoveries) at (0.04) percent of average loans in the second quarter of 2017 was the lowest of any of the last five quarters. The ALLL was $5.5 million, or 0.64 percent of total loans as of June 30, 2017, compared to $4.7 million, or 0.61 percent of total loans, as of June 30, 2016. In addition to the allowance there was $9.1 million additional discounts on $186.0 million in purchased loans.

Nonperforming loans as a percentage of total loans was 0.13 percent as of June 30, 2017, which was down substantially from 0.29 percent in the prior year. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.31 percent as of June 30, 2017, compared to 0.69 percent as of June 30, 2016.

Noninterest income to average assets of 0.47 percent for the quarter was up from 0.39 percent in the second quarter of 2016. Noninterest income totaled $1.3 million in the second quarter of 2017, compared to $1.0 million in the second quarter of 2016. The increase in non-interest income was primarily due to gains from higher sales volumes of SBA and mortgage loans.

Noninterest expense to average assets of 3.29 percent for the quarter was down from 3.42 percent in the second quarter of 2016 as the company continues to capture the efficiencies from economies of scale. Noninterest expense totaled $8.8 million in the second quarter of 2017, which was up from $8.5 million in the second quarter of 2016. The increase in noninterest expense compared to the prior year was primarily due to merger and conversion costs related to this quarter's branch acquisition and the pending Capstone Bancshares acquisition. Income tax expense was $726 thousand in the second quarter of 2017 compared to $691 thousand in the second quarter of 2016. The company's effective tax rate dropped to 30.6 percent in the second quarter of 2017 compared to 36.7 percent in the second quarter of 2016, as tax credits at the state level more than offset non-deductible merger expenses.

Second Quarter 2017 compared to First Quarter 2017
Net income available to common shareholders totaled $1.6 million in the second quarter of 2017, or $0.20 per diluted share, compared to $1.4 million, or $0.19 per diluted share, in the first quarter of 2017. Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $1.6 million in the second quarter of 2017 compared to $1.1 million in the previous quarter.

Net interest income to average assets of 3.81 percent for the quarter was unchanged from the first quarter of 2017. Net interest income totaled $10.2 million in the second quarter of 2017 compared to $9.8 million in the first quarter of 2017. Net interest income was positively impacted by approximately $117 thousand due to the one extra day in the current period. Net interest margin, taxable equivalent, increased from 4.07 percent in the first quarter of 2016 to 4.15 percent in the second quarter of 2017 as a result of increases in average loan balances and increases in the yields of the securities portfolio.

Provision for loan losses was $298 thousand in the second quarter of 2017, compared to $12 thousand in the first quarter of 2017. The increase in provision was due to loan portfolio growth during the quarter. The ALLL was $5.5 million, or 0.64 percent of total loans as of June 30, 2017, compared to $5.2 million, or 0.64 percent of total loans, as of March 31, 2017.

Nonperforming loans as a percentage of total loans was 0.13 percent as of June 30, 2017, which was down from 0.18 percent in the prior quarter. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.31 percent as of June 30, 2017, compared to 0.36 percent as of March 31, 2017.

Noninterest income to average assets of 0.47 percent for the period increases from 0.36 percent in the first quarter of 2017. Noninterest income totaled $1.3 million in the second quarter of 2017, compared to $0.9 million in the first quarter of 2017. The increase in non-interest income was primarily due to gains from higher sales volumes of SBA and mortgage loans.

Noninterest expense to average assets of 3.29 percent for the quarter was up from 3.16 percent in the first quarter of 2017. Noninterest expense totaled $8.8 million in the second quarter of 2017, which was up $684 thousand from the first quarter of 2017, primarily due to merger and conversion costs related to this quarter's branch acquisition and the pending Capstone Bancshares acquisition. Income tax expense was $726 thousand in the second quarter of 2017 compared to $946 thousand in the first quarter of 2017. The company's effective tax rate dropped to 30.6 percent in the second quarter of 2017 compared to 36.5 percent in the first quarter of 2017, as tax credits at the state level more than offset non-deductible merger expenses.

Conference Call Information
SmartFinancial plans to issue its earnings release for the second quarter of 2017 on Tuesday, July 25, 2017, and will host a conference call on Wednesday, July 26, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number: 7107357

A replay of the conference call will be available through August 3, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number: 10110303. Conference call materials (earnings release & conference call presentation) will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile at 9:00 am EST prior to the morning of the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with fourteen branches, one loan production office, and one mortgage production office located in East Tennessee, the Florida Panhandle, and North Georgia. Recruiting the best people, delivering exceptional client service, strategic branching and a conservative and disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

This release contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: the expected revenue synergies and cost savings from the proposed merger with Capstone may not be fully realized or may take longer than anticipated to be realized; the disruption from the proposed Capstone merger with customers, suppliers or employees or other business partners’ relationships; the risk of successful integration of our business with that of Capstone after consummation of the proposed merger; the failure of SmartFinancial’s or Capstone’s shareholders to approve the merger agreement; changes in management’s plans for the future, prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and other factors that may be described in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.
The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, SmartFinancial assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; and (iii) tangible common equity, in its analysis of the company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger and conversion costs, OREO gain and losses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses, merger and conversion costs, and adjustment for OREO gains and losses from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. Tangible common equity excludes total preferred stock, preferred stock paid in capital, goodwill, and other intangible assets.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Important Information for Investors and Shareholders

In connection with the proposed merger, SmartFinancial has filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 containing a joint proxy statement/prospectus of Capstone Bancshares, Inc. and SmartFinancial. A definitive joint proxy statement/prospectus will be mailed to shareholders of both SmartFinancial and Capstone. Shareholders of SmartFinancial and Capstone are urged to read the joint proxy statement/prospectus and other documents filed with the SEC carefully and in their entirety because they contain important information. Shareholders may obtain free copies of the registration statement and the joint proxy statement/prospectus and other documents filed with the SEC by SmartFinancial through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by SmartFinancial are also available free of charge on SmartFinancial’s website at www.smartfinancialinc.com or by contacting SmartFinancial’s Investor Relations Department at (423) 385-3009.

SmartFinancial, Capstone, their directors and executive officers, and other members of management and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of SmartFinancial is set forth in SmartFinancial’s proxy statement for its 2017 annual shareholders meeting. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
As of and for the three months ending
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
Selected Performance Ratios (Annualized)
Return on average assets 0.61% 0.64% 0.64% 0.63% 0.48%
Net operating return on average assets (Non-GAAP) 0.61% 0.44% 0.54% 0.44% 0.26%
Return on average shareholder equity 4.95% 5.18% 6.24% 6.19% 4.64%
Net operating return on average shareholder equity (Non-GAAP) 4.91% 3.55% 5.32% 4.35% 2.47%
Net interest income / average assets 3.81% 3.81% 3.80% 3.77% 3.88%
Yield on earning assets, TE (Non-GAAP) 4.66% 4.54% 4.51% 4.50% 4.62%
Cost of interest-bearing liabilities 0.65% 0.60% 0.58% 0.57% 0.56%
Net interest margin, TE (Non-GAAP) 4.15% 4.07% 4.06% 4.04% 4.16%
Noninterest income / average assets 0.47% 0.36% 0.37% 0.47% 0.39%
Noninterest expense / average assets 3.29% 3.16% 3.09% 3.14% 3.42%
Efficiency ratio 76.77% 75.79% 74.29% 74.06% 80.13%
Operating efficiency ratio (Non-GAAP) 78.98% 81.34% 78.98% 80.31% 85.49%
Pre-tax pre-provision income / average assets 0.96% 1.09% 1.08% 1.09% 0.85%
Per Common Share
Net income, basic $0.20 $0.19 $0.23 $0.23 $0.16
Net income, diluted 0.20 0.19 0.22 0.22 0.15
Net operating earnings, basic (Non-GAAP) 0.20 0.15 0.24 0.19 0.11
Net operating earnings, diluted (Non-GAAP) 0.20 0.15 0.23 0.19 0.10
Book value as of 16.39 16.14 15.81 15.83 15.64
Tangible book value (Non-GAAP) as of 15.48 15.34 14.69 14.70 14.48
Common shares outstanding as of 8,219 8,211 5,896 5,885 5,824
Composition Of Loans
Commercial & financial $ 105,129 $90,649 $85,696 $83,534 $87,253
Real estate construction & Development 101,151 115,675 117,748 128,733 115,385
Real estate commercial 445,176 407,933 414,860 394,346 389,368
owner occupied 211,469 197,032 199,645 191,697 199,716
non-owner occupied 233,707 210,901 215,215 202,649 189,652
Real estate residential 206,667 186,344 187,557 183,528 174,013
Other loans 7,298 6,938 7,515 7,001 7,377
Total loans $865,421 $ 807,539 $813,376 $797,142 $ 773,396
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
As of and for the three months ending
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
Asset Quality Data and Ratios
Nonperforming loans $1,147 $1,445 $2,142 $1,370 $2,226
Foreclosed assets 2,369 2,371 2,386 2,536 4,936
Total nonperforming assets $3,516 $3,816 $4,528 $3,906 $7,162
Restructured loans not included in nonperforming loans $ $301 $608 $3,388 $3,639
Net charge-offs to average loans (annualized) (0.04)% (0.02)% 0.02% 0.01% 0.01%
Allowance for loan losses to loans 0.64% 0.64% 0.63% 0.62% 0.61%
Nonperforming loans to total loans, gross 0.13% 0.18% 0.26% 0.17% 0.29%
Nonperforming assets to total assets 0.31% 0.36% 0.43% 0.38% 0.69%
Capital Ratios
Tangible equity to tangible assets 11.18% 12.06% 9.34% 9.53% 9.37%
Tangible common equity to tangible assets 11.18% 12.06% 8.20% 8.36% 8.20%
SmartFinancial, Inc.: Estimated
Tier 1 leverage 11.54% 12.37% 9.71% 9.77% 9.66%
Common equity Tier 1 13.43% 14.40% 9.98% 10.04% 10.53%
Tier 1 capital 13.43% 14.40% 11.35% 11.42% 12.04%
Total capital 14.10% 15.12% 11.93% 12.00% 12.60%
SmartBank: Estimated
Tier 1 leverage 11.41% 12.24% 9.71% 9.63% 9.7%
Common equity Tier 1 13.29% 14.25% 11.30% 11.26% 11.31%
Tier 1 capital 13.29% 14.25% 11.30% 11.26% 11.31%
Total capital 13.97% 14.98% 11.88% 11.83% 11.87%


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
Ending Balances
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
Assets
Cash & cash equivalents $82,835 $55,548 $68,748 $58,587 $71,737
Securities available for sale 132,762 137,133 129,422 138,628 142,875
Other investments 6,081 5,628 5,628 4,451 4,451
Total loans 865,421 807,539 813,376 797,143 773,396
Allowance for loan losses (5,498) (5,152) (5,105) (4,964) (4,720)
Loans, net 859,923 802,387 808,271 792,178 768,676
Premises and equipment 33,764 30,802 30,536 27,863 25,844
Foreclosed assets 2,369 2,371 2,386 2,536 4,936
Goodwill and other intangibles 7,492 6,583 6,636 6,675 6,755
Other assets 20,209 10,634 10,830 9,808 9,524
Total assets $ 1,145,435 $ 1,051,086 $1,062,456 $1,040,726 $ 1,034,798
Liabilities
Noninterest demand $183,324 $160,673 $153,483 $145,509 $145,864
Interest-bearing demand 156,150 167,433 162,702 152,216 153,166
Money market and savings 324,014 274,993 274,605 271,259 258,281
Time deposits 318,147 286,600 316,275 291,858 331,438
Total deposits 981,635 889,699 907,065 860,842 888,749
Repurchase agreements 22,946 23,153 26,622 24,202 26,883
FHLB & other borrowings 60 18,505 43,048 10,091
Other liabilities 6,120 5,622 5,024 7,463 6,011
Total liabilities 1,010,701 918,535 957,216 935,556 931,734
Shareholders' Equity
Preferred stock 12 12 12
Common stock 8,219 8,211 5,896 5,885 5,824
Additional paid-in capital 106,794 106,703 83,463 83,330 82,800
Retained earnings 19,968 18,320 16,871 15,494 14,153
Accumulated other comprehensive loss (247) (683) (1,002) 449 275
Total shareholders' equity 134,734 132,551 105,240 105,170 103,064
Total liabilities & shareholders' equity $1,145,435 $1,051,086 $1,062,456 $1,040,726 $1,034,798


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
INCOME STATEMENT
Three months ending
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
Interest Income
Loans, including fees $ 10,747 $ 10,216 $10,324 $10,111 $ 9,954
Investment securities and interest bearing due froms
692 661 570 602 665
Other interest income 78 73 83 51 50
Total interest income 11,517 10,949 10,977 10,763 10,669
Interest Expense
Deposits 1,241 1,098 1,066 1,065 1,013
Repurchase agreements 16 16 17 17 15
FHLB and other borrowings 12 15 37 17 29
Total interest expense 1,269 1,129 1,121 1,099 1,057
Net interest income 10,248 9,820 9,856 9,665 9,612
Provision for loan losses 298 12 171 261 218
Net interest income after provision for loan losses 9,950 9,808 9,685 9,404 9,394
Noninterest income
Service charges on deposit accounts 291 265 277 296 259
Gain on securities 18 98
Gain on sale of loans and other assets 405 275 242 287 197
Gain (loss) on sale of foreclosed assets 1 (16) 6 130 (4)
Other non-interest income 556 402 422 472 410
Total noninterest income 1,253 927 948 1,204 961
Noninterest expense
Salaries and employee benefits 4,758 4,647 4,422 4,312 4,486
Occupancy expense 963 978 875 965 1,137
FDIC premiums 61 153 166 153 151
Foreclosed asset expense 12 37 79 64
Marketing 129 164 79 179 184
Data Processing 475 340 541 457 555
Professional expenses 473 570 558 558 551
Amortization of other intangibles 61 53 39 80 93
Service contracts 313 296 281 272 316
Other noninterest expense 1,584 944 1,028 994 936
Total noninterest expense 8,829 8,145 8,026 8,050 8,472
Earnings before income taxes 2,374 2,590 2,607 2,558 1,883
Income tax expense 726 946 960 947 691
Net income (loss) 1,648 1,644 1,647 1,611 1,192
Dividends on preferred stock 195 270 270 270
Net income available to common shareholders $1,648 $1,449 $1,377 $1,341 $922
NET INCOME PER COMMON SHARE
Basic $0.20 $0.19 $0.23 $0.23 $0.16
Diluted 0.20 0.19 0.22 0.22 0.15
Weighted average common shares outstanding
Basic 8,217 7,525 5,891 5,835 5,820
Diluted 8,326 7,631 6,206 6,096 6,132


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
Three Months Ended June 30, 2017 Three Months Ended March 31, 2017 Three Months Ended June 30, 2016
Average Yield/ Average Yield/ Average Yield/
Balance Interest * Cost* Balance Interest * Cost* Balance Interest * Cost*
Assets
Loans $834,665 $ 10,752 5.17% $811,522 $ 10,220 5.11% $751,425 $ 9,960 5.32%
Investment securities and interest bearing due froms 138,965 707 2.04% 161,392 677 1.70% 171,526 678 1.59%
Federal funds and other 18,503 78 1.69% 6,621 73 4.47% 5,719 50 3.51%
Total interest-earning assets 992,133 11,537 4.66% 979,535 10,970 4.54% 928,670 10,688 4.62%
Non-interest-earning assets 85,553 66,208 66,530
Total assets $ 1,077,686 $ 1,045,743 $ 995,200
Liabilities and Stockholders’ Equity
Interest-bearing demand deposits $156,387 $115 0.29% $159,255 $93 0.24% $153,881 $69 0.18%
Money market and savings deposits 300,448 424 0.57% 275,576 328 0.48% 248,401 299 0.48%
Time deposits 305,171 702 0.92% 302,256 677 0.91% 321,244 645 0.81%
Total interest-bearing deposits 762,006 1,241 0.65% 737,087 1,098 0.60% 723,526 1,013 0.56%
Securities sold under agreement to repurchase 19,903 16 0.32% 18,682 16 0.35% 19,742 15 0.30%
Federal Home Loan Bank advances and other borrowings 3,482 11 1.27% 7,446 15 0.82% 11,287 29 1.03%
Total interest-bearing liabilities 785,391 1,268 0.65% 763,215 1,129 0.60% 754,555 1,057 0.56%
Noninterest-bearing deposits 157,965 149,305 132,765
Other liabilities 659 4,580 5,261
Total liabilities 944,015 917,100 891,431
Shareholders’ equity 133,671 128,643 102,619
Total liabilities and stockholders’ equity $1,077,686 $1,045,743 $995,200
Net interest income, taxable equivalent $10,269 $9,841 $9,631
Interest rate spread 4.01% 3.94% 4.06%
Tax equivalent net interest margin 4.15% 4.07% 4.16%
Percentage of average interest-earning assets to average interest-bearing liabilities 126.32% 128.34% 123.08%
Percentage of average equity to average assets 12.40% 12.30% 10.32%
* Taxable equivalent basis


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
NON-GAAP RECONCILIATIONS Three months ending
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
Net interest income, Taxable Equivalent
Net interest income (GAAP) $10,248 $9,820 $9,856 $9,665 $9,613
Taxable equivalent adjustment 21 21 22 14 18
Net interest income, Taxable Equivalent (Non-GAAP) $10,269 $9,841 $9,878 $9,679 $9,631
Operating Earnings
Net income (loss) (GAAP) $1,648 $1,644 $1,647 $1,611 $1,192
Purchased loan accounting adjustments1 (696) (540) (430) (450) (597)
Securities (gains) losses (18) (98)
Merger and conversion costs 420 153
Foreclosed assets (gains) losses 15 (6) (130) 4
Income tax effect of adjustments2 265 201 167 229 206
Net operating earnings (Non-GAAP) 1,637 1,320 1,378 1,242 860
Dividends on preferred stock (195) (270) (270) (270)
Net operating earnings available to common shareholders (Non-GAAP) $1,637 $1,125 $1,108 $972 $590
Net operating earnings per common share:
Basic $0.20 $0.15 $0.24 $0.19 $0.11
Diluted 0.20 0.15 0.23 0.19 0.10
Operating Efficiency Ratio
Efficiency ratio (GAAP) 76.77% 75.79% 74.29% 74.06% 80.13%
Adjustment for amortization of intangibles (0.69)% (0.65)% (0.49)% (0.99)% (1.10)%
Adjustment for taxable equivalent yields (0.22)% (0.25)% (0.26)% (0.18)% (0.16)%
Adjustment for purchased loan accounting adjustments1 7.88% 6.63% 5.36% 5.59% 7.05%
Adjustment for securities (gains) losses % % % 0.23% 1.16%
Adjustment for merger and conversion costs (4.76)% % % % (1.81)%
Adjustment for OREO (gains) losses % (0.18)% 0.08% 1.62% (0.05)%
Operating efficiency ratio (Non-GAAP) 78.98% 81.34% 78.98% 80.33% 85.22%
Loan Discount Data
Allowance for loan losses (GAAP) $5,498 $5,152 $5,105 $4,964 $4,720
Net acquisition accounting fair value discounts to loans3 $9,086 $9,831 $10,271 $10,742 $11,053
Tangible Common Equity
Shareholders' equity (GAAP) $134,734 $132,551 $ 105,240 $ 105,170 $103,064
Less preferred stock & preferred stock paid in capital 12,000 12,000 12,000
Less goodwill and other intangible assets 7,492 6,583 6,636 6,675 6,754
Tangible common equity (Non-GAAP) $ 127,242 $ 125,968 $86,604 $86,495 $84,310

1 Consists of ASC 310-30 accretion above (below) contractual loan income and ASC 310-20 accretion
2 Assumes 38.29% effective rate, except for those expenses which are not deductible for tax purposes
3 Includes ASC 310-20 and ASC 310-30 discounts

Investor Contacts Billy Carroll President & CEO (865) 868-0613 Frank Hughes Executive Vice President, Investor Relations (423) 385-3009 Media Contact Kelley Fowler First Vice President, Public Relations & Marketing SmartBank (865) 868-0611 kelley.fowler@smartbank.com

Source:SmartFinancial, Inc