SmartFinancial Increases Net Income Available to Common Shareholders 26 percent compared to prior year

KNOXVILLE, Tenn., Oct. 30, 2017 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), announced today net income of $1.7 million in its third quarter of 2017, compared to $1.6 million a year ago. Net income available to common shareholders totaled $1.7 million for third quarter of 2017 compared to $1.3 million during the third quarter of 2016.

Billy Carroll, President & CEO, stated: "In the third quarter net income was up five percent from a year ago. Compared to last year we grew net interest income over one million dollars by growing gross loans nine percent year over year and by increasing asset yields and our net interest margin. During the last quarter we added revenue producers in several markets and operations personnel to support them and the pending acquisition of Capstone Bancshares in Alabama. Those additions resulted in an increase in salaries and benefits that, along with over three hundred thousand dollars in merger and conversion costs during the current quarter, temporarily elevated our efficiency ratio. We anticipate additional merger related costs for the next two quarters with the integration of Capstone Bancshares after which time efficiencies will improve. Our team has done a great job of balancing the merger planning while growing the core bank."

SmartFinancial's Chairman, Miller Welborn, concluded: "We are looking forward to completing the acquisition of Capstone Bancshares. Our resulting company will have assets of approximately $1.6 billion. The company's larger scale will lead to increased efficiencies and should result in a higher return on assets by the second quarter of 2018. Just as exciting as completing this acquisition are the future opportunities available for the company. We believe by expanding our geographic footprint we are positioning the company as a 'partner of choice' among other community banks in the SouthEast."

Performance Highlights

  • Net income available to common shareholders of $1.7 million for the quarter, up from $1.3 million a year ago.
  • Net interest margin, taxable equivalent, increased to 4.17 percent, the highest in the past five quarters.
  • Increased average interest-earning assets to average interest-bearing liabilities to 128 percent.

Third Quarter 2017 compared to Third Quarter 2016

Net income available to common shareholders totaled $1.7 million in the third quarter of 2017, or $0.20 per diluted share, compared to $1.3 million, or $0.22 per diluted share, in the third quarter of 2016. Net operating earnings available to common shareholders, which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $1.8 million in the third quarter of 2017 compared to $1.3 million in the third quarter of 2016.

Net interest income to average assets of 3.81 percent for the quarter increased from 3.77 percent in the third quarter of 2016 as the average earning asset balances and yields increased compared to the prior year. Net interest income totaled $10.9 million in the third quarter of 2017 compared to $9.7 million in the third quarter of 2016. Net interest income was positively impacted compared to the prior year due to increases in loan balances and increases in the yields of the loan and securities portfolios. Net interest margin, taxable equivalent, increased from 4.03 percent in the third quarter of 2016 to 4.17 percent in the third quarter of 2017 as a result a higher percentage of average interest-earning assets to average interest-bearing liabilities and increases in the yield on earning assets.

Provision for loan losses was $30 thousand in the third quarter of 2017, compared to $261 thousand in the third quarter of 2016. The decrease in provision for loan losses was due to improvements in the credit profile of the loan portfolio as well as slower loan growth during the period. Annualized net charge-offs (recoveries) was (0.02) percent of average loans in the third quarter of 2017. The ALLL was $5.4 million, or 0.62 percent of total loans as of September 30, 2017, compared to $5.0 million, or 0.62 percent of total loans, as of September 30, 2016. In addition to the allowance there were $8.2 million additional discounts on $166.5 million of purchased loans.

Nonperforming loans as a percentage of total loans was 0.15 percent as of September 30, 2017, which was down from 0.17 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 0.37 percent as of September 30, 2017, compared to 0.38 percent as of September 30, 2016.

Noninterest income to average assets of 0.43 percent for the quarter was down from 0.47 percent in the third quarter of 2016. Noninterest income totaled $1.2 million in the third quarter of 2017, compared to $1.2 million in the third quarter of 2016. Year over year the largest changes in noninterest income were a $157 thousand decrease in gains on the sale of foreclosed assets, a $125 thousand increase in securities gains, and a $113 thousand increase in other income.

Noninterest expense to average assets of 3.33 percent for the quarter was up from 3.13 percent in the third quarter of 2016. Noninterest expense totaled $9.5 million in the third quarter of 2017, which was up from $8.0 million in the third quarter of 2016. The increase in noninterest expense compared to the prior year was primarily due to $723 thousand higher salaries and employee benefits and $303 thousand merger and conversion costs. Income tax expense was $882 thousand in the third quarter of 2017 compared to $947 thousand in the third quarter of 2016. The company's effective tax rate dropped to 34.4 percent in the third quarter of 2017 compared to 37.0 percent in the third quarter of 2016.

Third Quarter 2017 compared to Second Quarter 2017

Net income available to common shareholders totaled $1.7 million in the third quarter of 2017, or $0.20 per diluted share, compared to $1.6 million, or $0.20 per diluted share, in the second quarter of 2017. Net operating earnings available to common shareholders, which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $1.8 million in the third quarter of 2017 compared to $1.9 million in the previous quarter.

Net interest income to average assets of 3.81 percent for the quarter was unchanged from the second quarter of 2017. Net interest income totaled $10.9 million in the third quarter of 2017 compared to $10.2 million in the second quarter of 2017. Net interest income was positively impacted by approximately $123 thousand due to the one extra day in the current period. Net interest margin, taxable equivalent, increased from 4.15 percent in the second quarter of 2017 to 4.17 percent in the third quarter of 2017 as a result a higher percentage of average interest-earning assets to average interest-bearing liabilities and increases of the yield on earning assets.

Provision for loan losses was $30 thousand in the third quarter of 2017, compared to $298 thousand in the second quarter of 2017. The decrease in provision for loan losses was due to slower loan growth during the period. The ALLL was $5.4 million, or 0.62 percent of total loans as of September 30, 2017, compared to $5.5 million, or 0.64 percent of total loans, as of June 30, 2017.

Nonperforming loans as a percentage of total loans was 0.15 percent as of September 30, 2017, which was up slightly from 0.13 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 0.37 percent as of September 30, 2017, compared to 0.31 percent as of June 30, 2017.

Noninterest income to average assets of 0.43 percent for the period was down from 0.47 percent in the second quarter of 2017. Noninterest income totaled $1.2 million in the third quarter of 2017, compared to $1.3 million in the second quarter of 2017. The decrease in non-interest income was primarily due to smaller gains from lower sales volumes of SBA and mortgage loans.

Noninterest expense to average assets of 3.33 percent for the quarter was up from 3.29 percent in the second quarter of 2017. Noninterest expense totaled $9.5 million in the third quarter of 2017, which was up $718 thousand from the second quarter of 2017, primarily due to higher salaries and employee benefits. Income tax expense was $882 thousand in the third quarter of 2017 compared to $726 thousand in the second quarter of 2017. The company's effective tax rate increased to 34.4 percent in the third quarter of 2017 compared to 30.6 percent in the second quarter of 2017.

Conference Call Information
SmartFinancial will host a conference call on Tuesday, October 31, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number: 6556809. A replay of the conference call will be available through November 7, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number: 10113897. 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 merger with Capstone may not be fully realized or may take longer than anticipated to be realized; the disruption from the 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 merger; the amount of costs, fees, expenses, and charges related to the merger; 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, OREO gain and losses, merger and conversion expenses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses , adjustment for OREO gains and losses, and merger and conversion costs from the efficiency ratio. 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.

Source
SmartFinancial, Inc.

Investor Contacts
Billy Carroll Frank Hughes
President & CEO Executive Vice President, Investor Relations
(865) 868-0613 (423) 385-3009

Media Contact
Kelley Fowler
First Vice President, Public Relations & Marketing
SmartBank
(865) 868-0611
kelley.fowler@smartbank.com


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
As of and for the three months ending
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Selected Performance Ratios (Annualized)
Return on average assets 0.59 % 0.61 % 0.64 % 0.64 % 0.63 %
Net operating return on average assets (Non-GAAP) 0.63 % 0.61 % 0.44 % 0.54 % 0.44 %
Return on average shareholder equity 4.91 % 4.95 % 5.18 % 6.24 % 6.19 %
Net operating return on average shareholder equity (Non-GAAP) 5.25% 4.91 % 3.55 % 5.32 % 4.35 %
Net interest income / average assets 3.81 % 3.81 % 3.81 % 3.80 % 3.77 %
Yield on earning assets, TE (Non-GAAP) 4.70 % 4.66 % 4.54 % 4.51 % 4.48 %
Cost of interest-bearing liabilities 0.68 % 0.65 % 0.60 % 0.58 % 0.57 %
Net interest margin, TE (Non-GAAP) 4.17 % 4.15 % 4.07 % 4.06 % 4.03 %
Noninterest income / average assets 0.43 % 0.47 % 0.36 % 0.37 % 0.47 %
Noninterest expense / average assets 3.33 % 3.29 % 3.16 % 3.09 % 3.13 %
Efficiency ratio 78.62 % 76.77 % 75.79 % 74.29 % 74.06 %
Operating efficiency ratio (Non-GAAP) 76.46 % 78.98 % 81.34 % 78.98 % 80.31 %
Pre-tax pre-provision income / average assets 0.97 % 0.96 % 1.09 % 1.08 % 1.09 %
Per Common Share
Net income, basic $0.20 $0.20 $0.19 $0.23 $0.23
Net income, diluted 0.20 0.20 0.19 0.22 0.22
Net operating earnings, basic (Non-GAAP) 0.22 0.20 0.15 0.24 0.19
Net operating earnings, diluted (Non-GAAP) 0.22 0.20 0.15 0.23 0.19
Book value as of 16.57 16.39 16.14 15.81 15.83
Tangible book value (Non-GAAP) as of 15.67 15.48 15.34 14.69 14.70
Common shares outstanding as of 8,243 8,219 8,211 5,896 5,885
Composition Of Loans
Commercial & financial $119,782 $105,129 $90,649 $85,696 $83,534
Real estate construction & Development 98,212 101,151 115,675 117,748 128,733
Real estate commercial 447,620 445,176 407,933 414,860 394,346
owner occupied 210,489 211,469 197,032 199,645 191,697
non-owner occupied 237,131 233,707 210,901 215,215 202,649
Real estate residential 199,704 206,667 186,344 187,557 183,528
Other loans 6,361 7,298 6,938 7,515 7,001
Total loans $871,679 $865,421 $807,539 $813,376 $797,142
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
As of and for the three months ending
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Asset Quality Data and Ratios
Nonperforming loans $1,264 $1,147 $1,445 $2,142 $1,370
Foreclosed assets 2,888 2,369 2,371 2,386 2,536
Total nonperforming assets $4,152 $3,516 $3,816 $4,528 $3,906
Restructured loans not included in nonperforming loans $42 $ $301 $608 $3,388
Net charge-offs to average loans (annualized) (0.02)% (0.04)% (0.02)% 0.02 % 0.01 %
Allowance for loan losses to loans 0.62 % 0.64 % 0.64 % 0.63 % 0.62 %
Nonperforming loans to total loans, gross 0.15 % 0.13 % 0.18 % 0.26 % 0.17 %
Nonperforming assets to total assets 0.37 % 0.31 % 0.36 % 0.43 % 0.38 %
Capital Ratios
Tangible equity to tangible assets 11.45 % 11.18 % 12.06 % 9.34 % 9.53 %
Tangible common equity to tangible assets 11.45 % 11.18 % 12.06 % 8.20 % 8.36 %
SmartFinancial, Inc.: Estimated
Tier 1 leverage 12.18 % 11.54 % 12.37 % 9.71 % 9.77 %
Common equity Tier 1 13.74 % 13.43 % 14.40 % 9.98 % 10.04 %
Tier 1 capital 13.74 % 13.43 % 14.40 % 11.35 % 11.42 %
Total capital 14.32 % 14.10 % 15.12 % 11.93 % 12.00 %
SmartBank: Estimated
Tier 1 leverage 11.23 % 10.98 % 11.17 % 9.71 % 9.63 %
Common equity Tier 1 12.60 % 12.32 % 13.13 % 11.30 % 11.26 %
Tier 1 capital 12.60 % 12.32 % 13.13 % 11.30 % 11.26 %
Total capital 13.19 % 12.89 % 13.71 % 11.88 % 11.83 %



SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
Ending Balances
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Assets
Cash & cash equivalents $84,098 $82,835 $55,548 $68,748 $58,587
Securities available for sale 115,535 132,762 137,133 129,422 138,628
Other investments 6,081 6,081 5,628 5,628 4,451
Total loans 871,679 865,421 807,539 813,376 797,143
Allowance for loan losses (5,393) (5,498) (5,152) (5,105) (4,964)
Loans, net 866,286 859,923 802,387 808,271 792,178
Premises and equipment 33,778 33,765 30,802 30,536 27,863
Foreclosed assets 2,888 2,369 2,371 2,386 2,536
Goodwill and other intangibles 7,414 7,492 6,583 6,636 6,675
Other assets 19,742 20,253 10,634 10,830 9,808
Total assets $1,135,822 $1,145,479 $1,051,086 $1,062,456 $1,040,726
Liabilities
Noninterest demand $185,386 $183,324 $160,673 $153,483 $145,509
Interest-bearing demand 156,953 156,150 167,433 162,702 152,216
Money market and savings 306,357 324,014 274,993 274,605 271,259
Time deposits 311,490 318,147 286,600 316,275 291,858
Total deposits 960,187 981,635 889,699 907,065 860,842
Repurchase agreements 26,542 22,946 23,153 26,622 24,202
FHLB & other borrowings 6,000 60 18,505 43,048
Other liabilities 6,505 6,164 5,622 5,024 7,463
Total liabilities 999,234 1,010,745 918,535 957,216 935,556
Shareholders' Equity
Preferred stock 12 12
Common stock 8,243 8,219 8,211 5,896 5,885
Additional paid-in capital 107,065 106,794 106,703 83,463 83,330
Retained earnings 21,654 19,968 18,320 16,871 15,494
Accumulated other comprehensive loss (374) (248) (683) (1,002) 449
Total shareholders' equity 136,588 134,734 132,551 105,240 105,170
Total liabilities & shareholders' equity $1,135,822 $1,145,479 $1,051,086 $1,062,456 $1,040,726


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
INCOME STATEMENT
Three months ending
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Interest Income
Loans, including fees $11,491 $10,747 $10,216 $10,324 $10,111
Investment securities and interest bearing due
froms
740 692 661 570 602
Other interest income 86 78 73 83 51
Total interest income 12,317 11,517 10,949 10,977 10,763
Interest Expense
Deposits 1,373 1,241 1,098 1,066 1,065
Repurchase agreements 15 16 16 17 17
FHLB and other borrowings 5 12 15 37 17
Total interest expense 1,393 1,268 1,129 1,121 1,099
Net interest income 10,924 10,249 9,820 9,856 9,665
Provision for loan losses 30 298 12 171 261
Net interest income after provision for loan losses 10,894 9,951 9,808 9,685 9,404
Noninterest income
Service charges on deposit accounts 294 291 265 277 296
Gain on securities 144 18
Gain on sale of loans and other assets 224 405 275 242 287
Gain (loss) on sale of foreclosed assets (27) 1 (16) 6 130
Other non-interest income 585 556 402 422 472
Total noninterest income 1,220 1,253 927 948 1,204
Noninterest expense
Salaries and employee benefits 5,035 4,758 4,647 4,422 4,312
Occupancy expense 1,114 963 978 875 965
FDIC premiums 102 61 153 166 153
Foreclosed asset expense 20 12 37 79
Marketing 177 129 164 79 179
Data Processing 483 475 340 541 457
Professional expenses 472 473 570 558 558
Amortization of other intangibles 78 61 53 39 80
Service contracts 363 313 296 281 272
Other noninterest expense 1,703 1,584 944 1,028 994
Total noninterest expense 9,547 8,829 8,145 8,026 8,050
Earnings before income taxes 2,567 2,375 2,590 2,607 2,558
Income tax expense 882 726 946 960 947
Net income (loss) 1,685 1,649 1,644 1,647 1,611
Dividends on preferred stock 195 270 270
Net income available to common shareholders $1,685 $1,649 $1,449 $1,377 $1,341
NET INCOME PER COMMON SHARE
Basic $0.20 $0.20 $0.19 $0.23 $0.23
Diluted 0.20 0.20 0.19 0.22 0.22
Weighted average common shares outstanding
Basic 8,235 8,217 7,525 5,891 5,835
Diluted 8,333 8,326 7,631 6,206 6,096


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
Three Months Ended September 30, 2017 Three Months Ended June 30, 2017 Three Months Ended September 30, 2016
Average Yield/ Average Yield/ Average Yield/
Balance Interest * Cost* Balance Interest * Cost* Balance Interest * Cost*
Assets
Loans $868,352 $11,496 5.25% $834,665 $10,752 5.17% $788,585 $10,112 5.09%
Investment securities and interest bearing due froms 142,089 757 2.11% 138,965 707 2.04% 159,683 615 1.53%
Federal funds and other 31,864 86 1.07% 18,503 78 1.69% 5,442 51 3.72%
Total interest-earning assets 1,042,305 12,339 4.70% 992,133 11,537 4.66% 953,710 10,778 4.48%
Non-interest-earning assets 96,147 85,553 66,735
Total assets $1,138,452 $1,077,686 $1,020,445
Liabilities and Stockholders’ Equity
Interest-bearing demand deposits $153,838 $118 0.30% $156,387 $115 0.29% $147,102 $73 0.20%
Money market and savings deposits 329,933 519 0.62% 300,448 424 0.57% 268,307 283 0.42%
Time deposits 311,668 736 0.94% 305,171 702 0.92% 312,889 709 0.90%
Total interest-bearing deposits 795,439 1,373 0.68% 762,006 1,241 0.65% 728,298 1,065 0.58%
Securities sold under agreement to
repurchase
20,589 15 0.29% 19,903 16 0.32% 22,471 17 0.30%
Federal Home Loan Bank advances
and other borrowings
381 5 5.21% 3,482 11 1.27% 11,187 17 0.60%
Total interest-bearing liabilities 816,409 1,393 0.68% 785,391 1,268 0.65% 761,956 1,099 0.57%
Noninterest-bearing deposits 179,968 157,965 148,178
Other liabilities 5,978 659 6,194
Total liabilities 1,002,355 944,015 916,328
Shareholders’ equity 136,097 133,671 104,117
Total liabilities and stockholders’ equity $1,138,452 $1,077,686 $1,020,445
Net interest income, taxable equivalent $10,946 $10,269 $9,679
Interest rate spread 4.02% 4.01% 3.91%
Tax equivalent net interest margin 4.17% 4.15% 4.03%
Percentage of average interest-earning
assets to average interest-bearing
liabilities
127.67% 126.32% 125.17%
Percentage of average equity to
average assets
11.95% 12.40% 10.20%
* Taxable equivalent basis


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited)
(In thousands)
NON-GAAP RECONCILIATIONS Three months ending
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Net interest income, Taxable Equivalent
Net interest income (GAAP) $10,924 $10,248 $9,820 $9,856 $9,665
Taxable equivalent adjustment 22 21 21 22 14
Net interest income, Taxable Equivalent (Non-GAAP) $10,946 $10,269 $9,841 $9,878 $9,679
Operating Earnings1
Net income (loss) (GAAP) $1,685 $1,648 $1,644 $1,647 $1,611
Securities (gains) losses (144) (18)
Foreclosed assets (gains) losses 27 15 (6) (130)
Merger and conversion costs 303 420
Income tax effect of adjustments2 (71) (161) (6) 2 57
Net operating earnings (Non-GAAP) 1,800 1,907 1,653 1,643 1,520
Dividends on preferred stock (195) (270) (270)
Net operating earnings available to common shareholders
(Non-GAAP)
$1,800 $1,907 $1,458 $1,373 $1,250
Net operating earnings per common share:
Basic $0.22 $0.23 $0.19 $0.23 $0.21
Diluted 0.22 0.23 0.19 0.22 0.21
Operating Efficiency Ratio
Efficiency ratio (GAAP) 78.62 % 76.77 % 75.79 % 74.29 % 74.06 %
Adjustment for taxable equivalent yields (0.22)% (0.22)% (0.25)% (0.26)% (0.18)%
Adjustment for securities gains (losses) 1.51 % % % % 0.23 %
Adjustment for OREO gains (losses) (0.28)% % (0.18)% 0.08 % 1.62 %
Adjustment for merger & conversion costs (3.17)% (4.76)% % % %
Operating efficiency ratio (Non-GAAP) 76.46 % 71.79 % 75.36 % 74.11 % 75.73 %
Loan Discount Data
Allowance for loan losses (GAAP) $5,393 $5,498 $5,152 $5,105 $4,964
Net acquisition accounting fair value discounts to loans3 $8,167 $9,086 $9,831 $10,271 $10,742
Tangible Common Equity
Shareholders' equity (GAAP) $136,588 $134,734 $132,551 $105,240 $105,170
Less preferred stock & preferred stock paid in capital 12,000 12,000
Less goodwill and other intangible assets 7,414 7,492 6,583 6,636 6,675
Tangible common equity (Non-GAAP) $129,174 $127,242 $125,968 $86,604 $86,495

1 Operating earnings includes the following income and expenses related to past mergers and acquisitions:

September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Accretion above contractual loan income (ASC 310-20 & 310-30) 888 696 540 430 450
Amortization of other intangibles 78 61 53 39 80

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

Source:SmartFinancial, Inc.