Market Overview

SmartFinancial Announces Earnings with Second Quarter 2018 Net Income of $3.9 million

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Net operating earnings (Non-GAAP) of $4.8 million for the quarter

Performance Highlights

  • Return on average assets of 0.81 percent and net operating return on average assets (Non-GAAP) of 1.00 percent.
  • Net interest margin, taxable equivalent, of 4.57 percent, an increase of 0.42 percent from a year ago.
  • Asset quality improved with nonperforming assets to total assets decreasing to 0.25 percent.
  • Completed second acquisition in seven months, increasing assets to over $2.0 billion.

KNOXVILLE, Tenn., July 24, 2018 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), today announced net income of $3.9 million for the second quarter of 2018, compared to $1.6 million a year ago. Diluted net income per share was $0.32 for the second quarter of 2018, compared to $0.20 during the second quarter of 2017. Net operating earnings (Non-GAAP), which excludes securities gains and merger expenses, totaled $4.8 million in the second quarter of 2018 compared to $2.1 million in the second quarter of 2017.

Billy Carroll, President & CEO, stated:  "I am pleased to report another solid quarter for our company.  We crossed over $2.0 billion in assets, continued our upward momentum in earnings per share and return on assets, and maintained an extremely healthy net interest margin, even with an uptick in deposit costs. Our team has done a great job this year with the integration of Alabama-based Capstone in the first quarter, closing the acquisition of Tennessee Bancshares and begin planning of its integration in the second quarter, and announcing our planned Foothills Bancorp acquisition. All of these accomplishments while organically growing and improving the core bank."

SmartFinancial's Chairman, Miller Welborn, concluded: "I am excited about the continued progress that we have shown this past quarter. Our momentum is very positive in all areas of the bank. I am proud of the way we are executing on the recent acquisitions and our new markets are proving to be healthy."

Second Quarter 2018 compared to First Quarter 2018

Net income of $3.9 million for the second quarter of 2018, compared to $3.4 million in the prior quarter. Diluted net income per share was $0.32 for the second quarter of 2018, compared to $0.30 during the first quarter of 2018. Net operating earnings (Non-GAAP), which excludes securities gains and merger expenses, totaled $4.8 million in the second quarter of 2018 compared to $3.8 million in the previous quarter.

Net interest income to average assets of 4.03 percent for the quarter increased from 3.93 percent in the first quarter of 2018. Net interest income totaled $19.5 million in the second quarter of 2018 compared to $16.8 million in the first quarter of 2018. Net interest margin, taxable equivalent, increased from 4.38 percent in the first quarter of 2018 to 4.57 percent in the second quarter of 2018 as a result of increases on the yields of the core loan portfolio, yields of the securities portfolio, and higher accretion income on acquired loans.

Provision for loan losses was $617 thousand in the second quarter of 2018, compared to $689 thousand in the first quarter of 2018. The decrease in provision for loan losses was due to slightly slower growth of the organic loan portfolio during the period.  The allowance for loan losses and leases ("ALLL") was $7.1 million, or 0.45 percent of total loans as of June 30, 2018, compared to
$6.5 million, or 0.47 percent of total loans, as of March 31, 2018.

Nonperforming loans as a percentage of total loans was 0.11 percent as of June 30, 2018, which was a decrease from 0.14 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 0.25 percent as of June 30, 2018, compared to 0.26 percent as of March 31, 2018.  There were $20.7 million in discounts on $622.4 million of purchased loans as of June 30, 2018 compared to $16.3 million of discounts on $492.9 million of purchased loans as of March 31, 2018.

Noninterest income to average assets of 0.33 percent for the period decreased slightly from 0.34 percent in the first quarter of 2018. Noninterest income totaled $1.6 million in the second quarter of 2018, compared to $1.5 million in the first quarter of 2018.

Noninterest expense to average assets of 3.15 percent for the quarter increased from 3.09 percent in the first quarter of 2018. Noninterest expense totaled $15.3 million in the second quarter of 2018, an increase of $2.1 million from the first quarter of 2018, primarily due higher merger expenses and two months of salaries and employee benefits for associates added by the Tennessee Bancshares acquisition. Income tax expense was $1.3 million in the second quarter of 2018 compared to $0.9 million in the first quarter of 2018. The company's effective tax rate increased to 24.8 percent in the second quarter of 2018 compared to 21.6 percent in the first quarter of 2018, due to higher nondeductible merger expenses and a decrease in exercised options with associated tax benefits.

Second Quarter 2018 compared to Second Quarter 2017

Net income totaled $3.9 million in the second quarter of 2018, or $0.32 per diluted share, compared to $1.6 million, or $0.20 per diluted share, in the second quarter of 2017.  Net operating earnings (Non-GAAP), which excludes securities gains and merger expenses, totaled $4.8 million in the second quarter of 2018 compared to $2.1 million in the second quarter of 2017.

Net interest income to average assets of 4.03 percent for the quarter increased from 3.81 percent in the second quarter of 2017 as the average earning asset balances and yields increased compared to the prior year.  Net interest income totaled $19.5 million in the second quarter of 2018 compared to $10.2 million in the second quarter of 2017. Net interest income was positively impacted compared to the prior year due to increases in loan and securities balances and increases in the yields of the loan and securities portfolios.  Net interest margin, taxable equivalent, increased from 4.15 percent in the second quarter of 2017 to 4.57 percent in the second quarter of 2018 as a result of increases on the yields of the core loan portfolio, yields on the securities portfolio, and higher accretion income on acquired loans.

Provision for loan losses was $617 thousand in the second quarter of 2018, compared to $298 thousand in the second quarter of 2017. The increase in provision for loan losses was due to faster growth of the organic loan portfolio during the period. The ALLL was $7.1 million, or 0.45 percent of total loans as of June 30, 2018, 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 0.11 percent as of June 30, 2018, a decrease from 0.13 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 0.25 percent as of June 30, 2018, compared to 0.30 percent as of June 30, 2017.

Noninterest income to average assets of 0.33 percent for the quarter decreased from 0.47 percent in the second quarter of 2017. Noninterest income totaled $1.6 million in the second quarter of 2018, compared to $1.3 million in the second quarter of 2017.

Noninterest expense to average assets of 3.15 percent for the quarter decreased from 3.29 percent in the second quarter of 2017. Noninterest expense totaled $15.3 million in the second quarter of 2018, compared to $8.8 million in the second quarter of 2017. The increases in noninterest expense over the prior year were primarily due to the acquisitions of Capstone in the fourth quarter of 2017 and Tennessee Bancshares in the second quarter of 2018. The Company's effective tax rate was 24.8 percent in the second quarter of 2018 compared to 30.6 percent in the second quarter of 2017, primarily due to the decrease in the federal tax rate for
2018.

Conference Call Information

SmartFinancial plans to issue its earnings release for the second quarter of 2018 on Tuesday, July 24, 2018, and will host a conference call on Wednesday, July 25, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 5078284. A replay of the conference call will be available through July 25, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10122430. Conference call materials (earnings release and conference call presentation) will be published on the company's webpage located at http://www.smartfinancialinc.com/CorporateProfile at 9:00 am ET 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 26 branches across Tennessee, Alabama, and Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching and a disciplined approach to lending have contributed to SmartBank's success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.

Investor Contacts  
Billy Carroll Ron Gorczynski
President & CEO Executive Vice President, Chief Administrative Officer
(865) 868-0613   billy.carroll@smartbank.com (865) 437-5724   ron.gorczynski@smartbank.com
   
Media Contact  
Kelley Fowler  
Senior Vice President, Public Relations & Marketing  
(865) 868-0611   kelley.fowler@smartbank.com  
   

Non-GAAP Financial Matters  
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 several 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 conversion expenses, and the effect of the December, 2017 tax law change on deferred tax assets, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses and merger expenses 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.

Important Information for Shareholders
This press release shall not constitute an offer to sell, the solicitation of an offer to sell, or the solicitation of an offer to buy any securities or the solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger with Foothills Bancorp, Inc. ("Foothills Bancorp"), SmartFinancial will file a registration statement on Form S-4 with the Securities and Exchange Commission (the "SEC"), which will contain the proxy statement of Foothills Bancorp and a prospectus of SmartFinancial. Shareholders of Foothills Bancorp are encouraged to read the registration statement, including the proxy statement/prospectus that will be part of the registration statement, because it will contain important information about the proposed merger, Foothills Bancorp, and SmartFinancial. After the registration statement is filed with the SEC, the proxy statement/prospectus and other relevant documents will be mailed to Foothills Bancorp shareholders and will be available for free on the SEC's website (www.sec.gov). The proxy statement/prospectus will also be made available for free by contacting Ron Gorczynski, SmartFinancial's Chief Administrative Officer, at 865.437.5724 or Mark Loudermilk, the President and Chief Executive Officer of Foothills Bancorp, at 865.738.2230. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Forward-Looking Statements
Certain of the statements made in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements, including statements regarding the intent, belief, or current expectations of SmartFinancial's management regarding the company's strategic direction, prospects, or future results or the benefits of the proposed merger with Foothills Bancorp (the "Foothills merger"), are subject to numerous risks and uncertainties. Such risks and uncertainties include, among others, (1) the risk that the cost savings and revenue synergies anticipated in connection with the Foothills merger may not be realized or may take longer than anticipated to be realized, (2) disruption from the Foothills merger with customers, suppliers, or employee or other business relationships, (3) the occurrence of any event, change, or other circumstances that could give rise to the termination of the merger agreement with Foothills Bancorp, (4) the risk of successful integration of our business with that of Foothills Bancorp, (5) the failure of Foothills Bancorp's shareholders to approve the merger agreement, (6) the amount of costs, fees, expenses, and charges related to the Foothills merger, (7) our ability to successfully integrate the businesses acquired as part of previous mergers with that of SmartBank, (8) reputational risk and the reaction of our customers and Foothills Bancorp's customers to the Foothills merger, (9) the failure of the conditions to closing of the Foothills merger to be satisfied, (10) the risk that the integration of our merger partners' businesses into our operations will be materially delayed or will be more costly or difficult than expected, (11) the possibility that the Foothills merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (12) the dilution caused by SmartFinancial's issuance of additional shares of its common stock in the Foothills merger, (13) changes in management's plans for the future, (14) prevailing economic and political conditions, particularly in our market areas, (15) credit risk associated with our lending activities, (16) changes in interest rates, loan demand, real estate values, and competition, (17) changes in accounting principles, policies, or guidelines, (18) changes in applicable laws, rules, or regulations, and (19) other competitive, economic, political, and market factors affecting our business, operations, pricing, products, and services. Certain additional factors which could affect the forward-looking statements can be found in SmartFinancial's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the SEC and available on the SEC's website (www.sec.gov). SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

 
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,    March 31,    December 31,    September 30,    June 30, 
Selected Performance Ratios (Annualized)   2018    2018    2017    2017    2017 
Return on average assets   0.81 %   0.80 %   0.01 %   0.59 %   0.61 %
Net operating return on average assets (Non-GAAP)   1.00 %   0.89 %   0.99 %   0.63 %   0.61 %
Return on average shareholder equity   6.76 %   6.25 %   0.08 %   4.91 %   4.95 %
Net operating return on average shareholder equity (Non-GAAP)   8.33 %    6.97 %   7.98 %    5.30 %   4.91 %
Net interest income / average assets   4.03 %   3.93 %   4.09 %   3.81 %   3.81 %
Yield on Earning Assets   5.37 %   5.04 %   5.07 %   4.69 %   4.66 %
Yield on earning assets, TE   5.38 %   5.05 %   5.09 %   4.70 %   4.66 %
Cost of interest-bearing liabilities   1.00 %   0.82 %   0.70 %   0.68 %   0.65 %
Net interest margin   4.56 %   4.37 %   4.51 %   4.16 %   4.14 %
Net interest margin, TE   4.57 %   4.38 %   4.51 %   4.17 %   4.15 %
Noninterest income / average assets   0.33 %   0.34 %   0.42 %   0.43 %   0.47 %
Noninterest expense / average assets   3.15 %   3.09 %   3.35 %   3.34 %   3.29 %
Efficiency ratio   72.33 %   72.38 %   74.26 %   78.67 %   76.77 %
Operating efficiency ratio (Non-GAAP)   64.82 %   69.12 %   60.64 %   76.12 %   71.79 %
Pre-tax pre-provision income / average assets   1.21 %   1.18 %   1.16 %   0.90 %   0.96 %
           
 Per Common Share          
Net income, basic $    0.32   $    0.30   $    —   $    0.20   $    0.20  
Net income, diluted   0.32     0.30         0.20     0.20  
Net operating earnings, basic (Non-GAAP)   0.40     0.35     0.35     0.22     0.25  
Net operating earnings, diluted (Non-GAAP)   0.39     0.35     0.35     0.22     0.25  
Book value as of   19.48     18.60     18.46     16.57     16.39  
Tangible book value (Non-GAAP) as of   14.09     14.09     13.90     15.67     15.48  
                               
Common shares outstanding as of    12,705     11,234     11,153     8,243     8,219  
                               
Composition Of Loans                              
Real estate commercial                              
owner occupied $ 360,294   $  288,666   $ 281,297   $  210,489   $ 211,469  
non-owner occupied   385,536     375,028     361,691     237,131     233,707  
Real Estate Commercial, Total   745,830     663,694     642,988     447,620     445,176  
Commercial & industrial   279,341     256,333     238,087     119,782     105,129  
Real estate construction & development   179,361     142,702     135,409     98,212     101,151  
Real estate residential   355,755     299,148     293,457     199,704     206,667  
Other loans   15,148     12,380     13,317     6,361     7,298  
Total loans $ 1,575,435   $ 1,374,257   $  1,323,258   $  871,679   $ 865,421  
                               

 


 
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,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Asset Quality Data and Ratios
Nonperforming loans $    1,730     $    1,931     $    1,764     $    1,264     $    1,147  
Foreclosed assets   3,524       2,665       3,254       2,888       2,369  
Total nonperforming assets $    5,254     $    4,596     $    5,018     $    4,152     $    3,516  
Restructured loans not included in nonperforming loans $    660     $    40     $    41     $    42     $    —  
Net charge-offs (recoveries) to average loans (annualized)                                                      0.02 %     0.02 %     (0.01 )%     (0.02 )%     (0.04 )%
Allowance for loan losses to loans   0.45 %     0.47 %     0.44 %     0.62 %     0.64 %
Nonperforming loans to total loans, gross   0.11 %     0.14 %     0.13 %     0.15 %     0.13 %
Nonperforming assets to total assets   0.25 %     0.26 %     0.29 %     0.37 %     0.30 %


Capital Ratios                    
Tangible equity to tangible assets (Non- GAAP) 8.98 % 9.26 % 9.28 % 11.45 % 11.18 %
Tangible common equity to tangible assets(Non-GAAP)  8.98 % 9.26 % 9.28 % 11.45 % 11.18 %
SmartFinancial, Inc.: Estimated1          
Tier 1 leverage 9.37 % 9.59 % 10.48 % 11.46 % 11.91 %
Common equity Tier 1 10.36 % 10.84 % 10.59 % 13.37 % 13.43 %
Tier 1 capital 10.36 % 10.84 % 10.59 % 13.37 % 13.43 %
Total capital 10.76 % 11.27 % 10.98 % 13.93 % 14.00 %
SmartBank: Estimated1          
Tier 1 leverage 9.85 % 10.17 % 11.26 % 10.57 % 10.98 %
Common equity Tier 1 10.89 % 11.12 % 10.90 % 12.30 % 12.32 %
Tier 1 risk-based capital 10.89 % 11.12 % 10.90 % 12.30 % 12.32 %
Total risk-based capital 11.30 % 11.56 % 11.30 % 12.86 % 12.89 %
 
1 Current period capital ratios are estimated as of the date of this earnings release.


 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited) 
(In thousands except per share data)
BALANCE SHEET  
  Ending Balances 
  June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
Assets          
Cash & cash equivalents $    170,235   $    96,710   $    113,027   $    84,098   $    82,835  
Securities available for sale   156,577     156,210     151,945     115,535     132,762  
Other investments   8,273     7,808     6,431     6,081     6,080  
Total loans   1,575,435     1,374,257     1,323,258     871,679     865,421  
Allowance for loan losses   (7,074 )   (6,477 )   (5,860 )   (5,393 )   (5,498 )
Loans, net   1,568,361     1,367,780     1,317,398     866,286     859,923  
Premises and equipment   52,203     44,202     43,000     33,778     33,765  
Foreclosed assets   3,524     2,665     3,254     2,888     2,369  
Goodwill and other intangibles   68,449     50,660     50,837     7,414     7,492  
Cash surrender value of life insurance   21,944     21,797     21,647     11,484     11,392  
Other assets   12,666     12,593     13,232     8,258     8,861  
Total assets $    2,062,232   $    1,760,425   $    1,720,771   $    1,135,822   $    1,145,479  


Liabilities                              
Noninterest demand $    301,318   $    276,249   $    220,520   $    185,386   $    183,324  
Interest-bearing demand   246,943     278,965     231,644     156,953     156,150  
Money market and savings   632,518     491,243     543,645     306,358     324,014  
Time deposits   535,879     453,276     442,774     311,490     318,147  
Total deposits   1,716,658     1,499,733     1,438,583     960,187     981,635  
Repurchase agreements   18,635     15,968     24,055     26,542     22,946  
FHLB & other borrowings   72,040     30,000     43,600     6,000      
Other liabilities   7,412     5,775     8,681     6,505     6,164  
Total liabilities   1,814,745     1,551,476     1,514,919     999,234     1,010,745  
Shareholders' Equity          
Preferred stock                    
Common stock   12,705     11,234     11,152     8,243     8,219  
Additional paid-in capital   208,513     174,981     174,009     107,065     106,794  
Retained earnings   29,235     25,303     21,889     21,654     19,969  
Accumulated other comprehensive loss   (2,966 )   (2,569 )   (1,198 )   (374 )   (248 )
Total shareholders' equity   247,487     208,949     205,852     136,588     134,734  
Total liabilities & shareholders' equity $    2,062,232   $    1,760,425   $    1,720,771   $    1,135,822   $    1,145,479  

 

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited) 
(In thousands except per share data)
INCOME STATEMENT
 
  Three months ending
    June 30,     March 31,   December 31,   September 30,   June 30,
Interest Income   2018     2018   2017   2017   2017
Loans, including fees $    21,652   $    18,228 $    16,357 $    11,491 $    10,747
Investment securities and interest bearing due froms   1,197     1,049   770   740   692
Other interest income   144     101   117   86   78
Total interest income   22,993     19,378   17,244   12,317   11,517
Interest Expense          
Deposits   3,238     2,401   1,806   1,373   1,241
Repurchase agreements   11     13   15   15   16
FHLB and other borrowings   206     153   81   5   11
Total interest expense   3,455     2,567   1,902   1,393   1,268
Net interest income   19,538     16,811   15,342   10,924   10,249
Provision for loan losses   617     689   442   30   298
Net interest income after provision for loan losses   18,921     16,122   14,900   10,894   9,951
Noninterest income          
Service charges on deposit accounts   557     578   524   294   291
(Loss) gain on securities   (1 )       144  
Gain on sale of loans and other assets   322     325   366   224   405
Interchange and debit card transaction fees   121     146   304   233   223
Other noninterest income   579     406   386   352   333
Total noninterest income   1,578     1,455   1,580   1,247   1,252
Noninterest expense          
Salaries and employee benefits   7,648     7,176   6,272   5,035   4,758
Occupancy expense   1,522     1,533   1,217   1,114   963
FDIC premiums   317     102   150   102   61
Foreclosed asset expense   240     189   59   47   12
Marketing   215     185   167   177   129
Data Processing   600     526   583   483   475
Professional expenses   918     898   602   472   473
Amortization of other intangibles   229     188   155   78   61
Service contracts   492     479   426   363   313
Merger Expense   1,123     498   1,694   303   420
Other noninterest expense   1,968     1,448   1,242   1,400   1,164
Total noninterest expense   15,272     13,222   12,567   9,574   8,829
Earnings before income taxes   5,227     4,355   3,913   2,567   2,374
Income tax expense   1,295     940   3,875   882   726
Net income      3,932     3,415   38   1,685   1,648
                       
NET INCOME PER COMMON SHARE                      
Basic  0.32   $ 0.30 0.20 0.20
Diluted   0.32     0.30     0.20   0.20
                       
Weighted average common shares outstanding                      
Basic   12,201     11,211   10,552   8,235   8,217
Diluted   12,320     11,324   10,709   8,333   8,326

   

 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information (unaudited) 
(In thousands except per share data)
YIELD ANALYSIS      
  Three Months Ended June 30, 2018 Three Months Ended March 31, 2018 Three Months Ended June 30, 2017
  Average
Balance
 
Interest1
Yield/
Cost1
Average
Balance
 
Interest1
Yield/
Cost1
Average
Balance
 
Interest1
Yield/
Cost1
Assets                  
Loans $ 1,501,008 $ 21,654 5.79 % $    1,346,179 $  18,230 5.49 % $  834,665 $    10,752 5.17 %
Investment securities and interest bearing due froms   207,524   1,218 2.35 %   203,923   1,059 2.11 %   151,840   707 1.87 %
Federal funds and other   8,992   144 6.42 %   8,414   101 4.87 %   5,628   78 5.56 %
Total interest-earning assets   1,717,524   23,016 5.38 %   1,558,516   19,390 5.05 %   992,133   11,537 4.66 %
Non-interest-earning assets   226,820       176,646       85,553  
Total assets $ 1,944,344     $    1,735,162     $ 1,077,686


Liabilities and Stockholders' Equity  
Interest-bearing demand deposits $    254,496 $    265 0.42 % $    249,846 $    320 0.52 % $  156,387 $    115 0.29 %
Money market and savings deposits   586,981   1,418 0.97 %   526,093   870 0.67 %   300,448   424 0.57 %
Time deposits   510,447   1,555 1.22 %   454,660   1,211 1.08 %   305,171   702 0.92 %
Total interest-bearing deposits   1,351,924   3,238 0.96 %   1,230,599   2,401 0.79 %   762,006   1,241 0.65 %
Securities sold under agreement to                  
repurchase   15,643   11 0.28 %   16,186   13 0.33 %   19,903   16 0.32 %
Federal Home Loan Bank advances                  
and other borrowings   22,780   206 3.64 %   26,655   153 2.33 %   3,482   11 1.27 %
Total interest-bearing liabilities   1,390,347   3,455 1.00 %   1,273,440   2,567 0.82 %   785,391   1,268 0.65 %
Noninterest-bearing deposits   283,494       231,355       157,965        
Other liabilities   37,218       8,656       659        
Total liabilities   1,711,059       1,513,451       944,015        
Shareholders' equity   233,285       221,711       133,671        
Total liabilities and stockholders'                      
equity $ 1,944,344     $    1,735,162     $ 1,077,686        
Net interest income, taxable equivalent              $ 19,561        $ 16,823         $ 10,269    
Interest rate spread       4.38 %         4.23 %         4.01
Tax equivalent net interest margin       4.57 %         4.38 %         4.15 %
Percentage of average interest-
earning assets to average interest-
bearing liabilities
      123.53 %         122.39 %         126.32
Percentage of  average equity to
average assets 
      12.00 %         12.78 %         12.40
                               
1 Taxable equivalent                            


SmartFinancial, Inc. and Subsidiary                              
Condensed Consolidated Financial Information (unaudited)                               
(In thousands)                              
NON-GAAP RECONCILIATIONS Three months ended
  June 30, March 31, December 31, September 30, June 30,
  2018 2018 2017 2017 2017
Operating Earnings
                             
Net income (GAAP) $    3,932   $    3,415   $    38   $    1,685   $    1,648  
Securities (gains) losses   1             (144 )    
Merger expenses   1,123     498     1,694     303     420  
Revaluation of deferred tax assets due to change in tax law           2,482          
Income tax effect of adjustments   (211 )   (103 )   (506 )   (25 )   (3 )
Net operating earnings (Non-GAAP)   4,845     3,810     3,707     1,819     2,065  
Net operating earnings per common share (Non-GAAP):          
Basic $    0.40   $    0.34   $    0.35   $    0.22   $    0.25  
Diluted   0.39     0.34     0.35     0.22     0.25  
 
Operating Efficiency Ratio                              
Efficiency ratio (GAAP)   72.33 %   72.97 %   74.25 %   78.62 %   76.77 %
Adjustment for taxable equivalent yields   (0.15 )%   (0.09 )%   (0.13 )%   (0.22 )%   (0.22 )%
Adjustment for securities gains (losses)   (0.01 )%   %   %   1.50 %   %
Adjustment for merger & conversion costs          (7.35 )%   (3.76 )%   (13.48 )%   (3.18 )%   (4.76 )%
Operating efficiency ratio (Non-GAAP)   64.82 %   69.12 %   60.64 %   76.72 %   71.79 %
                               
Loan Discount Data
Allowance for loan losses (GAAP) $  7,074   $ 6,477   $ 5,860   $  5,393   $  5,498  
Net acquisition accounting fair value discounts to loans   20,748     16,323     17,862     8,167     9,086  
                               
Tangible Common Equity                              
Shareholders' equity (GAAP) $ 247,487   $ 208,949   $ 205,852   $ 136,588   $ 134,734  
Less goodwill and other intangible assets   68,449     50,660     50,837     7,414     7,492  
Tangible common equity (Non-GAAP) $ 179,038   $ 158,289   $ 155,015   $  129,174   $  127,242  
                               


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