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SmartFinancial Announces Earnings with Third Quarter 2019 Net Income of $6.0 million

Performance Highlights for Third Quarter of 2019

Return on average assets of 1.01% and net operating return on average assets (Non-GAAP) of 1.02%
Asset quality remains outstanding with nonperforming assets to total assets of 0.20%
Loan growth of $31.8 million, or 6.9% annualized
Tangible book value (Non-GAAP) per share of $16.37, a 13.8% year-over-year increase
Noninterest-bearing demand deposit growth of 8.7% annualized

KNOXVILLE, Tenn., Oct. 21, 2019 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), today announced net income of $6.0 million, or $0.42 per diluted common share, for the third quarter of 2019, compared to net income of $4.3 million, or $0.34 per diluted common share, for the third quarter of 2018. Net operating earnings (Non-GAAP), which excludes securities gains, and merger related and restructuring expenses, totaled $6.0 million, or $0.43 per diluted common share, in the third quarter of 2019 compared to $5.0 million, or $0.39 per diluted common share, in the third quarter of 2018.

Billy Carroll, President & CEO, stated: "This was another very solid quarter for our company, as we are starting to see the positive results of our recent integration initiatives.  Our continued focus on organic growth and cost savings are allowing us to drive stronger profitability, which has positioned us well for the future."

SmartFinancial's Chairman, Miller Welborn, concluded:  "The consistency we are beginning to show in our financial metrics is very exciting, as our team continues to execute on our strategy while maintaining a keen focus on growing our shareholder value."

Third Quarter 2019 compared to Second Quarter 2019

Net income totaled $6.0 million, or $0.42 per diluted common share, for the third quarter of 2019, a decrease of $3.1 million, compared to $9.1 million, or $0.65 per diluted common share, for the second quarter of 2019, primarily due to a $6.4 million fee received in the second quarter of 2019 in connection with the merger termination with Entegra Financial Corp. Net operating earnings (Non-GAAP) totaled $6.0 million, or $0.43 per diluted common share, in the third quarter of 2019 compared to $5.6 million, or $0.40 per diluted common share, in the previous quarter.

Net interest income increased $338 thousand to $21.1 million for the third quarter of 2019 compared to $20.8 million for the second quarter of 2019. The tax equivalent net interest margin was 3.91% for the third quarter of 2019 compared to 3.94% for the second quarter of 2019.  The tax equivalent average yield on interest-earning assets was 5.05% for the third quarter of 2019, a decrease from 5.17% for the second quarter of 2019. The yield on interest-bearing liabilities decreased to 1.47% for the third quarter of 2019 from 1.54% for the second quarter of 2019.

The yield on average loans was 5.48% for the third quarter of 2019 compared to 5.53% for the second quarter of 2019.  The decrease in yield on average loans was primarily due to the impact from two Federal rate decreases which effected the repricing of variable rate loans and new loan production.  During the third quarter of 2019, lower discount accretion was recorded on acquired loans (26 basis points in the third quarter of 2019 versus 30 basis points in the second quarter of 2019) being offset by increased loan fees (20 basis points in the third quarter of 2019 versus 16 basis points in the second quarter of 2019).  For the third quarter of 2019, the yield on average loans, excluding accretion, was 5.22%, a decrease of one basis point from the second quarter of 2019.

The cost of average interest-bearing deposits decreased to 1.37% for the third quarter of 2019 from 1.42% for the second quarter of 2019.  The decrease was driven primarily by the reduction in money market and savings rates of 21 basis points, offset partially by an eight basis point increase in time deposit rates.

Provision for loan losses was $724 thousand in the third quarter of 2019, compared to $393 thousand in the second quarter of 2019.  The increase in provision was primarily due to higher organic loan growth and an increase in specific reserves.  The allowance for loan losses was $9.8 million, or 0.53% of total loans, as of September 30, 2019, compared to $9.1 million, or 0.50% of total loans, as of June 30, 2019.

Nonperforming loans as a percentage of total loans was 0.17% as of September 30, 2019, an increase of two basis points from the 0.15% reported in the second quarter of 2019.  Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.20% as of September 30, 2019 as compared to 0.19%  at June 30, 2019.

Noninterest income decreased by $6.2 million to $2.2 million for the third quarter of 2019 compared to $8.4 million for the second quarter of 2019 primarily due to the $6.4 million merger termination fee received in the second quarter of 2019, and was offset by increases in mortgage banking of $126 thousand and service charges on deposit accounts of $60 thousand.  Operating noninterest income (Non-GAAP) to average assets (excluding the $6.4 million merger termination fee) of 0.37% for the third quarter of 2019 increased from 0.35% in the second quarter of 2019.

Noninterest expense decreased by $2.1 million to $14.7 million for the third quarter of 2019 compared to $16.8 million for the second quarter of 2019.  The decrease is primarily due to the reduction of merger-related and restructuring expenses of $1.7 million.  Operating noninterest expense (Non-GAAP,  excludes merger-related and restructuring expenses) decreased by $378 thousand to $14.6 million for the third quarter of 2019 compared to $15.0 million for the second quarter of 2019.  This decrease was primarily due to a credit recognized during the third quarter of 2019 from the FDIC as a result of the FDIC Deposit Insurance exceeding 1.38% of insured deposits at June 30, 2019, as such, no FDIC insurance expense was recognized during the third quarter of 2019.  Operating noninterest expense (Non-GAAP) to average assets was 2.47% for the third quarter of 2019 which is a decrease from 2.57% in the second quarter of 2019.

Under FDIC regulations, banks having consolidated assets below $10 billion paid a refundable assessment into the FDIC insurance fund over a nine quarter period beginning with the third quarter of 2016. That assessment was to be credited back to the institution if and when the deposit insurance fund (“DIF”) exceeded 1.38% of insured deposits, which occurred with the June 30, 2019 computation. Additionally, if the DIF remains above 1.38% of insured deposits assessment at December 31, 2019, an additional credit will be applied to the fourth quarter of 2019.

Income tax expense was $1.9 million in the third quarter of 2019 compared to $2.9 million in the second quarter of 2019.  The decrease of $1.0 million in income tax expense, was primarily due to the $6.4 million termination fee recognized in the second quarter of 2019.   The overall effective tax rate was 24.6% for the third quarter of 2019 compared to 24.1% in the second quarter of 2019.

Third Quarter 2019 compared to Third Quarter 2018

Net income increased by $1.7 million to $6.0 million, or $0.42 per diluted common share, for the third quarter of 2019 compared to $4.3 million, or $0.34 per diluted common share, for the third quarter of 2018 primarily due to the operating effects of the Tennessee Bancshares, Inc. and Foothills Bancorp, Inc. acquisitions which were completed in the second and fourth quarters of 2018, respectively. Net operating earnings (Non-GAAP) totaled $6.0 million, or $0.43 per diluted common share, in the third quarter of 2019 compared to $5.0 million, or $0.39 per diluted common share, for the third quarter of 2018.

Net interest income increased $2.2 million to $21.1 million for the third quarter of 2019 compared to $18.9 million for the third quarter of 2018. The tax equivalent net interest margin was 3.91% for the third quarter of 2019 compared to 4.11% for the third quarter of 2018.  The tax equivalent average yield on interest-earning assets was 5.05% for the third quarter of 2019 increasing slightly from 5.03% for the third quarter of 2018, while the yield on interest bearing liabilities increased to 1.47% for the third quarter of 2019 from 1.15% for the third quarter of 2018.

The yield on average loans was 5.48% for the third quarter of 2019 compared to 5.43% for the third quarter of 2018. The increase in yield on average loans was primarily due to increases in yields on average loans of 10 basis points, offset by lower discount accretion on acquired loans (26 basis points in the third quarter of 2019 versus 31 basis points in the third quarter of 2018).  For the third quarters of 2019 and 2018, the yield on average loans, excluding accretion, was 5.22% and 5.12%, respectively.

The cost of average interest-bearing deposits increased to 1.37% for the third quarter of 2019 from 1.11% for the third quarter of 2018. Deposit rates remain elevated at the end of the third quarter of 2019 due to a higher interest rate environment in 2019 and continued competition for deposits.

Provision for loan losses was $724 thousand in the third quarter of 2019, compared to $302 thousand in the third quarter of 2018. The increase in provision was primarily due to higher organic loan growth and an increase in specific reserves during the third quarter of 2019 when compared to the third quarter of 2018.  The allowance for loan losses was $9.8 million, or 0.53% of total loans, as of September 30, 2019, compared to $7.2 million, or 0.45% of total loans, as of September 30, 2018.

Nonperforming loans as a percentage of total loans was 0.17% as of September 30, 2019 and September 30, 2018. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.20% as of September 30, 2019, compared to 0.34% as of September 30, 2018.

Noninterest income increased by $365 thousand to $2.2 million for the third quarter of 2019 compared to $1.8 million for the third quarter of 2018 primarily due to increases in deposit services charges of $143 thousand, increases in mortgage banking of $25 thousand and wealth revenue of $135 thousand. Noninterest income to average assets of 0.37% for the third quarter of 2019 increased from 0.36% in the third quarter of 2018.

Noninterest expense was $14.7 million for the third quarter of 2019 compared to $14.8 million for the third quarter of 2018, remaining flat for compared periods. Operating noninterest expense (Non-GAAP, excludes merger-related and restructuring expenses of $73 thousand for third quarter of 2019 and $838 thousand for third quarter of 2018) increased by $0.7 million to $14.6 million for the third quarter of 2019 compared to $13.9 million for the third quarter of 2018.  This increase was primarily due to increases in personnel expense, as the second and third quarters of 2019 began to show the full effects of acquisitions completed during the prior reporting periods. Operating noninterest expense (Non-GAAP, excludes merger-related and restructuring expenses) to average assets of 2.47% for the third quarter of 2019 decreased from 2.73% in the third quarter of 2018.

Income tax expense was $1.9 million in the third quarter of 2019 compared to $1.3 million in the third quarter of 2018. The overall effective tax rate was 24.6% for the third quarter of 2019 compared 23.2% for the third quarter of 2018.

Certain captions and amounts in the prior periods presented were reclassified to conform to the current presentation.  Such reclassifications had no effect on net income or shareholders' equity.

Conference Call Information

SmartFinancial will issue its earnings release for the third quarter of 2019 on Monday, October 21, 2019, and will host a conference call on Tuesday, October 22, 2019 at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 0242522.  A replay of the conference call will be available through October 22, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10135243.  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 ET prior to 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 29 branches across Tennessee, Alabama, and the 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 Financial 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 Measures

Statements included in this presentation 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, (ii) net operating return on average assets, (iii) net operating return on average shareholder equity, (iv) return on average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio; (vii) tangible common equity; (viii) average tangible common equity; (ix) operating noninterest income; (x) operating noninterest expenses; and ratios derived therefrom, in its analysis of the company's performance. Net operating earnings excludes the following from net income: securities gains and losses, merger termination fee, merger related and restructuring expenses, the effect of the December, 2017 tax law change on deferred tax assets, tax benefit from director options previously exercised, and the income tax effect of adjustments. Net operating return on average equity is the annualized net operating earnings divided by average assets. Net operating return on average equity is the annualized net operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Net operating return on average tangible common equity is the annualized net operating earnings divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets.  Operating noninterest income excludes the merger termination fee.  Operating noninterest excludes merger-related and restructuring cost.  Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers.  Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance.  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.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under U.S. federal securities laws.  These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk of litigation related to the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (2) reputational risk resulting from the termination of the Entegra Merger Agreement; (3) potential changes to, or the risk that we may not be able to execute on, our business strategy as a result of the termination of the Entegra Merger Agreement; (4) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (5) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (6) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (7) changes in management’s plans for the future; (8) prevailing, or changes in, economic or political conditions, particularly in our market areas; (9) credit risk associated with our lending activities; (10) changes in interest rates, loan demand, real estate values, or competition; (11) changes in accounting principles, policies, or guidelines; (12) changes in applicable laws, rules, or regulations; and (13) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent 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 Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements.  SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this 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)            
(dollars in thousands except share and per share data)        
  As of and for The Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
         
Selected Performance Ratios (Annualized):           
Return on average assets 1.01 %   1.56 %   0.84 %   1.17 %   0.85 %
Return on average shareholders' equity 7.80 %   12.34 %   6.71 %   9.44 %   6.86 %
Return on average tangible common equity (Non-GAAP)¹ 10.52 %   16.78 %   9.26 %   13.09 %   9.45 %
Noninterest income / average assets 0.37 %   1.44 %   0.30 %   0.31 %   0.36 %
Noninterest expense / average assets 2.48 %   2.88 %   2.77 %   2.84 %   2.90 %
Efficiency ratio 63.03 %   57.53 %   68.65 %   67.71 %   71.33 %
                   
Operating Selected Performance Ratios (Annualized):                  
Net operating return on average assets (Non-GAAP)¹ 1.02 %   0.96 %   0.98 %   1.07 %   0.98 %
Net operating return on average shareholders' equity (Non-GAAP)¹ 7.87 %   7.58 %   7.81 %   8.65 %   7.88 %
Net operating return on average tangible common equity (Non-GAAP)¹ 10.61 %   10.31 %   10.79 %   12.00 %   10.84 %
Operating efficiency ratio (Non-GAAP)¹ 62.42 %   65.56 %   64.25 %   61.72 %   67.17 %
                   
Selected Interest Rates and Yields:                  
Yield on loans 5.48 %   5.53 %   5.62 %   5.81 %   5.43 %
Yield on earning assets, FTE 5.05 %   5.17 %   5.25 %   5.36 %   5.03 %
Cost of interest-bearing deposits 1.37 %   1.42 %   1.32 %   1.21 %   1.11 %
Cost of total deposits 1.13 %   1.18 %   1.10 %   1.00 %   0.91 %
Cost of interest-bearing liabilities 1.47 %   1.54 %   1.45 %   1.33 %   1.15 %
Net interest margin, FTE 3.91 %   3.94 %   4.10 %   4.28 %   4.11 %
                   
Per Common Share:                  
Net income, basic $ 0.43     $ 0.65     $ 0.34     $ 0.48     $ 0.34  
Net income, diluted 0.42     0.65     0.34     0.47     0.34  
Net operating earnings, basic (Non-GAAP)¹ 0.43     0.40     0.40     0.44     0.39  
Net operating earnings, diluted (Non-GAAP)¹ 0.43     0.40     0.39     0.43     0.39  
Book value 21.93     21.47     20.82     20.31     19.74  
Tangible book value (Non-GAAP)¹ 16.37     15.86     15.18     14.64     14.38  
Common shares outstanding 13,957,973     13,953,209     13,951,590     13,933,504     12,750,272  
                   
¹See reconciliation of Non-GAAP measures                  
                   
                   
                   
                   
                   
SmartFinancial, Inc. and Subsidiary        
Condensed Consolidated Financial Information - (unaudited)            
(In thousands)        
  As of and for The Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
Composition of Loans:        
Commercial real estate                  
owner occupied $ 422,363     $ 415,502     $ 416,152     $ 372,030     $ 364,164  
non-owner occupied 468,099     464,160     472,790     487,997     401,922  
Commercial real estate, total 890,462     879,662     888,942     860,027     766,086  
Commercial & industrial 341,207     334,258     341,471     308,254     289,784  
Construction & land development 219,751     204,731     187,009     187,895     165,906  
Consumer real estate 405,531     406,357     410,981     407,254     350,422  
Consumer and other 10,796     11,981     12,166     13,809     12,996  
Total loans $ 1,867,747     $ 1,836,989     $ 1,840,569     $ 1,777,239     $ 1,585,194  
                   
Asset Quality and Additional Loan Data:                  
Nonperforming loans $ 3,166     $ 2,838     $ 2,282     $ 3,280     $ 2,686  
Other real estate owned 1,561     1,814     2,066     2,495     4,230  
Total nonperforming assets $ 4,727     $ 4,652     $ 4,348     $ 5,775     $ 6,916  
Restructured loans not included in nonperforming loans $ 61     $ 62     $ 62     $ 116     $ 693  
Net charge-offs (recoveries) to average loans (annualized) 0.01 %   %   0.08 %   0.04 %   0.06 %
Allowance for loan losses to loans 0.53 %   0.50 %   0.47 %   0.47 %   0.45 %
Nonperforming loans to total loans, gross 0.17 %   0.15 %   0.12 %   0.18 %   0.17 %
Nonperforming assets to total assets 0.20 %   0.19 %   0.18 %   0.25 %   0.34 %
Purchase accounting discount balance $ 16,784     $ 18,571     $ 19,954     $ 21,528     $ 19,500  
Accretion income on acquired loans 1,246     1,374     1,717     2,343     1,208  
                   
Capital Ratios:                  
Equity to Assets 12.80 %   12.53 %   12.34 %   12.44 %   12.27 %
Tangible common equity to tangible assets (Non-GAAP)3 9.88 %   9.57 %   9.31 %   9.29 %   9.25 %
                   
SmartFinancial, Inc.1                  
Tier 1 leverage 10.02 %   9.92 %   9.29 %   9.47 %   9.26 %
Common equity Tier 1 11.54 %   11.21 %   10.61 %   10.81 %   10.88 %
Tier 1 capital 11.54 %   11.21 %   10.61 %   10.81 %   10.88 %
Total capital 13.98 %   13.65 %   13.01 %   13.29 %   13.57 %
                   
SmartBank Estimated2                
Tier 1 leverage 11.23 %   10.92 %   10.96 %   11.17 %   10.55 %
Common equity Tier 1 12.71 %   12.37 %   12.18 %   12.31 %   11.99 %
Tier 1 risk-based capital 12.71 %   12.37 %   12.18 %   12.31 %   11.99 %
Total risk-based capital 13.20 %   12.82 %   12.62 %   12.74 %   12.40 %

1All periods presented are estimated.
2 Current period capital ratios are estimated as of the date of this earnings release.
3Total common equity less intangibles divided by total assets less intangibles.



SmartFinancial, Inc. and Subsidiary                
Condensed Consolidated Financial Information - (unaudited)            
(dollars in thousands)                 
  Ending Balances
    September 30,     June 30,     March 31,     December 31,   September 30,
    2019     2019     2019     2018   2018
Assets:                  
Cash and cash equivalents $ 170,934     $ 199,534     $ 132,994     $ 115,822     $ 130,104  
Securities available-for-sale, at fair value 171,507     174,114     198,273     201,688     173,039  
Other investments 12,913     12,905     12,398     11,499     10,736  
Loans held for sale 3,068     4,087     2,103     1,979     4,038  
Loans 1,864,679     1,832,902     1,838,466     1,775,260     1,581,155  
Less: Allowance for loan losses (9,792 )   (9,097 )   (8,704 )   (8,275 )   (7,156 )
Loans, net 1,854,887     1,823,805     1,829,762     1,766,985     1,573,999  
Premises and equipment, net 58,386     56,589     56,583     56,012     51,138  
Other real estate owned 1,561     1,814     2,066     2,495     4,230  
Goodwill and core deposit intangibles, net 77,534     78,348     78,690     79,034     68,254  
Bank owned life insurance 24,796     24,695     24,540     24,381     22,088  
Other assets 14,899     15,366     16,572     14,514     13,320  
Total assets $ 2,390,485     $ 2,391,257     $ 2,353,981     $ 2,274,409     $ 2,050,946  
                   
Liabilities:                  
Deposits:                  
Noninterest-bearing demand $ 365,024     $ 357,220     $ 329,095     $ 319,861     $ 301,197  
Interest-bearing demand 351,474     333,705     331,629     311,482     267,146  
Money market and savings 634,934     648,132     698,431     641,945     570,172  
Time deposits 646,641     673,243     635,175     648,676     568,796  
Total deposits 1,998,073     2,012,300     1,994,330     1,921,964     1,707,311  
Securities sold under agreements to repurchase 4,368     8,219     7,070     11,756     16,786  
FHLB & other borrowings 25,460     15,460     8,605     11,243     25,324  
Subordinated debt 39,240     39,219     39,198     39,177     39,158  
Other liabilities 17,304     16,448     14,297     7,258     10,725  
Total liabilities 2,084,445     2,091,646     2,063,500     1,991,398     1,799,304  
Shareholders' Equity:                  
Common stock 13,958     13,953     13,952     13,933     12,750  
Additional paid-in capital 232,573     232,386     232,241     231,852     208,999  
Retained earnings 59,806     53,843     44,722     39,991     33,559  
Accumulated other comprehensive loss (297 )   (571 )   (434 )   (2,765 )   (3,666 )
Total shareholders' equity 306,040     299,611     290,481     283,011     251,642  
Total liabilities & shareholders' equity $ 2,390,485     $ 2,391,257     $ 2,353,981     $ 2,274,409     $ 2,050,946  



SmartFinancial, Inc. and Subsidiary        
Condensed Consolidated Financial Information - (unaudited)            
(dollars in thousands, except per share data)        
  Three Months Ended
    September 30,     June 30,     March 31,     December 31,     September 30,
    2019     2019     2019     2018     2018
   
Interest income:  
Loans, including fees $ 25,515     $ 25,278     $ 24,975     $ 25,018     $ 21,571  
Securities available-for-sale:                  
 Taxable 748     871     971     900     839  
 Tax-exempt 338     411     424     347     129  
Federal funds sold and other earning assets 743     743     573     506     529  
Total interest income 27,344     27,303     26,943     26,771     23,068  
                   
Interest expense:                  
Deposits 5,605     5,788     5,251     4,680     3,969  
Securities sold under agreements to repurchase 5     6     8     9     11  
FHLB advances and other borrowings 10     117     103     51     209  
Subordinated debt 584     590     584     584     19  
Total interest expense 6,204     6,501     5,946     5,324     4,208  
Net interest income 21,140     20,802     20,997     21,447     18,860  
Provision for loan losses 724     393     797     1,329     302  
Net interest income after provision for loan losses 20,416     20,409     20,200     20,118     18,558  
                   
Noninterest income:                  
Service charges on deposit accounts 767     707     654     663     624  
Gain on sale of securities, net 1     33         2      
Mortgage banking 518     392     282     251     493  
Interchange and debit card transaction fees
148     143     175     162     144  
Merger termination fee     6,400              
Other 762     741     587     602     570  
Total noninterest income 2,196     8,416     1,698     1,680     1,831  
                   
Noninterest expense:                  
Salaries and employee benefits 9,072     8,984     8,398     7,871     7,934  
Occupancy and equipment 1,635     1,658     1,640     1,610     1,638  
FDIC insurance (credit) (219 )   180     179     209     158  
Other real estate and loan related expense 335     242     490     738     578  
Advertising and marketing 263     259     295     246     228  
Data processing 273     577     615     372     407  
Professional services 573     489     662     707     727  
Amortization of intangibles 341     342     344     312     248  
Software as service contracts 560     568     567     577     507  
Merger related and restructuring expenses 73     1,796     923     1,322     838  
Other 1,802     1,714     1,466     1,697     1,497  
Total noninterest expense 14,708     16,809     15,579     15,661     14,760  
Income before income taxes 7,904     12,016     6,319     6,137     5,629  
Income tax expense 1,941     2,895     1,588     (307 )   1,305  
Net income $ 5,963     $ 9,121     $ 4,731     $ 6,444     $ 4,324  
                   
Earnings Per Common Share:                  
Basic $ 0.43     $ 0.65     $ 0.34     $ 0.48     $ 0.34  
Diluted $ 0.42     $ 0.65     $ 0.34     $ 0.47     $ 0.34  
Weighted average common shares outstanding:                  
Basic 13,955,859     13,951,643     13,942,016     13,534,806     12,718,861  
Diluted 14,053,432     14,046,500     14,018,163     13,616,616     12,817,556  


SmartFinancial, Inc. and Subsidiary 
Condensed Consolidated Financial Information - (unaudited) 
(In thousands) 
YIELD ANALYSIS 
    Three Months Ended
    September 30, 2019   June 30, 2019   September 30, 2018
    Average       Yield/   Average       Yield/   Average       Yield/
    Balance   Interest1   Cost1   Balance   Interest1   Cost1   Balance   Interest1   Cost1
Assets:                                    
Loans   $ 1,846,196     $ 25,515     5.48 %   $ 1,832,639     $ 25,278     5.53 %   $ 1,577,222     $ 21,573     5.43 %
Taxable securities   118,955     748     2.49 %   136,859     871     2.55 %   141,750     839     2.35 %
Tax-exempt securities   56,598     448     3.14 %   56,475     527     3.75 %   17,329     166     3.80 %
Federal funds sold and other earning assets   135,444     743     2.18 %   102,253     743     2.91 %   85,995     526     2.43 %
Total interest-earning assets   2,157,193     27,454     5.05 %   2,128,226     27,419     5.17 %   1,822,296     23,104     5.03 %
Noninterest-earning assets   191,940             215,010             198,215          
Total assets   $ 2,349,133             $ 2,343,236             $ 2,020,511          
                                     
Liabilities and Stockholders’ Equity:                                    
Interest-bearing demand deposits   $ 343,827     511     0.59 %   $ 329,556     464     0.57 %   $ 239,220     283     0.47 %
Money market and savings deposits   637,290     1,829     1.14 %   673,502     2,272     1.35 %   615,334     1,595     1.03 %
Time deposits   640,679     3,265     2.02 %   629,480     3,052     1.94 %   564,945     2,091     1.47 %
Total interest-bearing deposits   1,621,796     5,605     1.37 %   1,632,538     5,788     1.42 %   1,419,499     3,969     1.11 %
Securities sold under agreement to repurchase   6,490     5     0.31 %   7,249     6     0.33 %   17,694     11     0.25 %
Federal funds purchased and other borrowings   6,820     10     0.58 %   16,436     117     2.87 %   16,415     209     5.05 %
Subordinated debt   39,226     584     5.91 %   39,205     590     6.03 %   1,304     19     5.78 %
Total interest-bearing liabilities   1,674,332     6,204     1.47 %   1,695,428     6,501     1.54 %   1,454,912     4,208     1.15 %
Noninterest-bearing deposits   353,315             336,871             307,007          
Other liabilities   18,286             14,367             8,529          
Total liabilities   2,045,933             2,046,666             1,770,448          
Stockholders’ equity   303,200             296,570             250,063          
Total liabilities and stockholders’ equity   $ 2,349,133             $ 2,343,236             $ 2,020,511          
                                     
Net interest income, taxable equivalent       $ 21,250             $ 20,918             $ 18,896      
Interest rate spread           3.58 %           3.63 %           3.88 %
Tax equivalent net interest margin           3.91 %           3.94 %           4.11 %
                                     
Percentage of average interest-earning assets to average interest-bearing liabilities           128.84 %           125.53 %           125.25 %
Percentage of average equity to average assets           12.91 %           12.66 %           12.38 %
                                     

1 Taxable equivalent


SmartFinancial, Inc. and Subsidiary        
Condensed Consolidated Financial Information - (unaudited)            
(In thousands)        
NON-GAAP RECONCILIATIONS  
  Three Months Ended
    September 30,     June 30,     March 31     December 31,     September 30,
    2019     2019     2019     2018     2018
   
Operating Earnings:  
Net income (GAAP) $ 5,963     $ 9,121     $ 4,731     $ 6,444     $ 4,324  
Securities (gains) losses (1 )   (33 )       (2 )    
Merger termination fee     (6,400 )            
Merger related and restructuring expenses 73     1,796     923     1,322     838  
Tax benefit from director options previously exercised
            (1,600 )    
Income tax effect of adjustments (19 )   1,119     (145 )   (257 )   (196 )
Net operating earnings (Non-GAAP) $ 6,016     $ 5,603     $ 5,509     $ 5,907     $ 4,966  
Net operating earnings per common share (Non-GAAP):                  
Basic $ 0.43     $ 0.40     $ 0.40     $ 0.44     $ 0.39  
Diluted 0.43     0.40     0.39     0.43     0.39  
                   
Operating Noninterest Income:                  
  Noninterest income (GAAP) $ 2,196     $ 8,416     $ 1,698     $ 1,680     $ 1,831  
  Merger termination fee     (6,400 )            
  Operating noninterest income (Non-GAAP) $ 2,196     $ 2,016     $ 1,698     $ 1,680     $ 1,831  
                   
Operating Noninterest Expense:                  
  Noninterest expense (GAAP) $ 14,708     $ 16,809     $ 15,579     $ 15,661     $ 14,760  
  Merger related and restructuring expenses (73 )   (1,796 )   (923 )   (1,322 )   (838 )
  Operating noninterest expense (Non-GAAP) $ 14,635     $ 15,013     $ 14,656     $ 14,339     $ 13,922  
                   
Non-GAAP Return Ratios:                  
Net operating return on average assets (Non-GAAP)1 1.02 %   0.96 %   0.98 %   1.07 %   0.98 %
Return on average tangible common equity (Non-GAAP)2 10.52 %   16.78 %   9.26 %   13.09 %   9.45 %
Net operating return on average shareholder equity (Non-GAAP)3 7.87 %   7.58 %   7.81 %   8.65 %   7.88 %
Net operating return on average tangible common  equity (Non-GAAP)4 10.61 %   10.31 %   10.79 %   12.00 %   10.84 %
                   
Operating Efficiency Ratio:                  
Efficiency ratio (GAAP) 63.03 %   57.53 %   68.65 %   67.71 %   71.33 %
Adjustment for taxable equivalent yields (0.37 )%   (0.50 )%   (0.49 )%   (0.45 )%   (0.18 )%
Adjustment for securities gains (losses) %   0.14 %   %   0.01 %   %
Adjustment for merger related income and costs (0.24 )%   8.39 %   (3.91 )%   (5.55 )%   (3.98 )%
Operating efficiency ratio (Non-GAAP) 62.42 %   65.56 %   64.25 %   61.72 %   67.17 %
                   
1 Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets.
2 Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
3 Net operating return on average equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average equity.
4 Net operating return on average tangible common equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).
 


SmartFinancial, Inc. and Subsidiary                                      
Condensed Consolidated Financial Information - (unaudited)                                      
(In thousands)                                      
NON-GAAP RECONCILIATIONS                                      
  Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
    2019   2019   2019   2018   2018
Tangible Common Equity:                                      
Shareholders' equity (GAAP) $ 306,040     $ 299,611     $ 290,481     $ 283,011     $ 251,642  
Less goodwill and other intangible assets 77,534     78,348     78,690     79,034     68,254  
Tangible common equity (Non-GAAP) $ 228,506     $ 221,263     $ 211,791     $ 203,977     $ 183,388  
                   
Average Tangible Common Equity:                  
Average shareholders' equity (GAAP) $ 303,200     $ 296,570     $ 286,076     $ 270,884     $ 250,063  
Less average goodwill and other intangible assets 78,222     78,564     78,913     75,547     68,389  
Average tangible common equity (Non-GAAP) $ 224,978     $ 218,006     $ 207,163     $ 195,337     $ 181,674