EX-99.1 2 a33118earningsrelease-ex991.htm EXHIBIT 99.1
Exhibit 99.1
1 Q 2018
SmartFinancial Reports Record $0.30 Earnings per Common Share for the First Quarter 2018
Net operating earnings per common share was $0.35 for the quarter
Performance Highlights

• | Record high net income of $3.4 million for the quarter, up 108 percent from a year ago.

• | ROAA of 0.80 percent, a new record, for the quarter and net operating ROAA of 0.91 percent.

• | Organic loan growth of $51 million, over 15 percent annualized during the quarter.

• | Transaction accounts are over 37 percent of total deposits, a new high point for the company.

• | Efficiency ratio decreased to 72.66 percent, a new record and down by more than 3 percentage points from a year ago.

• | Net interest margin, taxable equivalent, of 4.38 percent which is up 0.31 percent from a year ago.

• | Asset quality was outstanding with nonperforming assets to total assets decreasing to just 0.26 percent.

KNOXVILLE, TN - April 24, 2018 - SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), announced today net income of $3.4 million in its first quarter of 2018, compared to $1.6 million a year ago. Diluted net income per common share was$0.30 for first quarter of 2018, compared to $0.19 during the first quarter of 2017.
Billy Carroll, President & CEO, stated: "We had a great first quarter with a new record high return on average assets and earnings per share. We achieved these milestones by growing loans at over a 15 percent pace while simultaneously maintaining a very strong net margin. Demand deposits increased significantly, and while a large portion was conversion related reclassifications, organic demand deposit growth for the quarter was over $25 million. As an organization we continue to improve on our efficiencies as we capture further economies of scale, even with over half a million in merger related costs. Our team has done a great job of integrating Capstone, planning for the Tennessee Bancshares acquisition, and growing the core bank."
SmartFinancial's Chairman, Miller Welborn, concluded: "We are looking forward to completing the acquisition of Tennessee Bancshares in the second quarter. Our resulting company will have assets approaching $2.0 billion by quarter end, setting us up for the next stage of growth. The opportunities before the company and in turn for our shareholders have never been greater. We are well on our way in creating one of the Southeast’s next great community banking franchises."
First Quarter 2018 compared to Fourth Quarter 2017
Net income available to common shareholders totaled $3.4 million in the first quarter of 2018, or $0.30 per diluted share, compared to $38 thousand, or $0.00 per diluted share, in the fourth quarter of 2017, which was negatively impacted by the revaluation and write down of deferred tax assets due to the Tax Cuts and Jobs Act which resulted in a lower federal tax rate for corporations. Net operating earnings available to common shareholders (Non-GAAP), which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $3.9 million in the first quarter of 2018 compared to $3.7 million in the previous quarter.
Net interest income to average assets of 3.93 percent for the quarter was down 4.09 percent from the fourth quarter of 2017. Net interest income totaled $16.8 million in the first quarter of 2018 compared to $15.3 million in the fourth quarter of 2017. Net interest income was negatively impacted approximately $368 thousand due to the two less days in the current period. Net interest margin, taxable equivalent, decreased from 4.51 percent in the fourth quarter of 2017 to 4.38 percent in the first quarter of 2018 primarily as a result of less income from purchase accounting adjustments on acquired loans and increases on the cost of interest-bearing liabilities.
Provision for loan losses was $689 thousand in the first quarter of 2018, compared to $442 thousand in the fourth quarter of 2017. The increase in provision for loan losses was due to higher loan growth during the period. The allowance for loan losses and leases

("ALLL") was $6.5 million, or 0.47 percent of total loans as of March 31, 2018, compared to $5.9 million, or 0.44 percent of total loans, as of December 31, 2017.
Nonperforming loans as a percentage of total loans was 0.14 percent as of March 31, 2018, 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 0.26 percent as of March 31, 2018, compared to 0.29 percent as of December 31, 2017. In addition to the allowance there were $16.3 million additional discounts on $492.9 million of purchased loans as of March 31, 2018 compared to $17.9 million on $513.5 million of purchased loans as of December 31, 2017.
Noninterest income to average assets of 0.38 percent for the period was down from 0.42 percent in the fourth quarter of 2017. Noninterest income totaled $1.6 million in the first quarter of 2018, compared to $1.6 million in the fourth quarter of 2017. The slight increase in noninterest income was primarily due to higher service charges on deposit accounts.
Noninterest expense to average assets of 3.13 percent for the quarter was down from 3.35 percent in the fourth quarter of 2017. Noninterest expense totaled $13.4 million in the first quarter of 2018, which was up $843 thousand from the fourth quarter of 2017, primarily due to three months of salaries and employee benefits for associates in Alabama compared to two months in the prior quarter. Income tax expense was $940 thousand in the first quarter of 2018 compared to $3.9 million in the fourth quarter of 2017, which was elevated by the revaluation and write down of deferred tax assets due to the Tax Cuts and Jobs Act which resulted in a lower federal tax rate for corporations. The company's effective tax rate decreased to 21.6 percent in the first quarter of 2018 compared to 99.0 percent in the fourth quarter of 2017.
First Quarter 2018 compared to First Quarter 2017
Net income available to common shareholders totaled $3.4 million in the first quarter of 2018, or $0.30 per diluted share, compared to $1.4 million, or $0.19 per diluted share, in the first quarter of 2017. Net operating earnings available to common shareholders (Non-GAAP), which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $3.9 million in the first quarter of 2018 compared to $1.5 million in the first quarter of 2017.
Net interest income to average assets of 3.93 percent for the quarter increased from 3.81 percent in the first quarter of 2017 as the average earning asset balances and yields increased compared to the prior year. Net interest income totaled $16.8 million in the first quarter of 2018 compared to $9.8 million in the first 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 4.07 percent in the first quarter of 2017 to 4.38 percent in the first quarter of 2018 as a result of increases in the yield on earning assets.
Provision for loan losses was $689 thousand in the first quarter of 2018, compared to $12 thousand in the first quarter of 2017. The increase in provision for loan losses was due to faster loan growth during the period. The ALLL was $6.5 million, or 0.47 percent of total loans as of March 31, 2018, compared to $5.2 million, or 0.64 percent of total loans, as of March 31, 2017.
Nonperforming loans as a percentage of total loans was 0.14 percent as of March 31, 2018, which was down from 0.18 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 0.26 percent as of March 31, 2018, compared to 0.36 percent as of March 31, 2017.
Noninterest income to average assets of 0.38 percent for the quarter was down from 0.36 percent in the first quarter of 2017. Noninterest income totaled $1.6 million in the first quarter of 2018, compared to $0.9 million in the first quarter of 2017.
Noninterest expense to average assets of 3.13 percent for the quarter was down from 3.16 percent in the first quarter of 2017. Noninterest expense totaled $13.4 million in the first quarter of 2018, compared to $8.2 million in the first quarter of 2017. The Company's effective tax rate was 21.6 percent in the first quarter of 2018 compared to 37.0 percent in the first quarter of 2017.

Conference Call Information
S martFinancial plans to issue its earnings release for the first quarter of 2018 on Tuesday, April 24, 2018, and will host a conference call on Wednesday, April 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 6173081. A replay of the conference call will be available through April 25, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number 10119695. 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 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 22 branches, four loan production offices, spanning East Tennessee, Tuscaloosa and Southwest 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 Frank Hughes
President & CEO Executive Vice President, Investor Relations
(865) 868-0613 (423) 385-3009
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, OREO gain and losses, merger and conversion expenses, 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, 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.
Forward Looking Statements
This release contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: the expected revenue synergies and cost savings from the proposed merger with Tennessee Bancshares, Inc. (the “Tennessee Bancshares merger”) and/or the recently completed merger with Capstone Bancshares, Inc. (the “Capstone merger”) may not be fully realized or may take longer than anticipated to be realized; the disruption from either the Tennessee Bancshares merger or the Capstone merger with customers, suppliers or employees or other business partners’ relationships; the risk of successful integration of our business with that of Tennessee Bancshares or Capstone; the amount of costs, fees, expenses, and charges related to Tennessee Bancshares merger; risks of expansion into new geographic or product markets, like the proposed expansion into the Nashville, TN MSA associated with the proposed Tennessee Bancshares 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 report 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.

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |
(In thousands except per share data) |  |  |  |
|  | As of and for the three months ending
|  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017 |  | March 31, 2017
Selected Performance Ratios (Annualized) |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 0.80 | % |  | 0.01 | % |  | 0.59 | % |  | 0.61 | % |  | 0.64 | %
Net operating return on average assets (Non-GAAP) |  | 0.91 | % |  | 0.99 | % |  | 0.63 | % |  | 0.61 | % |  | 0.44 | %
Return on average shareholder equity |  | 6.25 | % |  | 0.08 | % |  | 4.91 | % |  | 4.95 | % |  | 5.18 | %
Net operating return on average shareholder equity (Non-GAAP) |  | 7.12 | % |  | 7.99 | % |  | 5.25 | % |  | 4.91 | % |  | 3.55 | %
Net interest income / average assets |  | 3.93 | % |  | 4.09 | % |  | 3.81 | % |  | 3.81 | % |  | 3.81 | %
Yield on Earning Assets |  | 5.04 | % |  | 5.07 | % |  | 4.69 | % |  | 4.66 | % |  | 4.54 | %
Yield on earning assets, TE (Non-GAAP) |  | 5.05 | % |  | 5.09 | % |  | 4.70 | % |  | 4.66 | % |  | 4.54 | %
Cost of interest-bearing liabilities |  | 0.82 | % |  | 0.70 | % |  | 0.68 | % |  | 0.65 | % |  | 0.60 | %
Net Interest margin |  | 4.37 | % |  | 4.51 | % |  | 4.16 | % |  | 4.14 | % |  | 4.07 | %
Net interest margin, TE (Non-GAAP) |  | 4.38 | % |  | 4.51 | % |  | 4.17 | % |  | 4.15 | % |  | 4.07 | %
Noninterest income / average assets |  | 0.38 | % |  | 0.42 | % |  | 0.43 | % |  | 0.47 | % |  | 0.36 | %
Noninterest expense / average assets |  | 3.13 | % |  | 3.35 | % |  | 3.34 | % |  | 3.29 | % |  | 3.16 | %
Efficiency ratio |  | 72.66 | % |  | 74.26 | % |  | 78.67 | % |  | 76.77 | % |  | 75.79 | %
Operating efficiency ratio (Non-GAAP) |  | 67.62 | % |  | 60.73 | % |  | 76.46 | % |  | 78.98 | % |  | 81.34 | %
Pre-tax pre-provision income / average assets |  | 1.07 | % |  | 1.16 | % |  | 0.97 | % |  | 0.96 | % |  | 1.09 | %
Per Common Share |  |  |  |  |  |  |  |  |  |
Net income, basic |  | $ | 0.30 |  |  | $ | — |  |  | $ | 0.20 |  |  | $ | 0.20 |  |  | $ | 0.19 |
Net income, diluted |  | 0.30 |  |  | — |  |  | 0.20 |  |  | 0.20 |  |  | 0.19 |
Net operating earnings, basic (Non-GAAP) |  | 0.35 |  |  | 0.35 |  |  | 0.22 |  |  | 0.20 |  |  | 0.15 |
Net operating earnings, diluted (Non-GAAP) |  | 0.34 |  |  | 0.35 |  |  | 0.22 |  |  | 0.20 |  |  | 0.15 |
Book value as of |  | 18.60 |  |  | 18.46 |  |  | 16.57 |  |  | 16.39 |  |  | 16.14 |
Tangible book value (Non-GAAP) as of |  | 14.09 |  |  | 13.90 |  |  | 15.67 |  |  | 15.48 |  |  | 15.34 |
Common shares outstanding as of |  | 11,234 |  |  | 11,153 |  |  | 8,243 |  |  | 8,219 |  |  | 8,211 |
Composition Of Loans |  |  |  |  |  |  |  |  |  |
Real estate commercial |  |  |  |  |  |  |  |  |  |
owner occupied |  | $ | 288,666 |  |  | $ | 281,297 |  |  | $ | 210,489 |  |  | $ | 211,469 |  |  | $ | 197,032 |
non-owner occupied |  | 375,028 |  |  | 361,691 |  |  | 237,131 |  |  | 233,707 |  |  | 210,901 |
Real Estate Commercial, Total |  | 663,694 |  |  | 642,988 |  |  | 447,620 |  |  | 445,176 |  |  | 407,933 |
Commercial & industrial |  | 256,333 |  |  | 238,087 |  |  | 119,782 |  |  | 105,129 |  |  | 90,649 |
Real estate construction & development |  | 142,702 |  |  | 135,409 |  |  | 98,212 |  |  | 101,151 |  |  | 115,675 |
Real estate residential |  | 299,148 |  |  | 293,457 |  |  | 199,704 |  |  | 206,667 |  |  | 186,344 |
Other loans |  | 12,380 |  |  | 13,317 |  |  | 6,361 |  |  | 7,298 |  |  | 6,938 |
Total loans |  | $ | 1,374,257 |  |  | $ | 1,323,258 |  |  | $ | 871,679 |  |  | $ | 865,421 |  |  | $ | 807,539 |
SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |
(In thousands except per share data) |  |  |  |
|  | As of and for the three months ending
|  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017 |  | March 31, 2017
Asset Quality Data and Ratios |  |  |  |  |  |  |  |  |  |
Nonperforming loans |  | $ | 1,931 |  |  | $ | 1,764 |  |  | $ | 1,264 |  |  | $ | 1,147 |  |  | $ | 1,445 |
Foreclosed assets |  | 2,665 |  |  | 3,254 |  |  | 2,888 |  |  | 2,369 |  |  | 2,371 |
Total nonperforming assets |  | $ | 4,596 |  |  | $ | 5,018 |  |  | $ | 4,152 |  |  | $ | 3,516 |  |  | $ | 3,816 |
Restructured loans not included in nonperforming loans |  | $ | 40 |  |  | $ | 41 |  |  | $ | 42 |  |  | $ | — |  |  | $ | 301 |
Net charge-offs (recoveries) to average loans (annualized) |  | 0.02 | % |  | (0.01 | )% |  | (0.02 | )% |  | (0.04 | )% |  | (0.02 | )%
Allowance for loan losses to loans |  | 0.47 | % |  | 0.44 | % |  | 0.62 | % |  | 0.64 | % |  | 0.64 | %
Nonperforming loans to total loans, gross |  | 0.14 | % |  | 0.13 | % |  | 0.15 | % |  | 0.13 | % |  | 0.18 | %
Nonperforming assets to total assets |  | 0.26 | % |  | 0.29 | % |  | 0.37 | % |  | 0.31 | % |  | 0.36 | %
Capital Ratios |  |  |  |  |  |  |  |  |  |
Tangible equity to tangible assets (Non-GAAP) |  | 9.26 | % |  | 9.28 | % |  | 11.45 | % |  | 11.18 | % |  | 12.06 | %
Tangible common equity to tangible assets (Non-GAAP) |  | 9.26 | % |  | 9.28 | % |  | 11.45 | % |  | 11.18 | % |  | 12.06 | %
SmartFinancial, Inc.: |  | Estimated 1 |  |  |  |  |  |  |  |  |
Tier 1 leverage |  | 9.29 | % |  | 10.48 | % |  | 11.46 | % |  | 11.91 | % |  | 12.18 | %
Common equity Tier 1 |  | 10.57 | % |  | 10.59 | % |  | 13.37 | % |  | 13.43 | % |  | 14.46 | %
Tier 1 capital |  | 10.57 | % |  | 10.59 | % |  | 13.37 | % |  | 13.43 | % |  | 14.46 | %
Total capital |  | 10.99 | % |  | 10.98 | % |  | 13.93 | % |  | 14.00 | % |  | 15.05 | %
SmartBank: |  | Estimated 1 |  |  |  |  |  |  |  |  |
Tier 1 leverage |  | 9.57 | % |  | 11.26 | % |  | 10.57 | % |  | 10.98 | % |  | 11.17 | %
Common equity Tier 1 |  | 10.89 | % |  | 10.90 | % |  | 12.30 | % |  | 12.32 | % |  | 13.13 | %
Tier 1 risk-based capital |  | 10.89 | % |  | 10.90 | % |  | 12.30 | % |  | 12.32 | % |  | 13.13 | %
Total risk-based capital |  | 11.32 | % |  | 11.30 | % |  | 12.86 | % |  | 12.89 | % |  | 13.71 | %

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) |  |  |  |
BALANCE SHEET |  |  |  |  |  |  |  |  |  |
|  | Ending Balances
|  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017 |  | March 31, 2017
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash & cash equivalents |  | $ | 96,710 |  |  | $ | 113,027 |  |  | $ | 84,098 |  |  | $ | 82,835 |  |  | $ | 55,548 |
Securities available for sale |  | 156,210 |  |  | 151,945 |  |  | 115,535 |  |  | 132,762 |  |  | 137,133 |
Other investments |  | 7,808 |  |  | 6,431 |  |  | 6,081 |  |  | 6,080 |  |  | 5,628 |
Total loans |  | 1,374,257 |  |  | 1,323,258 |  |  | 871,679 |  |  | 865,421 |  |  | 807,539 |
Allowance for loan losses |  | (6,477 | ) |  | (5,860 | ) |  | (5,393 | ) |  | (5,498 | ) |  | (5,152 | )
Loans, net |  | 1,367,780 |  |  | 1,317,398 |  |  | 866,286 |  |  | 859,923 |  |  | 802,387 |
Premises and equipment |  | 44,202 |  |  | 43,000 |  |  | 33,778 |  |  | 33,765 |  |  | 30,802 |
Foreclosed assets |  | 2,665 |  |  | 3,254 |  |  | 2,888 |  |  | 2,369 |  |  | 2,371 |
Goodwill and other intangibles |  | 50,660 |  |  | 50,837 |  |  | 7,414 |  |  | 7,492 |  |  | 6,583 |
Cash surrender value of life insurance |  | 21,797 |  |  | 21,647 |  |  | 11,484 |  |  | 11,392 |  |  | 1,329 |
Other assets |  | 12,593 |  |  | 13,232 |  |  | 8,258 |  |  | 8,861 |  |  | 9,305 |
Total assets |  | $ | 1,760,425 |  |  | $ | 1,720,771 |  |  | $ | 1,135,822 |  |  | $ | 1,145,479 |  |  | $ | 1,051,086 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest demand |  | $ | 276,249 |  |  | $ | 220,520 |  |  | $ | 185,386 |  |  | $ | 183,324 |  |  | $ | 160,673 |
Interest-bearing demand |  | 278,965 |  |  | 231,644 |  |  | 156,953 |  |  | 156,150 |  |  | 167,433 |
Money market and savings |  | 491,243 |  |  | 543,645 |  |  | 306,358 |  |  | 324,014 |  |  | 274,994 |
Time deposits |  | 453,276 |  |  | 442,774 |  |  | 311,490 |  |  | 318,147 |  |  | 286,600 |
Total deposits |  | 1,499,733 |  |  | 1,438,583 |  |  | 960,187 |  |  | 981,635 |  |  | 889,700 |
Repurchase agreements |  | 15,968 |  |  | 24,055 |  |  | 26,542 |  |  | 22,946 |  |  | 23,153 |
FHLB & other borrowings |  | 30,000 |  |  | 43,600 |  |  | 6,000 |  |  | — |  |  | 60 |
Other liabilities |  | 5,775 |  |  | 8,681 |  |  | 6,505 |  |  | 6,164 |  |  | 5,622 |
Total liabilities |  | 1,551,476 |  |  | 1,514,919 |  |  | 999,234 |  |  | 1,010,745 |  |  | 918,535 |
Shareholders' Equity |  |  |  |  |  |  |  |  |  |
Preferred stock |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Common stock |  | 11,234 |  |  | 11,152 |  |  | 8,243 |  |  | 8,219 |  |  | 8,211 |
Additional paid-in capital |  | 174,981 |  |  | 174,009 |  |  | 107,065 |  |  | 106,794 |  |  | 106,703 |
Retained earnings |  | 25,303 |  |  | 21,889 |  |  | 21,654 |  |  | 19,969 |  |  | 18,320 |
Accumulated other comprehensive loss |  | (2,569 | ) |  | (1,198 | ) |  | (374 | ) |  | (248 | ) |  | (683 | )
Total shareholders' equity |  | 208,949 |  |  | 205,852 |  |  | 136,588 |  |  | 134,734 |  |  | 132,551 |
Total liabilities & shareholders' equity |  | $ | 1,760,425 |  |  | $ | 1,720,771 |  |  | $ | 1,135,822 |  |  | $ | 1,145,479 |  |  | $ | 1,051,086 |

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |
(In thousands) |  |  |  |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |
|  | Three months ending
|  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017 |  | March 31, 2017
Interest Income |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 18,228 |  |  | $ | 16,357 |  |  | $ | 11,491 |  |  | $ | 10,747 |  |  | $ | 10,210 |
Investment securities and interest bearing due froms |  | 1,049 |  |  | 770 |  |  | 740 |  |  | 692 |  |  | 661 |
Other interest income |  | 101 |  |  | 117 |  |  | 86 |  |  | 78 |  |  | 73 |
Total interest income |  | 19,378 |  |  | 17,244 |  |  | 12,317 |  |  | 11,517 |  |  | 10,944 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 2,401 |  |  | 1,806 |  |  | 1,373 |  |  | 1,241 |  |  | 1,098 |
Repurchase agreements |  | 13 |  |  | 15 |  |  | 15 |  |  | 16 |  |  | 16 |
FHLB and other borrowings |  | 153 |  |  | 81 |  |  | 5 |  |  | 12 |  |  | 15 |
Total interest expense |  | 2,567 |  |  | 1,902 |  |  | 1,393 |  |  | 1,268 |  |  | 1,129 |
Net interest income |  | 16,811 |  |  | 15,342 |  |  | 10,924 |  |  | 10,249 |  |  | 9,815 |
Provision for loan losses |  | 689 |  |  | 442 |  |  | 30 |  |  | 298 |  |  | 12 |
Net interest income after provision for loan losses |  | 16,122 |  |  | 14,898 |  |  | 10,894 |  |  | 9,951 |  |  | 9,803 |
Noninterest income |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  | 578 |  |  | 524 |  |  | 294 |  |  | 291 |  |  | 264 |
Gain on securities |  | — |  |  | — |  |  | 144 |  |  | — |  |  | — |
Gain on sale of loans and other assets |  | 325 |  |  | 366 |  |  | 224 |  |  | 405 |  |  | 281 |
Other non-interest income |  | 739 |  |  | 691 |  |  | 585 |  |  | 556 |  |  | 402 |
Total noninterest income |  | 1,642 |  |  | 1,581 |  |  | 1,247 |  |  | 1,252 |  |  | 947 |
Noninterest expense |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  | 7,176 |  |  | 6,272 |  |  | 5,035 |  |  | 4,758 |  |  | 4,679 |
Occupancy expense |  | 1,533 |  |  | 1,217 |  |  | 1,114 |  |  | 963 |  |  | 978 |
FDIC premiums |  | 102 |  |  | 150 |  |  | 102 |  |  | 61 |  |  | 153 |
Foreclosed asset expense |  | 189 |  |  | 59 |  |  | 47 |  |  | 12 |  |  | 14 |
Marketing |  | 185 |  |  | 167 |  |  | 177 |  |  | 129 |  |  | 164 |
Data Processing |  | 713 |  |  | 583 |  |  | 483 |  |  | 475 |  |  | 333 |
Professional expenses |  | 898 |  |  | 602 |  |  | 472 |  |  | 473 |  |  | 538 |
Amortization of other intangibles |  | 188 |  |  | 155 |  |  | 78 |  |  | 61 |  |  | 53 |
Service contracts |  | 479 |  |  | 426 |  |  | 363 |  |  | 313 |  |  | 296 |
Merger Expense |  | 498 |  |  | 1,694 |  |  | 303 |  |  | 420 |  |  | — |
Other noninterest expense |  | 1,448 |  |  | 1,242 |  |  | 1,400 |  |  | 1,164 |  |  | 952 |
Total noninterest expense |  | 13,409 |  |  | 12,566 |  |  | 9,574 |  |  | 8,829 |  |  | 8,160 |
Earnings before income taxes |  | 4,355 |  |  | 3,913 |  |  | 2,567 |  |  | 2,374 |  |  | 2,589 |
Income tax expense |  | 940 |  |  | 3,875 |  |  | 882 |  |  | 726 |  |  | 946 |
Net income |  | 3,415 |  |  | 38 |  |  | 1,685 |  |  | 1,648 |  |  | 1,644 |
Dividends on preferred stock |  | — |  |  | — |  |  | — |  |  | — |  |  | 195 |
Net income available to common shareholders |  | $ | 3,415 |  |  | $ | 38 |  |  | $ | 1,685 |  |  | $ | 1,648 |  |  | $ | 1,449 |
NET INCOME PER COMMON SHARE |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.30 |  |  | $ | — |  |  | $ | 0.20 |  |  | $ | 0.20 |  |  | $ | 0.19 |
Diluted |  | 0.30 |  |  | — |  |  | 0.20 |  |  | 0.20 |  |  | 0.19 |
Weighted average common shares outstanding |  |  |  |  |  |  |  |  |  |
Basic |  | 11,211 |  |  | 10,552 |  |  | 8,235 |  |  | 8,217 |  |  | 7,525 |
Diluted |  | 11,324 |  |  | 10,709 |  |  | 8,333 |  |  | 8,326 |  |  | 7,631 |

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
YIELD ANALYSIS |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended March 31, 2018 |  | Three Months Ended December 31, 2017 |  | Three Months Ended March 31, 2017
|  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/
|  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 1,346,179 |  |  | $ | 18,230 |  |  | 5.49 | % |  | $ | 1,160,599 |  |  | $ | 16,362 |  |  | 5.61 | % |  | $ | 811,522 |  |  | $ | 10,220 |  |  | 5.11 | %
Investment securities and interest bearing due froms |  | 203,923 |  |  | 1,059 |  |  | 2.11 | % |  | 179,768 |  |  | 781 |  |  | 1.73 | % |  | 161,392 |  |  | 677 |  |  | 1.70 | %
Federal funds and other |  | 8,414 |  |  | 101 |  |  | 4.87 | % |  | 9,947 |  |  | 117 |  |  | 4.68 | % |  | 6,621 |  |  | 73 |  |  | 4.47 | %
Total interest-earning assets |  | 1,558,516 |  |  | 19,390 |  |  | 5.05 | % |  | 1,350,314 |  |  | 17,260 |  |  | 5.09 | % |  | 979,535 |  |  | 10,970 |  |  | 4.54 | %
Non-interest-earning assets |  | 176,646 |  |  |  |  |  |  |  |  | 137,846 |  |  |  |  |  |  |  |  | 66,208 |  |  |  |  |  |  |
Total assets |  | $ | 1,735,162 |  |  |  |  |  |  |  |  | $ | 1,488,160 |  |  |  |  |  |  |  |  | $ | 1,045,743 |  |  |  |  |  |  |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits |  | $ | 249,846 |  |  | $ | 320 |  |  | 0.52 | % |  | $ | 195,783 |  |  | $ | 213 |  |  | 0.43 | % |  | $ | 159,255 |  |  | $ | 93 |  |  | 0.24 | %
Money market and savings deposits |  | 526,093 |  |  | 870 |  |  | 0.67 | % |  | 462,674 |  |  | 488 |  |  | 0.42 | % |  | 275,576 |  |  | 328 |  |  | 0.48 | %
Time deposits |  | 454,660 |  |  | 1,211 |  |  | 1.08 | % |  | 398,142 |  |  | 1,106 |  |  | 1.11 | % |  | 302,256 |  |  | 677 |  |  | 0.91 | %
Total interest-bearing deposits |  | 1,230,599 |  |  | 2,401 |  |  | 0.79 | % |  | 1,056,599 |  |  | 1,807 |  |  | 0.68 | % |  | 737,087 |  |  | 1,098 |  |  | 0.60 | %
Securities sold under agreement to repurchase |  | 16,186 |  |  | 13 |  |  | 0.33 | % |  | 20,226 |  |  | 15 |  |  | 0.30 | % |  | 18,682 |  |  | 16 |  |  | 0.35 | %
Federal Home Loan Bank advances and other borrowings |  | 26,655 |  |  | 153 |  |  | 2.33 | % |  | 8,281 |  |  | 81 |  |  | 3.90 | % |  | 7,446 |  |  | 15 |  |  | 0.82 | %
Total interest-bearing liabilities |  | 1,273,440 |  |  | 2,567 |  |  | 0.82 | % |  | 1,085,106 |  |  | 1,903 |  |  | 0.70 | % |  | 763,215 |  |  | 1,129 |  |  | 0.60 | %
Noninterest-bearing deposits |  | 231,355 |  |  |  |  |  |  |  |  | 203,457 |  |  |  |  |  |  |  |  | 149,305 |  |  |  |  |  |  |
Other liabilities |  | 8,656 |  |  |  |  |  |  |  |  | 15,302 |  |  |  |  |  |  |  |  | 4,580 |  |  |  |  |  |  |
Total liabilities |  | 1,513,451 |  |  |  |  |  |  |  |  | 1,303,865 |  |  |  |  |  |  |  |  | 917,100 |  |  |  |  |  |  |
Shareholders’ equity |  | 221,711 |  |  |  |  |  |  |  |  | 184,295 |  |  |  |  |  |  |  |  | 128,643 |  |  |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 1,735,162 |  |  |  |  |  |  |  |  | $ | 1,488,160 |  |  |  |  |  |  |  |  | $ | 1,045,743 |  |  |  |  |  |  |
Net interest income, taxable equivalent |  |  |  |  | $ | 16,823 |  |  |  |  |  |  |  |  | $ | 15,357 |  |  |  |  |  |  |  |  | $ | 9,841 |  |  |  |
Interest rate spread |  |  |  |  |  |  |  | 4.23 | % |  |  |  |  |  |  |  | 4.39 | % |  |  |  |  |  |  |  | 3.94 | %
Tax equivalent net interest margin |  |  |  |  |  |  |  | 4.38 | % |  |  |  |  |  |  |  | 4.51 | % |  |  |  |  |  |  |  | 4.07 | %
Percentage of average interest-earning assets to average interest-bearing liabilities |  |  |  |  |  |  |  | 122.39 | % |  |  |  |  |  |  |  | 124.44 | % |  |  |  |  |  |  |  | 128.34 | %
Percentage of average equity to average assets |  |  |  |  |  |  |  | 12.78 | % |  |  |  |  |  |  |  | 12.38 | % |  |  |  |  |  |  |  | 12.30 | %

1 Taxable equivalent

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |
(In thousands) |  |  |  |
NON-GAAP RECONCILIATIONS |  | Three months ending
|  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017 |  | March 31, 2017
Net interest income, Taxable Equivalent |  |  |  |  |  |  |  |  |  |
Net interest income (GAAP) |  | $ | 16,811 |  |  | $ | 15,341 |  |  | $ | 10,924 |  |  | $ | 10,248 |  |  | $ | 9,815 |
Taxable equivalent adjustment |  | 32 |  |  | 16 |  |  | 22 |  |  | 21 |  |  | 21 |
Net interest income, Taxable Equivalent (Non-GAAP) |  | $ | 16,823 |  |  | $ | 15,357 |  |  | $ | 10,946 |  |  | $ | 10,269 |  |  | $ | 9,836 |
Operating Earnings |  |  |  |  |  |  |  |  |  |
Net income (loss) (GAAP) |  | $ | 3,415 |  |  | $ | 38 |  |  | $ | 1,685 |  |  | $ | 1,648 |  |  | $ | 1,644 |
Securities (gains) losses |  | — |  |  | — |  |  | (144 | ) |  | — |  |  | — |
Foreclosed assets losses |  | 146 |  |  | 5 |  |  | 27 |  |  | — |  |  | 15 |
Merger and conversion costs |  | 498 |  |  | 1,694 |  |  | 303 |  |  | 420 |  |  | — |
Revaluation of deferred tax assets due to change in tax law |  | — |  |  | 2,482 |  |  | — |  |  | — |  |  | — |
Income tax effect of adjustments |  | (168 | ) |  | (508 | ) |  | (36 | ) |  | (3 | ) |  | (6 | )
Net operating earnings (Non-GAAP) |  | 3,891 |  |  | 3,711 |  |  | 1,835 |  |  | 2,065 |  |  | 1,653 |
Dividends on preferred stock |  | — |  |  | — |  |  | — |  |  | — |  |  | (195 | )
Net operating earnings available to common shareholders (Non-GAAP) |  | $ | 3,891 |  |  | $ | 3,711 |  |  | $ | 1,835 |  |  | $ | 2,065 |  |  | $ | 1,458 |
Net operating earnings per common share (Non-GAAP): |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.35 |  |  | $ | 0.35 |  |  | $ | 0.22 |  |  | $ | 0.25 |  |  | $ | 0.19 |
Diluted |  | 0.34 |  |  | 0.35 |  |  | 0.22 |  |  | 0.25 |  |  | 0.19 |
Operating Efficiency Ratio |  |  |  |  |  |  |  |  |  |
Efficiency ratio (GAAP) |  | 72.66 | % |  | 74.25 | % |  | 78.62 | % |  | 76.77 | % |  | 75.79 | %
Adjustment for taxable equivalent yields |  | (0.24 | )% |  | — | % |  | (0.22 | )% |  | (0.22 | )% |  | (0.25 | )%
Adjustment for securities gains (losses) |  | — | % |  | — | % |  | 1.51 | % |  | — | % |  | — | %
Adjustment for OREO gains (losses) |  | (1.09 | )% |  | (0.04 | )% |  | (0.28 | )% |  | — | % |  | (0.18 | )%
Adjustment for merger & conversion costs |  | (3.71 | )% |  | (13.49 | )% |  | (3.18 | )% |  | (4.76 | )% |  | — | %
Operating efficiency ratio (Non-GAAP) |  | 67.62 | % |  | 60.72 | % |  | 76.45 | % |  | 71.79 | % |  | 75.36 | %
Loan Discount Data |  |  |  |  |  |  |  |  |  |
Allowance for loan losses (GAAP) |  | $ | 6,477 |  |  | $ | 5,860 |  |  | $ | 5,393 |  |  | $ | 5,498 |  |  | $ | 5,152 |
Net acquisition accounting fair value discounts to loans |  | 16,323 |  |  | 17,862 |  |  | 8,167 |  |  | 9,086 |  |  | 9,831 |
Tangible Common Equity |  |  |  |  |  |  |  |  |  |
Shareholders' equity (GAAP) |  | $ | 208,949 |  |  | $ | 205,852 |  |  | $ | 136,588 |  |  | $ | 134,734 |  |  | $ | 132,551 |
Less goodwill and other intangible assets |  | 50,660 |  |  | 50,837 |  |  | 7,414 |  |  | 7,492 |  |  | 6,583 |
Tangible common equity (Non-GAAP) |  | $ | 158,289 |  |  | $ | 155,015 |  |  | $ | 129,174 |  |  | $ | 127,242 |  |  | $ | 125,968 |