EX-99.1 2 a063018earningsexhibit991.htm EXHIBIT 99.1
Exhibit 99.1
2 Q 2018
SmartFinancial Announces Earnings with Second Quarter 2018 Net Income of $3.9 million
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, TN - July 24, 2018 - 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, 2018 |  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017
Selected Performance Ratios (Annualized) |  |  |  |  |  |  |  |  |  |
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.: |  | Estimated 1 |  |  |  |  |  |  |  |  |
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: |  | Estimated 1 |  |  |  |  |  |  |  |  |
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) |  |  |  |
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) |  |  |  |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |
|  | Three months ending
|  | June 30, 2018 |  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 2017
Interest Income |  |  |  |  |  |  |  |  |  |
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) |  |  |  |  |  |  |  |  |  |  |  |
YIELD ANALYSIS |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended June 30, 2018 |  | Three Months Ended March 31, 2018 |  | Three Months Ended June 30, 2017
|  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/
|  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 1,501,008 |  |  | $ | 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 ending
|  | June 30, 2018 |  | March 31, 2018 |  | December 31, 2017 |  | September 30, 2017 |  | June 30, 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 |