EX-99.1 2 a03319earningsexhibit991.htm EXHIBIT 99.1
Exhibit 99.1
1 Q 2019
SmartFinancial Announces First Quarter 2019 Net Income of $4.7 million, a 39% Year over Year Increase
Net operating earnings (Non-GAAP) of $5.5 million for the quarter
Performance Highlights

• | Return on average assets of 0.84 percent and net operating return on average assets (non-GAAP) of 0.98 percent.

• | Yield on earning assets, taxable equivalent, of 5.25 percent, an increase of 0.24 percentage points from a year ago.

• | Quarterly loan growth of $63.3 million or 14.5 percent annualized.

• | Noninterest expense to average assets of 2.77 percent, a decrease of 0.32 percentage points from a year ago.

KNOXVILLE, TN - April 24, 2019 - SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), today announced net income of $4.7 million for the first quarter of 2019, compared to $3.4 million a year ago. Diluted net income per share was $0.34 for the first quarter of 2019, compared to $0.30 during the first quarter of 2018.
Billy Carroll, President & CEO, stated: "This quarter we had very strong organic loan growth of over $60 million and had outstanding growth in earnings compared to the same quarter last year. Demand deposits increased significantly, while we were able to keep the costs of those deposits at very reasonable levels. As an organization we continue to improve on our efficiencies as we capture further economies of scale, highlighted by the further reduction in noninterest expense to average assets. Our team also did an outstanding job integrating the Foothills Bank acquisition during the quarter as we continue to build a great core bank."
SmartFinancial's Chairman, Miller Welborn, concluded: "We are looking forward to carrying the momentum from this strong start into the remainder of the year. Strong organic loan growth, supported by core demand deposit funding while maintaining stringent credit quality positions us well for the future. The opportunities we have for this company have never been greater. We are well on our way in creating one of the Southeast’s next great community banking franchises."
First Quarter 2019 compared to Fourth Quarter 2018
Net income was $4.7 million for the first quarter of 2019, a decrease from $6.4 million in the prior quarter primarily due to a change in tax expense. Diluted net income per share was $0.34 for the first quarter of 2019, compared to $0.47 during the fourth quarter of 2018. Net operating earnings (non-GAAP) totaled $5.5 million in the first quarter of 2019 compared to $5.9 million in the previous quarter. SmartFinancial completed the acquisition of Foothills Bancorp, Inc. and its wholly owned subsidiary Foothills Bank & Trust in November of 2018 and this quarter includes three full months of the results of the acquired company .
Net interest income to average assets of 3.73 percent for the quarter decreased from 3.89 percent in the fourth quarter of 2018, primarily due to lower accretion on acquired loans and higher deposit costs. Net interest income totaled $21.0 million in the first quarter of 2019, compared to $21.4 million in the fourth quarter of 2018. Net interest margin, taxable equivalent, decreased from 4.28 percent in the fourth quarter of 2018 to 4.10 percent in the first quarter of 2019 as earning asset yields decreased while the cost of interest-bearing liabilities increased.
Provision for loan losses was $797 thousand in the first quarter of 2019, compared to $1.3 million in the fourth quarter of 2018. The allowance for loan losses was $8.7 million, or 0.47 percent of total loans, as of March 31, 2019, compared to $8.3 million, or 0.46 percent of total loans, as of December 31, 2018.

Nonperforming loans as a percentage of total loans was 0.12 percent as of March 31, 2019, which was a decrease from 0.16 percent in the prior quarter due to a reduction in impaired loan balances. 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 0.18 percent as of March 31, 2019, compared to 0.24 percent as of December 31, 2018.
Noninterest income to average assets of 0.30 percent for the current period decreased slightly from 0.31 percent in the fourth quarter of 2018 due to higher average asset balances. Noninterest income totaled $1.7 million in the first quarter of 2019, compared to $1.7 million in the fourth quarter of 2018.
Noninterest expense to average assets of 2.77 percent for the quarter decreased from 2.85 percent in the fourth quarter of 2018. Noninterest expense totaled $15.6 million in the first quarter of 2019 compared to $15.7 million in the fourth quarter of 2018 and included $923 thousand in merger expenses compared to $1.3 million in the prior period. Income tax expense was $1.6 million in the first quarter of 2019 compared to a benefit of $307 thousand in the fourth quarter of 2018. The company's effective tax rate was 25.1 percent in the first quarter of 2019 compared to a benefit in the fourth quarter of 2018. The benefit in 2018 resulted from director options previously exercised.
First Quarter 2019 compared to First Quarter 2018
Net income totaled $4.7 million in the first quarter of 2019, or $0.34 per diluted share, compared to $3.4 million, or $0.30 per diluted share, in the first quarter of 2018. Net operating earnings (non-GAAP) totaled $5.5 million in the first quarter of 2019 compared to $3.8 million in the first quarter of 2018.
Net interest income to average assets of 3.73 percent for the quarter decreased from 3.93 percent in the first quarter of 2018. Net interest income totaled $21.0 million in the first quarter of 2019, compared to $16.8 million in the first quarter of 2018. Net interest income was positively impacted compared to the prior year due to increases in average loan and securities balances and increases in the yields of the loan and securities portfolios. Net interest margin, taxable equivalent, decreased from 4.35 percent in the first quarter of 2018 to 4.10 percent in the first quarter of 2019 as a result of increases in the cost of deposits and the subordinated debt issued in the third quarter of 2018.
Provision for loan losses was $797 thousand in the first quarter of 2019, compared to $689 thousand in the first quarter of 2018. The allowance for loan losses was $8.7 million, or 0.47 percent of total loans, as of March 31, 2019, 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 0.12 percent as of March 31, 2019, a decrease from 0.14 percent in the first quarter of 2018. 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 0.18 percent as of March 31, 2019, compared to 0.26 percent as of March 31, 2018.
Noninterest income to average assets of 0.30 percent for the quarter decreased from 0.34 percent in the first quarter of 2018 due to higher average asset balances. Noninterest income totaled $1.7 million in the first quarter of 2019, compared to $1.5 million in the first quarter of 2018.
Noninterest expense to average assets of 2.77 percent for the quarter decreased from 3.09 percent in the first quarter of 2018. Noninterest expense totaled $15.6 million in the first quarter of 2019, compared to $13.2 million in the first quarter of 2018 and included $923 thousand in merger expenses compared to $498 thousand a year ago. The increases in noninterest expense over the prior year in salaries and employee benefits and occupancy expense were primarily due to the acquisitions of Tennessee Bancshares, Inc. in the second quarter of 2018 and Foothills Bancorp, Inc. in the fourth quarter of 2018. The company's effective tax rate was 25.1 percent in the first quarter of 2019 compared to 21.6 percent in the first quarter of 2018 where the rate was positively impacted due the benefits from options exercised.
Conference Call Information
SmartFinancial will host a conference call on Thursday, April 25, 2019 at 10:00 a.m. ET to discuss first quarter 2019 results and other matters. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 2152022. A replay of the conference call will be available through April 25, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10130759. Conference call materials (earnings release & conference call presentation will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile by 9:00 a.m. ET 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 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 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) net operating return on average assets, (iii) net operating return on average shareholder equity, (iv) return on average average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio; (vii) tangible common equity; and (viii) average 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 related 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 expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes 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
Certain of the statements made in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” and “estimate,” and similar expressions, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements pertaining to the intent, belief, or current expectations of SmartFinancial’s management regarding the company’s strategic direction, plans, objectives, prospects, or future results or financial performance. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of SmartFinancial to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk that the recent announcement of the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) could have adverse effects on the market price of our common stock; (2) the risk that the termination of the Entegra Merger Agreement or the announcement of the same could have an adverse effect on our business generally, including our ability to retain customers, retain or hire key personnel, or maintain relationships with customers or suppliers; (3) reputational risk from the announcement of the termination of the Entegra Merger Agreement.; (4) the fact that we have incurred significant costs and expenses related to the Entegra Merger Agreement and the transactions that were contemplated by the Entegra Merger Agreement; (5) the risk of litigation related to the termination of the Entegra Merger Agreement or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (6) 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; (7) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize, (8) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships, (9) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank, (10) changes in management’s plans for the future, (11) prevailing, or changes in, economic or political conditions, particularly in our market areas, (12) credit risk associated with our lending activities, (13) changes in interest rates, loan demand, real estate values, or competition, (14) changes in accounting principles, policies, or guidelines, (15) changes in applicable laws, rules, or regulations, and (16) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or 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 Securities and Exchange Commission (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 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
|  | March 31, 2019 |  | December 31, 2018 |  | September 30, 2018 |  | June 30, 2018 |  | March 31, 2018
Selected Performance Ratios (Annualized) |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 0.84 | % |  | 1.17 | % |  | 0.85 | % |  | 0.81 | % |  | 0.80 | %
Net operating return on average assets (Non-GAAP) |  | 0.98 | % |  | 1.07 | % |  | 0.98 | % |  | 1.00 | % |  | 0.89 | %
Return on average shareholder equity |  | 6.71 | % |  | 9.42 | % |  | 6.86 | % |  | 6.76 | % |  | 6.25 | %
Net operating return on average shareholder equity (Non-GAAP) |  | 7.81 | % |  | 8.65 | % |  | 7.88 | % |  | 8.33 | % |  | 6.97 | %
Return on average tangible common equity (Non-GAAP) |  | 9.26 | % |  | 13.06 | % |  | 9.45 | % |  | 8.96 | % |  | 8.10 | %
Net operating return on average tangible common equity (Non-GAAP) |  | 10.79 | % |  | 12.00 | % |  | 10.84 | % |  | 11.04 | % |  | 9.04 | %
Net interest income / average assets |  | 3.73 | % |  | 3.89 | % |  | 3.70 | % |  | 4.03 | % |  | 3.93 | %
Yield on earning assets, TE |  | 5.25 | % |  | 5.35 | % |  | 5.03 | % |  | 5.34 | % |  | 5.01 | %
Cost of interest-bearing liabilities |  | 1.45 | % |  | 1.34 | % |  | 1.15 | % |  | 1.00 | % |  | 0.82 | %
Net interest margin, TE |  | 4.10 | % |  | 4.28 | % |  | 4.11 | % |  | 4.54 | % |  | 4.35 | %
Noninterest income / average assets |  | 0.30 | % |  | 0.31 | % |  | 0.36 | % |  | 0.33 | % |  | 0.34 | %
Noninterest expense / average assets |  | 2.77 | % |  | 2.85 | % |  | 2.90 | % |  | 3.15 | % |  | 3.09 | %
Efficiency ratio |  | 68.65 | % |  | 67.80 | % |  | 71.33 | % |  | 72.34 | % |  | 72.39 | %
Operating efficiency ratio (Non-GAAP) |  | 64.25 | % |  | 61.72 | % |  | 67.17 | % |  | 66.92 | % |  | 69.62 | %
Pre-tax pre-provision income / average assets |  | 1.23 | % |  | 1.35 | % |  | 1.16 | % |  | 1.21 | % |  | 1.18 | %
Per Common Share |  |  |  |  |  |  |  |  |  |
Net income, basic |  | $ | 0.34 |  |  | $ | 0.48 |  |  | $ | 0.34 |  |  | $ | 0.32 |  |  | $ | 0.30 |
Net income, diluted |  | 0.34 |  |  | 0.47 |  |  | 0.34 |  |  | 0.32 |  |  | 0.30 |
Net operating earnings, basic (Non-GAAP) |  | 0.40 |  |  | 0.44 |  |  | 0.39 |  |  | 0.40 |  |  | 0.34 |
Net operating earnings, diluted (Non-GAAP) |  | 0.39 |  |  | 0.43 |  |  | 0.39 |  |  | 0.39 |  |  | 0.34 |
Book value |  | 20.82 |  |  | 20.31 |  |  | 19.74 |  |  | 19.48 |  |  | 18.60 |
Tangible book value (Non-GAAP) |  | 15.18 |  |  | 14.64 |  |  | 14.38 |  |  | 14.09 |  |  | 14.09 |
Common shares outstanding |  | 13,952 |  |  | 13,934 |  |  | 12,750 |  |  | 12,705 |  |  | 11,234 |
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, 2019 |  | December 31, 2018 |  | September 30, 2018 |  | June 30, 2018 |  | March 31, 2018
Composition of Loans |  |  |  |  |  |  |  |  |  |
Real estate commercial |  |  |  |  |  |  |  |  |  |
owner occupied |  | $ | 416,152 |  |  | $ | 372,030 |  |  | $ | 364,164 |  |  | $ | 360,294 |  |  | $ | 288,666 |
non-owner occupied |  | 476,234 |  |  | 487,997 |  |  | 400,275 |  |  | 385,536 |  |  | 375,028 |
Total real estate commercial |  | 892,386 |  |  | 860,027 |  |  | 764,439 |  |  | 745,830 |  |  | 663,694 |
Commercial & financial |  | 341,015 |  |  | 308,254 |  |  | 289,732 |  |  | 279,341 |  |  | 256,333 |
Real estate construction & development |  | 186,427 |  |  | 187,895 |  |  | 166,089 |  |  | 179,361 |  |  | 142,702 |
Real estate residential |  | 408,661 |  |  | 407,254 |  |  | 351,948 |  |  | 355,755 |  |  | 299,148 |
Other loans |  | 12,080 |  |  | 13,809 |  |  | 12,986 |  |  | 15,148 |  |  | 12,380 |
Total loans |  | $ | 1,840,569 |  |  | $ | 1,777,239 |  |  | $ | 1,585,194 |  |  | $ | 1,575,434 |  |  | $ | 1,374,257 |
Asset Quality Data and Ratios |  |  |  |  |  |  |  |  |  |
Nonperforming loans |  | $ | 2,158 |  |  | $ | 2,856 |  |  | $ | 2,604 |  |  | $ | 1,730 |  |  | $ | 1,930 |
Foreclosed assets |  | 2,066 |  |  | 2,495 |  |  | 4,230 |  |  | 3,524 |  |  | 2,665 |
Total nonperforming assets |  | $ | 4,224 |  |  | $ | 5,351 |  |  | $ | 6,834 |  |  | $ | 5,254 |  |  | $ | 4,595 |
Restructured loans not included in nonperforming loans |  | $ | 32 |  |  | $ | 116 |  |  | $ | 369 |  |  | $ | 660 |  |  | $ | 40 |
Net charge-offs to average loans (annualized) |  | 0.08 | % |  | 0.04 | % |  | 0.06 | % |  | 0.02 | % |  | 0.02 | %
Allowance for loan losses to loans |  | 0.47 | % |  | 0.46 | % |  | 0.45 | % |  | 0.45 | % |  | 0.47 | %
Nonperforming loans to total loans, gross |  | 0.12 | % |  | 0.16 | % |  | 0.16 | % |  | 0.11 | % |  | 0.14 | %
Nonperforming assets to total assets |  | 0.18 | % |  | 0.24 | % |  | 0.33 | % |  | 0.25 | % |  | 0.26 | %
Acquisition accounting discounts on loans |  | $ | 19,954 |  |  | $ | 21,528 |  |  | $ | 19,500 |  |  | $ | 20,748 |  |  | $ | 16,323 |
Accretion income on all acquired loans |  | 1,881 |  |  | 2,755 |  |  | 1,208 |  |  | 2,583 |  |  | 1,274 |
Capital Ratios |  |  |  |  |  |  |  |  |  |
Equity to Assets |  | 12.34 | % |  | 12.44 | % |  | 12.27 | % |  | 12.00 | % |  | 11.87 | %
Tangible common equity to tangible assets (Non-GAAP) |  | 9.31 | % |  | 9.29 | % |  | 9.25 | % |  | 8.98 | % |  | 9.26 | %
SmartFinancial, Inc.: |  | Estimated 1 |  |  | Estimated 1 |  |  | Estimated 1 |  |  |  |  |
Tier 1 leverage |  | 9.29 | % |  | 9.47 | % |  | 9.26 | % |  | 9.82 | % |  | 9.59 | %
Common equity Tier 1 |  | 10.72 | % |  | 10.81 | % |  | 10.88 | % |  | 10.83 | % |  | 10.84 | %
Tier 1 capital |  | 10.72 | % |  | 10.81 | % |  | 10.88 | % |  | 10.83 | % |  | 10.84 | %
Total capital |  | 13.14 | % |  | 13.29 | % |  | 13.57 | % |  | 11.25 | % |  | 11.27 | %
SmartBank: |  | Estimated 2 |  |  |  |  |  |  |  |  |
Tier 1 leverage |  | 10.60 | % |  | 11.17 | % |  | 10.55 | % |  | 10.43 | % |  | 10.17 | %
Common equity Tier 1 |  | 12.23 | % |  | 12.31 | % |  | 11.99 | % |  | 11.41 | % |  | 11.12 | %
Tier 1 risk-based capital |  | 12.23 | % |  | 12.31 | % |  | 11.99 | % |  | 11.41 | % |  | 11.12 | %
Total risk-based capital |  | 12.67 | % |  | 12.75 | % |  | 12.40 | % |  | 11.83 | % |  | 11.56 | %

1 Effective 9/30/18 the company files the FRY-9SP which does not include capital ratios.
2 Ratios will be finalized with the filing of the Quarterly Call Report.

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |
(In thousands) |  |  |  |
BALANCE SHEET |  |  |  |  |  |  |  |  |  |
|  | Ending Balances
|  | March 31, 2019 |  | December 31, 2018 |  | September 30, 2018 |  | June 30, 2018 |  | March 31, 2018
Assets |  |  |  |  |  |  |  |  |  |
Cash & cash equivalents |  | $ | 132,994 |  |  | $ | 115,822 |  |  | $ | 130,104 |  |  | $ | 170,235 |  |  | $ | 96,710 |
Securities available-for-sale |  | 198,273 |  |  | 201,688 |  |  | 173,039 |  |  | 156,577 |  |  | 156,210 |
Restricted investments, at cost |  | 12,398 |  |  | 11,499 |  |  | 10,736 |  |  | 8,273 |  |  | 7,808 |
Total loans |  | 1,840,569 |  |  | 1,777,239 |  |  | 1,585,194 |  |  | 1,575,434 |  |  | 1,374,257 |
Allowance for loan losses |  | (8,704 | ) |  | (8,275 | ) |  | (7,156 | ) |  | (7,074 | ) |  | (6,477 | )
Loans, net |  | 1,831,865 |  |  | 1,768,964 |  |  | 1,578,038 |  |  | 1,568,361 |  |  | 1,367,780 |
Bank premises and equipment, net |  | 56,583 |  |  | 56,012 |  |  | 51,138 |  |  | 52,203 |  |  | 44,202 |
Foreclosed assets |  | 2,066 |  |  | 2,495 |  |  | 4,230 |  |  | 3,524 |  |  | 2,665 |
Goodwill and core deposit intangible, net |  | 78,690 |  |  | 79,034 |  |  | 68,254 |  |  | 68,449 |  |  | 50,660 |
Cash surrender value of life insurance |  | 24,539 |  |  | 24,381 |  |  | 22,088 |  |  | 21,944 |  |  | 21,797 |
Other assets |  | 16,909 |  |  | 14,514 |  |  | 13,320 |  |  | 12,666 |  |  | 12,593 |
Total assets |  | $ | 2,354,317 |  |  | $ | 2,274,409 |  |  | $ | 2,050,946 |  |  | $ | 2,062,232 |  |  | $ | 1,760,425 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand deposits |  | $ | 329,095 |  |  | $ | 319,861 |  |  | $ | 301,197 |  |  | $ | 301,318 |  |  | $ | 276,249 |
Interest-bearing demand deposits |  | 331,629 |  |  | 311,482 |  |  | 267,146 |  |  | 246,942 |  |  | 278,965 |
Money market and savings deposits |  | 698,431 |  |  | 641,945 |  |  | 570,172 |  |  | 632,518 |  |  | 491,243 |
Time deposits |  | 635,175 |  |  | 648,675 |  |  | 568,796 |  |  | 535,879 |  |  | 453,276 |
Total deposits |  | 1,994,330 |  |  | 1,921,964 |  |  | 1,707,311 |  |  | 1,716,658 |  |  | 1,499,733 |
Securities sold under agreement to repurchase |  | 7,070 |  |  | 11,756 |  |  | 16,786 |  |  | 18,635 |  |  | 15,968 |
Federal funds purchased and other borrowings |  | 8,605 |  |  | 11,243 |  |  | 25,324 |  |  | 72,040 |  |  | 30,000 |
Subordinated debt |  | 39,198 |  |  | 39,177 |  |  | 39,158 |  |  | — |  |  | — |
Accrued expenses and other liabilities |  | 14,633 |  |  | 7,258 |  |  | 10,724 |  |  | 7,413 |  |  | 5,775 |
Total liabilities |  | 2,063,836 |  |  | 1,991,398 |  |  | 1,799,304 |  |  | 1,814,745 |  |  | 1,551,476 |
Stockholders' equity: |  |  |  |  |  |  |  |  |  |
Common stock |  | 13,952 |  |  | 13,934 |  |  | 12,750 |  |  | 12,705 |  |  | 11,234 |
Additional paid-in capital |  | 232,241 |  |  | 231,852 |  |  | 208,999 |  |  | 208,513 |  |  | 174,981 |
Retained earnings |  | 44,722 |  |  | 39,991 |  |  | 33,559 |  |  | 29,235 |  |  | 25,303 |
Accumulated other comprehensive loss |  | (434 | ) |  | (2,765 | ) |  | (3,666 | ) |  | (2,966 | ) |  | (2,569 | )
Total stockholders' equity |  | 290,481 |  |  | 283,011 |  |  | 251,642 |  |  | 247,487 |  |  | 208,949 |
Total liabilities and stockholders' equity |  | $ | 2,354,317 |  |  | $ | 2,274,409 |  |  | $ | 2,050,946 |  |  | $ | 2,062,232 |  |  | $ | 1,760,425 |

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |
(In thousands, except per share data) |  |  |  |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |
|  | Three months ending
|  | March 31, 2019 |  | December 31, 2018 |  | September 30, 2018 |  | June 30, 2018 |  | March 31, 2018
Interest Income |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 24,975 |  |  | $ | 25,017 |  |  | $ | 21,572 |  |  | $ | 21,652 |  |  | $ | 18,228 |
Securities |  | 1,395 |  |  | 1,248 |  |  | 969 |  |  | 974 |  |  | 908 |
Federal funds sold and other earning assets |  | 573 |  |  | 506 |  |  | 527 |  |  | 367 |  |  | 242 |
Total interest income |  | 26,943 |  |  | 26,771 |  |  | 23,068 |  |  | 22,993 |  |  | 19,378 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 5,251 |  |  | 4,680 |  |  | 3,969 |  |  | 3,238 |  |  | 2,401 |
Repurchase agreements |  | 8 |  |  | 9 |  |  | 11 |  |  | 11 |  |  | 13 |
Subordinated debt |  | 584 |  |  | 584 |  |  | 19 |  |  | — |  |  | — |
FHLB and other borrowings |  | 103 |  |  | 62 |  |  | 209 |  |  | 207 |  |  | 153 |
Total interest expense |  | 5,946 |  |  | 5,335 |  |  | 4,208 |  |  | 3,455 |  |  | 2,567 |
Net interest income |  | 20,997 |  |  | 21,436 |  |  | 18,860 |  |  | 19,538 |  |  | 16,811 |
Provision for loan losses |  | 797 |  |  | 1,329 |  |  | 302 |  |  | 617 |  |  | 689 |
Net interest income after provision for loan losses |  | 20,200 |  |  | 20,105 |  |  | 18,559 |  |  | 18,921 |  |  | 16,122 |
Noninterest income |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  | 654 |  |  | 657 |  |  | 624 |  |  | 557 |  |  | 578 |
Gain (loss) on securities |  | — |  |  | 2 |  |  | — |  |  | (1 | ) |  | — |
Gain on sale of loans and other assets |  | 282 |  |  | 288 |  |  | 493 |  |  | 327 |  |  | 325 |
Interchange and debit card transaction fees |  | 175 |  |  | 162 |  |  | 144 |  |  | 121 |  |  | 146 |
Other noninterest income |  | 587 |  |  | 606 |  |  | 570 |  |  | 579 |  |  | 406 |
Total noninterest income |  | 1,698 |  |  | 1,715 |  |  | 1,831 |  |  | 1,583 |  |  | 1,455 |
Noninterest expense |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  | 8,398 |  |  | 7,871 |  |  | 7,934 |  |  | 7,649 |  |  | 7,176 |
Occupancy expense |  | 1,640 |  |  | 1,610 |  |  | 1,638 |  |  | 1,522 |  |  | 1,533 |
FDIC premiums |  | 179 |  |  | 209 |  |  | 158 |  |  | 317 |  |  | 102 |
Foreclosed asset expense |  | 62 |  |  | 262 |  |  | 79 |  |  | 245 |  |  | 189 |
Marketing |  | 295 |  |  | 245 |  |  | 228 |  |  | 215 |  |  | 185 |
Data processing |  | 615 |  |  | 372 |  |  | 407 |  |  | 600 |  |  | 526 |
Professional expenses |  | 797 |  |  | 908 |  |  | 922 |  |  | 918 |  |  | 898 |
Amortization of other intangibles |  | 344 |  |  | 312 |  |  | 248 |  |  | 229 |  |  | 188 |
Service contracts |  | 567 |  |  | 577 |  |  | 507 |  |  | 492 |  |  | 479 |
Merger expense |  | 923 |  |  | 1,322 |  |  | 838 |  |  | 1,123 |  |  | 498 |
Other noninterest expense |  | 1,760 |  |  | 2,008 |  |  | 1,800 |  |  | 1,968 |  |  | 1,448 |
Total noninterest expense |  | 15,579 |  |  | 15,696 |  |  | 14,759 |  |  | 15,278 |  |  | 13,222 |
Earnings before income taxes |  | 6,319 |  |  | 6,124 |  |  | 5,630 |  |  | 5,226 |  |  | 4,355 |
Income tax expense (benefit) |  | 1,588 |  |  | (307 | ) |  | 1,305 |  |  | 1,295 |  |  | 940 |
Net income |  | $ | 4,731 |  |  | $ | 6,431 |  |  | $ | 4,325 |  |  | $ | 3,931 |  |  | $ | 3,415 |
NET INCOME PER COMMON SHARE |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.34 |  |  | $ | 0.48 |  |  | $ | 0.34 |  |  | $ | 0.32 |  |  | $ | 0.30 |
Diluted |  | 0.34 |  |  | 0.47 |  |  | 0.34 |  |  | 0.32 |  |  | 0.30 |
Weighted average common shares outstanding |  |  |  |  |  |  |  |  |  |
Basic |  | 13,942 |  |  | 13,535 |  |  | 12,719 |  |  | 12,201 |  |  | 11,211 |
Diluted |  | 14,018 |  |  | 13,617 |  |  | 12,818 |  |  | 12,320 |  |  | 11,324 |

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
YIELD ANALYSIS |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended March 31, 2019 |  | Three Months Ended December 31, 2018 |  | Three Months Ended March 31, 2018
|  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/
|  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 1,802,014 |  |  | $ | 24,977 |  |  | 5.62 | % |  | $ | 1,708,450 |  |  | $ | 25,019 |  |  | 5.81 | % |  | $ | 1,352,319 |  |  | $ | 18,230 |  |  | 5.47 | %
Taxable securities |  | 147,346 |  |  | 971 |  |  | 2.67 | % |  | 145,950 |  |  | 901 |  |  | 2.45 | % |  | 151,573 |  |  | 872 |  |  | 2.33 | %
Tax-exempt securities |  | 53,492 |  |  | 537 |  |  | 4.07 | % |  | 43,177 |  |  | 439 |  |  | 4.03 | % |  | 6,366 |  |  | 55 |  |  | 3.50 | %
Federal funds sold and other earning assets |  | 86,688 |  |  | 573 |  |  | 2.68 | % |  | 96,356 |  |  | 506 |  |  | 2.08 | % |  | 58,869 |  |  | 242 |  |  | 1.67 | %
Total interest-earning assets |  | 2,089,540 |  |  | 27,058 |  |  | 5.25 | % |  | 1,993,933 |  |  | 26,865 |  |  | 5.35 | % |  | 1,569,127 |  |  | 19,399 |  |  | 5.01 | %
Noninterest-earning assets |  | 193,698 |  |  |  |  |  |  | 183,333 |  |  |  |  |  |  | 166,035 |  |  |  |  |
Total assets |  | $ | 2,283,238 |  |  |  |  |  |  | $ | 2,177,266 |  |  |  |  |  |  | $ | 1,735,162 |  |  |  |  |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits |  | $ | 306,164 |  |  | $ | 474 |  |  | 0.63 | % |  | $ | 266,311 |  |  | $ | 422 |  |  | 0.63 | % |  | $ | 249,846 |  |  | $ | 320 |  |  | 0.52 | %
Money market and savings deposits |  | 665,018 |  |  | 1,978 |  |  | 1.21 | % |  | 646,750 |  |  | 1,697 |  |  | 1.04 | % |  | 526,093 |  |  | 870 |  |  | 0.67 | %
Time deposits |  | 637,767 |  |  | 2,799 |  |  | 1.78 | % |  | 616,008 |  |  | 2,561 |  |  | 1.65 | % |  | 454,660 |  |  | 1,211 |  |  | 1.08 | %
Total interest-bearing deposits |  | 1,608,949 |  |  | 5,251 |  |  | 1.32 | % |  | 1,529,069 |  |  | 4,680 |  |  | 1.21 | % |  | 1,230,599 |  |  | 2,401 |  |  | 0.79 | %
Securities sold under agreement to repurchase |  | 7,971 |  |  | 8 |  |  | 0.41 | % |  | 10,661 |  |  | 9 |  |  | 0.33 | % |  | 16,186 |  |  | 12 |  |  | 0.31 | %
Federal funds purchased and other borrowings |  | 10,217 |  |  | 103 |  |  | 4.09 | % |  | 4,001 |  |  | 62 |  |  | 6.15 | % |  | 26,655 |  |  | 153 |  |  | 2.32 | %
Subordinated debt |  | 39,184 |  |  | 584 |  |  | 6.04 | % |  | 39,177 |  |  | 584 |  |  | 5.91 | % |  |  |  |  |  |  |  |  |
Total interest-bearing liabilities |  | 1,666,321 |  |  | 5,946 |  |  | 1.45 | % |  | 1,582,908 |  |  | 5,335 |  |  | 1.34 | % |  | 1,273,440 |  |  | 2,566 |  |  | 0.82 | %
Noninterest-bearing deposits |  | 320,134 |  |  |  |  |  |  | 320,311 |  |  |  |  |  |  | 231,355 |  |  |  |  |
Other liabilities |  | 10,707 |  |  |  |  |  |  | 17,900 |  |  |  |  |  |  | 8,656 |  |  |  |  |
Total liabilities |  | 1,997,162 |  |  |  |  |  |  | 1,921,119 |  |  |  |  |  |  | 1,513,451 |  |  |  |  |
Stockholders’ equity |  | 286,076 |  |  |  |  |  |  | 256,147 |  |  |  |  |  |  | 221,711 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 2,283,238 |  |  |  |  |  |  | $ | 2,177,266 |  |  |  |  |  |  | $ | 1,735,162 |  |  |  |  |
Net interest income, taxable equivalent |  |  |  | $ | 21,112 |  |  |  |  |  |  | $ | 21,530 |  |  |  |  |  |  | $ | 16,823 |  |  |
Interest rate spread |  |  |  |  |  | 3.80 | % |  |  |  |  |  | 4.01 | % |  |  |  |  |  | 4.19 | %
Tax equivalent net interest margin |  |  |  |  |  | 4.10 | % |  |  |  |  |  | 4.28 | % |  |  |  |  |  | 4.35 | %
Percentage of average interest-earning assets to average interest-bearing liabilities |  |  |  |  |  | 125.40 | % |  |  |  |  |  | 125.97 | % |  |  |  |  |  | 123.22 | %
Percentage of average equity to average assets |  |  |  |  |  | 12.53 | % |  |  |  |  |  | 11.76 | % |  |  |  |  |  | 12.78 | %

1 Taxable equivalent

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information (unaudited) |  |  |  |
(In thousands) |  |  |  |
NON-GAAP RECONCILIATIONS |  | Three months ending
|  | March 31, 2019 |  | December 31, 2018 |  | September 30, 2018 |  | June 30, 2018 |  | March 31, 2018
Operating Earnings |  |  |  |  |  |  |  |  |  |
Net income (GAAP) |  | $ | 4,731 |  |  | $ | 6,444 |  |  | $ | 4,324 |  |  | $ | 3,931 |  |  | $ | 3,415 |
Securities (gains) losses |  | — |  |  | (2 | ) |  | — |  |  | 1 |  |  | — |
Merger expenses |  | 923 |  |  | 1,322 |  |  | 838 |  |  | 1,123 |  |  | 498 |
Tax benefit from director options previously exercised |  | — |  |  | (1,600 | ) |  | — |  |  | — |  |  | — |
Income tax effect of adjustments |  | (145 | ) |  | (256 | ) |  | (196 | ) |  | (211 | ) |  | (103 | )
Net operating earnings (Non-GAAP) |  | $ | 5,509 |  |  | $ | 5,908 |  |  | $ | 4,966 |  |  | $ | 4,844 |  |  | $ | 3,810 |
Net operating earnings per common share (Non-GAAP): |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.40 |  |  | $ | 0.44 |  |  | $ | 0.39 |  |  | $ | 0.40 |  |  | $ | 0.34 |
Diluted |  | 0.39 |  |  | 0.43 |  |  | 0.39 |  |  | 0.39 |  |  | 0.34 |
Non-GAAP Return Ratios |  |  |  |  |  |  |  |  |  |
Net operating return on average assets (Non-GAAP)1 |  | 0.98 | % |  | 1.07 | % |  | 0.98 | % |  | 1.00 | % |  | 0.89 | %
Net operating return on average shareholder equity (Non-GAAP)2 |  | 7.81 | % |  | 8.65 | % |  | 7.88 | % |  | 8.33 | % |  | 6.97 | %
Return on average tangible common equity (Non-GAAP)3 |  | 9.26 | % |  | 13.06 | % |  | 9.45 | % |  | 8.96 | % |  | 8.10 | %
Net operating return on average tangible common equity (Non-GAAP)4 |  | 10.79 | % |  | 12.00 | % |  | 10.84 | % |  | 11.04 | % |  | 9.04 | %
Operating Efficiency Ratio |  |  |  |  |  |  |  |  |  |
Efficiency ratio (GAAP) |  | 68.65 | % |  | 67.71 | % |  | 71.34 | % |  | 72.31 | % |  | 72.39 | %
Adjustment for taxable equivalent yields |  | (0.49 | )% |  | (0.45 | )% |  | (0.18 | )% |  | (0.11 | )% |  | (0.06 | )%
Adjustment for securities gains (losses) |  | — | % |  | 0.01 | % |  | — | % |  | (0.01 | )% |  | — | %
Adjustment for merger expenses |  | (3.91 | )% |  | (5.55 | )% |  | (3.99 | )% |  | (5.28 | )% |  | (2.71 | )%
Operating efficiency ratio (Non-GAAP) |  | 64.25 | % |  | 61.72 | % |  | 67.17 | % |  | 66.92 | % |  | 69.62 | %
Tangible Common Equity |  |  |  |  |  |  |  |  |  |
Stockholders' equity (GAAP) |  | $ | 290,481 |  |  | $ | 283,011 |  |  | $ | 251,642 |  |  | $ | 247,487 |  |  | $ | 208,949 |
Less goodwill and other intangible assets |  | 78,690 |  |  | 79,034 |  |  | 68,254 |  |  | 68,449 |  |  | 50,660 |
Tangible common equity (Non-GAAP) |  | $ | 211,791 |  |  | $ | 203,977 |  |  | $ | 183,388 |  |  | $ | 179,036 |  |  | $ | 158,289 |
Average Tangible Common Equity |  |  |  |  |  |  |  |  |  |
Average stockholders' equity (GAAP) |  | $ | 286,076 |  |  | $ | 270,884 |  |  | $ | 250,063 |  |  | $ | 233,285 |  |  | $ | 221,711 |
Less average goodwill and other intangible assets |  | 78,913 |  |  | 75,547 |  |  | 68,389 |  |  | 57,251 |  |  | 50,780 |
Average tangible common equity (Non-GAAP) |  | $ | 207,163 |  |  | $ | 195,337 |  |  | $ | 181,674 |  |  | $ | 176,034 |  |  | $ | 170,931 |

1 Net operating return on average assets (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average assets.
2 Net operating return on average equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average equity.
3 Return on average tangible common equity (non-GAAP) is the annualized net income divided by average tangible common equity (non-GAAP).
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).