EX-99..1 3 a123119earningsexhibit991.htm EXHIBIT 99..1
Exhibit 99.1
4Q 2019
SmartFinancial Announces Results for the Fourth Quarter 2019
KNOXVILLE, TN - January 21, 2020 - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $6.7 million, or $0.48 per diluted common share, for the fourth quarter of 2019, compared to net income of $6.0 million, or $0.42 per diluted common share, for the third quarter of 2019. Net operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $6.5 million, or $0.46 per diluted common share, in the fourth quarter of 2019, compared to $6.0 million, or $0.43 per diluted common share, in the third quarter of 2019.
For the year ending December 31, 2019, net income is $26.5 million, or $1.89 per diluted common share, compared to net income of $18.1 million, or $1.45 per diluted common share, for the year ending December 31, 2018. Net operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $23.6 million, or $1.68 per diluted common share, for the year ending December 31, 2019 compared to $19.5 million, or $1.56 per diluted common share, for the year ending December 31, 2018.
Highlights for Fourth Quarter of 2019

• | Return on average assets of 1.12% and net operating annualized return on average assets (Non-GAAP) of 1.08%

• | Asset quality remains outstanding with nonperforming assets to total assets of 0.21%

• | Loan growth of $32.7 million, or 7.0% annualized

• | Tangible book value (Non-GAAP) per share of $16.82, a 14.9% year-over-year increase

• | Announced the planned acquisition of Progressive Financial Group, Inc. ("PFG")

• | Initiation of a quarterly dividend

Billy Carroll, President & CEO, stated: “We posted a solid quarter and closed the books on another successful year where we made a number of outstanding foundational strides. Our team continues to focus on steady growth of our performance metrics and we remain bullish on our opportunities to move the company forward and continuing growth of shareholder value.”
SmartFinancial's Chairman, Miller Welborn, concluded: “The consistency we are beginning to show in all areas of our company, especially our financial metrics, is very exciting to me. Our team continues to improve their execution of our strategy while maintaining a laser focus on growing long term shareholder value.”
Net Interest Income and Net Interest Margin
Net interest income was $21.1 million for each of the fourth and third quarters of 2019 and $21.4 million for the fourth quarter of 2018. The tax equivalent net interest margin was 3.84% for the fourth quarter of 2019 compared to 3.91% for the third quarter of 2019. The tax equivalent average yield on interest-earning assets was 4.92% for the fourth quarter of 2019, a decrease from 5.05% for the third quarter of 2019. The yield on interest-bearing liabilities decreased to 1.39% for the fourth quarter of 2019 from 1.47% for the third quarter of 2019.
The yield on average loans was 5.36% for the fourth quarter of 2019 compared to 5.48% for the third quarter of 2019. The decrease in yield on average loans from the third to fourth quarters of 2019 was primarily due to the impact of three Federal rate decreases over these two quarters which effected the repricing of variable rate loans and new loan production. During the fourth quarter of 2019, increased discount accretion was recorded on acquired loans (29 basis points in the fourth quarter of 2019 versus 26 basis points in the third quarter of 2019) with loan fees remaining stable quarter over quarter. For the fourth quarter of 2019, the yield on average loans, excluding accretion, was 5.07%, a decrease of 15 basis points from the 5.22% reported in the third quarter of

2019. The impact of the acquired loan discount accretion on the tax equivalent net interest margin was 25 basis points for the fourth quarter of 2019 and 23 basis points for the third quarter of 2019.
The cost of average interest-bearing deposits was 1.29% for the fourth quarter of 2019 compared to 1.37% for the third quarter of 2019. The overall decrease of eight basis points in average interest-bearing deposits from the third to fourth quarter of 2019 was driven primarily by the three Federal rate decreases during the third and fourth quarters of 2019, creating a reduction of interest cost for all deposit classifications.
Provision for Loan Loss and Credit Quality
Provision for loan losses was $685 thousand in the fourth quarter of 2019, compared to $724 thousand in the third quarter of 2019 and $1.3 million in the fourth quarter of 2018. The allowance for loan losses was $10.2 million, or 0.54% of total loans, as of December 31, 2019, compared to $9.8 million, or 0.53% of total loans, as of September 30, 2019. The increase in allowance for loan losses to total loans was due primarily to the increase in the loan originations and, to lesser extent, the reduction of acquired loan balances.
Nonperforming loans as a percentage of total loans was 0.18% as of December 31, 2019, an increase of one basis point from the 0.17% reported in the third quarter of 2019. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.21% as of December 31, 2019 as compared to 0.20% as of September 30, 2019.
Noninterest Income
Noninterest income was $2.8 million for the fourth quarter of 2019 compared to $2.2 million for the third quarter of 2019. The increase of $644 thousand from the third quarter 2019 to the fourth quarter 2019 was primarily because of funds received from the Alabama Department of Economic and Community Affairs ("ADECA"). ADECA was a program that guaranteed 50% of a loans obligation for loan's approved and originated through the program. In September 2019, the ADECA program was dissolved and in October 2019 total proceeds of $1.2 million was received, of which $720 thousand was recorded as noninterest income, and the remainder of the proceeds were held in reserve for potential future losses on specific identified loans that were covered in the program.
Noninterest Expense
Noninterest expense was $16.1 million for the fourth quarter of 2019, an increase of $1.4 million, compared to $14.7 million for the third quarter of 2019. During the fourth quarter of 2019, the primary components of the increase in noninterest expense were as follows:

• | Increase of $1.2 million in salaries and employees benefits, which consisted of a $603 thousand prior year adjustment, acquired SERP adjustment, year-end employee incentive accrual adjustments, and from increased hiring of associates;

• | Increase of $219 thousand in FDIC insurance due to a credit reported during the third quarter of 2019, and no expense recorded during the fourth quarter of 2019;

• | Increase of $257 thousand in data processing expenses, primarily from core processor credits that were utilized during the third quarter of 2019;

• | Increase of $354 thousand in merger related and restructuring expenses relating to the Progressive Financial Group Inc. acquisition; and

• | Decrease of $644 thousand in other expenses, which consisted of a benefit of $312 thousand relating to a prior year adjustment to franchise taxes from the 2018 income tax return true-up, and a current period benefit of $468 thousand relating to excess tax credits applied to franchise taxes (See Income Tax Expense below).

Income Tax Expense
Income tax expense was $473 thousand for the fourth quarter of 2019, a decrease of $1.5 million, compared to $1.9 million for the third quarter of 2019. During the fourth quarter of 2019, the primary components of the decrease in income tax expense were as follows:

• | Tax benefit of $304 thousand relating to a prior year (2017) amended Federal tax return;

• | Adjustments relating to the true-up of 2018 Federal Tax return; and

• | Tax benefit of $1.1 million income tax benefit associated with a program the State of Tennessee manages for Community Investment loans. The Bank strategically originated loans in this program to reduce its 2019 tax liability. The benefit received from the loans approved under this program was first applied to the current year Tennessee income tax liability, and the excess benefit over the current tax liability was applied directly to the Company’s Tennessee franchise tax liability.

The amount of the benefit received from this opportunity totaled $1.6 million, with a benefit of $1.1 million applied to income tax liability and the excess benefit of $468 thousand applied to franchise tax (as mentioned above in Noninterest Expense).
The overall effective tax rate was 6.6% for the fourth quarter of 2019 compared to 24.6% for the third quarter of 2019.
Balance Sheet Trends
Total assets at December 31, 2019 were $2.45 billion compared with $2.27 billion at December 31, 2018. The year-over-year increase of $174.7 million is primarily from continued loan growth of $122.1 million.
Total liabilities increased to $2.14 billion at December 31, 2019 from $2.00 billion at December 31, 2018. The year-over-year increase of $145.0 million was primarily from the increase of total deposits of $125.3 million and FHLB and other borrowings of $14.2 million.
Shareholders' equity at December 31, 2019 totaled $312.7 million, an increase of $29.7 million, from December 31, 2018. The increase in shareholders' equity was primarily from net income of $26.5 million for the year 2019. Tangible book value per share (Non-GAAP) was $16.82 at December 31, 2019, an increase from $14.64 at December 31, 2018. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 9.93% at December 31, 2019, compared with 9.29% at December 31, 2018.
Conference Call Information
SmartFinancial will issue its earnings release for the fourth quarter of 2019 on Tuesday, January 21, 2020, and will host a conference call on Wednesday, January 22, 2020 at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 1935532. A replay of the conference call will be available through January 22, 2021, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10138335. Conference call materials (earnings release & conference call presentation) will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile ), at 9:00 am ET prior to the conference call.
About SmartFinancial, Inc.
SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with 29 branches across Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.
Source
SmartFinancial, Inc.
Investor Contacts
Billy Carroll Ron Gorczynski
President & CEO Executive Vice President, Chief Financial Officer
(865) 868-0613 billy.carroll@smartbank.com (865) 437-5724 ron.gorczynski@smartbank.com
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611 kelley.fowler@smartbank.com

Non-GAAP Financial Measures
Statements included in this presentation include Non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) net operating earnings, (ii) net operating return on average assets, (iii) net operating return on average shareholder equity, (iv) return on average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio; (vii) tangible common equity; (viii) average tangible common equity; (ix) tangible book value; and ratios derived therefrom, in its analysis of the company's performance. Net operating earnings excludes the following from net income: securities gains and losses, merger termination fee of $6.4 million in the second quarter of 2019, merger related and restructuring expenses, the effect of the December 2017 tax law change on deferred tax assets, tax benefit from director options previously exercised, and the income tax effect of adjustments. Net operating return on average equity is the annualized net operating earnings divided by average assets. Net operating return on average equity is the annualized net operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Net operating return on average tangible common equity is the annualized net operating earnings divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets. Tangible book value excludes intangible assets and goodwill. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
Forward-Looking Statements
This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act. These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk of litigation related to the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (2) reputational risk resulting from the termination of the Entegra Merger Agreement; (3) potential changes to, or the risk that we may not be able to execute on, our business strategy as a result of the termination of the Entegra Merger Agreement; (4) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (5) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (6) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (7) risks related to the proposed acquisition of PFG, including the risk that the proposed acquisition does not close when expected or at all because conditions to closing are not satisfied on a timely basis or at all, or the terms of the proposed transaction need to be modified to satisfy such conditions; (8) the risk that the anticipated benefits from the proposed acquisition of PFG may not be realized in the time frame anticipated; (9) changes in management’s plans for the future; (10) prevailing, or changes in, economic or political conditions, particularly in our market areas; (11) credit risk associated with our lending activities; (12) changes in interest rates, loan demand, real estate values, or competition; (13) changes in accounting principles, policies, or guidelines; (14) changes in applicable laws, rules, or regulations; and (15) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |
(dollars in thousands except share and per share data) |  |  |  |  |  |  |  |
|  | As of and for The Three Months Ended |  | Twelve Months Ended
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec |  | Dec |  | Dec
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018 |  | 2019 |  | 2018
Selected Performance Ratios (Annualized): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.12 | % |  | 1.01 | % |  | 1.56 | % |  | 0.84 | % |  | 1.17 | % |  | 1.13 | % |  | 0.92 | %
Return on average shareholders' equity |  | 8.65 | % |  | 7.80 | % |  | 12.34 | % |  | 6.71 | % |  | 9.44 | % |  | 8.89 | % |  | 7.47 | %
Return on average tangible common equity (Non-GAAP)¹ |  | 11.55 | % |  | 10.52 | % |  | 16.78 | % |  | 9.26 | % |  | 13.09 | % |  | 12.04 | % |  | 10.09 | %
Noninterest income / average assets |  | 0.47 | % |  | 0.37 | % |  | 1.44 | % |  | 0.30 | % |  | 0.31 | % |  | 0.65 | % |  | 0.34 | %
Noninterest expense / average assets |  | 2.68 | % |  | 2.48 | % |  | 2.88 | % |  | 2.77 | % |  | 2.84 | % |  | 2.70 | % |  | 3.00 | %
Efficiency ratio |  | 67.04 | % |  | 63.03 | % |  | 57.53 | % |  | 68.65 | % |  | 67.71 | % |  | 63.66 | % |  | 70.84 | %
Operating Selected Performance Ratios (Annualized): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net operating return on average assets (Non-GAAP)¹ |  | 1.08 | % |  | 1.02 | % |  | 0.96 | % |  | 0.98 | % |  | 1.07 | % |  | 1.01 | % |  | 0.99 | %
Net operating return on average shareholders' equity (Non-GAAP)¹ |  | 8.34 | % |  | 7.87 | % |  | 7.58 | % |  | 7.81 | % |  | 8.65 | % |  | 7.91 | % |  | 8.05 | %
Net operating return on average tangible common equity (Non-GAAP)¹ |  | 11.12 | % |  | 10.61 | % |  | 10.31 | % |  | 10.79 | % |  | 12.00 | % |  | 10.71 | % |  | 10.88 | %
Operating efficiency ratio (Non-GAAP)¹ |  | 64.95 | % |  | 62.42 | % |  | 65.56 | % |  | 64.25 | % |  | 61.72 | % |  | 64.29 | % |  | 66.15 | %
Operating noninterest income / average assets (Non-GAAP) |  | 0.35 | % |  | 0.37 | % |  | 0.34 | % |  | 0.33 | % |  | 0.32 | % |  | 0.35 | % |  | 0.36 | %
Operating noninterest expense / average assets (Non-GAAP) |  | 2.56 | % |  | 2.47 | % |  | 2.57 | % |  | 2.60 | % |  | 2.76 | % |  | 2.55 | % |  | 2.84 | %
Selected Interest Rates and Yields: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yield on loans |  | 5.36 | % |  | 5.48 | % |  | 5.53 | % |  | 5.62 | % |  | 5.81 | % |  | 5.49 | % |  | 5.72 | %
Yield on earning assets, FTE |  | 4.92 | % |  | 5.05 | % |  | 5.17 | % |  | 5.25 | % |  | 5.36 | % |  | 5.10 | % |  | 5.32 | %
Cost of interest-bearing deposits |  | 1.29 | % |  | 1.37 | % |  | 1.42 | % |  | 1.32 | % |  | 1.21 | % |  | 1.35 | % |  | 1.04 | %
Cost of total deposits |  | 1.06 | % |  | 1.13 | % |  | 1.18 | % |  | 1.10 | % |  | 1.00 | % |  | 1.12 | % |  | 0.86 | %
Cost of interest-bearing liabilities |  | 1.39 | % |  | 1.47 | % |  | 1.54 | % |  | 1.45 | % |  | 1.33 | % |  | 1.46 | % |  | 1.10 | %
Net interest margin, FTE |  | 3.84 | % |  | 3.91 | % |  | 3.94 | % |  | 4.10 | % |  | 4.28 | % |  | 3.95 | % |  | 4.43 | %
Per Common Share: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income, basic |  | $ | 0.48 |  |  | $ | 0.43 |  |  | $ | 0.65 |  |  | $ | 0.34 |  |  | $ | 0.48 |  |  | $ | 1.90 |  |  | $ | 1.46 |
Net income, diluted |  | 0.48 |  |  | 0.42 |  |  | 0.65 |  |  | 0.34 |  |  | 0.47 |  |  | 1.89 |  |  | 1.45 |
Net operating earnings, basic (Non-GAAP)¹ |  | 0.46 |  |  | 0.43 |  |  | 0.40 |  |  | 0.40 |  |  | 0.44 |  |  | 1.69 |  |  | 1.57 |
Net operating earnings, diluted (Non-GAAP)¹ |  | 0.46 |  |  | 0.43 |  |  | 0.40 |  |  | 0.39 |  |  | 0.43 |  |  | 1.68 |  |  | 1.56 |
Book value |  | 22.33 |  |  | 21.93 |  |  | 21.47 |  |  | 20.82 |  |  | 20.31 |  |  | 22.33 |  |  | 20.31 |
Tangible book value (Non-GAAP)¹ |  | 16.82 |  |  | 16.37 |  |  | 15.86 |  |  | 15.18 |  |  | 14.64 |  |  | 16.82 |  |  | 14.64 |
Common shares outstanding |  | 14,008,233 |  |  | 13,957,973 |  |  | 13,953,209 |  |  | 13,951,590 |  |  | 13,933,504 |  |  | 14,008,233 |  |  | 13,933,504 |
¹See reconciliation of Non-GAAP measures |  |  |  |  |  |  |  |  |  |  |  |  |  |
SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |
|  | As of and for The Three Months Ended |  |  |  |
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec |  |  |  |
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018 |  |  |  |
Composition of Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |
owner occupied |  | $ | 429,269 |  |  | $ | 422,363 |  |  | $ | 415,502 |  |  | $ | 416,152 |  |  | $ | 372,030 |  |  |  |  |
non-owner occupied |  | 476,038 |  |  | 468,099 |  |  | 464,160 |  |  | 472,790 |  |  | 487,997 |  |  |  |  |
Commercial real estate, total |  | 905,307 |  |  | 890,462 |  |  | 879,662 |  |  | 888,942 |  |  | 860,027 |  |  |  |  |
Commercial & industrial |  | 337,075 |  |  | 341,207 |  |  | 334,258 |  |  | 341,471 |  |  | 308,254 |  |  |  |  |
Construction & land development |  | 227,626 |  |  | 219,751 |  |  | 204,731 |  |  | 187,009 |  |  | 187,895 |  |  |  |  |
Consumer real estate |  | 423,337 |  |  | 405,531 |  |  | 406,357 |  |  | 410,981 |  |  | 407,254 |  |  |  |  |
Consumer and other |  | 9,903 |  |  | 10,796 |  |  | 11,981 |  |  | 12,166 |  |  | 13,809 |  |  |  |  |
Total loans |  | $ | 1,903,248 |  |  | $ | 1,867,747 |  |  | $ | 1,836,989 |  |  | $ | 1,840,569 |  |  | $ | 1,777,239 |  |  |  |  |
Asset Quality and Additional Loan Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonperforming loans |  | $ | 3,350 |  |  | $ | 3,166 |  |  | $ | 2,838 |  |  | $ | 2,282 |  |  | $ | 3,280 |  |  |  |  |
Other real estate owned |  | 1,757 |  |  | 1,561 |  |  | 1,814 |  |  | 2,066 |  |  | 2,495 |  |  |  |  |
Total nonperforming assets |  | $ | 5,107 |  |  | $ | 4,727 |  |  | $ | 4,652 |  |  | $ | 4,348 |  |  | $ | 5,775 |  |  |  |  |
Restructured loans not included in nonperforming loans |  | $ | 61 |  |  | $ | 61 |  |  | $ | 62 |  |  | $ | 62 |  |  | $ | 116 |  |  |  |  |
Net charge-offs (recoveries) to average loans (annualized) |  | 0.01 | % |  | 0.01 | % |  | — | % |  | 0.08 | % |  | 0.04 | % |  |  |  |
Allowance for loan losses to loans |  | 0.54 | % |  | 0.53 | % |  | 0.50 | % |  | 0.47 | % |  | 0.47 | % |  |  |  |
Nonperforming loans to total loans, gross |  | 0.18 | % |  | 0.17 | % |  | 0.15 | % |  | 0.12 | % |  | 0.18 | % |  |  |  |
Nonperforming assets to total assets |  | 0.21 | % |  | 0.20 | % |  | 0.19 | % |  | 0.18 | % |  | 0.25 | % |  |  |  |
Purchase accounting discount balance |  | $ | 15,348 |  |  | $ | 16,784 |  |  | $ | 18,571 |  |  | $ | 19,954 |  |  | $ | 21,528 |  |  |  |  |
Accretion income on acquired loans |  | 1,375 |  |  | 1,246 |  |  | 1,374 |  |  | 1,717 |  |  | 2,343 |  |  |  |  |
Capital Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity to Assets |  | 12.77 | % |  | 12.80 | % |  | 12.53 | % |  | 12.34 | % |  | 12.44 | % |  |  |  |
Tangible common equity to tangible assets (Non-GAAP)3 |  | 9.93 | % |  | 9.88 | % |  | 9.57 | % |  | 9.31 | % |  | 9.29 | % |  |  |  |
SmartFinancial, Inc.1 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tier 1 leverage |  | 10.34 | % |  | 10.02 | % |  | 9.92 | % |  | 9.29 | % |  | 9.47 | % |  |  |  |
Common equity Tier 1 |  | 11.61 | % |  | 11.54 | % |  | 11.21 | % |  | 10.61 | % |  | 10.81 | % |  |  |  |
Tier 1 capital |  | 11.61 | % |  | 11.54 | % |  | 11.21 | % |  | 10.61 | % |  | 10.81 | % |  |  |  |
Total capital |  | 14.02 | % |  | 13.98 | % |  | 13.65 | % |  | 13.01 | % |  | 13.29 | % |  |  |  |
SmartBank |  | Estimated 2 |  |  |  |  |  |  |  |  |  |  |  |  |
Tier 1 leverage |  | 11.41 | % |  | 11.22 | % |  | 10.92 | % |  | 10.96 | % |  | 11.17 | % |  |  |  |
Common equity Tier 1 |  | 12.81 | % |  | 12.71 | % |  | 12.37 | % |  | 12.18 | % |  | 12.31 | % |  |  |  |
Tier 1 risk-based capital |  | 12.81 | % |  | 12.71 | % |  | 12.37 | % |  | 12.18 | % |  | 12.31 | % |  |  |  |
Total risk-based capital |  | 13.31 | % |  | 13.19 | % |  | 12.82 | % |  | 12.62 | % |  | 12.74 | % |  |  |  |

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

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |
|  | Ending Balances
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 183,971 |  |  | $ | 170,934 |  |  | $ | 199,534 |  |  | $ | 132,994 |  |  | $ | 115,822 |
Securities available-for-sale, at fair value |  | 178,348 |  |  | 171,507 |  |  | 174,114 |  |  | 198,273 |  |  | 201,688 |
Other investments |  | 12,913 |  |  | 12,913 |  |  | 12,905 |  |  | 12,398 |  |  | 11,499 |
Loans held for sale |  | 5,856 |  |  | 3,068 |  |  | 4,087 |  |  | 2,103 |  |  | 1,979 |
Loans |  | 1,897,392 |  |  | 1,864,679 |  |  | 1,832,902 |  |  | 1,838,466 |  |  | 1,775,260 |
Less: Allowance for loan losses |  | (10,243 | ) |  | (9,792 | ) |  | (9,097 | ) |  | (8,704 | ) |  | (8,275 | )
Loans, net |  | 1,887,149 |  |  | 1,854,887 |  |  | 1,823,805 |  |  | 1,829,762 |  |  | 1,766,985 |
Premises and equipment, net |  | 59,433 |  |  | 58,386 |  |  | 56,589 |  |  | 56,583 |  |  | 56,012 |
Other real estate owned |  | 1,757 |  |  | 1,561 |  |  | 1,814 |  |  | 2,066 |  |  | 2,495 |
Goodwill and core deposit intangibles, net |  | 77,193 |  |  | 77,534 |  |  | 78,348 |  |  | 78,690 |  |  | 79,034 |
Bank owned life insurance |  | 24,949 |  |  | 24,796 |  |  | 24,695 |  |  | 24,540 |  |  | 24,381 |
Other assets |  | 17,554 |  |  | 14,899 |  |  | 15,366 |  |  | 16,572 |  |  | 14,514 |
Total assets |  | $ | 2,449,123 |  |  | $ | 2,390,485 |  |  | $ | 2,391,257 |  |  | $ | 2,353,981 |  |  | $ | 2,274,409 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 364,155 |  |  | $ | 365,024 |  |  | $ | 357,220 |  |  | $ | 329,095 |  |  | $ | 319,861 |
Interest-bearing demand |  | 380,234 |  |  | 351,474 |  |  | 333,705 |  |  | 331,629 |  |  | 311,482 |
Money market and savings |  | 623,284 |  |  | 634,934 |  |  | 648,132 |  |  | 698,431 |  |  | 641,945 |
Time deposits |  | 679,541 |  |  | 646,641 |  |  | 673,243 |  |  | 635,175 |  |  | 648,676 |
Total deposits |  | 2,047,214 |  |  | 1,998,073 |  |  | 2,012,300 |  |  | 1,994,330 |  |  | 1,921,964 |
Securities sold under agreements to repurchase |  | 6,184 |  |  | 4,368 |  |  | 8,219 |  |  | 7,070 |  |  | 11,756 |
FHLB & other borrowings |  | 25,439 |  |  | 25,460 |  |  | 15,460 |  |  | 8,605 |  |  | 11,243 |
Subordinated debt |  | 39,261 |  |  | 39,240 |  |  | 39,219 |  |  | 39,198 |  |  | 39,177 |
Other liabilities |  | 18,278 |  |  | 17,304 |  |  | 16,448 |  |  | 14,297 |  |  | 7,258 |
Total liabilities |  | 2,136,376 |  |  | 2,084,445 |  |  | 2,091,646 |  |  | 2,063,500 |  |  | 1,991,398 |
Shareholders' Equity: |  |  |  |  |  |  |  |  |  |
Common stock |  | 14,008 |  |  | 13,958 |  |  | 13,953 |  |  | 13,952 |  |  | 13,933 |
Additional paid-in capital |  | 232,732 |  |  | 232,573 |  |  | 232,386 |  |  | 232,241 |  |  | 231,852 |
Retained earnings |  | 65,839 |  |  | 59,806 |  |  | 53,843 |  |  | 44,722 |  |  | 39,991 |
Accumulated other comprehensive income (loss) |  | 168 |  |  | (297 | ) |  | (571 | ) |  | (434 | ) |  | (2,765 | )
Total shareholders' equity |  | 312,747 |  |  | 306,040 |  |  | 299,611 |  |  | 290,481 |  |  | 283,011 |
Total liabilities & shareholders' equity |  | $ | 2,449,123 |  |  | $ | 2,390,485 |  |  | $ | 2,391,257 |  |  | $ | 2,353,981 |  |  | $ | 2,274,409 |

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |
(dollars in thousands, except share and per share data) |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Twelve Months Ended
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec |  | Dec |  | Dec
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018 |  | 2019 |  | 2018
Interest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 25,398 |  |  | $ | 25,515 |  |  | $ | 25,278 |  |  | $ | 24,975 |  |  | $ | 25,018 |  |  | $ | 101,002 |  |  | $ | 86,469 |
Securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | 698 |  |  | 748 |  |  | 871 |  |  | 971 |  |  | 900 |  |  | 3,289 |  |  | 3,512 |
Tax-exempt |  | 345 |  |  | 338 |  |  | 411 |  |  | 424 |  |  | 347 |  |  | 1,518 |  |  | 587 |
Federal funds sold and other earning assets |  | 587 |  |  | 743 |  |  | 743 |  |  | 573 |  |  | 506 |  |  | 2,646 |  |  | 1,642 |
Total interest income |  | 27,028 |  |  | 27,344 |  |  | 27,303 |  |  | 26,943 |  |  | 26,771 |  |  | 108,455 |  |  | 92,210 |
Interest expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 5,271 |  |  | 5,605 |  |  | 5,788 |  |  | 5,251 |  |  | 4,680 |  |  | 21,915 |  |  | 14,288 |
Securities sold under agreements to repurchase |  | 5 |  |  | 5 |  |  | 6 |  |  | 8 |  |  | 9 |  |  | 23 |  |  | 45 |
FHLB advances and other borrowings |  | 65 |  |  | 10 |  |  | 117 |  |  | 103 |  |  | 51 |  |  | 296 |  |  | 630 |
Subordinated debt |  | 584 |  |  | 584 |  |  | 590 |  |  | 584 |  |  | 584 |  |  | 2,341 |  |  | 603 |
Total interest expense |  | 5,924 |  |  | 6,204 |  |  | 6,501 |  |  | 5,946 |  |  | 5,324 |  |  | 24,575 |  |  | 15,566 |
Net interest income |  | 21,104 |  |  | 21,140 |  |  | 20,802 |  |  | 20,997 |  |  | 21,447 |  |  | 83,880 |  |  | 76,644 |
Provision for loan losses |  | 685 |  |  | 724 |  |  | 393 |  |  | 797 |  |  | 1,329 |  |  | 2,599 |  |  | 2,936 |
Net interest income after provision for loan losses |  | 20,419 |  |  | 20,416 |  |  | 20,409 |  |  | 20,200 |  |  | 20,118 |  |  | 81,281 |  |  | 73,708 |
Noninterest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  | 773 |  |  | 767 |  |  | 707 |  |  | 654 |  |  | 663 |  |  | 2,902 |  |  | 2,416 |
Gain on sale of securities, net |  | — |  |  | 1 |  |  | 33 |  |  | — |  |  | 2 |  |  | 34 |  |  | 1 |
Mortgage banking |  | 374 |  |  | 518 |  |  | 392 |  |  | 282 |  |  | 251 |  |  | 1,566 |  |  | 1,433 |
Interchange and debit card transaction fees |  | 163 |  |  | 148 |  |  | 143 |  |  | 175 |  |  | 162 |  |  | 628 |  |  | 573 |
Merger termination fee |  | — |  |  | — |  |  | 6,400 |  |  | — |  |  | — |  |  | 6,400 |  |  | — |
Other |  | 1,530 |  |  | 762 |  |  | 741 |  |  | 587 |  |  | 602 |  |  | 3,785 |  |  | 2,161 |
Total noninterest income |  | 2,840 |  |  | 2,196 |  |  | 8,416 |  |  | 1,698 |  |  | 1,680 |  |  | 15,315 |  |  | 6,584 |
Noninterest expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  | 10,278 |  |  | 9,072 |  |  | 8,984 |  |  | 8,398 |  |  | 7,871 |  |  | 36,635 |  |  | 30,630 |
Occupancy and equipment |  | 1,749 |  |  | 1,635 |  |  | 1,658 |  |  | 1,640 |  |  | 1,610 |  |  | 6,716 |  |  | 6,303 |
FDIC insurance (credit) |  | — |  |  | (219 | ) |  | 180 |  |  | 179 |  |  | 209 |  |  | 140 |  |  | 786 |
Other real estate and loan related expense |  | 253 |  |  | 335 |  |  | 242 |  |  | 490 |  |  | 738 |  |  | 1,320 |  |  | 2,913 |
Advertising and marketing |  | 166 |  |  | 263 |  |  | 259 |  |  | 295 |  |  | 246 |  |  | 983 |  |  | 873 |
Data processing |  | 530 |  |  | 273 |  |  | 577 |  |  | 615 |  |  | 372 |  |  | 1,995 |  |  | 1,906 |
Professional services |  | 652 |  |  | 573 |  |  | 489 |  |  | 662 |  |  | 707 |  |  | 2,375 |  |  | 2,694 |
Amortization of intangibles |  | 340 |  |  | 341 |  |  | 342 |  |  | 344 |  |  | 312 |  |  | 1,368 |  |  | 976 |
Software as service contracts |  | 500 |  |  | 560 |  |  | 568 |  |  | 567 |  |  | 577 |  |  | 2,195 |  |  | 2,054 |
Merger related and restructuring expenses |  | 427 |  |  | 73 |  |  | 1,796 |  |  | 923 |  |  | 1,322 |  |  | 3,219 |  |  | 3,781 |
Other |  | 1,157 |  |  | 1,802 |  |  | 1,714 |  |  | 1,466 |  |  | 1,697 |  |  | 6,205 |  |  | 6,041 |
Total noninterest expense |  | 16,052 |  |  | 14,708 |  |  | 16,809 |  |  | 15,579 |  |  | 15,661 |  |  | 63,151 |  |  | 58,957 |
Income before income taxes |  | 7,206 |  |  | 7,904 |  |  | 12,016 |  |  | 6,319 |  |  | 6,137 |  |  | 33,445 |  |  | 21,335 |
Income tax expense |  | 473 |  |  | 1,941 |  |  | 2,895 |  |  | 1,588 |  |  | (307 | ) |  | 6,897 |  |  | 3,233 |
Net income |  | $ | 6,733 |  |  | $ | 5,963 |  |  | $ | 9,121 |  |  | $ | 4,731 |  |  | $ | 6,444 |  |  | $ | 26,548 |  |  | $ | 18,102 |
Earnings Per Common Share: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.48 |  |  | $ | 0.43 |  |  | $ | 0.65 |  |  | $ | 0.34 |  |  | $ | 0.48 |  |  | $ | 1.90 |  |  | $ | 1.46 |
Diluted |  | $ | 0.48 |  |  | $ | 0.42 |  |  | $ | 0.65 |  |  | $ | 0.34 |  |  | $ | 0.47 |  |  | $ | 1.89 |  |  | $ | 1.45 |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 13,965,877 |  |  | 13,955,859 |  |  | 13,951,643 |  |  | 13,942,016 |  |  | 13,534,806 |  |  | 13,953,497 |  |  | 12,423,618 |
Diluted |  | 14,066,269 |  |  | 14,053,432 |  |  | 14,046,500 |  |  | 14,018,163 |  |  | 13,616,616 |  |  | 14,046,366 |  |  | 12,517,640 |

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
YIELD ANALYSIS |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended
|  | December 31, 2019 |  | September 30, 2019 |  | December 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, including fees |  | $ | 1,881,501 |  |  | $ | 25,398 |  |  | 5.36 | % |  | $ | 1,846,196 |  |  | $ | 25,515 |  |  | 5.48 | % |  | $ | 1,708,916 |  |  | $ | 25,019 |  |  | 5.81 | %
Taxable securities |  | 116,278 |  |  | 698 |  |  | 2.38 | % |  | 118,955 |  |  | 748 |  |  | 2.49 | % |  | 171,133 |  |  | 900 |  |  | 2.09 | %
Tax-exempt securities |  | 59,048 |  |  | 461 |  |  | 3.09 | % |  | 56,598 |  |  | 448 |  |  | 3.14 | % |  | 43,177 |  |  | 440 |  |  | 4.04 | %
Federal funds sold and other earning assets |  | 133,681 |  |  | 587 |  |  | 1.74 | % |  | 135,444 |  |  | 743 |  |  | 2.18 | % |  | 67,036 |  |  | 506 |  |  | 2.99 | %
Total interest-earning assets |  | 2,190,508 |  |  | 27,144 |  |  | 4.92 | % |  | 2,157,193 |  |  | 27,454 |  |  | 5.05 | % |  | 1,990,262 |  |  | 26,865 |  |  | 5.36 | %
Noninterest-earning assets |  | 190,083 |  |  |  |  |  |  |  |  | 191,940 |  |  |  |  |  |  | 193,952 |  |  |  |  |  |  |
Total assets |  | $ | 2,380,591 |  |  |  |  |  |  |  |  | $ | 2,349,133 |  |  |  |  |  |  | $ | 2,184,214 |  |  |  |  |  |  |
Liabilities and Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits |  | $ | 351,901 |  |  | 486 |  |  | 0.55 | % |  | $ | 343,827 |  |  | 511 |  |  | 0.59 | % |  | $ | 289,207 |  |  | 562 |  |  | 0.77 | %
Money market and savings deposits |  | 632,555 |  |  | 1,695 |  |  | 1.06 | % |  | 637,290 |  |  | 1,829 |  |  | 1.14 | % |  | 624,231 |  |  | 1,696 |  |  | 1.08 | %
Time deposits |  | 633,867 |  |  | 3,090 |  |  | 1.93 | % |  | 640,679 |  |  | 3,265 |  |  | 2.02 | % |  | 616,296 |  |  | 2,422 |  |  | 1.56 | %
Total interest-bearing deposits |  | 1,618,323 |  |  | 5,271 |  |  | 1.29 | % |  | 1,621,796 |  |  | 5,605 |  |  | 1.37 | % |  | 1,529,734 |  |  | 4,680 |  |  | 1.21 | %
Securities sold under agreement to repurchase |  | 5,321 |  |  | 5 |  |  | 0.35 | % |  | 6,490 |  |  | 5 |  |  | 0.31 | % |  | 10,661 |  |  | 9 |  |  | 0.33 | %
Federal funds purchased and other borrowings |  | 25,549 |  |  | 65 |  |  | 1.00 | % |  | 6,820 |  |  | 10 |  |  | 0.58 | % |  | 4,070 |  |  | 51 |  |  | 4.97 | %
Subordinated debt |  | 39,248 |  |  | 584 |  |  | 5.90 | % |  | 39,226 |  |  | 584 |  |  | 5.91 | % |  | 39,178 |  |  | 584 |  |  | 5.91 | %
Total interest-bearing liabilities |  | 1,688,441 |  |  | 5,924 |  |  | 1.39 | % |  | 1,674,332 |  |  | 6,204 |  |  | 1.47 | % |  | 1,583,643 |  |  | 5,324 |  |  | 1.33 | %
Noninterest-bearing deposits |  | 363,542 |  |  |  |  |  |  |  |  | 353,315 |  |  |  |  |  |  | 320,412 |  |  |  |  |  |  |
Other liabilities |  | 19,836 |  |  |  |  |  |  |  |  | 18,286 |  |  |  |  |  |  | 9,275 |  |  |  |  |  |  |
Total liabilities |  | 2,071,819 |  |  |  |  |  |  |  |  | 2,045,933 |  |  |  |  |  |  | 1,913,330 |  |  |  |  |  |  |
Stockholders’ equity |  | 308,772 |  |  |  |  |  |  |  |  | 303,200 |  |  |  |  |  |  | 270,884 |  |  |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 2,380,591 |  |  |  |  |  |  |  |  | $ | 2,349,133 |  |  |  |  |  |  | $ | 2,184,214 |  |  |  |  |  |  |
Net interest income, taxable equivalent |  |  |  |  | $ | 21,220 |  |  |  |  |  |  |  | $ | 21,250 |  |  |  |  |  |  |  | $ | 21,541 |  |  |  |
Interest rate spread |  |  |  |  |  |  |  | 3.52 | % |  |  |  |  |  | 3.58 | % |  |  |  |  |  |  |  | 4.03 | %
Tax equivalent net interest margin |  |  |  |  |  |  |  | 3.84 | % |  |  |  |  |  | 3.91 | % |  |  |  |  |  |  |  | 4.28 | %
Percentage of average interest-earning assets to average interest-bearing liabilities |  |  |  |  |  |  |  | 129.74 | % |  |  |  |  |  | 128.84 | % |  |  |  |  |  |  |  | 125.68 | %
Percentage of average equity to average assets |  |  |  |  |  |  |  | 12.97 | % |  |  |  |  |  | 12.91 | % |  |  |  |  |  |  |  | 12.40 | %

1 Taxable equivalent

SmartFinancial, Inc. and Subsidiary |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |
(In thousands) |  |  |  |
YIELD ANALYSIS |  |  |  |
|  | Twelve Months Ended
|  | December 31, 2019 |  | December 31, 2018
|  | Average |  |  |  | Yield/ |  | Average |  |  |  | Yield/
|  | Balance |  | Interest 1 |  | Cost 1 |  | Balance |  | Interest 1 |  | Cost 1
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 1,840,821 |  |  | $ | 101,002 |  |  | 5.49 | % |  | $ | 1,511,724 |  |  | $ | 86,479 |  |  | 5.72 | %
Taxable securities |  | 129,705 |  |  | 3,289 |  |  | 2.54 | % |  | 143,281 |  |  | 3,512 |  |  | 2.46 | %
Tax-exempt securities |  | 56,458 |  |  | 1,972 |  |  | 3.49 | % |  | 19,734 |  |  | 767 |  |  | 3.90 | %
Federal funds sold and other earning assets |  | 110,380 |  |  | 2,646 |  |  | 2.40 | % |  | 65,244 |  |  | 1,642 |  |  | 2.52 | %
Total interest-earning assets |  | 2,137,364 |  |  | 108,909 |  |  | 5.10 | % |  | 1,739,983 |  |  | 92,400 |  |  | 5.32 | %
Noninterest-earning assets |  | 201,976 |  |  |  |  |  |  | 222,734 |  |  |  |  |
Total assets |  | $ | 2,339,340 |  |  |  |  |  |  | $ | 1,962,717 |  |  |  |  |
Liabilities and Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits |  | $ | 333,100 |  |  | 1,883 |  |  | 0.57 | % |  | $ | 242,859 |  |  | 1,290 |  |  | 0.53 | %
Money market and savings deposits |  | 651,855 |  |  | 7,827 |  |  | 1.20 | % |  | 601,808 |  |  | 5,579 |  |  | 0.93 | %
Time deposits |  | 635,451 |  |  | 12,205 |  |  | 1.92 | % |  | 536,964 |  |  | 7,419 |  |  | 1.39 | %
Total interest-bearing deposits |  | 1,620,406 |  |  | 21,915 |  |  | 1.35 | % |  | 1,381,631 |  |  | 14,288 |  |  | 1.04 | %
Securities sold under agreement to repurchase |  | 6,750 |  |  | 23 |  |  | 0.34 | % |  | 15,046 |  |  | 45 |  |  | 0.30 | %
Federal funds purchased and other borrowings |  | 14,776 |  |  | 296 |  |  | 2.00 | % |  | 17,806 |  |  | 630 |  |  | 3.55 | %
Subordinated debt |  | 39,216 |  |  | 2,341 |  |  | 5.97 | % |  | 9,882 |  |  | 603 |  |  | 6.12 | %
Total interest-bearing liabilities |  | 1,681,148 |  |  | 24,575 |  |  | 1.46 | % |  | 1,424,365 |  |  | 15,566 |  |  | 1.10 | %
Noninterest-bearing deposits |  | 343,611 |  |  |  |  |  |  | 285,729 |  |  |  |  |
Other liabilities |  | 15,852 |  |  |  |  |  |  | 10,172 |  |  |  |  |
Total liabilities |  | 2,040,611 |  |  |  |  |  |  | 1,720,266 |  |  |  |  |
Stockholders’ equity |  | 298,729 |  |  |  |  |  |  | 242,451 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 2,339,340 |  |  |  |  |  |  | $ | 1,962,717 |  |  |  |  |
Net interest income, taxable equivalent |  |  |  | $ | 84,334 |  |  |  |  |  |  | $ | 76,834 |  |  |
Interest rate spread |  |  |  |  |  | 3.63 | % |  |  |  |  |  | 4.22 | %
Tax equivalent net interest margin |  |  |  |  |  | 3.95 | % |  |  |  |  |  | 4.43 | %
Percentage of average interest-earning assets to average interest-bearing liabilities |  |  |  |  |  | 127.14 | % |  |  |  |  |  | 122.16 | %
Percentage of average equity to average assets |  |  |  |  |  | 12.77 | % |  |  |  |  |  | 12.35 | %

1 Taxable equivalent

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |
NON-GAAP RECONCILIATIONS |  |  |  |  |  |
|  | Three Months Ended |  | Twelve Months Ended
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec |  | Dec |  | Dec
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018 |  | 2019 |  | 2018
Operating Earnings: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (GAAP) |  | $ | 6,733 |  |  | $ | 5,963 |  |  | $ | 9,121 |  |  | $ | 4,731 |  |  | $ | 6,444 |  |  | $ | 26,548 |  |  | $ | 18,102 |
Noninterest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities gains |  | — |  |  | (1 | ) |  | (33 | ) |  | — |  |  | (2 | ) |  | (34 | ) |  | (1 | )
ADECA termination proceeds |  | (720 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (720 | ) |  | — |
Merger termination fee |  | — |  |  | — |  |  | (6,400 | ) |  | — |  |  | — |  |  | (6,400 | ) |  | — |
Noninterest expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries - prior year adjustment |  | 603 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 603 |  |  | — |
Merger related and restructuring expenses |  | 427 |  |  | 73 |  |  | 1,796 |  |  | 923 |  |  | 1,322 |  |  | 3,219 |  |  | 3,781 |
Other - prior year franchise tax true-up |  | (312 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (312 | ) |  | — |
Income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tax benefit - prior year amended return |  | (304 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (304 | ) |  | — |
Tax benefit from director options |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,600 | ) |  | — |  |  | (1,600 | )
Income tax effect of adjustments |  | 60 |  |  | (19 | ) |  | 1,119 |  |  | (145 | ) |  | (257 | ) |  | 1,015 |  |  | (766 | )
Net operating earnings (Non-GAAP) |  | $ | 6,487 |  |  | $ | 6,016 |  |  | $ | 5,603 |  |  | $ | 5,509 |  |  | $ | 5,907 |  |  | $ | 23,615 |  |  | $ | 19,516 |
Net operating earnings per common share (Non-GAAP): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.46 |  |  | $ | 0.43 |  |  | $ | 0.40 |  |  | $ | 0.40 |  |  | $ | 0.44 |  |  | $ | 1.69 |  |  | $ | 1.57 |
Diluted |  | 0.46 |  |  | 0.43 |  |  | 0.40 |  |  | 0.39 |  |  | 0.43 |  |  | 1.68 |  |  | 1.56 |
Operating Noninterest Income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest income (GAAP) |  | $ | 2,840 |  |  | $ | 2,196 |  |  | $ | 8,416 |  |  | $ | 1,698 |  |  | $ | 1,680 |  |  | $ | 15,315 |  |  | $ | 6,584 |
Securities (gains) losses |  | — |  |  | (1 | ) |  | (33 | ) |  | — |  |  | (2 | ) |  | (34 | ) |  | (1 | )
ADECA termination proceeds |  | (720 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (726 | ) |  | — |
Merger termination fee |  | — |  |  | — |  |  | (6,400 | ) |  | — |  |  | — |  |  | (6,400 | ) |  | — |
Operating noninterest income (Non-GAAP) |  | $ | 2,120 |  |  | $ | 2,195 |  |  | $ | 1,983 |  |  | $ | 1,698 |  |  | $ | 1,678 |  |  | $ | 8,155 |  |  | $ | 6,583 |
Operating Noninterest Expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest expense (GAAP) |  | $ | 16,052 |  |  | $ | 14,708 |  |  | $ | 16,809 |  |  | $ | 15,579 |  |  | $ | 15,661 |  |  | $ | 63,151 |  |  | $ | 58,957 |
Salaries - prior year adjustment |  | (603 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (603 | ) |  | — |
Merger related and restructuring expenses |  | (427 | ) |  | (73 | ) |  | (1,796 | ) |  | (923 | ) |  | (1,322 | ) |  | (3,219 | ) |  | (3,781 | )
Other - prior year franchise tax true-up |  | 312 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 312 |  |  | — |
Operating noninterest expense (Non-GAAP) |  | $ | 15,334 |  |  | $ | 14,635 |  |  | $ | 15,013 |  |  | $ | 14,656 |  |  | $ | 14,339 |  |  | $ | 59,641 |  |  | $ | 55,176 |
Non-GAAP Return Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net operating return on average assets (Non-GAAP)1 |  | 1.08 | % |  | 1.02 | % |  | 0.96 | % |  | 0.98 | % |  | 1.07 | % |  | 1.01 | % |  | 0.99 | %
Return on average tangible common equity (Non-GAAP)2 |  | 11.55 | % |  | 10.52 | % |  | 16.78 | % |  | 9.26 | % |  | 13.09 | % |  | 12.04 | % |  | 10.09 | %
Net operating return on average shareholder equity (Non-GAAP)3 |  | 8.34 | % |  | 7.87 | % |  | 7.58 | % |  | 7.81 | % |  | 8.65 | % |  | 7.91 | % |  | 8.05 | %
Net operating return on average tangible common equity (Non-GAAP)4 |  | 11.12 | % |  | 10.61 | % |  | 10.31 | % |  | 10.79 | % |  | 12.00 | % |  | 10.71 | % |  | 10.88 | %
Operating Efficiency Ratio: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Efficiency ratio (GAAP) |  | 67.04 | % |  | 63.03 | % |  | 57.53 | % |  | 68.65 | % |  | 67.71 | % |  | 63.66 | % |  | 70.84 | %
Adjustment for taxable equivalent yields |  | (0.45 | )% |  | (0.37 | )% |  | (0.50 | )% |  | (0.49 | )% |  | (0.45 | )% |  | 0.08 | % |  | (0.21 | )%
Adjustment for securities gains (losses) |  | — | % |  | — | % |  | 0.14 | % |  | — | % |  | 0.01 | % |  | (0.01 | )% |  | — | %
Adjustment for merger related income and costs |  | (1.64 | )% |  | (0.24 | )% |  | 8.39 | % |  | (3.91 | )% |  | (5.55 | )% |  | 0.56 | % |  | (4.47 | )%
Operating efficiency ratio (Non-GAAP) |  | 64.95 | % |  | 62.42 | % |  | 65.56 | % |  | 64.25 | % |  | 61.72 | % |  | 64.29 | % |  | 66.15 | %
1 Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets. 2 Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP). 3 Net operating return on average equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average equity. 4 Net operating return on average tangible common equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). |  |  |  |

SmartFinancial, Inc. and Subsidiary |  |  |  |  |  |  |  |
Condensed Consolidated Financial Information - (unaudited) |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |
NON-GAAP RECONCILIATIONS |  |  |  |  |  |
|  | Three Months Ended |  | Twelve Months Ended
|  | Dec |  | Sep |  | Jun |  | Mar |  | Dec |  | Dec |  | Dec
|  | 2019 |  | 2019 |  | 2019 |  | 2019 |  | 2018 |  | 2019 |  | 2018
Tangible Common Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shareholders' equity (GAAP) |  | $ | 312,747 |  |  | $ | 306,040 |  |  | $ | 299,611 |  |  | $ | 290,481 |  |  | $ | 283,011 |  |  | $ | 312,747 |  |  | $ | 283,011 |
Less goodwill and other intangible assets |  | 77,193 |  |  | 77,534 |  |  | 78,348 |  |  | 78,690 |  |  | 79,034 |  |  | 77,193 |  |  | 79,034 |
Tangible common equity (Non-GAAP) |  | $ | 235,555 |  |  | $ | 228,506 |  |  | $ | 221,263 |  |  | $ | 211,791 |  |  | $ | 203,977 |  |  | $ | 235,555 |  |  | $ | 203,977 |
Average Tangible Common Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average shareholders' equity (GAAP) |  | $ | 308,772 |  |  | $ | 303,200 |  |  | $ | 296,570 |  |  | $ | 286,076 |  |  | $ | 270,884 |  |  | $ | 298,729 |  |  | $ | 242,451 |
Less average goodwill and other intangible assets |  | 77,400 |  |  | 78,222 |  |  | 78,564 |  |  | 78,913 |  |  | 75,547 |  |  | 78,270 |  |  | 63,075 |
Average tangible common equity (Non-GAAP) |  | $ | 231,372 |  |  | $ | 224,978 |  |  | $ | 218,006 |  |  | $ | 207,163 |  |  | $ | 195,337 |  |  | $ | 220,459 |  |  | $ | 179,376 |