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Press Release

SmartFinancial Increases Net Income Available to Common Shareholders 26 percent compared to prior year

Company Release - 10/30/2017 5:00 PM ET

KNOXVILLE, Tenn., Oct. 30, 2017 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), announced today net income of $1.7 million in its third quarter of 2017, compared to $1.6 million a year ago.  Net income available to common shareholders totaled $1.7 million for third quarter of 2017 compared to $1.3 million during the third quarter of 2016.

Billy Carroll, President & CEO, stated:  "In the third quarter net income was up five percent from a year ago.  Compared to last year we grew net interest income over one million dollars by growing gross loans nine percent year over year and by increasing asset yields and our net interest margin.  During the last quarter we added revenue producers in several markets and operations personnel to support them and the pending acquisition of Capstone Bancshares in Alabama.  Those additions resulted in an increase in salaries and benefits that, along with over three hundred thousand dollars in merger and conversion costs during the current quarter, temporarily elevated our efficiency ratio.  We anticipate additional merger related costs for the next two quarters with the integration of Capstone Bancshares after which time efficiencies will improve. Our team has done a great job of balancing the merger planning while growing the core bank."

SmartFinancial's Chairman, Miller Welborn, concluded:  "We are looking forward to completing the acquisition of Capstone Bancshares.  Our resulting company will have assets of approximately $1.6 billion.  The company's larger scale will lead to increased efficiencies and should result in a higher return on assets by the second quarter of 2018.  Just as exciting as completing this acquisition are the future opportunities available for the company.  We believe by expanding our geographic footprint we are positioning the company as a 'partner of choice' among other community banks in the SouthEast."

Performance Highlights

  • Net income available to common shareholders of $1.7 million for the quarter, up from $1.3 million a year ago.
  • Net interest margin, taxable equivalent, increased to 4.17 percent, the highest in the past five quarters.
  • Increased average interest-earning assets to average interest-bearing liabilities to 128 percent.

Third Quarter 2017 compared to Third Quarter 2016

Net income available to common shareholders totaled $1.7 million in the third quarter of 2017, or $0.20 per diluted share, compared to $1.3 million, or $0.22 per diluted share, in the third quarter of 2016.  Net operating earnings available to common shareholders, which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $1.8 million in the third quarter of 2017 compared to $1.3 million in the third quarter of 2016.

Net interest income to average assets of 3.81 percent for the quarter increased from 3.77 percent in the third quarter of 2016 as the average earning asset balances and yields increased compared to the prior year.  Net interest income totaled $10.9 million in the third quarter of 2017 compared to $9.7 million in the third quarter of 2016.  Net interest income was positively impacted compared to the prior year due to increases in loan balances and increases in the yields of the loan and securities portfolios.  Net interest margin, taxable equivalent, increased from 4.03 percent in the third quarter of 2016 to 4.17 percent in the third quarter of 2017 as a result a higher percentage of average interest-earning assets to average interest-bearing liabilities and increases in the yield on earning assets.

Provision for loan losses was $30 thousand in the third quarter of 2017, compared to $261 thousand in the third quarter of 2016. The decrease in provision for loan losses was due to improvements in the credit profile of the loan portfolio as well as slower loan growth during the period.  Annualized net charge-offs (recoveries) was (0.02) percent of average loans in the third quarter of 2017.  The ALLL was $5.4 million, or 0.62 percent of total loans as of September 30, 2017, compared to $5.0 million, or 0.62 percent of total loans, as of September 30, 2016.  In addition to the allowance there were $8.2 million additional discounts on $166.5 million of purchased loans.

Nonperforming loans as a percentage of total loans was 0.15 percent as of September 30, 2017, which was down from 0.17 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 0.37 percent as of September 30, 2017, compared to 0.38 percent as of September 30, 2016.

Noninterest income to average assets of 0.43 percent for the quarter was down from 0.47 percent in the third quarter of 2016. Noninterest income totaled $1.2 million in the third quarter of 2017, compared to $1.2 million in the third quarter of 2016.  Year over year the largest changes in noninterest income were a $157 thousand decrease in gains on the sale of foreclosed assets, a $125 thousand increase in securities gains, and a $113 thousand increase in other income.

Noninterest expense to average assets of 3.33 percent for the quarter was up from 3.13 percent in the third quarter of 2016.  Noninterest expense totaled $9.5 million in the third quarter of 2017, which was up from $8.0 million in the third quarter of 2016.  The increase in noninterest expense compared to the prior year was primarily due to $723 thousand higher salaries and employee benefits and $303 thousand merger and conversion costs.  Income tax expense was $882 thousand in the third quarter of 2017 compared to $947 thousand in the third quarter of 2016.  The company's effective tax rate dropped to 34.4 percent in the third quarter of 2017 compared to 37.0 percent in the third quarter of 2016.

Third Quarter 2017 compared to Second Quarter 2017

Net income available to common shareholders totaled $1.7 million in the third quarter of 2017, or $0.20 per diluted share, compared to $1.6 million, or $0.20 per diluted share, in the second quarter of 2017.  Net operating earnings available to common shareholders, which excludes securities gains, foreclosed assets gains and losses, and merger and conversion costs, totaled $1.8 million in the third  quarter of 2017 compared to $1.9 million in the previous quarter.

Net interest income to average assets of 3.81 percent for the quarter was unchanged from the second quarter of 2017. Net interest income totaled $10.9 million in the third quarter of 2017 compared to $10.2 million in the second quarter of 2017.  Net interest income was positively impacted by approximately $123 thousand due to the one extra day in the current period.  Net interest margin, taxable equivalent, increased from 4.15 percent in the second quarter of 2017 to 4.17 percent in the third quarter of 2017 as a result a higher percentage of average interest-earning assets to average interest-bearing liabilities and increases of the yield on earning assets.

Provision for loan losses was $30 thousand in the third quarter of 2017, compared to $298 thousand in the second quarter of 2017.  The decrease in provision for loan losses was due to slower loan growth during the period.  The ALLL was $5.4 million, or 0.62 percent of total loans as of September 30, 2017, 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 0.15 percent as of September 30, 2017, which was up slightly from 0.13 percent in the prior quarter.  Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.37 percent as of September 30, 2017, compared to 0.31 percent as of June 30, 2017.

Noninterest income to average assets of 0.43 percent for the period was down from 0.47 percent in the second quarter of 2017.  Noninterest income totaled $1.2 million in the third quarter of 2017, compared to $1.3 million in the second quarter of 2017.  The decrease in non-interest income was primarily due to smaller gains from lower sales volumes of SBA and mortgage loans.

Noninterest expense to average assets of 3.33 percent for the quarter was up from 3.29 percent in the second quarter of 2017.  Noninterest expense totaled $9.5 million in the third quarter of 2017, which was up $718 thousand from the second quarter of 2017, primarily due to higher salaries and employee benefits.  Income tax expense was $882 thousand in the third quarter of 2017 compared to $726 thousand in the second quarter of 2017.  The company's effective tax rate increased to 34.4 percent in the third quarter of 2017 compared to 30.6 percent in the second quarter of 2017.

Conference Call Information
SmartFinancial will host a conference call on Tuesday, October 31, at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number: 6556809.  A replay of the conference call will be available through November 7, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number: 10113897.  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 EST prior to the morning of the conference call.

About SmartFinancial, Inc.
SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with fourteen branches, one loan production office, and one mortgage production office located in East Tennessee, the Florida Panhandle, and North Georgia. Recruiting the best people, delivering exceptional client service, strategic branching and a conservative and disciplined approach to lending have contributed to SmartBank’s success.  More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

This release contains forward-looking statements. SmartFinancial cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: the expected revenue synergies and cost savings from the merger with Capstone  may not be fully realized or may take longer than anticipated to be realized; the disruption from the Capstone merger with customers, suppliers or employees or other business partners’ relationships; the risk of successful integration of our business with that of Capstone after consummation of the merger; the amount of costs, fees, expenses, and charges related to the merger; changes in management’s plans for the future, prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and other factors that may be described in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time.

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, SmartFinancial assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

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 non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; and (iii) tangible common equity, in its analysis of the company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, OREO gain and losses, merger and conversion expenses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses , adjustment for OREO gains and losses, and merger and conversion costs  from the efficiency ratio.  Tangible common equity excludes total preferred stock, preferred stock paid in capital, goodwill, and other intangible assets.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Source
SmartFinancial, Inc.

Investor Contacts
Billy Carroll                                                                                         Frank Hughes
President & CEO                                                                                Executive Vice President, Investor Relations
(865) 868-0613                                                                                   (423) 385-3009

Media Contact
Kelley Fowler
First Vice President, Public Relations & Marketing
SmartBank
(865) 868-0611
kelley.fowler@smartbank.com


SmartFinancial, Inc. and Subsidiary    
Condensed Consolidated Financial Information (unaudited)    
(In thousands except per share data)    
  As of and for the three months ending
  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Selected Performance Ratios (Annualized)          
Return on average assets 0.59 % 0.61 % 0.64 % 0.64 % 0.63 %
Net operating return on average assets (Non-GAAP) 0.63 % 0.61 % 0.44 % 0.54 % 0.44 %
Return on average shareholder equity 4.91 % 4.95 % 5.18 % 6.24 % 6.19 %
Net operating return on average shareholder equity (Non-GAAP) 5.25% 4.91 % 3.55 % 5.32 % 4.35 %
Net interest income / average assets 3.81 % 3.81 % 3.81 % 3.80 % 3.77 %
Yield on earning assets, TE (Non-GAAP) 4.70 % 4.66 % 4.54 % 4.51 % 4.48 %
Cost of interest-bearing liabilities 0.68 % 0.65 % 0.60 % 0.58 % 0.57 %
Net interest margin, TE (Non-GAAP) 4.17 % 4.15 % 4.07 % 4.06 % 4.03 %
Noninterest income / average assets 0.43 % 0.47 % 0.36 % 0.37 % 0.47 %
Noninterest expense / average assets 3.33 % 3.29 % 3.16 % 3.09 % 3.13 %
Efficiency ratio 78.62 % 76.77 % 75.79 % 74.29 % 74.06 %
Operating efficiency ratio (Non-GAAP) 76.46 % 78.98 % 81.34 % 78.98 % 80.31 %
Pre-tax pre-provision income / average assets 0.97 % 0.96 % 1.09 % 1.08 % 1.09 %
           
Per Common Share          
Net income, basic $0.20  $0.20  $0.19  $0.23  $0.23 
Net income, diluted 0.20  0.20  0.19  0.22  0.22 
Net operating earnings, basic (Non-GAAP) 0.22  0.20  0.15  0.24  0.19 
Net operating earnings, diluted (Non-GAAP) 0.22  0.20  0.15  0.23  0.19 
Book value as of 16.57  16.39  16.14  15.81  15.83 
Tangible book value (Non-GAAP) as of 15.67  15.48  15.34  14.69  14.70 
           
Common shares outstanding as of 8,243  8,219  8,211  5,896  5,885 
           
Composition Of Loans          
Commercial & financial $119,782  $105,129  $90,649  $85,696  $83,534 
Real estate construction & Development 98,212  101,151  115,675  117,748  128,733 
Real estate commercial 447,620  445,176  407,933  414,860  394,346 
owner occupied 210,489  211,469  197,032  199,645  191,697 
non-owner occupied 237,131  233,707  210,901  215,215  202,649 
Real estate residential 199,704  206,667  186,344  187,557  183,528 
Other loans 6,361  7,298  6,938  7,515  7,001 
Total loans $871,679  $865,421  $807,539  $813,376  $797,142 
           
           
           
           
           
SmartFinancial, Inc. and Subsidiary    
Condensed Consolidated Financial Information (unaudited)    
(In thousands except per share data)    
  As of and for the three months ending
  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Asset Quality Data and Ratios          
Nonperforming loans $1,264  $1,147  $1,445  $2,142  $1,370 
Foreclosed assets 2,888  2,369  2,371  2,386  2,536 
Total nonperforming assets $4,152  $3,516  $3,816  $4,528  $3,906 
Restructured loans not included in nonperforming loans $42  $  $301  $608  $3,388 
Net charge-offs to average loans (annualized) (0.02)% (0.04)% (0.02)% 0.02 % 0.01 %
Allowance for loan losses to loans 0.62 % 0.64 % 0.64 % 0.63 % 0.62 %
Nonperforming loans to total loans, gross 0.15 % 0.13 % 0.18 % 0.26 % 0.17 %
Nonperforming assets to total assets 0.37 % 0.31 % 0.36 % 0.43 % 0.38 %
           
Capital Ratios          
Tangible equity to tangible assets 11.45 % 11.18 % 12.06 % 9.34 % 9.53 %
Tangible common equity to tangible assets 11.45 % 11.18 % 12.06 % 8.20 % 8.36 %
SmartFinancial, Inc.: Estimated        
Tier 1 leverage 12.18 % 11.54 % 12.37 % 9.71 % 9.77 %
Common equity Tier 1 13.74 % 13.43 % 14.40 % 9.98 % 10.04 %
Tier 1 capital 13.74 % 13.43 % 14.40 % 11.35 % 11.42 %
Total capital 14.32 % 14.10 % 15.12 % 11.93 % 12.00 %
SmartBank: Estimated        
Tier 1 leverage 11.23 % 10.98 % 11.17 % 9.71 % 9.63 %
Common equity Tier 1 12.60 % 12.32 % 13.13 % 11.30 % 11.26 %
Tier 1 capital 12.60 % 12.32 % 13.13 % 11.30 % 11.26 %
Total capital 13.19 % 12.89 % 13.71 % 11.88 % 11.83 %



SmartFinancial, Inc. and Subsidiary    
Condensed Consolidated Financial Information (unaudited)  
(In thousands)    
BALANCE SHEET          
  Ending Balances
  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Assets          
Cash & cash equivalents $84,098  $82,835  $55,548  $68,748  $58,587 
Securities available for sale 115,535  132,762  137,133  129,422  138,628 
Other investments 6,081  6,081  5,628  5,628  4,451 
Total loans 871,679  865,421  807,539  813,376  797,143 
Allowance for loan losses (5,393) (5,498) (5,152) (5,105) (4,964)
Loans, net 866,286  859,923  802,387  808,271  792,178 
Premises and equipment 33,778  33,765  30,802  30,536  27,863 
Foreclosed assets 2,888  2,369  2,371  2,386  2,536 
Goodwill and other intangibles 7,414  7,492  6,583  6,636  6,675 
Other assets 19,742  20,253  10,634  10,830  9,808 
Total assets $1,135,822  $1,145,479  $1,051,086  $1,062,456  $1,040,726 
           
Liabilities          
Noninterest demand $185,386  $183,324  $160,673  $153,483  $145,509 
Interest-bearing demand 156,953  156,150  167,433  162,702  152,216 
Money market and savings 306,357  324,014  274,993  274,605  271,259 
Time deposits 311,490  318,147  286,600  316,275  291,858 
Total deposits 960,187  981,635  889,699  907,065  860,842 
Repurchase agreements 26,542  22,946  23,153  26,622  24,202 
FHLB & other borrowings 6,000    60  18,505  43,048 
Other liabilities 6,505  6,164  5,622  5,024  7,463 
Total liabilities 999,234  1,010,745  918,535  957,216  935,556 
Shareholders' Equity          
Preferred stock       12  12 
Common stock 8,243  8,219  8,211  5,896  5,885 
Additional paid-in capital 107,065  106,794  106,703  83,463  83,330 
Retained earnings 21,654  19,968  18,320  16,871  15,494 
Accumulated other comprehensive loss (374) (248) (683) (1,002) 449 
Total shareholders' equity 136,588  134,734  132,551  105,240  105,170 
Total liabilities & shareholders' equity $1,135,822  $1,145,479  $1,051,086  $1,062,456  $1,040,726 


SmartFinancial, Inc. and Subsidiary    
Condensed Consolidated Financial Information (unaudited)  
(In thousands)    
INCOME STATEMENT          
  Three months ending
  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Interest Income          
Loans, including fees $11,491  $10,747  $10,216  $10,324  $10,111 
Investment securities and interest bearing due
froms 
 740  692  661  570  602 
Other interest income 86  78  73  83  51 
Total interest income 12,317  11,517  10,949  10,977  10,763 
Interest Expense          
Deposits 1,373  1,241  1,098  1,066  1,065 
Repurchase agreements 15  16  16  17  17 
FHLB and other borrowings 5  12  15  37  17 
Total interest expense 1,393  1,268  1,129  1,121  1,099 
Net interest income 10,924  10,249  9,820  9,856  9,665 
Provision for loan losses 30  298  12  171  261 
Net interest income after provision for loan losses 10,894  9,951  9,808  9,685  9,404 
Noninterest income          
Service charges on deposit accounts 294  291  265  277  296 
Gain on securities 144        18 
Gain on sale of loans and other assets 224  405  275  242  287 
Gain (loss) on sale of foreclosed assets (27) 1  (16) 6  130 
Other non-interest income 585  556  402  422  472 
Total noninterest income 1,220  1,253  927  948  1,204 
Noninterest expense          
Salaries and employee benefits 5,035  4,758  4,647  4,422  4,312 
Occupancy expense 1,114  963  978  875  965 
FDIC premiums 102  61  153  166  153 
Foreclosed asset expense 20  12    37  79 
Marketing 177  129  164  79  179 
Data Processing 483  475  340  541  457 
Professional expenses 472  473  570  558  558 
Amortization of other intangibles 78  61  53  39  80 
Service contracts 363  313  296  281  272 
Other noninterest expense 1,703  1,584  944  1,028  994 
Total noninterest expense 9,547  8,829  8,145  8,026  8,050 
Earnings before income taxes 2,567  2,375  2,590  2,607  2,558 
Income tax expense 882  726  946  960  947 
Net income (loss) 1,685  1,649  1,644  1,647  1,611 
Dividends on preferred stock     195  270  270 
Net income available to common shareholders $1,685  $1,649  $1,449  $1,377  $1,341 
           
NET INCOME PER COMMON SHARE          
Basic $0.20  $0.20  $0.19  $0.23  $0.23 
Diluted 0.20  0.20  0.19  0.22  0.22 
           
Weighted average common shares outstanding          
Basic 8,235  8,217  7,525  5,891  5,835 
Diluted 8,333  8,326  7,631  6,206  6,096 


SmartFinancial, Inc. and Subsidiary          
Condensed Consolidated Financial Information (unaudited)        
(In thousands)            
YIELD ANALYSIS            
  Three Months Ended September 30, 2017 Three Months Ended June 30, 2017 Three Months Ended September 30, 2016
  Average   Yield/ Average   Yield/ Average   Yield/
  Balance Interest * Cost* Balance Interest * Cost* Balance Interest * Cost*
Assets                  
Loans $868,352  $11,496  5.25% $834,665  $10,752  5.17% $788,585  $10,112  5.09%
Investment securities and interest bearing due froms 142,089  757  2.11% 138,965  707  2.04% 159,683  615  1.53%
Federal funds and other 31,864  86  1.07% 18,503  78  1.69% 5,442  51  3.72%
Total interest-earning assets 1,042,305  12,339  4.70% 992,133  11,537  4.66% 953,710  10,778  4.48%
Non-interest-earning assets 96,147      85,553      66,735     
Total assets $1,138,452      $1,077,686      $1,020,445     
                   
Liabilities and Stockholders’ Equity                  
Interest-bearing demand deposits $153,838  $118  0.30% $156,387  $115  0.29% $147,102  $73  0.20%
Money market and savings deposits 329,933  519  0.62% 300,448  424  0.57% 268,307  283  0.42%
Time deposits 311,668  736  0.94% 305,171  702  0.92% 312,889  709  0.90%
Total interest-bearing deposits 795,439  1,373  0.68% 762,006  1,241  0.65% 728,298  1,065  0.58%
Securities sold under agreement to
repurchase
 20,589  15  0.29% 19,903  16  0.32% 22,471  17  0.30%
Federal Home Loan Bank advances
and other borrowings
 381  5  5.21% 3,482  11  1.27% 11,187  17  0.60%
Total interest-bearing liabilities 816,409  1,393  0.68% 785,391  1,268  0.65% 761,956  1,099  0.57%
Noninterest-bearing deposits 179,968      157,965      148,178     
Other liabilities 5,978      659      6,194     
Total liabilities 1,002,355      944,015      916,328     
Shareholders’ equity 136,097      133,671      104,117     
Total liabilities and stockholders’ equity $1,138,452      $1,077,686      $1,020,445     
                   
Net interest income, taxable equivalent   $10,946      $10,269      $9,679   
Interest rate spread     4.02%     4.01%     3.91%
Tax equivalent net interest margin     4.17%     4.15%     4.03%
                   
Percentage of average interest-earning
assets to average interest-bearing
liabilities
     127.67%     126.32%     125.17%
Percentage of average equity to
average assets
     11.95%     12.40%     10.20%
* Taxable equivalent basis                  


SmartFinancial, Inc. and Subsidiary    
Condensed Consolidated Financial Information (unaudited)    
(In thousands)    
NON-GAAP RECONCILIATIONS Three months ending
  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Net interest income, Taxable Equivalent          
Net interest income (GAAP) $10,924  $10,248  $9,820  $9,856  $9,665 
Taxable equivalent adjustment 22  21  21  22  14 
Net interest income, Taxable Equivalent (Non-GAAP) $10,946  $10,269  $9,841  $9,878  $9,679 
           
Operating Earnings1          
Net income (loss) (GAAP) $1,685  $1,648  $1,644  $1,647  $1,611 
Securities (gains) losses (144)       (18)
Foreclosed assets (gains) losses 27    15  (6) (130)
Merger and conversion costs 303  420       
Income tax effect of adjustments2 (71) (161) (6) 2  57 
Net operating earnings (Non-GAAP) 1,800  1,907  1,653  1,643  1,520 
Dividends on preferred stock     (195) (270) (270)
Net operating earnings available to common shareholders
(Non-GAAP)
 $1,800  $1,907  $1,458  $1,373  $1,250 
Net operating earnings per common share:          
Basic $0.22  $0.23  $0.19  $0.23  $0.21 
Diluted 0.22  0.23  0.19  0.22  0.21 
           
Operating Efficiency Ratio          
Efficiency ratio (GAAP) 78.62 % 76.77 % 75.79 % 74.29 % 74.06 %
Adjustment for taxable equivalent yields (0.22)% (0.22)% (0.25)% (0.26)% (0.18)%
Adjustment for securities gains (losses) 1.51 %  %  %  % 0.23 %
Adjustment for OREO gains (losses) (0.28)%  % (0.18)% 0.08 % 1.62 %
Adjustment for merger & conversion costs (3.17)% (4.76)%  %  %  %
Operating efficiency ratio (Non-GAAP) 76.46 % 71.79 % 75.36 % 74.11 % 75.73 %
           
Loan Discount Data          
Allowance for loan losses (GAAP) $5,393  $5,498  $5,152  $5,105  $4,964 
Net acquisition accounting fair value discounts to loans3 $8,167  $9,086  $9,831  $10,271  $10,742 
           
Tangible Common Equity          
Shareholders' equity (GAAP) $136,588  $134,734  $132,551  $105,240  $105,170 
Less preferred stock & preferred stock paid in capital       12,000  12,000 
Less goodwill and other intangible assets 7,414  7,492  6,583  6,636  6,675 
Tangible common equity (Non-GAAP) $129,174  $127,242  $125,968  $86,604  $86,495 

1  Operating earnings includes the following income and expenses related to past mergers and acquisitions:

  September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Accretion above contractual loan income (ASC 310-20 & 310-30) 888  696  540  430  450 
Amortization of other intangibles 78  61  53  39  80 

2 Assumes 38.29% effective rate, except for those expenses which are not deductible for tax purposes
3 Includes ASC 310-20 and ASC 310-30 discounts 

Source: SmartFinancial, Inc.