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Press Release

SmartFinancial Reports $0.47 Earnings per Diluted Share for the Fourth Quarter of 2018

Net operating earnings per diluted common share (non-GAAP) was $0.43 for the fourth quarter of 2018

Company Release - 1/23/2019 7:06 PM ET

Performance Highlights

  • Net income available to common shareholders totaled $6.4 million in the quarter and ROAA increased to 1.17 percent.
  • Net operating earnings available to common shareholders (non-GAAP) totaled $5.9 million in the quarter and net operating ROAA (non-GAAP) increased to 1.07 percent.
  • Noninterest expense to average assets of 2.84 percent, a decrease of 0.51 percentage points from a year ago.
  • Loan growth, excluding loans acquired from Foothills, at 10 percent annualized.
  • A 26.8 percent increase in total revenue, to $23.1 million in the the fourth quarter of 2018, compared with total revenue of $16.9 million in the fourth quarter of 2017.
  • Asset quality was outstanding with nonperforming assets to total assets of just 0.24 percent.

KNOXVILLE, Tenn., Jan. 23, 2019 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), announced today net income available to common shareholders of $6.4 million in its fourth quarter of 2018, or $0.47 per diluted share, compared to $38 thousand, or $0.00 per diluted share a year ago, which included $2.4 million of tax charges related to changes in tax law.  On November 1, 2018, SmartFinancial completed the acquisition of Foothills Bancorp, Inc. and Foothills Bank & Trust, and this quarter includes two months of the results of the acquired companies.  This quarter also included $1.3 million in pre-tax merger related expenses and $1.6 million in tax benefit related adjustments from director options that were previously exercised.

Billy Carroll stated, "We are extremely proud of our accomplishments in the fourth quarter and for the year.  2018 was our company's busiest yet.  We converted two banks and closed on a third, but just as important was our continued strong organic growth that is building a great core bank. In addition, the announcement of our merger with Entegra Financial Corp. positions our company to take a transformative step in 2019.  We are very excited about what the future holds."

SmartFinancial Chairman Miller Welborn concluded, "I've been very pleased with what our team has accomplished this year and the fourth quarter showed our continued positive trends on our financial performance.  Closing the Foothills Bank deal during the quarter was a great addition to our Knoxville, TN market area, as well as the new talent we added to the team during the year, both of which will yield great upside in 2019. "

Fourth Quarter 2018 compared to Third Quarter 2018

Net income available to common shareholders totaled $6.4 million in the fourth quarter of 2018, or $0.47 per diluted share, compared to $4.3 million, or $0.34 per diluted share, in the third quarter of 2018.  Net operating earnings available to common shareholders (Non-GAAP), which excludes securities gains, merger expenses, and tax benefit related adjustments, totaled $5.9 million in the fourth quarter of 2018, or $0.43 per diluted share, compared to $5.0 million, or $0.39  per diluted share, in the previous quarter.

Net interest income to average assets of 3.90 percent for the quarter increased from 3.70 percent in the third quarter of 2018. Net interest income totaled $21.4 million in the fourth quarter of 2018 compared to $18.9 million in the third quarter of 2018. Net interest income was positively impacted during the quarter by increases in earning asset balances and higher earning asset yields.  Net interest margin, taxable equivalent, increased from 4.11 percent in the third quarter of 2018 to 4.29 percent in the fourth quarter of 2018 primarily due to higher average loan balances, higher loan yields (including purchased loan accounting adjustments), and higher security yields, which was partially offset by increases in funding costs.

Provision for loan losses was $1.3 million in the fourth quarter of 2018 compared to $302 thousand in the third quarter of 2018. The increase in provision for loan losses was primarily due to increases in net loan growth.  Annualized net charge-offs in the fourth quarter of 2018 remained at a very low level, just 0.04 percent of average loans compared to 0.06 percent in the third quarter of 2018.

The allowance for loan losses was $8.3 million, or 0.46 percent of total loans, as of December 31, 2018 compared to $7.2 million, or 0.45 percent of total loans, as of September 30, 2018. There were $21.5 million net purchase discounts on $640.2 million of acquired loans as of December 31, 2018 compared to $19.5 million net purchase discounts on $558.0 million of acquired loans as of September 30, 2018.

Nonperforming loans as a percentage of total loans was 0.16 percent as of December 31, 2018, which remained unchanged from 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 0.24 percent as of December 31, 2018 compared to 0.33 percent as of September 30, 2018.

Noninterest income to average assets of 0.31 percent for the quarter decreased slightly from 0.36 percent in the third quarter of 2018.  Noninterest income totaled $1.7 million in the fourth quarter of 2018, compared to $1.8 million in the third quarter of 2018.  The decrease in noninterest income was primarily due to lower gains on the sale of loans and other assets.

Noninterest expense to average assets of 2.84 percent for the quarter decreased from 2.90 percent in the third quarter of 2018. Noninterest expense totaled $15.7 million in the fourth quarter of 2018, which included $1.3 million in merger related charges, compared to $14.8 million in third quarter of 2018, which had $838 thousand in merger charges.

Income tax benefit was $0.3 million in the fourth quarter of 2018, which included $1.6 million in tax benefit related adjustments.  Income tax expense in the third quarter of 2018 was $1.3 million.  Excluding the tax benefit, the company's effective tax rate was 26.0 percent in the fourth quarter of 2018 compared to 23.2 percent in the third quarter of 2018.

Fourth Quarter 2018 compared to Fourth Quarter 2017

Net income available to common shareholders totaled $6.4 million in the fourth quarter of 2018, or $0.47 per diluted share, compared to $38 thousand, or $0.00 per diluted share, in the fourth quarter of 2017.  Net operating earnings available to common shareholders (Non-GAAP), which excludes securities gains, merger expenses, tax benefit related adjustments, and revaluation of deferred tax assets due to change in tax law, totaled $5.9 million in the fourth quarter of 2018 compared to $3.7 million in the fourth quarter of 2017.

Net interest income to average assets of 3.90 percent for the quarter decreased from 4.09 percent in the fourth quarter of 2017. Net interest income totaled $21.4 million in the fourth quarter of 2018 compared to $15.3 million in the fourth quarter of 2017. Net interest margin, taxable equivalent, decreased from 4.63 percent in the fourth quarter of 2017 to 4.29 percent in the fourth quarter of 2018 primarily due to higher cost of interest-bearing liabilities.

Provision for loan losses was $1.3 million in the fourth quarter of 2018 compared to $442 thousand in the fourth quarter of 2017. The increase in provision was primarily due to increases in originated loan balances.  Annualized net charge-offs in the fourth quarter of 2018 remained at a very low level, just 0.04 percent of average loans compared to net recoveries of 0.01 percent in the fourth quarter of 2017.

Nonperforming loans as a percentage of total loans was 0.16 percent as of December 31, 2018, which increased slightly from 0.13 percent in the prior year. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.24 percent as of December 31, 2018 compared to 0.29 percent as of December 31, 2017.

Noninterest income to average assets of 0.31 percent for the quarter decreased from 0.42 percent in the fourth quarter of 2017.  Noninterest income totaled $1.7 million in the fourth quarter of 2018 compared to $1.6 million in the fourth quarter of 2017.

Noninterest expense to average assets of 2.84 percent for the quarter decreased from 3.35 percent in the fourth quarter of 2017.  Noninterest expense totaled $15.7 million in the fourth quarter of 2018, which included $1.3 million in merger related charges, compared to $12.6 million in the fourth quarter of 2017, which had $1.7 million in merger charges.  The primary drivers of the increase in expense compared to the prior year were as a result of the Capstone, TN Bancshares, and Foothills mergers, which materially increased salaries and employee benefits, occupancy expense, amortization of intangibles, and other noninterest expense.

Income tax benefit was $0.3 million in the fourth quarter of 2018, which included $1.6 million in tax benefit related adjustments.  Income tax expense in the fourth quarter of 2017 was $3.9 million, which included a $2.4 million revaluation of deferred tax assets due to change in tax law.

Conference Call Information
SmartFinancial plans to issue its earnings release for the fourth quarter of 2018 on Wednesday, January 23, 2019, and will host a conference call on Thursday, January 24, 2019 at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 6152900.  A replay of the conference call will be available through January 24, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10127945.

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 am ET the morning of the conference call.

About SmartFinancial, Inc.
SmartFinancial, Inc., headquartered in Knoxville, Tennessee, is the bank holding company for SmartBank, a full-service commercial bank founded in 2007 and domiciled in Pigeon Forge, Tennessee. SmartFinancial’s common stock is traded on the Nasdaq Capital Market under the ticker symbol SMBK. SmartBank has 29 branch offices across Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching and acquisitions, and a disciplined approach to lending have all contributed to SmartFinancial’s and SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.

Investor Contacts 
Billy CarrollRon Gorczynski
President & CEOExecutive Vice President, Chief Administrative Officer
(865) 868-0613  billy.carroll@smartbank.com(865) 437-5724  ron.gorczynski@smartbank.com

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

Non-GAAP Financial Matters
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; (iii) tangible common equity; and (iv) net operating return on average assets, 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, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses and merger related expenses from the efficiency ratio. Tangible common equity excludes goodwill and other intangible assets. Net operating return on average assets is annualized net operating income divided by GAAP total average 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 press 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 about the benefits to SmartFinancial of its previously announced merger with Entegra Financial Corp. (“Entegra”), SmartFinancial’s future financial and operating results, and SmartFinancial’s plans, objectives, and intentions. 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 cost savings and any revenue synergies from the proposed merger with Entegra may not be realized or take longer than anticipated to be realized, (2) the risk that the cost savings and any revenue synergies from recently completed mergers may not be realized or may take longer than anticipated to realize, (3) disruption from the proposed merger with Entegra, or recently completed mergers, with customer, supplier, or employee relationships, (4) the occurrence of any event, change, or other circumstances that could give rise to the termination of the agreement and plan of merger among SmartFinancial, CT Merger Sub, Inc., and Entegra providing for the proposed merger with Entegra, (5) the failure to obtain necessary shareholder or regulatory approvals for the merger with Entegra, (6) the possibility that the amount of the costs, fees, expenses, and charges related to the merger with Entegra may be greater than anticipated, including as a result of unexpected or unknown factors, events, or liabilities, (7) the failure of the conditions to the merger with Entegra to be satisfied, (8) the risk of successful integration of the two companies’ businesses, including the risk that the integration of Entegra’s operations with those of SmartFinancial will be materially delayed or will be more costly or difficult than expected, (9) the risk of expansion into new geographic or product markets, (10) reputational risk and the reaction of SmartFinancial’s and Entegra’s customers to the merger, (11) the risk of potential litigation or regulatory action related to the merger with Entegra, (12) the dilution caused by SmartFinancial’s issuance of additional shares of its common stock in the merger with Entegra, and (13) general competitive, economic, political, and market conditions. 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 filed with the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website at http://www.sec.gov. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

IMPORTANT INFORMATION FOR SHAREHOLDERS AND INVESTORS
This press release shall not constitute an offer to sell, the solicitation of an offer to sell, or the solicitation of an offer to buy any securities or the solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with SmartFinancial’s proposed merger with Entegra, SmartFinancial will file a registration statement on Form S-4 with the SEC, which will contain the joint proxy statement of SmartFinancial and Entegra and a prospectus of SmartFinancial. Shareholders are encouraged to read the registration statement, including the joint proxy statement/prospectus that will be part of the registration statement, because it will contain important information about the proposed transaction, SmartFinancial, and Entegra. After the registration statement is filed with the SEC, the joint proxy statement/prospectus and other relevant documents will be mailed to SmartFinancial and Entegra shareholders and will be available for free on the SEC’s website (www.sec.gov). The joint proxy statement/prospectus will also be made available for free by contacting Ron Gorczynski, SmartFinancial’s Chief Administrative Officer, at (865) 437-5724 or David Bright, the Chief Financial Officer and Treasurer of Entegra, at (828) 524-7000. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

PARTICIPANTS IN THE SOLICITATION
SmartFinancial, Entegra, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from SmartFinancial and Entegra shareholders in connection with the previously announced proposed merger of SmartFinancial and Entegra under the rules of the SEC. Information about the directors and executive officers of SmartFinancial may be found in the definitive proxy statement for SmartFinancial’s 2018 annual meeting of shareholders, filed with the SEC by SmartFinancial on April 2, 2018, and other documents subsequently filed by SmartFinancial with the SEC. Information about the directors and executive officers of Entegra may be found in the definitive proxy statement for Entegra’s 2018 annual meeting of shareholders, filed by Entegra with the SEC on April 2, 2018. Additional information regarding the interests of these participants will also be included in the joint proxy statement/prospectus regarding the proposed transaction when it becomes available. Free copies of these documents maybe obtained as described in the paragraph above.

 
SmartFinancial, Inc. and Subsidiaries 
Condensed Consolidated Financial Information (unaudited) 
(In thousands, except per share data) 
  As of and for the three months ended
  December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Selected Performance Ratios (Annualized)                    
Return on average assets  1.17%  0.85%  0.81%  0.80%  0.01%
Net operating return on average assets (Non-GAAP)  1.07%  0.98%  1.00%  0.89%  0.99%
Return on average shareholder equity  9.44%  6.86%  6.76%  6.25%  0.08%
Return on average tangible common equity (Non-GAAP)  13.09%  9.44%  8.96%  8.10%  0.10%
Net operating return on average shareholder equity (Non-GAAP)  8.65%  7.88%  8.33%  6.97%  7.98%
Net operating return on average tangible common  equity (Non-GAAP)  12.00%  10.84%  11.04%  9.04%  9.94%
Net interest income / average assets  3.90%  3.70%  4.03%  3.93%  4.09%
Yield on earning assets  5.34%  5.02%  5.34%  5.02%  5.20%
Yield on earning assets, TE  5.36%  5.03%  5.34%  5.03%  5.20%
Cost of interest-bearing liabilities  1.33%  1.15%  1.00%  0.82%  0.70%
Net interest margin  4.28%  4.11%  4.53%  4.36%  4.62%
Net interest margin, TE  4.29%  4.11%  4.54%  4.36%  4.63%
Noninterest income / average assets  0.31%  0.36%  0.33%  0.34%  0.42%
Noninterest expense / average assets  2.84%  2.90%  3.15%  3.09%  3.35%
Efficiency ratio  67.71%  71.34%  72.34%  72.39%  74.26%
Operating efficiency ratio (Non-GAAP)  62.00%  67.17%  64.82%  69.12%  60.64%
Pre-tax pre-provision income / average assets  1.36%  1.23%  1.21%  1.18%  1.16%
 
Per Common Share 
Net income, basic $0.48  $0.34  $0.32  $0.30  $- 
Net income, diluted  0.47   0.34   0.32   0.30   - 
Net operating earnings, basic (Non-GAAP)  0.44   0.39   0.40   0.34   0.35 
Net operating earnings, diluted (Non-GAAP)  0.43   0.39   0.39   0.34   0.34 
Book value  20.31   19.74   19.48   18.6   18.46 
Tangible book value (Non-GAAP)  14.64   14.38   14.09   14.09   13.9 
 
Common shares outstanding  13,934   12,750   12,705   11,234   11,153 
 
 
SmartFinancial, Inc. and Subsidiaries 
Condensed Consolidated Financial Information (unaudited) 
(In thousands, except per share data) 
  As of and for the three months ended
  December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Composition of Loans                    
Real estate commercial 
owner occupied $372,030  $364,164  $360,294  $288,666  $281,297 
non-owner occupied  487,551   400,275   385,536   375,028   361,691 
Real estate commercial, total  859,581   764,439   745,830   663,694   642,988 
Commercial & industrial  307,886   289,732   279,341   256,333   238,087 
Real estate construction & development  187,868   166,089   179,361   142,702   135,409 
Real estate residential  408,164   351,948   355,755   299,148   293,457 
Other loans  13,728   12,986   15,148   12,380   13,317 
Total loans $1,777,227  $1,585,194  $1,575,434  $1,374,257  $1,323,258 
                     
Asset Quality and Additional Loan Data 
Nonperforming loans $2,856  $2,604  $1,730  $1,931  $1,764 
Foreclosed assets  2,495   4,230   3,524   2,665   3,254 
Total nonperforming assets $5,351  $6,834  $5,254  $4,595  $5,018 
Restructured loans not included in nonperforming loans $116  $369  $660  $40  $41 
Net charge-offs (recoveries) to average loans (annualized)  0.04%  0.06%  0.02%  0.02%  (0.01)%
Allowance for loan losses to loans  0.46%  0.45%  0.45%  0.47%  0.44%
Nonperforming loans to total loans, gross  0.16%  0.16%  0.11%  0.14%  0.13%
Nonperforming assets to total assets  0.24%  0.33%  0.25%  0.26%  0.29%
Acquisition accounting discounts on acquired loans $21,528  $19,500  $20,748  $16,323  $17,862 
Accretion income on acquired loans  2,755   1,208   2,583   1,274   2,411 
 
Capital Ratios 
Equity to Assets  12.44%  12.27%  12.00%  11.87%  11.96%
Tangible equity to tangible assets (Non-GAAP)  9.29%  9.25%  8.98%  9.26%  9.28%
Tangible common equity to tangible assets (Non-GAAP)  9.29%  9.25%  8.98%  9.26%  9.28%
SmartFinancial, Inc.: Estimated 1 Estimated 1 
Tier 1 leverage  9.47%  9.26%  9.82%  9.59%  10.48%
Common equity Tier 1  10.66%  10.70%  10.83%  10.84%  10.59%
Tier 1 capital  10.66%  10.70%  10.83%  10.84%  10.59%
Total capital  13.10%  13.34%  11.25%  11.27%  10.98%
SmartBank: Estimated 2 
Tier 1 leverage  10.23%  10.55%  10.43%  10.17%  11.26%
Common equity Tier 1  11.52%  11.99%  11.41%  11.12%  10.90%
Tier 1 risk-based capital  11.52%  11.99%  11.41%  11.12%  10.90%
Total risk-based capital  11.95%  12.40%  11.83%  11.56%  11.30%
 
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 Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
  Ending Balances
  December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Assets                    
Cash & cash equivalents $115,822  $130,104  $170,235  $96,710  $113,027 
Securities available for sale  201,688   173,039   156,577   156,210   151,945 
Other investments  11,499   10,736   8,273   7,808   6,431 
Total loans  1,777,227   1,585,194   1,575,434   1,374,257   1,323,258 
Allowance for loan losses  (8,263)  (7,156)  (7,074)  (6,477)  (5,860)
Loans, net  1,768,964   1,578,038   1,568,361   1,367,780   1,317,398 
Premises and equipment  56,012   51,138   52,203   44,202   43,000 
Foreclosed assets  2,495   4,230   3,524   2,665   3,254 
Goodwill and other intangibles  79,034   68,254   68,449   50,660   50,837 
Cash surrender value of life insurance  24,381   22,088   21,944   21,797   21,647 
Other assets  14,514   13,320   12,666   12,593   13,232 
Total assets $2,274,409  $2,050,946  $2,062,232  $1,760,425  $1,720,771 
 
Liabilities          
Noninterest demand $319,861  $301,197  $301,318  $276,249  $220,520 
Interest-bearing demand  311,482   267,146   246,942   278,965   231,644 
Money market and savings  641,945   570,172   632,518   491,243   543,645 
                     
                     
                     
                     
                     
                     
Time deposits  648,676   568,796   535,879   453,276   442,774 
                     
                     
                     
                     
                     
                     
Total deposits  1,921,964   1,707,311   1,716,658   1,499,733   1,438,583 
                     
                     
                     
                     
                     
                     
Repurchase agreements  11,756   16,786   18,635   15,968   24,055 
                     
                     
                     
                     
                     
                     
FHLB & other borrowings  11,243   25,324   72,040   30,000   43,600 
                     
                     
                     
                     
                     
                     
Subordinated debt  39,177   39,158          
                     
                     
                     
                     
                     
                     
Other liabilities  7,258   10,724   7,413   5,775   8,681 
Total liabilities  1,991,398   1,799,304   1,814,745   1,551,476   1,514,919 
Shareholders' Equity 
Common stock  13,934   12,750   12,705   11,234   11,152 
Additional paid-in capital  231,851   208,999   208,513   174,981   174,009 
Retained earnings  39,991   33,559   29,235   25,303   21,889 
Accumulated other comprehensive loss  (2,765)  (3,666)  (2,966)  (2,569)  (1,198)
Total shareholders' equity  283,011   251,642   247,487   208,949   205,852 
Total liabilities & shareholders' equity $2,274,409  $2,050,946  $2,062,232  $1,760,425  $1,720,771 
 

 

 
SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands, except per share data)
INCOME STATEMENT
 
  Three months ended
  December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Interest Income                 
Loans, including fees $25,017  $21,572 $21,652  $18,228 $16,357
Investment securities and interest bearing due froms  1,574   1,326  1,198   1,049  770
Other interest income  180   170  144   101  117
Total interest income  26,771   23,068  22,993   19,378  17,244
Interest Expense                 
Deposits  4,680   3,969  3,238   2,401  1,806
Repurchase agreements  9   11  11   13  15
FHLB and other borrowings  51   209  207   153  81
Subordinated Debt  584   19       
Total interest expense  5,324   4,208  3,455   2,567  1,902
Net interest income  21,447   18,861  19,538   16,811  15,342
Provision for loan losses  1,329   302  617   689  442
Net interest income after provision for loan losses  20,118   18,559  18,921   16,122  14,899
Noninterest income                 
Service charges on deposit accounts  663   624  557   578  524
(Loss) gain on securities  2     (1)    
Gain on sale of loans and other assets  251   493  327   325  366
Interchange and debit card transaction fees  162   144  121   146  304
Other noninterest income  601   570  579   406  387
Total noninterest income  1,679   1,831  1,583   1,455  1,581
Noninterest expense                 
Salaries and employee benefits  7,871   7,934  7,649   7,176  6,272
Occupancy expense  1,610   1,638  1,522   1,533  1,217
FDIC premiums  209   158  317   102  150
Foreclosed asset expense  267   79  245   189  59
Marketing  246   228  215   185  167
Data processing  372   407  600   526  583
Professional expenses  908   922  918   898  602
Amortization of other intangibles  312   248  229   188  155
Service contracts  577   507  492   479  426
Merger expense  1,322   838  1,123   498  1,694
Other noninterest expense  1,966   1,800  1,968   1,448  1,242
Total noninterest expense  15,660   14,759  15,278   13,222  12,566
Earnings before income taxes  6,137   5,631  5,226   4,355  3,913
Income tax expense (benefit)  (307)  1,305  1,295   940  3,875
Net income $6,444  $4,325 $3,931  $3,415 $38
 
NET INCOME PER COMMON SHARE 
Basic $0.48  $0.34 $0.32  $0.30 $-
Diluted  0.47   0.34  0.32   0.30  -
 
Weighted average common shares outstanding 
Basic  13,535   12,719  12,201   11,211  10,552
Diluted  13,617   12,818  12,320   11,324  10,709

 

 
SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
  Three Months Ended December 31,
2018
 Three Months Ended September 30,
2018
 Three Months Ended December 31,
2017
 Average   Yield/ Average   Yield/ Average   Yield/
  Balance Interest1 Cost1 Balance Interest1 Cost1 Balance Interest1 Cost1
Assets                  
Loans $1,708,916 $25,019 5.81% $1,577,222 $21,573 5.43% $1,159,161 $16,362 5.60%
Investment securities and interest bearing due froms  214,310  1,666 3.08%  232,041  1,361 2.33%  131,215  781 2.36%
Federal funds and other  67,036  180 1.07%  13,033  170 5.17%  25,905  117 1.79%
Total interest-earning assets  1,990,262  26,865 5.36%  1,822,296  23,104 5.03%  1,316,281  17,260 5.20%
Non-interest-earning assets  193,952  198,215  171,879 
Total assets $2,184,214 $2,020,511 $1,488,160 
 
Liabilities and Stockholders’ Equity 
Interest-bearing demand deposits $289,207 $562 0.77% $239,220 $283 0.47% $195,783 $213 0.43%
Money market and savings deposits  624,231  1,696 1.08%  615,334  1,595 1.03%  462,674  488 0.42%
Time deposits  616,296  2,422 1.56%  564,945  2,091 1.47%  398,142  1,105 1.10%
Total interest-bearing deposits  1,529,734  4,680 1.21%  1,419,499  3,969 1.11%  1,056,599  1,806 0.68%
Securities sold under agreement to repurchase  10,661  9 0.33%  17,694  11 0.27%  20,226  15 0.29%
Subordinated debt  39,178  584 5.91%  1,277  19 5.90%     %
Federal Home Loan Bank advances and other borrowings 4,070  51 4.97%  16,442  209 5.11%  8,281  81 3.88%
Total interest-bearing liabilities  1,583,643  5,324 1.33%  1,454,912  4,208 1.15%  1,085,106  1,902 0.70%
Noninterest-bearing deposits  320,412  307,007  203,457 
Other liabilities  9,275  8,529  15,302 
Total liabilities  1,913,330  1,770,448  1,303,865 
Shareholders’ equity  270,884  250,063  184,295 
Total liabilities and stockholders’ equity $2,184,214 $2,020,511 $1,488,160 
 
Net interest income, taxable equivalent $21,541 $18,896 $15,358 
Interest rate spread 4.03% 3.88% 4.50%
Tax equivalent net interest margin 4.29% 4.11% 4.63%
 
Percentage of average interest-earning assets to average interest-bearing liabilities 125.68% 125.25% 121.30%
Percentage of average equity to average assets 12.40% 12.38% 12.38%
 
 
1 Taxable equivalent basis 

 

 
SmartFinancial, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Condensed Consolidated Financial Information (unaudited)
(In thousands, except for per share data)
  Three months ended
  December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Operating Earnings                    
Net income (GAAP) $6,444  $4,324  $3,931  $3,415  $38 
Securities (gains) losses  (2)     1       
Merger expenses  1,322   838   1,123   498   1,694 
Tax charge related to change in tax law and tax benefit from director options previously exercised  (1,600)           2,440 
Income tax effect of adjustments  (256)  (196)  (211)  (103)  (506)
Net operating earnings (Non-GAAP) $5,908  $4,966  $4,845  $3,810  $3,666 
Net operating earnings per common share (Non-GAAP): 
Basic $0.44  $0.39  $0.40  $0.34  $0.35 
Diluted  0.43   0.39   0.39   0.34   0.34 
 
Non-GAAP Return Ratios 
Net operating return on average assets (Non-GAAP)1  1.07%  0.98%  1.00%  0.89%  0.99%
Return on average tangible common equity (Non-GAAP)2  13.09%  9.44%  8.96%  8.10%  0.10%
Net operating return on average shareholder equity (Non-GAAP)3  8.65%  7.88%  8.33%  6.97%  7.98%
Net operating return on average tangible common  equity (Non-GAAP)4  12.00%  10.84%  11.04%  9.04%  9.94%
 
Operating Efficiency Ratio 
Efficiency ratio (GAAP)  67.71%  71.34%  72.31%  72.39%  74.22%
Adjustment for taxable equivalent yields  %  (0.18)%  (0.11)%  (0.06)%  (0.09)%
Adjustment for securities gains (losses)  0.01%  %  (0.01)%  %  %
Adjustment for merger related costs  (5.72)%  (3.99)%  (5.28)%  (2.71)%  (9.97)%
Operating efficiency ratio (Non-GAAP)  62.00%  67.17%  66.92%  69.62%  64.16%
 
Tangible Common Equity 
Shareholders' equity (GAAP) $283,011  $251,642  $247,487  $208,949  $205,852 
Less goodwill and other intangible assets  79,034   68,254   68,449   50,660   50,837 
Tangible common equity (Non-GAAP) $203,977  $183,388  $179,036  $158,289  $155,015 
 
Average Tangible Common Equity 
Average shareholders' equity (GAAP) $270,884  $250,063  $233,285  $221,711  $184,295 
Less average goodwill and other intangible assets  75,547   68,389   57,251   50,780   36,267 
Average tangible common equity (Non-GAAP) $195,337  $181,674  $176,034  $170,931  $148,028 
 
 
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 shareholder equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average shareholder 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).
 

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Source: SmartFinancial, Inc.