KNOXVILLE, Tenn., April 26, 2017 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), announced today net income of $1.6 million in its first quarter of 2017, compared to $1.3 million a year ago.  In the first quarter of 2016, SmartFinancial completed the merger of Cornerstone Community Bank with and into SmartBank.  This quarter completes the fourth full quarter’s results of the merged bank.

Billy Carroll, President & CEO, stated:  "In the first quarter this year net income was up over twenty percent from a year ago as the company is capitalizing on the synergies of our merger.  Compared to last year we increased net interest income by over seven percent while keeping noninterest expense growth below three percent.  We grew net interest income not only by growing gross loans approximately nine percent year over year but also by increasing asset yields and net interest margin.  At the same time we were able to reduce the efficiency ratio by over two percentage points.  We are off to a great start in 2017 and look forward to a very successful year for our associates and our shareholders.”

SmartFinancial's Chairman, Miller Welborn, concluded:  "In the past year our company merged the banks, grew earning assets while increasing margin, improved asset quality, opened a branch in Panama City, completed a capital raise, redeemed our SBLF preferred stock, and increased net income available to our shareholders by over twenty five percent.  This year we look forward to the completion of our Cleveland branch acquisition, moving our Panama City branch to a new permanent facility, and of course increasing the returns for our shareholders.  We will continue to execute our objectives of growing the company while maintaining a strong margin, rigorous underwriting standards, and increasing efficiency. Every day we strive to achieve our goals of being a great place to work, a great place to bank, and making our company a rewarding investment for our shareholders."

Performance Highlights

• Net income available to common shareholders totaled $1.4 million or $0.19 per share during the first quarter of 2017 compared to $1.1 million or $0.20 per share during the first quarter of 2016.
• Annualized return on average assets was 0.64 percent in the first quarter of 2017, compared to 0.54 percent a year ago.
• Net interest margin increased during the quarter due to increases in average loan balances, increases in average balances and yields of the securities portfolio, and reductions in FHLB advances and other borrowings.
• Asset quality was outstanding with nonperforming assets to total assets dropping to just 0.36 percent.
• Dividends on preferred stock dropped to $195 thousand as the company used proceeds from the capital raise to redeem the preferred stock during the quarter.

First Quarter 2017 compared to First Quarter 2016
Net income available to common shareholders totaled $1.4 million in the first quarter of 2017, or $0.19 per diluted share, compared to $1.1 million, or $0.19 per diluted share, in the first quarter of 2016.  Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $1.1 million in the first quarter of 2017 compared to $780 thousand in the first quarter of 2016.

Net interest income to average assets of 3.81 percent for the quarter increased substantially from 3.67 percent in the first quarter of 2016.  Net interest income totaled $9.8 million in the first quarter of 2017 compared to $9.1 million in the first quarter of 2016.  Net interest income was positively impacted compared to the prior year primarily due to increased loan balances.  Net interest margin, taxable equivalent, increased substantially from 3.96 percent in the first quarter of 2016 to 4.07 percent in the first quarter of 2017 as a result of higher loan balances, higher yields on securities, and increased balances of noninterest-bearing deposits.

Provision for loan losses was $12 thousand in the first quarter of 2017, compared to $137 thousand in the first quarter of 2016. The decrease in provision for loan losses was due to a decrease in loan growth during the quarter when compared to the prior year.  Annualized net charge-offs (recoveries) at (0.02) percent of average loans in the first quarter of 2017 was unchanged from a year ago.  The ALLL was $5.2 million, or 0.64 percent of total loans as of March 31, 2017, compared to $4.5 million, or 0.61 percent of total loans, as of March 31, 2016.  Adjusted ALLL, which includes the ALLL as well as net acquisition accounting fair value adjustments for acquired loans, was 1.82 percent of total loans as of March 31, 2017, which was down from 2.11 percent as of March 31, 2016. The reduction in adjusted ALLL resulted from continued accretion of fair value discounts.

Nonperforming loans as a percentage of total loans was 0.18 percent as of March 31, 2017, which was down from 0.43 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 0.36 percent as of March 31, 2017, compared to 0.82 percent as of March 31, 2016.

Noninterest income to average assets of 0.36 percent for the quarter was down from 0.43 percent in the first quarter of 2016. Noninterest income totaled $927 thousand in the first quarter of 2017, compared to $1.1 million in the first quarter of 2016.  The decrease in non-interest income was primarily due to higher losses on the sale of foreclosed assets and the absence of securities gains.

Noninterest expense to average assets of 3.16 percent for the quarter was down from 3.19 percent in the first quarter of 2016. Noninterest expense totaled $8.1 million in the first quarter of 2017, which was up slightly from $8.0 million in the first quarter of 2016.  The increase in noninterest expense compared to the prior year was primarily due to annual merit based salary increases and increases in professional expenses.  Income tax expense was $946 thousand in the first quarter of 2017 compared to $764 thousand in the first quarter of 2016.  The company's effective tax rate was 36.5 percent in the first quarter of 2017 compared to 36.2 percent in the first quarter of 2016.

First Quarter 2017 compared to Fourth Quarter 2016
Net income available to common shareholders totaled $1.4 million in the first quarter of 2017, or $0.19 per diluted share, compared to $1.4 million, or $0.22 per diluted share, in the fourth quarter of 2016.  Net operating earnings available to common shareholders, which excludes purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $1.1 million in the first quarter of 2017 compared to $1.1 million in the previous quarter.

Net interest income to average assets of 3.81 percent for the quarter decreased from 3.80 percent in the fourth quarter of 2017. Net interest income totaled $9.8 million in the first quarter of 2017 compared to $9.9 million in the fourth quarter of 2016.  Net interest income was negatively impacted by approximately $230 thousand due to the two fewer days in the current period. Net interest margin, taxable equivalent, increased from 4.06 percent in the fourth quarter of 2016 to 4.07 percent in the first quarter of 2017 as a result of increases in average loan balances, increases in average balances and yields of the securities portfolio, and reductions in FHLB advances and other borrowings.

Provision for loan losses was $12 thousand in the first quarter of 2017, compared to $171 thousand in the fourth quarter of 2016.  The decrease in provision for loan losses was due to the balance reduction in the loan portfolio during the quarter.  Annualized net charge-offs (recoveries) remained very low at (0.02) percent of average loans as recoveries outpaced charge-offs in the first quarter of 2017.  The ALLL was $5.2 million, or 0.64 percent of total loans as of March 31, 2017, compared to $5.1 million, or 0.63 percent of total loans, as of December 31, 2016.  Adjusted ALLL, which includes the ALLL as well as net acquisition accounting fair value adjustments for acquired loans, was 1.82 percent of total loans as of March 31, 2017, which was down from 1.86 percent as of December 31, 2016. The reduction in adjusted ALLL resulted from continued accretion of fair value discounts.

Nonperforming loans as a percentage of total loans was 0.18 percent as of March 31, 2017, which was down from 0.26 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 0.36 percent as of March 31, 2017, compared to 0.43 percent as of December 31, 2016.

Noninterest income to average assets of 0.36 percent for the period decreased from 0.37 percent in the fourth quarter of 2016. Noninterest income totaled $927 thousand in the first quarter of 2017, compared to $948 thousand in the fourth quarter of 2016.  The slight decrease in non-interest income was primarily due to losses on sale of foreclosed assets during the period.

Noninterest expense to average assets of 3.16 percent for the quarter was up slightly from 3.09 percent in the fourth quarter of 2016.  Noninterest expense totaled $8.1 million in the first quarter of 2017, which was up $118 thousand from the fourth quarter of 2016, primarily due to annual merit based salary increases.  Income tax expense was $946 thousand in the first quarter of 2017 compared to $960 thousand in the fourth quarter of 2016.  The company's effective tax rate was 36.5 percent in the first quarter of 2017 compared to 36.8 percent in the fourth quarter of 2016.

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 thirteen branches, two loan production offices, 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: 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; (iii) adjusted allowance for loan losses to loans; and (iv) tangible common equity, in its analysis of the company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger and conversion costs, OREO gain and losses, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses, merger and conversion costs, and adjustment for OREO gains and losses from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. 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.

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
		As of and for the three months ending
		March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016
Selected Performance Ratios (Annualized)
Return on average assets		0.64		%		0.64		%		0.63		%		0.48		%		0.54		%
Net operating return on average assets (Non-GAAP)		0.44		%		0.54		%		0.44		%		0.26		%		0.40		%
Return on average shareholder equity		5.18		%		6.24		%		6.19		%		4.64		%		5.29		%
Net operating return on average shareholder equity (Non-GAAP)		3.55		%		5.32		%		4.35		%		2.47		%		3.89		%
Net interest income / average assets		3.81		%		3.80		%		3.77		%		3.88		%		3.67		%
Yield on earning assets, TE (Non-GAAP)		4.54		%		4.51		%		4.50		%		4.62		%		4.40		%
Cost of interest-bearing liabilities		0.60		%		0.58		%		0.57		%		0.56		%		0.53		%
Net interest margin, TE (Non-GAAP)		4.07		%		4.06		%		4.04		%		4.16		%		3.96		%
Noninterest income / average assets		0.36		%		0.37		%		0.47		%		0.39		%		0.43		%
Noninterest expense / average assets		3.16		%		3.09		%		3.14		%		3.42		%		3.19		%
Efficiency ratio		75.79		%		74.29		%		74.06		%		80.13		%		77.95		%
Operating efficiency ratio (Non-GAAP)		81.34		%		78.98		%		80.31		%		85.49		%		82.09		%
Pre-tax pre-provision income / average
assets		1.09		%		1.08		%		1.09		%		0.85		%		0.90		%
Per Common Share
Net income, basic		$	0.19			$	0.23			$	0.23			$	0.16			$	0.20
Net income, diluted		0.19				0.22				0.22				0.15				0.19
Net operating earnings, basic (Non-GAAP)		0.15				0.24				0.19				0.11				0.13
Net operating earnings, diluted (Non-
GAAP)		0.15				0.23				0.19				0.10				0.13
Book value as of		16.14				15.81				15.83				15.64				15.47
Tangible book value (Non-GAAP) as of		15.34				14.69				14.70				14.48				14.29
Common shares outstanding as of		8,211				5,896				5,885				5,824				5,817
Composition Of Loans
Commercial & financial		$	90,649			$	85,696			$	83,534			$	87,253			$	83,197
Real estate construction & Development		115,675				117,748				128,733				115,385				113,028
Real estate commercial		407,933				414,860				394,346				389,368				370,922
owner occupied		197,032				199,645				191,697				199,716				188,759
non-owner occupied		210,901				215,215				202,649				189,652				182,163
Real estate residential		186,344				187,557				183,528				174,013				166,214
Other loans		6,938				7,515				7,001				7,377				7,578
Total loans		$	807,539			$	813,376			$	797,142			$	773,396			$	740,939
SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands except per share data)
		As of and for the three months ending
		March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016
Asset Quality Data and Ratios
Nonperforming loans		$	1,445			$	2,142			$	1,370			$	2,226			$	3,171
Foreclosed assets		2,371				2,386				2,536				4,936				5,133
Total nonperforming assets		$	3,816			$	4,528			$	3,906			$	7,162			$	8,304
Restructured loans not included in
nonperforming loans		$	301			$	608			$	3,388			$	3,639			$	3,677
Net charge-offs to average loans
(annualized)		(0.02		)%		0.02		%		0.01		%		0.01		%		(0.02		)%
Allowance for loan losses to loans		0.64		%		0.63		%		0.62		%		0.61		%		0.61		%
Adjusted allowance for loan losses to loans
(Non-GAAP)		1.82		%		1.86		%		1.93		%		2.00		%		2.11		%
Nonperforming loans to total loans, gross		0.18		%		0.26		%		0.17		%		0.29		%		0.43		%
Nonperforming assets to total assets		0.36		%		0.43		%		0.38		%		0.69		%		0.82		%
Capital Ratios
Tangible equity to tangible assets		12.06		%		9.34		%		9.53		%		9.37		%		9.43		%
Tangible common equity to tangible assets		12.06		%		8.20		%		8.36		%		8.20		%		8.24		%
SmartFinancial, Inc.:		Estimated
Tier 1 leverage		12.37		%		9.71		%		9.77		%		9.66		%		9.74		%
Common equity Tier 1		14.40		%		9.98		%		10.04		%		10.53		%		10.61		%
Tier 1 capital		14.40		%		11.35		%		11.42		%		12.04		%		12.14		%
Total capital		15.12		%		11.93		%		12.00		%		12.60		%		12.70		%
SmartBank:		Estimated
Tier 1 leverage		12.24		%		9.71		%		9.63		%		9.70		%		9.49		%
Common equity Tier 1		14.25		%		11.30		%		11.26		%		11.31		%		11.64		%
Tier 1 capital		14.25		%		11.30		%		11.26		%		11.31		%		11.64		%
Total capital		14.98		%		11.88		%		11.83		%		11.87		%		12.20		%

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
BALANCE SHEET
		Ending Balances
		March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016
Assets
Cash & cash equivalents		$	55,548			$	68,748			$	58,587			$	71,737			$	68,933
Securities available for sale		137,133				129,422				138,628				142,875				157,560
Other investments		5,628				5,628				4,451				4,451				4,451
Total loans		807,539				813,376				797,143				773,396				740,939
Allowance for loan losses		(5,152		)		(5,105		)		(4,964		)		(4,720		)		(4,527		)
Loans net		802,387				808,271				792,178				768,676				736,412
Premises and equipment		30,802				30,536				27,863				25,844				25,680
Foreclosed assets		2,371				2,386				2,536				4,936				5,133
Goodwill and other intangibles		6,583				6,636				6,675				6,754				6,848
Other assets		10,634				10,830				9,808				9,524				11,207
Total assets		$	1,051,086			$	1,062,456			$	1,040,726			$	1,034,798			$	1,016,224
Liabilities
Noninterest demand		$	160,673			$	153,483			$	145,509			$	145,864			$	132,481
Interest-bearing demand		167,433				162,702				152,216				153,166				161,454
Money market and savings		274,993				274,605				271,259				258,281				241,500
Time deposits		286,600				316,275				291,857				331,438				323,676
Total deposits		889,699				907,065				860,842				888,749				859,111
Repurchase agreements		23,153				26,622				24,202				26,883				20,747
FHLB & other borrowings		60				18,505				43,048				10,091				30,125
Other liabilities		5,622				5,024				7,463				6,011				4,253
Total liabilities		918,535				957,216				935,556				931,734				914,236
Shareholders' Equity
Preferred stock		—				12				12				12				12
Common stock		8,211				5,896				5,885				5,824				5,817
Additional paid-in capital		106,703				83,463				83,330				82,800				82,717
Retained earnings		18,320				16,871				15,494				14,153				13,231
Accumulated other comprehensive loss		(683		)		(1,002		)		449				275				211
Total shareholders' equity		132,551				105,240				105,170				103,064				101,988
Total liabilities & shareholders' equity		$	1,051,086			$	1,062,456			$	1,040,726			$	1,034,798			$	1,016,224

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
INCOME STATEMENT
		Three months ending
		March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016
Interest Income
Loans, including fees		$	10,215			$	10,324			$	10,111			$	9,954			$	9,374
Investment securities and interest bearing due
froms		661				570				602				665				717
Other interest income		73				83				51				50				63
Total interest income		10,949				10,977				10,763				10,670				10,154
Interest Expense
Deposits		1,098				1,066				1,065				1,013				961
Repurchase agreements		16				17				17				15				17
FHLB and other borrowings		15				37				17				29				45
Total interest expense		1,129				1,121				1,099				1,057				1,023
Net interest income		9,820				9,856				9,665				9,613				9,131
Provision for loan losses		12				171				261				218				137
Net interest income after provision for loan losses		9,808				9,685				9,404				9,394				8,994
Noninterest income
Service charges on deposit accounts		265				277				296				259				296
Gain on securities		—				—				18				98				83
Gain on sale of loans and other assets		275				242				287				197				222
Gain (loss) on sale of foreclosed assets		(15		)		6				130				(4		)		58
Other non-interest income		402				422				472				410				412
Total noninterest income		927				948				1,204				961				1,071
Noninterest expense
Salaries and employee benefits		4,647				4,422				4,312				4,486				4,495
Occupancy expense		978				875				965				1,137				1,018
FDIC premiums		153				166				153				151				136
Foreclosed asset expense		—				37				79				64				57
Marketing		164				79				179				184				173
Data Processing		340				541				457				555				341
Professional expenses		570				558				558				551				455
Amortization of other intangibles		52				39				80				93				93
Service contracts		296				281				272				316				286
Other noninterest expense		944				1,028				994				936				897
Total noninterest expense		8,145				8,026				8,050				8,472				7,952
Earnings before income taxes		2,590				2,607				2,558				1,883				2,113
Income tax expense		946				960				947				691				764
Net income (loss)		1,644				1,647				1,611				1,192				1,349
Dividends on preferred stock		195				270				270				270				212
Net income available to common shareholders		$	1,449			$	1,377			$	1,341			$	922			$	1,137
NET INCOME PER COMMON SHARE
Basic		$	0.19			$	0.23			$	0.23			$	0.16			$	0.20
Diluted		0.19				0.22				0.22				0.15				0.19
Weighted average common shares outstanding
Basic		7,525				5,891				5,835				5,820				5,807
Diluted		7,631				6,206				6,096				6,132				6,108

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
YIELD ANALYSIS
		Three Months Ended March 31, 2017											Three Months Ended December 31, 2016											Three Months Ended March 31, 2016
		Average								Yield/			Average								Yield/			Average								Yield/
		Balance				Interest *				Cost*			Balance				Interest*				Cost*			Balance				Interest *				Cost*
Assets
Loans		$	811,522			$	10,220			5.11	%		$	799,397			$	10,329			5.14	%		$	734,918			$	9,378			5.12	%
Investment securities and interest
bearing due froms		161,392				677				1.70	%		155,426				586				1.50	%		182,988				730				1.60	%
Federal funds and other		6,621				73				4.47	%		14,266				83				2.31	%		8,817				63				2.91	%
Total interest-earning assets		979,535				10,970				4.54	%		969,089				10,998				4.51	%		926,723				10,171				4.40	%
Non-interest-earning assets		66,208											53,721											74,368
Total assets		$	1,045,743										$	1,031,887										$	1,001,091
Liabilities and Stockholders’ Equity
Interest-bearing demand deposits		$	159,255			$	93			0.24	%		$	151,108			$	78			0.21	%		$	150,538			$	66			0.18	%
Money market and savings deposits		275,576				328				0.48	%		273,257				318				0.46	%		242,125				272				0.45	%
Time deposits		302,256				677				0.91	%		295,529				670				0.90	%		334,782				623				0.75	%
Total interest-bearing deposits		737,087				1,098				0.60	%		719,894				1,066				0.59	%		727,445				961				0.53	%
Securities sold under agreement to
repurchase		18,682				16				0.35	%		21,848				17				0.31	%		21,237				17				0.32	%
Federal Home Loan Bank advances
and other borrowings		7,446				15				0.82	%		23,823				37				0.62	%		23,504				45				0.76	%
Total interest-bearing liabilities		763,215				1,129				0.60	%		765,565				1,120				0.58	%		772,186				1,023				0.53	%
Noninterest-bearing deposits		149,305											154,171											123,242
Other liabilities		4,580											6,514											4,160
Total liabilities		917,100											926,244											899,588
Shareholders’ equity		128,643											105,643											101,503
Total liabilities and stockholders’
equity		$	1,045,743										$	1,031,887										$	1,001,091
Net interest income, taxable
equivalent						$	9,841										$	9,878										$	9,148
Interest rate spread										3.94	%										3.93	%										3.87	%
Tax equivalent net interest margin										4.07	%										4.06	%										3.96	%
Percentage of average interest-
earning assets to average interest-
bearing liabilities										128.34	%										126.58	%										120.0	%
Percentage of average equity to
average assets										12.30	%										10.24	%										10.14	%
* Taxable equivalent basis

SmartFinancial, Inc. and Subsidiaries
Condensed Consolidated Financial Information (unaudited)
(In thousands)
NON-GAAP RECONCILIATIONS		Three months ending
		March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016
Net interest income, Taxable Equivalent
Net interest income (GAAP)		$	9,820			$	9,856			$	9,665			$	9,613			$	9,131
Taxable equivalent adjustment		21				22				14				18				18
Net interest income, Taxable Equivalent (Non-GAAP)		$	9,841			$	9,878			$	9,679			$	9,631			$	9,149
Operating Earnings
Net income (loss) (GAAP)		$	1,644			$	1,647			$	1,611			$	1,192			$	1,348
Purchased loan accounting adjustments*		(540		)		(430		)		(450		)		(597		)		(541		)
Securities (gains) losses		—				—				(18		)		(98		)		(83		)
Merger and conversion costs		—				—				—				153				105
Foreclosed assets (gains) losses		15				(6		)		(130		)		4				(58		)
Income tax effect of adjustments		201				167				229				206				221
Net operating earnings (Non-GAAP)		1,320				1,378				1,242				860				992
Dividends on preferred stock		(195		)		(270		)		(270		)		(270		)		(212		)
Net operating earnings available to common shareholders
(Non-GAAP)		$	1,125			$	1,108			$	972			$	590			$	780
Net operating earnings per common share:
Basic		$	0.15			$	0.24			$	0.19			$	0.11			$	0.13
Diluted		0.15				0.23				0.19				0.10				0.13
Operating Efficiency Ratio
Efficiency ratio (GAAP)		75.79		%		74.29		%		74.06		%		80.13		%		77.95		%
Adjustment for amortization of intangibles		(0.65		)%		(0.49		)%		(0.99		)%		(1.10		)%		(1.17		)%
Adjustment for taxable equivalent yields		(0.25		)%		(0.26		)%		(0.18		)%		(0.16		)%		(0.17		)%
Adjustment for purchased loan accounting adjustments*		6.63		%		5.36		%		5.59		%		7.05		%		6.81		%
Adjustment for securities (gains) losses		—		%		—		%		0.23		%		1.16		%		1.05		%
Adjustment for merger and conversion costs		—		%		—		%		—		%		(1.81		)%		(1.33		)%
Adjustment for OREO (gains) losses		(0.18		)%		0.08		%		1.62		%		(0.05		)%		0.73		%
Operating efficiency ratio (Non-GAAP)		81.34		%		78.98		%		80.33		%		85.22		%		83.87		%
Adjusted Allowance for Loan Losses
Allowance for loan losses (GAAP)		$	5,152			$	5,105			$	4,964			$	4,720			$	4,527
Net acquisition accounting fair value discounts to loans		9,831				10,271				10,742				11,053				11,381
Adjusted allowance for loan losses (Non-GAAP)		14,983				15,376				15,706				15,773				15,908
Loans (excluding acquisition accounting fair value
discounts)		822,522				828,753				812,848				789,169				752,321
Adjusted allowance for loan losses to loans (Non-GAAP)		1.82		%		1.86		%		1.93		%		2.00		%		2.11		%
Tangible Common Equity
Shareholders' equity (GAAP)		$	132,551			$	105,240			$	105,170			$	103,064			$	101,988
Less preferred stock & preferred stock paid in capital		—				12,000				12,000				12,000				12,000
Less goodwill and other intangible assets		6,583				6,636				6,675				6,754				6,848
Tangible common equity (Non-GAAP)		$	125,968			$	86,604			$	86,495			$	84,310			$	83,140
*Consists of ASC 310-30 accretion above (below) contractual loan income and ASC 310-20 accretion

Investor Contacts
Billy Carroll
President & CEO
(865) 868-0613

Frank Hughes
Executive Vice President
Investor Relations
(423) 385-3009

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

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