OREANDA-NEWS. SmartFinancial, Inc. ("SmartFinancial") (NASDAQ:SMBK), announced today net income of $1.6 million in its fourth quarter of 2016, compared to $1.2 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 third full quarter's results of the merged bank.

Billy Carroll, President & CEO, stated: "We are extremely proud of the achievements of our associates during our first full year as a combined company. We had outstanding organic loan growth of over $85 million, increased demand deposits by over $33 million, and maintained a net interest margin of over 4.00 percent for the year. We generated over $4 million in non-interest income during the year thanks to increased revenues from the sale of mortgage and SBA loans and higher revenues from deposit account services. We are successfully capturing our post merger efficiency gains as demonstrated by two consecutive quarterly decreases in noninterest expense to average assets. As a result we have generated increases in both net income and return on assets the last two quarters and look forward to continuing the trend of quarterly improvements into 2017."

SmartFinancial's Chairman, Miller Welborn, concluded: "The only thing more exciting than what we as a company have accomplished over the last year are the opportunities we have before us heading into 2017. We have added a veteran team of bankers in Bradley County, Tennessee to go along with our planned branch acquisition in that market and as part of our organic growth strategy we are opening a new branch in Panama City, Florida, and that is just to start the year. 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 $0.23 per share during the fourth quarter of 2016 which is up from $1.2 million or $0.20 per share in the fourth quarter of 2015.

Annualized return on average assets equaled 0.64 percent in the fourth quarter of 2016, compared to 0.63 percent in the third quarter of 2016.

Annualized net loan growth was approximately 8 percent in the fourth quarter and 12 percent for the full year 2016.

Asset quality was outstanding with nonperforming assets to total assets of just 0.43 percent.

Net interest margin, taxable equivalent, increased to 4.06 percent in the quarter as the asset sensitive balance sheet reacted to the increases in interest rates and as the percentage of earning-assets to total assets increased.

Fourth Quarter 2016 compared to Third Quarter 2016

Net income available to common shareholders totaled $1.4 million in the fourth quarter of 2016, or $0.22 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 purchased loans accounting adjustments, securities gains, merger and conversion costs, and foreclosed assets gains and losses, totaled $1.4 million in the fourth quarter of 2016 compared to $1.1 million in the previous quarter.

Net interest income to average assets of 3.82 percent for the quarter increased from 3.76 percent in the third quarter of 2016. Net interest income totaled $9.9 million in the fourth quarter of 2016 compared to $9.7 million in the third quarter of 2016. 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 4.04 percent in the third quarter of 2016 to 4.06 percent in the fourth quarter of 2016 primarily due to higher average loan balances and higher loan yields.

Provision for loan losses was $171 thousand in the fourth quarter of 2016, compared to $261 thousand in the third quarter of 2016. The decrease in provision for loan losses was due to credit improvements in the loan portfolio during the quarter. Annualized net charge-offs in the fourth quarter of 2016 remained at a very low level, just 0.02 percent of average loans compared to 0.01 percent the third quarter of 2016.

The allowance for loan losses, or the ALLL, was $5.1 million, or 0.63 percent of total loans as of December 31, 2016, compared to $5.0 million, or 0.62 percent of total loans, as of September 30, 2016. Adjusted ALLL, which includes the ALLL as well as net acquisition accounting fair value adjustments for acquired loans, was 1.86 percent of total loans as of December 31, 2016, which was down from 1.93 percent as of September 30, 2016. The reduction in adjusted ALLL resulted from continued accretion of fair value discounts.

Nonperforming loans as a percentage of total loans was 0.26 percent as of December 31, 2016, which was up slightly from 0.17 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 0.43 percent as of December 31, 2016, compared to 0.38 percent as of September 30, 2016.

Non-interest income to average assets of 0.37 percent for the quarter decreased from 0.47 percent in the third quarter of 2016. Non-interest income totaled $948 thousand in the fourth quarter of 2016, compared to $1.2 million in the third quarter of 2016. The decrease in non-interest income was primarily due to lower gains on sale of foreclosed assets.

Non-interest expense to average assets of 3.11 percent for the quarter was down from 3.13 percent in the third quarter of 2016 and was the lowest of any quarter in 2016. Non-interest expense totaled $8.0 million in the fourth quarter of 2016, which was down slightly from the third quarter of 2016.

Income tax expense was $960 thousand in the fourth quarter of 2016 compared to $947 thousand in the third quarter of 2016. The company's effective tax rate was 36.81 percent in the fourth quarter of 2016 compared to 37.03 percent in the third quarter of 2016.

Fourth Quarter 2016 compared to Fourth Quarter 2015

Net income available to common shareholders totaled $1.4 million in the fourth quarter of 2016, or $0.22 per diluted share, compared to $1.2 million, or $0.19 per diluted share, in the fourth quarter of 2015. 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 $1.4 million in the fourth quarter of 2016 compared to $584 thousand in the fourth quarter of 2015.