SmartFinancial Announces Results for the Third Quarter 2023

SmartFinancial, Inc.

KNOXVILLE, Tenn., Oct. 23, 2023 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $2.1 million, or $0.12 per diluted common share, for the third quarter of 2023, compared to net income of $11.5 million, or $0.68 per diluted common share, for the third quarter of 2022, and compared to prior quarter net income of $8.8 million, or $0.52 per diluted common share. Operating earnings¹, which excludes securities gains (losses) and merger related and restructuring expenses, net of tax adjustments, totaled $7.2 million, or $0.43 per diluted common share, in the third quarter of 2023, compared to $11.6 million, or $0.69 per diluted common share, in the third quarter of 2022, and compared to $8.8 million, or $0.52 per diluted common share, in the second quarter of 2023.

Highlights for the Third Quarter of 2023

• Operating earnings¹ of $7.2 million, or $0.43 per diluted common share

• Repositioned $159.6 million of available-for-sale securities, moving into higher yielding assets

• Net organic loan and lease growth of $42 million - 5% annualized quarter-over-quarter increase

• Credit quality remains solid with nonperforming assets to total assets of 0.12%

• Deposit growth of $46.9 million – 4.5% annualized quarter-over-quarter increase
  
  

Billy Carroll, President & CEO, stated: “Our Company and employees continue to operate at a high level, providing excellent client service while tactfully navigating a difficult operating landscape.  During September, we strategically took advantage of a balance sheet optimization opportunity, reallocating $160 million from low-yielding investments into higher yielding assets.  We felt it prudent to capitalize on the current rate environment and better position our balance sheet as we look toward 2024.  Our team continues to grow new loan and deposit relationships despite the higher rate headwinds, a testament to their professionalism and reputations within their respective markets.  As our Bank absorbs and moves through the impacts of the recent Fed rate increases, we look forward to continued revenue expansion and remain bullish on our Company outlook.”

SmartFinancial's Chairman, Miller Welborn, concluded: "The entire SmartBank team worked diligently over the past quarter and, quite frankly, over the entire year to exceed client expectations and drive consistent growth. However, this quarter I was especially pleased that SmartBank was once again honored with the “Top Workplace” designation as voted on by employees for the seventh year in a row! I’m so proud of where we are as a company and extremely optimistic about the future.”

______________________________
¹ Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation

Net Interest Income and Net Interest Margin

Net interest income was $31.0 million for the third quarter of 2023, compared to $31.6 million for the prior quarter. Average earning assets totaled $4.40 billion, an increase of $58.5 million from the prior quarter. The increase in average earnings assets was primarily driven by an increase in average loans and leases of $52.1 million and average interest-earning cash of $34.2 million, offset by a decrease in average securities of $27.8 million.  Average interest-bearing liabilities increased by $73.5 million from the prior quarter, attributable to an increase in average deposits of $82.1 million, offset by a decrease in average borrowings of $8.6 million.

The tax equivalent net interest margin was 2.81% for the third quarter of 2023, compared to 2.93% for the prior quarter. The tax equivalent net interest margin was negatively impacted by the continued rise in the cost of interest-bearing liabilities and increased pricing competition.  The yield on loans and leases, excluding loan fees was 5.52% for the third quarter, compared to 5.39% for the prior quarter.

The cost of total deposits for the third quarter of 2023 was 2.20% compared to 1.89% in the prior quarter. The cost of interest-bearing liabilities increased to 2.89% for the third quarter of 2023 compared to 2.53% for the prior quarter. The cost of average interest-bearing deposits was 2.84% for the third quarter of 2023 compared to 2.46% for the prior quarter, an increase of 38 basis points. The increase in the cost of deposits is due to an increase in interest rates, customer migration to higher rate deposit products and increased competition for deposits.

The following table presents selected interest rates and yields for the periods indicated:

		Three Months Ended
		Sep			Jun			Increase
Selected Interest Rates and Yields		2023			2023			(Decrease)
Yield on loans and leases, excluding loan fees		5.52		%	5.39		%	0.13		%
Yield on loans and leases		5.61		%	5.51		%	0.10		%
Yield on earning assets, on a fully tax equivalent basis (FTE)		4.99		%	4.82		%	0.17		%
Cost of interest-bearing deposits		2.84		%	2.46		%	0.38		%
Cost of total deposits		2.20		%	1.89		%	0.31		%
Cost of interest-bearing liabilities		2.89		%	2.53		%	0.36		%
Net interest margin, FTE		2.81		%	2.93		%	(0.12	)	%

Provision for Credit Losses on Loans and Leases and Credit Quality

At September 30, 2023, the allowance for credit losses was $33.7 million. The allowance for credit losses to total loans and leases was 1.00% as of September 30, 2023, compared to 0.98% as of June 30, 2023.

The following table presents detailed information related to the provision for credit losses for the periods indicated (dollars in thousands):

		Three Months Ended
		Sep				Jun
Provision for Credit Losses on Loans and Leases Rollforward			2023				2023			Change
Beginning balance		$	32,747			$	32,279			$	468
Charge-offs			(417	)			(207	)			(210	)
Recoveries			73				255				(182	)
Net (charge-offs) recoveries			(344	)			48				(392	)
Provision for credit losses (1)			1,284				420				864
Ending balance		$	33,687			$	32,747			$	940
Allowance for credit losses to total loans and leases, gross			1.00		%		0.98		%		0.02		%

	(1)	The current quarter-ended and prior quarter-ended, excludes unfunded commitments release of $489 thousand and $307 thousand, respectively. At September 30, 2023, the unfunded commitment liability totaled $2.3 million.

Nonperforming loans and leases as a percentage of total loans and leases was 0.12% as of September 30, 2023, an increase of 1 basis point from the 0.11% reported in the second quarter of 2023. Total nonperforming assets (which include nonaccrual loans and leases, loans and leases past due 90 days or more and still accruing, other real estate owned and other repossessed assets) as a percentage of total assets was 0.12% as of September 30, 2023, and June 30, 2023.

The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):

		Three Months Ended
			Sep				Jun			Increase
Credit Quality			2023				2023			(Decrease)
Nonaccrual loans and leases		$	3,934			$	3,722			$	212
Loans and leases past due 90 days or more and still accruing			229				-				229
Total nonperforming loans and leases			4,163				3,722				441
Other real estate owned			1,370				1,708				(338	)
Other repossessed assets			348				282				66
Total nonperforming assets		$	5,881			$	5,712			$	169
Nonperforming loans and leases to total loans and leases, gross			0.12		%		0.11		%		0.01		%
Nonperforming assets to total assets			0.12		%		0.12		%		-		%

Noninterest Income

Noninterest income decreased $6.4 million to $691 thousand for the third quarter of 2023 compared to $7.1 million for the prior quarter. The current quarter decrease was associated with a $6.8 million pre-tax loss on the sale of $159.6 million of available for sale securities, moving into higher yielding assets. Excluding the loss on securities, noninterest income increased $362 thousand.

The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):

		Three Months Ended
		Sep					Jun			Increase
Noninterest Income		2023					2023			(Decrease)
Service charges on deposit accounts		$	1,736			$	1,657			$	79
Gain (loss) on sale of securities, net			(6,801	)			-				(6,801	)
Mortgage banking income			309				332				(23	)
Investment services			1,461				1,300				161
Insurance commissions			1,153				1,139				14
Interchange and debit card transaction fees			1,357				1,347				10
Other			1,476				1,355				121
Total noninterest income		$	691			$	7,130			$	(6,439	)

Noninterest Expense

Noninterest expense increased $1.1 million to $28.5 million for the third quarter of 2023 compared to $27.4 million for the prior quarter. The current quarter increase was primarily related to increases in health insurance claims, incentives and additional commission expense associated with higher production from our leasing company, wealth and capital markets teams.

The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):

		Three Months Ended
			Sep				Jun			Increase
Noninterest Expense			2023				2023			(Decrease)
Salaries and employee benefits		$	16,785			$	15,947			$	838
Occupancy and equipment			3,547				3,318				229
FDIC insurance			825				875				(50	)
Other real estate and loan related expenses			603				441				162
Advertising and marketing			346				305				41
Data processing and technology			2,378				2,235				143
Professional services			735				764				(29	)
Amortization of intangibles			647				675				(28	)
Merger related and restructuring expenses			110				-				110
Other			2,540				2,850				(310	)
Total noninterest expense		$	28,516			$	27,410			$	1,106

Income Tax Expense

Income tax expense was $319 thousand for the third quarter of 2023, a decrease of $2.0 million, compared to $2.3 million for the prior quarter.

The effective tax rate was 13.37% for the third quarter of 2023 and 20.98% for the prior quarter. The primary reason for the 7.61% decline in the effective tax rate was due to lower earnings, largely from the $6.8 million pre-tax loss on sale of available-for-sale securities during the quarter.

Balance Sheet Trends

Total assets at September 30, 2023 were $4.80 billion compared to $4.64 billion at December 31, 2022. The $159.7 million increase is primarily attributable to increases in loans and leases of $125.4 million, cash and cash equivalents of $133.8 million and other assets of $15.1 million. Asset increases were offset by a decrease in securities of $102.4 million and an increase in the allowance for credit losses of $10.4 million, primarily for the one-time adjustment of $8.7 million related to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit losses on Financial Instruments (“ASU 2016-13”) on January 1, 2023.

Total liabilities increased to $4.35 billion at September 30, 2023 from $4.21 billion at December 31, 2022. The increase of $145.5 million was primarily from organic deposit growth of $169.4 million, offset by a decrease in borrowings of $27.7 million.

Shareholders' equity at September 30, 2023 totaled $446.7 million, an increase of $14.2 million, from December 31, 2022. The increase in shareholders' equity was primarily driven by net income of $22.4 million for the nine months ended September 30, 2023, offset by the impact of the adoption of ASU 2016-13 on January 1, 2023, of $6.6 million (net of taxes), and dividends paid of $4.1 million. Tangible book value per share¹ was $19.94 at September 30, 2023, compared to $19.09 at December 31, 2022. Tangible common equity¹ as a percentage of tangible assets¹ was 7.23% at September 30, 2023, compared with 7.13% at December 31, 2022.

The following table presents selected balance sheet information for the periods indicated (dollars in thousands):

		Sep				Dec				Increase
Selected Balance Sheet Information		2023				2022				(Decrease)
Total assets		$	4,797,171			$	4,637,498			$	159,673
Total liabilities			4,350,519				4,205,046				145,473
Total equity			446,652				432,452				14,200
Securities			667,444				769,842				(102,398	)
Loans and leases			3,378,999				3,253,627				125,372
Deposits			4,246,509				4,077,100				169,409
Borrowings			14,117				41,860				(27,743	)

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¹ Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation

Conference Call Information

SmartFinancial issued this earnings release for the third quarter of 2023 on Monday, October 23, 2023, and will host a conference call on Tuesday, October 24, 2023, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 470-1428 or (404) 975-4839 and entering the access code, 071225. A replay of the conference call will be available through December 23, 2023, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 816201. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 a.m. ET prior to the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with branches across Tennessee, Alabama, and Florida. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source

SmartFinancial, Inc.

Investor Contacts

Billy Carroll

President & CEO

(865) 868-0613   billy.carroll@smartbank.com

Ron Gorczynski

Executive Vice President, Chief Financial Officer

(865) 437-5724   ron.gorczynski@smartbank.com

Media Contact

Kelley Fowler

Senior Vice President, Public Relations & Marketing

(865) 868-0611   kelley.fowler@smartbank.com

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered 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) operating earnings, (ii) operating return on average assets, (iii) operating pre-provision net revenue return on average assets, (iv) operating return on average shareholders' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-provision net revenue earnings, (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value, (xiv) tangible assets; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses and merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by average assets. Operating pre-provision net revenue return on average assets is the annualized operating pre-provision net revenue income earnings (Non-GAAP) by average assets. Operating return on average shareholders' equity is the annualized operating earnings (Non-GAAP) divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity (Non-GAAP). Operating return on average tangible common equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses. Operating pre-provision net revenue earnings is net interest income plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity (Non-GAAP) and average tangible common equity (Non-GAAP) excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value (Non-GAAP) is tangible common equity (Non-GAAP) divided by common shares outstanding. Tangible assets (Non-GAAP) excludes goodwill and other intangibles from total assets. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these Non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) changes in management’s plans for the future; (7) prevailing, or changes in, economic or political conditions, particularly in our market areas, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; (8) increased technology and cybersecurity risks, including generative artificial intelligence risks; (9) credit risk associated with our lending activities; (10) changes in loan demand, real estate values, or competition; (11) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic and related variants; (15) potential impacts of adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; (16) significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; (17) the effects of war or other conflicts including the impacts related to or resulting from Russia’s military action in Ukraine or the conflict in Israel and surrounding areas; and (18) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)

	Ending Balances
	Sep				Jun				Mar				Dec				Sep
	2023				2023				2023				2022				2022
Assets:
Cash and cash equivalents	$	400,258			$	238,898			$	306,934			$	266,424			$	543,029
Securities available-for-sale, at fair value		385,131				540,308				560,418				483,893				519,723
Securities held-to-maturity, at amortized cost		282,313				283,564				284,776				285,949				287,104
Other investments		13,805				14,396				14,059				15,530				15,528
Loans held for sale		2,734				986				3,324				1,752				2,742
Loans and leases		3,378,999				3,337,790				3,281,787				3,253,627				3,099,116
Less: Allowance for credit losses		(33,687	)			(32,747	)			(32,279	)			(23,334	)			(22,769	)
Loans and leases, net		3,345,312				3,305,043				3,249,508				3,230,293				3,076,347
Premises and equipment, net		92,020				92,351				92,190				92,511				91,944
Other real estate owned		1,370				1,708				1,708				1,436				1,226
Goodwill and other intangibles, net		107,792				108,439				109,114				109,772				110,460
Bank owned life insurance		82,914				82,419				81,938				81,470				81,001
Other assets		83,522				77,688				65,836				68,468				67,807
Total assets	$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498			$	4,796,911
Liabilities:
Deposits:
Noninterest-bearing demand	$	923,763			$	1,003,432			$	989,753			$	1,072,449			$	1,186,209
Interest-bearing demand		993,717				938,758				989,738				965,911				962,901
Money market and savings		1,766,409				1,720,202				1,761,847				1,583,481				1,663,355
Time deposits		562,620				537,192				488,208				455,259				467,944
Total deposits		4,246,509				4,199,584				4,229,546				4,077,100				4,280,409
Borrowings		14,117				15,496				16,546				41,860				18,423
Subordinated debt		42,078				42,057				42,036				42,015				41,994
Other liabilities		47,815				43,816				38,278				44,071				41,374
Total liabilities		4,350,519				4,300,953				4,326,406				4,205,046				4,382,200
Shareholders' Equity:
Common stock		16,995				17,004				17,004				16,901				16,888
Additional paid-in capital		295,542				295,296				294,930				294,330				293,907
Retained earnings		168,271				167,564				160,085				156,545				144,723
Accumulated other comprehensive income (loss)		(34,156	)			(35,017	)			(28,620	)			(35,324	)			(40,807	)
Total shareholders' equity		446,652				444,847				443,399				432,452				414,711
Total liabilities & shareholders' equity	$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498			$	4,796,911

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)

	Three Months Ended																				Nine Months Ended
	Sep				Jun				Mar				Dec				Sep				Sep				Sep
	2023				2023				2023				2022				2022				2023				2022
Interest income:
Loans and leases, including fees	$	47,539			$	45,446			$	44,728			$	40,082			$	35,127			$	137,712			$	96,300
Investment securities:
Taxable		4,335				4,335				3,651				3,337				3,135				12,322				8,463
Tax-exempt		356				357				353				797				561				1,066				1,369
Federal funds sold and other earning assets		3,045				1,956				4,446				3,098				3,474				9,448				5,389
Total interest income		55,275				52,094				53,178				47,314				42,297				160,548				111,521
Interest expense:
Deposits		23,433				19,554				16,346				8,844				4,866				59,333				9,384
Borrowings		210				339				224				232				97				775				371
Subordinated debt		626				626				626				626				626				1,877				1,877
Total interest expense		24,269				20,519				17,196				9,702				5,589				61,985				11,632
Net interest income		31,006				31,575				35,982				37,612				36,708				98,563				99,889
Provision for credit losses		795				113				550				788				974				1,458				3,230
Net interest income after provision for credit losses		30,211				31,462				35,432				36,824				35,734				97,105				96,659
Noninterest income:
Service charges on deposit accounts		1,736				1,657				1,445				1,477				1,611				4,838				4,376
Gain (loss) on sale of securities, net		(6,801	)			—				—				144				—				(6,801	)			—
Mortgage banking		309				332				172				77				170				813				1,475
Investment services		1,461				1,300				1,005				958				1,051				3,766				3,186
Insurance commissions		1,153				1,139				1,259				1,233				864				3,551				2,363
Interchange and debit card transaction fees		1,357				1,347				1,383				1,328				1,356				4,087				4,107
Other		1,476				1,355				1,661				1,908				1,198				4,492				5,083
Total noninterest income		691				7,130				6,925				7,125				6,250				14,746				20,590
Noninterest expense:
Salaries and employee benefits		16,785				15,947				16,742				16,384				16,317				49,474				47,036
Occupancy and equipment		3,547				3,318				3,208				3,015				3,167				10,073				9,020
FDIC insurance		825				875				541				650				705				2,241				2,022
Other real estate and loan related expense		603				441				572				517				565				1,616				1,930
Advertising and marketing		346				305				355				308				288				1,006				985
Data processing and technology		2,378				2,235				2,163				2,097				1,872				6,777				5,185
Professional services		735				764				807				981				822				2,307				2,809
Amortization of intangibles		647				675				659				688				650				1,981				1,919
Merger related and restructuring expenses		110				—				—				(45	)			87				110				607
Other		2,540				2,850				2,482				2,821				2,757				7,870				7,361
Total noninterest expense		28,516				27,410				27,529				27,416				27,230				83,455				78,874
Income before income taxes		2,386				11,182				14,828				16,533				14,754				28,396				38,375
Income tax expense		319				2,346				3,328				3,529				3,211				5,993				8,357
Net income	$	2,067			$	8,836			$	11,500			$	13,004			$	11,543			$	22,403			$	30,018
Earnings per common share:
Basic	$	0.12			$	0.53			$	0.69			$	0.78			$	0.69			$	1.33			$	1.79
Diluted	$	0.12			$	0.52			$	0.68			$	0.77			$	0.68			$	1.33			$	1.78
Weighted average common shares outstanding:
Basic		16,807,548				16,806,389				16,791,406				16,758,706				16,749,255				16,801,840				16,734,298
Diluted		16,918,635				16,898,091				16,896,494				16,884,253				16,872,022				16,907,325				16,867,970

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS

	Three Months Ended
	September 30, 2023											June 30, 2023											September 30, 2022
	Average								Yield/			Average								Yield/			Average								Yield/
	Balance				Interest				Cost			Balance				Interest				Cost			Balance				Interest				Cost
Assets:
Loans and leases, including fees1	$	3,360,678			$	47,539			5.61		%	$	3,308,595			$	45,446			5.51		%	$	3,037,092			$	35,127			4.59		%
Taxable securities		743,054				4,335			2.31		%		770,275				4,335			2.26		%		720,114				3,135			1.73		%
Tax-exempt securities2		64,707				451			2.77		%		65,265				452			2.78		%		101,559				732			2.86		%
Federal funds sold and other earning assets		229,487				3,045			5.26		%		195,266				1,956			4.02		%		587,755				3,474			2.34		%
Total interest-earning assets		4,397,926				55,370			4.99		%		4,339,401				52,189			4.82		%		4,446,520				42,468			3.79		%
Noninterest-earning assets		379,456											355,701											362,869
Total assets	$	4,777,382										$	4,695,102										$	4,809,389
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$	969,122				5,463			2.24		%	$	950,227				4,892			2.06		%	$	966,437				1,956			0.80		%
Money market and savings deposits		1,753,671				13,744			3.11		%		1,737,303				11,785			2.72		%		1,632,510				2,298			0.56		%
Time deposits		551,191				4,226			3.04		%		504,350				2,877			2.29		%		501,919				612			0.48		%
Total interest-bearing deposits		3,273,984				23,433			2.84		%		3,191,880				19,554			2.46		%		3,100,866				4,866			0.62		%
Borrowings		16,228				210			5.13		%		24,845				339			5.47		%		13,141				97			2.93		%
Subordinated debt		42,065				626			5.90		%		42,044				626			5.97		%		41,980				626			5.91		%
Total interest-bearing liabilities		3,332,277				24,269			2.89		%		3,258,769				20,519			2.53		%		3,155,987				5,589			0.70		%
Noninterest-bearing deposits		951,179											951,381											1,192,813
Other liabilities		48,494											40,669											35,224
Total liabilities		4,331,950											4,250,819											4,384,024
Shareholders' equity		445,432											444,283											425,365
Total liabilities and shareholders' equity	$	4,777,382										$	4,695,102										$	4,809,389
Net interest income, taxable equivalent					$	31,101										$	31,670										$	36,879
Interest rate spread									2.11		%									2.30		%									3.09		%
Tax equivalent net interest margin									2.81		%									2.93		%									3.29		%
Percentage of average interest-earning assets to average interest-bearing liabilities									131.98		%									133.16		%									140.89		%
Percentage of average equity to average assets									9.32		%									9.46		%									8.84		%

¹ Includes average balance of $2.7 million, $2.9 million, and $22.0 million in PPP loans for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.  
² Yields computed on tax-exempt instruments on a tax equivalent basis include $95 thousand, $95 thousand, and $171 thousand of taxable equivalent income for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS

	Nine Months Ended
	September 30, 2023												September 30, 2022
	Average								Yield/				Average								Yield/
	Balance				Interest				Cost				Balance				Interest				Cost
Assets:
Loans and leases, including fees1	$	3,309,616			$	137,712				5.56		%	$	2,880,444			$	96,300			4.47		%
Taxable securities		745,694				12,322				2.21		%		683,926				8,463			1.65		%
Tax-exempt securities2		65,170				1,349				2.77		%		102,872				1,873			2.43		%
Federal funds sold and other earning assets		267,124				9,448				4.73		%		663,400				5,389			1.09		%
Total interest-earning assets		4,387,604				160,831				4.90		%		4,330,642				112,025			3.46		%
Noninterest-earning assets		365,123												373,081
Total assets	$	4,752,727											$	4,703,723
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$	954,585				14,583				2.04		%	$	952,523				3,137			0.44		%
Money market and savings deposits		1,770,232				35,912				2.71		%		1,572,287				4,282			0.36		%
Time deposits		508,600				8,838				2.32		%		531,419				1,965			0.49		%
Total interest-bearing deposits		3,233,417				59,333				2.45		%		3,056,229				9,384			0.41		%
Borrowings		19,309				775				5.37		%		37,933				371			1.31		%
Subordinated debt		42,044				1,877				5.97		%		41,959				1,877			5.98		%
Total interest-bearing liabilities		3,294,770				61,985				2.52		%		3,136,121				11,632			0.50		%
Noninterest-bearing deposits		972,507												1,111,854
Other liabilities		44,703												31,412
Total liabilities		4,311,980												4,279,387
Shareholders' equity		440,747												424,336
Total liabilities and shareholders' equity	$	4,752,727											$	4,703,723
Net interest income, taxable equivalent					$	98,846											$	100,393
Interest rate spread										2.39		%									2.96		%
Tax equivalent net interest margin										3.01		%									3.10		%
Percentage of average interest-earning assets to average interest-bearing liabilities										133.17		%									138.09		%
Percentage of average equity to average assets										9.27		%									9.02		%

¹ Includes average balance of $2.9 million and $36.6 million in PPP loans for the nine months ended September 30, 2023, and 2022, respectively.
² Yields computed on tax-exempt instruments on a tax equivalent basis include $283 thousand and $504 thousand of taxable equivalent income for the nine months ended September 30, 2023, and 2022, respectively.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)

	As of and for The Three Months Ended
	Sep				Jun				Mar				Dec				Sep
	2023				2023				2023				2022				2022
Composition of Loans and Leases:
Commercial real estate:
Owner occupied	$	776,402			$	769,978			$	764,166			$	765,041			$	714,734
Non-owner occupied		890,774				871,779				871,368				862,720				822,317
Commercial real estate, total		1,667,176				1,641,757				1,635,534				1,627,761				1,537,051
Commercial & industrial		617,115				594,427				571,153				551,867				514,280
Construction & land development		373,068				394,742				386,253				402,501				405,007
Consumer real estate		638,518				624,828				606,343				587,977				562,408
Leases		68,538				66,401				67,701				67,427				64,798
Consumer and other		14,584				15,635				14,803				16,094				15,572
Total loans and leases	$	3,378,999			$	3,337,790			$	3,281,787			$	3,253,627			$	3,099,116
Asset Quality and Additional Loan Data:
Nonperforming loans and leases	$	4,163			$	3,722			$	3,247			$	2,951			$	3,379
Other real estate owned		1,370				1,708				1,708				1,436				1,226
Other repossessed assets		348				282				66				422				—
Total nonperforming assets	$	5,881			$	5,712			$	5,021			$	4,809			$	4,605
Restructured loans and leases not included in nonperforming loans and leases	$	2,376			$	657			$	97			$	101			$	108
Net charge-offs to average loans and leases (annualized)		0.04		%		(0.01	)	%		0.03		%		0.03		%		0.02		%
Allowance for credit losses to loans and leases		1.00		%		0.98		%		0.98		%		0.72		%		0.73		%
Nonperforming loans and leases to total loans and leases, gross		0.12		%		0.11		%		0.10		%		0.09		%		0.11		%
Nonperforming assets to total assets		0.12		%		0.12		%		0.11		%		0.10		%		0.10		%
Acquired loan and lease fair value discount balance	$	—			$	—			$	—			$	13,128			$	14,465
Accretion income on acquired loans and leases		—				—				—				1,396				148
PPP net fees deferred balance		94				104				114				122				140
PPP net fees recognized		10				10				8				17				163
Capital Ratios:
Equity to Assets		9.31		%		9.37		%		9.30		%		9.33		%		8.65		%
Tangible common equity to tangible assets (Non-GAAP)1		7.23		%		7.25		%		7.17		%		7.13		%		6.49		%
SmartFinancial, Inc.2
Tier 1 leverage		8.13		%		8.24		%		7.91		%		7.95		%		7.40		%
Common equity Tier 1		10.01		%		10.12		%		9.95		%		9.65		%		9.65		%
Tier 1 capital		10.01		%		10.12		%		9.95		%		9.65		%		9.65		%
Total capital		11.83		%		11.94		%		11.77		%		11.40		%		11.44		%
SmartBank		Estimated3
Tier 1 leverage		9.00		%		9.18		%		8.87		%		8.90		%		8.27		%
Common equity Tier 1		11.13		%		11.27		%		11.15		%		10.82		%		10.78		%
Tier 1 capital		11.13		%		11.27		%		11.15		%		10.82		%		10.78		%
Total capital		11.85		%		11.97		%		11.85		%		11.44		%		11.41		%

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

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)

	As of and for The																				As of and for The
	Three Months Ended																				Nine Months Ended
	Sep				Jun				Mar				Dec				Sep				Sep				Sep
	2023				2023				2023				2022				2022				2023				2022
Selected Performance Ratios (Annualized):
Return on average assets		0.17		%		0.75		%		0.97		%		1.11		%		0.95		%		0.63		%		0.85		%
Return on average shareholders' equity		1.84		%		7.98		%		10.79		%		12.28		%		10.77		%		6.80		%		9.46		%
Return on average tangible common equity¹		2.43		%		10.57		%		14.45		%		16.65		%		14.36		%		9.02		%		12.60		%
Noninterest income / average assets		0.06		%		0.61		%		0.59		%		0.61		%		0.52		%		0.41		%		0.59		%
Noninterest expense / average assets		2.37		%		2.34		%		2.33		%		2.34		%		2.25		%		2.35		%		2.24		%
Efficiency ratio		89.96		%		70.82		%		64.16		%		61.28		%		63.39		%		73.65		%		65.47		%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		0.60		%		0.75		%		0.97		%		1.10		%		0.96		%		0.77		%		0.87		%
Operating PPNR return on average assets1		0.84		%		0.96		%		1.30		%		1.46		%		1.30		%		1.03		%		1.20		%
Operating return on average shareholders' equity1		6.41		%		7.98		%		10.79		%		12.15		%		10.83		%		8.35		%		9.60		%
Operating return on average tangible common equity1		8.46		%		10.57		%		14.45		%		16.47		%		14.44		%		11.09		%		12.78		%
Operating efficiency ratio1		73.60		%		70.64		%		64.02		%		61.36		%		62.93		%		69.23		%		64.69		%
Operating noninterest income / average assets1		0.62		%		0.61		%		0.59		%		0.60		%		0.52		%		0.61		%		0.59		%
Operating noninterest expense / average assets1		2.36		%		2.34		%		2.33		%		2.35		%		2.24		%		2.34		%		2.22		%
Selected Interest Rates and Yields:
Yield on loans and leases, excluding loan fees		5.52		%		5.39		%		5.20		%		4.99		%		4.50		%		5.37		%		4.31		%
Yield on loans and leases		5.61		%		5.51		%		5.57		%		5.05		%		4.59		%		5.56		%		4.47		%
Yield on earning assets, FTE		4.99		%		4.82		%		4.88		%		4.41		%		3.79		%		4.90		%		3.46		%
Cost of interest-bearing deposits		2.84		%		2.46		%		2.05		%		1.18		%		0.62		%		2.45		%		0.41		%
Cost of total deposits		2.20		%		1.89		%		1.56		%		0.85		%		0.45		%		1.89		%		0.30		%
Cost of interest-bearing liabilities		2.89		%		2.53		%		2.12		%		1.27		%		0.70		%		2.52		%		0.50		%
Net interest margin, FTE		2.81		%		2.93		%		3.31		%		3.51		%		3.29		%		3.01		%		3.10		%
Per Common Share:
Net income, basic	$	0.12			$	0.53			$	0.69			$	0.78			$	0.69			$	1.33			$	1.79
Net income, diluted		0.12				0.52				0.68				0.77				0.68				1.33				1.78
Operating earnings, basic¹		0.43				0.53				0.69				0.77				0.69				1.64				1.82
Operating earnings, diluted¹		0.43				0.52				0.68				0.76				0.69				1.63				1.81
Book value		26.28				26.16				26.08				25.59				24.56				26.28				24.56
Tangible book value¹		19.94				19.78				19.66				19.09				18.02				19.94				18.02
Common shares outstanding		16,994,543				17,004,092				17,004,092				16,900,805				16,887,555				16,994,543				16,887,555

¹Non-GAAP measure. See reconciliation of Non-GAAP measures.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS

	Three Months Ended																				Nine Months Ended
	Sep				Jun				Mar				Dec				Sep				Sep				Sep
	2023				2023				2023				2022				2022				2023				2022
Operating Earnings:
Net income (GAAP)	$	2,067			$	8,836			$	11,500			$	13,004			$	11,543			$	22,403			$	30,018
Noninterest income:
Securities (gains) losses, net		6,801				—				—				(144	)			—				6,801				—
Noninterest expenses:
Merger related and restructuring expenses		110				—				—				(45	)			87				110				607
Income taxes:
Income tax effect of adjustments		(1,785	)			—				—				49				(22	)			(1,785	)			(157	)
Operating earnings (Non-GAAP)	$	7,193			$	8,836			$	11,500			$	12,864			$	11,608			$	27,529			$	30,468
Operating earnings per common share (Non-GAAP):
Basic	$	0.43			$	0.53			$	0.69			$	0.77			$	0.69			$	1.64			$	1.82
Diluted		0.43				0.52				0.68				0.76				0.69				1.63				1.81
Operating Noninterest Income:
Noninterest income (GAAP)	$	691			$	7,130			$	6,925			$	7,125			$	6,250			$	14,746			$	20,590
Securities (gains) losses, net		6,801				—				—				(144	)			—				6,801				—
Operating noninterest income (Non-GAAP)	$	7,492			$	7,130			$	6,925			$	6,981			$	6,250			$	21,547			$	20,590
Operating noninterest income (Non-GAAP)/average assets1		0.62		%		0.61		%		0.59		%		0.60		%		0.52		%		0.61		%		0.59		%
Operating Noninterest Expense:
Noninterest expense (GAAP)	$	28,516			$	27,410			$	27,529			$	27,416			$	27,230			$	83,455			$	78,874
Merger related and restructuring expenses		(110	)			—				—				45				(87	)			(110	)			(607	)
Operating noninterest expense (Non-GAAP)	$	28,406			$	27,410			$	27,529			$	27,461			$	27,143			$	83,345			$	78,267
Operating noninterest expense (Non-GAAP)/average assets2		2.36		%		2.34		%		2.33		%		2.35		%		2.24		%		2.34		%		2.22		%
Operating Pre-provision Net revenue ("PPNR") Earnings:
Net interest income (GAAP)	$	31,006			$	31,575			$	35,982			$	37,612			$	36,708			$	98,563			$	99,889
Operating noninterest income (Non-GAAP)		7,492				7,130				6,925				6,981				6,250				21,547				20,590
Operating noninterest expense (Non-GAAP)		(28,406	)			(27,410	)			(27,529	)			(27,461	)			(27,143	)			(83,345	)			(78,267	)
Operating PPNR earnings (Non-GAAP)	$	10,092			$	11,295			$	15,378			$	17,132			$	15,815			$	36,765			$	42,212
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3		0.60		%		0.75		%		0.97		%		1.10		%		0.96		%		0.77		%		0.87		%
Operating PPNR return on average assets (Non-GAAP)4		0.84		%		0.96		%		1.30		%		1.46		%		1.30		%		1.03		%		1.20		%
Return on average tangible common equity (Non-GAAP)5		2.43		%		10.57		%		14.45		%		16.65		%		14.36		%		9.02		%		12.60		%
Operating return on average shareholders' equity (Non-GAAP)6		6.41		%		7.98		%		10.79		%		12.15		%		10.83		%		8.35		%		9.60		%
Operating return on average tangible common equity (Non-GAAP)7		8.46		%		10.57		%		14.45		%		16.47		%		14.44		%		11.09		%		12.78		%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)		89.96		%		70.82		%		64.16		%		61.28		%		63.39		%		73.65		%		65.47		%
Adjustment for taxable equivalent yields		(0.27	)	%		(0.18	)	%		(0.14	)	%		(0.22	)	%		(0.25	)	%		(0.18	)	%		(0.28	)	%
Adjustment for securities (gains) losses		15.89		%		—		%		—		%		(0.20	)	%		—		%		4.17		%		—		%
Adjustment for merger related income and costs		(31.98	)	%		—		%		—		%		0.50		%		(0.21	)	%		(8.41	)	%		(0.50	)	%
Operating efficiency ratio (Non-GAAP)		73.60		%		70.64		%		64.02		%		61.36		%		62.93		%		69.23		%		64.69		%

¹Operating noninterest income (Non-GAAP) is annualized and divided by average assets.
²Operating noninterest expense (Non-GAAP) is annualized and divided by average assets.
³Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.
⁴Operating PPNR return on average assets (Non-GAAP) is the annualized operating PPNR earnings (Non-GAAP) divided by average assets.
⁵Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
⁶Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.
⁷Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS

	Three Months Ended																				Nine Months Ended
	Sep				Jun				Mar				Dec				Sep				Sep				Sep
	2023				2023				2023				2022				2022				2023				2022
Tangible Common Equity:
Shareholders' equity (GAAP)	$	446,652			$	444,847			$	443,399			$	432,452			$	414,711			$	446,652			$	414,711
Less goodwill and other intangible assets		107,792				108,439				109,114				109,772				110,460				107,792				110,460
Tangible common equity (Non-GAAP)	$	338,860			$	336,408			$	334,285			$	322,680			$	304,251			$	338,860			$	304,251
Average Tangible Common Equity:
Average shareholders' equity (GAAP)	$	445,432			$	444,283			$	432,382			$	420,037			$	425,365			$	440,747			$	424,336
Less average goodwill and other intangible assets		108,194				108,851				109,537				110,206				106,483				108,856				105,698
Average tangible common equity (Non-GAAP)	$	337,238			$	335,432			$	322,845			$	309,831			$	318,882			$	331,891			$	318,638
Tangible Book Value per Common Share:
Book value per common share (GAAP)	$	26.28			$	26.16			$	26.08			$	25.59			$	24.56			$	26.28			$	24.56
Adjustment due to goodwill and other intangible assets		(6.34	)			(6.38	)			(6.42	)			(6.50	)			(6.54	)			(6.34	)			(6.54	)
Tangible book value per common share (Non-GAAP)1	$	19.94			$	19.78			$	19.66			$	19.09			$	18.02			$	19.94			$	18.02
Tangible Common Equity to Tangible Assets:
Total Assets (GAAP)	$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498			$	4,796,911			$	4,797,171			$	4,796,911
Less goodwill and other intangibles		107,792				108,439				109,114				109,772				110,460				107,792				110,460
Tangible Assets (Non-GAAP)	$	4,689,379			$	4,637,361			$	4,660,691			$	4,527,726			$	4,686,451			$	4,689,379			$	4,686,451
Tangible common equity to tangible assets (Non-GAAP)		7.23	%			7.25	%			7.17	%			7.13	%			6.49	%			7.23	%			6.49	%

¹Tangible book value per share (Non-GAAP) is computed by dividing total stockholder's equity, less goodwill and other intangible assets, by common shares outstanding.