SMBK SmartFinancial Inc

SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NASDAQ: SMBK), today announced net income of $13.0 million, or $0.77 per diluted common share, for the fourth quarter of 2022, compared to net income of $6.7 million, or $0.40 per diluted common share, for the fourth quarter of 2021, and compared to prior quarter net income of $11.5 million, or $0.68 per diluted common share. Operating earnings1, which excludes securities gains and merger related and restructuring expenses, net of tax adjustments, totaled $12.9 million, or $0.76 per diluted common share, in the fourth quarter of 2022, compared to $8.7 million, or $0.52 per diluted common share, in the fourth quarter of 2021, and compared to $11.6 million, or $0.69 per diluted common share, in the third quarter of 2022.

Billy Carroll, President & CEO, stated: “I am extremely pleased with our company’s results for the quarter and for the year. We wrapped-up 2022 with another record revenue quarter while continuing to gain operating leverage and build on the great work being done to diversify revenue, build out our ancillary lines of business, and maintain outstanding credit metrics. The core momentum our team is building is outstanding and will position us well as we enter 2023.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “We are very proud of our strong quarter and how we finished 2022. The team did a phenomenal job in all areas. The bank continues to show excellent credit, solid growth and strong profits. We couldn’t be more excited about how we are positioned to enter 2023.”

Net Interest Income and Net Interest Margin

Net interest income was $37.6 million for the fourth quarter of 2022, compared to $36.7 million for the prior quarter. Average earning assets totaled $4.27 billion, a decrease of $177.5 million. The decrease in average earnings assets was primarily driven by a decrease in average interest-earning cash of $264.8 million and average securities of $26.2 million. Partially offsetting the decrease in average earning assets was an increase in average loans and leases of $113.4 million. Average interest-bearing liabilities decreased $123.7 million attributable to a decrease in deposits of $128.9 million, offset by increased borrowings of $5.2 million.

The tax equivalent net interest margin was 3.51% for the fourth quarter of 2022, compared to 3.29% for the prior quarter. The tax equivalent net interest margin was positively impacted by the continued deployment of excess cash and cash equivalents into loans and leases and higher yields on cash deposits held in Federal Reserve System (the “Federal Reserve”). Additionally, the yield on interest-earning assets was positively impacted due to an increase quarter-over-quarter in loan discount accretion of $1.2 million.

The cost of interest-bearing liabilities increased to 1.27% for the fourth quarter of 2022 compared to 0.70% for the prior quarter. The cost of average interest-bearing deposits was 1.18% for the fourth quarter of 2022 compared to 0.62% for the prior quarter, an increase of 56 basis points, primarily attributable to both the impact of rising Federal Reserve rates and increased pricing competition. The cost of total deposits for the fourth quarter of 2022 was 0.85% compared to 0.45% in the prior quarter.

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

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

		Three Months Ended
		Dec		Sep		Increase
Selected Interest Rates and Yields		2022		2022		(Decrease)
Yield on loans and leases		5.05	%	4.59	%	0.46	%
Yield on earning assets, FTE		4.41	%	3.79	%	0.62	%
Cost of interest-bearing deposits		1.18	%	0.62	%	0.56	%
Cost of total deposits		0.85	%	0.45	%	0.40	%
Cost of interest-bearing liabilities		1.27	%	0.70	%	0.57	%
Net interest margin, FTE		3.51	%	3.29	%	0.22	%

Provision for Loan and Lease Losses and Credit Quality

At December 31, 2022, the allowance for loan and lease losses was $23.3 million. The allowance for loan and lease losses to total loans and leases was 0.72% as of December 31, 2022, compared to 0.73% as of September 30, 2022. For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.73% as of December 31, 2022, and 0.75% at September 30, 2022. The remaining discounts on the acquired loan and lease portfolio totaled $13.1 million, or 4.41% of acquired loans and leases as of December 31, 2022.  

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

			Three Months Ended
				Dec				Sep
	Provision for Loan and Lease Losses Rollforward			2022				2022				Change
	Beginning balance		$	22,769			$	21,938			$	831
	Charge-offs			(331	)			(231	)			(100	)
	Recoveries			108				88				20
	Net charge-offs			(223	)			(143	)			(80	)
	Provision			788				974				(186	)
	Ending balance		$	23,334			$	22,769			$	565
	Allowance for loan losses to total loans and leases, gross			0.72		%		0.73		%		(0.01	)	%

Nonperforming loans and leases as a percentage of total loans and leases was 0.09% as of December 31, 2022, a decrease of 2 basis points from the 0.11% reported in the third quarter of 2022. 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 0.10% as of December 31, 2022, and September 30, 2022, respectively 

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

			Three Months Ended
			Dec			Sep				Increase
	Credit Quality		2022			2022				(Decrease)
	Nonaccrual loans and leases		$	2,808		$	3,379		$	(571	)
	Loans and leases past due 90 days or more and still accruing			142			-			142
	Total nonperforming loans and leases			2,950			3,379			(429	)
	Other real estate owned			1,436			1,226			210
	Other repossessed assets			422			-			422
	Total nonperforming assets		$	4,808		$	4,605		$	203
	Nonperforming loans and leases to total loans and leases, gross			0.09	%		0.11	%		(0.02	)	%
	Nonperforming assets to total assets			0.10	%		0.10	%		-		%

Noninterest Income

Noninterest income increased $875 thousand to $7.1 million for the fourth quarter of 2022 compared to $6.3 million for the prior quarter. During the fourth quarter of 2022, the primary components of the changes in noninterest income were as follows:

• Decrease in service charges on deposit accounts, related to lower volume of transaction fees;
• Net gain on sale of securities and dissolution of associated derivative instrument;
• Increase in insurance commissions, driven by the addition of Sunbelt Group, LLC (“Sunbelt”) and organic growth; and
• Increase in other, primarily related to increased fees from capital markets activity.

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

		Three Months Ended
		Dec			Sep				Increase
Noninterest Income		2022			2022				(Decrease)
Service charges on deposit accounts		$	1,477		$	1,611		$	(134	)
Gain (loss) on sale of securities, net			144			-			144
Mortgage banking income			77			170			(93	)
Investment services			958			1,051			(93	)
Insurance commissions			1,233			864			369
Interchange and debit card transaction fees			1,328			1,356			(28	)
Other			1,908			1,198			710
Total noninterest income		$	7,125		$	6,250		$	875

Noninterest Expense

Noninterest expense increased $186 thousand to $27.4 million for the fourth quarter of 2022 compared to $27.2 million for the prior quarter. During the fourth quarter of 2022, the primary components of the changes in noninterest expense were as follows:

• Decrease in occupancy and equipment as a result of lower utility expenses (seasonality);
• Increase in data processing and technology as a result of enhancements to core systems; and
• Increase in professional services, related to higher audit expenses.

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

		Three Months Ended
		Dec				Sep				Increase
Noninterest Expense		2022				2022				(Decrease)
Salaries and employee benefits		$	16,384			$	16,317		$	67
Occupancy and equipment			3,015				3,167			(152	)
FDIC insurance			650				705			(55	)
Other real estate and loan related expenses			517				565			(48	)
Advertising and marketing			308				288			20
Data processing and technology			2,097				1,872			225
Professional services			981				822			159
Amortization of intangibles			688				650			38
Merger related and restructuring expenses			(45	)			87			(132	)
Other			2,821				2,757			64
Total noninterest expense		$	27,416			$	27,230		$	186

Income Tax Expense

Income tax expense was $3.5 million for the fourth quarter of 2022, an increase of $318 thousand, compared to $3.2 million for the prior quarter.

The effective tax rate was 21.35% for the fourth quarter of 2022 and 21.76% for the prior quarter.

Balance Sheet Trends

Total assets were $4.61 billion at December 31, 2022 and 2021, respectively. Total assets remained unchanged period-over-period; however, the bank experienced a shift in its asset mix during the fourth quarter 2022. The Company had increases primarily in the following categories: loans and leases, net of $531.7 million, securities of $210.4 million, premises and equipment of $6.6 million, goodwill and other intangibles, net of $3.9 million, attributable to Sunbelt purchase and other assets of $30.2 million. These increases were offset by a decrease in cash and cash equivalents of $778.7 million, primarily from the funding of loans and leases and purchase of securities.

Total liabilities were $4.18 billion for the periods ended December 31, 2022 and 2021, respectively. Total liabilities remained unchanged period-over-period; however, the bank experienced organic deposit growth of $55.2 million and a decrease in borrowings of $70.3 million.

Shareholders’ equity at December 31, 2022 totaled $432.5 million, an increase of $3.0 million, from December 31, 2021. The increase in shareholders’ equity was primarily driven by net income of $43.0 million for the year ended December 31, 2022, offset by the negative impact on accumulated other comprehensive income (loss) of $36.8 million and dividends paid of $4.7 million. Tangible book value per share2 was $19.09 at December 31, 2022, compared to $19.26 at December 31, 2021. Tangible common equity1 as a percentage of tangible assets1 was 7.17% at December 31, 2022, compared with 7.18% at December 31, 2021.

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

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

		Dec			Dec			Increase
Selected Balance Sheet Information		2022			2021			(Decrease)
Total assets		$	4,612,913		$	4,611,579		$	1,334
Total liabilities			4,180,461			4,182,149			(1,688	)
Total equity			432,452			429,430			3,022
Securities			769,842			559,422			210,420
Loans and leases			3,229,042			2,693,397			535,645
Deposits			4,077,100			4,021,938			55,162
Borrowings			17,275			87,585			(70,310	)

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2022 on Monday, January 23, 2023, and will host a conference call on Tuesday, January 24, 2023, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 or (646) 904-5544 and entering the access code, 179408. A replay of the conference call will be available through March 25, 2023, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 675735. 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 the Florida Panhandle. 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-tax pre-provision 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-tax pre-provision 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-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision 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-tax pre-provision 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, including statements regarding the effects of the COVID-19 pandemic and related variants on the Company’s business and financial results and conditions, 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) a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget; (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) the impact of the COVID-19 pandemic and related variants on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (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; 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 SubsidiaryCondensed Consolidated Financial Information - (unaudited)(dollars in thousands)

		Ending Balances
		Dec				Sep				Jun				Mar				Dec
		2022				2022				2022				2022				2021
Assets:
Cash and cash equivalents		$	266,424			$	543,029			$	654,945			$	763,968			$	1,045,077
Securities available-for-sale, at fair value			483,893				519,723				524,864				540,483				482,453
Securities held-to-maturity, at amortized cost			285,949				287,104				288,363				289,532				76,969
Other investments			15,530				15,528				16,569				16,499				16,494
Loans held for sale			1,752				2,742				1,707				5,894				5,103
Loans and leases			3,229,042				3,099,116				2,994,074				2,806,026				2,693,397
Less: Allowance for loan and lease losses			(23,334	)			(22,769	)			(21,938	)			(20,078	)			(19,352	)
Loans and leases, net			3,205,708				3,076,347				2,972,136				2,785,948				2,674,045
Premises and equipment, net			92,511				91,944				89,950				84,793				85,958
Other real estate owned			1,436				1,226				1,612				1,612				1,780
Goodwill and other intangibles, net			109,772				110,460				104,582				105,215				105,852
Bank owned life insurance			81,470				81,001				80,537				80,074				79,619
Other assets			68,468				67,807				52,848				44,561				38,229
Total assets		$	4,612,913			$	4,796,911			$	4,788,113			$	4,718,579			$	4,611,579
Liabilities:
Deposits:
Noninterest-bearing demand		$	1,072,449			$	1,186,209			$	1,162,843			$	1,093,933			$	1,055,125
Interest-bearing demand			965,911				962,901				999,893				975,272				899,158
Money market and savings			1,583,481				1,663,355				1,607,714				1,573,101				1,493,007
Time deposits			455,259				467,944				511,182				549,047				574,648
Total deposits			4,077,100				4,280,409				4,281,632				4,191,353				4,021,938
Borrowings			17,275				18,423				12,549				36,713				87,585
Subordinated debt			42,015				41,994				41,973				41,952				41,930
Other liabilities			44,071				41,374				31,532				28,519				30,696
Total liabilities			4,180,461				4,382,200				4,367,686				4,298,537				4,182,149
Shareholders’ Equity:
Common stock			16,901				16,888				16,898				16,893				16,803
Additional paid-in capital			294,330				293,907				293,815				293,376				292,937
Retained earnings			156,545				144,723				134,362				125,329				118,247
Accumulated other comprehensive income (loss)			(35,324	)			(40,807	)			(24,648	)			(15,556	)			1,443
Total shareholders’ equity			432,452				414,711				420,427				420,042				429,430
Total liabilities & shareholders’ equity		$	4,612,913			$	4,796,911			$	4,788,113			$	4,718,579			$	4,611,579

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

	Three Months Ended																Year Ended
	Dec				Sep			June			Mar			Dec			Dec			Dec
	2022				2022			2022			2022			2021			2022			2021
Interest income:
Loans and leases, including fees	$	40,082			$	35,127		$	31,530		$	29,643		$	30,567		$	136,381		$	118,582
Investment securities:
Taxable		3,337				3,135			2,908			2,418			1,341			11,799			3,813
Tax-exempt		797				561			441			368			322			2,166			1,215
Federal funds sold and other earning assets		3,098				3,474			1,430			486			547			8,488			1,622
Total interest income		47,314				42,297			36,309			32,915			32,777			158,834			125,232
Interest expense:
Deposits		8,844				4,866			2,504			2,014			2,116			18,228			8,849
Borrowings		232				97			117			157			180			602			540
Subordinated debt		626				626			626			626			626			2,503			2,449
Total interest expense		9,702				5,589			3,247			2,797			2,922			21,333			11,838
Net interest income		37,612				36,708			33,062			30,118			29,855			137,501			113,394
Provision for loan and lease losses		788				974			1,250			1,006			422			4,018			1,633
Net interest income after provision for loan and lease losses		36,824				35,734			31,812			29,112			29,433			133,483			111,761
Noninterest income:
Service charges on deposit accounts		1,477				1,611			1,446			1,319			1,372			5,853			4,650
Gain (loss) on sale of securities, net		144				—			—			—			—			144			45
Mortgage banking		77				170			471			834			803			1,552			4,040
Investment services		958				1,051			1,065			1,070			621			4,144			2,167
Insurance commissions		1,233				864			598			901			517			3,595			3,285
Interchange and debit card transaction fees		1,328				1,356			1,467			1,284			1,445			5,435			4,284
Other		1,908				1,198			2,182			1,703			2,048			6,992			5,478
Total noninterest income		7,125				6,250			7,229			7,111			6,806			27,715			23,949
Noninterest expense:
Salaries and employee benefits		16,384				16,317			15,673			15,046			14,990			63,420			51,656
Occupancy and equipment		3,015				3,167			2,793			3,059			3,026			12,034			10,196
FDIC insurance		650				705			676			641			567			2,672			1,833
Other real estate and loan related expense		517				565			636			729			583			2,446			2,098
Advertising and marketing		308				288			327			369			176			1,293			830
Data processing and technology		2,097				1,872			1,728			1,586			1,722			7,283			6,364
Professional services		981				822			745			1,242			847			3,790			3,147
Amortization of intangibles		688				650			633			637			660			2,607			2,256
Merger related and restructuring expenses		(45	)			87			81			439			2,762			562			3,701
Other		2,821				2,757			2,634			1,970			2,490			10,183			9,310
Total noninterest expense		27,416				27,230			25,926			25,718			27,823			106,290			91,391
Income before income taxes		16,533				14,754			13,115			10,505			8,416			54,908			44,319
Income tax expense		3,529				3,211			2,900			2,246			1,761			11,886			9,529
Net income	$	13,004			$	11,543		$	10,215		$	8,259		$	6,655		$	43,022		$	34,790
Earnings per common share:
Basic	$	0.78			$	0.69		$	0.61		$	0.49		$	0.40		$	2.57		$	2.23
Diluted	$	0.77			$	0.68		$	0.61		$	0.49		$	0.40		$	2.55		$	2.22
Weighted average common shares outstanding:
Basic		16,758,706				16,749,255			16,734,930			16,718,371			16,699,010			16,740,450			15,572,537
Diluted		16,884,253				16,872,022			16,867,774			16,858,288			16,846,315			16,871,369			15,699,215

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

		Three Months Ended
		December 31, 2022								September 30, 2022								December 31, 2021
		Average						Yield/		Average						Yield/		Average						Yield/
		Balance			Interest			Cost		Balance			Interest			Cost		Balance			Interest			Cost
Assets:
Loans and leases, including fees1		$	3,150,493		$	40,082		5.05	%	$	3,037,092		$	35,127		4.59	%	$	2,675,059		$	30,567		4.53	%
Taxable securities			701,787			3,337		1.89	%		720,114			3,135		1.73	%		339,371			1,341		1.57	%
Tax-exempt securities2			93,721			958		4.06	%		101,559			732		2.86	%		102,989			479		1.85	%
Federal funds sold and other earning assets			322,970			3,098		3.81	%		587,755			3,474		2.34	%		965,899			547		0.22	%
Total interest-earning assets			4,268,971			47,475		4.41	%		4,446,520			42,468		3.79	%		4,083,318			32,934		3.20	%
Noninterest-earning assets			372,864								362,869								383,783
Total assets		$	4,641,835							$	4,809,389							$	4,467,101
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits		$	924,320			3,141		1.35	%	$	966,437			1,956		0.80	%	$	853,763			403		0.19	%
Money market and savings deposits			1,587,688			4,855		1.21	%		1,632,510			2,298		0.56	%		1,428,472			920		0.26	%
Time deposits			459,996			848		0.73	%		501,919			612		0.48	%		583,165			793		0.54	%
Total interest-bearing deposits			2,972,004			8,844		1.18	%		3,100,866			4,866		0.62	%		2,865,400			2,116		0.29	%
Borrowings			18,309			232		5.03	%		13,141			97		2.93	%		88,828			180		0.80	%
Subordinated debt			42,002			626		5.91	%		41,980			626		5.91	%		41,917			626		5.92	%
Total interest-bearing liabilities			3,032,315			9,702		1.27	%		3,155,987			5,589		0.70	%		2,996,145			2,922		0.39	%
Noninterest-bearing deposits			1,146,374								1,192,813								1,016,438
Other liabilities			43,109								35,224								27,710
Total liabilities			4,221,798								4,384,024								4,040,293
Shareholders’ equity			420,037								425,365								426,808
Total liabilities and shareholders’ equity		$	4,641,835							$	4,809,389							$	4,467,101
Net interest income, taxable equivalent					$	37,773							$	36,879							$	30,012
Interest rate spread								3.14	%							3.09	%							2.81	%
Tax equivalent net interest margin								3.51	%							3.29	%							2.92	%
Percentage of average interest-earning assets to average interest-bearing liabilities								140.78	%							140.89	%							136.29	%
Percentage of average equity to average assets								9.05	%							8.84	%							9.55	%

1 Includes average balance of $3.3 million, $4.8 million, and $80.5 million in PPP loans for the quarters ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.   2 Yields computed on tax-exempt instruments on a tax equivalent basis include $161 thousand, $171 thousand and $156 thousand of taxable equivalent income for the quarters ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

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

		Year Ended
		December 31, 2022									December 31, 2021
		Average						Yield/			Average						Yield/
		Balance			Interest			Cost			Balance			Interest			Cost
Assets:
Loans and leases, including fees1		$	2,948,511		$	136,381			4.63	%	$	2,540,577		$	118,582		4.67	%
Taxable securities			688,428			11,799			1.71	%		207,459			3,813		1.84	%
Tax-exempt securities2			100,566			2,831			2.82	%		92,708			1,817		1.96	%
Federal funds sold and other earning assets			577,593			8,488			1.47	%		680,909			1,622		0.24	%
Total interest-earning assets			4,315,098			159,499			3.70	%		3,521,653			125,834		3.57	%
Noninterest-earning assets			373,026									317,457
Total assets		$	4,688,124								$	3,839,110
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits		$	945,414			6,278			0.66	%	$	737,251			1,378		0.19	%
Money market and savings deposits			1,576,170			9,137			0.58	%		1,191,916			3,501		0.29	%
Time deposits			513,416			2,813			0.55	%		533,994			3,970		0.74	%
Total interest-bearing deposits			3,035,000			18,228			0.60	%		2,463,161			8,849		0.36	%
Borrowings			32,986			602			1.83	%		83,105			540		0.65	%
Subordinated debt			41,970			2,503			5.96	%		40,221			2,449		6.09	%
Total interest-bearing liabilities			3,109,956			21,333			0.69	%		2,586,487			11,838		0.46	%
Noninterest-bearing deposits			1,120,555									841,746
Other liabilities			34,361									23,189
Total liabilities			4,264,872									3,451,422
Shareholders’ equity			423,252									387,688
Total liabilities and shareholders’ equity		$	4,688,124								$	3,839,110
Net interest income, taxable equivalent					$	138,166								$	113,996
Interest rate spread									3.01	%							3.12	%
Tax equivalent net interest margin									3.20	%							3.24	%
Percentage of average interest-earning assets to average interest-bearing liabilities									138.75	%							136.16	%
Percentage of average equity to average assets									9.03	%							10.10	%

1 Includes average balance of $14.1 million and $196.1 million in PPP loans for the year ended December 31, 2022, and 2021, respectively.2 Yields computed on tax-exempt instruments on a tax equivalent basis include $665 thousand and $602 thousand of taxable equivalent income for the year ended December 31, 2022, and 2021, respectively.

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

		As of and for The Three Months Ended
		Dec			Sep			Jun				Mar			Dec
		2022			2022			2022				2022			2021
Composition of Loans and Leases:
Commercial real estate:
owner occupied		$	759,456		$	714,734		$	684,250			$	612,675		$	590,064
non-owner occupied			843,720			822,317			850,338				863,181			794,092
Commercial real estate, total			1,603,176			1,537,051			1,534,588				1,475,856			1,384,156
Commercial & industrial			551,867			514,280			483,588				461,153			488,024
Construction & land development			402,501			405,007			364,368				314,654			278,386
Consumer real estate			587,977			562,408			533,582				483,229			477,272
Leases			67,427			64,798			63,264				59,892			53,708
Consumer and other			16,094			15,572			14,684				11,242			11,851
Total loans and leases		$	3,229,042		$	3,099,116		$	2,994,074			$	2,806,026		$	2,693,397
Asset Quality and Additional Loan Data:
Nonperforming loans and leases		$	2,950		$	3,379		$	3,413			$	3,342		$	3,188
Other real estate owned			1,436			1,226			1,612				1,612			1,780
Other repossessed assets			422			—			17				27			90
Total nonperforming assets		$	4,808		$	4,605		$	5,042			$	4,981		$	5,058
Restructured loans and leases not included in nonperforming loans and leases		$	101		$	108		$	678			$	625		$	206
Net charge-offs to average loans and leases (annualized)			0.03	%		0.02	%		(0.09	)	%		0.04	%		0.05	%
Allowance for loan and leases losses to loans and leases			0.72	%		0.73	%		0.73		%		0.72	%		0.72	%
Nonperforming loans and leases to total loans and leases, gross			0.09	%		0.11	%		0.11		%		0.12	%		0.12	%
Nonperforming assets to total assets			0.10	%		0.10	%		0.11		%		0.11	%		0.11	%
Acquired loan and lease fair value discount balance		$	13,128		$	14,465		$	14,737			$	14,913		$	15,483
Accretion income on acquired loans and leases			1,396			148			225				389			457
PPP net fees deferred balance			122			140			301				972			2,038
PPP net fees recognized			17			163			669				1,066			1,725
Capital Ratios:
Equity to Assets			9.37	%		8.65	%		8.78		%		8.90	%		9.31	%
Tangible common equity to tangible assets (Non-GAAP)1			7.17	%		6.49	%		6.74		%		6.82	%		7.18	%
SmartFinancial, Inc.2
Tier 1 leverage			7.95	%		7.40	%		7.48		%		7.41	%		7.45	%
Common equity Tier 1			9.73	%		9.65	%		9.95		%		10.30	%		10.56	%
Tier 1 capital			9.73	%		9.65	%		9.95		%		10.30	%		10.56	%
Total capital			11.49	%		11.44	%		11.80		%		12.22	%		12.55	%
SmartBank			Estimated3
Tier 1 leverage			8.90	%		8.27	%		8.33		%		8.24	%		8.23	%
Common equity Tier 1			10.90	%		10.78	%		11.08		%		11.46	%		11.66	%
Tier 1 capital			10.90	%		10.78	%		11.08		%		11.46	%		11.66	%
Total capital			11.53	%		11.41	%		11.72		%		12.08	%		12.29	%

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 SubsidiaryCondensed 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																Year Ended
	Dec			Sep			Jun			Mar			Dec				Dec			Dec
	2022			2022			2022			2022			2021				2022			2021
Selected Performance Ratios (Annualized):
Return on average assets		1.11	%		0.95	%		0.87	%		0.73	%		0.59	%			0.92	%		0.91	%
Return on average shareholders’ equity		12.28	%		10.77	%		9.76	%		7.83	%		6.19	%			10.16	%		8.97	%
Return on average tangible common equity¹		16.65	%		14.36	%		13.02	%		10.39	%		8.18	%			13.60	%		11.84	%
Noninterest income / average assets		0.61	%		0.52	%		0.62	%		0.63	%		0.60	%			0.59	%		0.62	%
Noninterest expense / average assets		2.34	%		2.25	%		2.21	%		2.27	%		2.47	%			2.27	%		2.38	%
Efficiency ratio		61.28	%		63.39	%		64.35	%		69.08	%		75.89	%			64.33	%		66.54	%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		1.10	%		0.96	%		0.88	%		0.76	%		0.77	%			0.92	%		0.98	%
Operating PTPP return on average assets1		1.46	%		1.30	%		1.23	%		1.05	%		1.03	%			1.27	%		1.29	%
Operating return on average shareholders’ equity1		12.15	%		10.83	%		9.82	%		8.14	%		8.09	%			10.24	%		9.67	%
Operating return on average tangible common equity1		16.47	%		14.44	%		13.09	%		10.80	%		10.70	%			13.69	%		12.77	%
Operating efficiency ratio1		61.36	%		62.93	%		63.88	%		67.60	%		68.07	%			63.79	%		63.59	%
Operating noninterest income / average assets1		0.60	%		0.52	%		0.62	%		0.63	%		0.60	%			0.59	%		0.62	%
Operating noninterest expense / average assets1		2.35	%		2.24	%		2.21	%		2.23	%		2.23	%			2.26	%		2.28	%
Selected Interest Rates and Yields:
Yield on loans and leases		5.05	%		4.59	%		4.40	%		4.41	%		4.53	%			4.63	%		4.67	%
Yield on earning assets, FTE		4.41	%		3.79	%		3.39	%		3.18	%		3.20	%			3.70	%		3.57	%
Cost of interest-bearing deposits		1.18	%		0.62	%		0.33	%		0.27	%		0.29	%			0.60	%		0.36	%
Cost of total deposits		0.85	%		0.45	%		0.24	%		0.20	%		0.22	%			0.44	%		0.27	%
Cost of interest-bearing liabilities		1.27	%		0.70	%		0.42	%		0.36	%		0.39	%			0.69	%		0.46	%
Net interest margin, FTE		3.51	%		3.29	%		3.08	%		2.91	%		2.92	%			3.20	%		3.24	%
Per Common Share:
Net income, basic	$	0.78		$	0.69		$	0.61		$	0.49		$	0.40			$	2.57		$	2.23
Net income, diluted		0.77			0.68			0.61			0.49			0.40				2.55			2.22
Operating earnings, basic¹		0.77			0.69			0.61			0.51			0.52				2.59			2.41
Operating earnings, diluted¹		0.76			0.69			0.61			0.51			0.52				2.57			2.39
Book value		25.59			24.56			24.88			24.86			25.56				25.59			25.56
Tangible book value¹		19.09			18.02			18.69			18.64			19.26				19.09			19.26
Common shares outstanding		16,900,805			16,887,555			16,898,405			16,893,282			16,802,990				16,900,805			16,802,990

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

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

		Three Months Ended																					Year Ended
		Dec				Sep				Jun				Mar				Dec					Dec				Dec
		2022				2022				2022				2022				2021					2022				2021
Operating Earnings:
Net income (GAAP)		$	13,004			$	11,543			$	10,215			$	8,259			$	6,655				$	43,022			$	34,790
Noninterest income:
Securities gains (losses), net			(144	)			—				—				—				—					(144	)			(45	)
Noninterest expenses:
Merger related and restructuring expenses			(45	)			87				81				439				2,762					562				3,701
Income taxes:
Income tax effect of adjustments			49				(22	)			(21	)			(113	)			(713	)				(108	)			(944	)
Operating earnings (Non-GAAP)		$	12,864			$	11,608			$	10,275			$	8,585			$	8,704				$	43,332			$	37,502
Operating earnings per common share (Non-GAAP):
Basic		$	0.77			$	0.69			$	0.61			$	0.51			$	0.52				$	2.59			$	2.41
Diluted			0.76				0.69				0.61				0.51				0.52					2.57				2.39
Operating Noninterest Income:
Noninterest income (GAAP)		$	7,125			$	6,250			$	7,229			$	7,111			$	6,806				$	27,715			$	23,949
Securities gains (losses), net			(144	)			—				—				—				—					(144	)			(45	)
Operating noninterest income (Non-GAAP)		$	6,981			$	6,250			$	7,229			$	7,111			$	6,806				$	27,571			$	23,904
Operating noninterest income (Non-GAAP)/average assets1			0.60		%		0.52		%		0.62		%		0.63		%		0.60		%			0.59		%		0.62		%
Operating Noninterest Expense:
Noninterest expense (GAAP)		$	27,416			$	27,230			$	25,926			$	25,718			$	27,823				$	106,290			$	91,391
Merger related and restructuring expenses			45				(87	)			(81	)			(439	)			(2,762	)				(562	)			(3,701	)
Operating noninterest expense (Non-GAAP)		$	27,461			$	27,143			$	25,845			$	25,279			$	25,061				$	105,728			$	87,690
Operating noninterest expense (Non-GAAP)/average assets2			2.35		%		2.24		%		2.21		%		2.23		%		2.23		%			2.26		%		2.28		%
Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP)		$	37,612			$	36,708			$	33,062			$	30,118			$	29,855				$	137,501			$	113,394
Operating noninterest income (Non-GAAP)			6,981				6,250				7,229				7,111				6,806					27,571				23,904
Operating noninterest expense (Non-GAAP)			(27,461	)			(27,143	)			(25,845	)			(25,279	)			(25,061	)				(105,728	)			(87,690	)
Operating PTPP earnings (Non-GAAP)		$	17,132			$	15,815			$	14,446			$	11,950			$	11,600				$	59,344			$	49,608
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3			1.10		%		0.96		%		0.88		%		0.76		%		0.77		%			0.92		%		0.98		%
Operating PTPP return on average assets (Non-GAAP)4			1.46		%		1.30		%		1.23		%		1.05		%		1.03		%			1.27		%		1.29		%
Return on average tangible common equity (Non-GAAP)5			16.65		%		14.36		%		13.02		%		10.39		%		8.18		%			13.60		%		11.84		%
Operating return on average shareholders’ equity (Non-GAAP)6			12.15		%		10.83		%		9.82		%		8.14		%		8.09		%			10.24		%		9.67		%
Operating return on average tangible common equity (Non-GAAP)7			16.47		%		14.44		%		13.09		%		10.80		%		10.70		%			13.69		%		12.77		%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)			61.28		%		63.39		%		64.35		%		69.08		%		75.89		%			64.33		%		66.54		%
Adjustment for taxable equivalent yields			(0.22	)	%		(0.25	)	%		(0.27	)	%		(0.31	)	%		(0.32	)	%			(0.26	)	%		(0.29	)	%
Adjustment for securities gains (losses)			(0.20	)	%		—		%		—		%		—		%		—		%			(0.06	)	%		(0.02	)	%
Adjustment for merger related income and costs			0.50		%		(0.21	)	%		(0.20	)	%		(1.17	)	%		(7.50	)	%			(0.22	)	%		(2.64	)	%
Operating efficiency ratio (Non-GAAP)			61.36		%		62.93		%		63.88		%		67.60		%		68.07		%			63.79		%		63.59		%

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 PTPP return on average assets (Non-GAAP) is the annualized operating PTPP 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 SubsidiaryCondensed Consolidated Financial Information - (unaudited)(dollars in thousands)NON-GAAP RECONCILIATIONS

		Three Months Ended																					Year Ended
		Dec				Sep				Jun				Mar				Dec					Dec				Dec
		2022				2022				2022				2022				2021					2022				2021
Tangible Common Equity:
Shareholders’ equity (GAAP)		$	432,452			$	414,711			$	420,427			$	420,042			$	429,430				$	432,452			$	429,430
Less goodwill and other intangible assets			109,772				110,460				104,582				105,215				105,852					109,772				105,852
Tangible common equity (Non-GAAP)		$	322,680			$	304,251			$	315,845			$	314,827			$	323,578				$	322,680			$	323,578
Average Tangible Common Equity:
Average shareholders’ equity (GAAP)		$	420,037			$	425,365			$	419,726			$	427,945			$	426,808				$	423,252			$	387,688
Less average goodwill and other intangible assets			110,206				106,483				104,986				105,617				104,193					106,834				93,910
Average tangible common equity (Non-GAAP)		$	309,831			$	318,882			$	314,740			$	322,328			$	322,615				$	316,418			$	293,778
Tangible Book Value per Common Share:
Book value per common share (GAAP)		$	25.59			$	24.56			$	24.88			$	24.86			$	25.56				$	25.59			$	25.56
Adjustment due to goodwill and other intangible assets			(6.50	)			(6.54	)			(6.19	)			(6.23	)			(6.30	)				(6.50	)			(6.30	)
Tangible book value per common share (Non-GAAP)1		$	19.09			$	18.02			$	18.69			$	18.64			$	19.26				$	19.09			$	19.26
Tangible Common Equity to Tangible Assets:
Total Assets		$	4,612,913			$	4,796,911			$	4,788,113			$	4,718,579			$	4,611,579				$	4,612,913			$	4,611,579
Less goodwill and other intangibles			109,772				110,460				104,582				105,215				105,852					109,772				105,852
Tangible Assets (Non-GAAP):		$	4,503,141			$	4,686,451			$	4,683,531			$	4,613,364			$	4,505,727				$	4,503,141			$	4,505,727
Tangible common equity to tangible assets (Non-GAAP)			7.17	%			6.49	%			6.74	%			6.82	%			7.18	%				7.17	%			7.18	%

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.