SMBK SmartFinancial Inc

SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $11.5 million, or $0.68 per diluted common share, for the first quarter of 2023, compared to net income of $8.3 million, or $0.49 per diluted common share, for the first quarter of 2022, and compared to prior quarter net income of $13.0 million, or $0.77 per diluted common share. Operating earnings1, which excludes securities gains and merger related and restructuring expenses, net of tax adjustments, totaled $11.5 million, or $0.68 per diluted common share, in the first quarter of 2023, compared to $8.6 million, or $0.51 per diluted common share, in the first quarter of 2022, and compared to $12.9 million, or $0.76 per diluted common share, in the fourth quarter of 2022.

Billy Carroll, President & CEO, stated: “I am extremely pleased with our start to 2023, especially considering the volatile banking environment we experienced during the quarter. The stability of our balance sheet and solid earnings performance through such an unpredictable period not only reaffirmed the strength of our company, but also the fortitude of our associates. The loyalty of our client base has been outstanding as demonstrated by our quarterly deposit growth. We look forward to showing that same loyalty back to our clients as we continue to support their future financial needs.”

SmartFinancial's Chairman, Miller Welborn, concluded: "We could not be prouder of the grit and determination our associates showed this quarter. The company’s solid performance would not have been possible without management’s steady stewardship and our associates’ calm handling of client relationships. Our continued balance sheet growth with no wholesale fundings or borrowings is a tremendous testament to our effective client focused business model and the professionals in this organization."

Net Interest Income and Net Interest Margin

Net interest income was $36.0 million for the first quarter of 2023, compared to $37.6 million for the prior quarter. Average earning assets totaled $4.43 billion, an increase of $156.8 million from the prior quarter. The increase in average earnings assets was primarily driven by an increase average loans and leases of $108.0 million and average interest-earning cash of $55.3 million. Partially offsetting the increase in average earning assets was a decrease in average securities of $6.4 million. Average interest-bearing liabilities increased $260.5 million from the prior quarter, attributable to an increase in average deposits of $261.9 million, offset by a decrease in average borrowings of $1.5 million.

The tax equivalent net interest margin was 3.31% for the first quarter of 2023, compared to 3.51% for the prior quarter. The tax equivalent net interest margin was negatively impacted by the continued rise in the cost of interest-bearing liabilities from rising Federal Reserve rates and increased pricing competition. The yield on interest-earning assets for the quarter was positively impacted by $1.4 million in deferred fees from the payoff of an acquired loan.  

1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation2 7% annualized organic loan growth based on Q1 ’23 net balance loan growth of $53 million divided by Q4 ’22 loans of $3.25 billion less a $24.6 million loan participation included in the Q4 ’22 loan balance that was subsequently removed on 1/1/23.

The cost of total deposits for the first quarter of 2023 was 1.56% compared to 0.85% in the prior quarter. The cost of interest-bearing liabilities increased to 2.12% for the first quarter of 2023 compared to 1.27% for the prior quarter. The cost of average interest-bearing deposits was 2.05% for the first quarter of 2023 compared to 1.18% for the prior quarter, an increase of 87 basis points, primarily attributable to both the impact of rising Federal Reserve rates and increased pricing competition.

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

		Three Months Ended
		Mar		Dec		Increase
Selected Interest Rates and Yields		2023		2022		(Decrease)
Yield on loans and leases		5.57	%	5.05	%	0.52	%
Yield on earning assets, on a fully tax equivalent basis (FTE)		4.88	%	4.41	%	0.47	%
Cost of interest-bearing deposits		2.05	%	1.18	%	0.87	%
Cost of total deposits		1.56	%	0.85	%	0.71	%
Cost of interest-bearing liabilities		2.12	%	1.27	%	0.85	%
Net interest margin, FTE		3.31	%	3.51	%	(0.20	)%

Provision for Loan and Lease Losses and Credit Quality

At March 31, 2023, the allowance for credit losses was $32.3 million. The allowance for credit losses to total loans and leases was 0.98% as of March 31, 2023, compared to 0.72% as of December 31, 2022. The increase of 26 basis points is primarily the result of the adoption of ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”). ASU 2016-13 was adopted on January 1, 2023, and resulted in an increase of $8.7 million to the allowance for credit losses.  

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
				Mar					Dec
	Provision for Loan and Lease Losses Rollforward			2023					2022					Change
	Beginning balance		$	23,334				$	22,769				$	565
	Adoption of ASU 2016-13			8,655					-					8,655
	Adjusted beginning balance			31,989					22,769					9,220
	Charge-offs			(315	)				(331	)				16
	Recoveries			55					108					(53	)
	Net charge-offs			(260	)				(223	)				(37	)
	Provision			550					788					(238	)
	Ending balance		$	32,279				$	23,334				$	8,945
	Allowance for credit losses to total loans and leases, gross			0.98	%				0.72	%				0.26	%

Nonperforming loans and leases as a percentage of total loans and leases was 0.10% as of March 31, 2023, an increase of 1 basis point from the 0.09% reported in the fourth 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 0.11% as of March 31, 2023, as compared to 0.10% as of December 31, 2022.

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

			Three Months Ended
				Mar				Dec				Increase
	Credit Quality			2023				2022				(Decrease)
	Nonaccrual loans and leases		$	3,247			$	2,808			$	439
	Loans and leases past due 90 days or more and still accruing			-				143				(143	)
	Total nonperforming loans and leases			3,247				2,951				296
	Other real estate owned			1,708				1,436				272
	Other repossessed assets			66				422				(356	)
	Total nonperforming assets		$	5,021			$	4,809			$	212
	Nonperforming loans and leases to total loans and leases, gross			0.10	%			0.09	%			0.01	%
	Nonperforming assets to total assets			0.11	%			0.10	%			0.01	%

Noninterest Income

Noninterest income decreased $200 thousand to $6.9 million for the first quarter of 2023 compared to $7.1 million for the prior quarter. During the first quarter of 2023, the primary components of the changes in noninterest income were as follows:

• Decrease in other, primarily related to decreased 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
			Mar			Dec			Increase
Noninterest Income			2023			2022			(Decrease)
Service charges on deposit accounts		$	1,445		$	1,477		$	(32	)
Gain (loss) on sale of securities, net			-			144			(144	)
Mortgage banking income			172			77			95
Investment services			1,005			958			47
Insurance commissions			1,259			1,233			26
Interchange and debit card transaction fees			1,383			1,328			55
Other			1,661			1,908			(247	)
Total noninterest income		$	6,925		$	7,125		$	(200	)

Noninterest Expense

Noninterest expense increased $113 thousand to $27.5 million for the first quarter of 2023 compared to $27.4 million for the prior quarter. During the first quarter of 2023, the primary components of the changes in noninterest expense were as follows:

• Increase in salaries and employee benefits as a result of higher employee taxes due to seasonality;
• Increase in occupancy and equipment as a result of new branch facilities and relocation expenses;
• Decrease in professional services, related to lower audit and consulting expenses; and
• Decrease in other, related to lower operational cost and decreased fees related to capital markets activity.

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

		Three Months Ended
			Mar			Dec				Increase
Noninterest Expense			2023			2022				(Decrease)
Salaries and employee benefits		$	16,742		$	16,384			$	358
Occupancy and equipment			3,208			3,015				193
FDIC insurance			541			650				(109	)
Other real estate and loan related expenses			572			517				55
Advertising and marketing			355			308				47
Data processing and technology			2,163			2,097				66
Professional services			807			981				(174	)
Amortization of intangibles			659			688				(29	)
Merger related and restructuring expenses			-			(45	)			45
Other			2,482			2,821				(339	)
Total noninterest expense		$	27,529		$	27,416			$	113

Income Tax Expense

Income tax expense was $3.3 million for the first quarter of 2023, a decrease of $201 thousand, compared to $3.5 million for the prior quarter.

The effective tax rate was 22.44% for the first quarter of 2023 and 21.35% for the prior quarter.

Balance Sheet Trends

Total assets at March 31, 2023 were $4.77 billion compared to $4.64 billion at December 31, 2022. The $132.3 million increase is primarily attributable to increases in securities of $75.4 million, cash and cash equivalents of $40.5 million and loans and leases of $28.2 million. Asset increases were offset by an increase in the allowance for credit losses of $8.9 million, primarily for the one-time adjustment of $8.7 million related to the adoption of ASU 2016-13 on January 1, 2023.

Total liabilities increased to $4.33 billion at March 31, 2023 from $4.21 billion at December 31, 2022. The increase of $121.4 million was primarily from organic deposit growth of $152.4 million, offset by a decrease in borrowings of $25.3 million and other liabilities of $5.8 million, related to a decrease in loan related swaps. The decrease in other liabilities was offset by $3.1 million in additional reserve for unfunded lending commitments related to the adoption of ASU 2016-13.

Shareholders' equity at March 31, 2023 totaled $443.4 million, an increase of $10.9 million, from December 31, 2022. The increase in shareholders' equity was primarily driven by net income of $11.5 million for the three months ended March 31, 2023, and the positive change in accumulated other comprehensive income (loss) of $6.7 million, 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 $1.4 million. Tangible book value per share2 was $19.66 at March 31, 2023, compared to $19.09 at December 31, 2022. Tangible common equity1 as a percentage of tangible assets1 was 7.17% at March 31, 2023, compared with 7.13% at December 31, 2022.

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):

		Mar			Dec			Increase
Selected Balance Sheet Information		2023			2022			(Decrease)
Total assets		$	4,769,805		$	4,637,498		$	132,307
Total liabilities			4,326,406			4,205,046			121,360
Total equity			443,399			432,452			10,947
Securities			845,194			769,842			75,352
Loans and leases			3,281,787			3,253,627			28,160
Deposits			4,229,546			4,077,100			152,446
Borrowings			16,546			41,860			(25,314	)

Conference Call Information

SmartFinancial issued this earnings release for the first quarter of 2023 on Monday, April 24, 2023, and will host a conference call on Tuesday, April 25, 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, 320998. A replay of the conference call will be available through June 24, 2023, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 383016. 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 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) potential impacts of the recent 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; 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
		Mar				Dec				Sep				Jun				Mar
		2023				2022				2022				2022				2022
Assets:
Cash and cash equivalents		$	306,934			$	266,424			$	543,029			$	654,945			$	763,968
Securities available-for-sale, at fair value			560,418				483,893				519,723				524,864				540,483
Securities held-to-maturity, at amortized cost			284,776				285,949				287,104				288,363				289,532
Other investments			14,059				15,530				15,528				16,569				16,499
Loans held for sale			3,324				1,752				2,742				1,707				5,894
Loans and leases			3,281,787				3,253,627				3,099,116				2,994,074				2,806,026
Less: Allowance for loan and lease losses			(32,279	)			(23,334	)			(22,769	)			(21,938	)			(20,078	)
Loans and leases, net			3,249,508				3,230,293				3,076,347				2,972,136				2,785,948
Premises and equipment, net			92,190				92,511				91,944				89,950				84,793
Other real estate owned			1,708				1,436				1,226				1,612				1,612
Goodwill and other intangibles, net			109,114				109,772				110,460				104,582				105,215
Bank owned life insurance			81,938				81,470				81,001				80,537				80,074
Other assets			65,836				68,468				67,807				52,848				44,561
Total assets		$	4,769,805			$	4,637,498			$	4,796,911			$	4,788,113			$	4,718,579
Liabilities:
Deposits:
Noninterest-bearing demand		$	989,753			$	1,072,449			$	1,186,209			$	1,162,843			$	1,093,933
Interest-bearing demand			989,738				965,911				962,901				999,893				975,272
Money market and savings			1,761,847				1,583,481				1,663,355				1,607,714				1,573,101
Time deposits			488,208				455,259				467,944				511,182				549,047
Total deposits			4,229,546				4,077,100				4,280,409				4,281,632				4,191,353
Borrowings			16,546				41,860				18,423				12,549				36,713
Subordinated debt			42,036				42,015				41,994				41,973				41,952
Other liabilities			38,278				44,071				41,374				31,532				28,519
Total liabilities			4,326,406				4,205,046				4,382,200				4,367,686				4,298,537
Shareholders' Equity:
Common stock			17,004				16,901				16,888				16,898				16,893
Additional paid-in capital			294,930				294,330				293,907				293,815				293,376
Retained earnings			160,085				156,545				144,723				134,362				125,329
Accumulated other comprehensive income (loss)			(28,620	)			(35,324	)			(40,807	)			(24,648	)			(15,556	)
Total shareholders' equity			443,399				432,452				414,711				420,427				420,042
Total liabilities & shareholders' equity		$	4,769,805			$	4,637,498			$	4,796,911			$	4,788,113			$	4,718,579

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

	Three Months Ended
	Mar			Dec				Sep			Jun			Mar
	2023			2022				2022			2022			2022
Interest income:
Loans and leases, including fees	$	44,728		$	40,082			$	35,127		$	31,530		$	29,643
Investment securities:
Taxable		3,651			3,337				3,135			2,908			2,418
Tax-exempt		353			797				561			441			368
Federal funds sold and other earning assets		4,446			3,098				3,474			1,430			486
Total interest income		53,178			47,314				42,297			36,309			32,915
Interest expense:
Deposits		16,346			8,844				4,866			2,504			2,014
Borrowings		224			232				97			117			157
Subordinated debt		626			626				626			626			626
Total interest expense		17,196			9,702				5,589			3,247			2,797
Net interest income		35,982			37,612				36,708			33,062			30,118
Provision for loan and lease losses		550			788				974			1,250			1,006
Net interest income after provision for loan and lease losses		35,432			36,824				35,734			31,812			29,112
Noninterest income:
Service charges on deposit accounts		1,445			1,477				1,611			1,446			1,319
Gain (loss) on sale of securities, net		—			144				—			—			—
Mortgage banking		172			77				170			471			834
Investment services		1,005			958				1,051			1,065			1,070
Insurance commissions		1,259			1,233				864			598			901
Interchange and debit card transaction fees		1,383			1,328				1,356			1,467			1,284
Other		1,661			1,908				1,198			2,182			1,703
Total noninterest income		6,925			7,125				6,250			7,229			7,111
Noninterest expense:
Salaries and employee benefits		16,742			16,384				16,317			15,673			15,046
Occupancy and equipment		3,208			3,015				3,167			2,793			3,059
FDIC insurance		541			650				705			676			641
Other real estate and loan related expense		572			517				565			636			729
Advertising and marketing		355			308				288			327			369
Data processing and technology		2,163			2,097				1,872			1,728			1,586
Professional services		807			981				822			745			1,242
Amortization of intangibles		659			688				650			633			637
Merger related and restructuring expenses		—			(45	)			87			81			439
Other		2,482			2,821				2,757			2,634			1,970
Total noninterest expense		27,529			27,416				27,230			25,926			25,718
Income before income taxes		14,828			16,533				14,754			13,115			10,505
Income tax expense		3,328			3,529				3,211			2,900			2,246
Net income	$	11,500		$	13,004			$	11,543		$	10,215		$	8,259
Earnings per common share:
Basic	$	0.69		$	0.78			$	0.69		$	0.61		$	0.49
Diluted	$	0.68		$	0.77			$	0.68		$	0.61		$	0.49
Weighted average common shares outstanding:
Basic		16,791,406			16,758,706				16,749,255			16,734,930			16,718,371
Diluted		16,896,494			16,884,253				16,872,022			16,867,774			16,858,288

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

		Three Months Ended
		March 31, 2023								December 31, 2022								March 31, 2022
		Average						Yield/		Average						Yield/		Average						Yield/
		Balance			Interest			Cost		Balance			Interest			Cost		Balance			Interest			Cost
Assets:
Loans and leases, including fees1		$	3,258,452		$	44,728		5.57	%	$	3,150,493		$	40,082		5.05	%	$	2,728,096		$	29,643		4.41	%
Taxable securities			723,540			3,651		2.05	%		701,787			3,337		1.89	%		612,980			2,418		1.60	%
Tax-exempt securities2			65,547			447		2.77	%		93,721			958		4.06	%		105,516			533		2.05	%
Federal funds sold and other earning assets			378,253			4,446		4.77	%		322,970			3,098		3.81	%		775,834			486		0.25	%
Total interest-earning assets			4,425,792			53,272		4.88	%		4,268,971			47,475		4.41	%		4,222,426			33,080		3.18	%
Noninterest-earning assets			359,996								372,864								381,807
Total assets		$	4,785,788							$	4,641,835							$	4,604,233
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits		$	944,132			4,227		1.82	%	$	924,320			3,141		1.35	%	$	921,835			446		0.20	%
Money market and savings deposits			1,820,455			10,381		2.31	%		1,587,688			4,855		1.21	%		1,523,188			859		0.23	%
Time deposits			469,361			1,738		1.50	%		459,996			848		0.73	%		561,207			709		0.51	%
Total interest-bearing deposits			3,233,948			16,346		2.05	%		2,972,004			8,844		1.18	%		3,006,230			2,014		0.27	%
Borrowings			16,858			224		5.39	%		18,309			232		5.03	%		69,769			157		0.91	%
Subordinated debt			42,022			626		6.04	%		42,002			626		5.90	%		41,938			626		6.05	%
Total interest-bearing liabilities			3,292,828			17,196		2.12	%		3,032,315			9,702		1.27	%		3,117,937			2,797		0.36	%
Noninterest-bearing deposits			1,015,670								1,146,374								1,028,298
Other liabilities			44,908								43,109								30,053
Total liabilities			4,353,406								4,221,798								4,176,288
Shareholders' equity			432,382								420,037								427,945
Total liabilities and shareholders' equity		$	4,785,788							$	4,641,835							$	4,604,233
Net interest income, taxable equivalent					$	36,076							$	37,773							$	30,283
Interest rate spread								2.76	%							3.14	%							2.82	%
Tax equivalent net interest margin								3.31	%							3.51	%							2.91	%
Percentage of average interest-earning assets to average interest-bearing liabilities								134.41	%							140.78	%							135.42	%
Percentage of average equity to average assets								9.03	%							9.05	%							9.29	%

1 Includes average balance of $3.1 million, $3.3 million, and $54.0 million in PPP loans for the quarters ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.   2 Yields computed on tax-exempt instruments on a tax equivalent basis include $94 thousand, $161 thousand, and $165 thousand of taxable equivalent income for the quarters ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.

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

		As of and for The Three Months Ended
		Mar			Dec			Sep			Jun			Mar
		2023			2022			2022			2022			2022
Composition of Loans and Leases:
Commercial real estate:
owner occupied		$	764,166		$	765,041		$	714,734		$	684,250		$	612,675
non-owner occupied			871,368			862,720			822,317			850,338			863,181
Commercial real estate, total			1,635,534			1,627,761			1,537,051			1,534,588			1,475,856
Commercial & industrial			571,153			551,867			514,280			483,588			461,153
Construction & land development			386,253			402,501			405,007			364,368			314,654
Consumer real estate			606,343			587,977			562,408			533,582			483,229
Leases			67,701			67,427			64,798			63,264			59,892
Consumer and other			14,803			16,094			15,572			14,684			11,242
Total loans and leases		$	3,281,787		$	3,253,627		$	3,099,116		$	2,994,074		$	2,806,026
Asset Quality and Additional Loan Data:
Nonperforming loans and leases		$	3,247		$	2,951		$	3,379		$	3,413		$	3,342
Other real estate owned			1,708			1,436			1,226			1,612			1,612
Other repossessed assets			66			422			—			17			27
Total nonperforming assets		$	5,021		$	4,809		$	4,605		$	5,042		$	4,981
Restructured loans and leases not included in nonperforming loans and leases		$	97		$	101		$	108		$	678		$	625
Net charge-offs to average loans and leases (annualized)			0.03	%		0.03	%		0.02	%		(0.09	)%		0.04	%
Allowance for loan and leases losses to loans and leases			0.98	%		0.72	%		0.73	%		0.73	%		0.72	%
Nonperforming loans and leases to total loans and leases, gross			0.10	%		0.09	%		0.11	%		0.11	%		0.12	%
Nonperforming assets to total assets			0.11	%		0.10	%		0.10	%		0.11	%		0.11	%
Acquired loan and lease fair value discount balance		$	—		$	13,128		$	14,465		$	14,737		$	14,913
Accretion income on acquired loans and leases			—			1,396			148			225			389
PPP net fees deferred balance			114			122			140			301			972
PPP net fees recognized			8			17			163			669			1,066
Capital Ratios:
Equity to Assets			9.30	%		9.33	%		8.65	%		8.78	%		8.90	%
Tangible common equity to tangible assets (Non-GAAP)1			7.17	%		7.13	%		6.49	%		6.74	%		6.82	%
SmartFinancial, Inc.2
Tier 1 leverage			7.91	%		7.95	%		7.40	%		7.48	%		7.41	%
Common equity Tier 1			9.91	%		9.65	%		9.65	%		9.95	%		10.30	%
Tier 1 capital			9.91	%		9.65	%		9.65	%		9.95	%		10.30	%
Total capital			11.73	%		11.40	%		11.44	%		11.80	%		12.22	%
SmartBank			Estimated3
Tier 1 leverage			8.87	%		8.90	%		8.27	%		8.33	%		8.24	%
Common equity Tier 1			11.12	%		10.82	%		10.78	%		11.08	%		11.46	%
Tier 1 capital			11.12	%		10.82	%		10.78	%		11.08	%		11.46	%
Total capital			11.81	%		11.44	%		11.41	%		11.72	%		12.08	%

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
	Three Months Ended
	Mar			Dec			Sep			Jun			Mar
	2023			2022			2022			2022			2022
Selected Performance Ratios (Annualized):
Return on average assets		0.97	%		1.11	%		0.95	%		0.87	%		0.73	%
Return on average shareholders' equity		10.79	%		12.28	%		10.77	%		9.76	%		7.83	%
Return on average tangible common equity¹		14.45	%		16.65	%		14.36	%		13.02	%		10.39	%
Noninterest income / average assets		0.59	%		0.61	%		0.52	%		0.62	%		0.63	%
Noninterest expense / average assets		2.33	%		2.34	%		2.25	%		2.21	%		2.27	%
Efficiency ratio		64.16	%		61.28	%		63.39	%		64.35	%		69.08	%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		0.97	%		1.10	%		0.96	%		0.88	%		0.76	%
Operating PTPP return on average assets1		1.30	%		1.46	%		1.30	%		1.23	%		1.05	%
Operating return on average shareholders' equity1		10.79	%		12.15	%		10.83	%		9.82	%		8.14	%
Operating return on average tangible common equity1		14.45	%		16.47	%		14.44	%		13.09	%		10.80	%
Operating efficiency ratio1		64.02	%		61.36	%		62.93	%		63.88	%		67.60	%
Operating noninterest income / average assets1		0.59	%		0.60	%		0.52	%		0.62	%		0.63	%
Operating noninterest expense / average assets1		2.33	%		2.35	%		2.24	%		2.21	%		2.23	%
Selected Interest Rates and Yields:
Yield on loans and leases		5.57	%		5.05	%		4.59	%		4.40	%		4.41	%
Yield on earning assets, FTE		4.88	%		4.41	%		3.79	%		3.39	%		3.18	%
Cost of interest-bearing deposits		2.05	%		1.18	%		0.62	%		0.33	%		0.27	%
Cost of total deposits		1.56	%		0.85	%		0.45	%		0.24	%		0.20	%
Cost of interest-bearing liabilities		2.12	%		1.27	%		0.70	%		0.42	%		0.36	%
Net interest margin, FTE		3.31	%		3.51	%		3.29	%		3.08	%		2.91	%
Per Common Share:
Net income, basic	$	0.69		$	0.78		$	0.69		$	0.61		$	0.49
Net income, diluted		0.68			0.77			0.68			0.61			0.49
Operating earnings, basic¹		0.69			0.77			0.69			0.61			0.51
Operating earnings, diluted¹		0.68			0.76			0.69			0.61			0.51
Book value		26.08			25.59			24.56			24.88			24.86
Tangible book value¹		19.66			19.09			18.02			18.69			18.64
Common shares outstanding		17,004,092			16,900,805			16,887,555			16,898,405			16,893,282

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
		Mar				Dec				Sep				Jun				Mar
		2023				2022				2022				2022				2021
Operating Earnings:
Net income (GAAP)		$	11,500			$	13,004			$	11,543			$	10,215			$	8,259
Noninterest income:
Securities gains (losses), net			—				(144	)			—				—				—
Noninterest expenses:
Merger related and restructuring expenses			—				(45	)			87				81				439
Income taxes:
Income tax effect of adjustments			—				49				(22	)			(21	)			(113	)
Operating earnings (Non-GAAP)		$	11,500			$	12,864			$	11,608			$	10,275			$	8,585
Operating earnings per common share (Non-GAAP):
Basic		$	0.69			$	0.77			$	0.69			$	0.61			$	0.51
Diluted			0.68				0.76				0.69				0.61				0.51
Operating Noninterest Income:
Noninterest income (GAAP)		$	6,925			$	7,125			$	6,250			$	7,229			$	7,111
Securities gains (losses), net			—				(144	)			—				—				—
Operating noninterest income (Non-GAAP)		$	6,925			$	6,981			$	6,250			$	7,229			$	7,111
Operating noninterest income (Non-GAAP)/average assets1			0.59	%			0.60	%			0.52	%			0.62	%			0.63	%
Operating Noninterest Expense:
Noninterest expense (GAAP)		$	27,529			$	27,416			$	27,230			$	25,926			$	25,718
Merger related and restructuring expenses			—				45				(87	)			(81	)			(439	)
Operating noninterest expense (Non-GAAP)		$	27,529			$	27,461			$	27,143			$	25,845			$	25,279
Operating noninterest expense (Non-GAAP)/average assets2			2.33	%			2.35	%			2.24	%			2.21	%			2.23	%
Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP)		$	35,982			$	37,612			$	36,708			$	33,062			$	30,118
Operating noninterest income (Non-GAAP)			6,925				6,981				6,250				7,229				7,111
Operating noninterest expense (Non-GAAP)			(27,529	)			(27,461	)			(27,143	)			(25,845	)			(25,279	)
Operating PTPP earnings (Non-GAAP)		$	15,378			$	17,132			$	15,815			$	14,446			$	11,950
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3			0.97	%			1.10	%			0.96	%			0.88	%			0.76	%
Operating PTPP return on average assets (Non-GAAP)4			1.30	%			1.46	%			1.30	%			1.23	%			1.05	%
Return on average tangible common equity (Non-GAAP)5			14.45	%			16.65	%			14.36	%			13.02	%			10.39	%
Operating return on average shareholders' equity (Non-GAAP)6			10.79	%			12.15	%			10.83	%			9.82	%			8.14	%
Operating return on average tangible common equity (Non-GAAP)7			14.45	%			16.47	%			14.44	%			13.09	%			10.80	%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)			64.16	%			61.28	%			63.39	%			64.35	%			69.08	%
Adjustment for taxable equivalent yields			(0.14	)%			(0.22	)%			(0.25	)%			(0.27	)%			(0.31	)%
Adjustment for securities gains (losses)			—	%			(0.20	)%			—	%			—	%			—	%
Adjustment for merger related income and costs			—	%			0.50	%			(0.21	)%			(0.20	)%			(1.17	)%
Operating efficiency ratio (Non-GAAP)			64.02	%			61.36	%			62.93	%			63.88	%			67.60	%

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
		Mar				Dec				Sep				Jun				Mar
		2023				2022				2022				2022				2021
Tangible Common Equity:
Shareholders' equity (GAAP)		$	443,399			$	432,452			$	414,711			$	420,427			$	420,042
Less goodwill and other intangible assets			109,114				109,772				110,460				104,582				105,215
Tangible common equity (Non-GAAP)		$	334,285			$	322,680			$	304,251			$	315,845			$	314,827
Average Tangible Common Equity:
Average shareholders' equity (GAAP)		$	432,382			$	420,037			$	425,365			$	419,726			$	427,945
Less average goodwill and other intangible assets			109,537				110,206				106,483				104,986				105,617
Average tangible common equity (Non-GAAP)		$	322,845			$	309,831			$	318,882			$	314,740			$	322,328
Tangible Book Value per Common Share:
Book value per common share (GAAP)		$	26.08			$	25.59			$	24.56			$	24.88			$	24.86
Adjustment due to goodwill and other intangible assets			(6.42	)			(6.50	)			(6.54	)			(6.19	)			(6.23	)
Tangible book value per common share (Non-GAAP)1		$	19.66			$	19.09			$	18.02			$	18.69			$	18.64
Tangible Common Equity to Tangible Assets:
Total Assets		$	4,769,805			$	4,637,498			$	4,796,911			$	4,788,113			$	4,718,579
Less goodwill and other intangibles			109,114				109,772				110,460				104,582				105,215
Tangible Assets (Non-GAAP):		$	4,660,691			$	4,527,726			$	4,686,451			$	4,683,531			$	4,613,364
Tangible common equity to tangible assets (Non-GAAP)			7.17	%			7.13	%			6.49	%			6.74	%			6.82	%

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.