Highlights for the Third Quarter of 2022

Operating earnings¹ of $11.6 million, or $0.69 per diluted common share
Operating earnings increase of 13% compared to the previous quarter and 17% compared to the same prior year quarter
Net organic loan and lease growth of over $109.0 million - 15% annualized quarter-over-quarter increase
Non-maturity deposit growth of over $42.0 million – 4% annualized quarter-over-quarter increase
Net interest income growth of $3.6 million or 44% annualized quarter-over-quarter increase
Credit quality remains solid with nonperforming assets to total assets of 0.10%
Completed the asset purchase of Sunbelt Insurance ("Sunbelt")

KNOXVILLE, Tenn., Oct. 24, 2022 (GLOBE NEWSWIRE) -- 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 third quarter of 2022, compared to net income of $9.6 million, or $0.61 per diluted common share, for the third quarter of 2021, and compared to prior quarter net income of $10.2 million, or $0.61 per diluted common share. Operating earnings¹, which excludes securities gains and merger related and restructuring expenses, net of tax adjustments, totaled $11.6 million, or $0.69 per diluted common share, in the third quarter of 2022, compared to $9.9 million, or $0.63 per diluted common share, in the third quarter of 2021, and compared to $10.3 million, or $0.61 per diluted common share, in the second quarter of 2022.

Billy Carroll, President & CEO, stated: "I am extremely pleased with another outstanding quarter. We posted a record quarter for revenue and continue to see strong EPS growth. Our team has done a phenomenal job of building our core revenue foundation this year as we continue to gain operating leverage."

SmartFinancial's Chairman, Miller Welborn, concluded: "We are delighted with our results for the quarter. First, I'm very excited to welcome the Sunbelt Insurance team into The SmartFinancial family. Our operating metrics improved for the quarter in almost every category, and this is a testament to the diligent effort by our entire team."

Net Interest Income and Net Interest Margin

Net interest income was $36.7 million for the third quarter of 2022, compared to $33.1 million for the prior quarter. Average earning assets totaled $4.45 billion, an increase of $126.0 million. The growth in average earnings assets was primarily driven by an increase in average loans and leases of $164.3 million and securities of $2.6 million, offset by a decrease in average interest-earning cash of $40.9 million as the Bank continues to deploy excess liquidity into loans and leases. Average interest-bearing liabilities increased $22.0 million as a result of core deposit growth of $40.3 million and a decrease in borrowings of $18.4 million.

The tax equivalent net interest margin was 3.29% for the third quarter of 2022, compared to 3.08% 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 the increase in rates by the Board of Governors of the Federal Reserve System (the "Federal Reserve").

The yield on interest-bearing liabilities increased to 0.70% for the third quarter of 2022 compared to 0.42% for the prior quarter. The cost of average interest-bearing deposits was 0.62% for the third quarter of 2022 compared to 0.33% for the prior quarter, an increase of 29 basis points, primarily attributable to the increases in rates by the Federal Reserve. The cost of total deposits for the third quarter of 2022 was 0.45% compared to 0.24% 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
	Sep		Jun		Increase
Selected Interest Rates and Yields	2022		2022		(Decrease)
Yield on loans and leases	4.59	%	4.40	%	0.19	%
Yield on earning assets, FTE	3.79	%	3.39	%	0.40	%
Cost of interest-bearing deposits	0.62	%	0.33	%	0.29	%
Cost of total deposits	0.45	%	0.24	%	0.21	%
Cost of interest-bearing liabilities	0.70	%	0.42	%	0.28	%
Net interest margin, FTE	3.29	%	3.08	%	0.21	%

Provision for Loan and Lease Losses and Credit Quality

At September 30, 2022, the allowance for loan and lease losses was $22.8 million. The allowance for loan and lease losses to total loans and leases was 0.73% as of September 30, 2022, and June 30, 20022, respectively. For the Company's originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.75% as of September 30, 2022, and 0.74% at June 30, 2022. The remaining discounts on the acquired loan and lease portfolio totaled $14.5 million, or 4.29% of acquired loans and leases as of September 30, 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
	Sep				Jun
Provision for Loan and Lease Losses Rollforward	2022				2022				Change
Beginning balance	$	21,938			$	20,078			$	1,860
Charge-offs		(231	)			(143	)			(88	)
Recoveries		88				753				(665	)
Net charge-offs		(143	)			610				(753	)
Provision		974				1,250				(276	)
Ending balance	$	22,769			$	21,938			$	831

Allowance for loan losses to total loans and leases, gross		0.73		%		0.73		%		-		%

The Company is not required to implement the provisions of the Current Expected Credit Losses ("CECL") accounting standard until January 1, 2023 and is continuing to account for the allowance for loan and lease losses under the incurred loss model.

Nonperforming loans and leases as a percentage of total loans and leases was 0.11% as of September 30, 2022, and June 30, 2022, respectively. 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 September 30, 2022, a decrease of 1 bases point from the 11% reported in the second quarter of 2022.

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	2022			2022			(Decrease)
Nonaccrual loans and leases	$	3,379		$	3,413		$	(34	)
Loans and leases past due 90 days or more and still accruing		-			-			-
Total nonperforming loans and leases		3,379			3,413			(34	)
Other real estate owned		1,226			1,612			(386	)
Other repossessed assets		-			17			(17	)
Total nonperforming assets	$	4,605		$	5,042		$	(437	)

Nonperforming loans and leases to total loans and leases, gross		0.11	%		0.11	%		-		%
Nonperforming assets to total assets		0.10	%		0.11	%		(0.01	)	%

Noninterest Income

Noninterest income decreased $979 thousand to $6.3 million for the third quarter of 2022 compared to $7.2 million for the prior quarter. During the third quarter of 2022, the primary components of the changes in noninterest income were as follows:

Increase in service charges on deposit accounts, related to deposit growth and enhancements to our treasury management fee structure;
Decrease in mortgage banking income, related to increased secondary market interest rates driving lower volume;
Increase in insurance commissions, driven by the addition of Sunbelt and organic growth;
Decrease in interchange and debit card transaction fees, related to lower volume; and
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
	Sep		June		Increase
Noninterest Income	2022		2022		(Decrease)
Service charges on deposit accounts	$	1,611	$	1,446	$	165
Mortgage banking income		170		471		(301	)
Investment services		1,051		1,065		(14	)
Insurance commissions		864		598		266
Interchange and debit card transaction fees		1,356		1,467		(111	)
Other		1,198		2,182		(984	)
Total noninterest income	$	6,250	$	7,229	$	(979	)

Noninterest Expense

Noninterest expense increased $1.3 million to $27.2 million for the third quarter of 2022 compared to $25.9 million for the prior quarter. During the third quarter of 2022, the primary components of the changes in noninterest expense were as follows:

Salaries and employee benefits increased due to stronger than expected performance generating additional accruals to the Bank's incentive plans and, to a lesser extent, the addition of Sunbelt;
Increase in occupancy and equipment as a result of higher utility expenses (seasonality and higher rates) and charges associated with new branch expansions in our footprint; and
Increase in data processing and technology as a result of implementation of new loan and security platforms.

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


	Three Months Ended
	Sep		June			Increase
Noninterest Expense	2022		2022			(Decrease)
Salaries and employee benefits	$	16,317	$	15,673	$	644
Occupancy and equipment		3,167		2,793		374
FDIC insurance		705		676		29
Other real estate and loan related expenses		565		636		(71	)
Advertising and marketing		288		327		(39	)
Data processing and technology		1,872		1,728		144
Professional services		822		745		77
Amortization of intangibles		650		633		17
Merger related and restructuring expenses		87		81		6
Other		2,757		2,634		123
Total noninterest expense	$	27,230	$	25,926	$	1,304

Income Tax Expense

Income tax expense was $3.2 million for the third quarter of 2022, an increase of $311 thousand, compared to $2.9 million for the prior quarter.

The effective tax rate was 21.76% for the third quarter of 2022 and 22.11% for the prior quarter.

Balance Sheet Trends

Total assets at September 30, 2022 were $4.80 billion compared with $4.61 billion at December 31, 2021. The increase of $185.3 million is primarily attributable to increases in loans and leases of $405.7 million, securities of $247.5 million, goodwill and other intangibles, net of $4.6 million, attributable to Sunbelt, and other assets of $29.6 million, offset by a decrease in cash and cash equivalents of $502.0 million, primarily from the funding of loans and leases and purchase of securities.

Total liabilities increased to $4.38 billion at September 30, 2022 from $4.18 billion at December 31, 2021. The increase of $200.1 million was primarily from organic deposit growth of $258.5 million and increase in other liabilities of $10.7 million, offset by a decrease in borrowings of $69.2 million.

Shareholders' equity at September 30, 2022 totaled $414.7 million, a decrease of $14.7 million, from December 31, 2021. The decrease in shareholders' equity was primarily driven by the market increases in interest rates and the negative impact on accumulated other comprehensive income (loss) of $42.3 million and dividends paid of $3.5 million, offset by net income of $30.0 million for the nine months ended September 30, 2022. Tangible book value per share² was $18.02 at September 30, 2022, compared to $19.26 at December 31, 2021. Tangible common equity¹ as a percentage of tangible assets¹ was 6.49% at September 30, 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):

	Sep		Dec		Increase
Selected Balance Sheet Information	2022		2021		(Decrease)
Total assets	$	4,796,911	$	4,611,579	$	185,332
Total liabilities		4,382,200		4,182,149		200,051
Total equity		414,711		429,430		(14,719	)
Securities		806,827		559,422		247,405
Loans and leases		3,099,116		2,693,397		405,719
Deposits		4,280,409		4,021,938		258,471
Borrowings		18,423		87,585		(69,162	)

Conference Call Information

SmartFinancial issued this earnings release for the third quarter of 2022 on Monday, October 24, 2022, and will host a conference call on Tuesday, October 25, 2022, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 927-1758 or (646) 904-5544 and entering the access code, 380946. A replay of the conference call will be available through December 24, 2022, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 355013. 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) risks related to the acquisition of Sevier County Bancshares, Inc. ("SCB"); (7) the risk that the anticipated benefits from the acquisition of SCB may not be realized in the time frame anticipated; (8) changes in management's plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (13) changes in prices, values and sales volumes of residential and commercial real estate; (14) changes in accounting principles, policies, or guidelines; (15) changes in applicable laws, rules, or regulations; (16) 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; (17) 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; (18) higher inflation and its impacts; (19) 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; (20) the effects of war or other conflicts including the impacts related to or resulting from Russia's military action in Ukraine; and (21) 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
	2022			2022			2022			2021			2021
Assets:
Cash and cash equivalents	$	543,029		$	654,945		$	763,968		$	1,045,077		$	1,091,160
Securities available-for-sale, at fair value		519,723			524,864			540,483			482,453			339,343
Securities held-to-maturity, at amortized cost		287,104			288,363			289,532			76,969			—
Other investments		15,528			16,569			16,499			16,494			14,972
Loans held for sale		2,742			1,707			5,894			5,103			3,418
Loans and leases		3,099,116			2,994,074			2,806,026			2,693,397			2,652,663
Less: Allowance for loan and lease losses		(22,769	)		(21,938	)		(20,078	)		(19,352	)		(19,295	)
Loans and leases, net		3,076,347			2,972,136			2,785,948			2,674,045			2,633,368
Premises and equipment, net		91,944			89,950			84,793			85,958			85,346
Other real estate owned		1,226			1,612			1,612			1,780			2,415
Goodwill and other intangibles, net		110,460			104,582			105,215			105,852			104,930
Bank owned life insurance		81,001			80,537			80,074			79,619			79,145
Other assets		67,807			52,848			44,561			38,229			29,934
Total assets	$	4,796,911		$	4,788,113		$	4,718,579		$	4,611,579		$	4,384,031
Liabilities:
Deposits:
Noninterest-bearing demand	$	1,186,209		$	1,162,843		$	1,093,933		$	1,055,125		$	977,180
Interest-bearing demand		962,901			999,893			975,272			899,158			847,007
Money market and savings		1,663,355			1,607,714			1,573,101			1,493,007			1,389,393
Time deposits		467,944			511,182			549,047			574,648			585,692
Total deposits		4,280,409			4,281,632			4,191,353			4,021,938			3,799,272
Borrowings		18,423			12,549			36,713			87,585			88,748
Subordinated debt		41,994			41,973			41,952			41,930			41,909
Other liabilities		41,374			31,532			28,519			30,696			29,382
Total liabilities		4,382,200			4,367,686			4,298,537			4,182,149			3,959,311
Shareholders' Equity:
Common stock		16,888			16,898			16,893			16,803			16,801
Additional paid-in capital		293,907			293,815			293,376			292,937			292,760
Retained earnings		144,723			134,362			125,329			118,247			112,600
Accumulated other comprehensive income (loss)		(40,807	)		(24,648	)		(15,556	)		1,443			2,559
Total shareholders' equity		414,711			420,427			420,042			429,430			424,720
Total liabilities & shareholders' equity	$	4,796,911		$	4,788,113		$	4,718,579		$	4,611,579		$	4,384,031

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		June		Mar		Dec		Sep		Sep		Sep
	2022		2022		2022		2021		2021		2022		2021
Interest income:
Loans and leases, including fees	$	35,127	$	31,530	$	29,643	$	30,567	$	31,674	$	96,300	$	88,015
Investment securities:
Taxable		3,135		2,908		2,418		1,341		832		8,463		2,472
Tax-exempt		561		441		368		322		331		1,369		894
Federal funds sold and other earning assets		3,474		1,430		486		547		474		5,389		1,074
Total interest income		42,297		36,309		32,915		32,777		33,311		111,521		92,455
Interest expense:
Deposits		4,866		2,504		2,014		2,116		2,153		9,384		6,733
Borrowings		97		117		157		180		121		371		360
Subordinated debt		626		626		626		626		655		1,877		1,823
Total interest expense		5,589		3,247		2,797		2,922		2,929		11,632		8,916
Net interest income		36,708		33,062		30,118		29,855		30,382		99,889		83,539
Provision for loan and lease losses		974		1,250		1,006		422		1,149		3,230		1,211
Net interest income after provision for loan and lease losses		35,734		31,812		29,112		29,433		29,233		96,659		82,328
Noninterest income:
Service charges on deposit accounts		1,611		1,446		1,319		1,372		1,220		4,376		3,278
Gain (loss) on sale of securities, net		—		—		—		—		45		—		45
Mortgage banking		170		471		834		803		994		1,475		3,238
Investment services		1,051		1,065		1,070		621		448		3,186		1,546
Insurance commissions		864		598		901		517		745		2,363		2,768
Interchange and debit card transaction fees		1,356		1,467		1,284		1,445		1,078		4,107		2,839
Other		1,198		2,182		1,703		2,048		1,779		5,083		3,429
Total noninterest income		6,250		7,229		7,111		6,806		6,309		20,590		17,143
Noninterest expense:
Salaries and employee benefits		16,317		15,673		15,046		14,990		13,594		47,036		36,666
Occupancy and equipment		3,167		2,793		3,059		3,026		2,536		9,020		7,170
FDIC insurance		705		676		641		567		525		2,022		1,266
Other real estate and loan related expense		565		636		729		583		407		1,930		1,514
Advertising and marketing		288		327		369		176		235		985		654
Data processing and technology		1,872		1,728		1,586		1,722		1,753		5,185		4,642
Professional services		822		745		1,242		847		810		2,809		2,300
Amortization of intangibles		650		633		637		660		711		1,919		1,597
Merger related and restructuring expenses		87		81		439		2,762		464		607		939
Other		2,757		2,634		1,970		2,490		2,274		7,361		6,822
Total noninterest expense		27,230		25,926		25,718		27,823		23,309		78,874		63,570
Income before income taxes		14,754		13,115		10,505		8,416		12,233		38,375		35,901
Income tax expense		3,211		2,900		2,246		1,761		2,633		8,357		7,767
Net income	$	11,543	$	10,215	$	8,259	$	6,655	$	9,600	$	30,018	$	28,134
Earnings per common share:
Basic	$	0.69	$	0.61	$	0.49	$	0.40	$	0.62	$	1.79	$	1.85
Diluted	$	0.68	$	0.61	$	0.49	$	0.40	$	0.61	$	1.78	$	1.84
Weighted average common shares outstanding:
Basic		16,749,255		16,734,930		16,718,371		16,699,010		15,557,528		16,734,298		15,192,919
Diluted		16,872,022		16,867,774		16,858,288		16,846,315		15,691,126		16,867,970		15,312,755

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS


	Three Months Ended
	September 30, 2022						June 30, 2022						September 30, 2021
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Assets:
Loans and leases, including fees¹	$	3,037,092	$	35,127	4.59	%	$	2,872,748	$	31,530	4.40	%	$	2,536,591	$	31,674	4.95	%
Taxable securities		720,114		3,135	1.73	%		717,507		2,908	1.63	%		187,032		832	1.77	%
Tax-exempt securities²		101,559		732	2.86	%		101,585		609	2.40	%		87,621		477	2.16	%
Federal funds sold and other earning assets		587,755		3,474	2.34	%		628,677		1,430	0.91	%		802,712		474	0.23	%
Total interest-earning assets		4,446,520		42,468	3.79	%		4,320,517		36,477	3.39	%		3,613,956		33,457	3.67	%
Noninterest-earning assets		362,869						374,776						323,067
Total assets	$	4,809,389					$	4,695,293					$	3,937,023

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	966,437		1,956	0.80	%	$	968,806		734	0.30	%	$	763,613		414	0.21	%
Money market and savings deposits		1,632,510		2,298	0.56	%		1,559,963		1,126	0.29	%		1,233,533		854	0.27	%
Time deposits		501,919		612	0.48	%		531,783		644	0.49	%		524,327		885	0.67	%
Total interest-bearing deposits		3,100,866		4,866	0.62	%		3,060,552		2,504	0.33	%		2,521,473		2,153	0.34	%
Borrowings		13,141		97	2.93	%		31,510		117	1.49	%		80,188		121	0.60	%
Subordinated debt		41,980		626	5.91	%		41,959		626	5.98	%		40,211		654	6.47	%
Total interest-bearing liabilities		3,155,987		5,589	0.70	%		3,134,021		3,247	0.42	%		2,641,872		2,928	0.44	%
Noninterest-bearing deposits		1,192,813						1,112,643						877,831
Other liabilities		35,224						28,903						24,522
Total liabilities		4,384,024						4,275,567						3,544,225
Shareholders' equity		425,365						419,726						392,798
Total liabilities and shareholders' equity	$	4,809,389					$	4,695,293					$	3,937,023

Net interest income, taxable equivalent			$	36,879					$	33,230					$	30,529
Interest rate spread					3.09	%					2.97	%					3.23	%
Tax equivalent net interest margin					3.29	%					3.08	%					3.35	%

Percentage of average interest-earning assets to average interest-bearing liabilities					140.89	%					137.86	%					136.80	%
Percentage of average equity to average assets					8.84	%					8.94	%					9.98	%

¹ Includes average balance of $21,968 million, $34,307 million and $128,408 million in PPP loans for the quarters ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively.

²Yields computed on tax-exempt instruments on a tax equivalent basis include $171 thousand, $168 thousand and $146 thousand of taxable equivalent income for the quarters ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS


	Nine Months Ended
	September 30, 2022							September 30, 2021
	Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost
Assets:
Loans and leases, including fees¹	$	2,880,444	$	96,300		4.47	%	$	2,495,567	$	88,015	4.72	%
Taxable securities		683,926		8,463		1.65	%		163,005		2,472	2.03	%
Tax-exempt securities²		102,872		1,873		2.43	%		89,244		1,339	2.01	%
Federal funds sold and other earning assets		663,400		5,389		1.09	%		584,970		1,074	0.25	%
Total interest-earning assets		4,330,642		112,025		3.46	%		3,332,786		92,900	3.73	%
Noninterest-earning assets		373,081							295,074
Total assets	$	4,703,723						$	3,627,860

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	952,523		3,137		0.44	%	$	698,148		974	0.19	%
Money market and savings deposits		1,572,287		4,282		0.36	%		1,112,342		2,580	0.31	%
Time deposits		531,419		1,965		0.49	%		517,566		3,179	0.82	%
Total interest-bearing deposits		3,056,229		9,384		0.41	%		2,328,056		6,733	0.39	%
Borrowings		37,933		371		1.31	%		81,177		360	0.59	%
Subordinated debt		41,959		1,877		5.98	%		39,650		1,823	6.15	%
Total interest-bearing liabilities		3,136,121		11,632		0.50	%		2,448,883		8,916	0.49	%
Noninterest-bearing deposits		1,111,854							782,960
Other liabilities		31,412							21,553
Total liabilities		4,279,387							3,253,396
Shareholders' equity		424,336							374,464
Total liabilities and shareholders' equity	$	4,703,723						$	3,627,860

Net interest income, taxable equivalent			$	100,393						$	83,984
Interest rate spread						2.96	%					3.24	%
Tax equivalent net interest margin						3.10	%					3.37	%

Percentage of average interest-earning assets to average interest-bearing liabilities						138.09	%					136.09	%
Percentage of average equity to average assets						9.02	%					10.32	%

¹ Includes average balance of $36,630 million and $235,027 million in PPP loans for the nine months ended September 30, 2022, and 2021, respectively.

²Yields computed on tax-exempt instruments on a tax equivalent basis include $504 thousand and $445 thousand of taxable equivalent income for the nine months ended September 30, 2022, and 2021, 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
	2022			2022				2022			2021			2021
Composition of Loans and Leases:
Commercial real estate:
owner occupied	$	714,734		$	684,250			$	612,675		$	590,064		$	560,671
non-owner occupied		822,317			850,338				863,181			794,092			752,576
Commercial real estate, total		1,537,051			1,534,588				1,475,856			1,384,156			1,313,247
Commercial & industrial		514,280			483,588				461,153			488,024			469,739
Construction & land development		405,007			364,368				314,654			278,386			326,374
Consumer real estate		562,408			533,582				483,229			477,272			478,161
Leases		64,798			63,264				59,892			53,708			53,396
Consumer and other		15,572			14,684				11,242			11,851			11,746
Total loans and leases	$	3,099,116		$	2,994,074			$	2,806,026		$	2,693,397		$	2,652,663

Asset Quality and Additional Loan Data:
Nonperforming loans and leases	$	3,379		$	3,413			$	3,342		$	3,188		$	3,567
Other real estate owned		1,226			1,612				1,612			1,780			2,415
Other repossessed assets		—			17				27			90			77
Total nonperforming assets	$	4,605		$	5,042			$	4,981		$	5,058		$	6,059
Restructured loans and leases not included in nonperforming loans and leases	$	108		$	678			$	625		$	206		$	212
Net charge-offs to average loans and leases (annualized)		0.02	%		(0.09	)	%		0.04	%		0.05	%		0.03	%
Allowance for loan and leases losses to loans and leases		0.73	%		0.73		%		0.72	%		0.72	%		0.73	%
Nonperforming loans and leases to total loans and leases, gross		0.11	%		0.11		%		0.12	%		0.12	%		0.13	%
Nonperforming assets to total assets		0.10	%		0.11		%		0.11	%		0.11	%		0.14	%
Acquired loan and lease fair value discount balance	$	14,465		$	14,737			$	14,913		$	15,483		$	13,001
Accretion income on acquired loans and leases		148			225				389			457			1,760
PPP net fees deferred balance		140			301				972			2,038			3,783
PPP net fees recognized		163			669				1,066			1,725			2,873

Capital Ratios:
Equity to Assets		8.65	%		8.78		%		8.90	%		9.31	%		9.69	%
Tangible common equity to tangible assets (Non-GAAP)¹		6.49	%		6.74		%		6.82	%		7.18	%		7.47	%

SmartFinancial, Inc.²
Tier 1 leverage		7.40	%		7.48		%		7.41	%		7.45	%		8.36	%
Common equity Tier 1		9.64	%		9.95		%		10.30	%		10.56	%		10.85	%
Tier 1 capital		9.64	%		9.95		%		10.30	%		10.56	%		10.85	%
Total capital		11.43	%		11.80		%		12.22	%		12.55	%		12.92	%

SmartBank		Estimated³
Tier 1 leverage		8.27	%		8.33		%		8.24	%		8.23	%		9.20	%
Common equity Tier 1		10.77	%		11.08		%		11.46	%		11.66	%		11.94	%
Tier 1 capital		10.77	%		11.08		%		11.46	%		11.66	%		11.94	%
Total capital		11.40	%		11.72		%		12.08	%		12.29	%		12.59	%

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
	2022			2022			2022			2021			2021			2022			2021
Selected Performance Ratios (Annualized):
Return on average assets		0.95	%		0.87	%		0.73	%		0.59	%		0.97	%		0.85	%		1.04	%
Return on average shareholders' equity		10.77	%		9.76	%		7.83	%		6.19	%		9.70	%		9.46	%		10.05	%
Return on average tangible common equity¹		14.36	%		13.02	%		10.39	%		8.18	%		12.84	%		12.60	%		13.24	%
Noninterest income / average assets		0.52	%		0.62	%		0.63	%		0.60	%		0.64	%		0.59	%		0.63	%
Noninterest expense / average assets		2.25	%		2.21	%		2.27	%		2.47	%		2.35	%		2.24	%		2.34	%
Efficiency ratio		63.39	%		64.35	%		69.08	%		75.89	%		63.53	%		65.47	%		63.14	%

Operating Selected Performance Ratios (Annualized):
Operating return on average assets¹		0.96	%		0.88	%		0.76	%		0.77	%		1.00	%		0.87	%		1.06	%
Operating PTPP return on average assets¹		1.30	%		1.23	%		1.05	%		1.03	%		1.39	%		1.20	%		1.40	%
Operating return on average shareholders' equity¹		10.83	%		9.82	%		8.14	%		8.09	%		10.01	%		9.60	%		10.28	%
Operating return on average tangible common equity¹		14.44	%		13.09	%		10.80	%		10.70	%		13.26	%		12.78	%		13.56	%
Operating efficiency ratio¹		62.93	%		63.88	%		67.60	%		68.07	%		62.10	%		64.69	%		61.96	%
Operating noninterest income / average assets¹		0.52	%		0.62	%		0.63	%		0.60	%		0.63	%		0.59	%		0.63	%
Operating noninterest expense / average assets¹		2.24	%		2.21	%		2.23	%		2.23	%		2.30	%		2.22	%		2.31	%

Selected Interest Rates and Yields:
Yield on loans and leases		4.59	%		4.40	%		4.40	%		4.53	%		4.95	%		4.47	%		4.72	%
Yield on earning assets, FTE		3.79	%		3.39	%		3.18	%		3.20	%		3.67	%		3.46	%		3.73	%
Cost of interest-bearing deposits		0.62	%		0.33	%		0.27	%		0.29	%		0.34	%		0.41	%		0.39	%
Cost of total deposits		0.45	%		0.24	%		0.20	%		0.22	%		0.25	%		0.30	%		0.29	%
Cost of interest-bearing liabilities		0.70	%		0.42	%		0.36	%		0.39	%		0.44	%		0.50	%		0.49	%
Net interest margin, FTE		3.29	%		3.08	%		2.91	%		2.92	%		3.35	%		3.10	%		3.37	%

Per Common Share:
Net income, basic	$	0.69		$	0.61		$	0.49		$	0.40		$	0.62		$	1.79		$	1.85
Net income, diluted		0.68			0.61			0.49			0.40			0.61			1.78			1.84
Operating earnings, basic¹		0.69			0.61			0.51			0.52			0.64			1.82			1.90
Operating earnings, diluted¹		0.69			0.61			0.51			0.52			0.63			1.81			1.88
Book value		24.56			24.88			24.86			25.56			25.28			24.56			25.28
Tangible book value¹		18.02			18.69			18.64			19.26			19.03			18.02			19.03
Common shares outstanding		16,887,555			16,898,405			16,893,282			16,802,990			16,801,447			16,887,555			16,801,447

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
	2022				2022				2022				2021				2021				2022				2021
Operating Earnings:
Net income (GAAP)	$	11,543			$	10,215			$	8,259			$	6,655			$	9,600			$	30,018			$	28,134
Noninterest income:
Securities gains (losses), net		—				—				—				—				(45	)			—				(45	)
Noninterest expenses:
Merger related and restructuring expenses		87				81				439				2,762				464				607				939
Income taxes:
Income tax effect of adjustments		(22	)			(21	)			(113	)			(713	)			(108	)			(157	)			(231	)
Operating earnings (Non-GAAP)	$	11,608			$	10,275			$	8,585			$	8,704			$	9,911			$	30,468			$	28,797
Operating earnings per common share (Non-GAAP):
Basic	$	0.69			$	0.61			$	0.51			$	0.52			$	0.64			$	1.82			$	1.90
Diluted		0.69				0.61				0.51				0.52				0.63				1.81				1.88

Operating Noninterest Income:
Noninterest income (GAAP)	$	6,250			$	7,229			$	7,111			$	6,806			$	6,309			$	20,590			$	17,143
Securities gains (losses), net		—				—				—				—				(45	)			—				(45	)
Operating noninterest income (Non-GAAP)	$	6,250			$	7,229			$	7,111			$	6,806			$	6,264			$	20,590			$	17,098
Operating noninterest income (Non-GAAP)/average assets¹		0.52		%		0.62		%		0.63		%		0.60		%		0.63		%		0.59		%		0.63		%

Operating Noninterest Expense:
Noninterest expense (GAAP)	$	27,230			$	25,926			$	25,718			$	27,823			$	23,309			$	78,874			$	63,570
Merger related and restructuring expenses		(87	)			(81	)			(439	)			(2,762	)			(464	)			(607	)			(939	)
Operating noninterest expense (Non-GAAP)	$	27,143			$	25,845			$	25,279			$	25,061			$	22,845			$	78,267			$	62,631
Operating noninterest expense (Non-GAAP)/average assets²		2.24		%		2.21		%		2.23		%		2.23		%		2.30		%		2.22		%		2.31		%

Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP)	$	36,708			$	33,062			$	30,118			$	29,855			$	30,382			$	99,889			$	83,539
Operating noninterest income (Non-GAAP)		6,250				7,229				7,111				6,806				6,264				20,590				17,098
Operating noninterest expense (Non-GAAP)		(27,143	)			(25,845	)			(25,279	)			(25,061	)			(22,845	)			(78,267	)			(62,631	)
Operating PTPP earnings (Non-GAAP)	$	15,815			$	14,446			$	11,950			$	11,600			$	13,801			$	42,212			$	38,006

Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)³		0.96		%		0.88		%		0.76		%		0.77		%		1.00		%		0.87		%		1.06		%
Operating PTPP return on average assets (Non-GAAP)⁴		1.30		%		1.23		%		1.05		%		1.03		%		1.39		%		1.20		%		1.40		%
Return on average tangible common equity (Non-GAAP)⁵		14.36		%		13.02		%		10.39		%		8.18		%		12.84		%		12.60		%		13.24		%
Operating return on average shareholders' equity (Non-GAAP)⁶		10.83		%		9.82		%		8.14		%		8.09		%		10.01		%		9.60		%		10.28		%
Operating return on average tangible common equity (Non-GAAP)⁷		14.44		%		13.09		%		10.80		%		10.70		%		13.26		%		12.78		%		13.56		%

Operating Efficiency Ratio:
Efficiency ratio (GAAP)		63.39		%		64.35		%		69.08		%		75.89		%		63.53		%		65.47		%		63.14		%
Adjustment for taxable equivalent yields		(0.25	)	%		(0.27	)	%		(0.31	)	%		(0.32	)	%		(0.25	)	%		(0.28	)	%		(0.28	)	%
Adjustment for securities gains (losses)		—		%		—		%		—		%		—		%		(0.08	)	%		—		%		(0.03	)	%
Adjustment for merger related income and costs		(0.21	)	%		(0.20	)	%		(1.17	)	%		(7.50	)	%		(1.10	)	%		(0.50	)	%		(0.87	)	%
Operating efficiency ratio (Non-GAAP)		62.93		%		63.88		%		67.60		%		68.07		%		62.10		%		64.69		%		61.96		%

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 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
	2022			2022			2022			2021			2021			2022			2021
Tangible Common Equity:
Shareholders' equity (GAAP)	$	414,711		$	420,427		$	420,042		$	429,430		$	424,720		$	414,711		$	424,720
Less goodwill and other intangible assets		110,460			104,582			105,215			105,852			104,930			110,460			104,930
Tangible common equity (Non-GAAP)	$	304,251		$	315,845		$	314,827		$	323,578		$	319,790		$	304,251		$	319,790

Average Tangible Common Equity:
Average shareholders' equity (GAAP)	$	425,365		$	419,726		$	427,945		$	426,808		$	392,798		$	424,336		$	374,464
Less average goodwill and other intangible assets		106,483			104,986			105,617			104,193			96,250			105,698			90,445
Average tangible common equity (Non-GAAP)	$	318,882		$	314,740		$	322,328		$	322,615		$	296,548		$	318,638		$	284,019

Tangible Book Value per Common Share:
Book value per common share (GAAP)	$	24.56		$	24.88		$	24.86		$	25.56		$	25.28		$	24.56		$	25.28
Adjustment due to goodwill and other intangible assets		(6.54	)		(6.19	)		(6.23	)		(6.30	)		(6.25	)		(6.54	)		(6.25	)
Tangible book value per common share (Non-GAAP)¹	$	18.02		$	18.69		$	18.64		$	19.26		$	19.03		$	18.02		$	19.03

Tangible Common Equity to Tangible Assets:
Total Assets	$	4,796,911		$	4,788,113		$	4,718,579		$	4,611,579		$	4,384,031		$	4,796,911		$	4,384,031
Less goodwill and other intangibles		110,460			104,582			105,215			105,852			104,930			110,460			104,930
Tangible Assets (Non-GAAP):	$	4,686,451		$	4,683,531		$	4,613,364		$	4,505,727		$	4,279,101		$	4,686,451		$	4,279,101
Tangible common equity to tangible assets (Non-GAAP)		6.49	%		6.74	%		6.82	%		7.18	%		7.47	%		6.49	%		7.47	%

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