Highlights for the Fourth Quarter of 2022

Operating earnings¹ of $12.9 million, or $0.76 per diluted common share
Operating earnings¹ increase of 11% compared to the previous quarter and 48% compared to the same prior year quarter
Net organic loan and lease growth of over $130.2 million - 17% annualized quarter-over-quarter increase
Net interest income growth of $904 thousand or 10% annualized quarter-over-quarter increase
Credit quality remains solid with nonperforming assets to total assets of 0.10%

KNOXVILLE, Tenn., Jan. 23, 2023 (GLOBE NEWSWIRE) -- 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 Subsidiary

Condensed 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 Subsidiary

Condensed 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 Subsidiary

Condensed 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.

²Yields 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 Subsidiary

Condensed 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.

²Yields 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 Subsidiary

Condensed 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 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															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 Subsidiary

Condensed 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 Subsidiary

Condensed 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.

SmartFinancial Announces Results for the Fourth Quarter 2022