KNOXVILLE, Tenn., Oct. 19, 2021 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ((", SmartFinancial", or the ", Company", , NASDAQ:SMBK), today announced net income of $9.6 million, or $0.61 per diluted common share, for the third quarter of 2021, compared to net income of $6.4 million, or $0.42 per diluted common share, for the third quarter of 2020, and compared to net income of $8.8 million, or $0.58 per diluted common share, for the second quarter of 2021. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.9 million, or $0.63 per diluted common share, in the third quarter of 2021, compared to $6.6 million, or $0.44 per diluted common share, in the third quarter of 2020, and compared to $9.1 million, or $0.60 per diluted common share, in the second quarter of 2021.

Highlights for the Third Quarter of 2021

Net organic loan growth of over $52 million, an 8.6% annualized quarter-over-quarter increase
Operating earnings (non-GAAP) of $0.63 per diluted share, a 43.2% increase from the prior-year-quarter
Tangible book value per share (Non-GAAP) of $19.03, a 7.3% annualized quarter-over-quarter increase
Completed the acquisition of Sevier County Bancshares ("SCB")
Hired seasoned commercial banking team members in Dothan, Montgomery and Birmingham, Alabama and Tallahassee, Florida

Billy Carroll, President & CEO, stated: "Our company is continuing to perform at a very high level, and we are extremely pleased with our results and accomplishments this quarter. In addition to our solid financial performance, we closed our SCB transaction and added several outstanding, seasoned bankers to our staff. The momentum around our team is strong and I am very excited with the direction of our company."

SmartFinancial's Chairman, Miller Welborn, concluded: "The execution of our Strategic Plan is really coming together. All of our operating metrics are on target, and we are excited about our future."

Net Interest Income and Net Interest Margin

Net interest income was $30.4 million for the third quarter of 2021, compared to $26.9 million for the second quarter of 2021. Average earning assets totaled $3.61 billion, an increase of $314.9 million. The growth was primarily driven by an increase in average cash and cash equivalents of $271.6 million and average loans and leases of $24.2 million. Average interest-bearing liabilities increased $212.2 million, related to continued core deposit growth and the acquisition of SCB.

The tax equivalent net interest margin was 3.35% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021. The tax equivalent net interest margin was impacted by a 2 basis point increase in the average yield on interest-earning assets and offset by a 5 basis point decline in the rate on interest-bearing liabilities over the prior quarter. The increase in yield on interest-earning assets was primarily driven by an increase of $1.7 million of loan discount accretion and Payroll Protection Program ("PPP") fee accretion during the third quarter of 2021 when compared to the second quarter of 2021, offset by lower yielding excess liquidity.

The yield on interest-bearing liabilities decreased to 0.44% for the third quarter of 2021 when compared to 0.49% for the second quarter of 2021. The cost of average interest-bearing deposits was 0.34% for the third quarter of 2021 compared to 0.39% for the second quarter of 2021, a decrease of 5 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, which decreased 16 basis points during the period. The cost of total deposits for the third quarter of 2021 was 0.25% compared to 0.29% in the second quarter of 2021.

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


	Three Months Ended
	Sep		Jun		Increase
Selected Interest Rates and Yields	2021		2021		(Decrease)
Yield on loans and leases	4.95	%	4.52	%	0.43		%
Yield on earning assets, FTE	3.67	%	3.65	%	0.02		%
Cost of interest-bearing deposits	0.34	%	0.39	%	(0.05	)	%
Cost of total deposits	0.25	%	0.29	%	(0.04	)	%
Cost of interest-bearing liabilities	0.44	%	0.49	%	(0.05	)	%
Net interest margin, FTE	3.35	%	3.29	%	0.06		%

Provision for Loan and Lease Losses and Credit Quality

At September 30, 2021, the allowance for loan and lease losses was $19.3 million. The allowance for loan and lease losses to total loans and leases was 0.73% as of September 30, 2021, compared to 0.74% as of June 30, 2021. For the Company's originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.76% as of September 30, 2021, compared to 0.86% as of June 30, 2021. The remaining discounts on the acquired loan and lease portfolio totaled $13.0 million, or 2.48% of acquired loans and leases as of September 30, 2021.

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		2021				2021				Change
Beginning balance	$	18,310			$	18,370			$	(60	)
Charge-offs		(239	)			(153	)			(86	)
Recoveries		75				98				(23	)
Net charge-offs		(164	)			(55	)			(109	)
Provision		1,149				(5	)			(1,154	)
Ending balance	$	19,295			$	18,310			$	985

Allowance for loan losses to total loans and leases, gross		0.73		%		0.74		%		(0.01	)	%

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 0.13% as of September 30, 2021, a decrease of 2 basis points from the 0.15% reported in the second quarter of 2021. 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 0.14% as of September 30, 2021, as compared to 0.18% as of June 30, 2021.

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		2021			2021			(Decrease)
Nonaccrual loans and leases	$	3,567		$	3,694		$	(127	)
Loans and leases past due 90 days or more and still accruing		-			64			(64	)
Total nonperforming loans and leases		3,567			3,758			(191	)
Other real estate owned		2,415			2,499			(84	)
Other repossessed assets		77			199			(122	)
Total nonperforming assets	$	6,059		$	6,456		$	(397	)

Nonperforming loans and leases to total loans and leases, gross		0.13	%		0.15	%		(0.02	)	%
Nonperforming assets to total assets		0.14	%		0.18	%		(0.04	)	%

Noninterest Income

Noninterest income increased $1.2 million to $6.3 million for the third quarter of 2021 compared to $5.1 million for the second quarter of 2021. During the third quarter of 2021, the primary components of the changes in noninterest income were as follows:

Increase in service charges on deposit accounts, related to the SCB acquisition, deposit growth and transaction volume;
Increase in insurance commissions due to improved activity;
Increase in interchange and debit card transaction fees, related to increased volume, deposit growth and the SCB acquisition; and
Increase in other, includes $469 thousand in SWAP fee income from newly created capital markets program and $159 thousand in income from the Company's bank owned life insurance program.

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

	Three Months Ended
		Sep		Jun		Increase
Noninterest Income		2021		2021		(Decrease)
Service charges on deposit accounts	$	1,220	$	1,048	$	172
Gain (loss) on sale of securities, net		45		-		45
Mortgage banking income		994		1,105		(111	)
Investment services		448		567		(119	)
Insurance commissions		745		557		188
Interchange and debit card transaction fees		1,078		922		156
Other		1,779		944		835
Total noninterest income	$	6,309	$	5,143	$	1,166

Noninterest Expense

Noninterest expense increased $2.5 million to $23.3 million for the third quarter of 2021 compared to $20.8 million for the second quarter of 2021. During the third quarter of 2021, the primary components of the changes in noninterest expense were as follows:

Increase in salaries and employee benefits, primarily due to the hiring of additional talent from both the SCB acquisition and the Auburn, Dothan, Montgomery and Birmingham, Alabama and Tallahassee, Florida teams;
Increase in occupancy and equipment expense from the SCB acquisition and expansion in Alabama;
Increase in FDIC insurance from continued asset growth; and
Increase in data processing and technology, primarily from continued infrastructure build.

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


	Three Months Ended
		Sep		Jun		Increase
Noninterest Expense		2021		2021		(Decrease)
Salaries and employee benefits	$	13,594	$	12,203	$	1,391
Occupancy and equipment		2,536		2,294		242
FDIC insurance		525		371		154
Other real estate and loan related expenses		407		506		(99	)
Advertising and marketing		235		230		5
Data processing and technology		1,753		1,509		244
Professional services		810		849		(39	)
Amortization of intangibles		711		441		270
Merger related and restructuring expenses		464		372		92
Other		2,274		2,022		252
Total noninterest expense	$	23,309	$	20,797	$	2,512

Income Tax Expense

Income tax expense was $2.6 million for the third quarter of 2021, an increase of $163 thousand, compared to $2.5 million for the second quarter of 2021.

The effective tax rate was 22.0% for the third and second quarters of 2021, respectively.

Balance Sheet Trends

Total assets at September 30, 2021 were $4.38 billion compared with $3.30 billion at December 31, 2020. The increase of $1.08 billion is primarily attributable to increases in cash and cash equivalents of $609.4 million, securities available-for-sale of $123.7 million, loans and leases of $270.4 million, bank owned life insurance of $47.9 million and goodwill and intangibles of $14.5 related to the SCB acquisition.

Total liabilities increased to $3.96 billion at September 30, 2021 from $2.95 billion at December 31, 2020. The increase of $1.01 billion million was primarily from organic deposit growth of $561.4 million and deposits of $432.7 million from the SCB acquisition.

Shareholders' equity at September 30, 2021 totaled $424.7 million, an increase of $67.6 million, from December 31, 2020. The increase in shareholders' equity was primarily from the issuance of $42.3 million of common stock for the acquisition of SCB and net income of $28.1 million for the nine months ended September 30, 2021, which was offset by repurchase of the Company's common stock of $1.2 million and $2.7 million of dividends paid. Tangible book value per share (Non-GAAP) was $19.03 at September 30, 2021, compared to $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.47% at September 30, 2021, compared with 8.41% at December 31, 2020.

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


	Sep		Dec		Increase
Selected Balance Sheet Information	2021		2020		(Decrease)
Total assets	$	4,384,031	$	3,304,949	$	1,079,082
Total liabilities		3,959,311		2,947,781		1,011,530
Total equity		424,720		357,168		67,552
Securities available-for-sale, at fair value		339,343		215,634		123,709
Loans and leases		2,652,663		2,382,243		270,420
Deposits		3,799,272		2,805,215		994,057
Borrowings		88,748		81,199		7,549

Conference Call Information

SmartFinancial issued this earnings release for the third quarter of 2021 on Tuesday, October 19, 2021, and will host a conference call on Wednesday, October 20, 2021, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 or (646) 904-5544 and enter the confirmation number, 289025. A replay of the conference call will be available through December 22, 2021, by dialing (866) 813-9403 or (929) 458-6194 and entering the confirmation number, 781192. Conference call materials will be published on the Company's webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am 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, proceeds related to the termination of an Alabama Department of Economic and Community Affairs ("ADECA") loan program, merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings divided by average assets. Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income earnings by average assets. Operating return on average shareholders' equity is the annualized operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Operating return on average tangible common equity is the annualized operating earnings 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, proceeds related to the termination of the ADECA loan program. Operating pre-tax pre-provision earnings is net interest income plus operating noninterest income less operating noninterest expense. 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 and average tangible common equity excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value is tangible common equity divided by common shares outstanding. Tangible assets 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 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) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (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; (15) the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (17) 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
	2021			2021			2021			2020			2020
Assets:
Cash and cash equivalents	$	1,091,160		$	673,515		$	556,701		$	481,719		$	541,815
Securities available-for-sale, at fair value		339,343			250,817			250,937			215,634			214,634
Other investments		14,972			14,584			14,728			14,794			14,829
Loans held for sale		3,418			4,334			7,870			11,721			11,292
Loans and leases		2,652,663			2,468,318			2,487,129			2,382,243			2,404,057
Less: Allowance for loan and lease losses		(19,295	)		(18,310	)		(18,370	)		(18,346	)		(18,817	)
Loans and leases, net		2,633,368			2,450,008			2,468,759			2,363,897			2,385,240
Premises and equipment, net		85,346			72,314			72,697			72,682			73,934
Other real estate owned		2,415			2,499			3,946			4,619			3,932
Goodwill and other intangibles, net		104,930			90,966			86,350			86,471			86,710
Bank owned life insurance		79,145			72,013			71,586			31,215			31,034
Other assets		29,934			23,306			23,629			22,197			24,168
Total assets	$	4,384,031		$	3,654,356		$	3,557,203		$	3,304,949		$	3,387,588
Liabilities:
Deposits:
Noninterest-bearing demand	$	977,180		$	807,560		$	777,968		$	685,957		$	669,733
Interest-bearing demand		847,007			702,470			683,887			649,129			534,128
Money market and savings		1,389,393			1,140,029			1,073,941			919,631			871,098
Time deposits		585,692			489,413			512,417			550,498			577,064
Total deposits		3,799,272			3,139,472			3,048,213			2,805,215			2,652,023
Borrowings		88,748			78,834			82,642			81,199			319,391
Subordinated debt		41,909			39,388			39,367			39,346			39,325
Other liabilities		29,382			23,269			22,923			22,021			27,060
Total liabilities		3,959,311			3,280,963			3,193,145			2,947,781			3,037,799
Shareholders' Equity:
Common stock		16,801			15,110			15,105			15,107			15,233
Additional paid-in capital		292,760			252,039			251,836			252,693			254,626
Retained earnings		112,600			103,906			96,034			87,185			78,918
Accumulated other comprehensive income		2,559			2,338			1,083			2,183			1,012
Total shareholders' equity		424,720			373,393			364,058			357,168			349,789
Total liabilities & shareholders' equity	$	4,384,031		$	3,654,356		$	3,557,203		$	3,304,949		$	3,387,588

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands except share and per share data)

	Three Months Ended												Nine Months Ended
	Sep		Jun			Mar		Dec		Sep			Sep		Sep
	2021		2021			2020		2020		2020			2021		2020
Interest income:
Loans and leases, including fees	$	31,674	$	28,323		$	28,018	$	28,594	$	28,621		$	88,015	$	83,718
Securities available-for-sale:
Taxable		832		916			724		609		546			2,472		1,813
Tax-exempt		331		304			259		306		364			894		1,064
Federal funds sold and other earning assets		474		309			291		303		327			1,074		1,206
Total interest income		33,311		29,852			29,292		29,812		29,858			92,455		87,801
Interest expense:
Deposits		2,153		2,248			2,331		2,580		2,897			6,733		11,016
Borrowings		121		123			117		142		334			360		674
Subordinated debt		655		584			584		584		584			1,823		1,751
Total interest expense		2,929		2,955			3,032		3,306		3,815			8,916		13,441
Net interest income		30,382		26,897			26,260		26,506		26,043			83,539		74,360
Provision for loan and lease losses		1,149		(5	)		67		—		2,634			1,211		8,683
Net interest income after provision for loan and lease losses		29,233		26,902			26,193		26,506		23,409			82,328		65,677
Noninterest income:
Service charges on deposit accounts		1,220		1,048			1,009		1,032		892			3,278		2,370
Gain (loss) on sale of securities, net		45		—			—		—		(9	)		45		6
Mortgage banking		994		1,105			1,139		1,331		1,029			3,238		2,544
Investment services		448		567			531		407		359			1,546		1,159
Insurance commissions		745		557			1,466		548		560			2,768		1,302
Interchange and debit card transaction fees		1,078		922			839		760		868			2,839		1,652
Other		1,779		944			707		898		422			3,429		1,417
Total noninterest income		6,309		5,143			5,691		4,976		4,121			17,143		10,450
Noninterest expense:
Salaries and employee benefits		13,594		12,203			10,869		11,516		11,032			36,666		31,395
Occupancy and equipment		2,536		2,294			2,341		2,256		2,186			7,170		6,093
FDIC insurance		525		371			371		297		534			1,266		894
Other real estate and loan related expense		407		506			602		516		643			1,514		1,535
Advertising and marketing		235		230			190		181		253			654		653
Data processing and technology		1,753		1,509			1,379		1,182		1,131			4,642		3,293
Professional services		810		849			641		786		594			2,300		2,172
Amortization of intangibles		711		441			444		571		402			1,597		1,169
Merger related and restructuring expenses		464		372			103		702		290			939		3,863
Other		2,274		2,022			2,524		1,946		2,102			6,822		5,699
Total noninterest expense		23,309		20,797			19,464		19,953		19,167			63,570		56,766
Income before income taxes		12,233		11,248			12,420		11,529		8,363			35,901		19,361
Income tax expense		2,633		2,470			2,664		2,499		1,968			7,767		4,059
Net income	$	9,600	$	8,778		$	9,756	$	9,030	$	6,395		$	28,134	$	15,302
Earnings per common share:
Basic	$	0.62	$	0.59		$	0.65	$	0.60	$	0.42		$	1.85	$	1.03
Diluted	$	0.61	$	0.58		$	0.65	$	0.59	$	0.42		$	1.84	$	1.02
Weighted average common shares outstanding:
Basic		15,557,528		15,003,657			15,011,573		15,109,298		15,160,579			15,192,919		14,903,757
Diluted		15,691,126		15,126,184			15,111,947		15,182,796		15,210,611			15,312,755		14,965,455

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS

	Three Months Ended
	September 30, 2021						June 30, 2021						September 30, 2020
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest¹		Cost¹		Balance		Interest¹		Cost¹		Balance		Interest¹		Cost¹
Assets:
Loans and leases, including fees²	$	2,532,604	$	31,623	4.95	%	$	2,508,388	$	28,256	4.52	%	$	2,410,173	$	28,508	4.71	%
Loans held for sale		3,987		51	5.09	%		5,315		67	5.03	%		8,048		113	5.57	%
Taxable securities		187,032		832	1.77	%		164,935		916	2.23	%		132,642		546	1.64	%
Tax-exempt securities		87,621		477	2.16	%		89,296		453	2.04	%		88,129		515	2.32	%
Federal funds sold and other earning assets		802,712		474	0.23	%		531,125		309	0.23	%		438,785		327	0.30	%
Total interest-earning assets		3,613,956		33,457	3.67	%		3,299,059		30,001	3.65	%		3,077,777		30,009	3.88	%
Noninterest-earning assets		323,067						286,211						262,764
Total assets	$	3,937,023					$	3,585,270					$	3,340,541

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	763,613		414	0.21	%	$	688,756		304	0.18	%	$	509,999		199	0.16	%
Money market and savings deposits		1,233,533		854	0.27	%		1,117,290		905	0.32	%		833,022		704	0.34	%
Time deposits		524,327		885	0.67	%		502,755		1,039	0.83	%		615,714		1,994	1.29	%
Total interest-bearing deposits		2,521,473		2,153	0.34	%		2,308,801		2,248	0.39	%		1,958,735		2,897	0.59	%
Borrowings³		80,188		121	0.60	%		81,525		123	0.61	%		319,265		334	0.42	%
Subordinated debt		40,211		654	6.47	%		39,375		584	5.95	%		39,311		584	5.91	%
Total interest-bearing liabilities		2,641,872		2,928	0.44	%		2,429,701		2,955	0.49	%		2,317,311		3,815	0.65	%
Noninterest-bearing deposits		877,831						768,399						649,489
Other liabilities		24,522						17,845						25,834
Total liabilities		3,544,225						3,215,945						2,992,634
Shareholders' equity		392,798						369,325						347,907
Total liabilities and shareholders' equity	$	3,937,023					$	3,585,270					$	3,340,541

Net interest income, taxable equivalent			$	30,529					$	27,046					$	26,194
Interest rate spread					3.23	%					3.16	%					3.22	%
Tax equivalent net interest margin					3.35	%					3.29	%					3.39	%

Percentage of average interest-earning assets to average interest-bearing liabilities					136.80	%					135.78	%					132.82	%
Percentage of average equity to average assets					9.98	%					10.30	%					10.41	%

¹Taxable equivalent

²Includes average balance of $128,408, $266,114 and $295,045 in PPP loans for the quarters ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

³ Includes average balance of $237,780 in Paycheck Protection Program Liquidity Facility ("PPPLF") funding for the quarter ended September 30, 2020. No PPPLF funding was used for the quarters ended September 30, 2021, and June 30, 2021.

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS


	Nine Months Ended
	September 30, 2021							September 30, 2020
	Average				Yield/			Average				Yield/
	Balance		Interest¹		Cost¹			Balance		Interest¹		Cost¹
Assets:
Loans and leases, including fees²	$	2,489,843	$	87,823		4.72	%	$	2,252,075	$	83,487	4.95	%
Loans held for sale		5,724		192		4.49	%		6,409		231	4.81	%
Taxable securities		163,005		2,472		2.03	%		123,895		1,813	1.95	%
Tax-exempt securities		89,244		1,339		2.01	%		81,604		1,486	2.43	%
Federal funds sold and other earning assets		584,970		1,074		0.25	%		296,449		1,206	0.54	%
Total interest-earning assets		3,332,786		92,900		3.73	%		2,760,432		88,223	4.27	%
Noninterest-earning assets		295,074							248,293
Total assets	$	3,627,860						$	3,008,725

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	698,148		974		0.19	%	$	451,074		782	0.23	%
Money market and savings deposits		1,112,342		2,580		0.31	%		749,316		2,707	0.48	%
Time deposits		517,566		3,179		0.82	%		667,303		7,527	1.51	%
Total interest-bearing deposits		2,328,056		6,733		0.39	%		1,867,693		11,016	0.79	%
Borrowings³		81,177		360		0.59	%		203,202		674	0.44	%
Subordinated debt		39,650		1,823		6.15	%		39,290		1,751	5.95	%
Total interest-bearing liabilities		2,448,883		8,916		0.49	%		2,110,185		13,441	0.85	%
Noninterest-bearing deposits		782,960							537,860
Other liabilities		21,553							23,826
Total liabilities		3,253,396							2,671,871
Shareholders' equity		374,464							336,854
Total liabilities and shareholders' equity	$	3,627,860						$	3,008,725

Net interest income, taxable equivalent			$	83,984						$	74,782
Interest rate spread						3.24	%					3.42	%
Tax equivalent net interest margin						3.37	%					3.62	%

Percentage of average interest-earning assets to average interest-bearing liabilities						136.09	%					130.81	%
Percentage of average equity to average assets						10.32	%					11.20	%

¹Taxable equivalent

²Includes average balance of $235,027 and $169,617 in PPP loans for the six months ended September 30, 2021, and 2020, respectively.

³ Includes average balance of $115,734 in Paycheck Protection Program Liquidity Facility ("PPPLF") funding for the nine months ended September 30, 2020. No PPPLF funding was used for the nine months ended September 30, 2021.

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS

	Year Ended
	December 31, 2020							December 31, 2019
	Average				Yield/			Average				Yield/
	Balance		Interest¹		Cost¹			Balance		Interest¹		Cost¹
Assets:
Loans, including fees²	$	2,289,612	$	111,992		4.89	%	$	1,836,963	$	100,831	5.49	%
Loans held for sale		7,360		320		4.34	%		3,858		171	4.43	%
Taxable securities		122,900		2,423		1.97	%		129,705		3,289	2.54	%
Tax-exempt securities		83,765		1,941		2.32	%		56,458		1,972	3.49	%
Federal funds sold and other earning assets		308,843		1,509		0.49	%		110,380		2,646	2.40	%
Total interest-earning assets		2,812,480		118,185		4.20	%		2,137,364		108,909	5.10	%
Noninterest-earning assets		250,955							201,976
Total assets	$	3,063,435						$	2,339,340

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	481,050		1,013		0.21	%	$	333,100		1,883	0.57	%
Money market and savings deposits		788,006		3,482		0.44	%		651,855		7,827	1.20	%
Time deposits		641,647		9,102		1.42	%		635,451		12,205	1.92	%
Total interest-bearing deposits		1,910,703		13,597		0.71	%		1,620,406		21,915	1.35	%
Borrowings³		177,204		816		0.46	%		21,526		319	1.48	%
Subordinated debt		39,301		2,334		5.94	%		39,216		2,341	5.97	%
Total interest-bearing liabilities		2,127,208		16,747		0.79	%		1,681,148		24,575	1.46	%
Noninterest-bearing deposits		571,282							343,611
Other liabilities		23,775							15,852
Total liabilities		2,722,265							2,040,611
Shareholders' equity		341,170							298,729
Total liabilities and shareholders' equity	$	3,063,435						$	2,339,340

Net interest income, taxable equivalent			$	101,438						$	84,334
Interest rate spread						3.41	%					3.64	%
Tax equivalent net interest margin						3.61	%					3.95	%

Percentage of average interest-earning assets to average interest-bearing liabilities						132.21	%					127.14	%
Percentage of average equity to average assets						11.14	%					12.77	%

¹Taxable equivalent

²Includes average balance of $201,470 in PPP loans for the twelve months ended December 31, 2020.

³ Includes average balance of $91,190 in PPPLF funding for twelve months ended December 31, 2020.

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
	2021			2021			2021			2020			2020
Composition of Loans and Leases:
Commercial real estate:
owner occupied	$	560,671		$	492,750		$	477,293		$	463,771		$	467,569
non-owner occupied		752,576			669,741			593,348			549,205			563,082
Commercial real estate, total		1,313,247			1,162,491			1,070,641			1,012,976			1,030,651
Commercial & industrial		469,739			496,114			686,010			634,446			644,498
Construction & land development		326,374			300,704			285,973			278,075			275,172
Consumer real estate		478,161			444,640			432,486			443,930			440,310
Leases		53,396			53,038			—			—			—
Consumer and other		11,746			11,331			12,019			12,816			13,426
Total loans and leases	$	2,652,663		$	2,468,318		$	2,487,129		$	2,382,243		$	2,404,057

Asset Quality and Additional Loan Data:
Nonperforming loans and leases	$	3,567		$	3,758		$	6,234		$	5,782		$	2,248
Other real estate owned		2,415			2,499			3,946			4,619			3,932
Other repossessed assets		77			199			—			—			—
Total nonperforming assets	$	6,059		$	6,456		$	10,180		$	10,401		$	6,180
Restructured loans and leases not included in nonperforming loans and leases	$	212		$	219		$	250		$	257		$	8
Net charge-offs to average loans and leases (annualized)		0.03	%		0.01	%		0.01	%		0.08	%		0.01	%
Allowance for loan and leases losses to loans and leases		0.73	%		0.74	%		0.74	%		0.77	%		0.78	%
Nonperforming loans and leases to total loans and leases, gross		0.13	%		0.15	%		0.25	%		0.24	%		0.09	%
Nonperforming assets to total assets		0.14	%		0.18	%		0.29	%		0.31	%		0.18	%
Acquired loan and lease fair value discount balance	$	13,001		$	12,982		$	12,951		$	14,467		$	15,141
Accretion income on acquired loans and leases		1,760			761			1,636			768			960
PPP net fees deferred balance		3,783			6,651			7,351			4,190			6,348
PPP net fees recognized		2,873			2,132			2,398			2,157			1,812

Capital Ratios:
Equity to Assets		9.69	%		10.22	%		10.23	%		10.81	%		10.33	%
Tangible common equity to tangible assets (Non-GAAP)¹		7.47	%		7.93	%		8.00	%		8.41	%		7.97	%

SmartFinancial, Inc.²
Tier 1 leverage		8.36	%		8.10	%		8.55	%		8.69	%		8.78	%
Common equity Tier 1		10.85	%		10.63	%		11.29	%		11.61	%		11.33	%
Tier 1 capital		10.85	%		10.63	%		11.29	%		11.61	%		11.33	%
Total capital		12.92	%		12.80	%		13.62	%		14.07	%		13.81	%

SmartBank		Estimated³
Tier 1 leverage		9.20	%		8.75	%		9.33	%		9.58	%		9.74	%
Common equity Tier 1		11.95	%		11.50	%		12.31	%		12.79	%		12.57	%
Tier 1 capital		11.95	%		11.50	%		12.31	%		12.79	%		12.57	%
Total capital		12.60	%		12.19	%		13.05	%		13.57	%		13.37	%

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
	2021			2021			2021			2020			2020			2021			2020
Selected Performance Ratios (Annualized):
Return on average assets		0.97	%		0.98	%		1.18	%		1.11	%		0.76	%		1.04	%		0.68	%
Return on average shareholders' equity		9.70	%		9.53	%		10.96	%		10.15	%		7.31	%		10.05	%		6.07	%
Return on average tangible common equity¹		12.84	%		12.54	%		14.41	%		13.43	%		9.72	%		13.24	%		8.10	%
Noninterest income / average assets		0.64	%		0.58	%		0.69	%		0.61	%		0.49	%		0.63	%		0.46	%
Noninterest expense / average assets		2.35	%		2.33	%		2.35	%		2.46	%		2.28	%		2.34	%		2.52	%
Efficiency ratio		63.53	%		64.91	%		60.92	%		63.38	%		63.54	%		63.14	%		66.93	%

Operating Selected Performance Ratios (Annualized):
Operating return on average assets¹		1.00	%		1.01	%		1.19	%		1.14	%		0.79	%		1.06	%		0.81	%
Operating PTPP return on average assets¹		1.39	%		1.30	%		1.52	%		1.45	%		1.35	%		1.40	%		1.42	%
Operating return on average shareholders' equity¹		10.01	%		9.83	%		11.05	%		10.34	%		7.57	%		10.28	%		7.20	%
Operating return on average tangible common equity¹		13.26	%		12.93	%		14.53	%		13.69	%		10.06	%		13.56	%		9.60	%
Operating efficiency ratio¹		62.09	%		63.46	%		60.32	%		60.86	%		62.25	%		61.96	%		62.07	%
Operating noninterest income / average assets¹		0.63	%		0.58	%		0.69	%		0.56	%		0.49	%		0.63	%		0.46	%
Operating noninterest expense / average assets¹		2.30	%		2.29	%		2.34	%		2.37	%		2.25	%		2.31	%		2.35	%

Selected Interest Rates and Yields:
Yield on loans and leases		4.95	%		4.52	%		4.67	%		4.72	%		4.71	%		4.72	%		4.95	%
Yield on earning assets, FTE		3.67	%		3.65	%		3.88	%		4.01	%		3.88	%		3.73	%		4.27	%
Cost of interest-bearing deposits		0.34	%		0.39	%		0.44	%		0.50	%		0.59	%		0.39	%		0.79	%
Cost of total deposits		0.25	%		0.29	%		0.33	%		0.38	%		0.44	%		0.29	%		0.61	%
Cost of interest-bearing liabilities		0.44	%		0.49	%		0.54	%		0.60	%		0.65	%		0.49	%		0.85	%
Net interest margin, FTE		3.35	%		3.29	%		3.48	%		3.57	%		3.39	%		3.37	%		3.62	%

Per Common Share:
Net income, basic	$	0.62		$	0.59		$	0.65		$	0.60		$	0.42		$	1.85		$	1.03
Net income, diluted		0.61			0.58			0.65			0.59			0.42			1.84			1.02
Operating earnings, basic¹		0.64			0.60			0.65			0.61			0.44			1.90			1.22
Operating earnings, diluted¹		0.63			0.60			0.65			0.61			0.44			1.88			1.21
Book value		25.28			24.71			24.10			23.64			22.96			25.28			22.96
Tangible book value¹		19.03			18.69			18.39			17.92			17.27			19.03			17.27
Common shares outstanding		16,801,447			15,109,736			15,104,536			15,107,214			15,233,227			16,801,447			15,233,227

¹See 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
	2021				2021				2021				2020				2020				2021				2020
Operating Earnings:
Net income (GAAP)	$	9,600			$	8,778			$	9,756			$	9,030			$	6,395			$	28,134			$	15,302
Noninterest income:
Securities gains (losses), net		(45	)			—				—				—				9				(45	)			(6	)
ADECA termination proceeds		—				—				—				(465	)			—				—				—
Noninterest expenses:
Merger related and restructuring expenses		464				372				103				702				290				939				3,863
Income taxes:
Income tax effect of adjustments		(108	)			(96	)			(27	)			(62	)			(77	)			(231	)			(1,009	)
Operating earnings (Non-GAAP)	$	9,911			$	9,054			$	9,832			$	9,205			$	6,617			$	28,797			$	18,150
Operating earnings per common share (Non-GAAP):
Basic	$	0.64			$	0.60			$	0.65			$	0.61			$	0.44			$	1.90			$	1.22
Diluted		0.63				0.60				0.65				0.61				0.44				1.88				1.21

Operating Noninterest Income:
Noninterest income (GAAP)	$	6,309			$	5,143			$	5,691			$	4,976			$	4,121			$	17,143			$	10,450
Securities gains (losses), net		(45	)			—				—				—				9				(45	)			(6	)
ADECA termination proceeds		—				—				—				(465	)			—				—				—
Operating noninterest income (Non-GAAP)	$	6,264			$	5,143			$	5,691			$	4,511			$	4,130			$	17,098			$	10,444
Operating noninterest income (Non-GAAP)/average assets¹		0.63		%		0.58		%		0.69		%		0.56		%		0.49		%		0.63		%		0.46		%

Operating Noninterest Expense:
Noninterest expense (GAAP)	$	23,309			$	20,797			$	19,464			$	19,953			$	19,167			$	63,570			$	56,766
Merger related and restructuring expenses		(464	)			(372	)			(103	)			(702	)			(290	)			(939	)			(3,863	)
Operating noninterest expense (Non-GAAP)	$	22,845			$	20,425			$	19,361			$	19,251			$	18,877			$	62,631			$	52,903
Operating noninterest expense (Non-GAAP)/average assets²		2.30		%		2.29		%		2.34		%		2.37		%		2.25		%		2.31		%		2.35		%

Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP)	$	30,382			$	26,897			$	26,260			$	26,506			$	26,043			$	83,539			$	74,360
Operating noninterest income		6,264				5,143				5,691				4,511				4,130				17,098				10,444
Operating noninterest expense		(22,845	)			(20,425	)			(19,361	)			(19,251	)			(18,877	)			(62,631	)			(52,903	)
Operating PTPP earnings (Non-GAAP)	$	13,801			$	11,615			$	12,590			$	11,766			$	11,296			$	38,006			$	31,901

Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)³		1.00		%		1.01		%		1.19		%		1.14		%		0.79		%		1.06		%		0.81		%
Operating PTPP return on average assets (Non-GAAP)⁴		1.39		%		1.30		%		1.52		%		1.45		%		1.35		%		1.40		%		1.42		%
Return on average tangible common equity (Non-GAAP)⁵		12.84		%		12.54		%		14.41		%		13.43		%		9.72		%		13.24		%		8.10		%
Operating return on average shareholders' equity (Non-GAAP)⁶		10.01		%		9.83		%		11.05		%		10.34		%		7.57		%		10.28		%		7.20		%
Operating return on average tangible common equity (Non-GAAP)⁷		13.26		%		12.93		%		14.53		%		13.69		%		10.06		%		13.56		%		9.60		%

Operating Efficiency Ratio:
Efficiency ratio (GAAP)		63.53		%		64.91		%		60.92		%		63.38		%		63.54		%		63.14		%		66.93		%
Adjustment for taxable equivalent yields		(0.25	)	%		(0.30	)	%		(0.28	)	%		(0.30	)	%		(0.32	)	%		(0.28	)	%		(0.33	)	%
Adjustment for securities gains (losses)		(0.08	)	%		—		%		—		%		—		%		0.02		%		(0.03	)	%		(0.01	)	%
Adjustment for merger related income and costs		(1.11	)	%		(1.15	)	%		(0.32	)	%		(2.22	)	%		(0.99	)	%		(0.87	)	%		(4.52	)	%
Operating efficiency ratio (Non-GAAP)		62.09		%		63.46		%		60.32		%		60.86		%		62.25		%		61.96		%		62.07		%

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
	2021			2021			2021			2020			2020			2021			2020
Tangible Common Equity:
Shareholders' equity (GAAP)	$	424,720		$	373,393		$	364,058		$	357,168		$	349,789		$	424,720		$	349,789
Less goodwill and other intangible assets		104,930			90,966			86,350			86,471			86,710			104,930			86,710
Tangible common equity (Non-GAAP)	$	319,790		$	282,427		$	277,708		$	270,697		$	263,079		$	319,790		$	263,079

Average Tangible Common Equity:
Average shareholders' equity (GAAP)	$	392,798		$	369,325		$	360,919		$	354,026		$	347,907		$	374,464		$	336,854
Less average goodwill and other intangible assets		96,250			88,551			86,424			86,561			86,206			90,445			84,361
Average tangible common equity (Non-GAAP)	$	296,548		$	280,774		$	274,495		$	267,465		$	261,701		$	284,019		$	252,493

Tangible Book Value per Common Share:
Book value per common share (GAAP)	$	25.28		$	24.71		$	24.10		$	23.64		$	22.96		$	25.28		$	22.96
Adjustment due to goodwill and other intangible assets		(6.25	)		(6.02	)		(5.71	)		(5.72	)		(5.69	)		(6.25	)		(5.69	)
Tangible book value per common share (Non-GAAP)¹	$	19.03		$	18.69		$	18.39		$	17.92		$	17.27		$	19.03		$	17.27

Tangible Common Equity to Tangible Assets:
Total Assets	$	4,384,031		$	3,654,356		$	3,557,203		$	3,304,949		$	3,387,588		$	4,384,031		$	3,387,588
Less goodwill and other intangibles		104,930			90,966			86,350			86,471			86,710			104,930			86,710
Tangible Assets (Non-GAAP):	$	4,279,101		$	3,563,390		$	3,470,853		$	3,218,478		$	3,300,878		$	4,279,101		$	3,300,878
Tangible common equity to tangible assets (Non-GAAP)		7.47	%		7.93	%		8.00	%		8.41	%		7.97	%		7.47	%		7.97	%

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

SmartFinancial Announces Results for the Third Quarter 2021