SmartFinancial Announces Results for the Second Quarter 2021

KNOXVILLE, Tenn., July 20, 2021 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NASDAQ: SMBK), today announced net income of $8.8 million, or $0.58 per diluted common share, for the second quarter of 2021, compared to net income of $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, and compared to net income of $9.8 million, or $0.65 per diluted common share, for the first quarter of 2021. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.1 million, or $0.60 per diluted common share, in the second quarter of 2021, compared to $7.3 million, or $0.48 per diluted common share, in the second quarter of 2020, and compared to $9.8 million, or $0.65 per diluted common share, in the first quarter of 2021.

Highlights for the Second Quarter of 2021

• Net organic loan growth of over $87 million, a 16.3% annualized quarter-over-quarter increase
• Operating earnings (non-GAAP) of $9.1 million, or $0.60 per diluted share
• Tangible book value per share (Non-GAAP) of $18.69, a 6.5% annualized quarter-over-quarter increase
• Announced the $38.1 million proposed acquisition of Sevier County Bancshares
• Announced and completed the acquisition of Fountain Equipment Finance (“Fountain”)
• Hired three seasoned commercial banking team members in Auburn, Alabama

Billy Carroll, President & CEO, stated: “Our team continues to execute at a very high level, as evidenced by another nice quarter. Growth has continued to be very strong, and our sales team are capitalizing on our outstanding markets. We are also extremely excited to open SmartBank Auburn and continue to organically build out our Alabama footprint.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “Another incredibly solid quarter by our team. Our Board could not be more excited about the trajectory of our company. We continue to execute our growth strategy for loans, deposits and earnings and remain extremely bullish on our Company’s future.”

Net Interest Income and Net Interest Margin

Net interest income was $26.9 million for the second quarter of 2021, compared to $26.3 million for the first quarter of 2021. Average earning assets totaled $3.3 billion, an increase of $218.2 million. The growth was primarily driven by an increase in average cash and cash equivalents of $114.0 million, average securities of $26.9 million and average loans and leases of $79.9 million of which $35.7 million of the increase is related to the acquisition of Fountain during the second quarter. Average interest-bearing liabilities increased $157.3 million, directly related to continued core deposit growth.

The tax equivalent net interest margin was 3.29% for the second quarter of 2021, compared to 3.48% for the first quarter of 2021. The tax equivalent net interest margin was impacted by a 23 basis point decrease 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 decrease in yield on interest-earning assets was primarily driven by a decreased level of loan discount accretion and Payroll Protection Program (“PPP”) fee accretion and additional excess liquidity from the significant deposit growth experienced during the first six months of 2021. We recognized $1.1 million less of loan discount accretion and PPP fee accretion during the second quarter of 2021 when compared to the first quarter of 2021. However, the interest-earning yield compression was partially offset by the acquisition of Fountain, resulting in a positive margin impact of 13 basis points.

The lower yields on interest-earning assets continue to be mitigated, in part, by a lower cost of funds. The yield on interest-bearing liabilities decreased to 0.49% for the second quarter of 2021 when compared to 0.54% for the first quarter of 2021. The cost of average interest-bearing deposits was 0.39% for the second quarter of 2021 compared to 0.44% for the first 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 14 basis points during the period. The cost of total deposits for the second quarter of 2021 was 0.29% compared to 0.33% in the first quarter of 2021.

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

		Three Months Ended
		Jun		Mar		Increase
Selected Interest Rates and Yields		2021		2021		(Decrease)
Yield on loans and leases		4.52	%	4.67	%	(0.15	)%
Yield on earning assets, FTE		3.65	%	3.88	%	(0.23	)%
Cost of interest-bearing deposits		0.39	%	0.44	%	(0.05	)%
Cost of total deposits		0.29	%	0.33	%	(0.04	)%
Cost of interest-bearing liabilities		0.49	%	0.54	%	(0.05	)%
Net interest margin, FTE		3.29	%	3.48	%	(0.19	)%

Provision for Loan and Lease Losses and Credit Quality

At June 30, 2021, the allowance for loan and lease losses was $18.3 million. The allowance for loan and lease losses to total loans and leases was 0.74% as of June 30, 2021 and March 31, 2021, 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 0.86% as of June 30, 2021, compared to 0.93% as of March 31, 2021. The remaining discounts on the acquired loan and lease portfolio totaled $13.0 million, or 3.61% of acquired loans and leases as of June 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
				Jun				Mar
	Provision for Loan and Lease Losses Rollforward			2021				2021				Change
	Beginning balance		$	18,370			$	18,346			$	24
	Charge-offs			(153	)			(120	)			(33	)
	Recoveries			98				77				21
	Net charge-offs			(55	)			(43	)			(12	)
	Provision			(5	)			67				72
	Ending balance		$	18,310			$	18,370			$	(60	)
	Allowance for loan losses to total loans and leases, gross			0.74	%			0.74	%			-	%

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 0.15% as of June 30, 2021, a decrease of 10 basis points from the 0.25% reported in the first 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 0.18% as of June 30, 2021, as compared to 0.29% as of March 31, 2021. 

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

			Three Months Ended
				Jun			Mar			Increase
	Credit Quality			2021			2021			(Decrease)
	Nonaccrual loans and leases		$	3,694		$	4,739		$	(1,045	)
	Loans and leases past due 90 days or more and still accruing			64			1,495			(1,431	)
	Total nonperforming loans and leases			3,758			6,234			(2,476	)
	Other real estate owned			2,499			3,946			(1,447	)
	Other repossessed assets			199			-			199
	Total nonperforming assets		$	6,456		$	10,180		$	(3,724	)
	Nonperforming loans and leases to total loans and leases, gross			0.15	%		0.25	%		(0.10	)%
	Nonperforming assets to total assets			0.18	%		0.29	%		(0.11	)%

Noninterest Income

Noninterest income decreased $548 thousand to $5.1 million for the second quarter of 2021 compared to $5.7 million for the first quarter of 2021. During the second quarter of 2021, the primary components of the changes in noninterest income were as follows:

• Decrease in insurance commissions of $909 thousand, primarily due from larger commissions recognized in the prior quarter from the placement of life insurance policies;
• Increase in other of $237 thousand, is primarily attributable to $155 thousand of new fee income from the acquisition of Fountain and an increase in the cash surrender value of bank owned life insurance (“BOLI”) income of $57 thousand.

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

		Three Months Ended
			Jun			Mar			Increase
Noninterest Income			2021			2021			(Decrease)
Service charges on deposit accounts		$	1,048		$	1,009		$	39
Mortgage banking income			1,105			1,139			(34	)
Investment services			567			531			36
Insurance commissions			557			1,466			(909	)
Interchange and debit card transaction fees			922			839			83
Other			944			707			237
Total noninterest income		$	5,143		$	5,691		$	(548	)

Noninterest Expense

Noninterest expense increased $1.3 million to $20.8 million for the second quarter of 2021 compared to $19.5 million for the first quarter of 2021. During the second quarter of 2021, the primary components of the changes in noninterest expense were as follows:

• Salaries and employee benefits increased $1.3 million, primarily due to the additional headcount from both the Fountain acquisition and hiring of the Gulf Coast Team, and from a reduction in deferred salary cost that was recognized in the prior quarter relating to the PPP loan originations;
• Data processing and technology increased $130 thousand, primarily from continued infrastructure build;
• Professional services increased $208 thousand, primarily from additional services performed during the quarter;
• Merger related and restructuring expense increased $269 thousand: and
• Other decreased $502 thousand, primarily from an investment in a start-up fintech company recognized in the prior quarter.
  

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

		Three Months Ended
			Jun			Mar			Increase
Noninterest Expense			2021			2021			(Decrease)
Salaries and employee benefits		$	12,203		$	10,869		$	1,334
Occupancy and equipment			2,294			2,341			(47	)
FDIC insurance			371			371			-
Other real estate and loan related expenses			506			602			(96	)
Advertising and marketing			230			190			40
Data processing and technology			1,509			1,379			130
Professional services			849			641			208
Amortization of intangibles			441			444			(3	)
Merger related and restructuring expenses			372			103			269
Other			2,022			2,524			(502	)
Total noninterest expense		$	20,797		$	19,464		$	1,333

Income Tax Expense

Income tax expense was $2.5 million for the second quarter of 2021, a decrease of $194 thousand, compared to $2.7 million for the first quarter of 2021.

For the second quarter of 2021, the effective tax rate was 22.0% compared to 21.5% for the first quarter of 2021.

Balance Sheet Trends

Total assets at June 30, 2021 were $3.65 billion compared with $3.30 billion at December 31, 2020. The increase of $349.4 million is primarily attributable to increases in cash and cash equivalents of $191.8 million, securities available-for-sale of $35.2 million, loans and leases of $86.1 million and bank owned life insurance of $40.8 million. The increase in loans and leases consisted of organic loan growth of $143.1 million and leases acquired from Fountain of $53.7 million, offset by $110.0 million in net PPP loan activity of $138.4 in originations and $248.4 million in forgiveness.

Total liabilities increased to $3.28 billion at June 30, 2021 from $2.95 billion at December 31, 2020. The increase of $333.1 million was primarily from organic deposit growth of $334.3 million.

Shareholders’ equity at June 30, 2021 totaled $373.4 million, an increase of $16.2 million, from December 31, 2020. The increase in shareholders’ equity was primarily from net income of $18.5 million for the six months ended June 30, 2021 and a net change in accumulated other comprehensive income of $155 thousand, which was offset by repurchase of the Company’s common stock of $1.2 million and $1.8 million of dividends paid. Tangible book value per share (Non-GAAP) was $18.69 at June 30, 2021, an increase from $18.39 at March 31, 2021. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.93% at June 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):

		Jun			Dec			Increase
Selected Balance Sheet Information		2021			2020			(Decrease)
Total assets		$	3,654,356		$	3,304,949		$	349,407
Total liabilities			3,280,963			2,947,781			333,182
Total equity			373,393			357,168			16,225
Securities available-for-sale, at fair value			250,817			215,634			35,183
Loans and leases			2,468,318			2,382,243			86,075
Deposits			3,139,472			2,805,215			334,257
Borrowings			78,834			81,199			(2,365	)

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2021 on Tuesday, July 20, 2021, and will host a conference call on Wednesday, July 21, 2021, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 5194560. A replay of the conference call will be available through July 21, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10158581. 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 35 branches across East and Middle 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 shareholder’ 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 proposed acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the proposed 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
		Jun				Mar				Dec				Sep				Jun
		2021				2021				2020				2020				2020
Assets:
Cash and cash equivalents		$	673,515			$	556,701			$	481,719			$	541,815			$	399,467
Securities available-for-sale, at fair value			250,817				250,937				215,634				214,634				219,631
Other investments			14,584				14,728				14,794				14,829				14,829
Loans held for sale			4,334				7,870				11,721				11,292				6,330
Loans and leases			2,468,318				2,487,129				2,382,243				2,404,057				2,408,284
Less: Allowance for loan losses			(18,310	)			(18,370	)			(18,346	)			(18,817	)			(16,254	)
Loans and leases, net			2,450,008				2,468,759				2,363,897				2,385,240				2,392,030
Premises and equipment, net			72,314				72,697				72,682				73,934				73,868
Other real estate owned			2,499				3,946				4,619				3,932				5,524
Goodwill and core deposit intangibles, net			90,966				86,350				86,471				86,710				86,327
Bank owned life insurance			72,013				71,586				31,215				31,034				30,853
Other assets			23,306				23,629				22,197				24,168				37,126
Total assets		$	3,654,356			$	3,557,203			$	3,304,949			$	3,387,588			$	3,265,985
Liabilities:
Deposits:
Noninterest-bearing demand		$	807,560			$	777,968			$	685,957			$	669,733			$	645,650
Interest-bearing demand			702,470				683,887				649,129				534,128				479,212
Money market and savings			1,140,029				1,073,941				919,631				871,098				762,246
Time deposits			489,413				512,417				550,498				577,064				652,581
Total deposits			3,139,472				3,048,213				2,805,215				2,652,023				2,539,689
Borrowings			78,834				82,642				81,199				319,391				318,855
Subordinated debt			39,388				39,367				39,346				39,325				39,304
Other liabilities			23,269				22,923				22,021				27,060				24,649
Total liabilities			3,280,963				3,193,145				2,947,781				3,037,799				2,922,497
Shareholders’ Equity:
Common stock			15,110				15,105				15,107				15,233				15,217
Additional paid-in capital			252,039				251,836				252,693				254,626				254,396
Retained earnings			103,906				96,034				87,185				78,918				73,283
Accumulated other comprehensive income			2,338				1,083				2,183				1,012				592
Total shareholders’ equity			373,393				364,058				357,168				349,789				343,488
Total liabilities & shareholders’ equity		$	3,654,356			$	3,557,203			$	3,304,949			$	3,387,588			$	3,265,985

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

	Three Months Ended																	Six Months Ended
	Jun				Mar			Dec			Sep				Jun			Jun			Jun
	2021				2021			2020			2020				2020			2021			2020
Interest income:
Loans and leases, including fees	$	28,323			$	28,018		$	28,594		$	28,621			$	28,663		$	56,341		$	55,097
Securities available-for-sale:
Taxable		916				724			609			546				589			1,640			1,268
Tax-exempt		304				259			306			364				416			563			699
Federal funds sold and other earning assets		309				291			303			327				277			600			879
Total interest income		29,852				29,292			29,812			29,858				29,945			59,144			57,943
Interest expense:
Deposits		2,248				2,331			2,580			2,897				3,366			4,579			8,120
Borrowings		123				117			142			334				249			241			339
Subordinated debt		584				584			584			584				584			1,167			1,167
Total interest expense		2,955				3,032			3,306			3,815				4,199			5,987			9,626
Net interest income		26,897				26,260			26,506			26,043				25,746			53,157			48,317
Provision for loan and lease losses		(5	)			67			—			2,634				2,850			62			6,049
Net interest income after provision for loan and lease losses		26,902				26,193			26,506			23,409				22,896			53,095			42,268
Noninterest income:
Service charges on deposit accounts		1,048				1,009			1,032			892				709			2,057			1,479
Gain (loss) on sale of securities, net		—				—			—			(9	)			16			—			16
Mortgage banking		1,105				1,139			1,331			1,029				931			2,244			1,515
Investment services		567				531			407			359				363			1,098			801
Insurance commissions		557				1,466			548			560				473			2,023			742
Interchange and debit card transaction fees		922				839			760			868				508			1,761			784
Other		944				707			898			422				511			1,652			993
Total noninterest income		5,143				5,691			4,976			4,121				3,511			10,835			6,330
Noninterest expense:
Salaries and employee benefits		12,203				10,869			11,516			11,032				10,357			23,072			20,363
Occupancy and equipment		2,294				2,341			2,256			2,186				1,996			4,635			3,906
FDIC insurance		371				371			297			534				180			741			360
Other real estate and loan related expense		506				602			516			643				346			1,108			892
Advertising and marketing		230				190			181			253				202			419			400
Data processing and technology		1,509				1,379			1,182			1,131				1,155			2,889			2,163
Professional services		849				641			786			594				868			1,490			1,578
Amortization of intangibles		441				444			571			402				405			886			767
Merger related and restructuring expenses		372				103			702			290				1,477			475			3,573
Other		2,022				2,524			1,946			2,102				1,820			4,547			3,598
Total noninterest expense		20,797				19,464			19,953			19,167				18,806			40,262			37,600
Income before income taxes		11,248				12,420			11,529			8,363				7,601			23,668			10,998
Income tax expense		2,470				2,664			2,499			1,968				1,427			5,134			2,091
Net income	$	8,778			$	9,756		$	9,030		$	6,395			$	6,174		$	18,534		$	8,907
Earnings per common share:
Basic	$	0.59			$	0.65		$	0.60		$	0.42			$	0.41		$	1.24		$	0.60
Diluted	$	0.58			$	0.65		$	0.59		$	0.42			$	0.41		$	1.23		$	0.60
Weighted average common shares outstanding:
Basic		15,003,657				15,011,573			15,109,298			15,160,579				15,152,768			15,007,593			14,773,935
Diluted		15,126,184				15,111,947			15,182,796			15,210,611				15,202,335			15,118,924			14,842,486

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

		Three Months Ended
		June 30, 2021								March 31, 2021								June 30, 2020
		Average						Yield/		Average						Yield/		Average						Yield/
		Balance			Interest1			Cost1		Balance			Interest1			Cost1		Balance			Interest1			Cost1
Assets:
Loans and leases, including fees2		$	2,508,388		$	28,256		4.52	%	$	2,428,499		$	27,943		4.67	%	$	2,359,101		$	28,590		4.87	%
Loans held for sale			5,315			67		5.03	%		7,913			75		3.82	%		6,868			73		4.28	%
Taxable securities			164,935			916		2.23	%		136,492			724		2.15	%		122,135			589		1.94	%
Tax-exempt securities			89,296			453		2.04	%		90,849			409		1.82	%		86,227			570		2.66	%
Federal funds sold and other earning assets			531,125			309		0.23	%		417,144			291		0.28	%		297,696			277		0.37	%
Total interest-earning assets			3,299,059			30,001		3.65	%		3,080,897			29,442		3.88	%		2,872,027			30,099		4.22	%
Noninterest-earning assets			286,211								275,272								260,089
Total assets		$	3,585,270							$	3,356,169							$	3,132,116
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits		$	688,756			304		0.18	%	$	641,214			256		0.16	%	$	453,795			148		0.13	%
Money market and savings deposits			1,117,290			905		0.32	%		983,893			821		0.34	%		748,673			614		0.33	%
Time deposits			502,755			1,039		0.83	%		526,062			1,254		0.97	%		701,390			2,604		1.49	%
Total interest-bearing deposits			2,308,801			2,248		0.39	%		2,151,169			2,331		0.44	%		1,903,858			3,366		0.71	%
Borrowings3			81,525			123		0.61	%		81,837			117		0.58	%		237,143			249		0.42	%
Subordinated debt			39,375			584		5.95	%		39,354			584		6.01	%		39,290			584		5.98	%
Total interest-bearing liabilities			2,429,701			2,955		0.49	%		2,272,360			3,032		0.54	%		2,180,291			4,199		0.77	%
Noninterest-bearing deposits			768,399								700,962								587,322
Other liabilities			17,845								21,928								24,642
Total liabilities			3,215,945								2,995,250								2,792,255
Shareholders’ equity			369,325								360,919								339,861
Total liabilities and shareholders’ equity		$	3,585,270							$	3,356,169							$	3,132,116
Net interest income, taxable equivalent					$	27,046							$	26,410							$	25,900
Interest rate spread								3.16	%							3.33	%							3.44	%
Tax equivalent net interest margin								3.29	%							3.48	%							3.63	%
Percentage of average interest-earning assets to average interest-bearing liabilities								135.78	%							135.58	%							131.73	%
Percentage of average equity to average assets								10.30	%							10.75	%							10.85	%

¹ Taxable equivalent
² Includes average balance of $266,114, $312,582 and $208,814 in PPP loans for the quarters ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.  
³ Includes average balance of $108,082 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended June 30, 2020. No PPPLF funding was used for the quarters ended June 30, 2021 and March 31, 2021.

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

		Six Months Ended
		June 30, 2021									June 30, 2020
		Average						Yield/			Average						Yield/
		Balance			Interest1			Cost1			Balance			Interest1			Cost1
Assets:
Loans and leases, including fees2		$	2,468,665		$	56,200			4.59	%	$	2,172,158		$	54,979		5.09	%
Loans held for sale			6,607			141			4.31	%		5,581			118		4.26	%
Taxable securities			150,792			1,640			2.19	%		119,474			1,268		2.13	%
Tax-exempt securities			90,068			862			1.93	%		78,306			970		2.49	%
Federal funds sold and other earning assets			474,449			600			0.26	%		226,726			879		0.78	%
Total interest-earning assets			3,190,581			59,443			3.76	%		2,602,245			58,214		4.50	%
Noninterest-earning assets			280,772									238,749
Total assets		$	3,471,353								$	2,840,994
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits		$	665,116			560			0.17	%	$	421,288			583		0.28	%
Money market and savings deposits			1,050,961			1,726			0.33	%		707,003			2,003		0.57	%
Time deposits			514,344			2,293			0.90	%		693,382			5,534		1.61	%
Total interest-bearing deposits			2,230,421			4,579			0.41	%		1,821,673			8,120		0.90	%
Borrowings3			81,680			241			0.59	%		144,532			339		0.47	%
Subordinated debt			39,364			1,167			5.98	%		39,279			1,167		5.97	%
Total interest-bearing liabilities			2,351,465			5,987			0.51	%		2,005,484			9,626		0.97	%
Noninterest-bearing deposits			734,867									481,432
Other liabilities			19,876									22,812
Total liabilities			3,106,208									2,509,728
Shareholders’ equity			365,145									331,266
Total liabilities and shareholders’ equity		$	3,471,353								$	2,840,994
Net interest income, taxable equivalent					$	53,456								$	48,588
Interest rate spread									3.25	%							3.53	%
Tax equivalent net interest margin									3.38	%							3.75	%
Percentage of average interest-earning assets to average interest-bearing liabilities									135.68	%							129.76	%
Percentage of average equity to average assets									10.52	%							11.66	%

¹ Taxable equivalent
² Includes average balance of $289,220 and $106,213 in PPP loans for the six months ended June 30, 2021 and 2020, respectively.  
³ Includes average balance of $54,041 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the six months ended June 30, 2020. No PPPLF funding was used for the six months ended June 30, 2021.

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

		As of and for The Three Months Ended
		Jun			Mar			Dec			Sep			Jun
		2021			2021			2020			2020			2020
Composition of Loans and Leases:
Commercial real estate:
owner occupied		$	492,750		$	477,293		$	463,771		$	467,569		$	464,073
non-owner occupied			669,741			593,348			549,205			563,082			552,958
Commercial real estate, total			1,162,491			1,070,641			1,012,976			1,030,651			1,017,031
Commercial & industrial			496,114			686,010			634,446			644,498			637,450
Construction & land development			300,704			285,973			278,075			275,172			279,216
Consumer real estate			444,640			432,486			443,930			440,310			459,861
Leases			53,038			—			—			—			—
Consumer and other			11,331			12,019			12,816			13,426			14,726
Total loans and leases		$	2,468,318		$	2,487,129		$	2,382,243		$	2,404,057		$	2,408,284
Asset Quality and Additional Loan Data:
Nonperforming loans and leases		$	3,758		$	6,234		$	5,782		$	2,248		$	3,776
Other real estate owned			2,499			3,946			4,619			3,932			5,524
Other repossessed assets			199			—			—			—			—
Total nonperforming assets		$	6,456		$	10,180		$	10,401		$	6,180		$	9,300
Restructured loans and leases not included in nonperforming loans and leases		$	219		$	250		$	257		$	8		$	9
Net charge-offs to average loans and leases (annualized)			0.01	%		0.01	%		0.08	%		0.01	%		—	%
Allowance for loan and leases losses to loans and leases			0.74	%		0.74	%		0.77	%		0.78	%		0.67	%
Nonperforming loans and leases to total loans and leases, gross			0.15	%		0.25	%		0.24	%		0.09	%		0.16	%
Nonperforming assets to total assets			0.18	%		0.29	%		0.31	%		0.18	%		0.28	%
Acquired loan and lease fair value discount balance		$	12,982		$	12,951		$	14,467		$	15,141		$	16,187
Accretion income on acquired loans and leases			761			1,636			768			960			888
PPP net fees deferred balance			6,651			7,351			4,190			6,348			8,582
PPP net fees recognized			2,132			2,398			2,157			1,812			1,909
Capital Ratios:
Equity to Assets			10.22	%		10.23	%		10.81	%		10.33	%		10.52	%
Tangible common equity to tangible assets (Non-GAAP)1			7.93	%		8.00	%		8.41	%		7.97	%		8.09	%
SmartFinancial, Inc.2
Tier 1 leverage			8.10	%		8.55	%		8.69	%		8.78	%		8.83	%
Common equity Tier 1			10.66	%		11.29	%		11.61	%		11.33	%		10.92	%
Tier 1 capital			10.66	%		11.29	%		11.61	%		11.33	%		10.92	%
Total capital			12.83	%		13.62	%		14.07	%		13.81	%		13.25	%
SmartBank			Estimated3
Tier 1 leverage			8.76	%		9.33	%		9.58	%		9.74	%		9.82	%
Common equity Tier 1			11.53	%		12.31	%		12.79	%		12.57	%		12.14	%
Tier 1 capital			11.53	%		12.31	%		12.79	%		12.57	%		12.14	%
Total capital			12.22	%		13.05	%		13.57	%		13.37	%		12.82	%

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																Six Months Ended
	Jun			Mar			Dec			Sep			Jun				Jun			Jun
	2021			2021			2020			2020			2020				2021			2020
Selected Performance Ratios (Annualized):
Return on average assets		0.98	%		1.18	%		1.11	%		0.76	%		0.79	%			1.08	%		0.63	%
Return on average shareholders’ equity		9.53	%		10.96	%		10.15	%		7.31	%		7.31	%			10.24	%		5.41	%
Return on average tangible common equity¹		12.54	%		14.41	%		13.43	%		9.72	%		9.80	%			13.46	%		7.23	%
Noninterest income / average assets		0.58	%		0.69	%		0.61	%		0.49	%		0.45	%			0.63	%		0.45	%
Noninterest expense / average assets		2.33	%		2.35	%		2.46	%		2.28	%		2.41	%			2.34	%		2.66	%
Efficiency ratio		64.91	%		60.92	%		63.38	%		63.54	%		64.28	%			62.92	%		68.81	%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		1.01	%		1.19	%		1.14	%		0.79	%		0.93	%			1.10	%		0.82	%
Operating PTPP return on average assets1		1.30	%		1.52	%		1.45	%		1.35	%		1.53	%			1.41	%		1.46	%
Operating return on average shareholders’ equity1		9.83	%		11.05	%		10.34	%		7.57	%		8.58	%			10.43	%		7.00	%
Operating return on average tangible common equity1		12.93	%		14.53	%		13.69	%		10.06	%		11.51	%			13.72	%		9.36	%
Operating efficiency ratio1		63.46	%		60.32	%		60.86	%		62.25	%		58.95	%			61.89	%		61.98	%
Operating noninterest income / average assets1		0.58	%		0.69	%		0.56	%		0.49	%		0.45	%			0.63	%		0.45	%
Operating noninterest expense / average assets1		2.29	%		2.34	%		2.37	%		2.25	%		2.23	%			2.31	%		2.41	%
Selected Interest Rates and Yields:
Yield on loans and leases		4.52	%		4.67	%		4.72	%		4.71	%		4.87	%			4.59	%		5.09	%
Yield on earning assets, FTE		3.65	%		3.88	%		4.01	%		3.88	%		4.22	%			3.76	%		4.50	%
Cost of interest-bearing deposits		0.39	%		0.44	%		0.50	%		0.59	%		0.71	%			0.41	%		0.90	%
Cost of total deposits		0.29	%		0.33	%		0.38	%		0.44	%		0.54	%			0.31	%		0.71	%
Cost of interest-bearing liabilities		0.49	%		0.54	%		0.60	%		0.65	%		0.77	%			0.51	%		0.97	%
Net interest margin, FTE		3.29	%		3.48	%		3.57	%		3.39	%		3.63	%			3.38	%		3.75	%
Per Common Share:
Net income, basic	$	0.59		$	0.65		$	0.60		$	0.42		$	0.41			$	1.24		$	0.60
Net income, diluted		0.58			0.65			0.59			0.42			0.41				1.23			0.60
Operating earnings, basic¹		0.60			0.65			0.61			0.44			0.48				1.25			0.78
Operating earnings, diluted¹		0.60			0.65			0.61			0.44			0.48				1.25			0.78
Book value		24.71			24.10			23.64			22.96			22.57				24.71			22.57
Tangible book value¹		18.69			18.39			17.92			17.27			16.90				18.69			16.90
Common shares outstanding		15,109,736			15,104,536			15,107,214			15,233,227			15,216,932				15,109,736			15,216,932

¹See reconciliation of Non-GAAP measures

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

		Three Months Ended																					Six Months Ended
		Jun				Mar				Dec				Sep				Jun					Jun				Jun
		2021				2021				2020				2020				2020					2021				2020
Operating Earnings:
Net income (GAAP)		$	8,778			$	9,756			$	9,030			$	6,395			$	6,174				$	18,534			$	8,907
Noninterest income:
Securities gains (losses), net			—				—				—				9				(16	)				—				(16	)
ADECA termination proceeds			—				—				(465	)			—				—					—				—
Noninterest expenses:
Merger related and restructuring expenses			372				103				702				290				1,477					475				3,573
Income taxes:
Income tax effect of adjustments			(96	)			(27	)			(62	)			(77	)			(382	)				(123	)			(931	)
Operating earnings (Non-GAAP)		$	9,054			$	9,832			$	9,205			$	6,617			$	7,253				$	18,886			$	11,533
Operating earnings per common share (Non-GAAP):
Basic		$	0.60			$	0.65			$	0.61			$	0.44			$	0.48				$	1.25			$	0.78
Diluted			0.60				0.65				0.61				0.44				0.48					1.25				0.78
Operating Noninterest Income:
Noninterest income (GAAP)		$	5,143			$	5,691			$	4,976			$	4,121			$	3,511				$	10,835			$	6,330
Securities gains (losses), net			—				—				—				9				(16	)				—				(16	)
ADECA termination proceeds			—				—				(465	)			—				—					—				—
Operating noninterest income (Non-GAAP)		$	5,143			$	5,691			$	4,511			$	4,130			$	3,495				$	10,835			$	6,314
Operating noninterest income (Non-GAAP)/average assets1			0.58	%			0.69	%			0.56	%			0.49	%			0.45	%				0.63	%			0.45	%
Operating Noninterest Expense:
Noninterest expense (GAAP)		$	20,797			$	19,464			$	19,953			$	19,167			$	18,806				$	40,262			$	37,600
Merger related and restructuring expenses			(372	)			(103	)			(702	)			(290	)			(1,477	)				(475	)			(3,573	)
Operating noninterest expense (Non-GAAP)		$	20,425			$	19,361			$	19,251			$	18,877			$	17,329				$	39,787			$	34,027
Operating noninterest expense (Non-GAAP)/average assets2			2.29	%			2.34	%			2.37	%			2.25	%			2.23	%				2.31	%			2.41	%
Operating Pre-tax Pre-provision (“PTPP”) Earnings:
Net interest income (GAAP)		$	26,897			$	26,260			$	26,506			$	26,043			$	25,746				$	53,157			$	48,317
Operating noninterest income			5,143				5,691				4,511				4,130				3,495					10,835				6,314
Operating noninterest expense			(20,425	)			(19,361	)			(19,251	)			(18,877	)			(17,329	)				(39,787	)			(34,027	)
Operating PTPP earnings (Non-GAAP)		$	11,615			$	12,590			$	11,766			$	11,296			$	11,912				$	24,205			$	20,604
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3			1.01	%			1.19	%			1.14	%			0.79	%			0.93	%				1.10	%			0.82	%
Operating PTPP return on average assets (Non-GAAP)4			1.30	%			1.52	%			1.45	%			1.35	%			1.53	%				1.41	%			1.46	%
Return on average tangible common equity (Non-GAAP)5			12.54	%			14.41	%			13.43	%			9.72	%			9.80	%				13.46	%			7.23	%
Operating return on average shareholders’ equity (Non-GAAP)6			9.83	%			11.05	%			10.34	%			7.57	%			8.58	%				10.43	%			7.00	%
Operating return on average tangible common equity (Non-GAAP)7			12.93	%			14.53	%			13.69	%			10.06	%			11.51	%				13.72	%			9.36	%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)			64.91	%			60.92	%			63.38	%			63.54	%			64.28	%				62.92	%			68.81	%
Adjustment for taxable equivalent yields			(0.30	)%			(0.28	)%			(0.30	)%			(0.32	)%			(0.34	)%				(0.31	)%			(0.34	)%
Adjustment for securities gains (losses)			—	%			—	%			—	%			0.02	%			(0.04	)%				—				(0.02	)%
Adjustment for merger related income and costs			(1.15	)%			(0.32	)%			(2.22	)%			(0.99	)%			(4.95	)%				(0.72	)%			(6.46	)%
Operating efficiency ratio (Non-GAAP)			63.46	%			60.32	%			60.86	%			62.25	%			58.95	%				61.89	%			61.98	%

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																				Six Months Ended
		Jun				Mar				Dec				Sep				Jun				Jun				Jun
		2021				2021				2020				2020				2020				2021				2020
Tangible Common Equity:
Shareholders’ equity (GAAP)		$	373,393			$	364,058			$	357,168			$	349,789			$	343,488			$	373,393			$	343,488
Less goodwill and other intangible assets			90,966				86,350				86,471				86,710				86,327				90,966				86,327
Tangible common equity (Non-GAAP)		$	282,427			$	277,708			$	270,697			$	263,079			$	257,161			$	282,427			$	257,161
Average Tangible Common Equity:
Average shareholders’ equity (GAAP)		$	369,325			$	360,919			$	354,026			$	347,907			$	339,861			$	365,145			$	331,266
Less average goodwill and other intangible assets			88,551				86,424				86,561				86,206				86,484				87,494				83,427
Average tangible common equity (Non-GAAP)		$	280,774			$	274,495			$	267,465			$	261,701			$	253,377			$	277,651			$	247,839
Tangible Book Value per Common Share:
Book value per common share (GAAP)		$	24.71			$	24.10			$	23.64			$	22.96			$	22.57			$	24.71			$	22.57
Adjustment due to goodwill and other intangible assets			(6.02	)			(5.71	)			(5.72	)			(5.69	)			(5.67	)			(6.02	)			(5.67	)
Tangible book value per common share (Non-GAAP)1		$	18.69			$	18.39			$	17.92			$	17.27			$	16.90			$	18.69			$	16.90
Tangible Common Equity to Tangible Assets:
Total Assets		$	3,654,356			$	3,557,203			$	3,304,949			$	3,387,588			$	3,265,985			$	3,654,356			$	3,265,985
Less goodwill and other intangibles			90,966				86,350				86,471				86,710				86,327				90,966				86,327
Tangible Assets (Non-GAAP):		$	3,563,390			$	3,470,853			$	3,218,478			$	3,300,878			$	3,179,658			$	3,563,390			$	3,179,658
Tangible common equity to tangible assets (Non-GAAP)			7.93	%			8.00	%			8.41	%			7.97	%			8.09	%			7.93	%			8.09	%

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