SmartFinancial Announces Results for the Fourth Quarter 2023

SmartFinancial, Inc.

KNOXVILLE, Tenn., Jan. 22, 2024 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NYSE: SMBK), today announced net income of $6.2 million, or $0.37 per diluted common share, for the fourth quarter of 2023, compared to net income of $13.0 million, or $0.77 per diluted common share, for the fourth quarter of 2022, and compared to prior quarter net income of $2.1 million, or $0.12 per diluted common share. Operating earnings¹, which excludes non-recurring expenses related to a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation, net of tax adjustments, totaled $6.9 million, or $0.41 per diluted common share, in the fourth quarter of 2023, compared to $12.9 million, or $0.76 per diluted common share, in the fourth quarter of 2022, and compared to $7.2 million, or $0.43 per diluted common share, in the third quarter of 2023.

Highlights for the Fourth Quarter of 2023

• Operating earnings¹ of $6.9 million, or $0.41 per diluted common share

• Net organic loan and lease growth of $66 million - 8% annualized quarter-over-quarter increase

• Credit quality remains solid with nonperforming assets to total assets of 0.20%

• Deposit growth of $21.3 million – 2.0% annualized quarter-over-quarter increase

• SmartFinancial celebrates successful debut on the New York Stock Exchange

• Chief Banking Officer position added in fourth quarter 2023

• SmartBank President and CEO elected to Federal Reserve Bank of Atlanta’s Board of Directors
  

Billy Carroll, President & CEO, stated: “Our Company closed 2023 with positive momentum despite persistent operating environment challenges.  The fourth quarter was highlighted by continued growth in our balance sheet with loans growing at 8% and deposits growing at 2%, annualized, respectively quarter over quarter.  Our operating earnings were bolstered by stabilization of our net interest margin, as well as continued expense control.  Despite the headwinds our industry faced during the year, our team responded incredibly well, positioning SmartBank to continue its upward trajectory.”

SmartFinancial's Chairman, Miller Welborn, concluded: “We are extremely proud of the entire SmartBank family for its efforts this year. Once again, this year showed that our team’s steadfast commitment to clients, even in the face of adversity, continues to be a winning formula. And while our growth in 2023 was good, I am especially pleased with the various operational enhancements we implemented throughout the year. Our associates work tirelessly to make SmartBank better and it’s through these initiatives that we improved our organization and ready us for 2024 and beyond. Thank you!”

Net Interest Income and Net Interest Margin

Net interest income was $31.5 million for the fourth quarter of 2023, compared to $31.0 million for the prior quarter. Average earning assets totaled $4.38 billion, a decrease of $17.3 million from the prior quarter. The decrease in average earnings assets was primarily driven by a decrease in average securities of $125.5 million, offset by an increase in average loans and leases of $47.8 million and average interest-earning cash of $60.4 million.   Average interest-bearing liabilities increased by $19.7 million from the prior quarter, attributable to an increase in average deposits of $22.5 million, offset by a decrease in average borrowings of $2.8 million.

The tax equivalent net interest margin was 2.86% for the fourth quarter of 2023, compared to 2.81% for the prior quarter. The tax equivalent net interest margin was positively impacted by the increased yield on interest-earning assets coupled with a slower rise in the cost of interest-bearing liabilities, quarter over quarter. The yield on loans and leases, excluding loan fees, was 5.61% for the fourth quarter, compared to 5.52% for the prior quarter.

The cost of total deposits for the fourth quarter of 2023 was 2.35% compared to 2.20% in the prior quarter. The cost of interest-bearing liabilities increased to 3.07% for the fourth quarter of 2023, compared to 2.89% for the prior quarter. The cost of average interest-bearing deposits was 3.00% for the fourth quarter of 2023, compared to 2.84% for the prior quarter, an increase of 16 basis points.

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

		Three Months Ended
		Dec		Sep		Increase
Selected Interest Rates and Yields		2023		2023		(Decrease)
Yield on loans and leases, excluding loan fees		5.61	%	5.52	%	0.09	%
Yield on loans and leases		5.68	%	5.61	%	0.07	%
Yield on earning assets, on a fully tax equivalent basis (FTE)		5.22	%	4.99	%	0.23	%
Cost of interest-bearing deposits		3.00	%	2.84	%	0.16	%
Cost of total deposits		2.35	%	2.20	%	0.15	%
Cost of interest-bearing liabilities		3.07	%	2.89	%	0.18	%
Net interest margin, FTE		2.86	%	2.81	%	0.05	%

Provision for Credit Losses on Loans and Leases and Credit Quality

At December 31, 2023, the allowance for credit losses was $35.1 million. The allowance for credit losses to total loans and leases was 1.02% as of December 31, 2023, compared to 1.00% as of September 30, 2023.

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

			Three Months Ended
				Dec				Sep
	Provision for Credit Losses on Loans and Leases Rollforward			2023				2023				Change
	Beginning balance		$	33,687			$	32,747			$	940
	Charge-offs			(424	)			(417	)			(7	)
	Recoveries			302				73				229
	Net (charge-offs) recoveries			(122	)			(344	)			222
	Provision for credit losses(1)			1,501				1,284				217
	Ending balance		$	35,066			$	33,687			$	1,379
	Allowance for credit losses to total loans and leases, gross			1.02		%		1.00		%		0.02		%

⁽¹⁾ The current quarter-ended and prior quarter-ended, excludes unfunded commitments provision of $69 thousand and a release of $489 thousand, respectively. At December 31, 2023, the unfunded commitment liability totaled $2.4 million.  

Nonperforming loans and leases as a percentage of total loans and leases was 0.24% as of December 31, 2023, an increase of 12 basis points from the 0.12% reported in the third quarter of 2023. 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 0.20% as of December 31, 2023, and 0.12% on September 30, 2023.

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

			Three Months Ended
				Dec			Sep			Increase
	Credit Quality			2023			2023			(Decrease)
	Nonaccrual loans and leases		$	7,931		$	3,934		$	3,997
	Loans and leases past due 90 days or more and still accruing			170			229			(59	)
	Total nonperforming loans and leases			8,101			4,163			3,938
	Other real estate owned			517			1,370			(853	)
	Other repossessed assets			1,117			348			769
	Total nonperforming assets		$	9,735		$	5,881		$	3,854
	Nonperforming loans and leases to total loans and leases, gross			0.24	%		0.12	%		0.12		%
	Nonperforming assets to total assets			0.20	%		0.12	%		0.08		%

Noninterest Income

Noninterest income increased $6.9 million to $7.6 million for the fourth quarter of 2023 compared to $691 thousand for the prior quarter. The current quarter increase was associated with the $6.8 million pre-tax loss on the sale of $159.6 million of available for sale securities, moving into higher yielding assets during the prior quarter. Excluding the loss on securities, noninterest income increased $87 thousand quarter over quarter.

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

		Three Months Ended
			Dec			Sep				Increase
Noninterest Income			2023			2023				(Decrease)
Service charges on deposit accounts		$	1,673		$	1,736			$	(63	)
Gain (loss) on sale of securities, net			-			(6,801	)			6,801
Mortgage banking income			227			309				(82	)
Investment services			1,339			1,461				(122	)
Insurance commissions			1,133			1,153				(20	)
Interchange and debit card transaction fees			1,370			1,357				13
Other			1,837			1,476				361
Total noninterest income		$	7,579		$	691			$	6,888

Noninterest Expense

Noninterest expense increased $1.2 million to $29.7 million for the fourth quarter of 2023 compared to $28.5 million for the prior quarter. The current quarter increase was primarily related to an increase in other noninterest expenses associated with a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation.

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

		Three Months Ended
			Dec			Sep			Increase
Noninterest Expense			2023			2023			(Decrease)
Salaries and employee benefits		$	16,275		$	16,785		$	(510	)
Occupancy and equipment			3,378			3,547			(169	)
FDIC insurance			915			825			90
Other real estate and loan related expenses			781			603			178
Advertising and marketing			336			346			(10	)
Data processing and technology			2,458			2,378			80
Professional services			1,136			735			401
Amortization of intangibles			643			647			(4	)
Merger related and restructuring expenses			-			110			(110	)
Other			3,773			2,540			1,233
Total noninterest expense		$	29,695		$	28,516		$	1,179

Income Tax Expense

Income tax expense was $1.6 million for the fourth quarter of 2023, an increase of $1.3 million, compared to $319 thousand for the prior quarter.

The effective tax rate was 20.95% for the fourth quarter of 2023 and 13.37% for the prior quarter. The primary reason for the 7.58% increase in the effective tax rate was due to lower earnings in the prior quarter, largely from the $6.8 million pre-tax loss on sale of available-for-sale securities.

Balance Sheet Trends

Total assets at December 31, 2023 were $4.83 billion compared to $4.64 billion at December 31, 2022. The $191.9 million increase is primarily attributable to increases in loans and leases of $190.8 million, cash and cash equivalents of $85.8 million and other assets of $7.5 million. Asset increases were offset by a decrease in securities of $80.2 million and an increase in the allowance for credit losses of $11.7 million, primarily for the one-time adjustment of $8.7 million related to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit losses on Financial Instruments (“ASU 2016-13”) on January 1, 2023.

Total liabilities increased to $4.37 billion at December 31, 2023 from $4.21 billion at December 31, 2022. The increase of $164.5 million was primarily from organic deposit growth of $190.8 million, offset by a decrease in borrowings of $28.8 million.

Shareholders' equity at December 31, 2023, totaled $459.9 million, an increase of $27.4 million, from December 31, 2022. The increase in shareholders' equity was primarily driven by net income of $28.6 million for the twelve months ended December 31, 2023, and the positive change of $9.4 million in accumulated other comprehensive income, offset by the impact of the adoption of ASU 2016-13 on January 1, 2023, of $6.6 million (net of taxes), and dividends paid of $5.4 million. Tangible book value per share¹ was $20.76 at December 31, 2023, compared to $19.09 at December 31, 2022. Tangible common equity¹ as a percentage of tangible assets¹ was 7.47% at December 31, 2023, compared with 7.13% at December 31, 2022.

¹ Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation

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

		Dec			Dec			Increase
Selected Balance Sheet Information		2023			2022			(Decrease)
Total assets		$	4,829,387		$	4,637,498		$	191,889
Total liabilities			4,369,501			4,205,046			164,455
Total equity			459,886			432,452			27,434
Securities			689,646			769,842			(80,196	)
Loans and leases			3,444,462			3,253,627			190,835
Deposits			4,267,854			4,077,100			190,754
Borrowings			13,078			41,860			(28,782	)

Board of Directors Declares Dividend

On January 18, 2024, the board of directors of SmartFinancial declared a quarterly cash dividend of $0.08 per share of SmartFinancial common stock payable on February 20, 2024, to shareholders of record as of the close of business on February 2, 2024.

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2023 on Monday, January 22, 2024, and will host a conference call on Tuesday, January 23, 2024, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 470-1428 or (404) 975-4839 and entering the access code, 197280. A replay of the conference call will be available through March 14, 2024, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 371589. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 a.m. ET prior to the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with branches across Tennessee, Alabama, and Florida. 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-provision net revenue 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-provision net revenue earnings, (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value per common share, (xiv) tangible assets; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses and merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by average assets. Operating pre-provision net revenue return on average assets is the annualized operating pre-provision net revenue income earnings (Non-GAAP) by average assets. Operating return on average shareholders' equity is the annualized operating earnings (Non-GAAP) divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity (Non-GAAP). Operating return on average tangible common equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses. Operating pre-provision net revenue earnings is net interest income plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity (Non-GAAP) and average tangible common equity (Non-GAAP) excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value per common share (Non-GAAP) is tangible common equity (Non-GAAP) divided by common shares outstanding. Tangible assets (Non-GAAP) excludes goodwill and other intangibles from total assets. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these Non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) changes in management’s plans for the future; (7) prevailing, or changes in, economic or political conditions, particularly in our market areas, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; (8) increased technology and cybersecurity risks, including generative artificial intelligence risks; (9) credit risk associated with our lending activities; (10) changes in loan demand, real estate values, or competition; (11) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic and related variants; (15) potential impacts of adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; (16) significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; (17) the effects of war or other conflicts including the impacts related to or resulting from Russia’s military action in Ukraine or the conflict in Israel and surrounding areas; and (18) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

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

		Ending Balances
		Dec				Sep				Jun				Mar				Dec
		2023				2023				2023				2023				2022
Assets:
Cash and cash equivalents		$	352,271			$	400,258			$	238,898			$	306,934			$	266,424
Securities available-for-sale, at fair value			408,410				385,131				540,308				560,418				483,893
Securities held-to-maturity, at amortized cost			281,236				282,313				283,564				284,776				285,949
Other investments			13,662				13,805				14,396				14,059				15,530
Loans held for sale			4,418				2,734				986				3,324				1,752
Loans and leases			3,444,462				3,378,999				3,337,790				3,281,787				3,253,627
Less: Allowance for credit losses			(35,066	)			(33,687	)			(32,747	)			(32,279	)			(23,334	)
Loans and leases, net			3,409,396				3,345,312				3,305,043				3,249,508				3,230,293
Premises and equipment, net			92,963				92,020				92,351				92,190				92,511
Other real estate owned			517				1,370				1,708				1,708				1,436
Goodwill and other intangibles, net			107,148				107,792				108,439				109,114				109,772
Bank owned life insurance			83,434				82,914				82,419				81,938				81,470
Other assets			75,932				83,522				77,688				65,836				68,468
Total assets		$	4,829,387			$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498
Liabilities:
Deposits:
Noninterest-bearing demand		$	898,044			$	923,763			$	1,003,432			$	989,753			$	1,072,449
Interest-bearing demand			1,006,915				993,717				938,758				989,738				965,911
Money market and savings			1,812,427				1,766,409				1,720,202				1,761,847				1,583,481
Time deposits			550,468				562,620				537,192				488,208				455,259
Total deposits			4,267,854				4,246,509				4,199,584				4,229,546				4,077,100
Borrowings			13,078				14,117				15,496				16,546				41,860
Subordinated debt			42,099				42,078				42,057				42,036				42,015
Other liabilities			46,470				47,815				43,816				38,278				44,071
Total liabilities			4,369,501				4,350,519				4,300,953				4,326,406				4,205,046
Shareholders' Equity:
Common stock			16,989				16,995				17,004				17,004				16,901
Additional paid-in capital			295,699				295,542				295,296				294,930				294,330
Retained earnings			173,105				168,271				167,564				160,085				156,545
Accumulated other comprehensive income (loss)			(25,907	)			(34,156	)			(35,017	)			(28,620	)			(35,324	)
Total shareholders' equity			459,886				446,652				444,847				443,399				432,452
Total liabilities & shareholders' equity		$	4,829,387			$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498

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

	Three Months Ended																	Year Ended
	Dec			Sep				Jun			Mar			Dec				Dec				Dec
	2023			2023				2023			2023			2022				2023				2022
Interest income:
Loans and leases, including fees	$	48,767		$	47,539			$	45,446		$	44,728		$	40,082			$	186,479			$	136,381
Investment securities:
Taxable		4,344			4,335				4,335			3,651			3,337				16,665				11,799
Tax-exempt		352			356				357			353			797				1,418				2,166
Federal funds sold and other earning assets		4,032			3,045				1,956			4,446			3,098				13,481				8,488
Total interest income		57,495			55,275				52,094			53,178			47,314				218,043				158,834
Interest expense:
Deposits		24,926			23,433				19,554			16,346			8,844				84,260				18,228
Borrowings		162			210				339			224			232				936				602
Subordinated debt		890			626				626			626			626				2,767				2,503
Total interest expense		25,978			24,269				20,519			17,196			9,702				87,963				21,333
Net interest income		31,517			31,006				31,575			35,982			37,612				130,080				137,501
Provision for credit losses		1,571			795				113			550			788				3,029				4,018
Net interest income after provision for credit losses		29,946			30,211				31,462			35,432			36,824				127,051				133,483
Noninterest income:
Service charges on deposit accounts		1,673			1,736				1,657			1,445			1,477				6,511				5,853
Gain (loss) on sale of securities, net		—			(6,801	)			—			—			144				(6,801	)			144
Mortgage banking		227			309				332			172			77				1,040				1,552
Investment services		1,339			1,461				1,300			1,005			958				5,105				4,144
Insurance commissions		1,133			1,153				1,139			1,259			1,233				4,684				3,595
Interchange and debit card transaction fees		1,370			1,357				1,347			1,383			1,328				5,457				5,435
Other		1,837			1,476				1,355			1,661			1,908				6,329				6,992
Total noninterest income		7,579			691				7,130			6,925			7,125				22,325				27,715
Noninterest expense:
Salaries and employee benefits		16,275			16,785				15,947			16,742			16,384				65,749				63,420
Occupancy and equipment		3,378			3,547				3,318			3,208			3,015				13,451				12,034
FDIC insurance		915			825				875			541			650				3,156				2,672
Other real estate and loan related expense		781			603				441			572			517				2,397				2,446
Advertising and marketing		336			346				305			355			308				1,342				1,293
Data processing and technology		2,458			2,378				2,235			2,163			2,097				9,235				7,283
Professional services		1,136			735				764			807			981				3,443				3,790
Amortization of intangibles		643			647				675			659			688				2,624				2,607
Merger related and restructuring expenses		—			110				—			—			(45	)			110				562
Other		3,773			2,540				2,850			2,482			2,821				11,643				10,183
Total noninterest expense		29,695			28,516				27,410			27,529			27,416				113,150				106,290
Income before income taxes		7,830			2,386				11,182			14,828			16,533				36,226				54,908
Income tax expense		1,640			319				2,346			3,328			3,529				7,633				11,886
Net income	$	6,190		$	2,067			$	8,836		$	11,500		$	13,004			$	28,593			$	43,022
Earnings per common share:
Basic	$	0.37		$	0.12			$	0.53		$	0.69		$	0.78			$	1.70			$	2.57
Diluted	$	0.37		$	0.12			$	0.52		$	0.68		$	0.77			$	1.69			$	2.55
Weighted average common shares outstanding:
Basic		16,814,647			16,807,548				16,806,389			16,791,406			16,758,706				16,805,068				16,740,450
Diluted		16,918,234			16,918,635				16,898,091			16,896,494			16,884,253				16,911,185				16,871,369

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

		Three Months Ended
		December 31, 2023								September 30, 2023								December 31, 2022
		Average						Yield/		Average						Yield/		Average						Yield/
		Balance			Interest			Cost		Balance			Interest			Cost		Balance			Interest			Cost
Assets:
Loans and leases, including fees1		$	3,408,430		$	48,767		5.68	%	$	3,360,678		$	47,539		5.61	%	$	3,150,493		$	40,082		5.05	%
Taxable securities			618,511			4,344		2.79	%		743,054			4,335		2.31	%		701,787			3,337		1.89	%
Tax-exempt securities2			63,767			445		2.77	%		64,707			451		2.77	%		93,721			958		4.06	%
Federal funds sold and other earning assets			289,896			4,032		5.52	%		229,487			3,045		5.26	%		322,970			3,098		3.81	%
Total interest-earning assets			4,380,604			57,588		5.22	%		4,397,926			55,370		4.99	%		4,268,971			47,475		4.41	%
Noninterest-earning assets			386,202								379,456								372,864
Total assets		$	4,766,806							$	4,777,382							$	4,641,835
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits		$	974,637			5,631		2.29	%	$	969,122			5,463		2.24	%	$	924,320			3,141		1.35	%
Money market and savings deposits			1,764,826			14,556		3.27	%		1,753,671			13,744		3.11	%		1,587,688			4,855		1.21	%
Time deposits			556,996			4,739		3.38	%		551,191			4,226		3.04	%		459,996			848		0.73	%
Total interest-bearing deposits			3,296,459			24,926		3.00	%		3,273,984			23,433		2.84	%		2,972,004			8,844		1.18	%
Borrowings			13,420			162		4.79	%		16,228			210		5.13	%		18,309			232		5.03	%
Subordinated debt			42,087			890		8.39	%		42,065			626		5.90	%		42,002			626		5.91	%
Total interest-bearing liabilities			3,351,966			25,978		3.07	%		3,332,277			24,269		2.89	%		3,032,315			9,702		1.27	%
Noninterest-bearing deposits			915,259								951,179								1,146,374
Other liabilities			50,055								48,494								43,109
Total liabilities			4,317,280								4,331,950								4,221,798
Shareholders' equity			449,526								445,432								420,037
Total liabilities and shareholders' equity		$	4,766,806							$	4,777,382							$	4,641,835
Net interest income, taxable equivalent					$	31,610							$	31,101							$	37,773
Interest rate spread								2.14	%							2.11	%							3.14	%
Tax equivalent net interest margin								2.86	%							2.81	%							3.51	%
Percentage of average interest-earning assets to average interest-bearing liabilities								130.69	%							131.98	%							140.78	%
Percentage of average equity to average assets								9.43	%							9.32	%							9.05	%

¹ Includes average balance of $2.3 million, $2.7 million, and $3.3 million in PPP loans for the quarters ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively.  
² Yields computed on tax-exempt instruments on a tax equivalent basis include $94 thousand, $95 thousand, and $161 thousand of taxable equivalent income for the quarters ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively.

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

		Year Ended
		December 31, 2023									December 31, 2022
		Average						Yield/			Average						Yield/
		Balance			Interest			Cost			Balance			Interest			Cost
Assets:
Loans and leases, including fees1		$	3,334,523		$	186,479			5.59	%	$	2,948,511		$	136,381		4.63	%
Taxable securities			713,637			16,665			2.34	%		688,428			11,799		1.71	%
Tax-exempt securities2			64,816			1,795			2.77	%		100,566			2,831		2.82	%
Federal funds sold and other earning assets			272,864			13,481			4.94	%		577,593			8,488		1.47	%
Total interest-earning assets			4,385,840			218,420			4.98	%		4,315,098			159,499		3.70	%
Noninterest-earning assets			370,436									373,026
Total assets		$	4,756,276								$	4,688,124
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits		$	959,639			20,214			2.11	%	$	945,414			6,278		0.66	%
Money market and savings deposits			1,768,869			50,468			2.85...	%		1,576,170			9,137		0.58	%
Time deposits			520,799			13,578			2.61	%		513,416			2,813		0.55	%
Total interest-bearing deposits			3,249,307			84,260			2.59	%		3,035,000			18,228		0.60	%
Borrowings			17,824			936			5.25	%		32,986			602		1.83	%
Subordinated debt			42,055			2,767			6.58	%		41,970			2,503		5.96	%
Total interest-bearing liabilities			3,309,186			87,963			2.66	%		3,109,956			21,333		0.69	%
Noninterest-bearing deposits			958,078									1,120,555
Other liabilities			46,052									34,361
Total liabilities			4,313,316									4,264,872
Shareholders' equity			442,960									423,252
Total liabilities and shareholders' equity		$	4,756,276								$	4,688,124
Net interest income, taxable equivalent					$	130,457								$	138,166
Interest rate spread									2.32	%							3.01	%
Tax equivalent net interest margin									2.97	%							3.20	%
Percentage of average interest-earning assets to average interest-bearing liabilities									132.54	%							138.75	%
Percentage of average equity to average assets									9.31	%							9.03	%

¹ Includes average balance of $2.8 million and $14.1 million in PPP loans for the year ended December 31, 2023, and 2022, respectively.
² Yields computed on tax-exempt instruments on a tax equivalent basis include $377 thousand and $665 thousand of taxable equivalent income for the year ended December 31, 2023, and 2022, respectively.

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

		As of and for The Three Months Ended
		Dec			Sep			Jun				Mar			Dec
		2023			2023			2023				2023			2022
Composition of Loans and Leases:
Commercial real estate:
Owner occupied		$	798,416		$	776,402		$	769,978			$	764,166		$	765,041
Non-owner occupied			940,789			890,774			871,779				871,368			862,720
Commercial real estate, total			1,739,205			1,667,176			1,641,757				1,635,534			1,627,761
Commercial & industrial			645,918			617,115			594,427				571,153			551,867
Construction & land development			327,185			373,068			394,742				386,253			402,501
Consumer real estate			649,867			638,518			624,828				606,343			587,977
Leases			68,752			68,538			66,401				67,701			67,427
Consumer and other			13,535			14,584			15,635				14,803			16,094
Total loans and leases		$	3,444,462		$	3,378,999		$	3,337,790			$	3,281,787		$	3,253,627
Asset Quality and Additional Loan Data:
Nonperforming loans and leases		$	8,101		$	4,163		$	3,722			$	3,247		$	2,951
Other real estate owned			517			1,370			1,708				1,708			1,436
Other repossessed assets			1,117			348			282				66			422
Total nonperforming assets		$	9,735		$	5,881		$	5,712			$	5,021		$	4,809
Restructured loans and leases not included in nonperforming loans and leases		$	4,245		$	2,376		$	657			$	97		$	101
Net charge-offs to average loans and leases (annualized)			0.04	%		0.04	%		(0.01	)	%		0.03	%		0.03	%
Allowance for credit losses to loans and leases			1.02	%		1.00	%		0.98		%		0.98	%		0.72	%
Nonperforming loans and leases to total loans and leases, gross			0.24	%		0.12	%		0.11		%		0.10	%		0.09	%
Nonperforming assets to total assets			0.20	%		0.12	%		0.12		%		0.11	%		0.10	%
Acquired loan and lease fair value discount balance		$	—		$	—		$	—			$	—		$	13,128
Accretion income on acquired loans and leases			—			—			—				—			1,396
PPP net fees deferred balance			84			94			104				114			122
PPP net fees recognized			10			10			10				8			17
Capital Ratios:
Equity to Assets			9.52	%		9.31	%		9.37		%		9.30	%		9.33	%
Tangible common equity to tangible assets (Non-GAAP)1			7.47	%		7.23	%		7.25		%		7.17	%		7.13	%
SmartFinancial, Inc.2
Tier 1 leverage			8.27	%		8.13	%		8.24		%		7.91	%		7.95	%
Common equity Tier 1			10.21	%		10.07	%		10.12		%		9.95	%		9.65	%
Tier 1 capital			10.21	%		10.07	%		10.12		%		9.95	%		9.65	%
Total capital			11.86	%		11.90	%		11.94		%		11.77	%		11.40	%
SmartBank			Estimated3
Tier 1 leverage			9.18	%		9.00	%		9.18		%		8.87	%		8.90	%
Common equity Tier 1			11.29	%		11.15	%		11.27		%		11.15	%		10.82	%
Tier 1 capital			11.29	%		11.15	%		11.27		%		11.15	%		10.82	%
Total capital			12.04	%		11.87	%		11.97		%		11.85	%		11.44	%

¹Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.
²All periods presented are estimated.
³ Current period capital ratios are estimated as of the date of this earnings release.

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

	As of and for The																As of and for The
	Three Months Ended																Year Ended
	Dec			Sep			Jun			Mar			Dec				Dec			Dec
	2023			2023			2023			2023			2022				2023			2022
Selected Performance Ratios (Annualized):
Return on average assets		0.52	%		0.17	%		0.75	%		0.97	%		1.11	%			0.60	%		0.92	%
Return on average shareholders' equity		5.46	%		1.84	%		7.98	%		10.79	%		12.28	%			6.45	%		10.16	%
Return on average tangible common equity¹		7.18	%		2.43	%		10.57	%		14.45	%		16.65	%			8.55	%		13.60	%
Noninterest income / average assets		0.63	%		0.06	%		0.61	%		0.59	%		0.61	%			0.47	%		0.59	%
Noninterest expense / average assets		2.47	%		2.37	%		2.34	%		2.33	%		2.34	%			2.38	%		2.27	%
Efficiency ratio		75.95	%		89.96	%		70.82	%		64.16	%		61.28	%			74.24	%		64.33	%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		0.57	%		0.60	%		0.75	%		0.97	%		1.10	%			0.72	%		0.92	%
Operating PPNR return on average assets1		0.86	%		0.84	%		0.96	%		1.30	%		1.46	%			0.99	%		1.27	%
Operating return on average shareholders' equity1		6.07	%		6.41	%		7.98	%		10.79	%		12.15	%			7.77	%		10.24	%
Operating return on average tangible common equity1		7.98	%		8.46	%		10.57	%		14.45	%		16.47	%			10.29	%		13.69	%
Operating efficiency ratio1		73.41	%		73.60	%		70.64	%		64.02	%		61.36	%			70.26	%		63.79	%
Operating noninterest income / average assets1		0.63	%		0.62	%		0.61	%		0.59	%		0.60	%			0.61	%		0.59	%
Operating noninterest expense / average assets1		2.39	%		2.36	%		2.34	%		2.33	%		2.35	%			2.36	%		2.26	%
Selected Interest Rates and Yields:
Yield on loans and leases, excluding loan fees		5.61	%		5.52	%		5.39	%		5.20	%		4.99	%			5.43	%		4.41	%
Yield on loans and leases		5.68	%		5.61	%		5.51	%		5.57	%		5.05	%			5.59	%		4.63	%
Yield on earning assets, FTE		5.22	%		4.99	%		4.82	%		4.88	%		4.41	%			4.98	%		3.70	%
Cost of interest-bearing deposits		3.00	%		2.84	%		2.46	%		2.05	%		1.18	%			2.59	%		0.60	%
Cost of total deposits		2.35	%		2.20	%		1.89	%		1.56	%		0.85	%			2.00	%		0.44	%
Cost of interest-bearing liabilities		3.07	%		2.89	%		2.53	%		2.12	%		1.27	%			2.66	%		0.69	%
Net interest margin, FTE		2.86	%		2.81	%		2.93	%		3.31	%		3.51	%			2.97	%		3.20	%
Per Common Share:
Net income, basic	$	0.37		$	0.12		$	0.53		$	0.69		$	0.78			$	1.70		$	2.57
Net income, diluted		0.37			0.12			0.52			0.68			0.77				1.69			2.55
Operating earnings, basic¹		0.41			0.43			0.53			0.69			0.77				2.05			2.59
Operating earnings, diluted¹		0.41			0.43			0.52			0.68			0.76				2.03			2.57
Book value		27.07			26.28			26.16			26.08			25.59				27.07			25.59
Tangible book value¹		20.76			19.94			19.78			19.66			19.09				20.76			19.09
Common shares outstanding		16,988,879			16,994,543			17,004,092			17,004,092			16,900,805				16,988,879			16,900,805

¹Non-GAAP measure. See reconciliation of Non-GAAP measures.

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

		Three Months Ended																					Year Ended
		Dec				Sep				Jun				Mar				Dec					Dec				Dec
		2023				2023				2023				2022				2022					2023				2022
Operating Earnings:
Net income (GAAP)		$	6,190			$	2,067			$	8,836			$	11,500			$	13,004				$	28,593			$	43,022
Noninterest income:
Securities (gains) losses, net			—				6,801				—				—				(144	)				6,801				(144	)
Noninterest expenses:
Donation of a former branch location			250				—				—				—				—					250				—
Accruals for pending litigation			675				—				—				—				—					675				—
Merger related and restructuring expenses			—				110				—				—				(45	)				110				562
Income taxes:
Income tax effect of adjustments			(239	)			(1,785	)			—				—				49					(2,024	)			(108	)
Operating earnings (Non-GAAP)		$	6,876			$	7,193			$	8,836			$	11,500			$	12,864				$	34,405			$	43,332
Operating earnings per common share (Non-GAAP):
Basic		$	0.41			$	0.43			$	0.53			$	0.69			$	0.77				$	2.05			$	2.59
Diluted			0.41				0.43				0.52				0.68				0.76					2.03				2.57
Operating Noninterest Income:
Noninterest income (GAAP)		$	7,579			$	691			$	7,130			$	6,925			$	7,125				$	22,325			$	27,715
Securities (gains) losses, net			—				6,801				—				—				(144	)				6,801				(144	)
Operating noninterest income (Non-GAAP)		$	7,579			$	7,492			$	7,130			$	6,925			$	6,981				$	29,126			$	27,571
Operating noninterest income (Non-GAAP)/average assets1			0.63		%		0.62		%		0.61		%		0.59		%		0.60		%			0.61		%		0.59		%
Operating Noninterest Expense:
Noninterest expense (GAAP)		$	29,695			$	28,516			$	27,410			$	27,529			$	27,416				$	113,150			$	106,290
Donation of a former branch location			(250	)			—				—				—				—					(250	)			—
Accruals for pending litigation			(675	)			—				—				—				—					(675	)			—
Merger related and restructuring expenses			—				(110	)			—				—				45					(110	)			(562	)
Operating noninterest expense (Non-GAAP)		$	28,770			$	28,406			$	27,410			$	27,529			$	27,461				$	112,115			$	105,728
Operating noninterest expense (Non-GAAP)/average assets2			2.39		%		2.36		%		2.34		%		2.33		%		2.35		%			2.36		%		2.26		%
Operating Pre-provision Net revenue ("PPNR") Earnings:
Net interest income (GAAP)		$	31,517			$	31,006			$	31,575			$	35,982			$	37,612				$	130,080			$	137,501
Operating noninterest income (Non-GAAP)			7,579				7,492				7,130				6,925				6,981					29,126				27,571
Operating noninterest expense (Non-GAAP)			(28,770	)			(28,406	)			(27,410	)			(27,529	)			(27,461	)				(112,115	)			(105,728	)
Operating PPNR earnings (Non-GAAP)		$	10,326			$	10,092			$	11,295			$	15,378			$	17,132				$	47,091			$	59,344
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3			0.57		%		0.60		%		0.75		%		0.97		%		1.10		%			0.72		%		0.92		%
Operating PPNR return on average assets (Non-GAAP)4			0.86		%		0.84		%		0.96		%		1.30		%		1.46		%			0.99		%		1.27		%
Return on average tangible common equity (Non-GAAP)5			7.18		%		2.43		%		10.57		%		14.45		%		16.65		%			8.55		%		13.60		%
Operating return on average shareholders' equity (Non-GAAP)6			6.07		%		6.41		%		7.98		%		10.79		%		12.15		%			7.77		%		10.24		%
Operating return on average tangible common equity (Non-GAAP)7			7.98		%		8.46		%		10.57		%		14.45		%		16.47		%			10.29		%		13.69		%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)			75.95		%		89.96		%		70.82		%		64.16		%		61.28		%			74.24		%		64.33		%
Adjustment for taxable equivalent yields			(0.18	)	%		(0.27	)	%		(0.18	)	%		(0.14	)	%		(0.22	)	%			(0.18	)	%		(0.26	)	%
Adjustment for securities gains (losses)			—		%		(15.89	)	%		—		%		—		%		0.20		%			(3.17	)	%		0.06		%
Adjustment for donation of a former branch location			(0.64	)	%		—		%		—		%		—		%		—		%			(0.16	)	%		—		%
Adjustment for accruals for pending litigation			(1.72	)	%		—		%		—		%		—		%		—		%			(0.44	)	%		—		%
Adjustment for merger related income and costs			—		%		(0.20	)	%		—		%		—		%		0.10		%			(0.03	)	%		(0.34	)	%
Operating efficiency ratio (Non-GAAP)			73.41		%		73.60		%		70.64		%		64.02		%		61.36		%			70.26		%		63.79		%

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 PPNR return on average assets (Non-GAAP) is the annualized operating PPNR earnings (Non-GAAP) divided by average assets.
⁵Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
⁶Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.
⁷Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).

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

		Three Months Ended																					Year Ended
		Dec				Sep				Jun				Mar				Dec					Dec				Dec
		2023				2023				2023				2022				2022					2023				2022
Tangible Common Equity:
Shareholders' equity (GAAP)		$	459,886			$	446,652			$	444,847			$	443,399			$	432,452				$	459,886			$	432,452
Less goodwill and other intangible assets			107,148				107,792				108,439				109,114				109,772					107,148				109,772
Tangible common equity (Non-GAAP)		$	352,738			$	338,860			$	336,408			$	334,285			$	322,680				$	352,738			$	322,680
Average Tangible Common Equity:
Average shareholders' equity (GAAP)		$	449,526			$	445,432			$	444,283			$	432,382			$	420,037				$	442,960			$	423,252
Less average goodwill and other intangible assets			107,551				108,194				108,851				109,537				110,206					108,527				106,834
Average tangible common equity (Non-GAAP)		$	341,975			$	337,238			$	335,432			$	322,845			$	309,831				$	334,433			$	316,418
Tangible Book Value per Common Share:
Book value per common share (GAAP)		$	27.07			$	26.28			$	26.16			$	26.08			$	25.59				$	27.07			$	25.59
Adjustment due to goodwill and other intangible assets			(6.31	)			(6.34	)			(6.38	)			(6.42	)			(6.50	)				(6.31	)			(6.50	)
Tangible book value per common share (Non-GAAP)1		$	20.76			$	19.94			$	19.78			$	19.66			$	19.09				$	20.76			$	19.09
Tangible Common Equity to Tangible Assets:
Total Assets (GAAP)		$	4,829,387			$	4,797,171			$	4,745,800			$	4,769,805			$	4,637,498				$	4,829,387			$	4,637,498
Less goodwill and other intangibles			107,148				107,792				108,439				109,114				109,772					107,148				109,772
Tangible Assets (Non-GAAP)		$	4,722,239			$	4,689,379			$	4,637,361			$	4,660,691			$	4,527,726				$	4,722,239			$	4,527,726
Tangible common equity to tangible assets (Non-GAAP)			7.47	%			7.23	%			7.25	%			7.17	%			7.13	%				7.47	%			7.13	%

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