SmartFinancial Inc.

01/24/2022 | Press release | Distributed by Public on 01/24/2022 16:16

SmartFinancial Announces Results for the Fourth Quarter 2021 - Form 8-K

SmartFinancial Announces Results for the Fourth Quarter 2021

Highlightsfor the Fourth Quarter of 2021

● Operating earnings1 of $0.52 and $2.39 per diluted common share for the 2021 fourth quarter and year end, respectively
● 31% increase in year-over-year operating earnings1 per diluted common share
● Net organic loan growth of over $75 million, a 12% annualized quarter-over-quarter increase
● Tangible book value per share1 of $19.26, a 4.8% annualized quarter-over-quarter increase
● Strategic Nashville, TN MSA2 enhancement with several senior relationship manager hires
● Gulf Coast Wealth Management team lift-out previously responsible for managing ~$350 million in AUM2
● Completion of Sevier County Bancshares, Inc. ("SCB") integration; five branch closures with near full realization of operational efficiencies
● Opening of Mobile, AL branch office and application approval of Auburn, Dothan and Montgomery branch offices
● Opening of Birmingham, AL loan production office

KNOXVILLE, TN - January 24, 2022 - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $6.7 million, or $0.40 per diluted common share, for the fourth quarter of 2021, compared to net income of $9.0 million, or $0.59 per diluted common share, for the fourth quarter of 2020, and compared to prior quarter net income of $9.6 million, or $0.61 per diluted common share. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $8.7 million, or $0.52 per diluted common share, in the fourth quarter of 2021, compared to $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020, and compared to $9.9 million, or $0.63 per diluted common share, in the third quarter of 2021.

Billy Carroll, President & CEO, stated: "SmartFinancial reported another solid quarter as we wrapped up an outstanding year for our company. Loans and deposits continued to organically grow at a strong pace. We also expanded our sales team again this quarter with experienced and seasoned industry professionals. The investments we made in 2021 are positioning us very well as we look into 2022 and beyond."

SmartFinancial's Chairman, Miller Welborn, concluded: "We couldn't be more excited about where we are as a company. Our 2021 was a fantastic year on many fronts and it's nice to finish with strong numbers and incredible momentum. Our team is poised and ready for 2022".

Net Interest Income and Net Interest Margin

Net interest income was $29.9 million for the fourth quarter of 2021, compared to $30.4 million for the prior quarter. Average earning assets totaled $4.08 billion, an increase of $469.4 million. The growth in average earnings assets was primarily driven by an increase in average securities of $167.7 million, average interest-earning cash of $163.2 million and average loans and leases of $137.3 million. Average interest-bearing liabilities increased $354.3 million, related to continued core deposit growth.

The tax equivalent net interest margin was 2.92% for the fourth quarter of 2021, compared to 3.35% for the prior quarter. The tax equivalent net interest margin was impacted by a 47 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 due to the combined impact of a quarter-over-quarter loan discount accretion and Payroll Protection Program ("PPP") fee accretion decrease of $2.5 million and increased interest-earning cash position.

1 Non-GAAP

2 Metropolitan Statistical Area ("MSA"); Assets Under Management ("AUM")

The yield on interest-bearing liabilities decreased to 0.39% for the fourth quarter of 2021 compared to 0.44% for the prior quarter. The cost of average interest-bearing deposits was 0.29% for the fourth quarter of 2021 compared to 0.34% for the prior quarter, a decrease of 5 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, which decreased 13 basis points during the period. The cost of total deposits for the fourth quarter of 2021 was 0.22% compared to 0.25% in the prior quarter.

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

Three Months Ended

Dec

Sep

Increase

Selected Interest Rates and Yields

2021

2021

(Decrease)

Yield on loans and leases

4.53

%

4.95

%

(0.42)

%

Yield on earning assets, FTE

3.20

%

3.67

%

(0.47)

%

Cost of interest-bearing deposits

0.29

%

0.34

%

(0.05)

%

Cost of total deposits

0.22

%

0.25

%

(0.03)

%

Cost of interest-bearing liabilities

0.39

%

0.44

%

(0.05)

%

Net interest margin, FTE

2.92

%

3.35

%

(0.43)

%

Provision for Loan and Lease Losses and Credit Quality

At December 31, 2021, the allowance for loan and lease losses was $19.4 million. The allowance for loan and lease losses to total loans and leases was 0.72% as of December 31, 2021, compared to 0.73% as of September 30, 2021. For the Company's originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.74% as of December 31, 2021, compared to 0.76% as of September 30, 2021. The remaining discounts on the acquired loan and lease portfolio totaled $15.5 million, or 3.42% of acquired loans and leases as of December 31, 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

Dec

Sep

Provision for Loan and Lease Losses Rollforward

2021

2021

Change

Beginning balance

$

19,295

$

18,310

$

985

Charge-offs

(499)

(239)

(260)

Recoveries

134

75

59

Net charge-offs

(365)

(164)

(201)

Provision

422

1,149

727

Ending balance

$

19,352

$

19,295

$

57

Allowance for loan losses to total loans and leases, gross

0.72

%

0.73

%

(0.01)

%

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

Nonperforming loans and leases as a percentage of total loans and leases was 0.12% as of December 31, 2021, a decrease of 1 basis point from the 0.13% reported in the third 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 0.11% as of December 31, 2021, as compared to 0.14% as of September 30, 2021.

2

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

2021

2021

(Decrease)

Nonaccrual loans and leases

$

3,124

$

3,567

$

(443)

Loans and leases past due 90 days or more and still accruing

64

-

64

Total nonperforming loans and leases

3,188

3,567

(379)

Other real estate owned

1,780

2,415

(635)

Other repossessed assets

90

77

13

Total nonperforming assets

$

5,058

$

6,059

$

(1,001)

Nonperforming loans and leases to total loans and leases, gross

0.12

%

0.13

%

(0.01)

%

Nonperforming assets to total assets

0.11

%

0.14

%

(0.03)

%

Noninterest Income

Noninterest income increased $497 thousand to $6.8 million for the fourth quarter of 2021 compared to $6.3 million for the prior quarter. During the fourth quarter of 2021, the primary components of the changes in noninterest income were as follows:

● Increase in service charges on deposit accounts, related to the SCB acquisition, account growth and transaction volume;
● Increase in investment income, related to increased volume;
● Decrease in insurance commissions, due to lower transaction volume, primarily driven by seasonality;
● Increased interchange and debit card transaction fees, related to higher volume, account growth and the SCB acquisition; and
● Increase in other, primarily from the gain on sale of credit card portfolio.

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

2021

2021

(Decrease)

Service charges on deposit accounts

$

1,372

$

1,220

$

152

Gain (loss) on sale of securities, net

-

45

(45)

Mortgage banking income

803

994

(191)

Investment services

621

448

173

Insurance commissions

517

745

(228)

Interchange and debit card transaction fees

1,445

1,078

367

Other

2,048

1,779

269

Total noninterest income

$

6,806

$

6,309

$

497

3

Noninterest Expense

Noninterest expense increased $4.5 million to $27.8 million for the fourth quarter of 2021 compared to $23.3 million for the prior quarter. During the fourth quarter of 2021, the primary components of the changes in noninterest expense were as follows:

● Increase in salaries and employee benefits, primarily due to:
o Additional personnel related to the SCB acquisition;
o Banking team hires in Auburn, Dothan, Montgomery and Birmingham, AL, Tallahassee, FL and Nashville, TN;
o The Gulf Coast Wealth Management team lift-out;
● Increase in occupancy and equipment expense from the SCB acquisition and expansion in Alabama; and
● Increase in other expense, primarily related to overall franchise growth.

​

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

2021

2021

(Decrease)

Salaries and employee benefits

$

14,990

$

13,594

$

1,396

Occupancy and equipment

3,026

2,536

490

FDIC insurance

567

525

42

Other real estate and loan related expenses

583

407

176

Advertising and marketing

176

235

(59)

Data processing and technology

1,722

1,753

(31)

Professional services

847

810

37

Amortization of intangibles

660

711

(51)

Merger related and restructuring expenses

2,762

464

2,298

Other

2,490

2,274

216

Total noninterest expense

$

27,823

$

23,309

$

4,514

Income Tax Expense

Income tax expense was $1.8 million for the fourth quarter of 2021, a decrease of $872 thousand, compared to $2.6 million for the prior quarter.

The effective tax rate was 20.9% for the fourth quarter of 2021 and 21.5% for the prior quarter.

Balance Sheet Trends

Total assets at December 31, 2021 were $4.61 billion compared with $3.30 billion at December 31, 2020. The increase of $1.31 billion is primarily attributable to increases in cash and cash equivalents of $563.4 million, securities of $343.8 million, loans and leases of $311.2 million, bank owned life insurance of $48.4 million and goodwill and intangibles of $19.4 million related to the SCB acquisition and the acquisition of Fountain Equipment Finance, LLC.

Total liabilities increased to $4.18 billion at December 31, 2021 from $2.95 billion at December 31, 2020. The increase of $1.23 billion was primarily from organic deposit growth of $809.8 million and deposits of $407.0 million from the SCB acquisition.

Shareholders' equity at December 31, 2021 totaled $429.4 million, an increase of $72.3 million, from December 31, 2020. The increase in shareholders' equity was primarily from the issuance of $42.3 million of common stock for the acquisition of SCB and net income of $34.8 million for the twelve months ended December 31, 2021, which was offset by repurchase of the Company's common stock of $1.2 million and $3.7 million of dividends paid. Tangible book value per share (Non-GAAP) was $19.26 at December 31, 2021, compared to $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.18% at December 31, 2021, compared with 8.41% at December 31, 2020.

4

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

Dec

Dec

Increase

Selected Balance Sheet Information

2021

2020

(Decrease)

Total assets

$

4,611,579

$

3,304,949

$

1,306,630

Total liabilities

4,182,149

2,947,781

1,234,368

Total equity

429,430

357,168

72,262

Securities

559,422

215,634

343,788

Loans and leases

2,693,397

2,382,243

311,154

Deposits

4,021,938

2,805,215

1,216,723

Borrowings

87,585

81,199

6,386

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2021 on Monday, January 24, 2022, and will host a conference call on Tuesday, January 25, 2022, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 for United States or +1 (929) 526-1599 for other locations and enter the access code, 574606. A replay of the conference call will be available through March 26, 2022, by dialing (866) 813-9403 for United States or +44 (204) 525-0658 and entering the access code, 247688. Conference call materials will be published on the Company's webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with branches across Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank's success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source

SmartFinancial, Inc.

Investor Contacts

Billy Carroll

President & CEO

(865) 868-0613 [email protected]

Ron Gorczynski

Executive Vice President, Chief Financial Officer

(865) 437-5724 [email protected]

Media Contact

Kelley Fowler

Senior Vice President, Public Relations & Marketing

(865) 868-0611 [email protected]

5

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles ("GAAP") and therefore are considered non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets, (iv) operating return on average shareholders' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision earnings (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value; (xiv) tangible assets; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, proceeds related to the termination of an Alabama Department of Economic and Community Affairs ("ADECA") loan program, merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by average assets. Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income earnings (Non-GAAP) by average assets. Operating return on average shareholders' equity is the annualized operating earnings (Non-GAAP) divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity (Non-GAAP). Operating return on average tangible common equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses, proceeds related to the termination of the ADECA loan program. Operating pre-tax pre-provision earnings is net interest income plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity 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 (Non-GAAP) 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.

6

Forward-Looking Statements

This news release may contain statements that are based on management's current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the effects of the COVID-19 pandemic and related variants on the Company's business and financial results and conditions, are not historical in nature and can generally be identified by such words as "expect," "anticipate," "intend," "plan," "believe," "seek," "may," "estimate," and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) risks related to the acquisition of Sevier County Bancshares, Inc. ("SCB"); (7) the risk that the anticipated benefits from the acquisition of SCB may not be realized in the time frame anticipated; (8) changes in management's plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) 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 and related variants; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the COVID-19 pandemic and related variants; (15) the impact of the COVID-19 pandemic and related variants on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic and related variants; 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.

7

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

Ending Balances

Dec

Sep

Jun

Mar

Dec

2021

2021

2021

2021

2020

Assets:

Cash and cash equivalents

$

1,045,077

$

1,091,160

$

673,515

$

556,701

$

481,719

Securities available-for-sale, at fair value

482,453

339,343

250,817

250,937

215,634

Securities held-to-maturity, at amortized cost

76,969

-

-

-

-

Other investments

16,494

14,972

14,584

14,728

14,794

Loans held for sale

5,103

3,418

4,334

7,870

11,721

Loans and leases

2,693,397

2,652,663

2,468,318

2,487,129

2,382,243

Less: Allowance for loan and lease losses

(19,352)

(19,295)

(18,310)

(18,370)

(18,346)

Loans and leases, net

2,674,045

2,633,368

2,450,008

2,468,759

2,363,897

Premises and equipment, net

85,958

85,346

72,314

72,697

72,682

Other real estate owned

1,780

2,415

2,499

3,946

4,619

Goodwill and other intangibles, net

105,852

104,930

90,966

86,350

86,471

Bank owned life insurance

79,619

79,145

72,013

71,586

31,215

Other assets

38,229

29,934

23,306

23,629

22,197

Total assets

$

4,611,579

$

4,384,031

$

3,654,356

$

3,557,203

$

3,304,949

Liabilities:

Deposits:

Noninterest-bearing demand

$

1,055,125

$

977,180

$

807,560

$

777,968

$

685,957

Interest-bearing demand

899,158

847,007

702,470

683,887

649,129

Money market and savings

1,493,007

1,389,393

1,140,029

1,073,941

919,631

Time deposits

574,648

585,692

489,413

512,417

550,498

Total deposits

4,021,938

3,799,272

3,139,472

3,048,213

2,805,215

Borrowings

87,585

88,748

78,834

82,642

81,199

Subordinated debt

41,930

41,909

39,388

39,367

39,346

Other liabilities

30,696

29,382

23,269

22,923

22,021

Total liabilities

4,182,149

3,959,311

3,280,963

3,193,145

2,947,781

Shareholders' Equity:

Common stock

16,803

16,801

15,110

15,105

15,107

Additional paid-in capital

292,937

292,760

252,039

251,836

252,693

Retained earnings

118,247

112,600

103,906

96,034

87,185

Accumulated other comprehensive income

1,443

2,559

2,338

1,083

2,183

Total shareholders' equity

429,430

424,720

373,393

364,058

357,168

Total liabilities & shareholders' equity

$

4,611,579

$

4,384,031

$

3,654,356

$

3,557,203

$

3,304,949

8

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

2021

2021

2021

2021

2020

2021

2020

Interest income:

Loans and leases, including fees

$

30,567

$

31,674

$

28,323

$

28,018

$

28,594

$

118,582

$

112,312

Investment securities:

Taxable

1,341

832

916

724

609

3,813

2,423

Tax-exempt

322

331

304

259

306

1,215

1,369

Federal funds sold and other earning assets

547

474

309

291

303

1,622

1,509

Total interest income

32,777

33,311

29,852

29,292

29,812

125,232

117,613

Interest expense:

Deposits

2,116

2,153

2,248

2,331

2,580

8,849

13,597

Borrowings

180

121

123

117

142

540

816

Subordinated debt

626

655

584

584

584

2,449

2,334

Total interest expense

2,922

2,929

2,955

3,032

3,306

11,838

16,747

Net interest income

29,855

30,382

26,897

26,260

26,506

113,394

100,866

Provision for loan and lease losses

422

1,149

(5)

67

-

1,633

8,683

Net interest income after provision for loan and lease losses

29,433

29,233

26,902

26,193

26,506

111,761

92,183

Noninterest income:

Service charges on deposit accounts

1,372

1,220

1,048

1,009

1,032

4,650

3,403

Gain (loss) on sale of securities, net

-

45

-

-

-

45

6

Mortgage banking

803

994

1,105

1,139

1,331

4,040

3,875

Investment services

621

448

567

531

407

2,167

1,566

Insurance commissions

517

745

557

1,466

548

3,285

1,850

Interchange and debit card transaction fees

1,445

1,078

922

839

760

4,284

2,413

Other

2,048

1,779

944

707

898

5,478

2,313

Total noninterest income

6,806

6,309

5,143

5,691

4,976

23,949

15,426

Noninterest expense:

Salaries and employee benefits

14,990

13,594

12,203

10,869

11,516

51,656

42,911

Occupancy and equipment

3,026

2,536

2,294

2,341

2,256

10,196

8,348

FDIC insurance

567

525

371

371

297

1,833

1,190

Other real estate and loan related expense

583

407

506

602

516

2,098

2,050

Advertising and marketing

176

235

230

190

181

830

834

Data processing and technology

1,722

1,753

1,509

1,379

1,182

6,364

4,476

Professional services

847

810

849

641

786

3,147

2,958

Amortization of intangibles

660

711

441

444

571

2,256

1,740

Merger related and restructuring expenses

2,762

464

372

103

702

3,701

4,565

Other

2,490

2,274

2,022

2,524

1,946

9,310

7,647

Total noninterest expense

27,823

23,309

20,797

19,464

19,953

91,391

76,719

Income before income taxes

8,416

12,233

11,248

12,420

11,529

44,319

30,890

Income tax expense

1,761

2,633

2,470

2,664

2,499

9,529

6,558

Net income

$

6,655

$

9,600

$

8,778

$

9,756

$

9,030

$

34,790

$

24,332

Earnings per common share:

Basic

$

0.40

$

0.62

$

0.59

$

0.65

$

0.60

$

2.23

$

1.63

Diluted

$

0.40

$

0.61

$

0.58

$

0.65

$

0.59

$

2.22

$

1.62

Weighted average common shares outstanding:

Basic

16,699,010

15,557,528

15,003,657

15,011,573

15,109,298

15,572,537

14,955,423

Diluted

16,846,315

15,691,126

15,126,184

15,111,947

15,182,796

15,699,215

15,019,175

9

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS

Three Months Ended

December 31, 2021

September 30, 2021

December 31, 2020

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Assets:

Loans and leases, including fees2

$

2,669,943

$

30,510

4.53

%

$

2,532,604

$

31,623

4.95

%

$

2,401,406

$

28,506

4.72

%

Loans held for sale

5,116

57

4.45

%

3,987

51

5.09

%

10,191

88

3.45

%

Taxable securities

339,371

1,341

1.57

%

187,032

832

1.77

%

119,936

609

2.02

%

Tax-exempt securities

102,989

479

1.85

%

87,621

477

2.16

%

90,200

456

2.01

%

Federal funds sold and other earning assets

965,899

547

0.22

%

802,712

474

0.23

%

349,167

303

0.35

%

Total interest-earning assets

4,083,318

32,934

3.20

%

3,613,956

33,457

3.67

%

2,970,900

29,962

4.01

%

Noninterest-earning assets

383,783

323,067

255,477

Total assets

$

4,467,101

$

3,937,023

$

3,226,377

Liabilities and Stockholders' Equity:

Interest-bearing demand deposits

$

853,763

403

0.19

%

$

763,613

414

0.21

%

$

570,326

230

0.16

%

Money market and savings deposits

1,428,472

920

0.26

%

1,233,533

854

0.27

%

903,235

774

0.34

%

Time deposits

583,165

793

0.54

%

524,327

885

0.67

%

565,237

1,576

1.11

%

Total interest-bearing deposits

2,865,400

2,116

0.29

%

2,521,473

2,153

0.34

%

2,038,798

2,580

0.50

%

Borrowings3

88,828

180

0.80

%

80,188

121

0.60

%

99,777

142

0.57

%

Subordinated debt

41,917

626

5.92

%

40,211

654

6.46

%

39,332

584

5.90

%

Total interest-bearing liabilities

2,996,145

2,922

0.39

%

2,641,872

2,928

0.44

%

2,177,907

3,306

0.60

%

Noninterest-bearing deposits

1,016,438

877,831

670,820

Other liabilities

27,710

24,522

23,624

Total liabilities

4,040,293

3,544,225

2,872,351

Shareholders' equity

426,808

392,798

354,026

Total liabilities and shareholders' equity

$

4,467,101

$

3,937,023

$

3,226,377

Net interest income, taxable equivalent

$

30,012

$

30,529

$

26,656

Interest rate spread

2.81

%

3.23

%

3.41

%

Tax equivalent net interest margin

2.92

%

3.35

%

3.57

%

Percentage of average interest-earning assets to average interest-bearing liabilities

136.29

%

136.80

%

136.41

%

Percentage of average equity to average assets

9.55

%

9.98

%

10.97

%

1 Taxable equivalent

2 Includes average balance of $80,501, $128,408 and $296,337 in PPP loans for the quarters ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively.

3 Includes average balance of $18,092 in Paycheck Protection Program Liquidity Facility ("PPPLF") funding for the quarter ended December 31, 2020. No PPPLF funding was used for the quarters ended December 31, 2021, and September 30, 2021.

10

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS

Year Ended

December 31, 2021

December 31, 2020

Average

Yield/

Average

Yield/

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Assets:

Loans and leases, including fees2

$

2,535,006

$

118,332

4.67

%

$

2,289,612

$

111,992

4.89

%

Loans held for sale

5,571

250

4.48

%

7,360

320

4.34

%

Taxable securities

207,459

3,813

1.84

%

122,900

2,423

1.97

%

Tax-exempt securities

92,708

1,817

1.96

%

83,765

1,941

2.32

%

Federal funds sold and other earning assets

680,909

1,622

0.24

%

308,843

1,509

0.49

%

Total interest-earning assets

3,521,653

125,834

3.57

%

2,812,480

118,185

4.20

%

Noninterest-earning assets

317,457

250,955

Total assets

$

3,839,110

$

3,063,435

Liabilities and Stockholders' Equity:

Interest-bearing demand deposits

$

737,251

1,378

0.19

%

$

481,050

1,013

0.21

%

Money market and savings deposits

1,191,916

3,501

0.29

%

788,006

3,482

0.44

%

Time deposits

533,994

3,970

0.74

%

641,647

9,102

1.42

%

Total interest-bearing deposits

2,463,161

8,849

0.36

%

1,910,703

13,597

0.71

%

Borrowings3

83,105

540

0.65

%

177,204

816

0.46

%

Subordinated debt

40,221

2,449

6.09

%

39,301

2,334

5.94

%

Total interest-bearing liabilities

2,586,487

11,838

0.46

%

2,127,208

16,747

0.79

%

Noninterest-bearing deposits

841,746

571,282

Other liabilities

23,189

23,775

Total liabilities

3,451,422

2,722,265

Shareholders' equity

387,688

341,170

Total liabilities and shareholders' equity

$

3,839,110

$

3,063,435

Net interest income, taxable equivalent

$

113,996

$

101,438

Interest rate spread

3.12

%

3.41

%

Tax equivalent net interest margin

3.24

%

3.61

%

Percentage of average interest-earning assets to average interest-bearing liabilities

136.16

%

132.21

%

Percentage of average equity to average assets

10.10

%

11.14

%

1 Taxable equivalent

2 Includes average balance of $196,078 and $201,470 in PPP loans for the twelve months ended December 31, 2021, and 2020, respectively.

3 Includes average balance of $91,190 in PPPLF funding for the twelve months ended December 31, 2020. No PPPLF funding was used for the twelve months ended December 31, 2021.

11

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

2021

2021

2021

2021

2020

Composition of Loans and Leases:

Commercial real estate:

owner occupied

$

590,064

$

560,671

$

492,750

$

477,293

$

463,771

non-owner occupied

794,092

752,576

669,741

593,348

549,205

Commercial real estate, total

1,384,156

1,313,247

1,162,491

1,070,641

1,012,976

Commercial & industrial

488,024

469,739

496,114

686,010

634,446

Construction & land development

278,386

326,374

300,704

285,973

278,075

Consumer real estate

477,272

478,161

444,640

432,486

443,930

Leases

53,708

53,396

53,038

-

-

Consumer and other

11,851

11,746

11,331

12,019

12,816

Total loans and leases

$

2,693,397

$

2,652,663

$

2,468,318

$

2,487,129

$

2,382,243

Asset Quality and Additional Loan Data:

Nonperforming loans and leases

$

3,188

$

3,567

$

3,758

$

6,234

$

5,782

Other real estate owned

1,780

2,415

2,499

3,946

4,619

Other repossessed assets

90

77

199

-

-

Total nonperforming assets

$

5,058

$

6,059

$

6,456

$

10,180

$

10,401

Restructured loans and leases not included in nonperforming loans and leases

$

224

$

212

$

219

$

250

$

257

Net charge-offs to average loans and leases (annualized)

0.05

%

0.03

%

0.01

%

0.01

%

0.08

%

Allowance for loan and leases losses to loans and leases

0.72

%

0.73

%

0.74

%

0.74

%

0.77

%

Nonperforming loans and leases to total loans and leases, gross

0.12

%

0.13

%

0.15

%

0.25

%

0.24

%

Nonperforming assets to total assets

0.11

%

0.14

%

0.18

%

0.29

%

0.31

%

Acquired loan and lease fair value discount balance

$

15,483

$

13,001

$

12,982

$

12,951

$

14,467

Accretion income on acquired loans and leases

457

1,760

761

1,636

768

PPP net fees deferred balance

2,038

3,783

6,651

7,351

4,190

PPP net fees recognized

1,725

2,873

2,132

2,398

2,157

Capital Ratios:

Equity to Assets

9.31

%

9.69

%

10.22

%

10.23

%

10.81

%

Tangible common equity to tangible assets (Non-GAAP)1

7.18

%

7.47

%

7.93

%

8.00

%

8.41

%

SmartFinancial, Inc.2

Tier 1 leverage

7.45

%

8.36

%

8.10

%

8.55

%

8.69

%

Common equity Tier 1

10.23

%

10.85

%

10.63

%

11.29

%

11.61

%

Tier 1 capital

10.23

%

10.85

%

10.63

%

11.29

%

11.61

%

Total capital

12.16

%

12.92

%

12.80

%

13.62

%

14.07

%

SmartBank

Estimated3

Tier 1 leverage

8.23

%

9.20

%

8.75

%

9.33

%

9.58

%

Common equity Tier 1

11.58

%

11.94

%

11.50

%

12.31

%

12.79

%

Tier 1 capital

11.58

%

11.94

%

11.50

%

12.31

%

12.79

%

Total capital

12.21

%

12.59

%

12.19

%

13.05

%

13.57

%

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.

12

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

2021

2021

2021

2021

2020

2021

2020

Selected Performance Ratios (Annualized):

Return on average assets

0.59

%

0.97

%

0.98

%

1.18

%

1.11

%

0.91

%

0.79

%

Return on average shareholders' equity

6.19

%

9.70

%

9.53

%

10.96

%

10.15

%

8.97

%

7.13

%

Return on average tangible common equity¹

8.18

%

12.84

%

12.54

%

14.41

%

13.43

%

11.84

%

9.50

%

Noninterest income / average assets

0.60

%

0.64

%

0.58

%

0.69

%

0.61

%

0.62

%

0.50

%

Noninterest expense / average assets

2.47

%

2.35

%

2.33

%

2.35

%

2.46

%

2.38

%

2.50

%

Efficiency ratio

75.89

%

63.53

%

64.91

%

60.92

%

63.38

%

66.54

%

65.97

%

Operating Selected Performance Ratios (Annualized):

Operating return on average assets1

0.77

%

1.00

%

1.01

%

1.19

%

1.14

%

0.98

%

0.89

%

Operating PTPP return on average assets1

1.03

%

1.39

%

1.30

%

1.52

%

1.45

%

1.29

%

1.43

%

Operating return on average shareholders' equity1

8.09

%

10.01

%

9.83

%

11.05

%

10.34

%

9.67

%

8.02

%

Operating return on average tangible common equity1

10.70

%

13.26

%

12.93

%

14.53

%

13.69

%

12.77

%

10.67

%

Operating efficiency ratio1

68.07

%

62.09

%

63.46

%

60.32

%

60.86

%

63.59

%

61.75

%

Operating noninterest income / average assets1

0.60

%

0.63

%

0.58

%

0.69

%

0.56

%

0.62

%

0.49

%

Operating noninterest expense / average assets1

2.23

%

2.30

%

2.29

%

2.34

%

2.37

%

2.28

%

2.36

%

Selected Interest Rates and Yields:

Yield on loans and leases

4.53

%

4.95

%

4.52

%

4.67

%

4.72

%

4.67

%

4.89

%

Yield on earning assets, FTE

3.20

%

3.67

%

3.65

%

3.88

%

4.01

%

3.57

%

4.20

%

Cost of interest-bearing deposits

0.29

%

0.34

%

0.39

%

0.44

%

0.50

%

0.36

%

0.71

%

Cost of total deposits

0.22

%

0.25

%

0.29

%

0.33

%

0.38

%

0.27

%

0.55

%

Cost of interest-bearing liabilities

0.39

%

0.44

%

0.49

%

0.54

%

0.60

%

0.46

%

0.79

%

Net interest margin, FTE

2.92

%

3.35

%

3.29

%

3.48

%

3.57

%

3.24

%

3.61

%

Per Common Share:

Net income, basic

$

0.40

$

0.62

$

0.59

$

0.65

$

0.60

$

2.23

$

1.63

Net income, diluted

0.40

0.61

0.58

0.65

0.59

2.22

1.62

Operating earnings, basic¹

0.52

0.64

0.60

0.65

0.61

2.41

1.83

Operating earnings, diluted¹

0.52

0.63

0.60

0.65

0.61

2.39

1.82

Book value

25.56

25.28

24.71

24.10

23.64

25.56

23.64

Tangible book value¹

19.26

19.03

18.69

18.39

17.92

19.26

17.92

Common shares outstanding

16,802,990

16,801,447

15,109,736

15,104,536

15,107,214

16,802,990

15,107,214

¹See reconciliation of Non-GAAP measures

13

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

2021

2021

2021

2020

2020

2021

2020

Operating Earnings:

Net income (GAAP)

$

6,655

$

9,600

$

8,778

$

9,756

$

9,030

$

34,790

$

24,332

Noninterest income:

Securities gains (losses), net

-

(45)

-

-

-

(45)

(6)

ADECA termination proceeds

-

-

-

-

(465)

-

(465)

Noninterest expenses:

Merger related and restructuring expenses

2,762

464

372

103

702

3,701

4,565

Income taxes:

Income tax effect of adjustments

(713)

(108)

(96)

(27)

(62)

(944)

(1,071)

Operating earnings (Non-GAAP)

$

8,704

$

9,911

$

9,054

$

9,832

$

9,205

$

37,502

$

27,355

Operating earnings per common share (Non-GAAP):

Basic

$

0.52

$

0.64

$

0.60

$

0.65

$

0.61

$

2.41

$

1.83

Diluted

0.52

0.63

0.60

0.65

0.61

2.39

1.82

Operating Noninterest Income:

Noninterest income (GAAP)

$

6,806

$

6,309

$

5,143

$

5,691

$

4,976

$

23,949

$

15,426

Securities gains (losses), net

-

(45)

-

-

-

(45)

(6)

ADECA termination proceeds

-

-

-

-

(465)

-

(465)

Operating noninterest income (Non-GAAP)

$

6,806

$

6,264

$

5,143

$

5,691

$

4,511

$

23,904

$

14,955

Operating noninterest income (Non-GAAP)/average assets1

0.60

%

0.63

%

0.58

%

0.69

%

0.56

%

0.62

%

0.49

%

Operating Noninterest Expense:

Noninterest expense (GAAP)

$

27,823

$

23,309

$

20,797

$

19,464

$

19,953

$

91,391

$

76,719

Merger related and restructuring expenses

(2,762)

(464)

(372)

(103)

(702)

(3,701)

(4,565)

Operating noninterest expense (Non-GAAP)

$

25,061

$

22,845

$

20,425

$

19,361

$

19,251

$

87,690

$

72,154

Operating noninterest expense (Non-GAAP)/average assets2

2.23

%

2.30

%

2.29

%

2.34

%

2.37

%

2.28

%

2.36

%

Operating Pre-tax Pre-provision ("PTPP") Earnings:

Net interest income (GAAP)

$

29,855

$

30,382

$

26,897

$

26,260

$

26,506

$

113,394

$

100,866

Operating noninterest income

6,806

6,264

5,143

5,691

4,511

23,904

14,955

Operating noninterest expense

(25,061)

(22,845)

(20,425)

(19,361)

(19,251)

(87,690)

(72,154)

Operating PTPP earnings (Non-GAAP)

$

11,600

$

13,801

$

11,615

$

12,590

$

11,766

$

49,608

$

43,667

Non-GAAP Return Ratios:

Operating return on average assets (Non-GAAP)3

0.77

%

1.00

%

1.01

%

1.19

%

1.14

%

0.98

%

0.89

%

Operating PTPP return on average assets (Non-GAAP)4

1.03

%

1.39

%

1.30

%

1.52

%

1.45

%

1.29

%

1.43

%

Return on average tangible common equity (Non-GAAP)5

8.18

%

12.84

%

12.54

%

14.41

%

13.43

%

11.84

%

9.50

%

Operating return on average shareholders' equity (Non-GAAP)6

8.09

%

10.01

%

9.83

%

11.05

%

10.34

%

9.67

%

8.02

%

Operating return on average tangible common equity (Non-GAAP)7

10.70

%

13.26

%

12.93

%

14.53

%

13.69

%

12.77

%

10.67

%

Operating Efficiency Ratio:

Efficiency ratio (GAAP)

75.89

%

63.53

%

64.91

%

60.92

%

63.38

%

66.54

%

65.97

%

Adjustment for taxable equivalent yields

(0.32)

%

(0.25)

%

(0.30)

%

(0.28)

%

(0.30)

%

(0.29)

%

(0.33)

%

Adjustment for securities gains (losses)

-

%

(0.08)

%

-

%

-

%

-

%

(0.02)

%

(0.01)

%

Adjustment for merger related income and costs

(7.50)

%

(1.11)

%

(1.15)

%

(0.32)

%

(2.22)

%

(2.64)

%

(3.88)

%

Operating efficiency ratio (Non-GAAP)

68.07

%

62.09

%

63.46

%

60.32

%

60.86

%

63.59

%

61.75

%

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).

14

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

2021

2021

2021

2020

2020

2021

2020

Tangible Common Equity:

Shareholders' equity (GAAP)

$

429,430

$

424,720

$

373,393

$

364,058

$

357,168

$

429,430

$

357,168

Less goodwill and other intangible assets

105,852

104,930

90,966

86,350

86,471

105,852

86,471

Tangible common equity (Non-GAAP)

$

323,578

$

319,790

$

282,427

$

277,708

$

270,697

$

323,578

$

270,697

Average Tangible Common Equity:

Average shareholders' equity (GAAP)

$

426,808

$

392,798

$

369,325

$

360,919

$

354,026

$

387,688

$

341,170

Less average goodwill and other intangible assets

104,193

96,250

88,551

86,424

86,561

93,910

84,913

Average tangible common equity (Non-GAAP)

$

322,615

$

296,548

$

280,774

$

274,495

$

267,465

$

293,778

$

256,257

Tangible Book Value per Common Share:

Book value per common share (GAAP)

$

25.56

$

25.28

$

24.71

$

24.10

$

23.64

$

25.56

$

23.64

Adjustment due to goodwill and other intangible assets

(6.30)

(6.25)

(6.02)

(5.71)

(5.72)

(6.30)

(5.72)

Tangible book value per common share (Non-GAAP)1

$

19.26

$

19.03

$

18.69

$

18.39

$

17.92

$

19.26

$

17.92

Tangible Common Equity to Tangible Assets:

Total Assets

$

4,611,579

$

4,384,031

$

3,654,356

$

3,557,203

$

3,304,949

$

4,611,579

$

3,304,949

Less goodwill and other intangibles

105,852

104,930

90,966

86,350

86,471

105,852

86,471

Tangible Assets (Non-GAAP):

$

4,505,727

$

4,279,101

$

3,563,390

$

3,470,853

$

3,218,478

$

4,505,727

$

3,218,478

Tangible common equity to tangible assets (Non-GAAP)

7.18%

7.47%

7.93%

8.00%

8.41%

7.18%

8.41%

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

15