KNOXVILLE, Tenn., July 21, 2020 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, compared to net income of $2.7 million, or $0.19 per diluted common share for the first quarter of 2020.  Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $7.3 million, or $0.48 per diluted common share, in the second quarter of 2020, compared to $4.3 million, or $0.30 per diluted common share, in the first quarter of 2020.

Highlights for the Second Quarter of 2020

• Net income of $6.2 million and operating earnings of $7.3 million (Non-GAAP)
• Diluted earnings per share increased 115.8% for the quarter and diluted operating earnings per share (Non-GAAP) increased 60.0% for the quarter
• Total assets grew to over $3 billion
• Completed the integration of Progressive Financial Group (“PFG”)
• Tangible book value (Non-GAAP) per share of $16.90, a 6.6% year-over-year increase
• Originated approximately 2,800 Paycheck Protection Program (“PPP”) loans totaling $292.8 million 

Billy Carroll, President & CEO, stated: "We are extremely pleased to report another very solid quarter.  While finalizing our Progressive Financial Group integration and conversion, we reported outstanding increases in revenue, in particular our non-interest income performance.  Our team also continues to focus on our tremendous asset quality and have worked with many new and existing clients to secure PPP funding, creating a number of great opportunities for our bank.  The outlook for our company remains very strong."

SmartFinancial's Chairman, Miller Welborn, concluded: “We have closed another great quarter for our company. Our team has continued to successfully execute our Strategic Plan. We have strengthened our Balance Sheet, served our clients and our shareholders well and continued to increase the book value of our stock.”

Net Interest Income and Net Interest Margin

Net interest income increased $3.1 million to $25.7 million for the second quarter of 2020, compared to $22.6 million for the first quarter of 2020, primarily attributable to the full quarter effects of the Company’s March 1, 2020 acquisition of PFG (the “PFG Acquisition”) and participation in the PPP. Average earning assets increased $532.0 million, which reflects a $376.1 million increase in average loans, a $21.1 million increase in securities and a $134.8 million increase in other earning assets. Average interest-bearing liabilities increased $353.8 million, driven by an increase of $168.5 million in average interest-bearing deposits and an increase of $185.2 million in borrowings.

The tax equivalent net interest margin was 3.63% for the second quarter of 2020, compared to 3.90% for the first quarter of 2020. The tax equivalent net interest margin was impacted by a 61 basis point decline in the average yield on interest-earning assets offset by a 43 basis point decline in the rate on interest-bearing liabilities over the last quarter. The tax equivalent net interest margin, less discount accretion was 3.50% for the second quarter of 2020, a decrease from 3.58% for the first quarter of 2020.

The tax equivalent average yield on interest-earning assets was 4.22% for the second quarter of 2020, a decrease from 4.83% for the first quarter of 2020. The yield on average loans was 4.87% for the second quarter of 2020, compared to 5.35% for the first quarter of 2020. Offsetting the effects of the Federal Reserve rate cuts included in yield on average loans for the second quarter of 2020 was $1.9 million of PPP fee accretion and $888 thousand of discount accretion on acquired loans, compared to $1.8 million of discount accretion recognized in the first quarter of 2020. Additionally, increases in liquidity positions negatively impacted the net interest margin with lower yields earned on the excess cash position.

The yield on interest-bearing liabilities decreased to 0.77% for the second quarter of 2020 from 1.20% for the first quarter of 2020. The cost of average interest-bearing deposits was 0.71% for the second quarter of 2020 compared to 1.10% for the first quarter of 2020, a decrease of 39 basis points. This decrease was a result of the Company’s efforts deployed to reduce deposit rates in reaction to the Federal Reserve rate cuts.

Provision for Loan Loss and Credit Quality

Provision for loan losses was $2.9 million in the second quarter of 2020, compared to $3.2 million in the first quarter of 2020.  At June 30, 2020, the allowance for loan losses was $16.3 million.  The allowance for loan losses to total loans was 0.67% as of June 30, 2020, compared to 0.63% as of March 31, 2020.  For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.89% as of June 30, 2020, compared to 0.77% as of March 31, 2020.  The remaining discounts on the acquired loan portfolio totaled $16.2 million, or 3.40% of acquired loans as of June 30, 2020.  The elevated provision for loan losses was due to the continued economic conditions facing the U.S. economy related to the challenges being faced with the worldwide COVID-19 pandemic.

The Company is not required to implement the provisions of the CECL accounting standard until January 1, 2023, and is continuing to account for the allowance for loan losses under the incurred loss model.

Nonperforming loans as a percentage of total loans was 0.16% as of June 30, 2020, an increase of two basis points from the 0.14% reported in the first quarter of 2020.  Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.28% as of June 30, 2020, as compared to 0.31% as of March 31, 2020. 

Noninterest Income

Noninterest income increased $693 thousand to $3.5 million for the second quarter of 2020 compared to $2.8 million for the first quarter of 2020.  During the second quarter of 2020, the primary components of the changes in noninterest income were as follows:

• Increase in mortgage banking income of $347 thousand, as volume increased during the second quarter;
• Increase in insurance commissions income of $204 thousand, due to a full quarter of revenue from the PFG Acquisition;
• Increase in interchange and debit card transaction fees of $232 thousand, related to a full quarter of activity from the PFG Acquisition; and
• Decrease in investment services income of $74 thousand.

Noninterest Expense

Noninterest expense was $18.8 million for the second and first quarters of 2020.  Even though noninterest expense remained constant between the second and first quarters of 2020, the primary changes within noninterest expense were as follows:

• Salaries and employee benefits increased $351 thousand. The increase is attributable to the full quarter of salaries and benefits from the PFG Acquisition, annual salary increases, and other employee benefit accruals.  These increases were offset by deferred salary cost related to the origination of PPP loans; and
• Decrease of $619 thousand in merger related and restructuring expenses relating to the PFG Acquisition.

Income Tax Expense

Income tax expense was $1.4 million for the second quarter of 2020, an increase of $763 thousand, compared to $664 thousand for the first quarter of 2020.

For the second quarter of 2020, the effective tax rate was 18.8% compared to 19.6% for the first quarter of 2020.

Balance Sheet Trends

Total assets at June 30, 2020, were $3.27 billion compared with $2.45 billion at December 31, 2019.  The increase of $816.9 million is primarily attributable to assets acquired from the PFG Acquisition of approximately $307.2 million, increase in cash and cash equivalents of $215.5 million and the origination of $292.8 million of PPP loans.

Total liabilities increased to $2.92 billion at June 30, 2020 from $2.14 billion at December 31, 2019.  The increase of $786.1 million was primarily from deposit growth of $220.5 million, acquired deposits from the PFG Acquisition in the amount of $272.0 million, and an increase in borrowings of $287.2 million.

Shareholders' equity at June 30, 2020, totaled $343.5 million, an increase of $30.7 million, from December 31, 2019.  The increase in shareholders' equity was primarily from the issuance of common stock for the acquisition of PFG of $24.5 million, net income of $8.9 million for the six months ended June 30, 2020 and a net change in accumulated other comprehensive income of $424 thousand, which was offset by the repurchase of the Company's common stock of $2.1 million and $1.5 million of dividends paid. Tangible book value per share (Non-GAAP) was $16.90 at June 30, 2020, an increase from $16.82 at December 31, 2019.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.09% at June 30, 2020, compared with 9.93% at December 31, 2019.

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2020 on Tuesday, July 21, 2020, and will host a conference call on Wednesday, July 22, 2020, at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 5925756.  A replay of the conference call will be available through July 22, 2021, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10146072.  Conference call materials (earnings release & conference call presentation) 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 36 branches across East and Middle Tennessee, Alabama, and the Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.
Investor Contacts
Billy Carroll	Ron Gorczynski
President & CEO	Executive Vice President, Chief Financial Officer
(865) 868-0613   billy.carroll@smartbank.com	(865) 437-5724   ron.gorczynski@smartbank.com
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611   kelley.fowler@smartbank.com

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets (iv) operating return on average shareholder' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision income (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value, (xiv) tax equivalent net interest margin, (xv) tax equivalent yield in earning 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, expenses related to the termination of an Alabama Department of Economic and Community Affairs (“ADECA”) loan program, merger termination fee of $6.4 million in the second quarter of 2019, merger related and restructuring expenses.  Operating return on average assets is the annualized operating earnings divided by average assets.  Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income divided by average assets. Operating return on average shareholders' equity is the annualized operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Operating return on average tangible common equity is the annualized operating earnings divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses, expenses related to the termination of the ADECA loan program and the merger termination fee of $6.4 million in the second quarter of 2019.  Operating pre-tax pre-provision income is net interest expense plus operating noninterest income less operating noninterest expense.  Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively.  Tangible book value is tangible common equity divided by common shares outstanding.  Tax equivalent net interest margin is the annualized net interest income plus tax equivalent income divided by average interest earning assets. Tax equivalent yield in earning assets is the annualized interest income plus tax equivalent income divided by average interest earning assets. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers.  Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance.  Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.  These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (6) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) risks related to the completed acquisition of PFG; (7) the risk that the anticipated benefits from the completed acquisition of PFG may not be realized in the time frame anticipated; (8) changes in management’s plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; (15) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (17) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements.  SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)
	As of and for The																As of and for The
	Three Months Ended																Six Months Ended
	Jun			Mar			Dec			Sep			Jun				Jun			Jun
	2020			2020			2019			2019			2019				2020			2019
Selected Performance Ratios (Annualized):
Return on average assets		0.79	%		0.43	%		1.12	%		1.01	%		1.56	%			0.63	%		1.21	%
Return on average shareholders' equity		7.31	%		3.33	%		8.65	%		7.80	%		12.34	%			5.41	%		9.59	%
Return on average tangible common equity¹		9.80	%		4.41	%		11.55	%		10.52	%		16.78	%			7.23	%		13.14	%
Noninterest income / average assets		0.45	%		0.44	%		0.47	%		0.37	%		1.44	%			0.45	%		0.88	%
Noninterest expense / average assets		2.41	%		2.96	%		2.68	%		2.48	%		2.88	%			2.66	%		2.82	%
Efficiency ratio		64.28	%		74.02	%		67.04	%		63.03	%		57.53	%			68.81	%		62.39	%
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1		0.93	%		0.67	%		1.08	%		1.02	%		0.96	%			0.82	%		0.97	%
Operating PTPP return on average assets1		1.53	%		1.37	%		1.31	%		1.47	%		1.33	%			1.46	%		1.38	%
Operating return on average shareholders' equity1		8.58	%		5.22	%		8.34	%		7.87	%		7.58	%			7.00	%		7.69	%
Operating return on average tangible common equity1		11.51	%		6.90	%		11.12	%		10.61	%		10.31	%			9.36	%		10.54	%
Operating efficiency ratio1		58.95	%		65.46	%		64.95	%		62.42	%		65.56	%			61.98	%		64.91	%
Operating noninterest income / average assets1		0.45	%		0.44	%		0.35	%		0.37	%		0.34	%			0.45	%		0.32	%
Operating noninterest expense / average assets1		2.23	%		2.63	%		2.56	%		2.47	%		2.57	%			2.41	%		2.59	%
Selected Interest Rates and Yields:
Yield on loans		4.87	%		5.35	%		5.36	%		5.48	%		5.53	%			5.09	%		5.58	%
Yield on earning assets, FTE		4.22	%		4.83	%		4.92	%		5.05	%		5.17	%			4.50	%		5.23	%
Cost of interest-bearing deposits		0.71	%		1.10	%		1.29	%		1.37	%		1.42	%			0.90	%		1.37	%
Cost of total deposits		0.54	%		0.91	%		1.06	%		1.13	%		1.18	%			0.71	%		1.14	%
Cost of interest-bearing liabilities		0.77	%		1.20	%		1.39	%		1.47	%		1.54	%			0.97	%		1.49	%
Net interest margin, FTE		3.63	%		3.90	%		3.84	%		3.91	%		3.94	%			3.75	%		4.04	%
Per Common Share:
Net income, basic	$	0.41		$	0.19		$	0.48		$	0.43		$	0.65			$	0.60		$	0.99
Net income, diluted		0.41			0.19			0.48			0.42			0.65				0.60			0.99
Operating earnings, basic¹		0.48			0.30			0.46			0.43			0.40				0.78			0.80
Operating earnings, diluted¹		0.48			0.30			0.46			0.43			0.40				0.78			0.79
Book value		22.57			22.09			22.33			21.93			21.47				22.57			21.47
Tangible book value¹		16.90			16.40			16.82			16.37			15.86				16.90			15.86
Common shares outstanding		15,216,932			15,221,990			14,008,233			13,957,973			13,953,209				15,216,932			13,953,209

¹See reconciliation of Non-GAAP measures

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
	As of and for The Three Months Ended
	Jun			Mar			Dec			Sep			Jun
	2020			2020			2019			2019			2019
Composition of Loans:
Commercial real estate
owner occupied	$	464,073		$	473,398		$	429,269		$	422,363		$	415,502
non-owner occupied		552,958			535,637			476,038			468,099			464,160
Commercial real estate, total		1,017,031			1,009,035			905,307			890,462			879,662
Commercial & industrial		637,450			377,173			337,075			341,207			334,258
Construction & land development		279,216			253,445			227,626			219,751			204,731
Consumer real estate		459,861			482,728			417,481			402,463			402,270
Consumer and other		14,726			16,866			9,903			10,796			11,981
Total loans	$	2,408,284		$	2,139,247		$	1,897,392		$	1,864,679		$	1,832,902
Asset Quality and Additional Loan Data:
Nonperforming loans	$	3,776		$	3,069		$	3,350		$	3,166		$	2,838
Other real estate owned		5,524			5,894			1,757			1,561			1,814
Total nonperforming assets	$	9,300		$	8,963		$	5,107		$	4,727		$	4,652
Restructured loans not included in nonperforming loans	$	9		$	9		$	61		$	61		$	62
Net charge-offs to average loans (annualized)		—	%		—	%		0.01	%		0.01	%		—	%
Allowance for loan losses to loans		0.67	%		0.63	%		0.54	%		0.53	%		0.50	%
Nonperforming loans to total loans, gross		0.16	%		0.14	%		0.18	%		0.17	%		0.15	%
Nonperforming assets to total assets		0.28	%		0.31	%		0.21	%		0.20	%		0.19	%
Acquired loan fair value discount balance	$	16,187		$	17,237		$	15,348		$	16,784		$	18,571
Accretion income on acquired loans		888			1,841			1,375			1,246			1,374
PPP net fees deferred balance		8,582			—			—			—			—
PPP net fees recognized		1,909			—			—			—			—
Capital Ratios:
Equity to Assets		10.52	%		11.70	%		12.77	%		12.80	%		12.53	%
Tangible common equity to tangible assets (Non-GAAP)1		8.09	%		8.96	%		9.93	%		9.88	%		9.57	%
SmartFinancial, Inc.2
Tier 1 leverage		8.83	%		10.28	%		10.34	%		10.02	%		9.92	%
Common equity Tier 1		10.92	%		10.87	%		11.61	%		11.54	%		11.21	%
Tier 1 capital		10.92	%		10.87	%		11.61	%		11.54	%		11.21	%
Total capital		13.25	%		13.13	%		14.02	%		13.98	%		13.65	%
SmartBank		Estimated3
Tier 1 leverage		9.82	%		11.42	%		11.41	%		11.22	%		10.92	%
Common equity Tier 1		12.14	%		12.05	%		12.81	%		12.71	%		12.37	%
Tier 1 risk-based capital		12.14	%		12.05	%		12.81	%		12.71	%		12.37	%
Total risk-based capital		12.82	%		12.62	%		13.31	%		13.19	%		12.82	%

¹Total common equity less intangibles divided by total assets less intangibles.  See reconciliation of Non-GAAP measures.
²All periods presented are estimated.
³Current 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)
	Ending Balances
	Jun				Mar				Dec				Sep				Jun
	2020				2020				2019				2019				2019
Assets:
Cash and cash equivalents	$	399,467			$	309,089			$	183,971			$	170,934			$	199,534
Securities available-for-sale, at fair value		219,631				201,002				178,348				171,507				174,114
Other investments		14,829				14,113				12,913				12,913				12,905
Loans held for sale		6,330				6,045				5,856				3,068				4,087
Loans		2,408,284				2,139,247				1,897,392				1,864,679				1,832,902
Less: Allowance for loan losses		(16,254	)			(13,431	)			(10,243	)			(9,792	)			(9,097	)
Loans, net		2,392,030				2,125,816				1,887,149				1,854,887				1,823,805
Premises and equipment, net		73,868				73,801				59,433				58,386				56,589
Other real estate owned		5,524				5,894				1,757				1,561				1,814
Goodwill and core deposit intangibles, net		86,327				86,503				77,193				77,534				78,348
Bank owned life insurance		30,853				30,671				24,949				24,796				24,695
Other assets		37,126				20,781				17,554				14,899				15,366
Total assets	$	3,265,985			$	2,873,715			$	2,449,123			$	2,390,485			$	2,391,257
Liabilities:
Deposits:
Noninterest-bearing demand	$	645,650			$	431,781			$	364,155			$	365,024			$	357,220
Interest-bearing demand		479,212				444,141				380,234				351,474				333,705
Money market and savings		762,246				730,392				623,284				634,934				648,132
Time deposits		652,581				735,616				679,541				646,641				673,243
Total deposits		2,539,689				2,341,930				2,047,214				1,998,073				2,012,300
Borrowings		318,855				131,603				31,623				29,828				23,679
Subordinated debt		39,304				39,283				39,261				39,240				39,219
Other liabilities		24,649				24,699				18,278				17,304				16,448
Total liabilities		2,922,497				2,537,515				2,136,376				2,084,445				2,091,646
Shareholders' Equity:
Common stock		15,217				15,222				14,008				13,958				13,953
Additional paid-in capital		254,396				254,356				232,732				232,573				232,386
Retained earnings		73,283				67,869				65,839				59,806				53,843
Accumulated other comprehensive income (loss)		592				(1,247	)			168				(297	)			(571	)
Total shareholders' equity		343,488				336,200				312,747				306,040				299,611
Total liabilities & shareholders' equity	$	3,265,985			$	2,873,715			$	2,449,123			$	2,390,485			$	2,391,257

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands, except share and per share data)
	Three Months Ended																	Six Months Ended
	Jun			Mar			Dec			Sep				Jun				Jun			Jun
	2020			2020			2019			2019				2019				2020			2019
Interest income:
Loans, including fees	$	28,663		$	26,434		$	25,398		$	25,515			$	25,278			$	55,097		$	50,253
Securities available-for-sale:
Taxable		589			679			698			748				871				1,268			1,842
Tax-exempt		416			283			345			338				411				699			836
Federal funds sold and other earning assets		277			602			587			743				743				879			1,315
Total interest income		29,945			27,998			27,028			27,344				27,303				57,943			54,246
Interest expense:
Deposits		3,366			4,754			5,271			5,605				5,788				8,120			11,039
Borrowings		249			89			70			15				123				339			235
Subordinated debt		584			584			584			584				590				1,167			1,173
Total interest expense		4,199			5,427			5,924			6,204				6,501				9,626			12,447
Net interest income		25,746			22,571			21,104			21,140				20,802				48,317			41,799
Provision for loan losses		2,850			3,200			685			724				393				6,049			1,190
Net interest income after provision for loan losses		22,896			19,371			20,419			20,416				20,409				42,268			40,609
Noninterest income:
Service charges on deposit accounts		709			770			773			767				707				1,479			1,361
Gain on sale of securities, net		16			—			—			1				33				16			33
Mortgage banking		931			584			374			518				392				1,515			674
Investment services		363			437			261			260				255				801			424
Insurance commissions		473			269			—			—				—				742			—
Interchange and debit card transaction fees		508			276			163			148				143				784			318
Merger termination fee		—			—			—			—				6,400				—			6,400
Other		511			482			1,269			502				486				993			904
Total noninterest income		3,511			2,818			2,840			2,196				8,416				6,330			10,114
Noninterest expense:
Salaries and employee benefits		10,357			10,006			10,278			9,072				8,984				20,363			17,382
Occupancy and equipment		1,996			1,911			1,749			1,635				1,658				3,906			3,298
FDIC insurance		180			180			—			(219	)			180				360			359
Other real estate and loan related expense		346			545			253			335				242				892			732
Advertising and marketing		202			198			166			263				259				400			554
Data processing		594			538			530			273				577				1,132			1,192
Professional services		868			711			652			573				489				1,578			1,151
Amortization of intangibles		405			362			340			341				342				767			686
Software as service contracts		561			470			500			560				568				1,031			1,136
Merger related and restructuring expenses		1,477			2,096			427			73				1,796				3,573			2,719
Other		1,820			1,776			1,157			1,802				1,714				3,598			3,179
Total noninterest expense		18,806			18,793			16,052			14,708				16,809				37,600			32,388
Income before income taxes		7,601			3,396			7,206			7,904				12,016				10,998			18,335
Income tax expense		1,427			664			473			1,941				2,895				2,091			4,483
Net income	$	6,174		$	2,732		$	6,733		$	5,963			$	9,121			$	8,907		$	13,852
Earnings per common share:
Basic	$	0.41		$	0.19		$	0.48		$	0.43			$	0.65			$	0.60		$	0.99
Diluted	$	0.41		$	0.19		$	0.48		$	0.42			$	0.65			$	0.60		$	0.99
Weighted average common shares outstanding:
Basic		15,152,768			14,395,103			13,965,877			13,955,859				13,951,643				14,773,935			13,946,856
Diluted		15,202,335			14,479,679			14,066,269			14,053,432				14,046,500				14,842,486			14,036,790

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS
	Three Months Ended
	June 30, 2020								March 31, 2020								June 30, 2019
	Average						Yield/		Average						Yield/		Average						Yield/
	Balance			Interest1			Cost1		Balance			Interest1			Cost1		Balance			Interest1			Cost1
Assets:
Loans, including fees2	$	2,359,101		$	28,590		4.87	%	$	1,982,997		$	26,389		5.35	%	$	1,828,884		$	25,233		5.53	%
Loans held for sale		6,868			73		4.28	%		4,294			45		4.24	%		3,755			45		4.81	%
Taxable securities		122,135			589		1.94	%		116,837			679		2.34	%		136,859			871		2.55	%
Tax-exempt securities		86,227			570		2.66	%		70,397			400		2.28	%		56,475			527		3.75	%
Federal funds sold and other earning assets		297,696			277		0.37	%		165,512			602		1.46	%		102,253			743		2.91	%
Total interest-earning assets		2,872,027			30,099		4.22	%		2,340,037			28,115		4.83	%		2,128,226			27,419		5.17	%
Noninterest-earning assets		260,089								216,498								215,010
Total assets	$	3,132,116							$	2,556,535							$	2,343,236
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits	$	453,795			148		0.13	%	$	389,500			434		0.45	%	$	329,556			464		0.57	%
Money market and savings deposits		748,673			614		0.33	%		664,983			1,389		0.84	%		673,502			2,272		1.35	%
Time deposits		701,390			2,604		1.49	%		680,830			2,931		1.73	%		629,480			3,052		1.94	%
Total interest-bearing deposits		1,903,858			3,366		0.71	%		1,735,313			4,754		1.10	%		1,632,538			5,788		1.42	%
Borrowings3		237,143			249		0.42	%		51,921			89		0.69	%		23,685			123		2.08	%
Subordinated debt		39,290			584		5.98	%		39,269			584		5.98	%		39,205			590		6.03	%
Total interest-bearing liabilities		2,180,291			4,199		0.77	%		1,826,503			5,427		1.20	%		1,695,428			6,501		1.54	%
Noninterest-bearing deposits		587,322								373,125								336,871
Other liabilities		24,642								27,215								14,367
Total liabilities		2,792,255								2,226,843								2,046,666
Shareholders' equity		339,861								329,692								296,570
Total liabilities and shareholders' equity	$	3,132,116							$	2,556,535							$	2,343,236
Net interest income, taxable equivalent				$	25,900							$	22,688							$	20,918
Interest rate spread							3.44	%							3.63	%							3.63	%
Tax equivalent net interest margin							3.63	%							3.90	%							3.94	%
Percentage of average interest-earning assets to average interest-bearing liabilities							131.73	%							128.12	%							125.53	%
Percentage of average equity to average assets							10.85	%							12.90	%							12.66	%

¹ Taxable equivalent
² Includes average balance of $208,814 in PPP loans for the quarter ended June 30, 2020
³ Includes average balance of $108,082 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended June 30, 2020

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS
	Six Months Ended
	June 30, 2020									June 30, 2019
	Average						Yield/			Average						Yield/
	Balance			Interest1			Cost1			Balance			Interest1			Cost1
Assets:
Loans, including fees2	$	2,172,158		$	54,979			5.09	%	$	1,814,127		$	50,174		5.58	%
Loans held for sale		5,581			118			4.26	%		3,284			79		4.85	%
Taxable securities		119,474			1,268			2.13	%		141,994			1,842		2.62	%
Tax-exempt securities		78,306			970			2.49	%		55,070			1,065		3.90	%
Federal funds sold and other earning assets		226,726			879			0.78	%		85,798			1,315		3.09	%
Total interest-earning assets		2,602,245			58,214			4.50	%		2,100,273			54,475		5.23	%
Noninterest-earning assets		238,749									213,122
Total assets	$	2,840,994								$	2,313,395
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits	$	421,288			583			0.28	%	$	318,091			887		0.56	%
Money market and savings deposits		707,003			2,003			0.57	%		669,067			4,302		1.30	%
Time deposits		693,382			5,534			1.61	%		633,601			5,850		1.86	%
Total interest-bearing deposits		1,821,673			8,120			0.90	%		1,620,759			11,039		1.37	%
Borrowings3		144,532			339			0.47	%		20,951			235		2.26	%
Subordinated debt		39,279			1,167			5.97	%		39,195			1,173		6.04	%
Total interest-bearing liabilities		2,005,484			9,626			0.97	%		1,680,905			12,447		1.49	%
Noninterest-bearing deposits		481,432									328,549
Other liabilities		22,812									12,589
Total liabilities		2,509,728									2,022,043
Shareholders' equity		331,266									291,352
Total liabilities and shareholders' equity	$	2,840,994								$	2,313,395
Net interest income, taxable equivalent				$	48,588								$	42,028
Interest rate spread								3.53	%							3.74	%
Tax equivalent net interest margin								3.75	%							4.04	%
Percentage of average interest-earning assets to average interest-bearing liabilities								129.76	%							124.95	%
Percentage of average equity to average assets								11.66	%							12.59	%

¹ Taxable equivalent
² Includes average balance of $106,213 in PPP loans for the six months ended June 30, 2020
³ Includes average balance of $54,041in PPPLF funding for the six months ended June 30, 2020

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS
	Three Months Ended																					Six Months Ended
	Jun				Mar				Dec				Sep				Jun					Jun				Jun
	2020				2020				2019				2019				2019					2020				2019
Operating Earnings:
Net income (GAAP)	$	6,174			$	2,732			$	6,733			$	5,963			$	9,121				$	8,907			$	13,852
Noninterest income:
Securities gains		(16	)			—				—				(1	)			(33	)				(16	)			(33	)
ADECA termination proceeds		—				—				(720	)			—				—					—				—
Merger termination fee		—				—				—				—				(6,400	)				—				(6,400	)
Noninterest expenses:
Salaries - prior year adjustment		—				—				603				—				—					—				—
Merger related and restructuring expenses		1,477				2,096				427				73				1,796					3,573				2,719
Other - prior year franchise tax true-up		—				—				(312	)			—				—					—				—
Income taxes:
Tax benefit - prior year amended return		—				—				(304	)			—				—					—				—
Income tax effect of adjustments		(382	)			(548	)			60				(19	)			1,119					(931	)			974
Operating earnings (Non-GAAP)	$	7,253			$	4,280			$	6,487			$	6,016			$	5,603				$	11,533			$	11,112
Operating earnings per common share (Non-GAAP):
Basic	$	0.48			$	0.30			$	0.46			$	0.43			$	0.40				$	0.78			$	0.80
Diluted		0.48				0.30				0.46				0.43				0.40					0.78				0.79
Operating Noninterest Income:
Noninterest income (GAAP)	$	3,511			$	2,818			$	2,840			$	2,196			$	8,416				$	6,330			$	10,114
Securities gains		(16	)			—				—				(1	)			(33	)				(16	)			(33	)
ADECA termination proceeds		—				—				(720	)			—				—					—				—
Merger termination fee		—				—				—				—				(6,400	)				—				(6,400	)
Operating noninterest income (Non-GAAP)	$	3,495			$	2,818			$	2,120			$	2,195			$	1,983				$	6,314			$	3,681
Operating noninterest income (Non-GAAP)/average assets1		0.45		%		0.44		%		0.35		%		0.37		%		0.34		%			0.45		%		0.32		%
Operating Noninterest Expense:
Noninterest expense (GAAP)	$	18,806			$	18,793			$	16,052			$	14,708			$	16,809				$	37,600			$	32,388
Salaries - prior year adjustment		—				—				(603	)			—				—					—				—
Merger related and restructuring expenses		(1,477	)			(2,096	)			(427	)			(73	)			(1,796	)				(3,573	)			(2,719	)
Other - prior year franchise tax true-up		—				—				312				—				—					—				—
Operating noninterest expense (Non-GAAP)	$	17,329			$	16,697			$	15,334			$	14,635			$	15,013				$	34,027			$	29,669
Operating noninterest expense (Non-GAAP)/average assets2		2.23		%		2.63		%		2.56		%		2.47		%		2.57		%			2.41		%		2.59		%
Operating Pre-tax Pre-provision ("PTPP") Earnings:
Net interest income (GAAP)	$	25,746			$	22,571			$	21,104			$	21,140			$	20,802				$	48,317			$	41,799
Operating noninterest income		3,495				2,818				2,120				2,195				1,983					6,314				3,681
Operating noninterest expense		(17,329	)			(16,697	)			(15,334	)			(14,635	)			(15,013	)				(34,027	)			(29,669	)
Operating PTPP earnings (Non-GAAP)	$	11,912			$	8,692			$	7,890			$	8,700			$	7,772				$	20,604			$	15,811
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3		0.93		%		0.67		%		1.08		%		1.02		%		0.96		%			0.82		%		0.97		%
Operating PTPP return on average assets (Non-GAAP)4		1.53		%		1.37		%		1.31		%		1.47		%		1.33		%			1.46		%		1.38		%
Return on average tangible common equity (Non-GAAP)5		9.80		%		4.41		%		11.55		%		10.52		%		16.78		%			7.23		%		13.14		%
Operating return on average shareholder equity (Non-GAAP)6		8.58		%		5.22		%		8.34		%		7.87		%		7.58		%			7.00		%		7.69		%
Operating return on average tangible common equity (Non-GAAP)7		11.51		%		6.90		%		11.12		%		10.61		%		10.31		%			9.36		%		10.54		%
Operating Efficiency Ratio:
Efficiency ratio (GAAP)		64.28		%		74.02		%		67.04		%		63.03		%		57.53		%			68.81		%		62.39		%
Adjustment for taxable equivalent yields		(0.34	)	%		(0.34	)	%		(0.33	)	%		(0.30	)	%		(0.23	)	%			(0.34	)	%		(0.28	)	%
Adjustment for securities gains (losses)		(0.04	)	%		—		%		—		%		—		%		(0.07	)	%			(0.02	)	%		(0.04	)	%
Adjustment for merger related income and costs		(4.95	)	%		(8.21	)	%		(1.76	)	%		(0.31	)	%		8.32		%			(6.46	)	%		2.84		%
Operating efficiency ratio (Non-GAAP)		58.95		%		65.46		%		64.95		%		62.42		%		65.56		%			61.98		%		64.91		%

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 equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.
⁷Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS
	Three Months Ended																				Six Months Ended
	Jun				Mar				Dec				Sep				Jun				Jun				Jun
	2020				2020				2019				2019				2019				2020				2019
Tangible Common Equity:
Shareholders' equity (GAAP)	$	343,488			$	336,200			$	312,747			$	306,040			$	299,611			$	343,488			$	299,611
Less goodwill and other intangible assets		86,327				86,503				77,193				77,534				78,348				86,327				78,348
Tangible common equity (Non-GAAP)	$	257,161			$	249,697			$	235,554			$	228,506			$	221,263			$	257,161			$	221,263
Average Tangible Common Equity:
Average shareholders' equity (GAAP)	$	339,861			$	329,692			$	308,772			$	303,200			$	296,570			$	331,266			$	291,352
Less average goodwill and other intangible assets		86,484				80,370				77,400				78,222				78,564				83,427				78,738
Average tangible common equity (Non-GAAP)	$	253,377			$	249,322			$	231,372			$	224,978			$	218,006			$	247,839			$	212,614
Tangible Book Value per Common Share:
Book value per common share (GAAP)	$	22.57			$	22.09			$	22.33			$	21.93			$	21.47			$	22.57			$	21.47
Adjustment due to goodwill and other intangible assets		(5.67	)			(5.69	)			(5.51	)			(5.56	)			(5.61	)			(5.67	)			(5.61	)
Tangible book value per common share (Non-GAAP)1	$	16.90			$	16.40			$	16.82			$	16.37			$	15.86			$	16.90			$	15.86
Tangible Common Equity to Tangible Assets:
Total Assets	$	3,265,985			$	2,873,715			$	2,449,123			$	2,390,485			$	2,391,257			$	3,265,985			$	2,391,257
Less goodwill and other intangibles		86,327				86,503				77,193				77,534				78,348				86,327				78,348
Tangible Assets (Non-GAAP):	$	3,179,658			$	2,787,212			$	2,371,930			$	2,312,951			$	2,312,909			$	3,179,658			$	2,312,909
Tangible common equity to tangible assets (Non-GAAP)		8.09	%			8.96	%			9.93	%			9.88	%			9.57	%			8.09	%			9.57	%

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

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