SmartFinancial Announces Results for the Second Quarter 2024

KNOXVILLE, Tenn., July 22, 2024 (GLOBE NEWSWIRE) — SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NYSE: SMBK), today announced net income of $8.0 million, or $0.48 per diluted common share, for the second quarter of 2024, compared to net income of $8.8 million, or $0.52 per diluted common share, for the second quarter of 2023, and compared to prior quarter net income of $9.4 million, or $0.55 per diluted common share. Operating earnings1, which excludes non-recurring income, net of tax adjustments, totaled $7.8 million, or $0.46 per diluted common share, in the second quarter of 2024, compared to $8.8 million, or $0.52 per diluted common share, in the second quarter of 2023, and compared to $8.4 million, or $0.49 per diluted common share, in the first quarter of 2024.

Highlights for the Second Quarter of 2024

  • Operating earnings1 of $7.8 million, or $0.46 per diluted common share
  • Net organic loan and lease growth of $97 million with 11% annualized quarter-over-quarter increase
  • Quarter-over-quarter net tax equivalent interest margin expansion of 12 basis points to 2.97%
  • 10% annualized quarter-over-quarter increase in tangible book value per common share1
  • 136,195 shares repurchased at a weighted average price of $21.57
  • Credit quality remains solid with nonperforming assets to total assets of 0.20%

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

Billy Carroll, President & CEO, stated: “Our Company continued to gain momentum with a very nice second quarter highlighted by solid growth in operating revenue and a 10% annualized increase in tangible book value per share quarter over quarter.  We also took advantage of our liquidity position, growing loans at an 11% quarterly annualized pace.  Margin inflection accelerated during the quarter, and we look forward to seeing that trend continue.  The sales energy around our Company is very strong and our outlook for the second half of 2024 remains bullish as we gain further operating leverage.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “The Board of Directors was pleased to see operating leverage expansion and strong loan growth during the second quarter. The Company’s markets continue to provide great organic growth opportunities that we look forward to winning. We continue to strategically progress towards our longer-term financial objectives and this quarter’s margin expansion and expense control is a good demonstration of our team’s ability to execute our plan. We are confident in our team and look forward to continued improvement as the year progresses.”

Net Interest Income and Net Interest Margin

Net interest income was $32.8 million for the second quarter of 2024, compared to $31.7 million for the prior quarter. Average earning assets totaled $4.5 billion for the current and prior quarters. The categories of average earnings assets changed quarter-over-quarter, primarily from an increase in average loans and leases of $46.2 million, offset by a decrease in average securities of $40.8 million and average interest-earning cash of $7.5 million. Average interest-bearing liabilities decreased by $19.8 million from the prior quarter, attributable to a decrease in average deposits of $21.3 million, offset by an increase in average borrowings of $1.4 million.

The tax equivalent net interest margin was 2.97% for the second quarter of 2024, compared to 2.85% for the prior quarter. The tax equivalent net interest margin was positively impacted by the increased yield on interest-earning assets, quarter-over-quarter, coupled with a slower rise on the cost of interest-bearing liabilities, quarter-over-quarter. The yield on loans and leases, excluding loan fees, on a fully tax equivalent basis (“FTE”) was 5.80% for the second quarter, compared to 5.71% for the prior quarter.

The cost of total deposits for the second quarter of 2024 was 2.56% compared to 2.52% in the prior quarter. The cost of interest-bearing liabilities increased to 3.29% for the second quarter of 2024, compared to 3.23% for the prior quarter. The cost of average interest-bearing deposits was 3.23% for the second quarter of 2024, compared to 3.16% for the prior quarter, an increase of 7 basis points.  

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

    Three Months Ended        
    Jun   Mar   Increase  
Selected Interest Rates and Yields   2024   2024   (Decrease)  
Yield on loans and leases, excluding loan fees, FTE   5.80   % 5.71   % 0.09   %
Yield on loans and leases, FTE   5.87   % 5.82   % 0.05   %
Yield on earning assets, FTE   5.52   % 5.36   % 0.16   %
Cost of interest-bearing deposits   3.23   % 3.16   % 0.07   %
Cost of total deposits   2.56   % 2.52   % 0.04   %
Cost of interest-bearing liabilities   3.29   % 3.23   % 0.06   %
Net interest margin, FTE   2.97   % 2.85   % 0.12   %


Provision for Credit Losses on Loans and Leases and Credit Quality

At June 30, 2024, the allowance for credit losses was $34.7 million. The allowance for credit losses to total loans and leases was 0.97% as of June 30, 2024, compared to 0.98% as of March 31, 2024.  

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

    Three Months Ended        
    Jun   Mar   Increase  
Provision for Credit Losses on Loans and Leases Rollforward     2024       2024     (Decrease)  
Beginning balance   $ 34,203     $ 35,066     $ (863 )  
Charge-offs     (457 )     (920 )     463    
Recoveries     48       135       (87 )  
Net (charge-offs) recoveries     (409 )     (785 )     376    
Provision for credit losses (1)     896       (78 )     974    
Ending balance   $ 34,690     $ 34,203     $ 487    
                     
Allowance for credit losses to total loans and leases, gross     0.97   %   0.98   %   (0.01 ) %
  (1) The current quarter-ended and prior quarter-ended excludes unfunded commitments release of $13 thousand and $362 thousand, respectively. At June 30, 2024, the unfunded commitment liability totaled $2.0 million.

Nonperforming loans and leases as a percentage of total loans and leases was 0.19% as of June 30, 2024, an increase of 1 basis point from the 0.18% reported in the first quarter of 2024. 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 June 30, 2024, and 0.18% on March 31, 2024.

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

    Three Months Ended        
      Jun       Mar     Increase  
Credit Quality     2024       2024     (Decrease)  
Nonaccrual loans and leases   $ 6,432     $ 6,171     $ 261    
Loans and leases past due 90 days or more and still accruing     210       95       115    
Total nonperforming loans and leases     6,642       6,266       376    
Other real estate owned     688       696       (8 )  
Other repossessed assets     2,645       2,033       612    
Total nonperforming assets   $ 9,975     $ 8,995     $ 980    
                         
Nonperforming loans and leases to total loans and leases, gross     0.19   %   0.18   %   0.01   %
Nonperforming assets to total assets     0.20   %   0.18   %   0.02   %


Noninterest Income

Noninterest income decreased $776 thousand to $7.6 million for the second quarter of 2024 compared to $8.4 million for the prior quarter. The current quarter decrease was primarily associated with the $1.3 million pre-tax gain on the sale of a former branch building in the prior quarter, offset by a $283 thousand pre-tax gain on the sale of a bank property in the current quarter.  

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

    Three Months Ended      
      Jun       Mar     Increase
Noninterest Income     2024       2024     (Decrease)
Service charges on deposit accounts   $ 1,692     $ 1,612     $ 80  
Mortgage banking income     348       280       68  
Investment services     1,302       1,380       (78 )
Insurance commissions     1,284       1,103       181  
Interchange and debit card transaction fees     1,343       1,253       90  
Other     1,635       2,752       (1,117 )
Total noninterest income   $ 7,604     $ 8,380     $ (776 )


Noninterest Expense

Noninterest expense increased $648 thousand to $29.2 million for the second quarter of 2024 compared to $28.6 million for the prior quarter. The current quarter increase was primarily related to an increase in salaries and employee benefits related to incentive accruals for production performance.

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

    Three Months Ended      
      Jun       Mar     Increase
Noninterest Expense     2024       2024     (Decrease)
Salaries and employee benefits   $ 17,261     $ 16,639     $ 622  
Occupancy and equipment     3,324       3,396       (72 )
FDIC insurance     825       915       (90 )
Other real estate and loan related expenses     538       584       (46 )
Advertising and marketing     295       302       (7 )
Data processing and technology     2,452       2,465       (13 )
Professional services     1,064       924       140  
Amortization of intangibles     608       612       (4 )
Other     2,834       2,716       118  
Total noninterest expense   $ 29,201     $ 28,553     $ 648  


Income Tax Expense

Income tax expense was $2.3 million for the second quarter of 2024, a decrease of $299 thousand, compared to $2.6 million for the prior quarter.

The effective tax rate was 22.56% for the second quarter of 2024 and 21.94% for the prior quarter.

Balance Sheet Trends

Total assets at June 30, 2024 were $4.89 billion compared to $4.83 billion at December 31, 2023. The $61.6 million increase is primarily attributable to increases loans and leases of $129.7 million, offset by a decrease in securities of $59.8 million and cash and cash equivalents of $9.4 million.

Total liabilities increased to $4.42 billion at June 30, 2024 from $4.37 billion at December 31, 2023. The increase of $49.0 million was primarily from organic deposit growth of $48.8 million.

Shareholders’ equity at June 30, 2024, totaled $472.5 million, an increase of $12.6 million, from December 31, 2023. The increase in shareholders’ equity was primarily driven by net income of $17.4 million for the six months ended June 30, 2024, offset by dividends paid of $2.7 million and repurchase of the Company’s stock of $3.0 million. Tangible book value per share1 was $21.66 at June 30, 2024, compared to $20.76 at December 31, 2023. Tangible common equity1 as a percentage of tangible assets1 was 7.66% at June 30, 2024, compared with 7.47% at December 31, 2023.

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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):

    Jun   Dec   Increase
Selected Balance Sheet Information   2024   2023   (Decrease)
Total assets   $ 4,891,009     $ 4,829,387     $ 61,622  
Total liabilities     4,418,544       4,369,501       49,043  
Total equity     472,465       459,886       12,579  
Securities     629,817       689,646       (59,829 )
Loans and leases     3,574,158       3,444,462       129,696  
Deposits     4,316,656       4,267,854       48,802  
Borrowings     12,732       13,078       (346 )


Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2024 on Monday, July 22, 2024, and will host a conference call on Tuesday, July 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, 533803. A replay of the conference call will be available through August 22, 2024, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 897395. 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   [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]  


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 (“Non-GAAP”) 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 and ratios derived therefrom in its analysis of the Company’s performance, including:

  (i) Operating earnings
  (ii) Operating noninterest income
  (iii) Operating noninterest expense
  (iv) Operating pre-provision net revenue (“PPNR”) earnings
  (v) Tangible common equity
  (vi) Average tangible common equity
  (vii) Tangible book value per common share
  (viii) Tangible assets


Operating earnings, operating noninterest income, operating noninterest expense and operating PPNR exclude non-operating related income and expense items, respectively. 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 per common share is tangible common equity divided by common shares outstanding. Tangible assets excludes goodwill and other intangibles from total assets. A detailed reconciliation of these items and ratios derived therefrom is available in the Non-GAAP reconciliations.

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 also believes these Non-GAAP financial measures 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) our ability to anticipate interest rate changes and manage interest rate risk (including the impact of higher interest rates on macroeconomic conditions, competition, and the cost of doing business and the impact of prolonged elevated interest rates on our financial projections, models and guidance);
  (9) increased technology and cybersecurity risks, including generative artificial intelligence risks;
  (10) credit risk associated with our lending activities;
  (11) changes in loan demand, real estate values, or competition;
  (12) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance;
  (13) changes in accounting principles, policies, or guidelines;
  (14) changes in applicable laws, rules, or regulations;
  (15) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions;
  (16) 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;
  (17) 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;
  (18) 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
  (19) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.

These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.


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

  Ending Balances
  Jun      Mar      Dec      Sep      Jun
  2024   2024   2023   2023   2023
Assets:                                
Cash and cash equivalents $ 342,835     $ 477,941     $ 352,271     $ 400,258     $ 238,898  
Securities available-for-sale, at fair value   500,821       474,347       408,410       385,131       540,308  
Securities held-to-maturity, at amortized cost   128,996       180,169       281,236       282,313       283,564  
Other investments   13,780       13,718       13,662       13,805       14,396  
Loans held for sale   3,103       4,861       4,418       2,734       986  
Loans and leases   3,574,158       3,477,555       3,444,462       3,378,999       3,337,790  
Less: Allowance for credit losses   (34,690 )     (34,203 )     (35,066 )     (33,687 )     (32,747 )
Loans and leases, net   3,539,468       3,443,352       3,409,396       3,345,312       3,305,043  
Premises and equipment, net   91,315       92,694       92,963       92,020       92,351  
Other real estate owned   688       696       517       1,370       1,708  
Goodwill and other intangibles, net   105,929       106,537       107,148       107,792       108,439  
Bank owned life insurance   84,483       83,957       83,434       82,914       82,419  
Other assets   79,591       76,418       75,932       83,522       77,688  
Total assets $ 4,891,009     $ 4,954,690     $ 4,829,387     $ 4,797,171     $ 4,745,800  
Liabilities:                                 
Deposits:                                 
Noninterest-bearing demand $ 903,300     $ 907,254     $ 898,044     $ 923,763     $ 1,003,432  
Interest-bearing demand   988,057       996,298       1,006,915       993,717       938,758  
Money market and savings   1,901,281       1,952,410       1,812,427       1,766,409       1,720,202  
Time deposits   524,018       538,159       550,468       562,620       537,192  
Total deposits   4,316,656       4,394,121       4,267,854       4,246,509       4,199,584  
Borrowings   12,732       9,849       13,078       14,117       15,496  
Subordinated debt   42,142       42,120       42,099       42,078       42,057  
Other liabilities   47,014       41,804       46,470       47,815       43,816  
Total liabilities   4,418,544       4,487,894       4,369,501       4,350,519       4,300,953  
Shareholders’ Equity:                            
Common stock   16,926       17,057       16,989       16,995       17,004  
Additional paid-in capital   293,586       296,061       295,699       295,542       295,296  
Retained earnings   187,751       181,103       173,105       168,271       167,564  
Accumulated other comprehensive loss   (25,798 )     (27,425 )     (25,907 )     (34,156 )     (35,017 )
Total shareholders’ equity   472,465       466,796       459,886       446,652       444,847  
Total liabilities & shareholders’ equity $ 4,891,009     $ 4,954,690     $ 4,829,387     $ 4,797,171     $ 4,745,800  


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
  2024   2024   2023   2023   2023   2024   2023
Interest income:                                                       
Loans and leases, including fees $ 50,853     $ 50,020     $ 48,767     $ 47,539     $ 45,446     $ 100,873     $ 90,173  
Investment securities:                                                         
Taxable   5,320       4,548       4,344       4,335       4,335       9,869       7,986  
Tax-exempt   353       352       352       356       357       705       709  
Federal funds sold and other earning assets   4,759       4,863       4,032       3,045       1,956       9,620       6,405  
Total interest income   61,285       59,783       57,495       55,275       52,094       121,067       105,273  
Interest expense:                                                         
Deposits   27,439       27,035       24,926       23,433       19,554       54,474       35,900  
Borrowings   148       128       162       210       339       276       564  
Subordinated debt   884       899       890       626       626       1,782       1,252  
Total interest expense   28,471       28,062       25,978       24,269       20,519       56,532       37,716  
Net interest income   32,814       31,721       31,517       31,006       31,575       64,535       67,557  
Provision for credit losses   883       (440 )     1,571       795       113       443       663  
Net interest income after provision for credit losses   31,931       32,161       29,946       30,211       31,462       64,092       66,894  
Noninterest income:                                                         
Service charges on deposit accounts   1,692       1,612       1,673       1,736       1,657       3,304       3,102  
Loss on sale of securities, net                     (6,801 )                  
Mortgage banking   348       280       227       309       332       628       504  
Investment services   1,302       1,380       1,339       1,461       1,300       2,682       2,305  
Insurance commissions   1,284       1,103       1,133       1,153       1,139       2,387       2,398  
Interchange and debit card transaction fees   1,343       1,253       1,370       1,357       1,347       2,596       2,730  
Other   1,635       2,752       1,837       1,476       1,355       4,387       3,016  
Total noninterest income   7,604       8,380       7,579       691       7,130       15,984       14,055  
Noninterest expense:                                                         
Salaries and employee benefits   17,261       16,639       16,275       16,785       15,947       33,900       32,689  
Occupancy and equipment   3,324       3,396       3,378       3,547       3,318       6,720       6,526  
FDIC insurance   825       915       915       825       875       1,740       1,416  
Other real estate and loan related expense   538       584       781       603       441       1,123       1,013  
Advertising and marketing   295       302       336       346       305       597       660  
Data processing and technology   2,452       2,465       2,458       2,378       2,235       4,916       4,398  
Professional services   1,064       924       1,136       735       764       1,989       1,572  
Amortization of intangibles   608       612       643       647       675       1,220       1,334  
Merger related and restructuring expenses                     110                    
Other   2,834       2,716       3,773       2,540       2,850       5,549       5,331  
Total noninterest expense   29,201       28,553       29,695       28,516       27,410       57,754       54,939  
Income before income taxes   10,334       11,988       7,830       2,386       11,182       22,322       26,010  
Income tax expense   2,331       2,630       1,640       319       2,346       4,962       5,674  
Net income $ 8,003     $ 9,358     $ 6,190     $ 2,067     $ 8,836     $ 17,360     $ 20,336  
Earnings per common share:                                                         
Basic $ 0.48     $ 0.56     $ 0.37     $ 0.12     $ 0.53     $ 1.03     $ 1.21  
Diluted $ 0.48     $ 0.55     $ 0.37     $ 0.12     $ 0.52     $ 1.03     $ 1.20  
Weighted average common shares outstanding:                                                         
Basic   16,770,819       16,849,735       16,814,647       16,807,548       16,806,389       16,810,277       16,798,939  
Diluted   16,850,250       16,925,408       16,918,234       16,918,635       16,898,091       16,887,374       16,897,444  


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)
(dollars in thousands)
YIELD ANALYSIS

  Three Months Ended  
  June 30, 2024   March 31, 2024   June 30, 2023  
  Average                 Yield/      Average                 Yield/      Average                  Yield/  
  Balance   Interest   Cost   Balance   Interest   Cost   Balance   Interest   Cost  
Assets:                                                                           
Loans and leases, including fees1 $ 3,504,265     $ 51,110     5.87   %   $ 3,458,109     $ 50,020     5.82   %   $ 3,308,595     $ 45,446     5.51   %
Taxable securities   580,517       5,320     3.69   %     620,805       4,548     2.95   %     770,275       4,335     2.26   %
Tax-exempt securities2   63,690       447     2.82   %     64,161       445     2.79   %     65,265       452     2.78   %
Federal funds sold and other earning assets   346,459       4,759     5.52   %     353,913       4,863     5.53   %     195,266       1,956     4.02   %
Total interest-earning assets   4,494,931       61,636     5.52   %     4,496,988       59,876     5.36   %     4,339,401       52,189     4.82   %
Noninterest-earning assets   383,697                     380,231                       355,701                    
Total assets $ 4,878,628                   $ 4,877,219                     $ 4,695,102                    
                                                                   
Liabilities and Shareholders’ Equity:                                                                           
Interest-bearing demand deposits $ 983,433       5,950     2.43   %   $ 996,147       6,060     2.45   %   $ 950,227       4,892     2.06   %
Money market and savings deposits   1,909,125       16,529     3.48   %     1,904,855       16,149     3.41   %     1,737,303       11,785     2.72   %
Time deposits   528,985       4,960     3.77   %     541,792       4,826     3.58   %     504,350       2,877     2.29   %
Total interest-bearing deposits   3,421,543       27,439     3.23   %     3,442,794       27,035     3.16   %     3,191,880       19,554     2.46   %
Borrowings   12,684       148     4.69   %     11,245       128     4.58   %     24,845       339     5.47   %
Subordinated debt   42,129       884     8.44   %     42,107       899     8.59   %     42,044       626     5.97   %
Total interest-bearing liabilities   3,476,356       28,471     3.29   %     3,496,146       28,062     3.23   %     3,258,769       20,519     2.53   %
Noninterest-bearing deposits   888,693                     872,840                       951,381                    
Other liabilities   47,208                     47,085                       40,669                    
Total liabilities   4,412,257                     4,416,071                       4,250,819                    
Shareholders’ equity   466,371                     461,148                       444,283                    
Total liabilities and shareholders’ equity $ 4,878,628                   $ 4,877,219                     $ 4,695,102                    
                                                                   
Net interest income, taxable equivalent         $ 33,165                    $ 31,814                     $ 31,670           
Interest rate spread                 2.22   %                     2.13   %                     2.30   %  
Tax equivalent net interest margin                 2.97   %                     2.85   %                     2.93   %  
                                                                   
Percentage of average interest-earning assets to average interest-bearing liabilities                 129.30   %                     128.63   %                     133.16   %  
Percentage of average equity to average assets                 9.56   %                     9.46   %                     9.46   %  

1 Yields computed on tax-exempt loans on a tax equivalent basis include $257 thousand, $0 thousand, and $0 thousand of taxable equivalent income for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

2 Yields computed on tax-exempt instruments on a tax equivalent basis include $94 thousand, $93 thousand, and $95 thousand of taxable equivalent income for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.  

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

  Six Months Ended
  June 30, 2024   June 30, 2023  
  Average                 Yield/      Average                   Yield/       
  Balance   Interest   Cost   Balance   Interest     Cost    
Assets:                                                      
Loans and leases, including fees1 $ 3,481,187     $ 101,130       5.84   %   $ 3,283,662     $ 90,173       5.54   %  
Taxable securities   600,661       9,869       3.30   %     747,037       7,986       2.16   %  
Tax-exempt securities2   63,925       892       2.81   %     65,405       897       2.77   %  
Federal funds sold and other earning assets   350,186       9,620       5.52   %     286,254       6,405       4.51   %  
Total interest-earning assets   4,495,959       121,511       5.44   %     4,382,358       105,461       4.85   %  
Noninterest-earning assets   381,964                       357,837                      
Total assets $ 4,877,923                     $ 4,740,195                      
                                                 
Liabilities and Shareholders’ Equity:                                                      
Interest-bearing demand deposits $ 989,790       12,010       2.44   %   $ 947,196       9,119       1.94   %  
Money market and savings deposits   1,906,990       32,677       3.45   %     1,778,650       22,168       2.51   %  
Time deposits   535,389       9,787       3.68   %     486,952       4,613       1.91   %  
Total interest-bearing deposits   3,432,169       54,474       3.19   %     3,212,798       35,900       2.25   %  
Borrowings   11,964       276       4.64   %     20,874       564       5.45   %  
Subordinated debt   42,118       1,782       8.51   %     42,033       1,252       6.01   %  
Total interest-bearing liabilities   3,486,251       56,532       3.26   %     3,275,705       37,716       2.32   %  
Noninterest-bearing deposits   880,767                       983,348                     
Other liabilities   47,146                       42,777                     
Total liabilities   4,414,164                       4,301,830                     
Shareholders’ equity   463,759                       438,365                     
Total liabilities and shareholders’ equity $ 4,877,923                     $ 4,740,195                     
                                                 
Net interest income, taxable equivalent         $ 64,979                      $ 67,745            
Interest rate spread                   2.17   %                       2.53   %  
Tax equivalent net interest margin                   2.91   %                       3.12   %  
                                                 
Percentage of average interest-earning assets to average interest-bearing liabilities                   128.96   %                       133.78   %  
Percentage of average equity to average assets                   9.51   %                       9.25   %  

1Yields computed on tax-exempt loans on a tax equivalent basis included $257 thousand and $0 thousand of taxable equivalent income for the six months ended June 30, 2024, and 2023, respectively.

2Yields computed on tax-exempt instruments on a tax equivalent basis included $187 thousand and $188 thousand of taxable equivalent income for the six months ended June 30, 2024, and 2023, respectively.

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  
  2024   2024   2023   2023   2023  
Composition of Loans and Leases:                                         
Commercial real estate:                                         
Owner occupied $ 829,085     $ 804,557     $ 798,416     $ 776,402     $ 769,978    
Non-owner occupied   986,278       938,648       940,789       890,774       871,779    
Commercial real estate, total   1,815,363       1,743,205       1,739,205       1,667,176       1,641,757    
Commercial & industrial   701,460       667,903       645,918       617,115       594,427    
Construction & land development   294,575       321,860       327,185       373,068       394,742    
Consumer real estate   678,331       659,209       649,867       638,518       624,828    
Leases   70,299       71,909       68,752       68,538       66,401    
Consumer and other   14,130       13,469       13,535       14,584       15,635    
Total loans and leases $ 3,574,158     $ 3,477,555     $ 3,444,462     $ 3,378,999     $ 3,337,790    
                                       
Asset Quality and Additional Loan Data:                                         
Nonperforming loans and leases $ 6,642     $ 6,266     $ 8,101     $ 4,163     $ 3,722    
Other real estate owned   688       696       517       1,370       1,708    
Other repossessed assets   2,645       2,033       1,117       348       282    
Total nonperforming assets $ 9,975     $ 8,995     $ 9,735     $ 5,881     $ 5,712    
Modified loans and leases1 not included in nonperforming loans and leases $ 4,241     $ 4,413     $ 4,245     $ 2,376     $ 657    
Net charge-offs to average loans and leases (annualized)   0.05   %     0.09   %     0.04   %     0.04   %     (0.01 ) %
Allowance for credit losses to loans and leases   0.97   %     0.98   %     1.02   %     1.00   %     0.98   %
Nonperforming loans and leases to total loans and leases, gross   0.19   %     0.18   %     0.24   %     0.12   %     0.11   %
Nonperforming assets to total assets   0.20   %     0.18   %     0.20   %     0.12   %     0.12   %
                                       
Capital Ratios:                                         
Equity to Assets   9.66   %     9.42   %     9.52   %     9.31   %     9.37   %
Tangible common equity to tangible assets (Non-GAAP)2   7.66   %     7.43   %     7.47   %     7.23   %     7.25   %
                                       
SmartFinancial, Inc.3                                         
Tier 1 leverage   8.32   %     8.23   %     8.27   %     8.13   %     8.24   %
Common equity Tier 1   10.06   %     10.20   %     10.14   %     10.07   %     10.12   %
Tier 1 capital   10.06   %     10.20   %     10.14   %     10.07   %     10.12   %
Total capital   11.68   %     11.85   %     11.78   %     11.90   %     11.94   %
                                       
SmartBank   Estimated4                                    
Tier 1 leverage   9.11   %     9.07   %     9.18   %     9.00   %     9.18   %
Common equity Tier 1   11.02   %     11.23   %     11.26   %     11.15   %     11.27   %
Tier 1 capital   11.02   %     11.23   %     11.26   %     11.15   %     11.27   %
Total capital   11.79   %     12.00   %     12.02   %     11.87   %     11.97   %

1Borrowers that have experienced financial difficulty.
2Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.
3All periods presented are estimated.
4Current period capital ratios are estimated as of the date of this earnings release.


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

  As of and for The   As of and for The  
  Three Months Ended      Six Months Ended  
  Jun      Mar      Dec      Sep      Jun      Jun      June  
  2024   2024   2023   2023   2023   2024   2023  
Selected Performance Ratios (Annualized):                                                               
Return on average assets   0.66   %   0.77   %   0.52   %   0.17   %   0.75   %   0.72   %   0.87   %
Return on average shareholders’ equity   6.90   %   8.16   %   5.46   %   1.84   %   7.98   %   7.53   %   9.36   %
Return on average tangible common equity¹   8.94   %   10.63   %   7.18   %   2.43   %   10.57   %   9.77   %   12.46   %
Noninterest income / average assets   0.63   %   0.69   %   0.63   %   0.06   %   0.61   %   0.66   %   0.60   %
Noninterest expense / average assets   2.41   %   2.35   %   2.47   %   2.37   %   2.34   %   2.38   %   2.34   %
Efficiency ratio   72.25   %   71.20   %   75.95   %   89.96   %   70.82   %   71.73   %   67.32   %
                                                         
Operating Selected Performance Ratios (Annualized):                                                               
Operating return on average assets1   0.64   %   0.69   %   0.57   %   0.60   %   0.75   %   0.67   %   0.87   %
Operating PPNR return on average assets1   0.90   %   0.84   %   0.86   %   0.84   %   0.96   %   0.87   %   1.13   %
Operating return on average shareholders’ equity1   6.72   %   7.29   %   6.07   %   6.41   %   7.98   %   7.00   %   9.36   %
Operating return on average tangible common equity1   8.70   %   9.49   %   7.98   %   8.46   %   10.57   %   9.09   %   12.46   %
Operating efficiency ratio1   72.13   %   73.50   %   73.41   %   73.60   %   70.64   %   72.81   %   67.16   %
Operating noninterest income / average assets1   0.60   %   0.58   %   0.63   %   0.62   %   0.61   %   0.59   %   0.60   %
Operating noninterest expense / average assets1   2.41   %   2.35   %   2.39   %   2.36   %   2.34   %   2.38   %   2.34   %
                                                         
Selected Interest Rates and Yields:                                                               
Yield on loans and leases, excluding loan fees, FTE   5.80   %   5.71   %   5.61   %   5.52   %   5.39   %   5.76   %   5.30   %
Yield on loans and leases, FTE   5.87   %   5.82   %   5.68   %   5.61   %   5.51   %   5.84   %   5.54   %
Yield on earning assets, FTE   5.52   %   5.36   %   5.22   %   4.99   %   4.82   %   5.44   %   4.85   %
Cost of interest-bearing deposits   3.23   %   3.16   %   3.00   %   2.84   %   2.46   %   3.19   %   2.25   %
Cost of total deposits   2.56   %   2.52   %   2.35   %   2.20   %   1.89   %   2.54   %   1.73   %
Cost of interest-bearing liabilities   3.29   %   3.23   %   3.07   %   2.89   %   2.53   %   3.26   %   2.32   %
Net interest margin, FTE   2.97   %   2.85   %   2.86   %   2.81   %   2.93   %   2.91   %   3.12   %
                                                         
Per Common Share:                                                               
Net income, basic $ 0.48     $ 0.56     $ 0.37     $ 0.12     $ 0.53     $ 1.03     $ 1.21    
Net income, diluted   0.48       0.55       0.37       0.12       0.52       1.03       1.20    
Operating earnings, basic¹   0.47       0.50       0.41       0.43       0.53       0.96       1.21    
Operating earnings, diluted¹   0.46       0.49       0.41       0.43       0.52       0.96       1.20    
Book value   27.91       27.37       27.07       26.28       26.16       27.91       26.16    
Tangible book value¹   21.66       21.12       20.76       19.94       19.78       21.66       19.78    
Common shares outstanding   16,925,902       17,056,704       16,988,879       16,994,543       17,004,092       16,925,902       17,004,092    

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   Six Months Ended  
  Jun      Mar      Dec      Sep      Jun      Jun      June  
  2024   2024   2023   2023   2023   2024   2023  
Operating Earnings:                                               
Net income (GAAP) $ 8,003     $ 9,358     $ 6,190     $ 2,067     $ 8,836     $ 17,360     $ 20,336    
Noninterest income:                                                 
Securities (gains) losses, net                     6,801                      
Gain on sale of former branch building   (283 )     (1,346 )                       (1,629 )        
Noninterest expenses:                                          
Donation of a former branch location               250                            
Accruals for pending litigation               675                            
Merger related and restructuring expenses                     110                      
Income taxes:                                          
Income tax effect of adjustments   73       348       (239 )     (1,785 )           421          
Operating earnings (Non-GAAP) $ 7,793     $ 8,360     $ 6,876     $ 7,193     $ 8,836     $ 16,152     $ 20,336    
Operating earnings per common share (Non-GAAP):                                                 
Basic $ 0.47     $ 0.50     $ 0.41     $ 0.43     $ 0.53     $ 0.96     $ 1.21    
Diluted   0.46       0.49       0.41       0.43       0.52       0.96       1.20    
                                           
Operating Noninterest Income:                                                 
Noninterest income (GAAP) $ 7,604     $ 8,380     $ 7,579     $ 691     $ 7,130     $ 15,984     $ 14,055    
Securities (gains) losses, net                     6,801                      
Gain on sale of former branch building   (283 )     (1,346 )                       (1,629 )        
Operating noninterest income (Non-GAAP) $ 7,321     $ 7,034     $ 7,579     $ 7,492     $ 7,130     $ 14,355     $ 14,055    
Operating noninterest income (Non-GAAP)/average assets1   0.60   %   0.58   %     0.63   %     0.62   %     0.61   %   0.59   %   0.60   %
                                           
Operating Noninterest Expense:                                                 
Noninterest expense (GAAP) $ 29,201     $ 28,553     $ 29,695     $ 28,516     $ 27,410     $ 57,754     $ 54,939    
Donation of a former branch location               (250 )                          
Accruals for pending litigation               (675 )                          
Merger related and restructuring expenses                     (110 )                    
Operating noninterest expense (Non-GAAP) $ 29,201     $ 28,553     $ 28,770     $ 28,406     $ 27,410     $ 57,754     $ 54,939    
Operating noninterest expense (Non-GAAP)/average assets2   2.41   %   2.35   %     2.39   %     2.36   %     2.34   %   2.38   %   2.34   %
                                           
Operating Pre-provision Net revenue (“PPNR”) Earnings:                                          
Net interest income (GAAP) $ 32,814     $ 31,721     $ 31,517     $ 31,006     $ 31,575     $ 64,535     $ 67,557    
Operating noninterest income (Non-GAAP)   7,321       7,034       7,579       7,492       7,130       14,355       14,055    
Operating noninterest expense (Non-GAAP)   (29,201 )     (28,553 )     (28,770 )     (28,406 )     (27,410 )     (57,754 )     (54,939 )  
Operating PPNR earnings (Non-GAAP) $ 10,934     $ 10,202     $ 10,326     $ 10,092     $ 11,295     $ 21,136     $ 26,673    
                                           
Non-GAAP Return Ratios:                                                 
Operating return on average assets (Non-GAAP)3   0.64   %   0.69   %   0.57   %   0.60   %   0.75   %   0.67   %   0.87   %
Operating PPNR return on average assets (Non-GAAP)4   0.90   %   0.84   %   0.86   %   0.84   %   0.96   %   0.87   %   1.13   %
Return on average tangible common equity (Non-GAAP)5   8.94   %   10.62   %   7.18   %   2.43   %   10.57   %   9.77   %   12.46   %
Operating return on average shareholders’ equity (Non-GAAP)6   6.72   %   7.29   %   6.07   %   6.41   %   7.98   %   7.00   %   9.36   %
Operating return on average tangible common equity (Non-GAAP)7   8.70   %   9.49   %   7.98   %   8.46   %   10.57   %   9.09   %   12.46   %
                                           
Operating Efficiency Ratio:                                                 
Efficiency ratio (GAAP)   72.25   %   71.20   %   75.95   %   89.96   %   70.82   %   71.73   %   67.32   %
Adjustment for taxable equivalent yields   (0.63 ) %   (0.17 ) %   (0.18 ) %   (0.27 ) %   (0.18 ) %   (0.40 ) %   (0.16 ) %
Adjustment for securities gains (losses)     %     %     %   (15.89 ) %     %     %     %
Adjustment for sale of branch location   0.51   %   2.46   %     %     %     %   1.48   %     %
Adjustment for donation of a former branch location     %     %   (0.64 ) %     %     %     %     %
Adjustment for accruals for pending litigation     %     %   (1.72 ) %     %     %     %     %
Adjustment for merger related income and costs     %     %     %   (0.20 ) %     %     %     %
Operating efficiency ratio (Non-GAAP)   72.13   %   73.50   %   73.41   %   73.60   %   70.64   %   72.81   %   67.16   %

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
  Jun      Mar      Dec      Sep      Jun
  2024   2024   2023   2023   2023
Tangible Common Equity:                                 
Shareholders’ equity (GAAP) $ 472,465     $ 466,796     $ 459,886     $ 446,652     $ 444,847  
Less goodwill and other intangible assets   105,929       106,537       107,148       107,792       108,439  
Tangible common equity (Non-GAAP) $ 366,536     $ 360,259     $ 352,738     $ 338,860     $ 336,408  
                             
Average Tangible Common Equity:                                 
Average shareholders’ equity (GAAP) $ 466,371     $ 461,148     $ 449,526     $ 445,432     $ 444,283  
Less average goodwill and other intangible assets   106,301       106,920       107,551       108,194       108,851  
Average tangible common equity (Non-GAAP) $ 360,070     $ 354,228     $ 341,975     $ 337,238     $ 335,432  
                             
Tangible Book Value per Common Share:                            
Book value per common share (GAAP) $ 27.91     $ 27.37     $ 27.07     $ 26.28     $ 26.16  
Adjustment due to goodwill and other intangible assets   (6.25 )     (6.25 )     (6.31 )     (6.34 )     (6.38 )
Tangible book value per common share (Non-GAAP)1 $ 21.66     $ 21.12     $ 20.76     $ 19.94     $ 19.78  
                             
Tangible Common Equity to Tangible Assets:                            
Total Assets (GAAP) $ 4,891,009     $ 4,954,690     $ 4,829,387     $ 4,797,171     $ 4,745,800  
Less goodwill and other intangibles   105,929       106,537       107,148       107,792       108,439  
Tangible Assets (Non-GAAP) $ 4,785,080     $ 4,848,153     $ 4,722,239     $ 4,689,379     $ 4,637,361  
Tangible common equity to tangible assets (Non-GAAP)   7.66 %     7.43 %     7.47 %     7.23 %     7.25 %

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


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