SmartFinancial Announces Results for the Fourth Quarter 2022


Highlights for the Fourth Quarter of 2022

  • Operating earnings1 of $12.9 million, or $0.76 per diluted common share
  • Operating earnings1 increase of 11% compared to the previous quarter and 48% compared to the same prior year quarter
  • Net organic loan and lease growth of over $130.2 million - 17% annualized quarter-over-quarter increase
  • Net interest income growth of $904 thousand or 10% annualized quarter-over-quarter increase
  • Credit quality remains solid with nonperforming assets to total assets of 0.10%

KNOXVILLE, Tenn., Jan. 23, 2023 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NASDAQ: SMBK), today announced net income of $13.0 million, or $0.77 per diluted common share, for the fourth quarter of 2022, compared to net income of $6.7 million, or $0.40 per diluted common share, for the fourth quarter of 2021, and compared to prior quarter net income of $11.5 million, or $0.68 per diluted common share. Operating earnings1, which excludes securities gains and merger related and restructuring expenses, net of tax adjustments, totaled $12.9 million, or $0.76 per diluted common share, in the fourth quarter of 2022, compared to $8.7 million, or $0.52 per diluted common share, in the fourth quarter of 2021, and compared to $11.6 million, or $0.69 per diluted common share, in the third quarter of 2022.

Billy Carroll, President & CEO, stated: “I am extremely pleased with our company’s results for the quarter and for the year. We wrapped-up 2022 with another record revenue quarter while continuing to gain operating leverage and build on the great work being done to diversify revenue, build out our ancillary lines of business, and maintain outstanding credit metrics. The core momentum our team is building is outstanding and will position us well as we enter 2023.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “We are very proud of our strong quarter and how we finished 2022. The team did a phenomenal job in all areas. The bank continues to show excellent credit, solid growth and strong profits. We couldn’t be more excited about how we are positioned to enter 2023.”

Net Interest Income and Net Interest Margin

Net interest income was $37.6 million for the fourth quarter of 2022, compared to $36.7 million for the prior quarter. Average earning assets totaled $4.27 billion, a decrease of $177.5 million. The decrease in average earnings assets was primarily driven by a decrease in average interest-earning cash of $264.8 million and average securities of $26.2 million. Partially offsetting the decrease in average earning assets was an increase in average loans and leases of $113.4 million. Average interest-bearing liabilities decreased $123.7 million attributable to a decrease in deposits of $128.9 million, offset by increased borrowings of $5.2 million.

The tax equivalent net interest margin was 3.51% for the fourth quarter of 2022, compared to 3.29% for the prior quarter. The tax equivalent net interest margin was positively impacted by the continued deployment of excess cash and cash equivalents into loans and leases and higher yields on cash deposits held in Federal Reserve System (the “Federal Reserve”). Additionally, the yield on interest-earning assets was positively impacted due to an increase quarter-over-quarter in loan discount accretion of $1.2 million.

The cost of interest-bearing liabilities increased to 1.27% for the fourth quarter of 2022 compared to 0.70% for the prior quarter. The cost of average interest-bearing deposits was 1.18% for the fourth quarter of 2022 compared to 0.62% for the prior quarter, an increase of 56 basis points, primarily attributable to both the impact of rising Federal Reserve rates and increased pricing competition. The cost of total deposits for the fourth quarter of 2022 was 0.85% compared to 0.45% in the prior quarter.

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

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

        
  Three Months Ended   
  Dec Sep Increase 
Selected Interest Rates and Yields 2022 2022 (Decrease) 
Yield on loans and leases 5.05%4.59%0.46%
Yield on earning assets, FTE 4.41%3.79%0.62%
Cost of interest-bearing deposits 1.18%0.62%0.56%
Cost of total deposits 0.85%0.45%0.40%
Cost of interest-bearing liabilities 1.27%0.70%0.57%
Net interest margin, FTE 3.51%3.29%0.22%

Provision for Loan and Lease Losses and Credit Quality

At December 31, 2022, the allowance for loan and lease losses was $23.3 million. The allowance for loan and lease losses to total loans and leases was 0.72% as of December 31, 2022, compared to 0.73% as of September 30, 2022. For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.73% as of December 31, 2022, and 0.75% at September 30, 2022. The remaining discounts on the acquired loan and lease portfolio totaled $13.1 million, or 4.41% of acquired loans and leases as of December 31, 2022.  

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

            
   Three Months Ended    
    Dec   Sep     
 Provision for Loan and Lease Losses Rollforward  2022   2022   Change 
 Beginning balance $22,769  $21,938  $831  
 Charge-offs  (331)  (231)  (100) 
 Recoveries  108   88   20  
 Net charge-offs  (223)  (143)  (80) 
 Provision  788   974   (186) 
 Ending balance $23,334  $22,769  $565  
            
 Allowance for loan losses to total loans and leases, gross  0.72 % 0.73 % (0.01)%

Nonperforming loans and leases as a percentage of total loans and leases was 0.09% as of December 31, 2022, a decrease of 2 basis points from the 0.11% reported in the third quarter of 2022. 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 0.10% as of December 31, 2022, and September 30, 2022, respectively 

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

            
   Three Months Ended    
   Dec Sep  Increase 
 Credit Quality 2022 2022  (Decrease) 
 Nonaccrual loans and leases $2,808 $3,379 $(571) 
 Loans and leases past due 90 days or more and still accruing  142  -  142  
 Total nonperforming loans and leases  2,950  3,379  (429) 
 Other real estate owned  1,436  1,226  210  
 Other repossessed assets  422  -  422  
 Total nonperforming assets $4,808 $4,605 $203  
            
 Nonperforming loans and leases to total loans and leases, gross  0.09% 0.11% (0.02)%
 Nonperforming assets to total assets  0.10% 0.10% - %

Noninterest Income

Noninterest income increased $875 thousand to $7.1 million for the fourth quarter of 2022 compared to $6.3 million for the prior quarter. During the fourth quarter of 2022, the primary components of the changes in noninterest income were as follows:

  • Decrease in service charges on deposit accounts, related to lower volume of transaction fees;
  • Net gain on sale of securities and dissolution of associated derivative instrument;
  • Increase in insurance commissions, driven by the addition of Sunbelt Group, LLC (“Sunbelt”) and organic growth; and
  • Increase in other, primarily related to increased fees from capital markets activity.

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

          
  Three Months Ended   
  Dec Sep  Increase
Noninterest Income 2022 2022  (Decrease)
Service charges on deposit accounts $1,477 $1,611 $(134)
Gain (loss) on sale of securities, net  144  -  144 
Mortgage banking income  77  170  (93)
Investment services  958  1,051  (93)
Insurance commissions  1,233  864  369 
Interchange and debit card transaction fees  1,328  1,356  (28)
Other  1,908  1,198  710 
Total noninterest income $7,125 $6,250 $875 

Noninterest Expense

Noninterest expense increased $186 thousand to $27.4 million for the fourth quarter of 2022 compared to $27.2 million for the prior quarter. During the fourth quarter of 2022, the primary components of the changes in noninterest expense were as follows:

  • Decrease in occupancy and equipment as a result of lower utility expenses (seasonality);
  • Increase in data processing and technology as a result of enhancements to core systems; and
  • Increase in professional services, related to higher audit expenses.

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

          
  Three Months Ended   
  Dec Sep  Increase
Noninterest Expense 2022
 2022  (Decrease)
Salaries and employee benefits $16,384  $16,317 $67 
Occupancy and equipment  3,015   3,167  (152)
FDIC insurance  650   705  (55)
Other real estate and loan related expenses  517   565  (48)
Advertising and marketing  308   288  20 
Data processing and technology  2,097   1,872  225 
Professional services  981   822  159 
Amortization of intangibles  688   650  38 
Merger related and restructuring expenses  (45)  87  (132)
Other  2,821   2,757  64 
Total noninterest expense $27,416  $27,230 $186 

Income Tax Expense

Income tax expense was $3.5 million for the fourth quarter of 2022, an increase of $318 thousand, compared to $3.2 million for the prior quarter.

The effective tax rate was 21.35% for the fourth quarter of 2022 and 21.76% for the prior quarter.

Balance Sheet Trends

Total assets were $4.61 billion at December 31, 2022 and 2021, respectively. Total assets remained unchanged period-over-period; however, the bank experienced a shift in its asset mix during the fourth quarter 2022. The Company had increases primarily in the following categories: loans and leases, net of $531.7 million, securities of $210.4 million, premises and equipment of $6.6 million, goodwill and other intangibles, net of $3.9 million, attributable to Sunbelt purchase and other assets of $30.2 million. These increases were offset by a decrease in cash and cash equivalents of $778.7 million, primarily from the funding of loans and leases and purchase of securities.

Total liabilities were $4.18 billion for the periods ended December 31, 2022 and 2021, respectively. Total liabilities remained unchanged period-over-period; however, the bank experienced organic deposit growth of $55.2 million and a decrease in borrowings of $70.3 million.

Shareholders’ equity at December 31, 2022 totaled $432.5 million, an increase of $3.0 million, from December 31, 2021. The increase in shareholders’ equity was primarily driven by net income of $43.0 million for the year ended December 31, 2022, offset by the negative impact on accumulated other comprehensive income (loss) of $36.8 million and dividends paid of $4.7 million. Tangible book value per share2 was $19.09 at December 31, 2022, compared to $19.26 at December 31, 2021. Tangible common equity1 as a percentage of tangible assets1 was 7.17% at December 31, 2022, compared with 7.18% at December 31, 2021.

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

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

           
  Dec Dec Increase 
Selected Balance Sheet Information 2022 2021 (Decrease) 
Total assets $4,612,913 $4,611,579 $1,334  
Total liabilities  4,180,461  4,182,149  (1,688) 
Total equity  432,452  429,430  3,022  
Securities  769,842  559,422  210,420  
Loans and leases  3,229,042  2,693,397  535,645  
Deposits  4,077,100  4,021,938  55,162  
Borrowings  17,275  87,585  (70,310) 

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2022 on Monday, January 23, 2023, and will host a conference call on Tuesday, January 24, 2023, at 10:00 a.m. ET. To access this interactive teleconference, dial (844) 200-6205 or (646) 904-5544 and entering the access code, 179408. A replay of the conference call will be available through March 25, 2023, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 675735. 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 the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

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

Non-GAAP Financial Measures

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

Forward-Looking Statements

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

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

                
  Ending Balances
  Dec Sep Jun Mar Dec
  2022
 2022
 2022
 2022
 2021
Assets:               
Cash and cash equivalents $266,424  $543,029  $654,945  $763,968  $1,045,077 
Securities available-for-sale, at fair value  483,893   519,723   524,864   540,483   482,453 
Securities held-to-maturity, at amortized cost  285,949   287,104   288,363   289,532   76,969 
Other investments  15,530   15,528   16,569   16,499   16,494 
Loans held for sale  1,752   2,742   1,707   5,894   5,103 
Loans and leases  3,229,042   3,099,116   2,994,074   2,806,026   2,693,397 
Less: Allowance for loan and lease losses  (23,334)  (22,769)  (21,938)  (20,078)  (19,352)
Loans and leases, net  3,205,708   3,076,347   2,972,136   2,785,948   2,674,045 
Premises and equipment, net  92,511   91,944   89,950   84,793   85,958 
Other real estate owned  1,436   1,226   1,612   1,612   1,780 
Goodwill and other intangibles, net  109,772   110,460   104,582   105,215   105,852 
Bank owned life insurance  81,470   81,001   80,537   80,074   79,619 
Other assets  68,468   67,807   52,848   44,561   38,229 
Total assets $4,612,913  $4,796,911  $4,788,113  $4,718,579  $4,611,579 
Liabilities:               
Deposits:               
Noninterest-bearing demand $1,072,449  $1,186,209  $1,162,843  $1,093,933  $1,055,125 
Interest-bearing demand  965,911   962,901   999,893   975,272   899,158 
Money market and savings  1,583,481   1,663,355   1,607,714   1,573,101   1,493,007 
Time deposits  455,259   467,944   511,182   549,047   574,648 
Total deposits  4,077,100   4,280,409   4,281,632   4,191,353   4,021,938 
Borrowings  17,275   18,423   12,549   36,713   87,585 
Subordinated debt  42,015   41,994   41,973   41,952   41,930 
Other liabilities  44,071   41,374   31,532   28,519   30,696 
Total liabilities  4,180,461   4,382,200   4,367,686   4,298,537   4,182,149 
Shareholders’ Equity:               
Common stock  16,901   16,888   16,898   16,893   16,803 
Additional paid-in capital  294,330   293,907   293,815   293,376   292,937 
Retained earnings  156,545   144,723   134,362   125,329   118,247 
Accumulated other comprehensive income (loss)  (35,324)  (40,807)  (24,648)  (15,556)  1,443 
Total shareholders’ equity  432,452   414,711   420,427   420,042   429,430 
Total liabilities & shareholders’ equity $4,612,913  $4,796,911  $4,788,113  $4,718,579  $4,611,579 


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

                     
 Three Months Ended Year Ended
 Dec Sep June Mar Dec Dec Dec
 2022
 2022 2022 2022 2021 2022 2021
Interest income:                    
Loans and leases, including fees$40,082  $35,127 $31,530 $29,643 $30,567 $136,381 $118,582
Investment securities:                    
Taxable 3,337   3,135  2,908  2,418  1,341  11,799  3,813
Tax-exempt 797   561  441  368  322  2,166  1,215
Federal funds sold and other earning assets 3,098   3,474  1,430  486  547  8,488  1,622
Total interest income 47,314   42,297  36,309  32,915  32,777  158,834  125,232
Interest expense:                    
Deposits 8,844   4,866  2,504  2,014  2,116  18,228  8,849
Borrowings 232   97  117  157  180  602  540
Subordinated debt 626   626  626  626  626  2,503  2,449
Total interest expense 9,702   5,589  3,247  2,797  2,922  21,333  11,838
Net interest income 37,612   36,708  33,062  30,118  29,855  137,501  113,394
Provision for loan and lease losses 788   974  1,250  1,006  422  4,018  1,633
Net interest income after provision for loan and lease losses 36,824   35,734  31,812  29,112  29,433  133,483  111,761
Noninterest income:                    
Service charges on deposit accounts 1,477   1,611  1,446  1,319  1,372  5,853  4,650
Gain (loss) on sale of securities, net 144           144  45
Mortgage banking 77   170  471  834  803  1,552  4,040
Investment services 958   1,051  1,065  1,070  621  4,144  2,167
Insurance commissions 1,233   864  598  901  517  3,595  3,285
Interchange and debit card transaction fees 1,328   1,356  1,467  1,284  1,445  5,435  4,284
Other 1,908   1,198  2,182  1,703  2,048  6,992  5,478
Total noninterest income 7,125   6,250  7,229  7,111  6,806  27,715  23,949
Noninterest expense:                    
Salaries and employee benefits 16,384   16,317  15,673  15,046  14,990  63,420  51,656
Occupancy and equipment 3,015   3,167  2,793  3,059  3,026  12,034  10,196
FDIC insurance 650   705  676  641  567  2,672  1,833
Other real estate and loan related expense 517   565  636  729  583  2,446  2,098
Advertising and marketing 308   288  327  369  176  1,293  830
Data processing and technology 2,097   1,872  1,728  1,586  1,722  7,283  6,364
Professional services 981   822  745  1,242  847  3,790  3,147
Amortization of intangibles 688   650  633  637  660  2,607  2,256
Merger related and restructuring expenses (45)  87  81  439  2,762  562  3,701
Other 2,821   2,757  2,634  1,970  2,490  10,183  9,310
Total noninterest expense 27,416   27,230  25,926  25,718  27,823  106,290  91,391
Income before income taxes 16,533   14,754  13,115  10,505  8,416  54,908  44,319
Income tax expense 3,529   3,211  2,900  2,246  1,761  11,886  9,529
Net income$13,004  $11,543 $10,215 $8,259 $6,655 $43,022 $34,790
Earnings per common share:                    
Basic$0.78  $0.69 $0.61 $0.49 $0.40 $2.57 $2.23
Diluted$0.77  $0.68 $0.61 $0.49 $0.40 $2.55 $2.22
Weighted average common shares outstanding:                    
Basic 16,758,706   16,749,255  16,734,930  16,718,371  16,699,010  16,740,450  15,572,537
Diluted 16,884,253   16,872,022  16,867,774  16,858,288  16,846,315  16,871,369  15,699,215


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

                          
  Three Months Ended 
  December 31, 2022 September 30, 2022 December 31, 2021 
  Average    Yield/ Average    Yield/ Average    Yield/ 
  Balance Interest Cost Balance Interest Cost Balance Interest Cost 
Assets:                         
Loans and leases, including fees1 $3,150,493 $40,082 5.05%$3,037,092 $35,127 4.59%$2,675,059 $30,567 4.53%
Taxable securities  701,787  3,337 1.89% 720,114  3,135 1.73% 339,371  1,341 1.57%
Tax-exempt securities2  93,721  958 4.06% 101,559  732 2.86% 102,989  479 1.85%
Federal funds sold and other earning assets  322,970  3,098 3.81% 587,755  3,474 2.34% 965,899  547 0.22%
Total interest-earning assets  4,268,971  47,475 4.41% 4,446,520  42,468 3.79% 4,083,318  32,934 3.20%
Noninterest-earning assets  372,864       362,869       383,783      
Total assets $4,641,835      $4,809,389      $4,467,101      
                          
Liabilities and Shareholders’ Equity:                         
Interest-bearing demand deposits $924,320  3,141 1.35%$966,437  1,956 0.80%$853,763  403 0.19%
Money market and savings deposits  1,587,688  4,855 1.21% 1,632,510  2,298 0.56% 1,428,472  920 0.26%
Time deposits  459,996  848 0.73% 501,919  612 0.48% 583,165  793 0.54%
Total interest-bearing deposits  2,972,004  8,844 1.18% 3,100,866  4,866 0.62% 2,865,400  2,116 0.29%
Borrowings  18,309  232 5.03% 13,141  97 2.93% 88,828  180 0.80%
Subordinated debt  42,002  626 5.91% 41,980  626 5.91% 41,917  626 5.92%
Total interest-bearing liabilities  3,032,315  9,702 1.27% 3,155,987  5,589 0.70% 2,996,145  2,922 0.39%
Noninterest-bearing deposits  1,146,374       1,192,813       1,016,438      
Other liabilities  43,109       35,224       27,710      
Total liabilities  4,221,798       4,384,024       4,040,293      
Shareholders’ equity  420,037       425,365       426,808      
Total liabilities and shareholders’ equity $4,641,835      $4,809,389      $4,467,101      
                          
Net interest income, taxable equivalent    $37,773      $36,879      $30,012   
Interest rate spread       3.14%      3.09%      2.81%
Tax equivalent net interest margin       3.51%      3.29%      2.92%
                          
Percentage of average interest-earning assets to average interest-bearing liabilities       140.78%      140.89%      136.29%
Percentage of average equity to average assets       9.05%      8.84%      9.55%

1 Includes average balance of $3.3 million, $4.8 million, and $80.5 million in PPP loans for the quarters ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.  
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $161 thousand, $171 thousand and $156 thousand of taxable equivalent income for the quarters ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.


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

                   
  Year Ended
 
  December 31, 2022 December 31, 2021 
  Average    Yield/ Average    Yield/ 
  Balance Interest Cost Balance Interest Cost 
Assets:                  
Loans and leases, including fees1 $2,948,511 $136,381  4.63%$2,540,577 $118,582 4.67%
Taxable securities  688,428  11,799  1.71% 207,459  3,813 1.84%
Tax-exempt securities2  100,566  2,831  2.82% 92,708  1,817 1.96%
Federal funds sold and other earning assets  577,593  8,488  1.47% 680,909  1,622 0.24%
Total interest-earning assets  4,315,098  159,499  3.70% 3,521,653  125,834 3.57%
Noninterest-earning assets  373,026        317,457      
Total assets $4,688,124       $3,839,110      
                   
Liabilities and Shareholders’ Equity:                  
Interest-bearing demand deposits $945,414  6,278  0.66%$737,251  1,378 0.19%
Money market and savings deposits  1,576,170  9,137  0.58% 1,191,916  3,501 0.29%
Time deposits  513,416  2,813  0.55% 533,994  3,970 0.74%
Total interest-bearing deposits  3,035,000  18,228  0.60% 2,463,161  8,849 0.36%
Borrowings  32,986  602  1.83% 83,105  540 0.65%
Subordinated debt  41,970  2,503  5.96% 40,221  2,449 6.09%
Total interest-bearing liabilities  3,109,956  21,333  0.69% 2,586,487  11,838 0.46%
Noninterest-bearing deposits  1,120,555        841,746      
Other liabilities  34,361        23,189      
Total liabilities  4,264,872        3,451,422      
Shareholders’ equity  423,252        387,688      
Total liabilities and shareholders’ equity $4,688,124       $3,839,110      
                   
Net interest income, taxable equivalent    $138,166       $113,996   
Interest rate spread        3.01%      3.12%
Tax equivalent net interest margin        3.20%      3.24%
                   
Percentage of average interest-earning assets to average interest-bearing liabilities        138.75%      136.16%
Percentage of average equity to average assets        9.03%      10.10%

1 Includes average balance of $14.1 million and $196.1 million in PPP loans for the year ended December 31, 2022, and 2021, respectively.
2 Yields computed on tax-exempt instruments on a tax equivalent basis include $665 thousand and $602 thousand of taxable equivalent income for the year ended December 31, 2022, and 2021, respectively.


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

                 
  As of and for The Three Months Ended 
  Dec Sep Jun Mar Dec 
  2022 2022 2022 2022 2021 
Composition of Loans and Leases:                
Commercial real estate:                
owner occupied $759,456 $714,734 $684,250  $612,675 $590,064 
non-owner occupied  843,720  822,317  850,338   863,181  794,092 
Commercial real estate, total  1,603,176  1,537,051  1,534,588   1,475,856  1,384,156 
Commercial & industrial  551,867  514,280  483,588   461,153  488,024 
Construction & land development  402,501  405,007  364,368   314,654  278,386 
Consumer real estate  587,977  562,408  533,582   483,229  477,272 
Leases  67,427  64,798  63,264   59,892  53,708 
Consumer and other  16,094  15,572  14,684   11,242  11,851 
Total loans and leases $3,229,042 $3,099,116 $2,994,074  $2,806,026 $2,693,397 
                 
Asset Quality and Additional Loan Data:                
Nonperforming loans and leases $2,950 $3,379 $3,413  $3,342 $3,188 
Other real estate owned  1,436  1,226  1,612   1,612  1,780 
Other repossessed assets  422    17   27  90 
Total nonperforming assets $4,808 $4,605 $5,042  $4,981 $5,058 
Restructured loans and leases not included in nonperforming loans and leases $101 $108 $678  $625 $206 
Net charge-offs to average loans and leases (annualized)  0.03% 0.02% (0.09)% 0.04% 0.05%
Allowance for loan and leases losses to loans and leases  0.72% 0.73% 0.73 % 0.72% 0.72%
Nonperforming loans and leases to total loans and leases, gross  0.09% 0.11% 0.11 % 0.12% 0.12%
Nonperforming assets to total assets  0.10% 0.10% 0.11 % 0.11% 0.11%
Acquired loan and lease fair value discount balance $13,128 $14,465 $14,737  $14,913 $15,483 
Accretion income on acquired loans and leases  1,396  148  225   389  457 
PPP net fees deferred balance  122  140  301   972  2,038 
PPP net fees recognized  17  163  669   1,066  1,725 
                 
Capital Ratios:                
Equity to Assets  9.37% 8.65% 8.78 % 8.90% 9.31%
Tangible common equity to tangible assets (Non-GAAP)1  7.17% 6.49% 6.74 % 6.82% 7.18%
                 
SmartFinancial, Inc.2                
Tier 1 leverage  7.95% 7.40% 7.48 % 7.41% 7.45%
Common equity Tier 1  9.73% 9.65% 9.95 % 10.30% 10.56%
Tier 1 capital  9.73% 9.65% 9.95 % 10.30% 10.56%
Total capital  11.49% 11.44% 11.80 % 12.22% 12.55%
                 
SmartBank  Estimated3             
Tier 1 leverage  8.90% 8.27% 8.33 % 8.24% 8.23%
Common equity Tier 1  10.90% 10.78% 11.08 % 11.46% 11.66%
Tier 1 capital  10.90% 10.78% 11.08 % 11.46% 11.66%
Total capital  11.53% 11.41% 11.72 % 12.08% 12.29%

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


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

                       
 As of and for The  As of and for The 
 Three Months Ended  Year Ended 
 Dec Sep Jun Mar Dec  Dec Dec 
 2022 2022 2022 2022 2021  2022 2021 
Selected Performance Ratios (Annualized):                      
Return on average assets 1.11% 0.95% 0.87% 0.73% 0.59%  0.92% 0.91%
Return on average shareholders’ equity 12.28% 10.77% 9.76% 7.83% 6.19%  10.16% 8.97%
Return on average tangible common equity¹ 16.65% 14.36% 13.02% 10.39% 8.18%  13.60% 11.84%
Noninterest income / average assets 0.61% 0.52% 0.62% 0.63% 0.60%  0.59% 0.62%
Noninterest expense / average assets 2.34% 2.25% 2.21% 2.27% 2.47%  2.27% 2.38%
Efficiency ratio 61.28% 63.39% 64.35% 69.08% 75.89%  64.33% 66.54%
                       
Operating Selected Performance Ratios (Annualized):                      
Operating return on average assets1 1.10% 0.96% 0.88% 0.76% 0.77%  0.92% 0.98%
Operating PTPP return on average assets1 1.46% 1.30% 1.23% 1.05% 1.03%  1.27% 1.29%
Operating return on average shareholders’ equity1 12.15% 10.83% 9.82% 8.14% 8.09%  10.24% 9.67%
Operating return on average tangible common equity1 16.47% 14.44% 13.09% 10.80% 10.70%  13.69% 12.77%
Operating efficiency ratio1 61.36% 62.93% 63.88% 67.60% 68.07%  63.79% 63.59%
Operating noninterest income / average assets1 0.60% 0.52% 0.62% 0.63% 0.60%  0.59% 0.62%
Operating noninterest expense / average assets1 2.35% 2.24% 2.21% 2.23% 2.23%  2.26% 2.28%
                       
Selected Interest Rates and Yields:                      
Yield on loans and leases 5.05% 4.59% 4.40% 4.41% 4.53%  4.63% 4.67%
Yield on earning assets, FTE 4.41% 3.79% 3.39% 3.18% 3.20%  3.70% 3.57%
Cost of interest-bearing deposits 1.18% 0.62% 0.33% 0.27% 0.29%  0.60% 0.36%
Cost of total deposits 0.85% 0.45% 0.24% 0.20% 0.22%  0.44% 0.27%
Cost of interest-bearing liabilities 1.27% 0.70% 0.42% 0.36% 0.39%  0.69% 0.46%
Net interest margin, FTE 3.51% 3.29% 3.08% 2.91% 2.92%  3.20% 3.24%
                       
Per Common Share:                      
Net income, basic$0.78 $0.69 $0.61 $0.49 $0.40  $2.57 $2.23 
Net income, diluted 0.77  0.68  0.61  0.49  0.40   2.55  2.22 
Operating earnings, basic¹ 0.77  0.69  0.61  0.51  0.52   2.59  2.41 
Operating earnings, diluted¹ 0.76  0.69  0.61  0.51  0.52   2.57  2.39 
Book value 25.59  24.56  24.88  24.86  25.56   25.59  25.56 
Tangible book value¹ 19.09  18.02  18.69  18.64  19.26   19.09  19.26 
Common shares outstanding 16,900,805  16,887,555  16,898,405  16,893,282  16,802,990   16,900,805  16,802,990 

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


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

                        
  Three Months Ended  Year Ended 
  Dec Sep Jun Mar Dec  Dec Dec 
  2022
 2022
 2022
 2022
 2021
  2022
 2021
 
Operating Earnings:                       
Net income (GAAP) $13,004  $11,543  $10,215  $8,259  $6,655   $43,022  $34,790  
Noninterest income:                       
Securities gains (losses), net  (144)               (144)  (45) 
Noninterest expenses:                       
Merger related and restructuring expenses  (45)  87   81   439   2,762    562   3,701  
Income taxes:                       
Income tax effect of adjustments  49   (22)  (21)  (113)  (713)   (108)  (944) 
Operating earnings (Non-GAAP) $12,864  $11,608  $10,275  $8,585  $8,704   $43,332  $37,502  
Operating earnings per common share (Non-GAAP):                       
Basic $0.77  $0.69  $0.61  $0.51  $0.52   $2.59  $2.41  
Diluted  0.76   0.69   0.61   0.51   0.52    2.57   2.39  
                        
Operating Noninterest Income:                       
Noninterest income (GAAP) $7,125  $6,250  $7,229  $7,111  $6,806   $27,715  $23,949  
Securities gains (losses), net  (144)               (144)  (45) 
Operating noninterest income (Non-GAAP) $6,981  $6,250  $7,229  $7,111  $6,806   $27,571  $23,904  
Operating noninterest income (Non-GAAP)/average assets1  0.60 % 0.52 % 0.62 % 0.63 % 0.60 %  0.59 % 0.62 %
                        
Operating Noninterest Expense:                       
Noninterest expense (GAAP) $27,416  $27,230  $25,926  $25,718  $27,823   $106,290  $91,391  
Merger related and restructuring expenses  45   (87)  (81)  (439)  (2,762)   (562)  (3,701) 
Operating noninterest expense (Non-GAAP) $27,461  $27,143  $25,845  $25,279  $25,061   $105,728  $87,690  
Operating noninterest expense (Non-GAAP)/average assets2  2.35 % 2.24 % 2.21 % 2.23 % 2.23 %  2.26 % 2.28 %
                        
Operating Pre-tax Pre-provision ("PTPP") Earnings:                       
Net interest income (GAAP) $37,612  $36,708  $33,062  $30,118  $29,855   $137,501  $113,394  
Operating noninterest income (Non-GAAP)  6,981   6,250   7,229   7,111   6,806    27,571   23,904  
Operating noninterest expense (Non-GAAP)  (27,461)  (27,143)  (25,845)  (25,279)  (25,061)   (105,728)  (87,690) 
Operating PTPP earnings (Non-GAAP) $17,132  $15,815  $14,446  $11,950  $11,600   $59,344  $49,608  
                        
Non-GAAP Return Ratios:                       
Operating return on average assets (Non-GAAP)3  1.10 % 0.96 % 0.88 % 0.76 % 0.77 %  0.92 % 0.98 %
Operating PTPP return on average assets (Non-GAAP)4  1.46 % 1.30 % 1.23 % 1.05 % 1.03 %  1.27 % 1.29 %
Return on average tangible common equity (Non-GAAP)5  16.65 % 14.36 % 13.02 % 10.39 % 8.18 %  13.60 % 11.84 %
Operating return on average shareholders’ equity (Non-GAAP)6  12.15 % 10.83 % 9.82 % 8.14 % 8.09 %  10.24 % 9.67 %
Operating return on average tangible common equity (Non-GAAP)7  16.47 % 14.44 % 13.09 % 10.80 % 10.70 %  13.69 % 12.77 %
                        
Operating Efficiency Ratio:                       
Efficiency ratio (GAAP)  61.28 % 63.39 % 64.35 % 69.08 % 75.89 %  64.33 % 66.54 %
Adjustment for taxable equivalent yields  (0.22)% (0.25)% (0.27)% (0.31)% (0.32)%  (0.26)% (0.29)%
Adjustment for securities gains (losses)  (0.20)%  %  %  %  %  (0.06)% (0.02)%
Adjustment for merger related income and costs  0.50 % (0.21)% (0.20)% (1.17)% (7.50)%  (0.22)% (2.64)%
Operating efficiency ratio (Non-GAAP)  61.36 % 62.93 % 63.88 % 67.60 % 68.07 %  63.79 % 63.59 %

1Operating noninterest income (Non-GAAP) is annualized and divided by average assets.
2Operating noninterest expense (Non-GAAP) is annualized and divided by average assets.
3Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.
4Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets.
5Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
6Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.
7Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).


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

                       
  Three Months Ended  Year Ended
  Dec Sep Jun Mar Dec  Dec Dec
  2022
 2022
 2022
 2022
 2021
  2022
 2021
Tangible Common Equity:                      
Shareholders’ equity (GAAP) $432,452  $414,711  $420,427  $420,042  $429,430   $432,452  $429,430 
Less goodwill and other intangible assets  109,772   110,460   104,582   105,215   105,852    109,772   105,852 
Tangible common equity (Non-GAAP) $322,680  $304,251  $315,845  $314,827  $323,578   $322,680  $323,578 
                       
Average Tangible Common Equity:                      
Average shareholders’ equity (GAAP) $420,037  $425,365  $419,726  $427,945  $426,808   $423,252  $387,688 
Less average goodwill and other intangible assets  110,206   106,483   104,986   105,617   104,193    106,834   93,910 
Average tangible common equity (Non-GAAP) $309,831  $318,882  $314,740  $322,328  $322,615   $316,418  $293,778 
                       
Tangible Book Value per Common Share:                      
Book value per common share (GAAP) $25.59  $24.56  $24.88  $24.86  $25.56   $25.59  $25.56 
Adjustment due to goodwill and other intangible assets  (6.50)  (6.54)  (6.19)  (6.23)  (6.30)   (6.50)  (6.30)
Tangible book value per common share (Non-GAAP)1 $19.09  $18.02  $18.69  $18.64  $19.26   $19.09  $19.26 
                       
Tangible Common Equity to Tangible Assets:                      
Total Assets $4,612,913  $4,796,911  $4,788,113  $4,718,579  $4,611,579   $4,612,913  $4,611,579 
Less goodwill and other intangibles  109,772   110,460   104,582   105,215   105,852    109,772   105,852 
Tangible Assets (Non-GAAP): $4,503,141  $4,686,451  $4,683,531  $4,613,364  $4,505,727   $4,503,141  $4,505,727 
Tangible common equity to tangible assets (Non-GAAP)  7.17%  6.49%  6.74%  6.82%  7.18%   7.17%  7.18%

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