SmartFinancial, Inc. (NYSE:SMBK) Q3 2021 Earnings Conference Call October 20, 2021 10:00 AM ET Company Participants Miller Welborn - Chairman Billy Carroll - President and Chief Executive Officer Ron Gorczynski - Chief Financial Officer Rhett Jordan - Chief Credit Officer Conference Call Participants Ben Gerlinger - Hovde Group Stephen Scouten - Piper Sandler Thomas Wendler - Stephens Inc Catherine Mealor - KBW Feddie Strickland - Janney Montgomery Scott William Wallace - Raymond James Kevin Fitzsimmons - D ...

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-37661 (Exact name of registrant as specified in its charter) | Tennessee | 62-1173944 | | --- | --- ...

Financial Performance - SmartFinancial Inc reported net income of $8.8 million and operating earnings of $9.1 million for Q2 2021[5] - The company's ROAA (Return on Average Assets) was 0.98%, while the operating ROAA reached 1.01%[5] - ROATCE (Return on Average Tangible Common Equity) stood at 12.54%, with an operating ROATCE of 12.93%[5] - The efficiency ratio was 64.9%, and the operating efficiency ratio was 63.5%[5] Balance Sheet - As of June 30, 2021, SmartFinancial had total assets of $3.7 billion[5] - Gross loans and leases amounted to $2.5 billion[5] - Total deposits reached $3.1 billion[5] - Shareholders' equity was $373.4 million, with tangible common equity (Non-GAAP) at $282.4 million[5] Asset Quality - The ratio of Non-Performing Assets (NPAs) to total assets was 0.18%[5] - The allowance for loan and lease losses represented 0.74% of total loans and leases[5] Expansion and Acquisition - SmartBank added a new commercial banking team in Auburn, Alabama, with over 50 years of combined experience[8] - The acquisition of Sevier County Bank (SCB) is progressing, with a projected systems conversion in October 2021[11] - Fountain Equipment Finance, a small ticket construction equipment finance company, was acquired and integrated, resulting in ~$53 million in net leases and a ~13bps increase in net interest margin during Q2 '21[12]

Financial Data and Key Metrics Changes - Operating earnings for Q2 2021 were reported at $9.1 million or $0.60 per share, marking a 25% increase compared to the prior year quarter [10][18] - Tangible book value (TBV) increased to $18.69, reflecting a 10% year-over-year growth [10][23] - Net interest income for the quarter was over $27 million, slightly higher than the previous year's $26.4 million [26] - The interest margin was reported at 3.29%, a decline of 19 basis points from the prior quarter [27] Business Line Data and Key Metrics Changes - Net organic loan growth was over $87 million, or 16% annualized, excluding PPP loans [10][20] - Deposit growth was solid, with an increase of over $90 million during Q2 [11][25] - Non-interest income increased by almost 50% from the prior year quarter, with a forecast of $5.5 million for Q3 [32][34] Market Data and Key Metrics Changes - The loan portfolio saw a diversification with a 16% annualized organic loan growth, particularly in the commercial real estate (CRE) sector, which grew to approximately 39% of total portfolio outstandings [37][38] - The bank's asset quality metrics improved, with a non-performing asset (NPA) ratio of 0.17%, down from 0.29% in Q1 2021 [40][41] Company Strategy and Development Direction - The company is focusing on organic growth through team lift-outs and market expansions, particularly in Alabama and the Gulf Coast region [13][56] - The acquisition of Sevier County Bank is on track for closing, with plans for integration and rebranding [14][15] - The company aims to leverage its capital effectively while exploring additional lift-out opportunities as a strategic focus [69][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning and growth potential, citing strong market conditions and a robust loan pipeline [7][57] - The Southeast region is expected to continue experiencing growth, driven by population trends and economic recovery [53][54] Other Important Information - The company reported no need for a provision for loan losses in the current quarter, indicating strong credit quality [47] - The allowance for originated loans and leases, excluding PPP loans, was reported at 0.86% [48] Q&A Session Summary Question: What are the expected total loan balances by the end of the year excluding Sevier County? - The expected total loan balance is approximately $2.52 billion, not including Sevier County [62][64] Question: Is the lift-out strategy viewed as the go-forward plan for inorganic growth? - The company is always looking for opportunities, with a current focus on lift-outs rather than mergers and acquisitions [68][69] Question: How big was the loan portfolio managed by the Auburn team at their prior institution? - The Auburn team managed around $0.5 billion in total loans at their previous institution [82] Question: What is the outlook for fees in the back half of the year? - The forecast for non-interest income in Q3 is around $5.5 million, similar to Q4 expectations [101][102] Question: What is the appetite for buybacks in the back half of the year? - The company is in a good capital position but does not foresee heavy buybacks due to current valuations [103][104]

Financial Performance - Net income for the first quarter of 2021 was $9.8 million, or $0.65 per diluted common share, compared to $2.7 million, or $0.19 per diluted common share, for the same period in 2020[147] - Net interest income increased to $26.4 million for the first quarter of 2021, up from $22.7 million for the first quarter of 2020[148] - Total noninterest income increased by $2.9 million, or 102.0%, in Q1 2021 compared to Q1 2020, driven by higher service charges, mortgage banking, and insurance commissions[153] - Noninterest expense increased by $671 thousand, or 3.6%, in Q1 2021 compared to Q1 2020, primarily due to higher salaries and employee benefits related to franchise growth[154] - The effective tax rate for Q1 2021 was approximately 21.5%, compared to 19.6% in Q1 2020, influenced by the utilization of an NOL carryforward in March 2020[154] Loan and Deposit Growth - Average loan balances increased by $445.5 million, and average interest-bearing deposits increased by $415.9 million from the first quarter of 2020 to the first quarter of 2021[148] - Organic net loans increased by $142.8 million, or 7.2%, from December 31, 2020, to $2.12 billion at March 31, 2021, including $119.5 million of PPP loans originated during the quarter[156] - Total net loans outstanding reached approximately $2.47 billion at March 31, 2021, up from $2.36 billion at December 31, 2020[155] - Total deposits as of March 31, 2021, were $3.05 billion, an increase of $243 million from December 31, 2020[175] Interest Income and Margin - The tax equivalent net interest margin decreased to 3.48% for the first quarter of 2021, down from 3.90% for the first quarter of 2020[147] - The yield on earning assets decreased from 4.83% for the first quarter of 2020 to 3.88% for the first quarter of 2021[148] - Total interest-earning assets amounted to $3,080,897 thousand with a yield of 3.88% in Q1 2021, down from 4.83% in Q1 2020[149] - The cost of average interest-bearing deposits decreased from 1.10% for the first quarter of 2020 to 0.44% for the first quarter of 2021[148] Asset Quality - Nonperforming loans as a percentage of total gross loans was 0.25% as of March 31, 2021, down from 0.24% as of December 31, 2020[160] - Total nonperforming assets as a percentage of total assets was 0.29% as of March 31, 2021, compared to 0.31% as of December 31, 2020[160] - The provision for loan losses for the three months ended March 31, 2021, was $67 thousand, a decrease of $3.1 million from $3.2 million in the same period of 2020[164] - The allowance for loan losses was $18.4 million as of March 31, 2021, representing 0.74% of total loans, compared to $18.3 million and 0.77% as of December 31, 2020[164] Liquidity and Interest Rate Risk - The company has established guidelines to limit the variance of net interest income in response to instantaneous changes in interest rates, with a maximum decline of 6.22% for a ±100 basis points change over the next 12 months[185] - For a ±200 basis points change, the maximum decline in net interest income is projected at 12.66% over the next 12 months[185] - The economic value of equity model indicates a maximum decline of 5.29% for a +100 basis points change and a decline of 7.48% for a -100 basis points change in prevailing interest rates[186] - The company has an unused borrowing capacity of $276.7 million available with the Federal Reserve, FHLB, and other institutions, ensuring adequate liquidity[191] - The company monitors liquidity needs through its Asset-Liability Committee (ALCO) and is subject to regulatory oversight regarding liquidity and capital resources[189]

| --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | INVESTOR CALL 1Q 2021 April 21, 2021, 10:00am Webcast: www.smartbank.com (Investor Relations) Audio Only: 888-317-6003 Confirmation #: 6293687 | | | | | | Miller Welborn Chairman of the Board Billy Carroll President & CEO | | | | | | | | | | | | | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from __________ to __________ Commission File Number: 001-37661 (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or org ...

| --- | --- | --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | INVESTOR CALL 4Q 2020 January 20, 2021, 10:00am Webcast: www.smartbank.com (Investor Relations) Audio Only: 888-317-6003 Confirmation #: 0205038 Miller Welborn Chairman of the Board Billy Carro ...

| --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | INVESTOR CALL 2Q 2020 July 22, 2020, 10:00am Webcast: www.smartbank.com (Investor Relations) Audio Only: 888-317-6003 Confirmation #: 5925756 Miller Welborn Chairman of the Board Billy Carroll Pre ...

SmartFinancial, Inc. First Quarter 2020 Earnings Release April 29, 2020 Legal Disclaimer Forward-Looking Statements This presentation 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 forwardlooking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company's busines ...