SmartFinancial Announces Results for the 2nd Quarter 2023.

KNOXVILLE, Tenn: SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $8.8 million, or $0.52 per diluted common share, for the second quarter of 2023, compared to net income of $10.2 million, or $0.61 per diluted common share, for the second quarter of 2022, 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 $8.8 million, or $0.52 per diluted common share, in the second quarter of 2023, compared to $10.3 million, or $0.61 per diluted common share, in the second quarter of 2022, and compared to $11.5 million, or $0.68 per diluted common share, in the first quarter of 2023.

Billy Carroll, President & CEO, stated: "I am very pleased with our results for the quarter. While dealing with some headwinds related to deposit pricing, this quarter showed the strength of our Balance Sheet with our ability to fund with our core base. We've continued to focus on expenses without sacrificing investments for the future, and the quarter also allowed us some outstanding opportunities to gain strong client relationships. We continue to be bullish as we look forward."

SmartFinancial's Chairman, Miller Welborn, concluded: "The second quarter of 2023 shows further evidence of the strength of our company. Our entire team performed very well and executed our Strategic Plan effectively. I am as confident as ever that the economic environment in our southeastern markets remains very strong and our bank will continue to thrive in the months ahead."

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

Net Interest Income and Net Interest Margin

Net interest income was $31.6 million for the second quarter of 2023, compared to $36.0 million for the prior quarter. Average earning assets totaled $4.34 billion, a decrease of $86.4 million from the prior quarter. The decrease in average earnings assets was primarily driven by a decrease in average interest-earning cash of $183.0 million, offset by an increase in average loans and leases of $50.1 million and average securities of $46.5 million. Average interest-bearing liabilities decreased $34.1 million from the prior quarter, primarily attributable to a decrease in average deposits.

The tax equivalent net interest margin was 2.93% for the second quarter of 2023, compared to 3.31% for the prior quarter, which included $1.4 million in fees from the payoff of an acquired loan. The tax equivalent net interest margin was negatively impacted by the continued rise in the cost of interest-bearing liabilities from rising rates and increased pricing competition. The yield on loans and leases, excluding loan fees was 5.39% for the second quarter, compared to 5.20% for the prior quarter.

The cost of total deposits for the second quarter of 2023 was 1.89% compared to 1.56% in the prior quarter. The cost of interest-bearing liabilities increased to 2.53% for the second quarter of 2023 compared to 2.12% for the prior quarter. The cost of average interest-bearing deposits was 2.46% for the second quarter of 2023 compared to 2.05% for the prior quarter, an increase of 41 basis points. The increase in the cost of deposits is due to an increase in interest rates, customer migration to higher rate deposit products and increased competition for deposits.

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

Three Months Ended

Jun

Mar

Increase

Selected Interest Rates and Yields

2023

2023

(Decrease...