10-Q - SMBK - Equibles

Table of Contents

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025



☐	TRANSITION REPORT PURSUANT TO 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
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5401 Kingston Pike, Suite 600 Knoxville, Tennessee		37919
(Address of principal executive offices)		(Zip Code)
865-437-5700		Not Applicable
(Registrant’s telephone number, including area code)		(Former name, former address and former fiscal
		year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of Exchange on which Registered
Common Stock, par value $1.00	SMBK	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or and emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 1, 2025, there were 17,020,314 shares of common stock, $1.00 par value per share, issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets at June 30, 2025 and December 31, 2024	3

	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024	4

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024	5

	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024	7

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56

Item 4.	Controls and Procedures	56

PART II – OTHER INFORMATION		57

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3.	Defaults Upon Senior Securities	57

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	58

Table of Contents PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share data)


****	****	(Unaudited)		****
****	****	June 30,		****	December 31,
		2025			2024*
ASSETS:
Cash and due from banks		$	71,529		$	96,508
Interest-bearing deposits with banks			276,041			277,005
Federal funds sold			17,526			14,057
Total cash and cash equivalents			365,096			387,570
Securities available-for-sale, at fair value			502,150			482,328
Securities held-to-maturity (fair value of $108.1 million at June 30, 2025 and Dec. 31, 2024, respectively)			124,520			126,659
Other investments			14,713			14,740
Loans held for sale			5,484			5,996
Loans and leases			4,124,062			3,906,340
Less: Allowance for credit losses			(39,776)			(37,423)
Loans and leases, net			4,084,286			3,868,917
Premises and equipment, net			90,204			91,093
Other real estate owned			144			179
Goodwill and other intangibles, net			103,588			104,723
Bank owned life insurance			117,697			115,917
Other assets			82,981			77,782
Total assets		$	5,490,863		$	5,275,904

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand		$	906,965		$	965,552
Interest-bearing demand			843,820			836,731
Money market and savings			2,124,623			2,039,560
Time deposits			996,712			844,640
Total deposits			4,872,120			4,686,483
Borrowings			6,966			8,135
Subordinated debt			39,726			39,684
Other liabilities			52,924			50,141
Total liabilities			4,971,736			4,784,443
Commitments and contingent liabilities - see Note 8			—			—
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized; No shares issued and outstanding			—			—
Common stock, $1 par value; 40,000,000 shares authorized; 17,017,547 and 16,925,672 shares issued and outstanding, respectively			17,018			16,926
Additional paid-in capital			295,209			294,269
Retained earnings			224,061			203,824
Accumulated other comprehensive loss			(17,274)			(23,671)
Total shareholders' equity attributable to SmartFinancial Inc. and Subsidiary			519,014			491,348
Non-controlling interest - preferred stock of subsidiary			113			113
Total shareholders' equity			519,127			491,461
Total liabilities and shareholders' equity		$	5,490,863		$	5,275,904

* Derived from audited financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)


			Three Months Ended						Six Months Ended
		June 30,						June 30,
****	****	2025		****	2024		****	2025		****	2024
Interest income:
Loans and leases, including fees		$	61,049		$	50,853		$	118,811		$	100,873
Securities:
Taxable			4,848			5,320			9,623			9,869
Tax-exempt			395			353			749			705
Federal funds sold and other earning assets			3,161			4,759			6,647			9,620
Total interest income			69,453			61,285			135,830			121,067
Interest expense:
Deposits			28,301			27,439			55,636			54,474
Borrowings			70			148			140			276
Subordinated debt			739			884			1,472			1,782
Total interest expense			29,110			28,471			57,248			56,532
Net interest income			40,343			32,814			78,582			64,535
Provision for credit losses			2,411			883			3,391			443
Net interest income after provision for credit losses			37,932			31,931			75,191			64,092
Noninterest income:
Service charges on deposit accounts			1,766			1,692			3,502			3,304
Loss on sale of securities			(4)			—			(4)			—
Mortgage banking			633			348			1,126			628
Investment services			1,440			1,302			3,209			2,682
Insurance commissions			1,554			1,284			2,967			2,387
Interchange and debit card transaction fees, net			1,342			1,343			2,562			2,596
Other			2,167			1,635			4,133			4,387
Total noninterest income			8,898			7,604			17,495			15,984
Noninterest expense:
Salaries and employee benefits			19,602			17,261			38,836			33,900
Occupancy and equipment			3,432			3,324			6,829			6,720
FDIC insurance			992			825			1,952			1,740
Other real estate and loan related expense			757			538			1,415			1,123
Advertising and marketing			390			295			772			597
Data processing and technology			2,651			2,452			5,309			4,916
Professional services			1,153			1,064			2,521			1,989
Amortization of intangibles			566			608			1,135			1,220
Other			3,026			2,834			6,097			5,549
Total noninterest expense			32,569			29,201			64,866			57,754
Income before income tax expense			14,261			10,334			27,820			22,322
Income tax expense			2,556			2,331			4,861			4,962
Net income		$	11,705		$	8,003		$	22,959		$	17,360
Earnings per common share:
Basic		$	0.70		$	0.48		$	1.37		$	1.03
Diluted		$	0.69		$	0.48		$	1.36		$	1.03
Weighted average common shares outstanding:
Basic			16,778,988			16,770,819			16,773,293			16,810,277
Diluted			16,878,736			16,850,250			16,875,608			16,887,374

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


****	****	Three Months Ended				****	Six Months Ended
		June 30,					June 30,
		2025		2024			2025		****	2024
Net income		$	11,705	$	8,003		$	22,959		$	17,360
Other comprehensive income (loss):
Investment securities:
Unrealized holding gains (losses) on securities available-for-sale			2,888		1,998			7,851			(1,109)
Tax effect			(746)		(516)			(2,028)			287
Reclassification adjustment for amortization of unrealized gains included in other comprehensive income on securities transferred from available-for-sale to held-to-maturity			30		33			60			68
Tax effect			(7)		(9)			(15)			(18)
Reclassification adjustment for realized losses included in net income			4		—			4			—
Tax effect			(1)		—			(1)			—
Unrealized gains (losses) on securities available-for-sale, net of tax			2,168		1,506			5,871			(772)
Fair value hedging activities:
Unrealized gains (losses) on fair value municipal security hedges			(12)		(20)			(167)			400
Tax effect			3		6			43			(102)
Reclassification adjustment for realized losses (gains) included in net income			(2)		143			(3)			249
Tax effect			1		(38)			1			(65)
Unrealized gains (losses) on fair value hedged instruments arising during the period, net of tax			(10)		91			(126)			482
Cash flow hedging activities:
Unrealized gains on cash flow hedges			203		92			640			628
Tax effect			(53)		(23)			(165)			(162)
Reclassification adjustment for realized losses (gains) included in net income			88		(52)			239			(90)
Tax effect			(23)		13			(62)			23
Unrealized gains (losses) on cash flow hedge instruments arising during the period, net of tax			215		30			652			399

Total other comprehensive income			2,373		1,627			6,397			109
Comprehensive income		$	14,078	$	9,630		$	29,356		$	17,469

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – (Unaudited)

For the Three and Six Months Ended June 30, 2025 and 2024

(Dollars in thousands, except for share data)


		****			****			****			****	Accumulated		Non-controlling		****
												Other		Interest - Preferred
	Common Stock				****	Additional		****	Retained		****	Comprehensive		Stock of		****
	Shares		Amount			Paid-in Capital			Earnings		****	Income (Loss)		Subsidiary			Total
Balance, December 31, 2023	16,988,879		$	16,989		$	295,699		$	173,105		$	(25,907)	$	—		$	459,886
Net income	—			—			—			17,360			—		—			17,360
Other comprehensive income	—			—			—			—			109		—			109
Common stock issued pursuant to:
Stock options exercised	4,500			4			39			—			—		—			43
Restricted stock, net of forfeitures	74,757			75			(75)			—			—		—			—
Restricted stock, withheld for taxes	(6,039)			(6)			(139)			—			—		—			(145)
Stock compensation expense	—			—			894			—			—		—			894
Common stock dividend (0.16 per share)	—			—			—			(2,714)			—		—			(2,714)
Repurchases of common stock	(136,195)			(136)			(2,832)			—			—					(2,968)
Balance, June 30, 2024	16,925,902		$	16,926		$	293,586		$	187,751		$	(25,798)	$	—		$	472,465

Balance, December 31, 2024	16,925,672		$	16,926		$	294,269		$	203,824		$	(23,671)	$	113		$	491,461
Net income	—			—			—			22,959			—		—			22,959
Other comprehensive income	—			—			—			—			6,397		—			6,397
Common stock issued pursuant to:
Stock options exercised	4,203			4			59			—			—		—			63
Restricted stock, net of forfeitures	96,121			96			(96)			—			—		—			—
Restricted stock, withheld for taxes	(8,449)			(8)			(257)			—			—		—			(265)
Stock compensation expense	—			—			1,234			—			—		—			1,234
Common stock dividend (0.16 per share)	—			—			—			(2,722)			—		—			(2,722)
Balance, June 30, 2025	17,017,547		$	17,018		$	295,209		$	224,061		$	(17,274)	$	113		$	519,127

Balance, March 31, 2024	17,056,704		$	17,057		$	296,061		$	181,103		$	(27,425)	$	—		$	466,796
Net income	—			—			—			8,003			—		—			8,003
Other comprehensive income	—			—			—			—			1,627		—			1,627
Common stock issued pursuant to:
Restricted stock, net of forfeitures	6,000			6			(6)			—			—		—			—
Restricted stock, withheld for taxes	(607)			(1)			(13)			—			—		—			(14)
Stock compensation expense	—			—			376			—			—		—			376
Common stock dividend (0.08 per share)	—			—			—			(1,355)			—		—			(1,355)
Repurchases of common stock	(136,195)			(136)			(2,832)			—			—		—			(2,968)
Balance, June 30, 2024	16,925,902		$	16,926		$	293,586		$	187,751		$	(25,798)	$	—		$	472,465

Balance, March 31, 2025	17,017,547		$	17,018		$	294,736		$	213,721		$	(19,647)	$	113		$	505,941
Net income	—			—			—			11,705			—		—			11,705
Other comprehensive income	—			—			—			—			2,373		—			2,373
Stock compensation expense	—			—			473			—			—		—			473
Common stock dividends (0.08 per share)	—			—			—			(1,365)			—		—			(1,365)
Balance, June 30, 2025	17,017,547		$	17,018		$	295,209		$	224,061		$	(17,274)	$	113		$	519,127

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


****	****	Six Months Ended June 30,
		2025		2024
Cash flows from operating activities:
Net income		$	22,959	$	17,360
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,317		4,671
Amortization of intangible assets			1,135		1,220
Provision for credit losses			3,391		443
Stock compensation expense			1,234		894
Loss on sale of securities available-for-sale			4		—
Deferred income tax expense			66		1,293
Increase in cash surrender value of bank-owned life insurance			(1,780)		(1,049)
Net losses from sale and write-downs of other real estate owned and other repossessed assets			249		280
Net gains from mortgage banking			(1,070)		(568)
Origination of loans held for sale			(16,582)		(25,311)
Proceeds from sales of loans held for sale			18,164		27,194
Net (gain) loss from sale/disposal of fixed assets			14		(1,647)
Net change in:
Accrued interest receivable			(587)		200
Accrued interest payable			923		(604)
Other assets			(3,050)		(514)
Other liabilities			(1,078)		(243)
Net cash provided by operating activities			28,309		23,619
Cash flows from investing activities:
Available-for-sale:
Proceeds from maturities, calls and paydowns			26,175		22,958
Purchases			(38,842)		(117,389)
Held-to-maturity:
Proceeds from maturities, calls and paydowns			1,118		151,172
Proceeds from sales of other investments			1,041		135
Purchases of other investments			(1,666)		(452)
Net increase in loans and leases			(219,692)		(133,763)
Proceeds from sale of fixed assets			67		4,698
Purchases of premises and equipment			(1,707)		(4,017)
Proceeds from sale of other real estate owned and other repossessed assets			1,157		893
Net cash used in investing activities			(232,349)		(75,765)
Cash flows from financing activities:
Net increase in deposits			185,659		48,840
Net decrease in securities sold under agreements to repurchase			(1,169)		(346)
Proceeds from borrowings			1,000		4,000
Repayment of borrowings			(1,000)		(4,000)
Cash dividends paid			(2,722)		(2,714)
Issuance of common stock			63		43
Restricted shares withheld for taxes			(265)		(145)
Repurchases of common stock			—		(2,968)
Net cash provided by financing activities			181,566		42,710
Net change in cash and cash equivalents			(22,474)		(9,436)
Cash and cash equivalents, beginning of period			387,570		352,271
Cash and cash equivalents, end of period		$	365,096	$	342,835
Supplemental disclosures of cash flow information:
Cash paid during the period for interest		$	56,325	$	57,136
Net cash paid during the period for income taxes			5,118		4,295
Noncash investing and financing activities:
Recognition of operating lease assets in exchange for lease liabilities			614		2,913
Acquisition of real estate through foreclosure			—		179
Acquisition of other repossessed assets			1,732		2,631
Financed sales of other repossessed assets			679		463

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Presentation of Financial Information

Nature of Business:

SmartFinancial, Inc. (the “Company,” “SmartFinancial,” “we,” “our” or “us”) is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, SmartBank (the “Bank”). The Company provides a variety of financial services to individuals and corporate customers through its offices in East and Middle Tennessee, Alabama, and Florida. The Bank’s primary deposit products are noninterest-bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans.

Basis of Presentation and Accounting Estimates:

The accounting and financial reporting policies of the Company and its wholly owned subsidiary conform to U.S. generally accepted accounting principles (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements for the Company and its wholly owned subsidiary have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of foreclosed assets and deferred taxes, the fair value of financial instruments, goodwill, and the fair value of assets acquired, and liabilities assumed in acquisitions. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The following unaudited condensed financial statement notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2024.

Recently Issued and Adopted Accounting Pronouncements:

In November 2023, the FASB issued ASU No. 2023-07, *“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.”*ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The Company adopted ASU 2023-07 on December 31, 2024, and it did not have an impact on the Company’s Consolidated Financial Statements.

Recently Issued Not Yet Effective Accounting Pronouncements:

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2024, as filed in its Annual Report on Form 10-K with the SEC. The following is a summary of recent authoritative pronouncements issued but not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In December 2023, FASB issued ASU No. 2023-09, *“Income Taxes (Topic 740): Improvements to Income Tax Disclosures.”*ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in certain categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income 8

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. The guidance is effective for us the first annual period beginning after December 15, 2024, with first disclosure additions to be included in the 2025 Annual Report on Form 10K. The Company is assessing ASU 2023-09, and its adoption is not expected to have a significant impact on our Consolidated Financial Statements.

In November 2024, FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.”, and in January 2025, the FASB issued ASU 2025-01, *“Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date.”*ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03, as clarified by ASU 2025-01, requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for us fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, though early adoption is permitted. The Company is assessing ASU 2024-03, and its adoption is not expected to have a significant impact on our Consolidated Financial Statements.

Note 2. Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options and restricted stock. The effect from the stock options and restricted stock on incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are presented below. There were no antidilutive shares for the three and six months ended June 30, 2025, and June 30, 2024, respectively.

The following is a summary of the basic and diluted earnings per share computation (dollars in thousands, except share and per share data):


		Three Months Ended					Six Months Ended
		June 30,					June 30,
	****	2025		****	2024		2025		****	2024
Basic earnings per share computation:
Net income available to common shareholders		$	11,705		$	8,003	$	22,959		$	17,360
Average common shares outstanding – basic			16,778,988			16,770,819		16,773,293			16,810,277
Basic earnings per share		$	0.70		$	0.48	$	1.37		$	1.03
Diluted earnings per share computation:
Net income available to common shareholders		$	11,705		$	8,003	$	22,959		$	17,360
Average common shares outstanding – basic			16,778,988			16,770,819		16,773,293			16,810,277
Incremental shares from assumed conversions:
Stock options and restricted stock			99,748			79,431		102,315			77,097
Average common shares outstanding - diluted			16,878,736			16,850,250		16,875,608			16,887,374
Diluted earnings per common share		$	0.69		$	0.48	$	1.36		$	1.03

Note 3. Securities

Available-for-sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell, but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in accumulated other comprehensive income (loss). Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the estimated life of the security. 9

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Prepayments are anticipated for mortgage-backed and Small Business Administration (“SBA”) securities. Premiums on callable securities are amortized to their earliest call date.

Held-to-maturity securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date.

The amortized cost, gross unrealized gains and losses and fair value of securities AFS and HTM are summarized as follows (in thousands):


		June 30, 2025
	****			****	Gross		****	Gross		****
		Amortized			Unrealized			Unrealized			Fair
Available-for-sale:		Cost			Gains			Losses			Value
U.S. Treasury		$	82,839		$	—		$	(5,021)		$	77,818
U.S. Government-sponsored enterprises (GSEs)			34,500			278			(110)			34,668
Municipal securities			21,865			1			(842)			21,024
Other debt securities			40,323			291			(1,699)			38,915
Mortgage-backed securities (GSEs)			345,295			1,569			(17,139)			329,725
Total		$	524,822		$	2,139		$	(24,811)		$	502,150


		June 30, 2025
	****			****	Gross		****	Gross		****
		Amortized			Unrealized			Unrealized			Fair
Held-to-maturity:		Cost			Gains			Losses			Value
U.S. Government-sponsored enterprises (GSEs)		$	47,494		$	—		$	(6,020)		$	41,474
Municipal securities			51,131			—			(7,002)			44,129
Mortgage-backed securities (GSEs)			25,895			—			(3,364)			22,531
Total		$	124,520		$	—		$	(16,386)		$	108,134


		December 31, 2024
	****			****	Gross		****	Gross		****
		Amortized			Unrealized			Unrealized			Fair
Available-for-sale:		Cost			Gains			Losses			Value
U.S. Treasury		$	83,330		$	—		$	(7,104)		$	76,226
U.S. Government-sponsored enterprises (GSEs)			38,917			453			(182)			39,188
Municipal securities			18,277			—			(587)			17,690
Other debt securities			41,321			252			(2,138)			39,435
Mortgage-backed securities (GSEs)			330,839			515			(21,565)			309,789
Total		$	512,684		$	1,220		$	(31,576)		$	482,328


		December 31, 2024
	****			****	Gross		****	Gross		****
		Amortized			Unrealized			Unrealized			Fair
Held-to-maturity:		Cost			Gains			Losses			Value
U.S. Government-sponsored enterprises (GSEs)		$	48,112		$	—		$	(7,335)		$	40,777
Municipal securities			51,652			—			(7,037)			44,615
Mortgage-backed securities (GSEs)			26,895			—			(4,207)			22,688
Total		$	126,659		$	—		$	(18,579)		$	108,080

At June 30, 2025 and December 31, 2024, securities with a carrying value totaling approximately $446.4 million and $432.6 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

On investments for the three and six months ended June 30, 2025, the Company recorded no gross realized gains and $4 thousand in gross realized losses and for the three and six months ended June 30, 2024, there were no realized gross gains or gross losses recorded, respectively.

The amortized cost and estimated fair value of securities at June 30, 2025, by contractual maturity for non-mortgage-backed securities are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


		June 30, 2025
	****	Amortized		****	Fair
Available-for-sale:		Cost			Value
Due in one year or less		$	4,815		$	4,815
Due from one year to five years			98,528			93,514
Due from five years to ten years			63,791			62,366
Due after ten years			12,393			11,730
			179,527			172,425
Mortgage-backed securities			345,295			329,725
Total		$	524,822		$	502,150

Held-to-maturity:
Due in one year or less		$	—		$	—
Due from one year to five years			6,861			6,356
Due from five years to ten years			51,176			44,551
Due after ten years			40,588			34,696
			98,625			85,603
Mortgage-backed securities			25,895			22,531
Total		$	124,520		$	108,134

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities AFS and HTM have been in a continuous unrealized loss position (in thousands):


		June 30, 2025
		Less than 12 Months							12 Months or Greater							Total
	****			****	Gross		Number	****			****	Gross		Number	****			****	Gross		Number
		Fair			Unrealized		of		Fair			Unrealized		of		Fair			Unrealized		of
Available-for-sale:		Value			Losses		Securities		Value			Losses		Securities		Value			Losses		Securities
U.S. Treasury		$	—		$	—	—		$	77,818		$	(5,021)	9		$	77,818		$	(5,021)	9
U.S. Government-sponsored enterprises (GSEs)			3,427			(11)	2			6,495			(99)	5			9,922			(110)	7
Municipal securities			8,562			(424)	7			10,920			(418)	16			19,482			(842)	23
Other debt securities			3,183			(57)	3			22,712			(1,642)	19			25,895			(1,699)	22
Mortgage-backed securities (GSEs)			49,405			(551)	29			177,337			(16,588)	90			226,742			(17,139)	119
Total		$	64,577		$	(1,043)	41		$	295,282		$	(23,768)	139		$	359,859		$	(24,811)	180

		June 30, 2025
		Less than 12 Months							12 Months or Greater							Total
	****			****	Gross		Number	****			****	Gross		Number	****			****	Gross		Number
		Fair			Unrealized		of		Fair			Unrealized		of		Fair			Unrealized		of
Held-to-maturity:		Value			Losses		Securities		Value			Losses		Securities		Value			Losses		Securities
U.S. Government-sponsored enterprises (GSEs)		$	—		$	—	—		$	41,474		$	(6,020)	13		$	41,474		$	(6,020)	13
Municipal securities			—			—	—			44,129			(7,002)	35			44,129			(7,002)	35
Mortgage-backed securities (GSEs)			—			—	—			22,531			(3,364)	5			22,531			(3,364)	5
Total		$	—		$	—	—		$	108,134		$	(16,386)	53		$	108,134		$	(16,386)	53

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		December 31, 2024
		Less than 12 Months							12 Months or Greater							Total
	****			****	Gross		Number	****			****	Gross		Number	****			****	Gross		Number
		Fair			Unrealized		of		Fair			Unrealized		of		Fair			Unrealized		of
Available-for-sale:		Value			Losses		Securities		Value			Losses		Securities		Value			Losses		Securities
U.S. Treasury		$	—		$	—	—		$	76,226		$	(7,104)	9		$	76,226		$	(7,104)	9
U.S. Government-sponsored enterprises (GSEs)			9,069			(80)	4			4,813			(102)	4			13,882			(182)	8
Municipal securities			5,579			(59)	8			11,322			(528)	17			16,901			(587)	25
Other debt securities			4,425			(36)	3			28,294			(2,102)	24			32,719			(2,138)	27
Mortgage-backed securities (GSEs)			80,111			(939)	39			160,129			(20,626)	83			240,240			(21,565)	122
Total		$	99,184		$	(1,114)	54		$	280,784		$	(30,462)	137		$	379,968		$	(31,576)	191

		December 31, 2024
		Less than 12 Months							12 Months or Greater							Total
	****			****	Gross		Number	****			****	Gross		Number	****			****	Gross		Number
		Fair			Unrealized		of		Fair			Unrealized		of		Fair			Unrealized		of
Held-to-maturity:		Value			Losses		Securities		Value			Losses		Securities		Value			Losses		Securities
U.S. Government-sponsored enterprises (GSEs)		$	—		$	—	—		$	40,777		$	(7,335)	13		$	40,777		$	(7,335)	13
Municipal securities			—			—	—			44,615			(7,037)	35			44,615			(7,037)	35
Mortgage-backed securities (GSEs)			—			—	—			22,688			(4,207)	5			22,688			(4,207)	5
Total		$	—		$	—	—		$	108,080		$	(18,579)	53		$	108,080		$	(18,579)	53

For any securities classified as AFS that are in an unrealized loss position at the balance sheet date, the Company assesses whether it intends to sell the security, or more likely than not will be required to sell the security before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because the Company currently does not intend to sell those AFS securities that have an unrealized loss at June 30, 2025, and it is not likely that they will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value of AFS securities is the result of credit deterioration, which would require the recognition of an allowance for credit losses. The unrealized losses associated with available-for-sale securities at June 30, 2025, are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at June 30, 2025. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments.

The unrealized losses in the Company’s HTM portfolio were caused by changes in the interest rate environment. The Company has a zero-loss expectation for its U.S. Treasury securities in addition to U.S. Government-sponsored enterprises (GSEs) and mortgage-backed securities (GSEs), and accordingly, no allowance for credit losses is estimated for these securities. The HTM state and municipal securities are primarily general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt. All debt securities in an unrealized loss position as of June 30, 2025, continue to perform as scheduled and we do not believe an allowance for credit losses is necessary.

The Company utilizes bond credit ratings assigned by third party ratings agencies to monitor the credit quality of debt securities held-to-maturity. At June 30, 2025, all debt securities classified as held-to-maturity, with a published rating, were rated A+ or higher by the ratings agencies. Updated credit ratings are obtained as they become available from the ratings agencies.

Allowance for Credit Losses (“ACL”)

There were no past due or nonaccrual AFS or HTM securities at June 30, 2025, or December 31, 2024. Accrued interest receivable is excluded from the estimate of credit losses and based on the analysis of the underlying risk characteristics of 12

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

its AFS and HTM portfolios, including credit ratings and other qualitative factors, there was no provision for credit losses related to AFS or HTM securities recorded during the three and six months ended June 30, 2025, and 2024, respectively, because the ACL was deemed immaterial.

Other Investments:

Our other investments consist of restricted non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of June 30, 2025, the Company determined that there was no impairment on its other investment securities.

The following is the amortized cost and carrying value of other investments (in thousands):


		June 30,			December 31,
	****	2025		****	2024
Federal Reserve Bank stock		$	9,604		$	9,045
Federal Home Loan Bank stock			4,759			5,345
First National Bankers Bank stock			350			350
Total		$	14,713		$	14,740

Note 4. Loans and Leases and Allowance for Credit Losses

Portfolio Segmentation:

Major categories of loans and leases are summarized as follows (in thousands):


	June 30,		December 31,
	2025		2024
Commercial real estate:
Non-owner occupied	$	1,114,133	$	1,080,404
Owner occupied		958,989		867,678
Consumer real estate		803,270		741,836
Construction and land development		391,155		361,735
Commercial and industrial		778,754		775,620
Leases		62,495		64,878
Consumer and other		15,266		14,189
Total loans and leases		4,124,062		3,906,340
Less: Allowance for credit losses		(39,776)		(37,423)
Loans and leases, net	$	4,084,286	$	3,868,917

The loan and lease portfolio is disaggregated into segments. There are seven loan and lease portfolio segments which include commercial real estate non-owner occupied, commercial real estate owner occupied, consumer real estate, construction and land development, commercial and industrial, leases, and consumer and other.

The following describe risk characteristics relevant to each of the portfolio segments:

Commercial Real Estate – Non-Owner Occupied: Commercial real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Commercial Real Estate - Owner Occupied: Commercial real estate loans to operating businesses are long-term financing of land and buildings where the owner occupies the property. These loans are repaid by cash flow generated from the business operation.

Consumer Real Estate: Consumer real estate loans include real estate loans secured by first liens, second liens, or open end real estate loans, such as home equity lines. These are repaid by various means such as a borrower’s income, sale of the property, or rental income derived from the property. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Construction and Land Development: Loans for real estate construction and development are repaid through cash flow related to the operations, sale or refinance of the underlying property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Commercial and Industrial: The commercial and industrial loan portfolio segment includes commercial and financial loans. These loans include those loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or expansion projects. Loans are repaid by business cash flows. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the customers’ business operations.

Leases: The lease portfolio segment includes leases to small and mid-size companies for equipment financing leases. These leases are secured by a secured interest in the equipment being leased.

Consumer and Other: The consumer loan portfolio segment includes direct consumer installment loans, overdrafts and other revolving credit loans, and educational loans. Loans in this portfolio are sensitive to unemployment and other key consumer economic measures.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables detail the changes in the allowance for credit losses by loan and lease classification (in thousands):


	Three Months Ended June 30, 2025
	Commercial		Commercial
	Real Estate		Real Estate		Consumer		Construction		Commercial
	Non-Owner		Owner		Real		and ** Land**		and				Consumer
	Occupied		Occupied		Estate		Development		Industrial		Leases		and ** Other**		Total
Beginning balance	$	7,326	$	8,415	$	8,688	$	4,154	$	8,628	$	842	$	122	$	38,175
Charged-off loans and leases		—		—		—		—		(60)		(159)		(50)		(269)
Recoveries of charge-offs		—		1		—		—		99		3		20		123
Provision charged to expense ^(1)^		(72)		446		199		296		663		182		33		1,747
Ending balance	$	7,254	$	8,862	$	8,887	$	4,450	$	9,330	$	868	$	125	$	39,776


	Three Months Ended June 30, 2024
	Commercial		Commercial
	Real Estate		Real Estate		Consumer		Construction		Commercial
	Non-Owner		Owner		Real		and ** Land**		and				Consumer
	Occupied		Occupied		Estate		Development		Industrial		Leases		and ** Other**		Total
Beginning balance	$	6,454	$	8,389	$	7,246	$	4,704	$	6,641	$	657	$	112	$	34,203
Charged-off loans and leases		—		—		107		—		(222)		(245)		(97)		(457)
Recoveries of charge-offs		—		31		(75)		—		70		—		22		48
Provision charged to expense ^(2)^		564		192		265		(1,208)		745		258		80		896
Ending balance	$	7,018	$	8,612	$	7,543	$	3,496	$	7,234	$	670	$	117	$	34,690


	Six Months Ended June 30, 2025
	Commercial		Commercial
	Real Estate		Real Estate		Consumer		Construction		Commercial
	Non-Owner		Owner		Real		and Land		and				Consumer
	Occupied		Occupied		Estate		Development		Industrial		Leases		and Other		Total
Beginning balance	$	6,972	$	8,341	$	8,355	$	4,168	$	8,552	$	919	$	116	$	37,423
Charged-off loans and leases		—		—		—		—		(119)		(349)		(133)		(601)
Recoveries of charge-offs		—		3		—		200		122		3		35		363
Provision charged to expense ^(1)^		282		518		532		82		775		295		107		2,591
Ending balance	$	7,254	$	8,862	$	8,887	$	4,450	$	9,330	$	868	$	125	$	39,776


	Six Months Ended June 30, 2024
	Commercial		Commercial
	Real Estate		Real Estate		Consumer		Construction		Commercial
	Non-Owner		Owner		Real		and Land		and				Consumer
	Occupied		Occupied		Estate		Development		Industrial		Leases		and Other		Total
Beginning balance	$	6,846	$	8,418	$	7,249	$	4,874	$	6,924	$	640	$	115	$	35,066
Charged-off loans and leases		—		—		—		(441)		(423)		(322)		(191)		(1,377)
Recoveries of charge-offs		—		33		4		—		96		—		50		183
Provision charged to expense ^(2)^		172		161		290		(937)		637		352		143		818
Ending balance	$	7,018	$	8,612	$	7,543	$	3,496	$	7,234	$	670	$	117	$	34,690

(1)	In the provision expense in the consolidated statements of income there was a provision of $664 thousand and $800 thousand of unfunded commitments through the provision for credit losses not reflected in the three and six months ended June 30, 2025.
(2)	In the provision expense in the consolidated statements of income was a release of $13 thousand and $375 thousand of unfunded commitments through the provision for credit losses not reflected in the three and six months ended June 30, 2024.
---	---

We maintain the allowance for credit losses at a level that we deem appropriate to adequately cover the expected credit loss in the loan and lease portfolio. Our provision for credit losses on loan and lease for the three and six months ended June 30, 2025, was $1.7 million and $2.6 million, respectively, and $896 thousand and $818 thousand, during the three and six months ended June 30, 2024, respectively. As of June 30, 2025, and December 31, 2024, our allowance for credit losses was $39.8 million and $37.4 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for credit losses as a percentage of total loans and leases was 0.96% at June 30, 2025, and December 31, 2024.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A description of the general characteristics of the risk grades used by the Company is as follows:

Pass: Loans and leases in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan and lease obligations. Loans and leases in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the debt if required, for any weakness that may exist.

Watch: Loans and leases in this risk category involve borrowers that exhibit characteristics, or are operating under conditions that, if not successfully mitigated as planned, have a reasonable risk of resulting in a downgrade within the next six to twelve months. Loans and leases may remain in this risk category for six months and then are either upgraded or downgraded upon subsequent evaluation.

Special Mention: Loans and leases in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned” classification. Loans and leases in this category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and /or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the asset or in the Company’s credit position.

Substandard: Loans and leases in this risk grade are inadequately protected by the borrower’s current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans and leases in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined.

Uncollectible: Loans and leases in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan or lease has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan or lease, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken in the period in which the loan or lease becomes uncollectible. Consequently, the Company typically does not maintain a recorded investment in loans or leases within this category.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables outline the amount of each loan and lease classification and the amount categorized into each risk rating based on year of origination as of June 30, 2025, and December 31, 2024 (in thousands):


	June 30, 2025
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2025		2024		2023		2022		2021		Prior		Loans		to Term		Total
Commercial real estate - non-owner occupied
Pass	$	81,768	$	220,918	$	145,375	$	274,267	$	195,838	$	156,910	$	6,835	$	-	$	1,081,911
Watch		1,199		90		1,634		7,740		16,287		4,225		-		-		31,175
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		442		-		-		349		256		-		-		1,047
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied		82,967		221,450		147,009		282,007		212,474		161,391		6,835		-		1,114,133
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial real estate - owner occupied
Pass		98,302		150,101		121,199		286,059		148,170		128,970		12,567		51		945,419
Watch		885		3,113		3,058		1,150		-		656		748		-		9,610
Special mention		-		-		-		-		-		-		-		-		-
Substandard		309		-		-		-		3,275		376		-		-		3,960
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - owner occupied		99,496		153,214		124,257		287,209		151,445		130,002		13,315		51		958,989
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Consumer real estate
Pass		74,790		153,387		100,995		157,195		76,456		92,913		142,119		656		798,511
Watch		-		-		-		-		107		671		1,205		-		1,983
Special mention		-		-		-		-		-		49		-		-		49
Substandard		-		173		13		60		176		1,948		357		-		2,727
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer real estate		74,790		153,560		101,008		157,255		76,739		95,581		143,681		656		803,270
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Construction and land development
Pass		101,899		223,305		23,506		15,138		6,522		9,624		6,592		3,678		390,264
Watch		-		-		-		50		362		-		-		-		412
Special mention		-		452		-		-		-		-		-		-		452
Substandard		-		-		-		-		27		-		-		-		27
Doubtful		-		-		-		-		-		-		-		-		-
Total construction and land development		101,899		223,757		23,506		15,188		6,911		9,624		6,592		3,678		391,155
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial and industrial
Pass		76,531		112,575		104,365		116,558		38,583		40,025		264,013		377		753,027
Watch		-		932		98		99		123		-		22,141		-		23,393
Special mention		-		-		-		-		-		-		-		-		-
Substandard		20		8		31		455		1,520		175		125		-		2,334
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial		76,551		113,515		104,494		117,112		40,226		40,200		286,279		377		778,754
YTD gross charge-offs		-		-		(42)		(77)		-		-		-		-		(119)

Leases
Pass		12,940		20,625		13,502		12,603		2,114		711		-		-		62,495
Watch		-		-		-		-		-		-		-		-		-
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total leases		12,940		20,625		13,502		12,603		2,114		711		-		-		62,495
YTD gross charge-offs		-		(166)		(171)		(3)		-		(9)		-		-		(349)

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	June 30, 2025
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2025		2024		2023		2022		2021		Prior		Loans		to Term		Total
Consumer and other
Pass		3,434		2,559		1,120		767		292		432		6,654		-		15,258
Watch		-		5		-		-		-		-		-		-		5
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		2		-		1		-		-		-		-		3
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer and other		3,434		2,566		1,120		768		292		432		6,654		-		15,266
YTD gross charge-offs		(10)		(42)		(25)		(9)		(9)		(38)		-		-		(133)

Total loans
Pass		449,664		883,470		510,062		862,587		467,975		429,585		438,780		4,762		4,046,885
Watch		2,084		4,140		4,790		9,039		16,879		5,552		24,094		-		66,578
Special mention		-		452		-		-		-		49		-		-		501
Substandard		329		625		44		516		5,347		2,755		482		-		10,098
Doubtful		-		-		-		-		-		-		-		-		-
Total loans	$	452,077	$	888,687	$	514,896	$	872,142	$	490,201	$	437,941	$	463,356	$	4,762	$	4,124,062
Total YTD gross charge-offs	$	(10)	$	(208)	$	(238)	$	(89)	$	(9)	$	(47)	$	-	$	-	$	(601)


	December 31, 2024
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2024		2023		2022		2021		2020		Prior		Loans		to Term		Total
Commercial real estate - non-owner occupied
Pass	$	241,022	$	118,055	$	286,728	$	228,554	$	85,754	$	97,319	$	8,295	$	696	$	1,066,423
Watch		-		1,637		6,769		278		-		4,275		-		-		12,959
Special mention		-		-		-		-		-		-		-		-		-
Substandard		470		-		-		-		301		251		-		-		1,022
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied		241,492		119,692		293,497		228,832		86,055		101,845		8,295		696		1,080,404
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial real estate - owner occupied
Pass		145,848		118,233		275,328		155,119		62,755		78,934		12,368		198		848,783
Watch		1,451		2,814		2,398		1,251		1,676		364		744		-		10,698
Special mention		3,147		-		-		-		-		-		-		-		3,147
Substandard		-		332		-		3,303		305		365		745		-		5,050
Doubtful		-		-				-		-		-		-		-		-
Total commercial real estate - owner occupied		150,446		121,379		277,726		159,673		64,736		79,663		13,857		198		867,678
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Consumer real estate
Pass		151,786		105,416		154,956		82,463		47,122		61,844		131,267		2,099		736,953
Watch		-		81		-		109		258		420		1,241		-		2,109
Special mention		-		-		-		-		-		50		-		-		50
Substandard		184		-		61		311		-		1,854		314		-		2,724
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer real estate		151,970		105,497		155,017		82,883		47,380		64,168		132,822		2,099		741,836
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Construction and land development
Pass		199,160		74,200		51,438		6,146		2,168		9,562		12,392		89		355,155
Watch		2,477		-		105		3,015		-		-		-		-		5,597
Special mention		515		-		-		-		-		-		-		-		515
Substandard		262		-		-		68		-		138		-		-		468
Doubtful		-		-		-		-		-		-		-		-		-
Total construction and land development		202,414		74,200		51,543		9,229		2,168		9,700		12,392		89		361,735
YTD gross charge-offs		-		-		-		-		(441)		-		-		-		(441)

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	December 31, 2024
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2024		2023		2022		2021		2020		Prior		Loans		to Term		Total
Commercial and industrial
Pass		130,898		128,646		133,782		43,299		17,716		26,933		282,695		3,239		767,208
Watch		103		107		119		2,807		-		-		2,865		14		6,015
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		40		455		1,657		129		46		9		61		2,397
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial		131,001		128,793		134,356		47,763		17,845		26,979		285,569		3,314		775,620
YTD gross charge-offs		-		(618)		(235)		-		-		-		(29)		(46)		(928)

Leases
Pass		25,371		18,285		16,299		3,601		1,019		303		-		-		64,878
Watch		-		-		-		-		-		-		-		-		-
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total leases		25,371		18,285		16,299		3,601		1,019		303		-		-		64,878
YTD gross charge-offs		(74)		(619)		(589)		(1)		(1)		(28)		-		-		(1,312)

Consumer and other
Pass		4,385		1,932		922		387		284		238		6,024		-		14,172
Watch		4		-		-		-		-		-		-		-		4
Special mention		-		-		-		-		-		-		-		-		-
Substandard		11		-		-		-		-		2		-		-		13
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer and other		4,400		1,932		922		387		284		240		6,024		-		14,189
YTD gross charge-offs		(24)		(84)		(61)		(37)		(53)		(77)		-		-		(336)

Total loans
Pass		898,470		564,767		919,453		519,569		216,818		275,133		453,041		6,321		3,853,572
Watch		4,035		4,639		9,391		7,460		1,934		5,059		4,850		14		37,382
Special mention		3,662		-		-		-		-		50		-		-		3,712
Substandard		927		372		516		5,339		735		2,656		1,068		61		11,674
Doubtful		-		-		-		-		-		-		-		-		-
Total loans	$	907,094	$	569,778	$	929,360	$	532,368	$	219,487	$	282,898	$	458,959	$	6,396	$	3,906,340
Total YTD gross charge-offs	$	(98)	$	(1,321)	$	(885)	$	(38)	$	(495)	$	(105)	$	(29)	$	(46)	$	(3,017)

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Past Due Loans and Leases:

A loan or lease is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan or lease agreement. Generally, management places a loan or lease on nonaccrual when there is a clear indicator that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan or lease is 90 days past due.

The following tables present an aging analysis of our loan and lease portfolio (in thousands):


		June 30, 2025
	****			****			****	90 Days		****			****					****
	****	30-59 Days		****	60-89 Days		****	or More		****	Total		****	Loans Not		Total		****
	****	Past Due		****	Past Due		****	Past Due			Past Due			Past Due		Loans
Commercial real estate:
Non-owner occupied		$	—		$	469		$	—		$	469		$	1,113,664	$	1,114,133
Owner occupied			1,443			—			572			2,015			956,974		958,989
Consumer real estate			501			486			516			1,503			801,767		803,270
Construction and land development			—			—			—			—			391,155		391,155
Commercial and industrial			781			172			898			1,851			776,903		778,754
Leases			1,051			607			3,537			5,195			57,300		62,495
Consumer and other			135			6			32			173			15,093		15,266
Total		$	3,911		$	1,740		$	5,555		$	11,206		$	4,112,856	$	4,124,062


		December 31, 2024
	****			****			****	90 Days		****			****					****
	****	30-59 Days		****	60-89 Days		****	or More		****	Total		****	Loans Not		Total		****
	****	Past Due		****	Past Due		****	Past Due			Past Due			Past Due		Loans
Commercial real estate:
Non-owner occupied		$	378		$	—		$	263		$	641		$	1,079,763		1,080,404
Owner occupied			731			47			539			1,317			866,361		867,678
Consumer real estate			2,258			826			764			3,848			737,988		741,836
Construction and land development			523			—			—			523			361,212		361,735
Commercial and industrial			1,417			367			1,636			3,420			772,200		775,620
Leases			1,645			—			2,118			3,763			61,115		64,878
Consumer and other			96			24			18			138			14,051		14,189
Total		$	7,048		$	1,264		$	5,338		$	13,650		$	3,892,690	$	3,906,340

The table below presents the amortized cost basis of loans on nonaccrual status and loans past due 90 or more days and still accruing interest at June 30, 2025 and December 31, 2024. Also presented is the balance of loans on nonaccrual status at June 30, 2025 and December 31, 2024, for which there was no related allowance for credit losses is recorded (in thousands):


		June 30, 2025									December 31, 2024
	****	Total		****	Nonaccrual		****	Loans Past Due		****	Total		****	Nonaccrual		****	Loans Past Due
	****	Nonaccrual		****	With No Allowance		****	Over 90 Days			Nonaccrual			With No Allowance			Over 90 Days
	****	Loans		****	for Credit Losses		****	Still Accruing			Loans			for Credit Losses			Still Accruing
Commercial real estate:
Non-owner occupied		$	572		$	—		$	—		$	514		$	263		$	—
Owner occupied			915			572			—			906			539			—
Consumer real estate			1,233			175			—			1,995			752			—
Construction and land development			—			—			—			39			—			—
Commercial and industrial			2,612			—			—			1,820			—			144
Leases			2,556			—			—			2,433			—			—
Consumer and other			1			—			32			2			—			18
Total		$	7,889		$	747		$	32		$	7,709		$	1,554		$	162

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses (in thousands):


		June 30, 2025
	****	Real Estate		****	Other		****	Total
Commercial real estate:
Non-owner occupied		$	442		$	—		$	442
Owner occupied			3,577			—			3,577
Consumer real estate			1,019			—			1,019
Construction and land development			—			—			—
Commercial and industrial			—			2,149			2,149
Leases			—			528			528
Consumer and other			—			—			—
Total		$	5,038		$	2,677		$	7,715

		December 31, 2024
	****	Real Estate		****	Other		****	Total
Commercial real estate:
Non-owner occupied		$	733		$	—		$	733
Owner occupied			4,636			—			4,636
Consumer real estate			1,139			—			1,139
Construction and land development			262			—			262
Commercial and industrial			—			2,286			2,286
Leases			—			534			534
Consumer and other			—			—			—
Total		$	6,770		$	2,820		$	9,590

Loan Modifications to Borrowers Experiencing Financial Difficulty:

The table below shows the amortized cost of loans and leases made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2025, and 2024, respectively. (dollars in thousands):


	****			****			****	Payment Delay
	****	Payment		****	Term		****	and Term
Three Months Ended June 30, 2025		Delay		****	Extension			Extension		Total
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—	$	—
Owner occupied			—			—			—		—
Consumer real estate			—			58			—		58
Construction and land development			—			—			—		—
Commercial and industrial			—			—			—		—
Leases			—			—			—		—
Consumer and other			—			—			—		—
Total		$	—		$	58		$	—	$	58

	****
Six Months Ended June 30, 2025
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—	$	—
Owner occupied			—			—			—		—
Consumer real estate			—			58			—		58
Construction and land development			—			—			—		—
Commercial and industrial			—			20			—		20
Leases			—			—			—		—
Consumer and other			—			—			—		—
Total		$	—		$	78		$	—	$	78

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	****			****			****	Payment Delay
	****	Payment		****	Term		****	and Term
Three Months Ended June 30, 2024		Delay		****	Extension			Extension		Total
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—	$	—
Owner occupied			—			228			—		228
Consumer real estate			—			—			—		—
Construction and land development			—			—			—		—
Commercial and industrial			—			—			—		—
Leases			—			—			—		—
Consumer and other			—			—			—		—
Total		$	—		$	228		$	—	$	228

	****
Six Months Ended June 30, 2024
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—	$	—
Owner occupied			—			428			—		428
Consumer real estate			—			—			—		—
Construction and land development			—			—			—		—
Commercial and industrial			—			—			—		—
Leases			—			—			—		—
Consumer and other			—			—			—		—
Total		$	—		$	428		$	—	$	428

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and 2024, respectively. (dollars in thousands):


		Weighted-Average
	****	Term
	****	Extension
Three Months Ended June 30, 2025		(in months)
Commercial real estate:
Non-owner occupied			—
Owner occupied			—
Consumer real estate			114
Construction and land development			—
Commercial and industrial			—
Leases			—
Consumer and other			—

	****
Six Months Ended June 30, 2025
Commercial real estate:
Non-owner occupied			—
Owner occupied			—
Consumer real estate			114
Construction and land development			—
Commercial and industrial			36
Leases			—
Consumer and other			—

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		Weighted-Average
	****	Term
	****	Extension
Three Months Ended June 30, 2024		(in months)
Commercial real estate:
Non-owner occupied			—
Owner occupied			64
Consumer real estate			—
Construction and land development			—
Commercial and industrial			—
Leases			—
Consumer and other			—

	****
Six Months Ended June 30, 2024
Commercial real estate:
Non-owner occupied			—
Owner occupied			35
Consumer real estate			—
Construction and land development			—
Commercial and industrial			—
Leases			—
Consumer and other			—

No loan modifications made to borrowers experiencing financial difficulty in the past twelve months defaulted during the three and six months ended June 30, 2025, and 2024, respectively.

The table below shows an age analysis of loans and leases made to borrowers experiencing financial difficulty that were modified in the last twelve months, (in thousands):


		June 30, 2025
	****			****			****	90 Days		****			****
	****			****	30-89 Days		****	or More		****			****
	****	Current		****	Past Due		****	Past Due			Nonaccrual			Total
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—		$	—		$	—
Owner occupied			—			—			—			—			—
Consumer real estate			—			—			—			135			135
Construction and land development			—			—			—			—			—
Commercial and industrial			10			—			—			27			37
Leases			—			—			—			—			—
Consumer and other			—			—			—			—			—
Total		$	10		$	—		$	—		$	162		$	172

Foreclosure Proceedings and Balances:

As of June 30, 2025, there was no residential real estate property secured by real estate included in other real estate owned and there were no residential real estate loans in the process of foreclosure.

Note 5. Goodwill and Intangible Assets

In accordance with FASB ASC No. 2021-03,“Goodwill and Other (Topic 350),” regarding testing goodwill for impairment provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs its annual goodwill impairment test as of December 31 of each year, or more frequently if conditions warrant it. There were no conditions present to test goodwill at June 30, 2025. 23

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The Company’s other intangible assets consist of core deposit intangibles and customer relationship intangibles. They are initially recognized based on a valuation performed as of the consummation date. The core deposit intangible is amortized over the average remaining life of the acquired customer deposits, the insurance agency customer relationships are amortized over 14 years and the leasing company’s client list is amortized over 8 years.

The carrying amount of goodwill at June 30, 2025, and December 31, 2024, was $96.1 million.

Other intangible assets as of the dates indicated is summarized below (in thousands):


	Core Deposit		****	Customer Relationships		****			****
Amortized other intangible assets:	Intangibles			Intangibles			Total
June 30, 2025:
Beginning balance January 1, 2025, gross	$	17,470		$	5,670		$	23,140
Less: accumulated amortization		(12,252)			(3,445)			(15,697)
Balance, June 30, 2025, other intangible assets, net	$	5,218		$	2,225		$	7,443

December 31, 2024:
Beginning balance January 1, 2024, gross	$	17,470		$	5,670		$	23,140
Less: accumulated amortization		(11,435)			(3,127)			(14,562)
Balance, December 31, 2024, other intangible assets, net	$	6,035		$	2,543		$	8,578

The aggregate amortization expense for other intangible assets for the three and six months ended June 30, 2025, was $566 thousand and $1.1 million, respectively, and for the three and six months ended June 30, 2024, was $608 thousand and $1.2 million, respectively.

As of June 30, 2025, the estimated aggregate amortization expense for future periods for intangibles is as follows (in thousands):


Remainder of 2025	$	1,120
2026		2,086
2027		1,904
2028		1,139
2029		669
Thereafter		525
Total	$	7,443

Note 6. Borrowings, Line of Credit and Subordinated Debt

Borrowings:

At June 30, 2025, total borrowings were $7.0 million compared to $8.1 million at December 31, 2024. Borrowings consist of the following (in thousands):


	June 30,		December 31,
	2025		2024
Securities sold under customer repurchase agreements	$	2,966	$	4,135
Other borrowings		4,000		4,000
Total	$	6,966	$	8,135

Securities Sold Under Agreements to Repurchase:

Securities sold under repurchase agreements, which are secured borrowings, generally mature within one to four days from the transaction date. Securities sold under repurchase agreements are reflected at the amount of cash received in connection 24

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with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. The Company monitors the fair value of the underlying securities on a daily basis.

The Company had securities sold under agreements to repurchase with commercial checking customers which were secured by government agency securities. The carrying value of investment securities pledged as collateral under repurchase agreements was $6.2 million and $6.5 million at June 30, 2025 and December 31, 2024, respectively. The average balance of repurchase agreements during the six-month period ended June 30, 2025, and 2024 was $4.0 million and $5.1 million, respectively. The maximum month-end outstanding balance for the six-month period ended June 30, 2025, and 2024 was $4.5 million and $5.8 million, respectively.

Other Borrowings:

The Company has a revolving line of credit for an aggregate amount of $35 million. The maturity of the line of credit is May 1, 2027. At June 30, 2025, and December 31, 2024, $4.0 million was outstanding under the line of credit.

Subordinated Debt:

On September 28, 2018, the Company issued $40 million of 5.625% fixed-to-floating rate subordinated notes (the "Notes"), which were outstanding as of June 30, 2025 and December 31, 2024. Unamortized debt issuance cost was $274 thousand and $316 thousand at June 30, 2025 and December 31, 2024, respectively.

The Notes initially bore interest at a rate of 5.625% per annum from and including September 28, 2018, to but excluding October 2, 2023, with interest during this period payable semi-annually in arrears. As of October 2, 2023, to but excluding the maturity date or early redemption date, the interest rate has, with the sunset of the London Inter-bank Offered Rate, reset quarterly to an annual floating rate equal to three-month Chicago Mercantile Exchange published term Secured Overnight Financing Rate (“SOFR”), plus 281.161 basis points, with interest during this period payable quarterly in arrears. The Notes are redeemable by the Company, in whole or in part, on or after October 2, 2023, and at any time, in whole but not in part, upon the occurrence of certain events. The Notes have been structured to qualify initially as Tier 2 capital for the Company for regulatory capital purposes.

The Notes’ unamortized debt issuance costs totaled $274 thousand at June 30, 2025 and will be amortized through the Notes’ maturity date. Amortization expense totaled $21 thousand and $42 thousand for the three and six months ended June 30, 2025, and 2024, respectively.

Note 7. Employee Benefit Plans

401(k) Plan:

The Company provides a deferred salary reduction plan (“Plan”) under Section 401(k) of the Internal Revenue Code covering substantially all employees. After 90 days of service, the Company matches 100% of employee contributions up to 3% of compensation and 50% of employee contributions on the next 2% of compensation. The Company’s contribution to the Plan for the three and six month periods ending June 30, 2025, was $467 thousand and $1.0 million, respectively. The Company’s contribution to the Plan for the three and six months ended June 30, 2024, was $455 thousand and $955 thousand, respectively.

Equity Incentive Plans:

The Compensation Committee of the Company’s board of directors may grant or award eligible participants stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards or any combination of awards (collectively referred to herein as "Rights"). At June 30, 2025, the Company had one active equity incentive plan available for future grants, the Omnibus Incentive Plan, which was approved on May 22, 2025, and has 1,690,000 Rights available for future grants or awards. 25

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The Company’s 2015 Stock Incentive Plan expired on March 23, 2025, and has 5,945 Rights issued.

Stock Options:

A summary of the status of stock option plans is presented in the following table:


	****		****	Weighted
				Average
				Exercisable
		Number		Price
Outstanding at December 31, 2024	****	10,148		$	15.05
Granted		—			—
Exercised		(4,203)			15.05
Forfeited		—			—
Outstanding at June 30, 2025	****	5,945		$	15.05

Information pertaining to stock options outstanding at June 30, 2025, is as follows:


			Options Outstanding							Options Exercisable
		****		****	Weighted-	****			****		****
					Average		Weighted-					Weighted-
					Remaining		Average					Average
Exercise			Number		Contractual		Exercise			Number		Exercise
Prices			Outstanding		Life		Price			Exercisable		Price
$	15.05		5,945		0.25 years		$	15.05		5,945		$	15.05

Outstanding, end of period			5,945		0.25 years		$	15.05		5,945		$	15.05

The Company did not recognize any stock option-based compensation expense during the three and six months ended June 30, 2025, and 2024, respectively, as all stock options issued are fully vested, and no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plan.

No stock options were exercised during the three months ended June 30, 2025. Stock options of 4,203 shares were exercised during the six month period ended June 30, 2025. No stock options were exercised during the three months ended June 30, 2024. Stock options of 4,500 shares were exercised during the six month period ended June 30, 2024. The income tax benefit recognized for the exercise of options during the six months ended June 30, 2025, and 2024, was a benefit of $3 and $14 thousand, respectively.

No stock options were exercised during the three months ended June 30, 2025, and 2024. The intrinsic value of options exercised during the six months ended June 30, 2025, and 2024, was $77 thousand and $54 thousand, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at June 30, 2025, was $111 thousand. Cash received from options exercised under all share-based payment arrangements for the six months ended June 30, 2025, was $63 thousand.

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Restricted Stock Awards:

A summary of the activity of the Company’s unvested restricted stock awards for the period ended June 30, 2025, is presented below:


	****		****	Weighted
				Average
				Grant-Date
		Number		Fair Value
Outstanding at December 31, 2024	****	195,859		$	23.02
Granted		97,408			35.19
Vested		(53,996)			22.09
Forfeited/expired		(1,287)			24.55
Outstanding at June 30, 2025	****	237,984		$	28.21

The Company measures the fair value of restricted stock awards based on the price of the Company’s common stock on the grant date, and compensation expense is recorded over the vesting period. The compensation expense for restricted stock awards during the three and six months ended June 30, 2025, was $473 thousand and $1.2 million, respectively, and was $376 thousand and $894 thousand, during the three and six months ended June 30, 2024, respectively. As of June 30, 2025, there was $3.8 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. The cost is expected to be recognized over a weighted average period of 2.61 years. The grant-date fair value of restricted stock awards vested was $1.2 million for the six months ended June 30, 2025.

Stock Appreciation Rights (“SARs”):

At June 30, 2025, there are no outstanding SARs.

There was no SARs compensation expense for the three and six months ended June 30, 2025, and $22 thousand and ($34) thousand for the three and six months ended June 30, 2024. The credit adjustment for the six month ended June 30, 2024, was due to adjustments related to the fair value evaluation of SARs.

Note 8. Commitments and Contingent Liabilities

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing and depository needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized on the balance sheet. The majority of all commitments to extend credit are variable rate instruments while the standby letters of credit are primarily fixed rate instruments. The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

A summary of the Company’s total contractual amount for all off-balance sheet commitments are as follows (in thousands):


	June 30,		December 31,
	2025		2024
Commitments to extend credit	$	957,162	$	828,755
Standby letters of credit		19,487		23,246

At June 30, 2025, and December 31, 2024, the allowance for credit losses for these off-balance sheet commitments was $3.3 million and $2.5 million, respectively. The provision expense (credit) related to the allowance for off-balance sheet commitments during the three and six months ended June 30, 2025, was $664 thousand and $800 thousand, respectively, 27

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and was ($13) thousand and ($375) thousand, respectively, during the three and six months ended June 30, 2024, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial properties.

Standby letters of credit issued by the Company are conditional commitments to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral held varies and is required in instances which the Company deems necessary. At June 30, 2025 and December 31, 2024, the carrying amount of liabilities related to the Company’s obligation to perform under standby letters of credit was insignificant.

The Company is subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company will be material to the Company’s consolidated financial position. On an on-going basis, the Company assesses any potential liabilities or contingencies in connection with such legal proceedings. For those matters where it is deemed probable that the Company will incur losses and the amount of the losses can be reasonably estimated, the Company would record an expense and corresponding liability in its consolidated financial statements.

Note 9. Fair Value Disclosures

Determination of Fair Value:

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the “Fair Value Measurements and Disclosures” ASC Topic 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact business at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy:

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. 28

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Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following methodologies were used by the Company in estimating fair value disclosures for financial instruments measured on a recurring basis:

Securities available-for-sale – The fair value of U.S. Treasury, U.S. Government-sponsored enterprises, municipal securities, other debt securities and mortgage-backed securities, is estimated using a third-party pricing service. The third party provider evaluates securities based on comparable investments with trades and market data and will utilize pricing models that use a variety of inputs, such as benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers as needed. These securities are generally classified as Level 2.

Derivative financial instruments and interest rate swap agreements – The fair value for derivative financial instruments and interest rate swap agreements is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters. The derivative financial instruments are generally classified Level 2.

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Recurring Measurements of Fair Value:

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis (in thousands):


	****			****	Quoted Prices in		****	Significant		****	Significant
					Active Markets			Other			Other
					for Identical			Observable			Unobservable
					Assets			Inputs			Inputs
Description		Fair Value			(Level 1)			(Level 2)			(Level 3)
June 30, 2025:
Assets:
Securities available-for-sale:
U.S. Treasury		$	77,818		$	—		$	77,818		$	—
U.S. Government-sponsored enterprises (GSEs)			34,668			—			34,668			—
Municipal securities			21,024			—			21,024			—
Other debt securities			38,915			—			38,915			—
Mortgage-backed securities (GSEs)			329,725			—			329,725			—
Total securities available-for-sale			502,150			—			502,150			—

Derivative financial instruments and interest rate swap agreements			13,528			—			13,528			—
Total assets at fair value		$	515,678		$	—		$	515,678		$	—

Liabilities:
Derivative financial instruments and interest rate swap agreements		$	13,881		$	—		$	13,881		$	—

December 31, 2024:
Assets:
Securities available-for-sale:
U.S. Treasury		$	76,226		$	—		$	76,226		$	—
U.S. Government-sponsored enterprises (GSEs)			39,188			—			39,188			—
Municipal securities			17,690			—			17,690			—
Other debt securities			39,435			—			39,435			—
Mortgage-backed securities (GSEs)			309,789			—			309,789			—
Total securities available-for-sale			482,328			—			482,328			—

Derivative financial instruments and interest rate swap agreements			12,135			—			12,135			—
Total assets at fair value		$	494,463		$	—		$	494,463		$	—

Liabilities:
Derivative financial instruments and interest rate swap agreements		$	13,198		$	—		$	13,198		$	—

During the six months ending June 30, 2025, and twelve months ended December 31, 2024, there were no transfers between Level 1 and Level 2 or into or out of Level 3 in the fair value hierarchy.

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Assets Measured at Fair Value on a Nonrecurring Basis:

Under certain circumstances management adjusts fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The following tables present the financial instruments carried on the consolidated balance sheets by caption and by level in the fair value hierarchy, for which a nonrecurring change in fair value has been recorded (in thousands):


	****			****	Quoted Prices in		****	Significant		****	Significant
					Active Markets			Other			Other
					for Identical			Observable			Unobservable
					Assets			Inputs			Inputs
		Fair Value			(Level 1)			(Level 2)			(Level 3)
June 30, 2025:
Collateral-dependent loans		$	1,281		$	—		$	—		$	1,281

December 31, 2024:
Collateral-dependent loans		$	1,813		$	—		$	—		$	1,813

For Level 3 assets measured at fair value on a non-recurring basis, the significant unobservable inputs used in the fair value measurements are presented below (dollars in thousands):


****	****			****		****		****	Weighted
					Valuation		Significant Other		Average of
		Fair Value			Technique		Unobservable Input		Input
June 30, 2025:
Collateral-dependent loans		$	1,281		Appraisal		Appraisal discounts		75	%

December 31, 2024:
Collateral-dependent loans		$	1,813		Appraisal		Appraisal discounts		68	%

Collateral-dependent loans: A collateral-dependent loan is measured based on the fair value of the collateral securing these loans, less selling costs. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. The Company determines the value of the collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. Collateral-dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors discussed above. The amount of valuation allowance on all collateral-dependent loans was $3.9 million as of June 30, 2025, and December 31, 2024, respectively.

Other real estate owned: Other real estate owned, consisting of properties obtained through foreclosure or in satisfaction of loans, are initially recorded at fair value less estimated costs to sell upon transfer of the loans to other real estate. Subsequently, other real estate is carried at the lower of carrying value or fair value less costs to sell. Fair values are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes further discounted based on management’s historical knowledge, and/or changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts are typically significant unobservable inputs for determining fair value. In cases

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where the carrying amount exceeds the fair value, less estimated costs to sell, the difference is recognized in noninterest expense.

Carrying value and estimated fair value:

The carrying amount and estimated fair value of the Company’s financial instruments are as follows (in thousands):


		Fair Value Measurements Using
	****	Carrying		****			****			****			****	Estimated
		Amount			Level 1			Level 2			Level 3			Fair Value
June 30, 2025:
Assets:
Cash and cash equivalents		$	365,096		$	365,096		$	—		$	—		$	365,096
Securities available-for-sale			502,150			—			502,150			—			502,150
Securities held-to-maturity			124,520			—			108,134			—			108,134
Other investments			14,713			N/A			N/A			N/A			N/A
Loans and leases, net and loans held for sale			4,089,770			—			—			4,003,963			4,003,963
Derivative financial instruments and interest rate swap agreements			13,528			—			13,528			—			13,528

Liabilities:
Noninterest-bearing demand deposits			906,965			—			906,965			—			906,965
Interest-bearing demand deposits			843,820			—			843,820			—			843,820
Money market and savings deposits			2,124,623			—			2,124,623			—			2,124,623
Time deposits			996,712			—			996,945			—			996,945
Borrowings			6,966			—			6,966			—			6,966
Subordinated debt			39,726			—			—			38,090			38,090
Derivative financial instruments and interest rate swap agreements			13,881			—			13,881			—			13,881

December 31, 2024:	****			****			****			****			****
Assets:
Cash and cash equivalents		$	387,570		$	387,570		$	—		$	—		$	387,570
Securities available-for-sale			482,328			—			482,328			—			482,328
Securities held-to-maturity			126,659			—			108,080						108,080
Other investments			14,740			N/A			N/A			N/A			N/A
Loans and leases, net and loans held for sale			3,874,913			—			—			3,768,452			3,768,452
Derivative financial instruments and interest rate swap agreements			12,135			—			12,135			—			12,135

Liabilities:
Noninterest-bearing demand deposits			965,552			—			965,552			—			965,552
Interest-bearing demand deposits			836,731			—			836,731			—			836,731
Money market and savings deposits			2,039,560			—			2,039,560			—			2,039,560
Time deposits			844,640			—			844,694			—			844,694
Borrowings			8,135			—			8,135			—			8,135
Subordinated debt			39,684			—			—			38,043			38,043
Derivative financial instruments and interest rate swap agreements			13,198			—			13,198			—			13,198

Limitations:

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Note 10.Derivatives Financial Instruments

Derivatives designated as fair value hedges:

Financial derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative net investment hedge instrument as well as the offsetting gain or loss on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of certain fixed rate securities designated as available-for-sale. The hedging strategy converts the fixed interest rates to SOFR-based variable interest rates. These derivatives are designated as partial term hedges covering specified periods of time prior to the maturity date of the hedged securities. The Company adopted ASU 2017-12, “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities” in 2018, which allows such partial term hedge designations.

A summary of the Company’s fair value hedge relationships for the periods presented are as follows (dollars in thousands):


	****		****	Weighted	****		****		****			****		****
				Average										****
		Balance		Remaining		Weighted								****
		Sheet		Maturity		Average		Receive		Notional			Estimated
Asset/Liability derivatives		Location		(In Years)		Pay Rate		Rate		Amount			Fair Value
June 30, 2025:
Interest rate swap agreements - securities		Other liabilities		1.20		4.31	%	SOFR		$	51,507		$	(394)

December 31, 2024:
Interest rate swap agreements - securities		Other liabilities		1.70		4.31	%	SOFR		$	51,507		$	(224)

The effects of the Company’s fair value hedge relationships reported in interest income on taxable securities on the consolidated income statement were as follows (in thousands):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
	****	2025		2024		2025		2024
Interest income on taxable securities		$	4,846	$	5,177	$	9,620	$	9,620
Effects of fair value hedge relationships			2		143		3		249
Reported interest income on taxable securities		$	4,848	$	5,320	$	9,623	$	9,869


		Three Months Ended				Six Months Ended
		June 30,				June 30,
Gain (loss) on fair value hedging relationship	****	2025		2024		2025		2024
Interest rate swap agreements - securities:
Hedged items		$	(14)	$	123	$	(394)	$	114
Derivative designated as hedging instruments			14		(123)		394		(114)
Carry amount of hedged assets - mortgage-backed securities			48,617		47,132		48,617		47,132

Derivatives Designated as Cash Flow Hedges:

The Company enters into interest rate derivative contracts on assets and liabilities that are designated as qualifying cash flow hedges. The Company hedges the exposure to variability in expected future cash flows attributable to changes in contractual specified interest rates. To qualify for hedge accounting, a formal assessment is prepared to determine whether 33

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

the hedging relationship, both at inception and on an ongoing basis, is expected to be highly effective in offsetting cash flows attributable to the hedged risk. At inception, a statistical regression analysis is prepared to determine hedge effectiveness. At each reporting period thereafter, a statistical regression or qualitative analysis is performed. If it is determined that hedge effectiveness has not been or will not continue to be highly effective, then hedge accounting ceases and any gain or loss in accumulated other comprehensive income (“AOCI”) is recognized in earnings immediately. The cash flow hedges are recorded at fair value in other assets and liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax, see – Consolidated Statements of Comprehensive Income (Loss). Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the earnings effect of the hedged asset or liability, as future interest payments are made on the underlying assets. At June 30, 2025, the Company estimates that there will not be any reclassifications into interest income or interest expense over the next 12 months.

At June 30, 2025 and December 31, 2024, cash flow hedges are as follows (in thousands):


	June 30, 2025					December 31, 2024
	Balance Sheet	Notional		Estimated		Balance Sheet	Notional		Estimated
	Location	Amount		Fair Value		Location	Amount		Fair Value
Cash flow hedges:
Assets	Other assets	$	100,000	$	41	Other assets	$	-	$	-
Assets	Other liabilities		-		-	Other liabilities		100,000		(559)
Liabilities	Other assets		25,000		-	Other assets		-		-
Liabilities	Other liabilities		-		-	Other liabilities		150,000		(280)

The following table presents the effect of fair value and cash flow hedge accounting on AOCI (in thousands):


Derivatives in cash flow hedging relationships:		Amount of Gain (Loss) Recognized on OCI on Derivative	Location of Gain or (Loss) Recognized from AOCI into Income		Amount of Gain or (Loss) Reclassified from AOCI into Income
Three Months Ended June 30, 2025
Interest rate swaps - Assets	$	213	Interest income	$	(14)
Interest rate swaps - Liabilities		79	Interest expense		(74)

Three Months Ended June 30, 2024
Interest rate swaps - Assets	$	(80)	Interest income	$	(202)
Interest rate swaps - Liabilities		102	Interest expense		254

Six Months Ended June 30, 2025
Interest rate swaps - Assets	$	600	Interest income	$	(2)
Interest rate swaps - Liabilities		280	Interest expense		(237)

Six Months Ended June 30, 2024
Interest rate swaps - Assets	$	(1,201)	Interest income	$	(406)
Interest rate swaps - Liabilities		309	Interest expense		496

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents the effect of fair value and cash flow hedge accounting on the income statement (in thousands):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
	****	2025		2024		2025		2024
Total interest income		$	69,467	$	61,487	$	135,832	$	121,473
Effects of cash flow hedge relationships			(14)		(202)		(2)		(406)
Reported total interest income		$	69,453	$	61,285	$	135,830	$	121,067

Total interest expense		$	29,036	$	28,725	$	57,011	$	57,028
Effects of cash flow hedge relationships			74		(254)		237		(496)
Reported total interest expense		$	29,110	$	28,471	$	57,248	$	56,532

Non-hedged derivatives:

The Company provides a loan hedging program to certain loan customers. Through this program, the Company originates a variable rate loan with the customer. The Company and the customer will then enter into a fixed interest rate swap. Lastly, an identical offsetting swap is entered into by the Company with a dealer bank. These “back-to-back” swap arrangements are intended to offset each other and allow the Company to book a variable rate loan, while providing the customer with a contract for fixed interest payments. In these arrangements, the Company’s net cash flow is equal to the interest income received from the variable rate loan originated with the customer. These customer swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. Since the income statement impact of the offsetting positions is limited, any changes in fair value are recognized as other noninterest income in the current period.

At June 30, 2025, and December 31, 2024, interest rate swaps related to the Company’s loan hedging program that were outstanding are presented in the following table (in thousands):


	June 30, 2025				December 31, 2024
		Notional		Estimated		Notional		Estimated
		Amount		Fair Value		Amount		Fair Value
Interest rate swap agreements:
Assets	$	484,139	$	13,487	$	393,268	$	12,135
Liabilities		484,139		(13,487)		393,268		(12,135)

The Company establishes limits and monitors exposures for customer swap positions. Any fees received to enter the swap agreements at inception are recognized in earnings when received and is included in noninterest income. Such fees were as follows (in thousands):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
	****	2025		2024		2025		2024
Interest rate swap agreements		$	542	$	163	$	998	$	275

Collateral requirements:

These derivative rate contracts have collateral requirements, both at inception of the trade and as the value of each derivative position changes. At June 30, 2025, and December 31, 2024, collateral totaling $150 thousand was pledged to the derivative counterparties to comply with collateral requirements.

Note 11. Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company follows the guidance of ASU Topic 842. 35

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Substantially all the leases in which the Company is the lessee are comprised of real estate for branches and office space and all of our leases are classified as operating leases. Operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The lease agreements have maturity dates ranging from July 2025 to May 2044, some of which include options for multiple five-year extensions. The weighted average remaining life of the lease term and weighted average discount rate for these leases was 10.12 years and 3.55% at June 30, 2025, and 10.41 years 3.53% at December 31, 2024.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet (in thousands):


	Balance Sheet	****	June 30,		December 31,
	Location		2025		2024
Assets:
Operating lease right-of-use assets	Other assets		$	11,820	$	11,951
Liabilities:
Operating lease liabilities	Other liabilities		$	12,451	$	12,472

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value of the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If, at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance (in thousands):


	****	Three Months Ended				Six Months Ended
		June 30,				June 30,
	****	2025		2024		2025		2024
Lease costs:
Operating lease costs		$	467	$	468	$	948	$	919
Variable lease costs			20		26		36		56
Sublease income			(41)		—		(65)		—
Net lease cost		$	446	$	494	$	919	$	975
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	452	$	439	$	837	$	860

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2025, were as follows (in thousands):


	****	Amounts
Remainder of 2025		$	939
2026			1,769
2027			1,528
2028			1,509
2029			1,448
Thereafter			8,041
Total future minimum lease payments			15,234
Amounts representing interest			(2,783)
Present value of net future minimum lease payments		$	12,451

Note 12. Regulatory Matters

Regulatory Capital Requirements:

The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III Rules”) became effective January 1, 2015. In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the Basel III Rules, a covered banking organization is also required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of common equity Tier 1 (“CET1”), and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). As of January 1, 2019, an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets is required for compliance with the capital conservation buffer. The ratios for the Company and the Bank are currently sufficient to satisfy the fully phased-in conservation buffer. At June 30, 2025, the Company and the Bank exceeded the minimum regulatory requirements and exceeded the threshold for the “well capitalized” regulatory classification.

In December 2018, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation (“FDIC”) issued a final rule revising regulatory capital rules in anticipation of the adoption of ASU 2016-13, Financial Instruments—Credit Losses Measurement of Credit Losses on Financial Instruments (Topic 326), that provided an option to phase in over a three-year period on a straight line basis the day-one impact of the adoption on earnings and tier one capital. The Company adopted ASU 2016-13 on January 1, 2023, and has chosen the three-year phase in option.

Regulatory Restrictions on Dividends:

Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (the “TDFI”), pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years. Because this test involves a measure of net income, any charge on the Bank’s income statement, such as an impairment of goodwill, could impair the Bank’s ability to pay dividends to the Company. Under Tennessee corporate law, the Company is not permitted to pay dividends if, after giving effect to such payment, it would not be able to pay its debts as they become due in the usual course of business, or its total assets would be less than the sum of its total liabilities plus any amounts needed to satisfy any preferential rights if it were dissolving. In addition, in deciding whether to declare a dividend of any particular size, the Company’s board of directors must consider its and the Bank’s current and prospective capital, liquidity, and other needs. In addition to state law limitations on the Company’s ability to pay dividends, the Federal Reserve imposes limitations on the Company’s ability to pay dividends. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if the Company’s regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer. 37

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

During the six months ended June 30, 2025, the Bank paid $3.0 million in dividends to the Company, and the Company has paid a quarterly common stock dividend of $0.08 per share. The amount and timing of all future dividend payments by the Company, if any, is subject to discretion of the Company’s board of directors and will depend on the Company’s earnings, capital position, financial condition and other factors, including new regulatory capital requirements, as they become known to the Company.

Regulatory Capital Levels:

Actual and required capital levels at June 30, 2025, and December 31, 2024 are presented below (dollars in thousands):


												Minimum to be
												well
												capitalized under
							Minimum for					prompt
							capital					corrective action
			Actual				adequacy purposes					provisions^1^
****	****	Amount		****	Ratio	****	Amount		****	Ratio	****	Amount		****	Ratio
June 30, 2025
SmartFinancial:
Total Capital (to Risk Weighted Assets)		$	495,344		11.04	%	$	359,042		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)			433,782		9.67	%		269,281		6.00	%		N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)			433,782		9.67	%		201,961		4.50	%		N/A		N/A
Tier 1 Capital (to Average Assets)^2^			433,782		8.25	%		210,421		4.00	%		N/A		N/A

SmartBank:
Total Capital (to Risk Weighted Assets)		$	504,645		11.25	%	$	358,702		8.00	%	$	448,377		10.00	%
Tier 1 Capital (to Risk Weighted Assets)			466,919		10.41	%		269,026		6.00	%		358,702		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			466,919		10.41	%		201,770		4.50	%		291,445		6.50	%
Tier 1 Capital (to Average Assets)^2^			466,919		8.88	%		210,261		4.00	%		262,827		5.00	%

December 31, 2024
SmartFinancial:
Total Capital (to Risk Weighted Assets)		$	470,635		11.10	%	$	339,044		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)			413,616		9.76	%		254,283		6.00	%		N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)			413,616		9.76	%		190,712		4.50	%		N/A		N/A
Tier 1 Capital (to Average Assets)			413,616		8.29	%		199,585		4.00	%		N/A		N/A

SmartBank:
Total Capital (to Risk Weighted Assets)		$	478,368		11.30	%	$	338,774		8.00	%	$	423,467		10.00	%
Tier 1 Capital (to Risk Weighted Assets)			445,159		10.51	%		254,080		6.00	%		338,774		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			445,159		10.51	%		190,560		4.50	%		275,253		6.50	%
Tier 1 Capital (to Average Assets)			445,159		8.94	%		199,214		4.00	%		249,017		5.00	%

^1^The prompt corrective action provisions are applicable at the Bank level only.

^2^Average assets for the above calculations were based on the most recent quarter.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 13. Other Comprehensive Income (Loss)

The changes in each component of accumulated other comprehensive income (loss), presented net of tax, were as follows (in thousands):


	****	Three Months Ended June 30, 2025
	****		****										****	Accumulated
		Securities			Securities			Fair Value						Other
		Available-for-			Transferred to			Municipal			Cash Flow			Comprehensive
	****	Sale		****	Held-to-Maturity		****	Security Hedges		****	Hedges		****	Income (Loss)
Beginning balance, March 31, 2025		$	(18,669)		$	(512)		$	(282)		$	(184)		$	(19,647)

Other comprehensive income (loss)			2,142			—			(9)			150			2,283
Amounts reclassified from other comprehensive income			3			23			(1)			65			90
Net other comprehensive income (loss) during period			2,145			23			(10)			215			2,373

Ending balance, June 30, 2025		$	(16,524)		$	(489)		$	(292)		$	31		$	(17,274)

	****	Three Months Ended June 30, 2024
	****		****										****	Accumulated
		Securities			Securities			Fair Value						Other
		Available-for-			Transferred to			Municipal			Cash Flow			Comprehensive
	****	Sale		****	Held-to-Maturity		****	Security Hedges		****	Hedges		****	Income (Loss)
Beginning balance, March 31, 2024		$	(26,122)		$	(606)		$	(6)		$	(691)		$	(27,425)

Other comprehensive income (loss)			1,482			—			(14)			68			1,536
Amounts reclassified from other comprehensive income			—			24			105			(38)			91
Net other comprehensive income (loss) during period			1,482			24			91			30			1,627

Ending balance, June 30, 2024		$	(24,640)		$	(582)		$	85		$	(661)		$	(25,798)


		Six Months Ended June 30, 2025
	****		****										****	Accumulated
		Securities			Securities			Fair Value						Other
		Available-for-			Transferred to			Municipal			Cash Flow			Comprehensive
	****	Sale		****	Held-to-Maturity		****	Security Hedges		****	Hedges		****	Income (Loss)
Beginning balance, December 31, 2024		$	(22,350)		$	(534)		$	(166)		$	(621)		$	(23,671)

Other comprehensive income (loss)			5,823			—			(124)			475			6,174
Amounts reclassified from other comprehensive income			3			45			(2)			177			223
Net other comprehensive income (loss) during period			5,826			45			(126)			652			6,397

Ending balance, June 30, 2025		$	(16,524)		$	(489)		$	(292)		$	31		$	(17,274)

		Six Months Ended June 30, 2024
	****		****										****	Accumulated
		Securities			Securities			Fair Value						Other
		Available-for-			Transferred to			Municipal			Cash Flow			Comprehensive
	****	Sale		****	Held-to-Maturity		****	Security Hedges		****	Hedges		****	Income (Loss)
Beginning balance, December 31, 2023		$	(23,818)		$	(632)		$	(397)		$	(1,060)		$	(25,907)

Other comprehensive income (loss)			(822)			—			298			466			(58)
Amounts reclassified from other comprehensive income			—			50			184			(67)			167
Net other comprehensive income (loss) during period			(822)			50			482			399			109

Ending balance, June 30, 2024		$	(24,640)		$	(582)		$	85		$	(661)		$	(25,798)

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14. Segment Information

The Company, through the Bank, provides a broad range of financial services to individuals and companies through its offices in East and Middle Tennessee, Alabama and Florida. These services include, but are not limited to, primary deposit products are interest-bearing demand deposits, savings and money market deposits, and time deposits. Its primary lending products are commercial, residential, and consumer loans. The Company’s operations are managed, and financial performance is evaluated on an organization-wide basis. Accordingly, the Company’s banking and finance operations are not considered by management to constitute more than one reportable operating segment. This single segment is the General Banking Unit.

The Company’s chief operating decision maker (“CODM”) is the Executive Committee. The CODM includes the senior executive management team including the Chief Executive Officer, Chief Financial Officer, Chief Credit Officer, Chief Accounting Officer, Chief People Officer, Chief Risk Officer, and Chief Banking Officer.

The CODM assesses the performance of the General Banking Unit using a variety of figures, metrics and key performance indicators. However, the CODM primarily utilizes net income and net interest income to make business decisions. The CODM monitors these profitability measures at each meeting, and is regularly featured in various investor presentations, earnings releases, and other internal management reports. These performance and profitability measures influence business decisions and the allocation of resources within the General Banking Unit.

The table below provides information about the General Banking Unit. The most significant expenses to the General Banking Unit are deposit and other borrowing interest expense as well as employee compensation (in thousands):


	Banking Segment
	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Interest income	$	69,453	$	61,285	$	135,830	$	121,067
Interest expense		29,110		28,471		57,248		56,532
Net interest income		40,343		32,814		78,582		64,535
Provision for credit losses		2,411		883		3,391		443
Net interest income after provision for credit losses		37,932		31,931		75,191		64,092
Noninterest income:
Service charges on deposit accounts		1,766		1,692		3,502		3,304
Loss on sale of securities		(4)		—		(4)		—
Mortgage banking		633		348		1,126		628
Investment services		1,440		1,302		3,209		2,682
Insurance commissions		1,554		1,284		2,967		2,387
Interchange and debit card transaction fees, net		1,342		1,343		2,562		2,596
Other		2,167		1,635		4,133		4,387
Total noninterest income		8,898		7,604		17,495		15,984
Noninterest expense:
Salaries and employee benefits		19,602		17,261		38,836		33,900
Occupancy and equipment		3,432		3,324		6,829		6,720
FDIC insurance		992		825		1,952		1,740
Other real estate and loan related expense		757		538		1,415		1,123
Advertising and marketing		390		295		772		597
Data processing and technology		2,651		2,452		5,309		4,916
Professional services		1,153		1,064		2,521		1,989
Amortization of intangibles		566		608		1,135		1,220
Other		3,026		2,834		6,097		5,549
Total noninterest expense		32,569		29,201		64,866		57,754
Income before income tax expense		14,261		10,334		27,820		22,322
Income tax expense		2,556		2,331		4,861		4,962
Net income	$	11,705	$	8,003	$	22,959	$	17,360

Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

While we offer a wide range of commercial banking services, we focus on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in a number of industries, as well as loans to individuals for a variety of purposes. Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. We offer a broad range of deposit products, including checking (“NOW”), savings, money market accounts and time deposits. We actively pursue business relationships by utilizing the business contacts of our senior management, other bank officers and our directors, thereby capitalizing on our knowledge of our local market areas.

Forward-Looking Statement

The Company may from time to time make written or oral statements, including statements contained in this Quarterly Report on Form 10-Q (this “report”) and information incorporated by reference herein (including, without limitation, certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2), that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on assumptions and estimates and are not guarantees of future performance. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words (and their derivatives), such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, the negatives of such expressions, or the use of the future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of a current condition. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, financial condition, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to:

●	the impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within our primary market areas (particularly Tennessee), including the effects of inflationary pressures, changes in interest rates, tariffs or trade wars (including reduced consumer spending, supply chain issues, and adverse impacts to credit quality), slowdowns in economic growth or recession, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior (including the velocity of loan repayment) and credit risk as a result of the foregoing;
●	the risks of changes in interest rates on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities;
---	---
●	adverse developments in the banking industry and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding;
---	---
●	the possibility that our asset quality would decline or that we experience greater loan and lease losses than anticipated;
---	---
●	the impact of liquidity needs on our results of operations and financial condition;
---	---
●	competition from financial institutions and other financial service providers;
---	---
●	the impact of negative developments in the financial industry and U.S. and global capital and credit markets;
---	---

Table of Contents

●	the impact of recently enacted and future legislation and regulation on our business;
●	weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, profits on sales of mortgage loans, and the value of mortgage servicing rights;
---	---
●	risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively;
---	---
●	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;
---	---
●	the risks of mergers, acquisitions and divestitures, including our ability to continue to identify acquisition targets, successfully acquire and integrate desirable financial institutions and realize expected revenues and revenue synergies;
---	---
●	cyber-attacks, computer viruses or other malware that may breach the security of our websites or other systems we operate or rely upon for services to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems and negatively impact our operations and our reputation in the market, including as a result of increased remote working, which may be exacerbated by recent developments in generative artificial intelligence;
---	---
●	results of examinations by our primary regulators, the TDFI, the Federal Reserve, and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, require us to reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
---	---
●	government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve, as well as legislative, tax and regulatory changes that impact the money supply and inflation;
---	---
●	uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy which continue to impact the outlook for future economic growth, including U.S. imposition of tariffs and consideration of responsive actions by these nations or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth;
---	---
●	our inability to pay dividends at current levels, or at all, because of inadequate future earnings, impairments to goodwill, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements;
---	---
●	the relatively greater credit risk of commercial real estate loans and construction and land development loans in our loan and lease portfolio;
---	---
●	unanticipated credit deterioration in our loan and lease portfolio or higher than expected loan and lease losses within one or more segments of our loan and lease portfolio;
---	---
●	unexpected significant declines in the loan and lease portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors;
---	---
●	unanticipated loan and lease delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, natural disasters, acts of war or terrorism and other external events;
---	---
●	changes in expected income tax expense or tax rates, including changes resulting from revisions in tax laws, regulations and case law;
---	---
●	our ability to retain the services of key personnel;
---	---
●	changes in accounting principles, policies, or guidelines;
---	---
●	political instability, acts of God, or of war or terrorism, natural disasters, including in the Company’s footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;
---	---
●	risks related to our corporate responsibility strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
---	---
●	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, and uncertainties surrounding the debt ceiling and the federal budget;
---	---
●	the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit; and
---	---

Table of Contents

●	the impact of Tennessee’s anti-takeover statutes and certain of our charter provisions on potential acquisitions of us.

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. The Company 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.

Critical Accounting Estimates

Our Consolidated Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industries in which we operate. The most significant accounting policies we follow are presented in Note 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Application of these principles requires us to make estimates, assumptions, and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the Consolidated Financial Statements. These factors include among other things, whether the policy requires management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. The accounting policies which we believe to be most critical in preparing our Consolidated Financial Statements are presented in the section titled “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no other significant changes in the Company’s application of critical accounting policies since December 31, 2024.

Executive Summary

The following is a summary of the Company’s financial highlights and significant events during the second quarter and first six months of 2025:

●	Net income totaled $11.7 million, or $0.69 per diluted common share, during the second quarter of 2025 compared to $8.0 million, or $0.48 per diluted common share, for the same period in 2024.
●	Net income totaled $23.0 million, or $1.36 per diluted common share, during the first six months of 2025 compared to $17.4 million, or $1.03 per diluted common share, for the same period in 2024.
---	---
●	Annualized return on average assets for the three months ended June 30, 2025, and 2024 was 0.88% and 0.66%, respectively.
---	---
●	Annualized return on average assets for the six months ended June 30, 2025, and 2024 was 0.87% and 0.72%, respectively.
---	---
●	Net organic loans and leases increased year-to-date for 2025, with net loans and leases increasing $215.4 million from December 31, 2024.
---	---
●	Deposit growth of $185.6 million from December 31, 2024.
---	---

Table of Contents Selected Financial Information

The following is a summary of certain financial information for the three and six month periods ended June 30, 2025 and 2024 and as of June 30, 2025 and December 31, 2024 (dollars in thousands, except per share data):


	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2025			2024				Change		2025			2024				Change
Income Statement:
Interest income	$	69,453		$	61,285		$	8,168		$	135,830		$	121,067		$	14,763
Interest expense		29,110			28,471			639			57,248			56,532			716
Net interest income		40,343			32,814			7,529			78,582			64,535			14,047
Provision for credit losses		2,411			883			1,528			3,391			443			2,948
Net interest income after provision for credit losses		37,932			31,931			6,001			75,191			64,092			11,099
Noninterest income		8,898			7,604			1,294			17,495			15,984			1,511
Noninterest expense		32,569			29,201			3,368			64,866			57,754			7,112
Income before income taxes		14,261			10,334			3,927			27,820			22,322			5,498
Income tax expense		2,556			2,331			225			4,861			4,962			(101)
Net income	$	11,705		$	8,003		$	3,702		$	22,959		$	17,360		$	5,599

Per Share Data:
Basic income per common share	$	0.70		$	0.48		$	0.22		$	1.37		$	1.03		$	0.34
Diluted income per common share	$	0.69		$	0.48		$	0.21		$	1.36		$	1.03		$	0.33

Performance Ratios:
Return on average assets		0.88	%		0.66	%		0.22	%		0.87	%		0.72	%		0.15
Return on average shareholders' equity		9.19	%		6.90	%		2.29	%		9.18	%		7.53	%		1.65


	June 30,		December 31,
	2025		2024			Change
Balance Sheet:
Loans and leases, net	$	4,084,286	$	3,868,917	$	215,369
Deposits		4,872,120		4,686,483		185,637

Analysis of Results of Operations

Second quarter of 2025 compared to 2024

Net income was $11.7 million, or $0.69 per diluted common share, for the second quarter of 2025, compared to $8.0 million, or $0.48 per diluted common share, for the second quarter of 2024. For the three months ended June 30, 2025, when compared to the comparable period in 2024, the increase in net income of $3.7 million was due to an increase in net interest income after provision for loan and lease losses of $6.0 million and other noninterest income of $1.3 million, offset by an increase in noninterest expense of $3.4 million and an increase in income tax expense of $225 thousand. The tax equivalent net interest margin was 3.29% for the second quarter of 2025, compared to 2.97% for the second quarter of 2024. Noninterest income to average assets was 0.67% for the second quarter of 2025, increasing from 0.63% for the second quarter of 2024. Noninterest expense to average assets increased to 2.44% in the second quarter of 2025, from 2.41% in the second quarter of 2024.

First six months of 2025 compared to 2024

Net income totaled $23.0 million, or $1.36 per diluted common share, for the six months ended 2025, compared to $17.4 million, or $1.03 per diluted common share, for the six months ended 2024. The increase in net income of $5.6 million for this period was primarily from the increases in net interest income after provision for loan and lease losses of $11.1 million and noninterest income of $1.5 million, offset by an increase of $7.1 million in noninterest expense. The tax equivalent net interest margin was 3.25% for the first six months of 2025, compared to 2.91% for the first six months of 2024. Noninterest income to average assets was 0.66% for the first six months of 2025 and 2024. Noninterest expense to average assets increased to 2.46% in the first six months of 2025, from 2.38% in the first six months of 2024.

Net Interest Income and Yield Analysis

Second quarter of 2025 compared to 2024

Net interest income, taxable equivalent, increased to $40.7 million for the second quarter of 2025, up from $33.2 million for the second quarter of 2024. Net interest income increased due to higher loan and lease balances, higher yields on these 44

Table of Contents assets, and lower cost of interest-bearing liabilities. Average interest-earning assets increased from $4.49 billion for the second quarter of 2024, to $4.96 billion for the second quarter of 2025, primarily from the increase in our average loan and lease balances, which was offset by decreases in average securities and average cash balances. Over this period, average loan and lease balances increased by $546.2 million and average interest-bearing deposits increased by $432.7 million. Average securities decreased by $15.3 million, average federal funds sold and other interest earning assets decreased by $70.8 million, average borrowings decreased by $4.9 million and noninterest-bearing deposits increased by $9.7 million. The tax equivalent net interest margin increased to 3.29% for the second quarter of 2025, compared to 2.97% for the second quarter of 2024. The yield on earning assets increased from 5.52% for the second quarter of 2024, to 5.65% for the second quarter of 2025, primarily due the deployment of excess cash and cash equivalents into loans and leases. The cost of average interest-bearing deposits decreased from 3.23% for the second quarter of 2024, to 2.95% for the second quarter of 2025, primarily due to the decrease in rates by the Federal Reserve.

The following tables summarizes the major components of net interest income and the related yields and costs for the periods presented (dollars in thousands):


		Three Months Ended June 30,
		2025								2024
	****	Average		****	****		****	Yield/	****	Average		****	****		****	Yield/	****
		Balance			Interest			Cost		Balance			Interest			Cost
Assets:
Loans and leases, including fees^1^		$	4,050,485		$	61,294		6.07	%	$	3,504,265		$	51,110		5.87	%
Taxable securities			562,660			4,848		3.46	%		580,517			5,320		3.69	%
Tax-exempt securities^2^			66,223			500		3.03	%		63,690			447		2.82	%
Federal funds sold and other earning assets			275,647			3,161		4.60	%		346,459			4,759		5.52	%
Total interest-earning assets			4,955,015			69,803		5.65	%		4,494,931			61,636		5.52	%
Noninterest-earning assets			405,804								383,697
Total assets		$	5,360,819							$	4,878,628

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$	835,394			3,785		1.82	%	$	983,433			5,950		2.43	%
Money market and savings deposits			2,104,236			15,762		3.00	%		1,909,125			16,529		3.48	%
Time deposits			914,658			8,754		3.84	%		528,985			4,960		3.77	%
Total interest-bearing deposits			3,854,288			28,301		2.95	%		3,421,543			27,439		3.23	%
Borrowings			7,783			70		3.61	%		12,684			148		4.69	%
Subordinated debt			39,714			739		7.46	%		42,129			884		8.44	%
Total interest-bearing liabilities			3,901,785			29,110		2.99	%		3,476,356			28,471		3.29	%
Noninterest-bearing deposits			898,428								888,693
Other liabilities			49,539								47,208
Total liabilities			4,849,752								4,412,257
Shareholders' equity			511,067								466,371
Total liabilities and shareholders’ equity		$	5,360,819							$	4,878,628
Net interest income, taxable equivalent					$	40,693							$	33,165
Interest rate spread								2.66	%							2.22	%
Tax equivalent net interest margin								3.29	%							2.97	%

Percentage of average interest-earning assets to average interest-bearing liabilities								126.99	%							129.30	%
Percentage of average equity to average assets								9.53	%							9.56	%

^1^Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $245 thousand and $257 thousand for the three months ended June 30, 2025, and 2024, respectively.

^2^Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $105 thousand and $94 thousand for the three months ended June 30, 2025, and 2024, respectively.

First six months of 2025 compared to 2024

Net interest income, taxable equivalent, increased to $79.3 million for the first six months of 2025, up from $65.0 million for the first six months of 2024. Net interest income was positively impacted, compared to the prior year, primarily by the increase in balances of loans and leases and the increase in yield/rate on interest-earning assets and the decrease in the cost of interest-bearing liabilities. Average interest-earning assets increased from $4.50 billion for the first six months of 2024 to $4.91 billion for the first six months of 2025, primarily because of the Company’s continued organic loan and lease 45

Table of Contents growth, offset by decreases in our average securities and average cash balances. Over this period, average loan and lease balances increased by $515.0 million and average interest-bearing deposits increased by $391.1 million. Average securities decreased by $40.6 million, average federal funds sold and other interest earning assets decreased by $59.0, average borrowings decreased by $4.0 million and noninterest-bearing deposits increased by $10.5 million. The tax equivalent net interest margin increased to 3.25% for the first six months of 2025, compared to 2.91% for the first six months of 2024. The yield on earning assets increased from 5.44% for the first six months of 2024, to 5.61% for the first six months of 2025, primarily due to the deployment of excess cash and cash equivalents into loans and leases. The cost of average interest-bearing deposits decreased from 3.19% for the first six months of 2024 to 2.93% for the first six months of 2025, primarily due to the decrease in rates by the Federal Reserve.


		Six Months Ended June 30,
		2025						2024

	****	Average				Yield/		Average				Yield/
		Balance		Interest		Cost		Balance		Interest		Cost
Assets:
Loans and leases, including fees^1,2^		$	3,996,192	$	119,302	6.02	%	$	3,481,187	$	101,130	5.84	%
Taxable Securities			559,306		9,623	3.47	%		600,661		9,869	3.30	%
Tax-exempt securities^3^			64,663		948	2.96	%		63,925		892	2.81	%
Federal funds and other earning assets			291,219		6,647	4.60	%		350,186		9,620	5.52	%
Total interest-earning assets			4,911,380		136,520	5.61	%		4,495,959		121,511	5.44	%
Noninterest-earning assets			405,832						381,964
Total assets		$	5,317,212					$	4,877,923

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$	841,077		7,528	1.80	%	$	989,790		12,010	2.44	%
Money market and savings deposits			2,084,296		30,826	2.98	%		1,906,990		32,677	3.45	%
Time deposits			897,889		17,282	3.88	%		535,389		9,787	3.68	%
Total interest-bearing deposits			3,823,262		55,636	2.93	%		3,432,169		54,474	3.19	%
Borrowings			8,000		140	3.53	%		11,964		276	4.64	%
Subordinated debt			39,703		1,472	7.48	%		42,118		1,782	8.51	%
Total interest-bearing liabilities			3,870,965		57,248	2.98	%		3,486,251		56,532	3.26	%
Noninterest-bearing deposits			891,293						880,767
Other liabilities			50,394						47,146
Total liabilities			4,812,652						4,414,164
Shareholders' equity			504,560						463,759
Total liabilities and shareholders’ equity		$	5,317,212					$	4,877,923
Net interest income, taxable equivalent				$	79,272					$	64,979
Interest rate spread						2.62	%					2.17	%
Tax equivalent net interest margin						3.25	%					2.91	%

Percentage of average interest-earning assets to average interest-bearing liabilities						126.88	%					128.96	%
Percentage of average equity to average assets						9.49	%					9.51	%

^1^Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $491 thousand and $257 thousand for the six months ended June 30, 2025, and 2024, respectively.

^2^Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $199 thousand and $187 thousand for the six months ended June 30, 2025 and 2024, respectively.

Table of Contents Noninterest Income

The following table summarizes noninterest income by category (in thousands):


		Three Months Ended									Six Months Ended
		June 30,									June 30,
	****	2025		****	2024		****		Change	****	2025		****	2024		****		Change
Service charges on deposit accounts		$	1,766		$	1,692		$	74		$	3,502		$	3,304		$	198
Loss on sale of securities			(4)			—			(4)			(4)			—			(4)
Mortgage banking			633			348			285			1,126			628			498
Investment services			1,440			1,302			138			3,209			2,682			527
Insurance commissions			1,554			1,284			270			2,967			2,387			580
Interchange and debit card transaction fees, net			1,342			1,343			(1)			2,562			2,596			(34)
Other			2,167			1,635			532			4,133			4,387			(254)
Total noninterest income		$	8,898		$	7,604		$	1,294		$	17,495		$	15,984		$	1,511

Second quarter of 2025 compared to 2024

Noninterest income increased by $1.3 million during the second quarter of 2025 compared to the same period in 2024. This quarterly change in total noninterest income primarily resulted from the following:

●	Increase in mortgage banking, driven by increased volume;
●	Increase in insurance commissions, driven by organic growth; and
---	---
●	Increase in other, primarily related to fees from capital markets activity.
---	---

First six months of 2025 compared to 2024

Noninterest income increased by $1.5 million during the first six months of 2025 compared to the same period in 2024. This change in total noninterest income primarily resulted from the following:

●	Increase in mortgage banking, driven by increased volume;
●	Increase in investment services from a higher volume of investment activity; and
---	---
●	Increase in insurance commissions, driven by organic growth.
---	---

Noninterest Expense

The following table summarizes noninterest expense by category (in thousands):


		Three Months Ended									Six Months Ended
		June 30,									June 30,
	****	2025		****	2024		****		Change	****	2025		****	2024		****		Change
Salaries and employee benefits		$	19,602		$	17,261		$	2,341		$	38,836		$	33,900		$	4,936
Occupancy and equipment			3,432			3,324			108			6,829			6,720			109
FDIC insurance			992			825			167			1,952			1,740			212
Other real estate and loan-related expense			757			538			219			1,415			1,123			292
Advertising and marketing			390			295			95			772			597			175
Data processing and technology			2,651			2,452			199			5,309			4,916			393
Professional services			1,153			1,064			89			2,521			1,989			532
Amortization of intangibles			566			608			(42)			1,135			1,220			(85)
Other			3,026			2,834			192			6,097			5,549			548
Total noninterest expense		$	32,569		$	29,201		$	3,368		$	64,866		$	57,754		$	7,112

Second quarter of 2025 compared to 2024

Noninterest expense increased by $3.4 million in the second quarter of 2025 as compared to the same period in 2024. The quarterly increase in total noninterest expense primarily resulted from the following:

●	Increase in salary and employee benefits, related to increased salaries from franchise growth.

Table of Contents First six months of 2025 compared to 2024

Noninterest expense increased by $7.1 million in the first six months of 2025 as compared to the same period in 2024. The change in total noninterest expense primarily resulted from the following:

●	Increase in salary and employee benefits, related to increased salaries from franchise growth;
●	Increase in professional services, primarily due to increases in audit fees, advisory board fees and consulting expenses; and
---	---
●	Increase in other, related to overall franchise growth.
---	---

Taxes

Second quarter of 2025 compared to 2024

In the second quarter of 2025 income tax expense totaled $2.6 million as compared to $2.3 million in same period of 2024. The effective tax rate was approximately 17.9% in the second quarter of 2025 compared to 22.6% in the second quarter of 2024. The decrease is primarily related to the Bank’s Real Estate Investment Trust.

First six months of 2025 compared to 2024

In the first six months of 2025 income tax expense totaled $4.9 million compared to $5.0 million in the first six months of 2024. The effective tax rate was approximately 17.5% for first six months of 2025 compared to 22.2% for the six months ended 2024. The decrease is primarily related to the Bank’s Real Estate Investment Trust.

Loan and Lease Portfolio

The Company had total net loans and leases outstanding of approximately $4.08 billion at June 30, 2025, compared to $3.87 billion at December 31, 2024. Loans secured by real estate, consisting of commercial and residential property, are the principal component of our loan and lease portfolio.

The following table summarizes the composition of our loan and lease portfolio for the periods presented (dollars in thousands):


			% of					% of
	June 30,		Gross			December 31,		Gross
	2025		Total			2024		Total
Commercial real estate:
Non-owner occupied	$	1,114,133	26.9	%	$		1,080,404	27.5	%
Owner occupied		958,989	23.3	%			867,678	22.2	%
Consumer real estate		803,270	19.5	%			741,836	19.0	%
Construction and land development		391,155	9.5	%			361,735	9.3	%
Commercial and industrial		778,754	18.9	%			775,620	19.9	%
Leases		62,495	1.5	%			64,878	1.7	%
Consumer and other		15,266	0.4	%			14,189	0.4	%
Total loans and leases		4,124,062	100.0	%			3,906,340	100.0	%
Less: Allowance for credit losses		(39,776)					(37,423)
Loans and leases, net	$	4,084,286				$	3,868,917

Table of Contents Loan and Lease Portfolio Maturities

The following table sets forth the maturity distribution of our loans and leases at June 30, 2025, including the interest rate sensitivity for loans and leases maturing after one year (in thousands):


											Rate Structure for Loans and Leases
											Maturing Over One Year
	One Year		One through			Five through	Over Fifteen				Fixed		Floating
	or Less		Five Years			Fifteen Years	Years		Total		Rate		Rate
Commercial real estate:
Non-owner occupied	$	112,885	$	759,282	$	215,436	$	26,530	$	1,114,133	$	517,450	$	483,798
Owner occupied		39,388		521,377		374,797		23,427		958,989		481,129		438,472
Consumer real estate-mortgage		60,350		252,834		96,728		393,358		803,270		269,799		473,121
Construction and land development		119,911		163,447		52,420		55,377		391,155		80,678		190,566
Commercial and industrial		276,557		398,548		80,909		22,740		778,754		338,796		163,401
Leases		2,841		59,654		—		—		62,495		59,654		—
Consumer and other		9,902		5,032		301		31		15,266		4,768		596
Total loans and leases	$	621,834	$	2,160,174	$	820,591	$	521,463	$	4,124,062	$	1,752,274	$	1,749,954

Nonaccrual, Past Due, and Restructured Loans and Leases

Nonperforming loans and leases, as a percentage of total gross loans and leases, net of deferred fees, was 0.19% as of June 30, 2025, and 0.20% December 31, 2024. Total nonperforming assets, as a percentage of total assets, was 0.19% as of June 30, 2025, and December 31, 2024.

The following table is a summary of our loans and leases that were past due at least 30 days but less than 89 days, and 90 days or more past due, excluding nonaccrual loans for the periods presented (dollars in thousands):


			Accruing Loans				Accruing Loans
			30-89 Days				90 Days or More				Total Accruing
			Past Due				Past Due				Past Due Loans
					Percentage of				Percentage of				Percentage of
		Total			Loans in				Loans in				Loans in
		Loans		Amount	Category			Amount	Category			Amount	Category
June 30, 2025
Commercial real estate:
Non-owner occupied	$	1,114,133	$	246	0.02	%	$	-	-		$	246	0.02	%
Owner occupied		958,989		1,444	0.15			-	-			1,444	0.15
Consumer real estate		803,270		883	0.11			-	-			883	0.11
Construction and land development		391,155		-	-			-	-			-	-
Commercial and industrial		778,754		905	0.12			-	-			905	0.12
Leases		62,495		1,344	2.15			-	-			1,344	2.15
Consumer and other		15,266		139	0.91			32	0.21			171	1.12
Total	$	4,124,062	$	4,961	0.12	%	$	32	-	%	$	4,993	0.12	%

December 31, 2024
Commercial real estate:
Non-owner occupied	$	1,080,404	$	378	0.03	%	$	-	-	%	$	378	0.03	%
Owner occupied		867,678		411	0.05			-	-			411	0.05
Consumer real estate		741,836		2,748	0.37			-	-			2,748	0.37
Construction and land development		361,735		523	0.14			-	-			523	0.14
Commercial and industrial		775,620		1,745	0.22			144	0.02			1,889	0.24
Leases		64,878		1,453	2.24			-	-			1,453	2.24
Consumer and other		14,189		118	0.83			18	0.13			136	0.96
Total	$	3,906,340	$	7,376	0.19	%	$	162	-	%	$	7,538	0.19	%

Table of Contents

The following table is a summary of our nonaccrual loans and leases for the periods presented (dollars in thousands):


	June 30, 2025						December 31, 2024
			Nonaccrual Loans						Nonaccrual Loans
					Percentage of						Percentage of
		Total			Loans in			Total			Loans in
		Loans		Amount	Category			Loans		Amount	Category
Commercial real estate:
Non-owner occupied	$	1,114,133	$	572	0.05	%	$	1,080,404	$	514	0.05	%
Owner occupied		958,989		915	0.10			867,678		906	0.10
Consumer real estate		803,270		1,233	0.15			741,836		1,995	0.27
Construction and land development		391,155		-	-			361,735		39	0.01
Commercial and industrial		778,754		2,612	0.34			775,620		1,820	0.23
Leases		62,495		2,556	4.09			64,878		2,433	3.75
Consumer and other		15,266		1	0.01			14,189		2	0.01
Total	$	4,124,062	$	7,889	0.19	%	$	3,906,340	$	7,709	0.20	%

Allowance for credit losses to nonaccrual loans				504.20%						485.45%

Allocation of the Allowance for Credit Losses

We maintain the allowance at a level that we deem appropriate to adequately cover change in the loan and lease portfolio. Our provision for credit losses for loans and leases for the six months ended June 30, 2025, was $2.6 million compared to $818 thousand in the same period of 2024, an increase of $1.8 million, driven by increase in loan and lease volume. As of June 30, 2025, and December 31, 2024, our allowance for credit losses was $39.8 million and $37.4 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for credit loss as a percentage of total loans and leases was 0.96% at June 30, 2025, and December 31, 2024.

The following table sets forth, based on management's best estimate, the allocation of the allowance for credit losses on loans and leases to categories of loans and leases and loan and lease balances by category and the percentage of loans and leases in each category to total loans and leases and allowance for credit losses as a percentage of total loans and leases within each loan and lease category for each period presented (dollars in thousands):


			Percentage of Loans					Ratio of Allowance
	Amount of		in Each Category			Total		Allocated to Loans in
	Allowance Allocated		to Total Loans			Loans		Each Category
June 30, 2025
Commercial real estate:
Non-owner occupied	$	7,254		26.9	%	$	1,114,133		0.65	%
Owner occupied		8,862		23.3			958,989		0.92
Consumer real estate		8,887		19.5			803,270		1.11
Construction and land development		4,450		9.5			391,155		1.14
Commercial and industrial		9,330		18.9			778,754		1.20
Leases		868		1.5			62,495		1.39
Consumer and other		125		0.4			15,266		0.82
Total	$	39,776		100.0	%	$	4,124,062		0.96	%

December 31, 2024
Commercial real estate:
Non-owner occupied	$	6,972		27.5	%	$	1,080,404		0.65	%
Owner occupied		8,341		22.2			867,678		0.96
Consumer real estate		8,355		19.0			741,836		1.13
Construction and land development		4,168		9.3			361,735		1.15
Commercial and industrial		8,552		19.9			775,620		1.10
Leases		919		1.7			64,878		1.42
Consumer and other		116		0.4			14,189		0.82
Total	$	37,423		100.0	%	$	3,906,340		0.96	%

The allowance associated with the individually evaluated loans and leases was approximately $3.9 million at June 30, 2025, and December 31, 2024. 50

Table of Contents Analysis of the Allowance for Credit Losses

The following is a summary of changes in the allowance for credit losses for the periods presented including the ratio of the allowance for credit losses to total loans and leases as of the end of each period (dollars in thousands):


							Ratio of Net (charge-offs)
	Provision for		Net (charge-offs)		Average		Recoveries to
	Credit Losses		Recoveries		Loans		Average Loans
Three Months Ended June 30, 2025
Commercial real estate
Non-owner occupied	$	(72)	$	-	$	1,113,659		-	%
Owner occupied		446		1		920,454		-
Consumer real estate		199		-		792,439		-
Construction and land development		296		-		373,569		-
Commercial and industrial		663		39		772,146		0.01
Leases		182		(156)		63,232		(0.25)
Consumer and other		33		(30)		14,986		(0.20)
Total	$	1,747	$	(146)	$	4,050,485		-	%


Three Months Ended June 30, 2024
Commercial real estate
Non-owner occupied	$	564	$	-	$	954,929		-	%
Owner occupied		192		31		813,458		-
Consumer real estate		265		32		664,675		-
Construction and land development		(1,208)		-		306,330		-
Commercial and industrial		745		(152)		680,489		(0.02)
Leases		258		(245)		70,669		(0.35)
Consumer and other		80		(75)		13,715		(0.55)
Total	$	896	$	(409)	$	3,504,265		(0.01)	%


Six Months Ended June 30, 2025
Commercial real estate:
Non-owner occupied	$	282	$	-	$	1,098,731		-	%
Owner occupied		518		3		908,116		-
Consumer real estate		532		-		781,818		-
Construction and land development		82		200		368,561		0.05
Commercial and industrial		775		3		761,796		0.00
Leases		295		(346)		62,385		(0.55)
Consumer and other		107		(98)		14,785		(0.66)
Total	$	2,591	$	(238)	$	3,996,192		(0.01)	%


Six Months Ended June 30, 2024
Commercial real estate:
Non-owner occupied	$	172	$	-	$	950,269		-	%
Owner occupied		161		33		806,473		-
Consumer real estate		290		4		660,297		-
Construction and land development		(937)		(441)		304,313		(0.14)
Commercial and industrial		637		(327)		676,007		(0.05)
Leases		352		(322)		70,203		(0.46)
Consumer and other		143		(141)		13,625		(1.03)
Total	$	818	$	(1,194)	$	3,481,187		(0.03)	%

Securities Portfolio

Our available-for-sale securities portfolio is carried at fair market value and our held-to-maturity securities portfolio is carried at amortized cost, and consists primarily of Federal agency bonds, mortgage-backed securities, state and municipal securities and other debt securities. Our securities portfolio increased from $609.0 million at December 31, 2024, to $626.7 million at June 30, 2025, primarily as a result of available-for-sale securities purchases. Our securities to asset ratio has decreased from 11.5% at December 31, 2024, to 11.4% at June 30, 2025.

Table of Contents The following table presents the contractual maturity of the Company’s securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at June 30, 2025 (dollars in thousands). The composition and maturity/repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.


	****	One Year				One through				Five through				****	Over Ten				****					****
		or Less				Five Years				Ten Years					Years					Total
				Weighted				Weighted				Weighted					Weighted					Weighted
				Average				Average				Average					Average					Average
Available-for-sale:			Amount	Yield ^(1)^			Amount	Yield ^(1)^			Amount	Yield ^(1)^				Amount	Yield ^(1)^				Amount	Yield ^(1)^
U.S. Treasury		$	—	-	%	$	82,839	1.27	%	$	—	-	%		$	—	-	%		$	82,839	1.27	%
U.S. Government agencies			—	-			79	5.37			34,421	5.77				—	-				34,500	5.77
State and political subdivisions			565	3.80			3,856	2.97			5,550	3.60				11,894	4.32				21,865	3.88
Other debt securities			4,250	4.98			11,754	8.81			23,819	4.82				500	4.50				40,323	6.00
Mortgage-backed securities			17	2.03			29,632	4.16			102,328	3.57				213,318	3.79				345,295	3.76
Total securities		$	4,832	4.83		$	128,160	2.68		$	166,118	4.20			$	225,712	3.82			$	524,822	3.67

Held-to-maturity:
U.S. Treasury		$	—	-	%	$	—	-	%	$	—	-	%		$	—	-	%		$	—	-	%
U.S. Government agencies			—	-			6,140	1.86			41,354	1.86				—	-				47,494	1.86
State and political subdivisions			—	-			721	1.32			9,821	1.93				40,589	2.21				51,131	2.14
Other debt securities			—	-			—	-			—	-				—	-				—	-
Mortgage-backed securities			—	-			—	-			4,718	2.14				21,177	2.12				25,895	2.12
Total securities		$	—	-		$	6,861	1.80		$	55,893	1.90			$	61,766	2.18			$	124,520	2.03
(1)	Based on amortized cost, taxable equivalent basis
---	---

Deposits

Deposits are the primary source of funds for the Company’s lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts, Individual Retirement Accounts and certificates of deposit.. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company’s primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of June 30, 2025, brokered deposits represented approximately 5.52% of total deposits.

The following tables summarize the average balances outstanding and average interest rates for each major category of deposits for the three and six month periods ending June 30, 2025, and 2024, respectively (dollars in thousands):


		Three Months Ended							Three Months Ended
		June 30, 2025							June 30, 2024
	****	Average		****	% of	****	Average	****	Average		****	% of	****	Average	****
		Balance			Total		Rate		Balance			Total		Rate
Noninterest-bearing demand		$	898,428		18.9	%	—	%	$	888,693		20.6	%	—	%
Interest-bearing demand			835,394		17.6	%	1.82	%		983,433		22.8	%	2.43	%
Money market and savings			2,104,236		44.3	%	3.00	%		1,909,125		44.3	%	3.48	%
Time deposits			914,658		19.2	%	3.84	%		528,985		12.3	%	3.77	%
Total average deposits		$	4,752,716		100.0	%	2.39	%	$	4,310,236		100.0	%	2.56	%


		Six Months Ended							Six Months Ended
		June 30, 2025							June 30, 2024
	****	Average		****	% of	****	Average	****	Average		****	% of	****	Average	****
		Balance			Total		Rate		Balance			Total		Rate
Noninterest-bearing demand		$	891,293		18.9	%	—	%	$	880,767		20.4	%	—	%
Interest-bearing demand			841,077		17.8	%	1.80	%		989,790		22.9	%	2.44	%
Money market and savings			2,084,296		44.3	%	2.98	%		1,906,990		44.3	%	3.45	%
Time deposits			897,889		19.0	%	3.88	%		535,389		12.4	%	3.68	%
Total average deposits		$	4,714,555		100.0	%	2.38	%	$	4,312,936		100.0	%	2.54	%

Table of Contents The Company believes its deposit product offerings are properly structured to attract and retain core deposit relationships. The average cost of interest-bearing deposits for the three months ended June 30, 2025, and 2024, was 2.95% and 3.23%, respectively. The cost decrease was primarily attributable to the rate decreases by the Federal Reserve. The average cost of interest-bearing deposits for the six months ended June 30, 2025, and 2024, was 2.93% and 3.19%, respectively. The cost decrease was primarily attributable to rate decreases by the Federal Reserve.

Total deposits as of June 30, 2025, were $4.87 billion, which was an increase of $185.6 million from December 31, 2024. This overall increase was driven primarily by increases in other time deposits of $95.2 million, money market deposits of $85.1 million and interest-bearing demand deposits of $7.1 million and the issuance of brokered deposits of $56.9 million, offset by a decline in noninterest demand deposits of $58.6 million. As of June 30, 2025, the Company had outstanding time deposits under $250,000 with balances of $636.9 million and time deposits over $250,000 with balances of $359.8 million.

The following table summarizes the maturities of time deposits $250,000 or more (in thousands).


****	****	June 30,
		2025
Three months or less		$	127,495
Three to six months			79,558
Six to twelve months			123,693
More than twelve months			29,099
Total		$	359,845

Borrowings

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be down-streamed as Tier 1 capital to the Bank. Borrowings totaled $7.0 million at June 30, 2025, and consisted of short-term borrowings of $4.0 million, and $3.0 million of securities sold under repurchase agreements. Long-term debt totaled $39.7 million at June 30, 2025, and December 31, 2024, respectively, and consisted entirely of subordinated debt. For more information regarding our borrowings, see “Part I - Item 1. Consolidated Financial Statements – Note 6 – Borrowings, Line of Credit and Subordinated Debt” of this report.

Capital Resources

The Company uses leverage analysis to examine the potential of the institution to increase assets and liabilities using the current capital base. The key measurements included in this analysis are the Bank’s Common Equity Tier 1 capital, Tier 1 capital, leverage and total capital ratios. At June 30, 2025 and December 31, 2024, our capital ratios, including our Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time, we may be required to support the capital needs of our bank subsidiary. We believe we have various capital raising techniques available to us to provide for the capital needs of our bank, if necessary. For more information regarding our capital, leverage and total capital ratios, see “Part I - Item 1. Consolidated Financial Statements – Note 12 – Regulatory Matters” of this report.

Liquidity and Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing and depository needs of its customers. At June 30, 2025, we had $957.2 million of pre-approved but unused lines of credit and $19.5 million of standby letters of credit. These commitments generally have fixed expiration dates, and many will expire without being drawn upon. The total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to liquidate federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase federal funds from other financial institutions. For more information regarding our off-balance sheet arrangements, see “Part I - Item 1. Consolidated Financial Statements – Note 8 – Commitments and Contingent Liabilities” of this report. 53

Table of Contents Market Risk and Liquidity Risk Management

The Bank’s Asset Liability Management Committee (“ALCO”) oversees market risk management and establishes risk measures, limits on policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. A variety of measures are used to provide for a comprehensive overview of the Company’s magnitude of interest rate risk, the distribution of risk, the level of risk over time and the exposure to changes in certain interest rate relationships. We utilize an independent third-party earnings simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next 12-24 months. The model measures the impact on net interest income relative to a flat-rate case scenario of hypothetical fluctuations in interest rates over the next 12-24 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact of interest rate, caps and floors is also included in the model. Other interest rate-related risks such as prepayment, basis and option risk are also considered. In addition, third parties will join the meetings of ALCO to provide feedback regarding future balance sheet structure, earnings and liquidity strategies. ALCO continuously monitors and manages the balance between interest rate-sensitive assets and liabilities. The objective is to manage the impact of fluctuating market rates on net interest income within acceptable levels. In order to meet this objective, management may lengthen or shorten the duration of assets or liabilities.

Interest Rate Sensitivity

Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. In the normal course of business, we are exposed to market risk arising from fluctuations in interest rates. ALCO measures and evaluates the interest rate risk so that we can meet customer demands for various types of loans and leases and deposits. ALCO determines the most appropriate amounts of on-balance sheet and off-balance sheet items. The primary measurements we use to help us manage interest rate sensitivity are an earnings simulation model and an economic value of equity model. These measurements are used in conjunction with competitive pricing analysis and are further described below.

Earnings Simulation Model. We believe interest rate risk is effectively measured by our earnings simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with simulated forecasts of interest rates for the next 12 months. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the variance of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts or 12-month ramp in market interest rates over time. For changes up or down in rates from our static interest rate forecast over the next 12 months, limits in the decline in net interest income are as follows:


		Estimated % Change in Net Interest Income Over 12 Months
June 30, 2025:	****
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		(1.65)%
200 basis points increase		(3.27)%
100 basis points decrease		1.02%
200 basis points decrease		1.91%


		Estimated % Change in Net Interest Income Over 12 Months
June 30, 2025:	****
12-month RAMP, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		(0.68)%
200 basis points increase		(1.36)%
100 basis points decrease		0.39%
200 basis points decrease		0.73%

Table of Contents

Economic Value of Equity Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity.

To help monitor our related risk, we’ve established the following policy limits regarding simulated changes in our economic value of equity:


		Current Estimated Instantaneous Rate Change
June 30, 2025:
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		(1.22)%
200 basis points increase		(3.13)%
100 basis points decrease		2.76%
200 basis points decrease		3.97%

At June 30, 2025, our model results indicated that we were within our policy limits.

Liquidity Risk Management

The purpose of liquidity risk management is to ensure that there are sufficient cash flows to satisfy loan and lease demand, deposit withdrawals, and our other needs. Traditional sources of liquidity for a bank include asset maturities and growth in core deposits. A bank may achieve its desired liquidity objectives from the management of its assets and liabilities and by internally generated funding through its operations. Funds invested in marketable instruments that can be readily sold and the continuous maturing of other earning assets are sources of liquidity from an asset perspective. The liability base provides sources of liquidity through attraction of increased deposits and borrowing funds from various other institutions.

Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and intend to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.

Scheduled loan and lease payments are a relatively stable source of funds, but loan and lease payoffs and deposit flows fluctuate significantly, being influenced by interest rates, general economic conditions and competition. Additionally, debt securities are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.

The Company has $4.8 million in securities that mature throughout the next 12 months. The Company also has unused borrowing capacity in the amount of $1.22 billion available with the Federal Reserve, Federal Home Loan Bank, several correspondent banks and a line of credit. With these sources of funds, the Company currently anticipates adequate liquidity to meet the expected obligations of its customers.

Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information presented in the Market Risk and Liquidity Risk Management section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including SmartFinancial’s Chief Executive Officer and Chief Financial Officer, SmartFinancial has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2025 (the “Evaluation Date”). Based on such evaluation, SmartFinancial’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, SmartFinancial’s disclosure controls and procedures were effective to ensure that information required to be disclosed by SmartFinancial in the reports that it files or submits under the Exchange Act is (i) accumulated and communicated to SmartFinancial’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decision regarding the required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in SmartFinancial’s internal control over financial reporting during SmartFinancial’s fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, SmartFinancial’s internal control over financial reporting.

Table of Contents PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

SmartFinancial, Inc. and its wholly owned subsidiary, SmartBank, are periodically involved as a plaintiff or a defendant in various legal actions in the ordinary course of business. While the outcome of these matters is not currently determinable, management does not expect the disposition of any of these matters to have a material adverse impact on the Company’s financial condition, financial statements or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Part I – Item 1A – Risk Factors” in our Form 10-K for the year ended December 31, 2024. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. Please be aware that these risks may change over time and other risks may prove to be important in the future.

There are no material changes during the period covered by this report to the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a)	Not applicable
(b)	Not applicable
---	---
(c)	Issuer Purchases of Registered Equity Securities
---	---

On November 20, 2018, the Company announced that its board of directors had authorized a stock repurchase plan pursuant to which the Company may purchase up to $10.0 million in shares of the Company’s outstanding common stock. Stock repurchases under the plan will be made from time to time in the open market, at the discretion of the management of the Company, and in accordance with applicable legal requirements. The stock repurchase plan does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, amended, suspended, or discontinued at any time. As of June 30, 2025, we have purchased $8.5 million of the authorized $10.0 million and may purchase up to an additional $1.5 million in the Company’s outstanding common stock.

The following table summarizes the Company’s repurchase activity during the three months ended June 30, 2025.


					Maximum
					Number (or
					Approximate
					Dollar Value) of
					Shares That May
				Total Number of Shares	Yet Be Purchased
	Total Number of	Weighted		Purchased as Part of	Under the Plans
	Shares	Average Price Paid		Publicly Announced	or Programs (in
Period	Repurchased	Per Share		Plans or Programs	thousands)
April 1, 2025 to April 30, 2025	—	$	—	—	$	1,546
May 1, 2025 to May 31, 2025	—		—	—		1,546
June 1, 2025 to June 30, 2025	—		—	—		1,546
Total	—	$	—	—	$	1,546

Item 3. Defaults Upon Senior Securities.

None.

Table of Contents Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

(a)	Not applicable
(b)	Not applicable
---	---
(c)	Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025.
---	---

Item 6. Exhibits


Exhibit No.	****	Description	****	Location
3.1		Second Amended and Restated Charter of SmartFinancial, Inc.		Incorporated by reference to Exhibit 3.3 to Form 8-K filed September 2, 2015
3.2		Second Amended and Restated Bylaws of SmartFinancial, Inc.		Incorporated by reference to Exhibit 3.1 to Form 8-K filed October 26, 2015
10.1		The Third Amendment to Loan and Security Agreement, dated as of May 1, 2025, by and between SmartFinancial, Inc., as Borrower, and ServisFirst Bank, as Lender.		Incorporated by reference to Exhibit 10.1 to Form 8-K filed May 1, 2025.
10.2		The Amended and Restated Revolving Note, dated as of May 1, 2025, by and between SmartFinancial, Inc., as Borrower, and ServisFirst Bank, as Lender.		Incorporated by reference to Exhibit 10.2 to Form 8-K filed May 1, 2025.
10.3		SmartFinancial, Inc. Omnibus Incentive Plan		Incorporated by reference to Exhibit 99.1 to Form 8-K filed May 22, 2025.
10.4		Form of Employee Restricted Stock Award Certificate		Filed herewith.
10.5		Form of Non-Employee Director Restricted Stock Award Certificate		Filed herewith.
31.1		Certification pursuant to Rule 13a -14(a)/15d-14(a)		Filed herewith.
31.2		Certification pursuant to Rule 13a -14(a)/15d-14(a)		Filed herewith.
32.1		Certification pursuant to 18 USC Section 1350 -Sarbanes-Oxley Act of 2002		Furnished herewith.
32.2		Certification pursuant to 18 USC Section 1350 -Sarbanes-Oxley Act of 2002		Furnished herewith.
101		Interactive Data Files (formatted as Inline XBRL)		Filed herewith.
104		Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)		Filed herewith

* Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant will furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

Table of Contents SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SmartFinancial, Inc.

Date:	August 11, 2025	/s/ William Y. Carroll, Jr.
		William Y. Carroll, Jr.
		President and Chief Executive Officer
		(principal executive officer)

Date:	August 11, 2025	/s/ Ronald J. Gorczynski
		Ronald J. Gorczynski
		Executive Vice President and Chief Financial Officer
		(principal financial officer and accounting officer)

Exhibit 10.4 RESTRICTED STOCK AWARD CERTIFICATE

Non-transferable

GRANT TO

(“Grantee”)

by SmartFinancial, Inc. (the “Company”) of [________] shares of Stock (the “Shares”) pursuant to the SmartFinancial, Inc. Omnibus Incentive Plan (the “Plan”) and to the terms and conditions set forth on the following pages (the “Terms and Conditions”). By accepting the Shares and signing below, Grantee shall be deemed to have agreed to the Terms and Conditions set forth in this Award Certificate and the Plan. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

The Shares shall vest (become non-forfeitable) in accordance with the following vesting schedule, subject to Grantee’s Continuous Service on each such vesting date:

Percent of Shares Vested	Vesting Date

IN WITNESS WHEREOF, SmartFinancial, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

SmartFinancial, Inc.<br><br><br><br> <br><br>By:<br><br>Its:		GRANTEE<br><br><br><br> <br><br>[NAME]<br><br>

Grant Date:

TERMS AND CONDITIONS

1.	Restrictions. The Shares are subject to each of the following restrictions. “Restricted Shares” mean those Shares that are subject to the restrictions imposed hereunder which restrictions have not then expired or terminated. Restricted Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered to or in favor of any party, or be subjected to any lien, obligation or liability of Grantee to any other party. If Grantee’s Continuous Service is terminated for any reason other than as set forth in subsection (b) or (c) of Section 2 hereof, then Grantee shall forfeit all of Grantee’s right, title and interest in and to the Restricted Shares as of the date of termination, and such Restricted Shares shall revert to the Company immediately following the event of forfeiture. The restrictions imposed under this Section 1 shall apply to all Shares or other securities issued with respect to Restricted Shares hereunder in connection with any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Shares.
2.	Vesting and Termination of Restrictions. The Restricted Shares shall vest (become non-forfeitable) and the restrictions imposed under Section 1 will expire on the earliest to occur of the following (the period prior to such expiration being referred to herein as the “Restricted Period”):
---	---
(a)	as to the percentages and dates specified on the cover page hereto, provided that Grantee remains in Continuous Service on each such date;
---	---
(b)	as to 100% of the Restricted Shares upon the termination of Grantee’s Continuous Service by reason of death or Disability;
---	---

(c)	as to the Pro Rata Shares (as defined herein) upon the termination of Grantee’s Continuous Service by reason of (i) a termination by the Company without Cause, or (ii) a resignation by Grantee for Good Reason. For purposes of this Award Certificate, “Pro Rata Shares” means a number of Restricted Shares determined by multiplying the number of Restricted Shares outstanding as of the date of Grantee’s termination by a fraction, the numerator of which is the number of full calendar months Grantee has been employed by the Company or an employing Affiliate since the Grant Date (including for this purpose the month during which the Grant Date occurs if Grantee was employed by the Company or an employing Affiliate for the entirety of such month) and the denominator of which is forty-eight (48); or
(d)	as to 100% of the Restricted Shares on the occurrence of a Change in Control, subject to Grantee’s Continuous Service on the date of such Change in Control.
---	---
3.	Delivery of Shares. The Shares will be registered in the name of Grantee as of the Grant Date and may be held by the Company during the Restricted Period in certificated or uncertificated form. Any certificate for the Restricted Shares issued during the Restricted Period shall bear a legend in substantially the following form (in addition to any legend required under applicable state securities laws): “This certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in a Restricted Stock Award Certificate between the registered owner of the shares represented hereby and SmartFinancial, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of such Certificate, copies of which are on file in the offices of SmartFinancial, Inc.” Stock certificates for the Shares, without the first above legend, shall be delivered to Grantee or Grantee’s designee upon request of Grantee after the expiration of the Restricted Period, but delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply, if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of any Exchange, and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.
---	---

4.	Voting Rights. Grantee, as beneficial owner of the Shares, shall have full voting rights with respect to the Shares during and after the Restricted Period.
5.	Dividend Rights. Grantee, as beneficial owner of the Shares, shall have full dividend rights with respect to the Shares during and after the Restricted Period.
---	---
6.	Payment of Taxes. Upon issuance of the Shares hereunder, Grantee may make an election to be taxed upon such award under Section 83(b) of the Code (an “83(b) Election”). To effect such 83(b) Election, Grantee may file an appropriate election with Internal Revenue Service within 30 days after the grant date of the Shares and otherwise in accordance with applicable Treasury Regulations. The Company or an employing Affiliate has the authority and the right to deduct or withhold, or require Grantee to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including Grantee’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the grant or vesting of the Shares. If Grantee does not make an 83(b) election, and if so determined by the Company, the withholding requirement may be satisfied by withholding from the Shares a number of Shares having a Fair Market Value on the date of withholding equal to the amount required to be withheld in accordance with applicable tax requirements. If Grantee makes an 83(b) election, and to the extent not prohibited by applicable laws or regulations, the withholding requirement shall be satisfied, in whole or in part, by deducting any such taxes from any payment of any kind otherwise due to Grantee. The obligations of the Company under this Award Certificate will be conditional on such payment or arrangements, and the Company, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to Grantee. ****
---	---
7.	No Right of Continued Service. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s service at any time, nor confer upon Grantee any right to continue in the employ or service of the Company or any Affiliate.
---	---
8.	Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Award Certificate, and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.
---	---
9.	Successors. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.
---	---
10.	Severability. If any provision or portion of this Award Certificate shall be or become illegal, invalid or unenforceable in whole or in part for any reason, such provision shall be ineffective only to the extent of such illegality, invalidity or unenforceability without invalidating the remainder of such provision or the remaining provisions of this Award Certificate. Upon such determination that any term or other provision is illegal, invalid, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Award Certificate so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the agreements contemplated hereby are fulfilled to the extent possible.
---	---
11.	Interpretation. The headings contained in this Award Certificate are for reference purposes only and shall not affect in any way the meaning or interpretation of this Award Certificate. The language in all parts of this Award Certificate shall in all cases be construed according to its fair meaning, and not strictly for or against any party hereto. In this Award Certificate, unless the context otherwise requires, the masculine, feminine and neuter genders and the singular and the plural include one another.
---	---
12.	Notice. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to
---	---

SmartFinancial, Inc., 5401 Kingston Pike, Suite 600, Knoxville, TN 37919; Attn: Chief Financial Officer, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee shall be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.
13.	Clawback. The Shares shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to Grantee and to awards of this type.
---	---
14.	Applicable Law. The Company and Grantee agree that this Award Certificate shall be governed by and construed and interpreted in accordance with the laws of the State of Tennessee without giving effect to its conflicts of law principles.
---	---

SMARTFINANCIAL, INC.

OMNIBUS INCENTIVE PLAN

Designation/Change of Beneficiary Form

I, the undersigned, a participant in the above-named plan (the “Plan”), do hereby designate the following beneficiary to exercise my rights under the Plan and to receive any distribution with respect to any awards granted thereunder upon my death, and I hereby revoke all prior beneficiary designations that I may have made under the Plan.

Beneficiary:

Name:_______________________________________________________________

Address:_______________________________________________________________

_______________________________________________________________

Relationship:_______________________________________________________________

I understand that my beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreements (as defined in the Plan) applicable to me, except to the extent the Plan and Award Agreements otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee (as defined in the Plan). I further understand that if no beneficiary has been designated or survives me, payment shall be made to my estate.

Executed this _____ day of ___________, 20 ___.

______________________________________________________________________

WitnessParticipant

Exhibit 10.5 RESTRICTED STOCK AWARD CERTIFICATE

Non-transferable

GRANT TO

(“Grantee”)

The Shares shall vest (become non-forfeitable) in accordance with the following vesting schedule, subject to Grantee’s Continuous Service on each such vesting date:

Percent of Shares Vested	Vesting Date

IN WITNESS WHEREOF, SmartFinancial, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

SmartFinancial, Inc.<br><br><br><br> <br><br>By:<br><br>Its:		GRANTEE<br><br><br><br> <br><br>[NAME]<br><br>

Grant Date:

TERMS AND CONDITIONS

1.	Restrictions. The Shares are subject to each of the following restrictions. “Restricted Shares” mean those Shares that are subject to the restrictions imposed hereunder which restrictions have not then expired or terminated. Restricted Shares may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered to or in favor of any party, or be subjected to any lien, obligation or liability of Grantee to any other party. If Grantee’s Continuous Service is terminated for any reason other than as set forth in subsection (b) of Section 2 hereof, then Grantee shall forfeit all of Grantee’s right, title and interest in and to the Restricted Shares as of the date of termination, and such Restricted Shares shall revert to the Company immediately following the event of forfeiture. The restrictions imposed under this Section 1 shall apply to all Shares or other securities issued with respect to Restricted Shares hereunder in connection with any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Shares.
2.	Vesting and Termination of Restrictions. The Restricted Shares shall vest (become non-forfeitable) and the restrictions imposed under Section 1 will expire on the earliest to occur of the following (the period prior to such expiration being referred to herein as the “Restricted Period”):
---	---
(a)	as to the percentages and dates specified on the cover page hereto, provided that Grantee remains in Continuous Service on each such date;
---	---
(b)	as to 100% of the Restricted Shares upon the termination of Grantee’s Continuous Service by reason of death or Disability; or
---	---
(c)	as to 100% of the Restricted Shares on the occurrence of a Change in Control, subject to Grantee’s Continuous Service on the date of such Change in Control.
---	---
3.	Delivery of Shares. The Shares will be registered in the name of Grantee as of the Grant Date and may be held by the Company during the Restricted Period in certificated or uncertificated form. Any certificate for the Restricted Shares issued during the Restricted Period shall bear a legend in substantially the following form (in addition to any legend required under applicable state securities laws): “This certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in a Restricted Stock Award Certificate between the registered owner of the shares represented hereby and SmartFinancial, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of such Certificate, copies of which are on file in the offices of SmartFinancial, Inc.” Stock certificates for the Shares, without the first above legend, shall be delivered to Grantee or Grantee’s designee upon request of Grantee after the expiration of the Restricted Period, but delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply, if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of any Exchange, and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.
---	---
4.	Voting Rights. Grantee, as beneficial owner of the Shares, shall have full voting rights with respect to the Shares during and after the Restricted Period.
---	---
5.	Dividend Rights. Grantee, as beneficial owner of the Shares, shall have full dividend rights with respect to the Shares during and after the Restricted Period.
---	---
6.	Payment of Taxes. Upon issuance of the Shares hereunder, Grantee may make an election to be taxed upon such award under Section 83(b) of the Code (an “83(b) Election”). To effect such 83(b) Election, Grantee may file an appropriate election with Internal Revenue Service within 30 days after the grant date of the Shares and otherwise in accordance with applicable Treasury Regulations.
---	---
7.	No Right of Continued Service. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s service at any time, nor confer upon Grantee any right to continue in the employ or service of the Company or any Affiliate.
---	---

8.	Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Award Certificate, and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.
9.	Successors. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.
---	---
10.	Severability. If any provision or portion of this Award Certificate shall be or become illegal, invalid or unenforceable in whole or in part for any reason, such provision shall be ineffective only to the extent of such illegality, invalidity or unenforceability without invalidating the remainder of such provision or the remaining provisions of this Award Certificate. Upon such determination that any term or other provision is illegal, invalid, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Award Certificate so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the agreements contemplated hereby are fulfilled to the extent possible.
---	---
11.	Interpretation. The headings contained in this Award Certificate are for reference purposes only and shall not affect in any way the meaning or interpretation of this Award Certificate. The language in all parts of this Award Certificate shall in all cases be construed according to its fair meaning, and not strictly for or against any party hereto. In this Award Certificate, unless the context otherwise requires, the masculine, feminine and neuter genders and the singular and the plural include one another.
---	---
12.	Notice. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to SmartFinancial, Inc., 5401 Kingston Pike, Suite 600, Knoxville, TN 37919; Attn: Chief Financial Officer, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee shall be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.
---	---
13.	Clawback. The Shares shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to Grantee and to awards of this type.
---	---
14.	Applicable Law. The Company and Grantee agree that this Award Certificate shall be governed by and construed and interpreted in accordance with the laws of the State of Tennessee without giving effect to its conflicts of law principles.
---	---

SMARTFINANCIAL, INC.

OMNIBUS INCENTIVE PLAN

Designation/Change of Beneficiary Form

Beneficiary:

Name:_______________________________________________________________

Address:_______________________________________________________________

_______________________________________________________________

Relationship:_______________________________________________________________

Executed this _____ day of ___________, 20 ___.

______________________________________________________________________

WitnessParticipant

EXHIBIT 31.1

CERTIFICATION

I, William Y. Carroll, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of SmartFinancial, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 11, 2025

/s/ William Y. Carroll, Jr.

William Y. Carroll, Jr.

President and Chief Executive Officer

(principal executive officer)

EXHIBIT 31.2

CERTIFICATION

I, Ronald J. Gorczynski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SmartFinancial, Inc. (the “Registrant”);

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 11, 2025

/s/ Ronald J. Gorczynski

Ronald J. Gorczynski

Executive Vice President and Chief Financial Officer

(principal financial officer and accounting officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SmartFinancial, Inc., (the “Company”) on Form 10-Q for the quarter ended June 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Y. Carroll, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2025

/s/ William Y. Carroll, Jr.

William Y. Carroll, Jr.

President and Chief Executive Officer

(principal executive officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SmartFinancial, Inc., (the “Company”) on Form 10-Q for the quarter ended June 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald J. Gorczynski, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2025

/s/ Ronald J. Gorczynski

Ronald J. Gorczynski

Executive Vice President and Chief Financial Officer

(principal financial and accounting officer)