SMARTFINANCIAL INC._March 31, 2026

Three Months Ended

March 31,

Interest rate swap agreements

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 March 31, 2026



☐	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 mark 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 May 8, 2026, there were 17,098,473 shares of common stock, $1.00 par value per share, issued and outstanding.

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TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets at March 31, 2026 and December 31, 2025	3

	Consolidated Statements of Income for the Three Months Ended March 31, 2026 and 2025	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 2025	5

	Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2026 and 2025	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025	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	55

Item 4.	Controls and Procedures	55

PART II – OTHER INFORMATION		56

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 3.	Defaults Upon Senior Securities	56

Item 4.	Mine Safety Disclosures	57

Item 5.	Other Information	57

Item 6.	Exhibits	57

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PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share data)


		(Unaudited)
		March 31,			December 31,
		2026			2025*
ASSETS:
Cash and due from banks		$	56,746		$	56,469
Interest-bearing deposits with banks			282,379			395,120
Federal funds sold			6,946			12,828
Total cash and cash equivalents			346,071			464,417
Securities available-for-sale, at fair value			552,083			539,882
Securities held-to-maturity (fair value of $107.2 million at March 31, 2026 and $109.4 million at Dec. 31, 2025)			120,968			122,121
Other investments			16,597			16,441
Loans held for sale			7,277			10,865
Loans and leases			4,518,391			4,363,582
Less: Allowance for credit losses			(43,950)			(40,906)
Loans and leases, net			4,474,441			4,322,676
Premises and equipment, net			93,360			88,387
Other real estate owned			—			—
Goodwill and other intangibles, net			94,871			95,328
Bank owned life insurance			120,438			119,525
Other assets			81,579			81,168
Total assets		$	5,907,685		$	5,860,810

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand		$	951,366		$	1,062,918
Interest-bearing demand			954,292			945,716
Money market and savings			2,455,945			2,273,612
Time deposits			834,633			870,543
Total deposits			5,196,236			5,152,789
Borrowings			3,178			3,009
Subordinated debt			98,733			98,662
Other liabilities			47,377			53,858
Total liabilities			5,345,524			5,308,318
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; 17,098,473 and 17,029,317 shares issued and outstanding, respectively			17,098			17,029
Additional paid-in capital			296,284			295,950
Retained earnings			261,032			248,719
Accumulated other comprehensive loss			(12,366)			(9,319)
Total shareholders' equity attributable to SmartFinancial Inc. and Subsidiary			562,048			552,379
Non-controlling interest - preferred stock of subsidiary			113			113
Total shareholders' equity			562,161			552,492
Total liabilities and shareholders' equity		$	5,907,685		$	5,860,810

* Derived from audited financial statements.

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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


			Three Months Ended
		March 31,
		2026			2025
Interest income:
Loans and leases, including fees		$	65,638		$	57,762
Securities:
Taxable			5,492			4,775
Tax-exempt			555			354
Federal funds sold and other earning assets			2,585			3,485
Total interest income			74,270			66,376
Interest expense:
Deposits			26,529			27,335
Borrowings			1			70
Subordinated debt			1,864			733
Total interest expense			28,394			28,138
Net interest income			45,876			38,238
Provision for credit losses			4,139			979
Net interest income after provision for credit losses			41,737			37,259
Noninterest income:
Service charges on deposit accounts			1,853			1,736
Gain (loss) on sale of securities, net			1			—
Mortgage banking			760			493
Investment services			1,796			1,769
Insurance commissions			—			1,412
Interchange and debit card transaction fees, net			1,418			1,220
Other			2,113			1,967
Total noninterest income			7,941			8,597
Noninterest expense:
Salaries and employee benefits			20,414			19,234
Occupancy and equipment			3,344			3,397
FDIC insurance			750			960
Other real estate and loan related expense			792			658
Advertising and marketing			387			382
Data processing and technology			2,436			2,657
Professional services			1,193			1,368
Amortization of intangibles			457			569
Other			3,142			3,071
Total noninterest expense			32,915			32,296
Income before income tax expense			16,763			13,560
Income tax expense			3,083			2,306
Net income		$	13,680		$	11,254
Earnings per common share:
Basic		$	0.81		$	0.67
Diluted		$	0.81		$	0.67
Weighted average common shares outstanding:
Basic			16,821,486			16,767,535
Diluted			16,935,530			16,872,097

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


		Three Months Ended
		March 31,
		2026		2025
Net income		$	13,680	$	11,254
Other comprehensive (loss) income:
Investment securities:
Unrealized holding (losses) gains on securities available-for-sale			(4,520)		4,963
Tax effect			1,168		(1,282)
Amortization of unrealized gains on investment securities transferred from available-for-sale to held-to-maturity			28		30
Tax effect			(7)		(8)
Reclassification adjustment for realized gains, net included in net income			(1)		—
Tax effect			—		—
Unrealized (losses) gains on securities available-for-sale, net of tax			(3,332)		3,703
Fair value hedging activities:
Unrealized gains (losses) on fair value mortgage-backed security hedges			307		(155)
Tax effect			(79)		40
Reclassification adjustment for realized gains included in net income			—		(1)
Tax effect			—		—
Unrealized gains (losses) on fair value hedged instruments arising during the period, net of tax			228		(116)
Cash flow hedging activities:
Unrealized gains on cash flow hedges			99		437
Tax effect			(26)		(112)
Reclassification adjustment for realized losses included in net income			(22)		151
Tax effect			6		(39)
Unrealized gains on cash flow hedge instruments arising during the period, net of tax			57		437

Total other comprehensive (loss) income			(3,047)		4,024
Comprehensive income		$	10,633	$	15,278

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

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

For the Three Months Ended March 31, 2026 and 2025

(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, 2024		16,925,672		$	16,926		$	294,269		$	203,824		$	(23,671)	$	113		$	491,461
Net income		—			—			—			11,254			—		—			11,254
Other comprehensive income		—			—			—			—			4,024		—			4,024
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		—			—			761			—			—		—			761
Common stock dividend ($0.08 per share)		—			—			—			(1,357)			—		—			(1,357)
Balance, March 31, 2025		17,017,547		$	17,018		$	294,736		$	213,721		$	(19,647)	$	113		$	505,941

Balance, December 31, 2025		17,029,317		$	17,029		$	295,950		$	248,719		$	(9,319)	$	113		$	552,492
Net income		—			—			—			13,680			—		—			13,680
Other comprehensive loss		—			—			—			—			(3,047)		—			(3,047)
Common stock issued pursuant to:
Restricted stock, net of forfeitures		77,587			77			(77)			—			—		—			—
Restricted stock, withheld for taxes		(8,431)			(8)			(303)			—			—		—			(311)
Stock compensation expense		—			—			714			—			—		—			714
Common stock dividend ($0.08 per share)		—			—			—			(1,367)			—		—			(1,367)
Balance, March 31, 2026		17,098,473		$	17,098		$	296,284		$	261,032		$	(12,366)	$	113		$	562,161

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


		Three Months Ended March 31,
		2026		2025
Cash flows from operating activities:
Net income		$	13,680	$	11,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,297		2,168
Amortization of intangible assets			457		569
Provision for credit losses			4,139		979
Stock compensation expense			714		761
Net (gain) loss on sale of securities, net			(1)		—
Deferred income tax expense			565		988
Increase in cash surrender value of bank owned life insurance			(913)		(888)
Net losses from sale and write-downs of other real estate owned and other repossessed assets			155		84
Net gains from mortgage banking			(736)		(464)
Origination of loans held for sale			(8,986)		(4,758)
Proceeds from sales of loans held for sale			13,311		7,374
Net loss from sale/disposal of fixed assets			—		26
Net change in:
Accrued interest receivable			(292)		(106)
Accrued interest payable			(2,889)		1,188
Other assets			(1,073)		(1,696)
Other liabilities			(3,068)		(3,192)
Net cash provided by operating activities			16,360		14,287
Cash flows from investing activities:
Available-for-sale:
Proceeds from sales			13,312		—
Proceeds from maturities, calls and paydowns			14,277		11,144
Purchases			(43,761)		(23,639)
Held-to-maturity:
Proceeds from maturities, calls and paydowns			630		570
Proceeds from sales of other investments			—		1,041
Purchases of other investments			(218)		(797)
Net increase in loans and leases			(155,016)		(87,115)
Proceeds from sale of fixed assets			—		17
Purchases of premises and equipment			(6,204)		(929)
Proceeds from sale of other real estate owned and other repossessed assets			333		730
Net cash used in investing activities			(176,647)		(98,978)
Cash flows from financing activities:
Net increase in deposits			43,450		122,188
Net increase (decrease) in securities sold under agreements to repurchase			169		(524)
Cash dividends paid			(1,367)		(1,357)
Issuance of common stock			—		63
Restricted stock withheld for taxes			(311)		(265)
Net cash provided by financing activities			41,941		120,105
Net change in cash and cash equivalents			(118,346)		35,414
Cash and cash equivalents, beginning of period			464,417		387,570
Cash and cash equivalents, end of period		$	346,071	$	422,984
Supplemental disclosures of cash flow information:
Cash paid during the period for interest		$	31,283	$	26,950
Net cash (received) paid during the period for income taxes			(327)		23
Noncash investing and financing activities:
Recognition of operating lease assets in exchange for lease liabilities			—		55
Acquisition of other repossessed assets			38		1,156
Financed sales of other repossessed assets			197		562

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

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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, 2025.

Recently modified accounting policies:

During the quarter ended March 31, 2026, the Company transitioned to a new allowance for credit losses (“ACL”) modeling platform used to estimate expected credit losses under the Current Expected Credit Losses model (“ASC 326”). The change resulted from management’s ongoing evaluation of the credit risk management framework and supporting technology and was intended to improve analytical and reporting capabilities and better align the process with the Company’s portfolio structure, available data, and internal control environment. As part of the implementation, management also refined certain segment-level ACL methodologies to better reflect portfolio-specific characteristics, relevant economic factors, and qualitative considerations, while maintaining the Company’s overall CECL framework, governance, and internal controls over the ACL estimation process. Management concluded that the transition did not have a material impact on the Company’s consolidated financial position as of March 31, 2026. The provision for credit losses for the three months ended March 31, 2026, reflects this change in estimate and is accounted for prospectively.

Allowance for Credit Losses (“ACL”) – Loans and Leases:

ACL – Loans and Leases – The ACL reflects management’s estimate of expected losses that will result from the inability of our clients to make required loan and lease payments. Loans and leases deemed to be uncollectible are charged against the ACL, while recoveries of previously charged-off amounts are credited to the ACL. Management uses systematic methodologies to determine its ACL for loans and leases held for investment and certain off-balance-sheet exposures. The ACL is a valuation account that is subtracted from the amortized cost basis to present the net amount expected to be

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

collected on the loan and lease portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan and lease portfolio. The ACL recorded on the balance sheet reflects management’s best estimate of expected credit losses. The Company’s ACL is calculated using collectively assessed and individually assessed loans and leases. The ACL is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments.

Prior to March 31, 2026, the Company segmented the loan and lease portfolio by call code and risk rating. The loan portfolio reserve estimate was calculated using a non-discounted cash flow method for probability of default and loss given default values. This method utilized the Company’s data along with peer data that was regressed against the national unemployment rate. For the contractual term that extended beyond the reasonable and supportable forecast period, the Company reverted to the long term mean of historical factors utilizing a straight-line approach. The Company used an eight-quarter forecast period and a four-quarter reversion period. The lease portfolio’s reserve estimate was based on the open pool methodology which is a simplified process of capturing losses by quarter over the life of a lease divided by the balance of all leases originated. Refer to Note 1, “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for a detailed discussion regarding ACL methodology.

As of March 31, 2026, the Company began using a Discounted Cash Flow methodology, adjusted for current conditions and reasonable and supportable forecasts, for its non-consumer loan segments. This method utilizes the Company’s data, along with peer data which is comprised of banks of similar size and geographical location, that were regressed against the Federal Open Market Committee Summary of Economic Projections for both the Growth Rate of Real Gross Domestic Product and the Civilian Unemployment Rate. The discounted cash flow models estimate the net present value and are compared to the amortized cost of the pool with the resulting difference between the net present value and amortized cost as the initial modeled quantitative expected credit loss estimate for such pools. The consumer non-real estate loan portfolio is reserved using the Remaining Life Methodology. Under the Remaining Life Methodology, expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments, by applying a cumulative loss rate derived from historical loss experience over the average remaining life of the portfolio. Loss rates are calculated using a life-of-loan approach and are applied to the current outstanding balance to estimate lifetime expected losses as of the measurement date. The lease portfolio reserve estimate is based on the Static Pool Methodology. Under the Static Pool Methodology, expected credit losses are estimated using historical loss experience from pools of loans or leases originated during the same period and tracked over their contractual lives.

Management considers forward-looking information in estimating expected credit losses. For segments utilizing the Discounted Cash Flow methodology, the Company uses Federal Open Market Committee Summary of Economic Projections for both the Growth Rate of Real Gross Domestic Product and the Civilian Unemployment Rate as a regression tool to determine the best estimate of probability of default expectations. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors using a straight-line approach. The Company uses a four-quarter forecast and a four-quarter reversion period.

Management considered the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation. The Company considered the qualitative factors that were relevant as of the reporting date, which included, but was not limited to: independent loan review results, portfolio concentrations, lending strategies, quality of assets, regulatory review results, economic conditions and associate retention.

Loans that do not share risk characteristics are evaluated on an individual basis. The Company maintains a net book balance threshold of $500,000 for individually evaluated loans unless further analysis in the future suggests a change is needed to this threshold based on the credit environment at that time. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

Management measures expected credit losses over the contractual term of a loan. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expects it will execute a loan modification (“LM”) with a borrower. In the event of a reasonably expected LM, the Company factors the reasonably-expected LM into the current expected credit losses estimate.

Purchased credit-deteriorated, otherwise referred to herein as (“PCD”), assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e. allowance for credit losses) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition day, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the unpaid principal balance and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s purchased credit-impaired loans (“PCI”) were treated as PCD loans.

The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an allowance for credit losses on accrued interest receivable. As of March 31, 2026, and December 31, 2025, the accrued interest receivables for loans recorded in other assets were $16.0 million and $15.5 million, respectively.

ACL – Off Balance Sheet Credit Exposures – The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the expected credit loss will be recorded as a liability on the balance sheet with an offsetting income statement expense. Management has determined that all the Company’s off-balance-sheet credit exposures, net of floorplan lines, are not unconditionally cancellable. As of March 31, 2026, and December 31, 2025, the liability recorded for expected credit losses on unfunded commitments in Other Liabilities was $4.5 million and $3.6 million, respectively. The current adjustment to the ACL for unfunded commitments is recognized through the provision for credit losses in the Consolidated Statement of Income.

Recently Issued and Adopted Accounting Pronouncements:

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 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 became effective for us on January 1, 2025, and has been applied prospectively. ASU 2023-09 did not have a material impact on the Company’s Consolidated Financial Statements.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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, 2025, 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 November 2024, FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 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.

In November 2025, FASB issued ASU No. 2025-08, “Financial Instruments – Credit Losses (Topic 326). The amendments in this update expand the use of the gross-up approach to certain acquired loans beyond purchased financial assets with credit deterioration. The new guidance is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The amendments in this update must be adopted prospectively to loans that are acquired on or after the initial application date. Management is evaluating the provisions of this ASU and does not expect this ASU to have a material impact on the Company's consolidated financial statements.

In November 2025, FASB issued ASU No. 2025-09, “Derivative and Hedging (Topic 815)” The amendments in this update are intended to more closely align hedge accounting with the economics of an entity’s risk management activities. This update is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, though early adoption is permitted. Management is evaluating the provisions of this ASU and does not expect this ASU to have a material impact on the Company's consolidated financial statements.

In December 2025, FASB issued ASU No. 2025-11 “Interim Reporting (Topic 270)” The amendments in this update clarify current interim disclosure requirements and provide a comprehensive list of required interim disclosures. The update also incorporates a disclosure principle that requires entities to disclose events that occur after the end of the last annual reporting period. This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted. Management is evaluating the provisions of this ASU and does not expect this ASU to have a material impact on the Company's consolidated financial statements.

In December 2025, FASB issued ASU No. 2025-12 “Codification Improvements” ASU 2025-12 address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Management is evaluating the provisions of this ASU and does not expect this ASU to have a material impact on the Company's 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

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incremental shares from the assumed conversions for net income per share-basic and net income per share-diluted are presented below. There were 14,811 antidilutive shares for the three months ended March 31, 2026, and none for the three months ended March 31, 2025, respectively.

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


		March 31,
		2026			2025
Basic earnings per share computation:
Net income available to common shareholders		$	13,680		$	11,254
Average common shares outstanding – basic			16,821,486			16,767,535
Basic earnings per share		$	0.81		$	0.67
Diluted earnings per share computation:
Net income available to common shareholders		$	13,680		$	11,254
Average common shares outstanding – basic			16,821,486			16,767,535
Incremental shares from assumed conversions:
Stock options and restricted stock			114,044			104,562
Average common shares outstanding - diluted			16,935,530			16,872,097
Diluted earnings per common share		$	0.81		$	0.67

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. 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.

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


		March 31, 2026
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
Available-for-sale:		Cost			Gains			Losses			Value
March 31, 2026:
U.S. Treasury		$	31,555		$	—		$	(2,186)		$	29,369
U.S. Government-sponsored enterprises (GSEs)			19,262			72			(136)			19,198
Municipal securities			37,443			114			(571)			36,986
Other debt securities			23,190			225			(866)			22,549
Mortgage-backed securities (GSEs)			456,781			1,649			(14,449)			443,981
Total		$	568,231		$	2,060		$	(18,208)		$	552,083


		March 31, 2026
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
Held-to-maturity:		Cost			Gains			Losses			Value
March 31, 2026:
U.S. Government-sponsored enterprises (GSEs)		$	46,548		$	—		$	(5,412)		$	41,136
Municipal securities			50,247			—			(5,556)			44,691
Mortgage-backed securities (GSEs)			24,173			—			(2,833)			21,340
Total		$	120,968		$	—		$	(13,801)		$	107,167


		December 31, 2025
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
Available-for-sale:		Cost			Gains			Losses			Value
U.S. Treasury		$	31,688		$	—		$	(2,059)		$	29,629
U.S. Government-sponsored enterprises (GSEs)			19,012			127			(75)			19,064
Municipal securities			35,376			542			(253)			35,665
Other debt securities			21,673			219			(892)			21,000
Mortgage-backed securities (GSEs)			443,759			2,990			(12,225)			434,524
Total		$	551,508		$	3,878		$	(15,504)		$	539,882


		December 31, 2025
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
Held-to-maturity:		Cost			Gains			Losses			Value
U.S. Government-sponsored enterprises (GSEs)		$	46,864		$	—		$	(5,017)		$	41,847
Municipal securities			50,516			—			(4,945)			45,571
Mortgage-backed securities (GSEs)			24,741			—			(2,743)			21,998
Total		$	122,121		$	—		$	(12,705)		$	109,416

At March 31, 2026 and December 31, 2025, securities with a carrying value totaling approximately $334.7 million and $315.1 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

For the three months ended March 31, 2026, the Company recorded gross realized gains of $8 thousand and gross realized losses of $7 thousand. For the three months ended March 31, 2025, there were no gross gains or gross losses related to the sale of investment securities.

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The amortized cost and estimated fair value of securities at March 31, 2026, 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.


		March 31, 2026
		Amortized			Fair
Available-for-sale:		Cost			Value
Due in one year or less		$	1,095		$	1,090
Due from one year to five years			42,767			40,521
Due from five years to ten years			39,586			38,817
Due after ten years			28,002			27,674
			111,450			108,102
Mortgage-backed securities			456,781			443,981
Total		$	568,231		$	552,083

Held-to-maturity:
Due in one year or less		$	—		$	—
Due from one year to five years			24,060			22,176
Due from five years to ten years			38,771			33,842
Due after ten years			33,964			29,809
			96,795			85,827
Mortgage-backed securities			24,173			21,340
Total		$	120,968		$	107,167

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):


		March 31, 2026
		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		$	—		$	—	—		$	29,369		$	(2,186)	4		$	29,369		$	(2,186)	4
U.S. Government-sponsored enterprises (GSEs)			8,730			(71)	4			5,002			(65)	3			13,732			(136)	7
Municipal securities			19,549			(317)	19			8,108			(254)	7			27,657			(571)	26
Other debt securities			997			(3)	1			12,136			(863)	10			13,133			(866)	11
Mortgage-backed securities (GSEs)			183,798			(2,653)	80			118,647			(11,796)	58			302,445			(14,449)	138
Total		$	213,074		$	(3,044)	104		$	173,262		$	(15,164)	82		$	386,336		$	(18,208)	186

		March 31, 2026
		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)		$	—		$	—	—		$	41,136		$	(5,412)	13		$	41,136		$	(5,412)	13
Municipal securities			3,455			(276)	4			41,236			(5,280)	33			44,691			(5,556)	37
Mortgage-backed securities (GSEs)			—			—	—			21,340			(2,833)	5			21,340			(2,833)	5
Total		$	3,455		$	(276)	4		$	103,712		$	(13,525)	51		$	107,167		$	(13,801)	55

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		December 31, 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		$	—		$	—	—		$	29,629		$	(2,059)	4		$	29,629		$	(2,059)	4
U.S. Government-sponsored enterprises (GSEs)			4,986			(1)	2			5,366			(74)	3			10,352			(75)	5
Municipal securities			6,184			(113)	4			9,110			(140)	12			15,294			(253)	16
Other debt securities			—			—	—			12,608			(892)	11			12,608			(892)	11
Mortgage-backed securities (GSEs)			111,336			(713)	42			133,449			(11,512)	66			244,785			(12,225)	108
Total		$	122,506		$	(827)	48		$	190,162		$	(14,677)	96		$	312,668		$	(15,504)	144

		December 31, 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)		$	—		$	—	—		$	41,847		$	(5,017)	13		$	41,847		$	(5,017)	13
Municipal securities			3,493			(259)	4			42,078			(4,686)	33			45,571			(4,945)	37
Mortgage-backed securities (GSEs)			—			—	—			21,998			(2,743)	5			21,998			(2,743)	5
Total		$	3,493		$	(259)	4		$	105,923		$	(12,446)	51		$	109,416		$	(12,705)	55

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 March 31, 2026, 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 March 31, 2026, 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 March 31, 2026. 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. Government-sponsored enterprises (GSEs) and mortgage-backed securities (GSEs), and accordingly, no allowance for credit losses is estimated for these securities. The HTM 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 March 31, 2026, 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 March 31, 2026, all rated debt securities classified as held-to-maturity were rated AA- or higher by at least one rating agency. 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 March 31, 2026, or December 31, 2025. Accrued interest receivable is excluded from the estimate of credit losses and based on the analysis of the underlying risk characteristics of its AFS and HTM portfolios, including credit ratings and other qualitative factors, there was no provision for credit losses

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related to AFS or HTM securities recorded during the three months ended March 31, 2026, and 2025, respectively, because the ACL was deemed immaterial.

Other Investments:

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 March 31, 2026, 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):


		March 31,			December 31,
		2026			2025
Federal Reserve Bank stock		$	10,988		$	10,981
Federal Home Loan Bank stock			5,259			5,110
First National Bankers Bank stock			350			350
Total		$	16,597		$	16,441

Note 4. Loans and Leases and Allowance for Credit Losses

Portfolio Segmentation:

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


	March 31,		December 31,
	2026		2025
Commercial real estate:
Non-owner occupied	$	1,263,455	$	1,196,758
Owner occupied		1,033,211		1,022,871
Consumer real estate		851,484		834,626
Construction and land development		478,301		419,176
Commercial and industrial		819,875		817,595
Leases		54,296		55,422
Consumer and other		17,769		17,134
Total loans and leases		4,518,391		4,363,582
Less: Allowance for credit losses		(43,950)		(40,906)
Loans and leases, net	$	4,474,441	$	4,322,676

The loan and lease portfolio is disaggregated into segments. There are seven loan and lease portfolio segments which include commercial real estate, 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.

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.

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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.

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


	Three Months Ended March 31, 2026
	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	$	8,044	$	8,876	$	8,767	$	4,298	$	8,611	$	2,173	$	137	$	40,906
Charged-off loans and leases		—		—		—		—		(91)		(59)		(79)		(229)
Recoveries of charge-offs		—		2		—		—		36		—		22		60
Provision charged to expense ^{(1) (2)}		320		(762)		145		4,434		(363)		(650)		89		3,213
Ending balance	$	8,364	$	8,116	$	8,912	$	8,732	$	8,193	$	1,464	$	169	$	43,950


	Three Months Ended March 31, 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		—		—		—		—		(59)		(190)		(83)		(332)
Recoveries of charge-offs		—		2		—		200		23		—		16		241
Provision charged to expense ⁽³⁾		354		72		333		(214)		112		113		73		843
Ending balance	$	7,326	$	8,415	$	8,688	$	4,154	$	8,628	$	842	$	122	$	38,175

(1)

In the provision charged to expense, there was a provision for unfunded commitment liability in the amount of $926 thousand that is not included in the table above for the three months ended March 31, 2026.

(2)

The increase in the provision charged to expense for construction and land development loans was primarily driven by updates to the allowance methodology, specifically around the quantitative reserve, which resulted in higher modeled loss expectations for this portfolio segment.

(3)

In the provision charged to expense, there was a provision for unfunded commitment liability in the amount of $136 thousand that is not included in the table above for the three months ended March 31, 2025.

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 loan and lease losses for the three months ended March 31, 2026,

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and 2025, is $3.2 million and $843 thousand, respectively. As of March 31, 2026, and December 31, 2025, our allowance for credit losses was $44.0 million and $40.9 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 0.97 % at March 31, 2026, and 0.94% at December 31, 2025.

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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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 March 31, 2026, and December 31, 2025 (in thousands):


	March 31, 2026
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2026		2025		2024		2023		2022		Prior		Loans		to Term		Total
Commercial real estate - non-owner occupied
Pass	$	115,210	$	249,122	$	202,684	$	122,368	$	245,127	$	259,534	$	28,976	$	-	$	1,223,021
Watch		-		1,155		-		12,031		10,015		16,114		21		-		39,336
Special mention		-		-		-		-		-		-		-		-		-
Substandard		213		152		397		-		-		336		-		-		1,098
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied		115,423		250,429		203,081		134,399		255,142		275,984		28,997		-		1,263,455
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial real estate - owner occupied
Pass		38,358		196,053		161,059		112,305		268,097		231,347		16,589		-		1,023,808
Watch		-		408		-		2,930		1,121		-		-		-		4,459
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		1,063		-		-		-		3,782		99		-		4,944
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - owner occupied		38,358		197,524		161,059		115,235		269,218		235,129		16,688		-		1,033,211
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Consumer real estate
Pass		53,693		136,817		117,264		88,590		143,622		132,179		175,199		-		847,364
Watch		-		-		-		100		-		240		47		-		387
Special mention		-		-		-		-		-		46		-		-		46
Substandard		-		-		161		10		58		2,221		1,237		-		3,687
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer real estate		53,693		136,817		117,425		88,700		143,680		134,686		176,483		-		851,484
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Construction and land development
Pass		17,696		262,429		138,503		23,820		10,841		17,675		6,938		-		477,902
Watch		200		-		-		-		48		151		-		-		399
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total construction and land development		17,896		262,429		138,503		23,820		10,889		17,826		6,938		-		478,301
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial and industrial
Pass		38,550		159,705		85,740		78,803		76,341		52,464		324,754		226		816,583
Watch		-		20		577		634		82		4		78		152		1,547
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		50		6		29		-		1,293		210		-		1,588
Doubtful		-		157		-		-		-		-		-		-		157
Total commercial and industrial		38,550		159,932		86,323		79,466		76,423		53,761		325,042		378		819,875
YTD gross charge-offs		-		-		-		(37)		(54)		-		-		-		(91)

Leases
Pass⁽¹⁾		5,137		18,287		13,910		8,466		7,350		1,146		-		-		54,296
Watch		-		-		-		-		-		-		-		-		-
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total leases		5,137		18,287		13,910		8,466		7,350		1,146		-		-		54,296
YTD gross charge-offs		-		-		-		(4)		(55)		-		-		-		(59)

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	March 31, 2026
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2026		2025		2024		2023		2022		Prior		Loans		to Term		Total
Consumer and other
Pass		1,895		3,607		1,188		581		143		555		9,791		-		17,760
Watch		-		-		2		-		-		-		-		-		2
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		7		-		-		-		-		-		7
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer and other		1,895		3,607		1,197		581		143		555		9,791		-		17,769
YTD gross charge-offs		(3)		(18)		(20)		(11)		(8)		(19)		-		-		(79)

Total loans
Pass⁽¹⁾		270,539		1,026,020		720,348		434,933		751,521		694,900		562,247		226		4,460,734
Watch		200		1,583		579		15,695		11,266		16,509		146		152		46,130
Special mention		-		-		-		-		-		46		-		-		46
Substandard		213		1,265		571		39		58		7,632		1,546		-		11,324
Doubtful		-		157		-		-		-		-		-		-		157
Total loans	$	270,952	$	1,029,025	$	721,498	$	450,667	$	762,845	$	719,087	$	563,939	$	378	$	4,518,391
Total YTD gross charge-offs	$	(3)	$	(18)	$	(20)	$	(52)	$	(117)	$	(19)	$	-	$	-	$	(229)


	December 31, 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	$	247,845	$	221,359	$	123,497	$	261,984	$	165,444	$	131,376	$	11,671	$	115	$	1,163,291
Watch		1,172		-		12,093		3,079		15,991		-		21		-		32,356
Special mention		-		-		-		-		-		-		-		-		-
Substandard		156		413		-		-		326		216		-		-		1,111
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied		249,173		221,772		135,590		265,063		181,761		131,592		11,692		115		1,196,758
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial real estate - owner occupied
Pass		191,743		164,596		113,916		274,522		137,210		112,896		15,321		42		1,010,246
Watch		3,487		-		2,974		1,131		-		-		99		-		7,691
Special mention		-		-		-		-		-		-		-		-		-
Substandard		1,106		-		-		-		3,233		595		-		-		4,934
Doubtful		-		-				-		-		-		-		-		-
Total commercial real estate - owner occupied		196,336		164,596		116,890		275,653		140,443		113,491		15,420		42		1,022,871
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Consumer real estate
Pass		149,016		125,788		92,303		150,978		70,886		70,941		169,640		646		830,198
Watch		-		-		100		-		102		143		1,069		-		1,414
Special mention		-		-		-		-		-		46		-		-		46
Substandard		-		165		11		59		-		2,513		220		-		2,968
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer real estate		149,016		125,953		92,414		151,037		70,988		73,643		170,929		646		834,626
YTD gross charge-offs		-		-		-		-		-		-		(6)		-		(6)

Construction and land development
Pass		222,643		134,374		23,669		10,235		5,751		6,687		11,547		3,915		418,821
Watch		202		-		-		-		153		-		-		-		355
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total construction and land development		222,845		134,374		23,669		10,235		5,904		6,687		11,547		3,915		419,176
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	December 31, 2025
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2025		2024		2023		2022		2021		Prior		Loans		to Term		Total
Commercial and industrial
Pass		172,097		91,374		87,069		86,520		24,666		31,529		321,104		611		814,970
Watch		9		673		-		87		5		-		290		-		1,064
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		7		30		-		1,301		-		66		-		1,404
Doubtful		157		-		-		-		-		-		-		-		157
Total commercial and industrial		172,263		92,054		87,099		86,607		25,972		31,529		321,460		611		817,595
YTD gross charge-offs		(18)		(8)		(678)		(1,018)		(200)		(175)		(48)		-		(2,145)

Leases
Pass⁽¹⁾		19,573		15,268		9,837		9,136		1,112		496		-		-		55,422
Watch		-		-		-		-		-		-		-		-		-
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total leases		19,573		15,268		9,837		9,136		1,112		496		-		-		55,422
YTD gross charge-offs		-		(431)		(563)		(215)		(25)		(16)		-		-		(1,250)

Consumer and other
Pass		5,072		1,570		720		183		221		342		9,014		-		17,122
Watch		-		3		-		-		-		-		-		-		3
Special mention		-		-		-		-		-		-		-		-		-
Substandard		9		-		-		-		-		-		-		-		9
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer and other		5,081		1,573		720		183		221		342		9,014		-		17,134
YTD gross charge-offs		(48)		(106)		(41)		(34)		(22)		(87)		-		-		(338)

Total loans
Pass⁽¹⁾		1,007,989		754,329		451,011		793,558		405,290		354,267		538,297		5,329		4,310,070
Watch		4,870		676		15,167		4,297		16,251		143		1,479		-		42,883
Special mention		-		-		-		-		-		46		-		-		46
Substandard		1,428		585		41		59		4,860		3,324		286		-		10,583
Doubtful		-		-		-		-		-		-		-		-		-
Total loans	$	1,014,287	$	755,590	$	466,219	$	797,914	$	426,401	$	357,780	$	540,062	$	5,329	$	4,363,582
Total YTD gross charge-offs	$	(66)	$	(545)	$	(1,282)	$	(1,267)	$	(247)	$	(278)	$	(54)	$	-	$	(3,739)

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):


		March 31, 2026
								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		$	—		$	152		$	—		$	152		$	1,263,303	$	1,263,455
Owner occupied			173			340			270			783			1,032,428		1,033,211
Consumer real estate			504			500			2,150			3,154			848,330		851,484
Construction and land development			56			—			—			56			478,245		478,301
Commercial and industrial			1,592			467			1,412			3,471			816,404		819,875
Leases			717			931			3,220			4,868			49,428		54,296
Consumer and other			89			24			—			113			17,656		17,769
Total		$	3,131		$	2,414		$	7,052		$	12,597		$	4,505,794	$	4,518,391


		December 31, 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		$	—		$	—		$	189		$	189		$	1,196,569		1,196,758
Owner occupied			1,150			211			270			1,631			1,021,240		1,022,871
Consumer real estate			1,786			1,725			918			4,429			830,197		834,626
Construction and land development			68			—			—			68			419,108		419,176
Commercial and industrial			1,178			674			1,204			3,056			814,539		817,595
Leases			1,889			73			2,156			4,118			51,304		55,422
Consumer and other			117			3			—			120			17,014		17,134
Total		$	6,188		$	2,686		$	4,737		$	13,611		$	4,349,971	$	4,363,582

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 March 31, 2026, and December 31, 2025. During the three months ended March 31, 2026, and 2025, the Company did not recognize any interest income on nonaccrual loans. Also presented is the balance of loans on nonaccrual status at March 31, 2026 and December 31, 2025, for which there was no related allowance for credit losses is recorded (in thousands):


		March 31, 2026									December 31, 2025
		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		$	937		$	—		$	—		$	672		$	—		$	—
Owner occupied			1,869			789			—			1,934			1,167			—
Consumer real estate			3,165			1,684			—			2,300			806			—
Construction and land development			48			—			—			—			—			—
Commercial and industrial			2,489			—			—			1,828			—			—
Leases			3,742			—			—			2,858			—			—
Consumer and other			7			—			—			9			—			—
Total		$	12,257		$	2,473		$	—		$	9,601		$	1,973		$	—

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):


	March 31, 2026
	Real Estate		Other		Total
Commercial real estate:
Non-owner occupied	$	398	$	—	$	398
Owner occupied		3,872		—		3,872
Consumer real estate		2,002		—		2,002
Construction and land development		—		—		—
Commercial and industrial		—		1,982		1,982
Leases		—		529		529
Consumer and other		—		—		—
Total	$	6,272	$	2,511	$	8,783

	December 31, 2025
	Real Estate		Other		Total
Commercial real estate:
Non-owner occupied	$	413	$	—	$	413
Owner occupied		4,129		—		4,129
Consumer real estate		1,075		—		1,075
Construction and land development		—		—		—
Commercial and industrial		—		3,115		3,115
Leases		—		2,409		2,409
Consumer and other		—		—		—
Total	$	5,617	$	5,524	$	11,141

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 months ended March 31, 2026, and 2025, respectively. (dollars in thousands):

 

Payment Delay

Payment

Term

and Term

Three Months Ended March 31, 2026

Delay

Extension

Total

Commercial real estate:

Non-owner occupied

—

Owner occupied

—

Consumer real estate

—

Construction and land development

—

Commercial and industrial

—

Leases

—

Consumer and other

—

Total

—


								Payment Delay
		Payment			Term			and Term
Three Months Ended March 31, 2025		Delay			Extension			Extension		Total
Commercial real estate:
Non-owner occupied		$	—		$	—		$	—	$	—
Owner occupied			—			—			—		—
Consumer real estate			—			—			—		—
Construction and land development			—			—			—		—
Commercial and industrial			—			23			—		23
Leases			—			—			—		—
Consumer and other			—			—			—		—
Total		$	—		$	23		$	—	$	23

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2026, and 2025, respectively. (dollars in thousands):


		Weighted-Average
		Term
		Extension
Three Months Ended March 31, 2026		(in months)
Commercial real estate:
Non-owner occupied			—
Owner occupied			—
Consumer real estate			—
Construction and land development			—
Commercial and industrial			—
Leases			—
Consumer and other			—


		Weighted-Average
		Term
		Extension
Three Months Ended March 31, 2025		(in months)
Commercial real estate:
Non-owner occupied			—
Owner occupied			—
Consumer real estate			—
Construction and land development			—
Commercial and industrial			36
Leases			—
Consumer and other			—

No loan modifications made to borrowers experiencing financial difficulty defaulted during the three months ended March 31, 2026, and 2025, 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):


		March 31, 2026
								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			—			—			—			155			155
Construction and land development			—			—			—			—			—
Commercial and industrial			—			—			—			53			53
Leases			—			—			—			—			—
Consumer and other			—			—			—			—			—
Total		$	—		$	—		$	—		$	208		$	208

Foreclosure Proceedings and Balances:

As of March 31, 2026, there was no residential real estate property secured by real estate included in other real estate owned and there were three residential real estate loans totaling $1.8 million in the process of foreclosure.

Table of Contents

SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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.

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 and the leasing company’s client list is amortized over 8 years.

The carrying amount of goodwill at March 31, 2026, and December 31, 2025, was $90.4 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
March 31, 2026:
Beginning balance January 1, 2026, gross¹	$	17,470		$	2,658		$	20,128
Less: accumulated amortization¹		(13,449)			(2,179)			(15,628)
Balance, March 31, 2026, other intangible assets, net	$	4,021		$	479		$	4,500

December 31, 2025:
Beginning balance January 1, 2025, gross	$	17,470		$	5,670		$	23,140
Write-off of intangibles from sale of SBKI		-			(1,471)			(1,471)
Less: accumulated amortization		(13,054)			(3,658)			(16,712)
Balance, December 31, 2025, other intangible assets, net	$	4,416		$	541		$	4,957

¹Removed $3,012 from the beginning gross balance and $1,471 from accumalted amortization for the sale of SBKI in the third quarter of 2025, in the Customer Relationship Intangibles.

The aggregate amortization expense for other intangible assets for the three months ended March 31, 2026, and 2025, was $457 thousand and $569 thousand, respectively.

As of March 31, 2026, the estimated aggregate amortization expense for future periods for intangibles is as follows (in thousands):


Remainder of 2026	$	1,350
2027		1,664
2028		936
2029		505
2030		37
Thereafter		8
Total	$	4,500

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6. Borrowings, Line of Credit and Subordinated Debt

Borrowings:

At March 31, 2026, total borrowings were $3.2 million compared to $3.0 million at December 31, 2025. Borrowings consist of the following (in thousands):


	March 31,		December 31,
	2026		2025
Securities sold under customer repurchase agreements	$	3,178	$	3,009
Other borrowings		—		—
Total	$	3,178	$	3,009

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 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 $3.2 million and $3.0 million at March 31, 2026 and December 31, 2025, respectively. The average balance of repurchase agreements during the three-month period ended March 31, 2026, and 2025 was $3.5 million and $4.2 million, respectively. The maximum month-end outstanding balance for the three-month period ended March 31, 2026, and 2025 was $3.8 million and $4.5 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 March 31, 2026 and December 31, 2025, $0 was outstanding under the line of credit.

Subordinated Debt:

On August 20, 2025, the Company issued $100 million of 7.25% fixed-to-floating rate subordinated notes (the "2025 Notes"), which were outstanding as of March 31, 2026 and December 31, 2025.

The 2025 Notes have a stated maturity of September 1, 2035, are redeemable by the Company (i) in whole or in part, on or after September 1, 2030, and (ii) in full, at any time upon the occurrence of certain events. The 2025 Notes will bear interest at a fixed rate of 7.25% per year, from and including August 20, 2025, to, but excluding September 1, 2030, or earlier redemption date. From and including September 1, 2030, to, but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term secured overnight financing rate (“SOFR”), plus 385 basis points. As provided in the 2025 Notes, the interest rate during the applicable floating rate period may be determined based on a rate other than three-month term SOFR.

The debt issuance costs for the 2025 Notes totaled $1.4 million and will be amortized through September 1, 2030. Unamortized debt issuance cost was $1.3 million at March 31, 2026. Amortization expense totaled $72 thousand for the three months ended March 31, 2026.

On September 28, 2018, the Company issued $40 million of 5.625% fixed-to-floating rate subordinated notes (the "Notes"), which were not outstanding as of December 31, 2025. The Notes’ were retired on October 2, 2025.

The Notes’ unamortized debt issuance costs totaled $295 thousand at March 31, 2025, and was written-off as of September 30, 2025. Amortization expense totaled $21 thousand for the three months ended March 31, 2025.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 months ending March 31, 2026, and 2025, was $574 thousand and $561 thousand, respectively.

Equity Incentive Plans:

The Human Resources and 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 March 31, 2026, the Company had one active equity incentive plan available for future grants, the Omnibus Incentive Plan, which was has 1,601,746 Rights available for future grants or awards.

Stock Options:

At March 31, 2026, there are no outstanding stock options, all were exercised during 2025.

The Company did not recognize any stock option-based compensation expense during the three months ended March 31, 2025, as all stock options issued as of March 31, 2025, were fully vested, and no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plan.

Stock options of 4,203 were exercised during the three-month periods ended March 31, 2025. The income tax benefit recognized for the exercise of options during the three months ended March 31, 2025, was $3 thousand.

The intrinsic value of options exercised during the three months ended March 31, 2025, was $77 thousand.

Restricted Stock Awards:

A summary of the activity of the Company’s unvested restricted stock awards for the period ended March 31, 2026, is presented below:


				Weighted
				Average
				Grant-Date
		Number		Fair Value
Outstanding at December 31, 2025		238,609		$	28.51
Granted		77,587			38.59
Vested		(43,776)			25.11
Forfeited/expired		—			—
Outstanding at March 31, 2026		272,420		$	31.93

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 months ended March 31, 2026, and 2025, was $714 thousand and $761 thousand, respectively. As of March 31, 2026, there was $6.0 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 2.75 years. The grant-date fair value of restricted stock awards vested was $1.1 million for the three months ended March 31, 2026.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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):


	March 31,		December 31,
	2026		2025
Commitments to extend credit	$	1,044,905	$	1,093,462
Standby letters of credit		23,703		15,467

At March 31, 2026, and December 31, 2025, the allowance for credit losses for these off-balance sheet commitments was $4.5 million and $3.6 million, respectively. The expense related to the allowance for credit losses for off-balance sheet commitments during the three months ended March 31, 2026, and 2025, was $926 thousand and $136 thousand, 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 March 31, 2026, and December 31, 2025, 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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.

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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)
March 31, 2026:
Assets:
Securities available-for-sale:
U.S. Treasury		$	29,369		$	—		$	29,369		$	—
U.S. Government-sponsored enterprises (GSEs)			19,198			—			19,198			—
Municipal securities			36,986			—			36,986			—
Other debt securities			22,549			—			22,549			—
Mortgage-backed securities (GSEs)			443,981			—			443,981			—
Total securities available-for-sale			552,083			—			552,083			—

Derivative financial instruments and interest rate swap agreements			11,537			—			11,537			—
Total assets at fair value		$	563,620		$	—		$	563,620		$	—

Liabilities:
Derivative financial instruments and interest rate swap agreements		$	11,621		$	—		$	11,621		$	—

December 31, 2025:
Assets:
Securities available-for-sale:
U.S. Treasury		$	29,629		$	—		$	29,629		$	—
U.S. Government-sponsored enterprises (GSEs)			19,064			—			19,064			—
Municipal securities			35,665			—			35,665			—
Other debt securities			21,000			—			21,000			—
Mortgage-backed securities (GSEs)			434,524			—			434,524			—
Total securities available-for-sale			539,882			—			539,882			—

Derivative financial instruments and interest rate swap agreements			13,191			—			13,191			—
Total assets at fair value		$	553,073		$	—		$	553,073		$	—

Liabilities:
Derivative financial instruments and interest rate swap agreements		$	13,524		$	—		$	13,524		$	—

During the three months ending March 31, 2026, and twelve months ended December 31, 2025, there were no transfers between Level 1 and Level 2 or into our out of Level 3 in the fair value hierarchy.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 (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)
March 31, 2026:
Collateral-dependent loans		$	5,074		$	—		$	—		$	5,074

December 31, 2025:
Collateral-dependent loans		$	6,285		$	—		$	—		$	6,285

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
March 31, 2026:
Collateral-dependent loans		$	5,074		Appraisal		Appraisal discounts		42	%

December 31, 2025:
Collateral-dependent loans		$	6,285		Appraisal		Appraisal discounts		56	%

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 $3.7 and $4.9 million as of March 31, 2026 and December 31, 2025, 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 where the carrying amount exceeds the fair value, less estimated costs to sell, the difference is recognized in noninterest expense.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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
March 31, 2026:
Assets:
Cash and cash equivalents		$	346,071		$	346,071		$	—		$	—		$	346,071
Securities available-for-sale			552,083			—			552,083			—			552,083
Securities held-to-maturity			120,968			—			107,167			—			107,167
Other investments			16,597			N/A			N/A			N/A			N/A
Loans and leases, net and loans held for sale			4,481,718			—			—			4,438,839			4,438,839
Derivative financial instruments and interest rate swap agreements			11,537			—			11,537			—			11,537

Liabilities:
Noninterest-bearing demand deposits			951,366			—			951,366			—			951,366
Interest-bearing demand deposits			954,292			—			954,292			—			954,292
Money market and savings deposits			2,455,945			—			2,455,945			—			2,455,945
Time deposits			834,633			—			834,852			—			834,852
Borrowings			3,178			—			3,178			—			3,178
Subordinated debt			98,733			—			—			100,731			100,731
Derivative financial instruments and interest rate swap agreements			11,621			—			11,621			—			11,621

December 31, 2025:
Assets:
Cash and cash equivalents		$	464,417		$	464,417		$	—		$	—		$	464,417
Securities available-for-sale			539,882			—			539,882			—			539,882
Securities held-to-maturity			122,121			—			109,416						109,416
Other investments			16,441			N/A			N/A			N/A			N/A
Loans and leases, net and loans held for sale			4,333,541			—			—			4,281,699			4,281,699
Derivative financial instruments and interest rate swap agreements			13,191			—			13,191			—			13,191

Liabilities:
Noninterest-bearing demand deposits			1,062,918			—			1,062,918			—			1,062,918
Interest-bearing demand deposits			945,716			—			945,716			—			945,716
Money market and savings deposits			2,273,612			—			2,273,612			—			2,273,612
Time deposits			870,543			—			872,143			—			872,143
Borrowings			3,009			—			3,009			—			3,009
Subordinated debt			98,662			—			—			100,660			100,660
Derivative financial instruments and interest rate swap agreements			13,524			—			13,524			—			13,524

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

March 31, 2026:

Interest rate swap agreements - securities

Other liabilities

1.29

3.89

SOFR

59,050

(26)

December 31, 2025:

Interest rate swap agreements - securities

Other liabilities

1.20

3.98

SOFR

76,507

(334)

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
		March 31,
		2026		2025
Interest income on taxable securities		$	5,535	$	4,774
Effects of fair value hedge relationships			(43)		1
Reported interest income on taxable securities		$	5,492	$	4,775


		Three Months Ended
		March 31,
Gain (loss) on fair value hedging relationship		2026		2025
Interest rate swap agreements - securities:
Hedged items		$	(26)	$	(380)
Derivative designated as hedging instruments			26		380
Carrying amount of hedged assets - mortgage-backed securities			126,956		48,115

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

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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 March 31, 2026, the Company estimates that there will not be any reclassifications into interest income or interest expense over the next 12 months.

At March 31, 2026 and December 31, 2025, cash flow hedges are as follows (in thousands):

March 31, 2026

December 31, 2025

Balance Sheet

Notional

Estimated

Balance Sheet

Notional

Estimated

Location

Amount

Fair Value

Location

Amount

Fair Value

Cash flow hedges:

Assets

Other assets

100,000

Other assets

100,000

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 March 31, 2026
Interest rate swaps - Assets	$	77	Interest income	$	22

Three Months Ended March 31, 2025
Interest rate swaps - Assets	$	387	Interest income	$	13
Interest rate swaps - Liabilities		201	Interest expense		(164)

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


		Three Months Ended
		March 31,
		2026		2025
Total interest income		$	74,248	$	66,363
Effects of cash flow hedge relationships			22		13
Reported total interest income		$	74,270	$	66,376

Total interest expense		$	28,394	$	27,974
Effects of cash flow hedge relationships			—		164
Reported total interest expense		$	28,394	$	28,138

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

of the offsetting positions is limited, any changes in fair value are recognized as other noninterest income in the current period.

At March 31, 2026 and December 31, 2025, interest rate swaps related to the Company’s loan hedging program that were outstanding are presented in the following table (in thousands):


	March 31, 2026				December 31, 2025
		Notional		Estimated		Notional		Estimated
		Amount		Fair Value		Amount		Fair Value
Interest rate swap agreements:
Assets	$	604,174	$	11,460	$	569,060	$	13,190
Liabilities		604,174		(11,460)		569,060		(13,190)

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):

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 March 31, 2026, and December 31, 2025, collateral totaling $150 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.

Substantially all of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2044. All of our leases are classified as operating leases. With the adoption of Topic 842, 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 August 2026 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 9.64 years and 3.63% at March 31, 2026, and 9.75 years and 3.60% at December 31, 2025.

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		March 31,		December 31,
	Location		2026		2025
Assets:
Operating lease right-of-use assets	Other assets		$	10,752	$	11,152
Liabilities:
Operating lease liabilities	Other liabilities		$	11,379	$	11,756

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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
		March 31,
		2026		2025
Lease costs:
Operating lease costs		$	497	$	481
Variable lease costs			30		16
Sublease income			(49)		(24)
Net lease cost		$	478	$	473
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	475	$	385

Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2026, were as follows (in thousands):


		Amounts
Remainder of 2026		$	1,327
2027			1,545
2028			1,499
2029			1,448
2030			1,358
Thereafter			6,683
Total future minimum lease payments			13,860
Amounts representing interest			(2,481)
Present value of net future minimum lease payments		$	11,379

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

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

sufficient to satisfy the fully phased-in conservation buffer. At March 31, 2026, 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.

During the three months ended March 31, 2026, the Bank paid $0 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.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Regulatory Capital Levels:

Actual and required capital levels at March 31, 2026, and December 31, 2025 are presented below (dollars in thousands):


												Minimum to be
												well
												capitalized under
							Minimum for					prompt
							capital					corrective action
			Actual				adequacy purposes					provisions¹
		Amount			Ratio		Amount			Ratio		Amount			Ratio
March 31, 2026
SmartFinancial:
Total Capital (to Risk Weighted Assets)		$	623,251		12.72	%	$	391,885		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)			478,573		9.77	%		293,914		6.00	%		N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)			478,573		9.77	%		220,435		4.50	%		N/A		N/A
Tier 1 Capital (to Average Assets)²			478,573		8.41	%		227,508		4.00	%		N/A		N/A

SmartBank:
Total Capital (to Risk Weighted Assets)		$	606,998		12.41	%	$	391,292		8.00	%	$	489,115		10.00	%
Tier 1 Capital (to Risk Weighted Assets)			561,053		11.47	%		293,469		6.00	%		391,292		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			561,053		11.47	%		220,102		4.50	%		317,925		6.50	%
Tier 1 Capital (to Average Assets)²			561,053		9.88	%		227,216		4.00	%		284,020		5.00	%

December 31, 2025
SmartFinancial:
Total Capital (to Risk Weighted Assets)		$	606,158		12.71	%	$	381,470		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)			468,641		9.83	%		286,103		6.00	%		N/A		N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)			468,641		9.83	%		214,577		4.50	%		N/A		N/A
Tier 1 Capital (to Average Assets)			468,641		8.30	%		225,852		4.00	%		N/A		N/A

SmartBank:
Total Capital (to Risk Weighted Assets)		$	586,675		12.32	%	$	380,891		8.00	%	$	476,114		10.00	%
Tier 1 Capital (to Risk Weighted Assets)			547,820		11.51	%		285,668		6.00	%		380,891		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			547,820		11.51	%		214,251		4.50	%		309,474		6.50	%
Tier 1 Capital (to Average Assets)			547,820		9.71	%		225,566		4.00	%		281,957		5.00	%

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

²Average 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 March 31, 2026
														Accumulated
		Securities			Securities									Other
		Available-for-			Transferred to			Fair Value			Cash Flow			Comprehensive
		Sale			Held-to-Maturity			Hedges			Hedges			Income (Loss)
Beginning balance, December 31, 2025		$	(8,625)		$	(448)		$	(248)		$	2		$	(9,319)

Other comprehensive income (loss)			(3,352)			—			228			73			(3,051)
Amounts reclassified from other comprehensive income			(1)			21			—			(16)			4
Net other comprehensive income (loss) during period			(3,353)			21			228			57			(3,047)

Ending balance, March 31, 2026		$	(11,978)		$	(427)		$	(20)		$	59		$	(12,366)

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

Other comprehensive income			3,681			—			(115)			325			3,891
Amounts reclassified from other comprehensive income			—			22			(1)			112			133
Net other comprehensive income during period			3,681			22			(116)			437			4,024

Ending balance, March 31, 2025		$	(18,669)		$	(512)		$	(282)		$	(184)		$	(19,647)

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 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.

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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 March 31,
	2026		2025
Interest income	$	74,270	$	66,376
Interest expense		28,394		28,138
Net interest income		45,876		38,238
Provision for credit losses		4,139		979
Net interest income after provision for credit losses		41,737		37,259
Noninterest income:
Service charges on deposit accounts		1,853		1,736
Gain (loss) on sale of securities, net		1		—
Mortgage banking		760		493
Investment services		1,796		1,769
Insurance commissions		—		1,412
Interchange and debit card transaction fees, net		1,418		1,220
Other		2,113		1,967
Total noninterest income		7,941		8,597
Noninterest expense:
Salaries and employee benefits		20,414		19,234
Occupancy and equipment		3,344		3,397
FDIC insurance		750		960
Other real estate and loan related expense		792		658
Advertising and marketing		387		382
Data processing and technology		2,436		2,657
Professional services		1,193		1,368
Amortization of intangibles		457		569
Other		3,142		3,071
Total noninterest expense		32,915		32,296
Income before income tax expense		16,763		13,560
Income tax expense		3,083		2,306
Net income	$	13,680	$	11,254

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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:

●

general economic and business conditions in our local markets (particularly Tennessee), including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayment);

●

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;

●

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;

●

adverse developments in the banking industry highlighted by high-profile bank failures such as those in 2023, and the impact of such developments on customer confidence, liquidity and regulatory responses to such developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding;

●

the impact of negative developments in the financial industry and U.S. and global capital and credit markets;

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●

the impact of recently enacted and future legislation and regulation on our business;

●

the impact of recent or proposed changes in fiscal, monetary and economic policy, laws, and regulations, or the interpretation or application thereof, and the uncertainty of future implementation and enforcement of these policies and regulations, including persistent inflationary pressures, potential interest rate fluctuations, and potential changes to government policies related to immigration, trade, and government spending;

●

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;

●

our ability to identify and addres cybersecurity risks, such as 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,;

●

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, other legislative, tax and regulatory changes that impact the money supply and inflation, the imposition of tariffs and retaliatory responses, and the possibility that the U.S. could default on its debt obligations;

●

our inability to pay dividends at current levels, or at all, because of inadequate future earnings, 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 portfolio;

●

our ability to maintain expenses in line with current projections;

●

unanticipated credit deterioration in our loan portfolio or higher than expected loan and lease losses within one or more segments of our loan portfolio;

●

unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors;

●

unanticipated loan 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;

●

a deterioriation in 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;

●

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; and

●

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

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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, 2025. 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, 2025. During this quarter ending March 31, 2026, the Bank enhanced its ACL loss model for loans and leases. See Note 1. Recently Modified Accounting Policies and Allowance for Credit Losses in the Notes to our Consolidated Financial Statements in this Form 10-Q for further information related to these changes. There have been no other significant changes in the Company’s application of critical accounting policies since December 31, 2025.

Executive Summary

The following is a summary of the Company’s financial highlights and significant events during the first quarter of 2026:

●

Net income totaled $13.7 million, or $0.81 per diluted common share, during the first quarter of 2026 compared to $11.3 million, or $0.67 per diluted common share, for the same period in 2025.

●

Annualized return on average assets for the three months ended March 31, 2026, and 2025 was 0.96% and 0.87%, respectively.

●

Net organic loan and lease increased year-to-date for 2026, with net loans and leases increasing $151.8 million from December 31, 2025.

●

Deposit growth of $43.4 million from December 31, 2025.

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Selected Financial Information

The following is a summary of certain financial information for the three-month periods ended March 31, 2026, and 2025 and as of March 31, 2026, and December 31, 2025 (dollars in thousands, except per share data):


	Three Months Ended
	March 31,
	2026			2025				Change
Income Statement:
Interest income	$	74,270		$	66,376		$	7,894
Interest expense		28,394			28,138			256
Net interest income		45,876			38,238			7,638
Provision for credit losses		4,139			979			3,160
Net interest income after provision for credit losses		41,737			37,259			4,478
Noninterest income		7,941			8,597			(656)
Noninterest expense		32,915			32,296			619
Income before income taxes		16,763			13,560			3,203
Income tax expense		3,083			2,306			777
Net income	$	13,680		$	11,254		$	2,426

Per Share Data:
Basic income per common share	$	0.81		$	0.67		$	0.14
Diluted income per common share	$	0.81		$	0.67		$	0.13

Performance Ratios:
Return on average assets		0.96	%		0.87	%		0.09	%
Return on average shareholders' equity		9.90	%		9.17	%		0.75	%


	March 31,		December 31,
	2026		2025			Change
Balance Sheet:
Loans and leases, net	$	4,474,441	$	4,322,676	$	151,765
Deposits		5,196,236		5,152,789		43,447

Analysis of Results of Operations

First quarter of 2026 compared to 2025

Net income was $13.7 million, or $0.81 per diluted common share, for the first quarter of 2026, compared to $11.3 million, or $0.67 per diluted common share, for the first quarter of 2025. For the three months ended March 31, 2026, when compared to the comparable period in 2025, the increase in net income of $2.4 million was due to an increase in net interest income after provision for loan and lease losses of $4.5 million, offset by a decrease on noninterest income of $656 thousand and an increase in noninterest expense of $619 thousand and income tax expense of $777 thousand. The tax equivalent net interest margin was 3.48% for the first quarter of 2026, compared to 3.21% for the first quarter of 2025. Noninterest income to average assets was 0.56% for the first quarter of 2026, decreasing from 0.66% for the first quarter of 2025. Noninterest expense to average assets decreased to 2.31% in the first quarter of 2026, from 2.48% in the first quarter of 2025.

Net Interest Income and Yield Analysis

First quarter of 2026 compared to 2025

Net interest income, taxable equivalent, increased to $46.2 million for the first quarter of 2026, up from $38.6 million for the first quarter of 2025. Net interest income increased due to higher loan and lease balances, higher yields on these assets, and lower cost of interest-bearing libailities. Average interest-earning assets increased from $4.87 billion for the first quarter of 2025, to $5.39 billion for the first quarter of 2026, primarily from the increase in our average loan and lease balances and average securities, which was offset by decreases in average cash balances. Over this period, average loan and lease balances increased by $492.9 million and average interest-bearing deposits increased by $342.6 million. Average securities increased by $46.1 million, average federal funds sold and other interest earning assets decreased by $20.4 million, average borrowings decreased by $4.7 million and noninterest-bearing deposits increased by $47.8 million. The tax equivalent net interest margin increased to 3.48% for the first quarter of 2026, compared to 3.21% for the first quarter of 2025. The yield on earning assets increased from 5.56% for the first quarter of 2025, to 5.62% for the first quarter of

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2026, primarily due the deployment of excess cash and cash equivalents into loans and leases. The cost of average interest-bearing deposits decreased from 2.92% for the first quarter of 2025, to 2.60% for the first quarter of 2026, 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 March 31,
		2026								2025
		Average						Yield/		Average						Yield/
		Balance			Interest			Cost		Balance			Interest			Cost
Assets:
Loans and leases, including fees¹		$	4,434,181		$	65,855		6.02	%	$	3,941,295		$	58,008		5.97	%
Taxable securities			584,608			5,492		3.81	%		555,914			4,775		3.48	%
Tax-exempt securities²			80,535			703		3.54	%		63,085			448		2.88	%
Federal funds sold and other earning assets			286,539			2,585		3.66	%		306,966			3,485		4.60	%
Total interest-earning assets			5,385,863			74,635		5.62	%		4,867,260			66,716		5.56	%
Noninterest-earning assets			397,680								405,860
Total assets		$	5,783,543							$	5,273,120

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$	955,450			3,931		1.67	%	$	846,823			3,743		1.79	%
Money market and savings deposits			2,337,523			15,236		2.64	%		2,064,134			15,065		2.96	%
Time deposits			841,515			7,362		3.55	%		880,933			8,527		3.93	%
Total interest-bearing deposits			4,134,488			26,529		2.60	%		3,791,890			27,335		2.92	%
Borrowings			3,549			1		0.11	%		8,220			70		3.45	%
Subordinated debt			98,692			1,864		7.66	%		39,692			733		7.49	%
Total interest-bearing liabilities			4,236,729			28,394		2.72	%		3,839,802			28,138		2.97	%
Noninterest-bearing deposits			931,863								884,078
Other liabilities			54,603								51,260
Total liabilities			5,223,195								4,775,140
Shareholders' equity			560,348								497,980
Total liabilities and shareholders’ equity		$	5,783,543							$	5,273,120
Net interest income, taxable equivalent					$	46,241							$	38,578
Interest rate spread								2.90	%							2.59	%
Tax equivalent net interest margin								3.48	%							3.21	%

Percentage of average interest-earning assets to average interest-bearing liabilities								127.12	%							126.76	%
Percentage of average equity to average assets								9.69	%							9.44	%

¹Yields 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 $218 thousand and $246 thousand for the three months ended March 31, 2026, and 2025, respectively.

²Yields 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 $148 thousand and $94 thousand for the three months ended March 31, 2026, and 2025, respectively.

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Noninterest Income

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


		Three Months Ended
		March 31,
		2026			2025				Change
Service charges on deposit accounts		$	1,853		$	1,736		$	117
Gain on sale of securities, net			1			—			1
Mortgage banking			760			493			267
Investment services			1,796			1,769			27
Insurance commissions			—			1,412			(1,412)
Interchange and debit card transaction fees, net			1,418			1,220			198
Other			2,113			1,967			146
Total noninterest income		$	7,941		$	8,597		$	(656)

First quarter of 2026 compared to 2025

Noninterest income decreased by $656 thousand during the first quarter of 2026 compared to the same period in 2025. This quarterly change in total noninterest income primarily resulted from the following:

●

Decrease in insurance commissions, due to the sale of SBK Insurance in the third quarter of 2025.

Noninterest Expense

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


		Three Months Ended
		March 31,
		2026			2025				Change
Salaries and employee benefits		$	20,414		$	19,234		$	1,180
Occupancy and equipment			3,344			3,397			(53)
FDIC insurance			750			960			(210)
Other real estate and loan-related expense			792			658			134
Advertising and marketing			387			382			5
Data processing and technology			2,436			2,657			(221)
Professional services			1,193			1,368			(175)
Amortization of intangibles			457			569			(112)
Other			3,142			3,071			71
Total noninterest expense		$	32,915		$	32,296		$	619

First quarter of 2026 compared to 2025

Noninterest expense increased by $619 thousand in the first quarter of 2026 as compared to the same period in 2025. 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.

Taxes

First quarter of 2026 compared to 2025

In the first quarter of 2026 income tax expense totaled $3.1 million compared to $2.3 million in the first quarter of 2025. The effective tax rate was approximately 18.39% in the first quarter of 2026 compared to 17.01% in the first quarter of 2025. The increase in the effective tax rate is primarily due to a higher estimated annual effective tax rate for 2026. The higher annual rate reflects an increase in projected pre-tax book income while permanent tax benefits remain relatively consistent, resulting in a higher overall tax rate.

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Loan and Lease Portfolio

The Company had total net loans and leases outstanding of approximately $4.47 billion at March 31, 2026, compared to $4.32 billion at December 31, 2025. 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
	March 31,		Gross		December 31,		Gross
	2026		Total		2025		Total
Commercial real estate:
Non-owner occupied	$	1,263,455	28.0	%	$	1,196,758	27.5	%
Owner occupied		1,033,211	22.9	%		1,022,871	23.4	%
Consumer real estate		851,484	18.8	%		834,626	19.1	%
Construction and land development		478,301	10.6	%		419,176	9.6	%
Commercial and industrial		819,875	18.1	%		817,595	18.7	%
Leases		54,296	1.2	%		55,422	1.3	%
Consumer and other		17,769	0.4	%		17,134	0.4	%
Total loans and leases		4,518,391	100.0	%		4,363,582	100.0	%
Less: Allowance for credit losses		(43,950)				(40,906)
Loans and leases, net	$	4,474,441			$	4,322,676

Loan and Lease Portfolio Maturities

The following table sets forth the maturity distribution of our loans and leases at March 31, 2026, 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	$	189,832	$	760,314	$	284,138	$	29,171	$	1,263,455	$	454,205	$	619,418
Owner occupied		86,203		517,667		403,585		25,756		1,033,211		473,553		473,455
Consumer real estate-mortgage		72,336		222,048		96,324		460,776		851,484		247,477		531,671
Construction and land development		166,868		189,444		62,611		59,378		478,301		43,842		267,591
Commercial and industrial		328,888		358,115		111,084		21,788		819,875		322,317		168,670
Leases		2,454		49,945		1,897		—		54,296		51,842		—
Consumer and other		12,969		4,559		204		37		17,769		4,601		199
Total loans and leases	$	859,550	$	2,102,092	$	959,843	$	596,906	$	4,518,391	$	1,597,837	$	2,061,004

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 0.27% as of March 31, 2026, and 0.22% as of December 31, 2025 respectively. Total nonperforming assets, as a percentage of total assets, was 0.25% as of March 31, 2026, and 0.22% as of December 31, 2025, respectively.

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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
March 31, 2026
Commercial real estate:
Non-owner occupied	$	1,263,455	$	-	-	%	$	-	-		$	-	-	%
Owner occupied		1,033,211		-	-			-	-			-	-
Consumer real estate		851,484		416	0.05			-	-			416	0.05
Construction and land development		478,301		56	0.01			-	-			56	0.01
Commercial and industrial		819,875		1,877	0.23			-	-			1,877	0.23
Leases		54,296		1,254	2.31			-	-			1,254	2.31
Consumer and other		17,769		115	0.65			-	-			115	0.65
Total	$	4,518,391	$	3,718	0.08	%	$	-	-	%	$	3,718	0.08	%

December 31, 2025
Commercial real estate:
Non-owner occupied	$	1,196,758	$	-	-	%	$	-	-	%	$	-	-	%
Owner occupied		1,022,871		803	0.08			-	-			803	0.08
Consumer real estate		834,626		2,673	0.32			-	-			2,673	0.32
Construction and land development		419,176		68	0.02			-	-			68	0.02
Commercial and industrial		817,595		1,287	0.16			-	-			1,287	0.16
Leases		55,422		1,404	2.53			-	-			1,404	2.53
Consumer and other		17,134		120	0.70			-	-			120	0.70
Total	$	4,363,582	$	6,355	0.15	%	$	-	-	%	$	6,355	0.15	%

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


	March 31, 2026						December 31, 2025
			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	$	1,263,455	$	937	0.07	%	$	1,196,758	$	672	0.06	%
Owner occupied		1,033,211		1,869	0.18			1,022,871		1,934	0.19
Consumer real estate		851,484		3,165	0.37			834,626		2,300	0.28
Construction and land development		478,301		48	0.01			419,176		-	-
Commercial and industrial		819,875		2,489	0.30			817,595		1,828	0.22
Leases		54,296		3,742	6.89			55,422		2,858	5.16
Consumer and other		17,769		7	0.04			17,134		9	0.05
Total	$	4,518,391	$	12,257	0.27	%	$	4,363,582	$	9,601	0.22	%

Allowance for credit losses to nonaccrual loans				358.57%						426.06%

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 three months ended March 31, 2026, is $3.2 million compared to $843 thousand in the same period of 2025, an increase of $2.4 million. As of March 31, 2026, and December 31, 2025, our allowance for credit losses was $44.0 million and $40.9 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 0.97% at March 31, 2026, and 0.94% at December 31, 2025. During this quarter ending March 31, 2026, the Bank enhanced its ACL loss model for loans and leases. See Note 1. Recently Modified Accounting Policies and Allowance for Credit Losses in the Notes to our Consolidated Financial Statements in this Form 10-Q for further information related to these changes.

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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
March 31, 2026
Commercial real estate:
Non-owner occupied	$	8,364		28.0	%	$	1,263,455		0.66	%
Owner occupied		8,116		22.9			1,033,211		0.79
Consumer real estate		8,912		18.8			851,484		1.05
Construction and land development		8,732		10.6			478,301		1.83
Commercial and industrial		8,193		18.1			819,875		1.00
Leases		1,464		1.2			54,296		2.70
Consumer and other		169		0.4			17,769		0.95
Total	$	43,950		100.0	%	$	4,518,391		0.97	%

December 31, 2025
Commercial real estate:
Non-owner occupied	$	8,044		27.5	%	$	1,196,758		0.67	%
Owner occupied		8,876		23.4			1,022,871		0.87
Consumer real estate		8,767		19.1			834,626		1.05
Construction and land development		4,298		9.6			419,176		1.03
Commercial and industrial		8,611		18.7			817,595		1.05
Leases		2,173		1.3			55,422		3.92
Consumer and other		137		0.4			17,134		0.80
Total	$	40,906		100.0	%	$	4,363,582		0.94	%

The allowance associated with the individually evaluated loans and leases were approximately $3.7 million at March 31, 2026, compared to $4.9 million at December 31, 2025.

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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 March 31, 2026
Commercial real estate:
Non-owner occupied	$	320	$	-	$	1,239,907		-	%
Owner occupied		(762)		2		1,013,955		-
Consumer real estate		145		-		835,615		-
Construction and land development		4,434		-		469,387		-
Commercial and industrial		(363)		(55)		804,595		(0.01)
Leases		(650)		(59)		53,284		(0.11)
Consumer and other		89		(57)		17,438		(0.33)
Total	$	3,213	$	(169)	$	4,434,181		-	%


Three Months Ended March 31, 2025
Commercial real estate:
Non-owner occupied	$	354	$	-	$	1,103,142		-	%
Owner occupied		72		2		874,105		-
Consumer real estate		333		-		774,596		-
Construction and land development		(214)		200		352,835		0.06
Commercial and industrial		112		(36)		758,654		-
Leases		113		(190)		63,389		(0.30)
Consumer and other		73		(67)		14,574		(0.46)
Total	$	843	$	(91)	$	3,941,295		-	%

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 $662.0 million at December 31, 2025, to $673.1 million at March 31, 2026, primarily as a result of available-for-sale securities purchases Our securities to asset ratio increased from 11.3% at December 31, 2025, to 11.4% at March 31, 2026.

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 March 31, 2026 (dollars in thousands). The

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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		$	—	-	%	$	31,555	1.28	%	$	—	-	%		$	—	-	%		$	31,555	1.28	%
U.S. Government agencies			—	-			—	-			19,262	4.73				—	-				19,262	4.73
State and political subdivisions			1,095	3.18			3,777	3.42			4,569	3.46				28,002	5.15				37,443	4.71
Other debt securities			—	-			7,435	7.29			15,755	5.81				—	-				23,190	6.28
Mortgage-backed securities			2,028	1.25			38,113	4.44			66,306	4.23				350,334	4.14				456,781	4.17
Total securities		$	3,123	1.93		$	80,880	3.42		$	105,892	4.52			$	378,336	4.22			$	568,231	4.15

Held-to-maturity:
U.S. Treasury		$	—	-	%	$	—	-	%	$	—	-	%		$	—	-	%		$	—	-	%
U.S. Government agencies			—	-			21,080	1.90			25,468	1.82				—	-				46,548	1.86
State and political subdivisions			—	-			2,980	2.55			13,303	1.73				33,964	2.30				50,247	2.16
Other debt securities			—	-			—	-			—	-				—	-				—	-
Mortgage-backed securities			—	-			4,626	2.14			—	-				19,547	2.13				24,173	2.13
Total securities		$	—	-		$	28,686	2.01		$	38,771	1.79			$	53,511	2.24			$	120,968	2.04

(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 Deposits. 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 March 31, 2026, and December 31, 2025, the Company had $0 and $51.9 million in brokered deposits, respectively.

The following tables summarize the average balances outstanding and average interest rates for each major category of deposits for the three month periods ending March 31, 2026, and 2025, respectively (dollars in thousands):


		Three Months Ended							Three Months Ended
		March 31, 2026							March 31, 2025
		Average			% of		Average		Average			% of		Average
		Balance			Total		Rate		Balance			Total		Rate
Noninterest-bearing demand		$	931,863		18.4	%	—	%	$	884,078		18.9	%	—	%
Interest-bearing demand			955,450		18.9	%	1.67	%		846,823		18.1	%	1.79	%
Money market and savings			2,337,523		46.1	%	2.64	%		2,064,134		44.1	%	2.96	%
Time deposits			841,515		16.6	%	3.55	%		880,933		18.8	%	3.93	%
Total average deposits		$	5,066,351		100.0	%	2.12	%	$	4,675,968		100.0	%	2.37	%

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 March 31, 2026, and 2025, was 2.60% and 2.92%, respectively. The cost decrease was primarily attributable to the rate decreases by the Federal Reserve.

Total deposits as of March 31, 2026, were $5.20 billion, which was an increase of $43.4 million from December 31, 2025. This overall increase was driven primarily by increases in money market deposits of $182.3 million, other time deposits of $16.1 million, interest-bearing demand deposits of $8.6, offset by a decline in noninterest demand deposits of $111.6 million and brokered deposits of $51.9 million. As of March 31, 2026, the Company had outstanding time deposits under $250,000 with balances of $366.3 million and time deposits over $250,000 with balances of $468.3 million.

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


		March 31,
		2026
Three months or less		$	86,224
Three to six months			194,306
Six to twelve months			160,391
More than twelve months			27,415
Total		$	468,336

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 $3.2 million at March 31, 2026, and consisted entirely of securities sold under repurchase agreements. Long-term debt totaled $98.7 million at March 31, 2026, and December 31, 2025, 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 March 31, 2026 and December 31, 2025, 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 March 31, 2026, we had $1.04 billion of pre-approved but unused lines of credit and $23.7 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.

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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
March 31, 2026:
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		0.72%
200 basis points increase		0.70%
100 basis points decrease		(0.83)%
200 basis points decrease		(1.25)%


		Estimated % Change in Net Interest Income Over 12 Months
March 31, 2026:
12-month ramp, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		0.37%
200 basis points increase		0.54%
100 basis points decrease		(0.36)%
200 basis points decrease		(0.55)%

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.

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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
March 31, 2026:
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to:
100 basis points increase		(0.92)%
200 basis points increase		(2.39)%
100 basis points decrease		1.52%
200 basis points decrease		1.33%

At March 31, 2026, 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 $3.1 million in securities that mature throughout the next 12 months. The Company also has unused borrowing capacity in the amount of $1.06 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.

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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 March 31, 2026 (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 March 31, 2026, that have materially affected, or are reasonably likely to materially affect, SmartFinancial’s internal control over financial reporting.

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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, 2025. 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, 2025.

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 January 30, 2026, the Company announced that its board of directors had authorized a stock repurchase program, effective March 1, 2026, and will expire on February 28, 2027, pursant 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 March 31, 2026, we have purchased $0 of the authorized $10.0 million.

The following table summarizes the Company’s repurchase activity during the three months ended March 31, 2026.


					Maximum
					Number (or
					Approximate
					Dollar Value) of
					Shares That May
				Total Number of Shares	Yet Be Purchased
	Total Number of			Purchased as Part of	Under the Plans
	Shares	Average Price Paid		Publicly Announced	or Programs (in
Period	Repurchased	Per Share		Plans or Programs	thousands)
January 1, 2026 to January 31, 2026	—	$	—	—	$	10,000
February 1, 2026 to February 28, 2026	—		—	—		10,000
March 1, 2026 to March 31, 2026	—		—	—		10,000
Total	—	$	—	—	$	10,000

Item 3. Defaults Upon Senior Securities.

None.

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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 March 31, 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
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.

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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:	May 11, 2026	/s/ William Y. Carroll, Jr.
		William Y. Carroll, Jr.
		President and Chief Executive Officer
		(principal executive officer)

Date:	May 11, 2026	/s/ Ronald J. Gorczynski
		Ronald J. Gorczynski
		Executive Vice President and Chief Financial Officer
		(principal financial officer and accounting officer)