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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.

Table of Contents

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

Table of Contents

PART I –FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SMARTFINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share data)


		(Unaudited)
		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.

Table of Contents

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.

Table of Contents

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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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SMARTFINANCIAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables outline the amount of each loan and lease classification and the amount categorized into each risk rating based on year of origination as of 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		-

SMARTFINANCIAL INC. 10-Q