KBRA Affirms Ratings for SmartFinancial, Inc.

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Knoxville, Tennessee based SmartFinancial, Inc. (NYSE: SMBK) (“the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, SmartBank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by SMBK’s favorable funding profile, continued credit quality outperformance, and an improving earnings trajectory. After experiencing margin pressure during the rising rate environment, NIM has recovered meaningfully as strong loan growth, asset repricing, and the reinvestment of lower-yielding securities into higher-yielding assets have increasingly outpaced funding cost pressures. Deposit cost pressures have also moderated as deposit remixing slowed and a meaningful portion of the deposit base (approximately 45%) reprices with rate cuts. As a result, NIM improved by 20 bps through 9M25 to 3.21%, contributing to ROA increasing to 0.90% over the same period. Prospectively, SMBK appears well positioned for continued margin expansion, driven by solid organic loan growth, ongoing asset repricing, and improving deposit betas in a declining rate environment. Additionally, SMBK maintains a durable core deposit franchise, supported by a top-10 deposit market share among locally headquartered banks within its core footprint. The company also maintains minimal reliance on wholesale funding sources and a conservative liquidity profile, with a loan-to-core deposit ratio of 95% as of 3Q25. Elsewhere, SMBK sold its insurance business in 3Q25, which is expected to reduce noninterest income contributions prospectively; however, KBRA continues to view the company’s revenue profile favorably given the diversity of remaining noninterest income sources, including service charges, investment services, interchange fees, and mortgage banking income. Asset quality remains a core credit strength, underpinned by prudent underwriting and a conservative operating philosophy, which have resulted in a strong credit foundation. Net charge-offs have averaged approximately 3 bps over the past five years, while classified and criticized loans remain well contained at less than 0.50% of total loans. While some isolated stress persists within the equipment finance portfolio, overall credit performance remains strong, and SMBK’s operating markets across the Southeast continue to benefit from comparatively favorable economic conditions. Capital ratios have historically tracked modestly below peer averages (3Q25 CET1 ratio of 9.9%); however, KBRA views the company’s capital profile as adequate relative to its risk profile, earnings capacity, and history of credit outperformance.

Rating Sensitivities

A rating upgrade is unlikely over the medium term; however, over the longer term, capital ratios in line with higher-rated peers, continued credit quality outperformance, and strong earnings performance would be viewed favorably. Conversely, if the consolidated CET1 ratio were consistently managed meaningfully below 10%, combined with unexpected credit losses, a material deterioration in the funding profile, and/or a significant shift in risk appetite, negative rating action could occur.

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