SmartFinancial Q3 Earnings Rise 36% as Loans and Deposits Grow

SmartFinancial Inc. (SMBK), the parent of SmartBank, reported higher third-quarter 2026 earnings as loan and deposit growth lifted net interest income, although a sequential decline in net interest margin and higher operating expenses weighed on pre-provision profitability.

Net income for the three months ended Sept. 30 rose 36% from a year earlier and 14% from the second quarter to $18.6 million. Diluted GAAP and operating earnings were both $1.10 per share because the quarter included no non-GAAP adjustments. Operating diluted EPS increased from $0.96 in the prior quarter and $0.86 a year earlier.

Operating return on average assets reached 1.20%, compared with 1.10% in the second quarter and 1.02% in the year-earlier period. Operating return on average tangible common equity increased to 15.1% from 13.7% and 13.5%, respectively.

Balance-sheet growth supports revenue

Net interest income rose 3% sequentially and 16% year over year to $49.4 million. Operating revenue, a non-GAAP measure combining net interest income and operating noninterest income, increased to $57.5 million from $55.9 million in the second quarter and $50.8 million a year earlier.

The fully taxable-equivalent net interest margin was 3.45%, down from 3.52% in the second quarter but above 3.25% a year earlier. The yield on interest-earning assets increased to 5.72% from 5.70% sequentially, while the average cost of total deposits rose to 2.26% from 2.15%.

Loans held for investment reached $4.86 billion, up from $4.68 billion at the end of the second quarter and $4.22 billion a year earlier. SmartFinancial characterized quarterly organic loan growth as an annualized 15%. Commercial real estate remained a major part of the portfolio, with non-owner-occupied commercial real estate accounting for 27% of total loans and construction and development exposure representing 12%.

Deposits increased to $5.58 billion from $5.39 billion in the prior quarter and $5.05 billion a year earlier. Core deposits grew at a 12% annualized rate during the quarter, and the loan-to-deposit ratio was 87%. Total assets stood at $6.32 billion.

Operating noninterest income was $8.1 million, up from $7.8 million sequentially but below $8.4 million a year earlier. The company highlighted several sources of fee and relationship revenue, including wealth and private banking with about $1.6 billion in assets under management, treasury management with more than $825 million in analyzed deposits, and equipment finance with $147 million of outstanding loans and leases.

Expenses limit pre-provision growth

Operating noninterest expense increased 7% from both the previous quarter and the year-earlier period to $36.4 million. As a result, operating pre-provision net revenue declined 3% sequentially to $21.2 million, though it remained 16% above the third quarter of 2025.

The non-GAAP operating efficiency ratio rose to 62.9% from 60.4% in the second quarter, but improved from 63.6% a year earlier. Management’s stated strategy remains focused on using existing infrastructure more efficiently, expanding commercial banking capabilities, making strategic hires and enhancing treasury-management and digital products. The company said its merger-and-acquisition focus has shifted toward strategic or more consequential opportunities.

SmartFinancial also identified potential asset repricing over the coming quarters. About $453 million of fixed-rate loans yielding 4.98% are scheduled to mature by the end of 2027, while $131 million of adjustable-rate loans yielding 5.11% are expected to mature or reprice over the same period. The presentation did not provide formal earnings or margin guidance.

Credit, capital and liquidity

Nonperforming assets represented 0.25% of total assets, unchanged from the second quarter and slightly above 0.22% a year earlier. Delinquent and nonaccrual loans increased to $28.5 million, or 0.59% of total loans and leases, from $17.8 million, or 0.38%, in the prior quarter. Net charge-offs were 0.06%, while the allowance for credit losses was $45.6 million, equal to 0.94% of loans held for investment.

Tangible book value per common share, a non-GAAP measure, rose 1% sequentially and 10% year over year to $28.50. GAAP book value per share was $34.00. The common equity Tier 1 ratio was 9.8%, the total capital ratio was 12.6%, and the leverage ratio was 8.5%.

The company reported $1.9 billion of untapped liquidity sources and $700 million of on-balance-sheet liquidity. Its securities portfolio had a book value of $708 million, a 3.83% book yield and an unrealized loss of $50 million.

SmartFinancial identified credit risk, changes in loan demand and real-estate values, interest-rate fluctuations, deposit outflows, cybersecurity threats, trade conflicts, regulatory changes and broader economic weakness among the factors that could cause actual results to differ from management’s expectations.