SmartFinancial posted higher earnings on organic balance-sheet growth, but the quarter’s profit lift leaned on a $2.6 million tax benefit while core profitability softened sequentially as funding costs rose faster than asset yields 8-K.
SmartFinancial, Inc · Q3 2026 · Reported 19 Oct 2026 · US
Key figures
Corrected key figures
USD million, except EPS and percentages.
Q3 2026 | Q2 2026 | Q3 2025 | QoQ change | |
|---|---|---|---|---|
Net interest income | 49.40 | 48.06 | 42.43 | +2.8% |
Noninterest income | 8.13 | 7.89 | 8.64 | +3.1% |
Noninterest expense | 36.36 | 33.96 | 33.87 | +7.1% |
Operating PPNR (non-GAAP) | 21.18 | 21.94 | 18.27 | −3.5% |
Pre-tax income | 20.49 | 20.53 | 16.97 | −0.2% |
Net income | 18.63 | 16.32 | 13.69 | +14.1% |
Diluted EPS (USD) | 1.10 | 0.96 | 0.81 | +14.6% |
Net interest margin (FTE) | 3.45% | 3.52% | 3.25% | −7 bps |
Changes are calculated from the reported figures. Operating PPNR is a company-defined non-GAAP measure. FTE refers to fully taxable equivalent.
Earnings improved, but not mainly from better core spread economics
Net income rose to $18.6 million from $13.7 million a year earlier, and company-defined operating earnings were also $18.6 million, indicating no non-GAAP adjustments in the quarter 8-K. The bigger sequential driver was below pre-tax income: income tax expense fell to $1.9 million from $4.2 million in the prior quarter, primarily because SmartFinancial recognized a $2.6 million tax benefit tied to transferable energy tax credits 8-K.
That matters because pre-tax earnings were essentially flat with the prior quarter at $20.5 million versus $20.5 million, while company-defined operating PPNR earnings fell to $21.2 million from $21.9 million 8-K. The release therefore points to a cleaner year-on-year earnings gain than a quarter-on-quarter acceleration in underlying operating momentum 8-K.
Growth stayed strong, but deposits got more expensive
Management highlighted $174 million of net organic loan and lease growth and $163 million of core deposit growth in the quarter 8-K. Average earning assets increased by $193.1 million from the prior quarter, primarily from higher average loans and leases, and net interest income still increased to $49.4 million from $48.1 million 8-K.
The tradeoff was margin pressure. Tax-equivalent net interest margin was 3.45%, down from 3.52% in the prior quarter, and the release says higher funding costs more than offset improvement in earning-asset yields 8-K. That is visible in the detail: loan and lease yield excluding fees rose to 5.99% (FTE) from 5.95%, but cost of total deposits increased to 2.26% from 2.15% and cost of interest-bearing deposits rose to 2.71% from 2.62% 8-K.
Credit costs eased, but asset-quality metrics were not uniformly better
Provision for credit losses was $687 thousand, down from $1.5 million in the prior quarter, and the allowance for credit losses to total loans and leases improved to 0.94% from 0.97% 8-K. The third-quarter provision included $1.1 million related to loans and leases, partly offset by a $371 thousand release of the reserve for unfunded commitments 8-K.
But the release does not support an all-clear on credit. Nonperforming loans and leases as a percentage of total loans and leases increased to 0.28% from 0.25%, and nonperforming assets as a percentage of total assets rose to 0.25% from 0.23% 8-K. Noninterest expense also climbed to $36.4 million from $34.0 million, driven primarily by other real estate and loan related expenses, salaries and employee benefits, and higher professional services and other expenses 8-K.
What to watch next
Whether deposit growth can continue without further net interest margin pressure, since management said disciplined pricing remains a priority while funding costs rose faster than asset yields this quarter 8-K.
Whether higher nonperforming asset ratios and elevated other real estate and loan related expense prove temporary; the release gives no 10-Q-level detail yet on cash flow, problem credits, or broader risk exposures 8-K.
Sources
Produced by Clarifo Research with the Clarifo financial research engine from the company's public filings. AI was used in parts of the analysis and drafting. Figures are checked automatically against the filings they come from. This is not investment advice.