SmartFinancial Reports Strong Second-Quarter 2026 Results as Loan Growth and Net Interest Margin Improve
SmartFinancial, Inc. reported solid financial results for the second quarter of 2026, highlighted by stronger earnings, continued organic loan growth, an expansion in net interest margin, and the achievement of a significant asset milestone. The company also announced its regular quarterly cash dividend, reinforcing its commitment to returning capital to shareholders while continuing to invest in its banking franchise.
For the quarter ended June 30, 2026, SmartFinancial generated net income of $16.3 million, or $0.96 per diluted common share. The results represented a notable improvement compared with net income of $11.7 million, or $0.69 per diluted common share, in the second quarter of 2025. Earnings also increased from $13.7 million, or $0.81 per diluted common share, in the first quarter of 2026.
The company’s second-quarter performance reflected continued progress across several key areas of its business. SmartFinancial recorded approximately $165 million in net organic loan and lease growth, representing a 15% annualized increase on a quarter-over-quarter basis. Total assets surpassed $6 billion during the quarter, reaching $6.12 billion as of June 30, 2026.
Core deposits also increased by $83 million during the quarter, equivalent to a 6% annualized quarter-over-quarter growth rate. In addition, tangible book value per common share increased at a 13% annualized rate compared with the prior quarter.
SmartFinancial also reported positive operating leverage during the period, with revenue growth outpacing the increase in operating expenses. The company was additionally recertified as a Great Place to Work after more than 97% of SmartBank associates recognized the organization positively.
“Our second quarter results reflect steady progress in the execution of our strategy,” said Billy Carroll, President and CEO of SmartFinancial. “During the quarter, we generated approximately 15% annualized loan growth and expanded our net interest margin to 3.52%, while maintaining excellent asset quality.”
Carroll noted that diluted earnings per share increased to $0.96, representing a $0.15 improvement from the first quarter. He also highlighted the 13% annualized quarter-over-quarter growth in tangible book value per common share and the company’s ability to generate positive operating leverage.
According to Carroll, loan pipelines across the company remain healthy. He added that ongoing consolidation and operational challenges affecting certain competitors are creating opportunities for SmartFinancial to deepen existing customer relationships and gain additional market share.
“While we recognize there is still work to do, our strong momentum gives us confidence in the long-term trajectory of the Company and our ability to continue creating value for shareholders,” Carroll said.
SmartFinancial Chairman Miller Welborn also pointed to the strength of the company’s franchise and its corporate culture.
“The momentum we continue to build across SmartBank reflects the strength of our franchise and the commitment of our associates,” Welborn said. “Being recertified as a Great Place to Work by more than 97% of our associates is particularly meaningful because it speaks to the culture that has been foundational to our success.”
Welborn added that the quarter’s results reflected disciplined execution across the company and the benefits of investments made in its markets, employees, and operating platform.
Net Interest Income and Margin Expansion
Net interest income increased to $48.1 million in the second quarter of 2026, compared with $45.9 million in the first quarter. Average earning assets totaled $5.52 billion, an increase of $131.7 million from the previous quarter.
The increase in average earning assets was primarily driven by a $176.3 million increase in average loans and leases and a $9.7 million increase in average securities. These increases were partially offset by a $54.3 million decline in average federal funds sold and other earning assets.
Average interest-bearing liabilities increased by $153.3 million during the quarter. The increase was primarily related to a $115.5 million rise in average interest-bearing deposits and a $37.7 million increase in borrowings.
SmartFinancial’s tax-equivalent net interest margin expanded to 3.52% from 3.48% in the prior quarter. The improvement was primarily driven by asset yields increasing faster than liability costs.
The fully taxable equivalent yield on loans and leases, excluding loan fees, increased to 5.95% from 5.93% in the first quarter. Including loan fees, the yield on loans and leases increased to 6.07% from 6.02%.
The yield on earning assets also improved, rising to 5.70% from 5.62%. At the same time, the cost of interest-bearing deposits increased modestly to 2.62% from 2.60%. The cost of total deposits rose to 2.15% from 2.12%, while the cost of interest-bearing liabilities increased to 2.74% from 2.72%.
The modest increase in funding costs was more than offset by the improvement in asset yields, supporting the expansion in the company’s net interest margin.
Credit Quality Remains Strong
SmartFinancial continued to report strong credit quality during the second quarter. The allowance for credit losses on loans and leases stood at $45.3 million as of June 30, 2026. The allowance represented 0.97% of total loans and leases, unchanged from March 31, 2026.
During the first quarter, SmartBank updated its allowance for credit losses model by adopting a discounted cash flow methodology, refining key assumptions and qualitative factors, and expanding the use of macroeconomic drivers. Those changes contributed to a higher provision for credit losses in the first quarter.
During the second quarter, the provision for credit losses on loans and leases totaled $1.855 million, compared with $3.213 million in the prior quarter. Net charge-offs were $553,000, compared with $169,000 in the first quarter.
Nonperforming loans and leases declined to $11.5 million from $12.3 million at March 31, 2026. As a percentage of total loans and leases, nonperforming loans and leases improved to 0.25% from 0.27%.
Total nonperforming assets declined to $14.2 million from $15.1 million. Nonperforming assets as a percentage of total assets improved to 0.23% from 0.25%.
The company reported no loans and leases that were 90 days or more past due and still accruing. Other repossessed assets totaled $2.8 million, while there were no other real estate owned assets.
The improvement in key credit metrics provides additional support for SmartFinancial’s continued loan growth strategy.
Noninterest Income Shows Mixed Performance
Noninterest income totaled $7.9 million in the second quarter, a modest decrease of $55,000 from the previous quarter.
The quarter included increases in mortgage banking income and interchange and debit card transaction fees. Mortgage banking income rose to $916,000 from $760,000, while interchange and debit card transaction fees increased to $1.676 million from $1.418 million.
Service charges on deposit accounts also increased modestly to $1.881 million.
These gains were partially offset by lower income from other sources, including a decline in capital markets income. Investment services income decreased to $1.724 million from $1.796 million, while other noninterest income declined to $1.635 million from $2.113 million.
Despite the mixed performance across individual categories, overall noninterest income remained broadly stable during the quarter.
Operating Expenses Increase
Noninterest expense increased by $1.0 million to $34.0 million from $32.9 million in the first quarter.
The increase was primarily driven by higher salaries and employee benefits, FDIC insurance costs, data processing and technology expenses, and professional services.
Salaries and employee benefits increased to $21.0 million from $20.4 million. Data processing and technology expenses rose to $2.7 million, while professional services expenses increased to $1.4 million.
FDIC insurance expenses also increased to $920,000 from $750,000.
These increases were partially offset by a decline in other expenses, which fell to $3.0 million from $3.1 million.
Although expenses increased, SmartFinancial reported positive operating leverage during the quarter because revenue growth exceeded the pace of expense growth.
Income Tax Expense Rises
Income tax expense totaled $4.2 million during the second quarter, compared with $3.1 million in the prior quarter.
The increase was primarily attributed to a higher projected annual effective tax rate resulting from increased forecasted taxable income relative to non-taxable income.
Balance Sheet Surpasses $6 Billion
SmartFinancial’s total assets reached $6.12 billion as of June 30, 2026, compared with $5.86 billion at the end of 2025. The $254.5 million increase was primarily driven by continued growth in loans and leases.
Loans and leases increased by $319.4 million during the first six months of the year. Securities increased by $17.9 million, while premises and equipment rose by $4.9 million. Bank-owned life insurance also increased by $1.8 million.
These increases were partially offset by an $85.0 million decline in cash and cash equivalents and a $1.2 million decline in loans held for sale.
Total liabilities increased to $5.54 billion from $5.31 billion at the end of 2025. Total deposits rose by $232.8 million.
Deposit growth was primarily driven by an increase of $181.2 million in money market and savings deposits, a $76.4 million increase in interest-bearing demand deposits, and a $116.3 million increase in time deposits. These gains were partially offset by a $141.0 million decline in noninterest-bearing demand deposits.
Borrowings decreased by $2.4 million during the period.
Shareholders’ Equity and Tangible Book Value Improve
Shareholders’ equity totaled $576.9 million at June 30, 2026, an increase of $24.4 million from December 31, 2025.
The increase was primarily driven by $30.0 million in net income generated during the first six months of the year. This growth was partially offset by a $3.6 million increase in accumulated other comprehensive loss and $2.9 million in dividends paid.
Tangible book value per common share increased to $28.22 at June 30, 2026, from $26.85 at the end of 2025. Tangible common equity as a percentage of tangible assets improved to 8.01% from 7.93%.
The improvement in tangible book value reflects the company’s continued ability to generate earnings and build capital while supporting business growth.
Continued Focus on Growth and Shareholder Value
SmartFinancial’s second-quarter results demonstrate continued momentum across its core banking operations. The combination of loan growth, improving net interest margin, stable credit quality, increasing deposits, and positive operating leverage provided a strong foundation for the quarter’s performance.
The company also continues to focus on strengthening its franchise through investments in its markets, technology, employees, and operating platform. Management believes that opportunities created by industry consolidation and challenges at certain competing institutions could allow SmartBank to attract new customers and expand existing relationships.
At the same time, the company’s strong workplace culture remains a key component of its strategy. The recertification as a Great Place to Work, supported by positive feedback from more than 97% of associates, reflects management’s emphasis on employee engagement and organizational culture.
With total assets now above $6 billion, strong organic loan growth, improving tangible book value, and continued attention to asset quality, SmartFinancial enters the second half of 2026 with a positive outlook.
The company remains focused on executing its strategy, expanding customer relationships, improving operating efficiency, and creating long-term value for shareholders. Its second-quarter results suggest that the combination of disciplined growth, strong credit performance, and strategic investment is continuing to support the company’s expansion as it moves forward.
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