Part III, Article XIII. How One is Justified before God, and of Good Works.
1] What I have hitherto and constantly taught concerning this I know not how to change in the least, namely, that by faith, as St. Peter says, we acquire a new and clean heart, and God will and does account us entirely righteous and holy for the sake of Christ, our Mediator. And although sin in the flesh has not yet been altogether removed or become dead, yet He will not punish or remember it.
2] And such faith, renewal, and forgiveness of sins is followed by good works. And what there is still sinful or imperfect also in them shall not be accounted as sin or defect, even [and that, too] for Christ's sake; but the entire man, both as to his person and his works, is to be called and to be righteous and holy from pure grace and mercy, shed upon us [unfolded] and spread over us in Christ. 3] Therefore we cannot boast of many merits and works, if they are viewed apart from grace and mercy, but as it is written, 1 Cor. 1:31: He that glorieth, let him glory in the Lord, namely, that he has a gracious God. For thus all is well. 4] We say, besides, that if good works do not follow, faith is false and not true.
http://www.bookofconcord.org/smalcald.php#keys
