Operator: Hello everyone. Thank you for joining us, and welcome to the SmartFinancial Q3 2026 Earnings Release and Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand over to Nate Strall, Director of Investor Relations, to begin. Please go ahead.
Nate Strall: Thanks, Erica. Good morning, everyone, and thank you for joining us for SmartFinancial's third quarter 2026 earnings webcast and conference call. During today's call, we will reference the slides and earnings release available in the investor relations section of our website at smartbank.com. Billy Carroll, our President and Chief Executive Officer, will begin the call, followed by Ron Gorczynski, our Chief Financial Officer, who will provide additional commentary. We will be available to answer your questions at the conclusion of our call. Our comments today include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Factors that could cause actual results to differ materially are described in our earnings release and SEC filings, which are available on our website.
Nate Strall: We undertake no obligation to update any of the forward-looking statements as a result of new information, future developments, or otherwise, except as required by law. During today's call, we may reference non-GAAP financial measures related to the company's performance. Reconciliation of these measures to the most directly comparable GAAP measures are included in the appendices to the earnings release and investor presentation filed with the SEC on 19 October 2026. I will turn the call over to Billy Carroll.
Billy Carroll: Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. As usual, I will open our call with some commentary and then hand it over to Ron to walk through the numbers in greater detail. After our prepared comments, we will open it up with Ron, Nate, Rhett, Miller, and myself available for Q&A. The Q3 was another outstanding one for our company. We continue to build strong organic momentum, generated record operating revenue, and expanded our return metrics. The foundation we have built over the past several years is producing the results we expected, and our team remains highly focused on disciplined growth and long-term shareholder value. Let me jump right into some of the highlights.
Billy Carroll: First, and as I always say, one of the most important metrics to me, we continue to increase the tangible book value of our company. Tangible book value per share was up, ending the quarter at $28.50. The tangible book value excluding AOCI increased to $30.03. That represents 15% annualized quarter-over-quarter growth excluding AOCI. For the quarter, we posted operating earnings of $18.6 million, or $1.10 per diluted share, and record operating revenue of $57.5 million. We did have a few moving parts that netted out positive to operating earnings this quarter, including a nice tax credit transaction that Ron will discuss in a moment. We again delivered excellent growth on both sides of the balance sheet, with 15% annualized organic loan growth and 12% annualized core deposit growth. Our return metrics, though slightly aided this quarter, continue to strengthen.
Billy Carroll: Operating return on average assets increased to 1.20%, and operating return on average tangible common equity increased to 15.1%. Credit quality remains very sound. Non-performing assets were only 25 basis points of total assets, and annualized net charge-offs were 6 basis points. We did have a slight uptick in delinquencies in our Fountain Equipment subsidiary as higher diesel prices have strained some transportation business, but overall, very manageable as that continues to be a relatively small piece of our overall loan book. We were thrilled to open our full-service Columbus, Georgia Financial Center during the quarter. This is our first branch in this great state and an important step in building density in that market and supporting the strong start our Columbus team has made. Looking at the first few pages in our deck, you can see the continued progress in revenue, EPS, return metrics, and tangible book value.
Billy Carroll: The consistency of those trends demonstrates the strength of our organic strategy and the operating leverage we are building. A couple of additional high-level comments from me. On growth, we added $174 million in loans this quarter, representing 15% annualized. The growth remains broad-based, with strong production across all regions and continued momentum in C&I lending. Our average loan portfolio yield, including fees and accretion, ticked up to 6.08%. Regarding deposits, core deposits increased $163 million or 12% annualized during the quarter. Our focus on both sides of the balance sheet continues to pay off, and loan-to-deposit ratios maintain very manageable at 87%. Deposit pricing remains competitive and higher funding costs pressure the margin modestly, but net interest income still increased nicely to $49.4 million as balance sheet growth more than offset that pressure. On expenses, operating non-interest expense was $36.4 million.
Billy Carroll: The quarter included some slightly higher one-time items along with continued investment in our people and franchise. Even with that increase, year over year operating revenue growth outpaced operating expense growth. We will maintain discipline around expenses, but will also continue making investments that support growth, including revenue-producing talent, technology, and strategic facilities. All in all, another excellent quarter of continued execution. I am going to stop there and hand it over to Ron to dive into the details. Ron?
Ron Gorczynski: Thanks, Billy, and good morning, everyone. I will start with deposits. During the quarter, our non-broker deposits grew $163 million, driven by continued new account growth and strong relationship expansion. The weighted average cost of new deposit production increased 43 basis points to 3.33% for the quarter and was 3.36% for September. Non-interest-bearing deposits were essentially unchanged at $920 million, representing approximately 70% of total deposits. Interest-bearing deposit costs increased 9 basis points to 2.71%, while total deposit costs increased 11 basis points to 2.26%. Loan balances increased to $174 million, with growth diversified across all loan categories and geographies. New loan production carried a weighted average yield of 6.37% for the quarter and was 6.78% for September. Our growth on both sides of the balance sheet reflects the consistent execution of our relations-based strategy.
Ron Gorczynski: Our bankers remain focused on pairing quality loan growth with broader client relationships, operating accounts, and core deposits. Turning to margin, net interest income increased $1.3 million to $49.4 million, and net interest margin was 3.45%, in line with our stated guidance. Looking ahead, we expect continued improvement in asset yields to support modest margin expansion over time. However, near-term deposit cost pressure is expected to continue to offset some of that benefit. As such, for Q4, we currently expect net interest margin to remain around current levels in the 3.45% range. Our provision for credit losses declined to $687,000 from $1.5 million in the prior quarter. This included approximately $1.1 million of provision, partially offset by a $371,000 release from our unfunded commitments liability. The provision also benefited from a $1.7 million net release of a loan-specific reserve driven by a loan payoff.
Ron Gorczynski: Overall, the allowance for credit losses increased slightly to $45.6 million and our allowance to loans ratio declined to 94 basis points. We believe the allowance is appropriate for the portfolio and current environment. Operating non-interest income was $8.1 million, up $245,000 from the prior quarter, led by service charges and mortgage banking income. Together with higher net interest income drove operating revenue to $57.5 million, reflecting continued momentum across the company. Operating non-interest expense totaled $36.4 million, up $2.4 million from the prior quarter. Approximately $1 million of this increase was attributable to sale losses and valuation write-downs on repossessed equipment in our Fountain Equipment Finance subsidiary. Salary and benefit expenses also increased, primarily due to higher production-related variable compensation. Professional service expense included approximately $300,000 of consulting and placement costs associated with our tax credit purchase.
Ron Gorczynski: Adjusting for the equipment finance and tax credit expenses, our non-interest expenses were in line with our stated guidance. Our operating efficiency ratio increased to approximately 63% from 60% in the prior quarter. Although the ratio was elevated this quarter due to the aforementioned items, we expect to generate positive operating leverage over time as our recent investments contribute more meaningfully to revenue. We will continue making targeted investments in our expanding markets while maintaining discipline across the broader expense base. For Q4, we expect operating non-interest income of approximately $7.5 million and operating non-interest expense of $35 to $35.5 million. Salary and benefit expenses are expected to range from $21 to $21.5 million, reflecting production-related incentive compensation and additional hiring. Incentive compensation accruals will vary with performance. Turning to taxes, income tax expense was $1.9 million, compared with $4.2 million in the prior quarter.
Ron Gorczynski: During the quarter, we purchased $36 million of transferable energy tax credits at a discount to face, resulting in a $2.6 million income tax benefit. Looking ahead, we may consider similar transactions from time to time as part of our tax planning. Our effective tax rate going forward will be in the range of 19.5% to 20.5%. I will wrap up with capital. Our tangible common equity ratio was 7.8%, compared with 8% in Q2. The decline in the tangible common equity ratio was primarily attributable to changes in AOCI as rising interest rates reduced the fair value of our bond portfolio during the quarter. In contrast, our estimated common equity Tier 1 ratio increased to 9.8%, and our estimated total risk-based capital ratio was 12.6% at quarter end.
Ron Gorczynski: Our capital position remains solid and provides flexibility to support organic growth, maintain balance sheet strength, and continue building long-term shareholder value. With that said, I will turn it back over to Billy.
Billy Carroll: Thanks, Ron. As you can tell from Ron's comments, we continue to execute successfully in the leveraging phase of our company's growth. Our outlook remains centered on the strategy that has brought us here: getting deeper in our markets, growing share, expanding high-value relationships, recruiting great bankers, and leveraging the infrastructure and capabilities we have built. Our pipelines remain solid, and we continue to see opportunities across our footprint. The higher rate forecast does present some added challenges as we look ahead, but I'm going to continue to stick to our high single digits plus growth guidance, even though we bettered that in recent quarters. Talent acquisition remains a high priority. Market disruption across the Southeast continues to create opportunities for us to add experienced revenue producers who fit our culture.
Billy Carroll: We have added some strong bankers in several markets this year, and our ability to recruit maintains one of our company's key competitive advantages. We had several very nice recruiting wins this quarter and have several other great talent members in the pipeline currently. Columbus, Georgia, is a good example of our strategy in action as we opened our full-service financial center during the quarter, right in the heart of Columbus's main business district. We're very bullish about the opportunity to build meaningful relationships and market share there. To summarize, we're positioned very well. We are executing, posting record operating revenue this quarter. We are producing, posting double-digit organic growth on both sides of the balance sheet. We're managing risk as credit remains very sound, and we are winning on talent as we continue to add outstanding new team members.
Billy Carroll: I also want to close with a huge shout-out to our associates as our company was recently named to Great Place to Work's list of top 50 mid-sized companies in the country. We also ranked number 11 nationally in the financial institutions category. This is another great statement on the culture that this team is creating. Our future is bright, and I appreciate the work of our SmartFinancial and SmartBank team and the efforts of all of our associates. I'm extremely proud of what we're building here at SMBK. I'll stop there, and we'll open it up for questions.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Will Jones with KBW. Your line is open. Please go ahead.
Will Jones: Yeah. Hey, great. Good morning, guys.
Billy Carroll: Hey, Will.
Will Jones: Hey. Another really strong quarter of growth, both sides of the balance sheet, loans and deposits. I know last quarter we spoke about some deposit seasonality that we would see in the back half of the quarter that may be supporting some of the growth we saw. Could you speak to maybe any seasonality in this quarter's results and what you would expect to maybe flow through into the balance of this year?
Billy Carroll: Ron, you want to jump in on that one?
Ron Gorczynski: Yeah, we did get a pickup really for Q3 throughout the board, not only new relationships but building of the existing client base. I think we're still looking for a good growth quarter for Q4 and we're out of our seasonality trend, our historical trending for that.
Will Jones: Yeah. Got it. Okay. Ron, I heard you say the new deposits in the quarter were $330 million. Did I hear that right?
Ron Gorczynski: Correct. $333 million for the quarter. Yes.
Will Jones: Okay. As we just kind of model out and think about deposit betas moving forward, could you just maybe walk us through where you would level set expectations there? I hear you that that margin may be more stable over the near term as some of your repricing on the asset side is offset by deposit costs. Is that how we should think about additional incremental hikes from here? I know the forward curve would imply maybe a few more hikes coming into 2027. Is kind of a stable margin where you would kind of peg margin performance as we think about additional hikes in the future?
Ron Gorczynski: Yeah. First, since the rates hiked again, we are probably running around 70% beta at this point of time. We are really so neutral. We are really not going to be affected by rate hikes or rate decreases at this point. A lot of our expansion that is our modest expansion throughout 2027 is really due to our repricing book. We will see incremental lift going through 2027. As far as rate hikes, we should be fairly neutral throughout each rate hike. Our guidance does include a rate hike in December.
Will Jones: Yeah. Okay. Then just fair to say, I know we talked about a $1 EPS target by the end of this year. It feels like things are still kind of trending in that direction if we normalize some of the expenses from this quarter. Is that a fair comment? Is that the way that you guys are kind of viewing the business?
Ron Gorczynski: Yeah, Will, I think you are spot on. You shake out the ebbs and flows this quarter is really a solid quarter. We still feel very good about our ability to hit that 4x4 challenge that we have stated publicly, hitting that dollar run rate. We are still on that trajectory, and feel really good about our ability, not just to hit that, but our ability to continue to move EPS higher as we look into next year. Again, we have talked about it a lot. Our focus on just continuing to grow EPS and revenue and book value, that is kind of where we are sitting, and the team is doing a great job on that. Yeah, I think we are moving in that direction and feel pretty good about the chances of getting that here pretty soon.
Will Jones: Well, the momentum is certainly still very much evident. So congrats there, guys, and thanks for the questions.
Billy Carroll: Thanks, Will.
Ron Gorczynski: Thanks, Will.
Operator: The next question comes from the line of Russell Gunther with Stephens. Your line is open. Please go ahead.
Russell Gunther: Hey, good morning, guys. I wanted to start on the loan growth side of things. Morning, Billy. Another enviable organic growth quarter and guide. Maybe a more intermediate question on my end. As you guys think about potential Fed rate hikes and the absolute level of interest rates, is there a threshold where you would expect to see some pipeline fallout that would put that kind of high single, low double-digit growth profile at risk?
Billy Carroll: Yes, that is a really good question, Russell. Yeah. Obviously, as rates edge up, and quite frankly, we are talking about that a lot with our division and regional leadership. We are talking about pipelines and thinking about 2027 and starting to lay out our forecasts. Right now, even with the current rate environment, pipelines still feel pretty good. Now, I do agree. I think if you are going to see another 2 to 3 hikes, could that have some impact as we look into 2027? Absolutely. I think the macro is the macro, and so we have got to deal with that just like everybody else. What I will say is that the, I call it the hustle factor that our guys and gals have across our board of just getting out and bringing in new relationships. I do not think that will slow down.
Billy Carroll: It might slow a little bit of just what I call just maybe some of the new projects that are going on that we see. But I still think we have got a great shot at continuing to bring in new relationships, new deposit accounts, and new funded debt as we hopefully move things from other entities.
Russell Gunther: Got it. That is very helpful. Thank you, Billy. Then, always have that great slide in the deck that fleshes out your back book repricing opportunity. Ron, you mentioned the reinvestment rates on the loan side. Could you just share where you are reinvesting on the investment securities front? Then on the other side, it would be helpful to get a sense for just kind of where spot kind of period deposit rates ended the quarter.
Ron Gorczynski: At this point, we are buying bonds SOFR plus 85, so in the 5-plus range. Again, a lot of our, we are just kind of just keeping our balance of our investments pretty stable over time. The spot deposit pricing, our CDs were today around 4.10% for 7-month CDs. Our 13-month CDs are at 4.15%, and our money markets are in the 3.60% to 3.70% range at this point. We try to target.
Russell Gunther: Got it.
Ron Gorczynski: around 90% to 95% of Fed funds.
Russell Gunther: Okay. Fantastic. Thank you. Just last one for me, if you do not mind. I appreciate the near-term expense outlook, but how are you guys thinking about a core expense growth rate on a more intermediate-term basis as you guys balance franchise investment and talent and tech with the goal of delivering positive operating leverage?
Billy Carroll: Yeah, great question. Again, we are having these exact same conversations, Russell, as we are kind of going through our 2027 forecasting. Again, you used the word, it is balance. We are continuing to grow, continuing to add team members. When we look at, we kind of look at it almost in a little bit of, I call it same-store sales, when you kind of factor out some of the new adds. I think if you factor out kind of some of that and you just look at where we are moving forward, I think we can stay pretty reasonable on the expense growth. Ron, I know we are talking about it. I do not know if you have got. We are probably not prepared to really lay out. I know we are working through forecasts right now, probably not ready to give 2027 guidance.
Billy Carroll: But percentage-wise, you got a range that you could maybe share?
Ron Gorczynski: For both of these, I think we are going to be in the 5% to 6% growth range going off of Q4's run rate. But again, we will be providing continuous leverage and sustainability in our workforce and our franchise. We benefited from keeping our expenses to a tight band. But our franchise is growing, so we will have incremental growth in our non-interest expenses.
Russell Gunther: Yep. No, understood. I appreciate your thoughts, guys. Thanks for taking my question.
Ron Gorczynski: Thank you, Russell.
Operator: The next question comes from the line of Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.
Stephen Scouten: Hey, good morning, everyone. Ron, I appreciate the information you gave there on CD and money market costs there. Can you talk a little bit about maybe what you are seeing all-in kind of blended rates come in at on the deposit side, and how you are seeing spreads overall and any sort of directional trends there, whether you are seeing spreads compress given competition or what have you?
Ron Gorczynski: Yeah. Over the last couple of quarters, we were probably, on our side of the house, kind of quiet from getting the phone calls of pricing. The pricing competition is real. We are coming in at the 3.35% range, all in. That is kind of what we expect. I do not know how much incrementally higher we are going to go at this point, but that is to be determined. The market is real, and we are getting more calls every day for exception pricing. So that is about as best I can tell you at this point.
Billy Carroll: But I will add too, Stephen, I think the team is also doing a really nice job on the asset side. We are sitting down and really looking at watching that and kind of fighting for every basis point on the asset side. Loan growth is competitive too, but we have been able to continue to eke out pretty nice incremental rates on our loan growth as well. So while, yeah, a little more deposit funding than we would like to see, we are doing a nice job balancing it with the growth that we are getting.
Stephen Scouten: Yeah. The growth is a huge tailwind there, and I think that the average yield is, what, 608 currently? I am not sure if you noted this or if it is in the slide deck, apologies if I have missed it, but new loan yields are coming on around where, all-in?
Ron Gorczynski: Yeah. September was 678. So for the quarter, it was 637. So we are getting some nice lift from the rate increase.
Stephen Scouten: Yeah, that is fantastic. Okay, great. Appreciate that. I think, Billy, you mentioned the $1 run rate and your progression there. Do you guys have or do you think you will maybe be putting out some longer-term profitability targets from here? You guys have made just obviously tremendous strides over the last couple of years. Just kind of curious where you think you can continue to head from here. What is possible for the franchise?
Billy Carroll: Yeah. Stephen, we will. I think we're spending a lot of time. We've worked through our executive team's planning meetings over the last few weeks and got board strategy coming up here in a couple of weeks. We're laying out the forecast. As you all know, we're pretty transparent. We've demonstrated our ability to kind of challenge ourselves internally and execute on that. That's worked pretty well. We're kind of working through what that next challenge is going to be for our group. But we will. We'll be sharing that at the appropriate time. But again, I remain so excited about what we're seeing in this company, the energy, the, again, I mentioned recruitment. We're adding some great bankers to this platform, just strategically and in some key markets. So I love our ability to continue executing. Yeah, we'll be laying out.
Billy Carroll: Nate's kind of our marketing guy when it comes to kind of crafting the mantras for the challenges. So we're trying to figure out exactly what we want to lay out for 2027, but stay tuned.
Ron Gorczynski: I do think the whole team's up for the challenge. They push us
Billy Carroll: Absolutely.
Nate Strall: as much as we push them.
Billy Carroll: Yeah.
Nate Strall: It is a good mix of driving for higher.
Stephen Scouten: Yeah, it seems like you have a group that likes a challenge, so that is fantastic. I guess last thing for me, and I think I kind of asked you this last quarter as well, but M&A possibilities, does any of this change, you continue to have a strength from a pricing power perspective. You are now in Columbus. Do you think about maybe changing direction at all or putting that back on the table in any way, shape, or form, given maybe a desire to get more scale and density in newer markets?
Billy Carroll: I think our focus continues to be 1A on what we have done. This organic strategy and just adding great regional bankers is really where we want to focus. We are watching what is going on in the world. There are opportunities out there. Again, I have said it before, and I will reiterate it. I think it would have to be something that was really unique that made us better and not just bigger if we were ever to look at something. Because, again, we have kind of got this thing built to where we can punch up. When you look at our products and our services and our ability to compete against the larger regional banks, we can do that now at Fishville. I think for us, it would have to be really unique for us to consider it. But we are always keeping our eye open on what is happening.
Billy Carroll: Organic continues to be 1A.
Nate Strall: Yeah, I think it is intriguing to look at, obviously always fun to run the numbers, but man, we are pretty darn focused on what we are doing now. I echo what Billy said. It would have to be super attractive for us to deviate from the current strategy.
Stephen Scouten: Yep, makes sense. Continues to be a great answer there. Keep it up, guys. Appreciate the time.
Nate Strall: Thank you.
Billy Carroll: Thanks, Stephen.
Operator: The next question comes from the line of Brett Rabatin with StoneX Group. Your line is open. Please go ahead.
Brett Rabatin: Hey, guys. Good morning. If I heard the guidance correct, the guidance for Q4 fee income was $7.5 million. One, is that the right number? Then two, it is a little softer than Q3. If so, any thoughts on the Q4 level of fee income?
Ron Gorczynski: Yeah, Brett. Q4, we are projecting $7.5 million, and it is softer. It is really our mortgage unit, the seasonality of it. Could we do better? Maybe, from what is in the pipeline. But right now, usually we do start slowing down, and that has been a pretty decent lift for us quarter-over-quarter. So that is really the only item that is really causing that.
Brett Rabatin: Okay. Any thoughts on the Q3 strength, versus what I have seen from some other banks, when mortgage has been tough given rates?
Billy Carroll: I'm sorry, Brett, was that mortgage? Was that mortgage specific?
Brett Rabatin: Yeah, just the mortgage banking line item was stronger in Q3 than Q2 and Q1. It just seems like others have had some pretty tough comps in Q3, just given rates. So I was just curious what the strength was related to Q3.
Billy Carroll: Yeah, I'll do that, and then Ron or Brett, y'all chime in. Overall, I think a lot of it has just been our mortgage group has really had just an overall really good year. We've continued to add some really good mortgage bankers over the course, especially early in the year. Those folks have ramped up and have gained momentum, even in an environment. We were actually talking with one of our mortgage team members yesterday about prospects, and Ron said you do get a little bit of seasonality, as you don't have as many closings usually in Q4. But our pipeline's still pretty good. While some one to four pockets may be a little bit softer in some different spots, we've been able to continue to eke out really good growth and been real pleased with what we've been able to accomplish this year on mortgage.
Billy Carroll: I think a lot of it is just, number one, team's very focused and sales side's doing a great job there. Then probably number two is just that we've been able to do it with some really good new mortgage banker additions this year. I don't know, Brett, Ron, any additional color on that from you guys?
Ron Gorczynski: No, you are spot on. Our volume, we have been putting more originators out on the field, so our volume has increased. So it has been working for us.
Rhett Jordan: Right. Team, great hustle. The production side has, to your point, Billy, the new hires has been a key driver. Then I think that team's ability to just continue to process activity very efficiently, it helps with the new producers. We are able to get deals turned around quickly, get responses back, and then business.
Brett Rabatin: Okay. That is super helpful. Then the other question I had was just around slide 14, and if you could just refresh my memory on, you have got nearly half a billion of fixed rate loans yielding slightly under 5% that mature by the end of next year, and a little over 100 billion of adjustable rate loans at a similar rate. I assume those are all more fixed rate commercial real estate type properties. Do those loans, do you think, reprice to a higher level, or do you think that those loans end up repricing someplace else with another institution? Or just any thoughts on that slide 14, those loans that are repricing over the next year.
Billy Carroll: Ron, do you want to jump in?
Ron Gorczynski: Yeah, I'll start. What we have seen for our renewals and repricing, one, we're getting about 100, 110 basis points over the original rate. Two, for the renewal side, we are keeping around 80%, 85% of those in-house. So we're very successful in keeping those. Nice retention and a lot better rates than what we've had. So it's been something we've been working at for a while and quarter-over-quarter, so we don't see why that would defer or change going forward either.
Brett Rabatin: Okay. If I could ask one last quick one, just around demand. I've had folks asking about maybe demand being quelled by higher rates, and you guys obviously have an origination rate for September close to 7%. Have you guys seen any of that where higher rates might be starting to slow demand a little bit, or is it just not a factor at this point?
Billy Carroll: We're watching it, Brett. I know, Brett, I know we talk about pipelines a lot, just trying to project growth over the near term, as good as you can project off your pipelines. But we've usually been pretty accurate around that. We're not seeing it slow yet. I think if you do get a couple of more rate increases in there, could you see some slowdown as we look into 2027? Absolutely. Again, I'll go back to my comment that I made earlier. It is not slowing our team's calling efforts down and our prospecting efforts. So even though you might get a little bit of softness maybe in some new projects, I think our ability to move clients over and to move deals over remains pretty good. I don't read anything that you would add to that.
Rhett Jordan: No, I think that's spot on, Billy. I would say what we're seeing in opportunities, I don't think is really slow when you combine our calling efforts and our new team members and additions we've had across the footprint. We're still seeing a very steady pipeline.
Brett Rabatin: Okay, great. Appreciate it, guys.
Billy Carroll: Thanks, Brett.
Operator: The next question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.
Steve Moss: Good morning, guys. Maybe just start on the equipment finance. Hey, Billy. On the equipment finance here, just with Fountain. I think I heard you, Billy, talk about there is some challenges within that portfolio regarding higher diesel. Just kind of curious, how large is that portfolio? And any color you can give there.
Billy Carroll: Yeah, I'll give just a high level, and Rhett, maybe you could walk through specifics on portfolio balances. Overall, my comments were we saw a little bit of delinquency creep in that book. A lot of that's just some of these smaller mom-and-pop transports, just a little bit of strain there.
Steve Moss: Okay.
Billy Carroll: We've been able to kind of navigate that pretty well internally. With diesel prices up, we might have a little bit more delinquency, but overall, we think it continues to be very manageable as it's a small piece of the book. Rhett, any portfolio specifics?
Rhett Jordan: I'll just say it's about $145 million or so.
Billy Carroll: Yeah.
Rhett Jordan: Is the entire book.
Steve Moss: Okay, great. Appreciate that color there. Just on thinking about NII growth here going forward, given the 70% deposit beta, sounds like you will have another good quarter of loan growth. Obviously, like a mid-teens type year for you guys. For NII in the upcoming quarter, if the margin is only 345, is that like a 2% type NII number for you guys here?
Billy Carroll: Ron, NII growth. We were probably a little better than that this quarter. I have not looked at it from a percentage standpoint. We can probably calculate it pretty quick, but I think we were a little better than that this last quarter. That is probably right in the right range, Ron. You got a quick math on that?
Ron Gorczynski: Yeah, we are probably looking at the NII change about pretty closer to 3% growth for Q4.
Steve Moss: Okay. Maybe loan growth is similar to the current quarter for the Q4 here.
Ron Gorczynski: Yeah. Maybe a touch higher, but yes, sir.
Steve Moss: Awesome. Thanks, Ron Gorczynski. Just in terms of you guys have managed down your securities and liquidity a bit. It kind of seems like we are hitting the floor here. Just curious, are you guys willing to run it a bit lower to fund loan growth or have we hit the floor, I should say? That is what I am trying to ask.
Ron Gorczynski: Yeah. I still think we have a little bit. We could probably go $80 million less, but we are getting near our floor at this point. So we got a little bit more ammo, but we just keep reinvesting in the portfolio.
Steve Moss: Okay. Great. Well, nice quarter, and that is all my questions. Appreciate all the color here, guys. Thank you very much.
Billy Carroll: Thanks, Steve.
Ron Gorczynski: Thanks, Steve.
Operator: The next question comes from the line of Christopher Adamo with Green Capital. Your line is open. Please go ahead.
Chris Adamo: Hey, guys. This is Chris Adamo on for Chris Marinac. I got a quick one for you on the credit front. I guess, could you provide any color, I guess, into the CRA loss rate for the quarter? Also, I guess, how do you kind of see that going forward and impacting future provision and overall reserve levels going forward as well? Thanks.
Billy Carroll: I guess just make sure I had to clarify the right question, Chris. You are saying loss levels? Is that what, I guess, just how do we view loss levels going forward? Is that correct?
Chris Adamo: Yeah, that is correct.
Billy Carroll: Yeah, I will make a high-level comment, then let Rhett jump in. Overall, we still feel really good about the credit book. Again, when you look at what little we had in the way of losses so far this year, most of that has been our equipment finance sub-related which is usually typical. We will have a little bit more than that just because we get the yield for it. But I do not anticipate anything unusual going forward. Rhett, anything on your side as far as just kind of expected thoughts around credit in the next couple of quarters?
Rhett Jordan: No, Billy, I would say absolutely for purposes of the outlook, I mean, I think it is clearly to your point, I mean, our strain is in that equipment portfolio, and would not anticipate to see any significant changes there as far as larger additional losses. I mean, we will work through that book as we go through this cycle in that transportation space, but do not anticipate it having any significant impact. I mean, we feel like our allowance is positioned very well with where we are today. So, I do not see it being a significant issue.
Billy Carroll: So yeah, I think, Chris, loss rate is stable moving forward.
Chris Adamo: Well, that is all I have for you guys. I appreciate the time.
Billy Carroll: Appreciate it. Thank you.
Rhett Jordan: Thank you.
Operator: There are no further questions at this time. I will now turn the call back to Miller Welborn, Chairman of the Board, for closing remarks.
Miller Welborn: We really appreciate you all joining us today. Thank you for your interest in what we're building here at the bank and for our team. I hope you all each have a great day. Talk to you soon. Thanks.
Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining SmartFinancial Third Quarter 2026 Earnings Release and Conference Call. The line will disconnect automatically.
