Oct 22, 2026 earnings call — Loan and deposit growth amid elevated credit costs
Third-quarter earnings were $42 million, or $1.14 per diluted share, with strong loan and deposit growth.
Revenue $0.2B (est $0.2B) · EPS $1.17 (est $1.38)
Key quotes
"Turning to slide six, total loans reached $12.3 billion at quarter end, representing a net quarterly expansion of $453 million, or nearly 4% sequentially."
"The $18 million in provision expense for the quarter was largely driven by loan growth and $11 million in net charge-offs."
"Capital management actions in the quarter included the repurchase of over 525,000 shares totaling $34 million, and increasing our quarterly dividend by $0.01 to $0.36 per common share for the fourth quarter."
Analyst Q&A 7
California owned properties and credit recovery
Q (Jeff Rulis · D.A. Davidson): He asked for an update on the California OREO properties that were under contract and when credit would normalize. He also asked about expectations for non-interest income, the state tax credit line, and a fee income run rate.
A: Management said meaningful progress was made on the California properties and many are under contract, representing well over half of the related value, but court timing remains. They expect further progress later this quarter and into early 2027, and they said Laguna is the large share of non-performing assets that should monetize in Q1. They also reported a roughly $7 million negative hit mostly in the tax credit line and said they are working to eliminate that impact and see a $13 plus $7 adjustment as a reasonable run rate target for 4Q.
"As we get through the Laguna portfolio, obviously we'll see our non-performing assets return back to a much more normalized level of closer to 45-50 basis points." — Doug Bauche
Ag NPAs, SBA loans, profitability outlook
Q (Daniel Tamayo · Raymond James): He asked what drove the agriculture NPAs and how the SBA portfolio is reacting to higher rates and possible defaults. He also asked when core normalized profitability (without the noise) might return.
A: Management said the ag portfolio is under $50 million and only two credits went to NPA; one is largely secured by farm ground and is about $13 million, and the other is a $4.5 million distributor they expect to exit quickly. On SBA, they expect defaults to increase with higher rates and inflation but said their owner-occupied first mortgage history shows very low loss given defaults and average loan sizes around $1.2 million-$1.5 million. On profitability, they said if you normalize out the non-interest income and carrying costs, PPNR in the quarter was about 180 basis points and improving operating trends plus ORE resolution should help return metrics toward normal.
"So in the quarter, if you normalize out really the non-interest income stuff and maybe some of the carrying costs for the ORE properties, your PPNR is about 180 basis points." — Keene Turner (CFO)
Buybacks, expenses, deposit costs
Q (Brandon Rud · Stephens): He asked whether the lower TCE ratio after AOCI changes would affect near-term buybacks and what to expect for expenses in 4Q, especially deposit cost behavior.
A: Management said they plan to continue to net accrete capital and remain active in buybacks, but may be less aggressive than when TCE was 9.13% versus the current 8.13%, and they expect some buyback activity in 4Q. For expenses, they expect core deposit costs to be roughly level with 3Q but expect the deposit ECR line to rise by $1.5 million to $2 million sequentially. They noted deposit pricing has a month lag and behaves fairly linearly, and they are working to improve pricing while expecting balance growth to help fund loan growth.
"Then I expect that deposit ECR line item with growth and what happened with the Fed funds hike and what was contractually tied to Fed funds, we expect that line to move up $1.5 million to $2 million sequentially." — Keene Turner (CFO)
Margin outlook and provisioning levels
Q (Damon DelMonte · KBW): He asked how management thinks about margin into 2027 if rates move or not, and whether there is an upward bias. He also asked about how to ballpark provisioning going forward compared with recent quarters.
A: Management said margin has upward momentum: September improved and they expect mid-4.30s margin into 4Q with additional rate improvement adding to it, and they are optimistic about net interest income and margin growth over the next several quarters. On provisioning, they said nothing fundamental changed for provisioning of new loan growth, they are emphasizing lower-risk businesses, and they expect to provision about 100 basis points-115 basis points on new growth while noting net charge-offs are currently at the high end of the spectrum and getting to 25 basis points would be a short-term win.
"So we're 100 basis points-115 basis points on new growth." — Keene Turner (CFO)
State tax credit exit and loan growth
Q (Nathan Race · Piper Sandler): He asked whether the bank is exiting the state tax credit business, the timing, and whether that will affect the tax rate. He also asked about whether incremental loan and deposit growth is margin neutral or accretive.
A: Management said they expect to change how they participate in the state tax credit business over the next quarter or two and are working to remove the volatile fee item from the public income statement while continuing to be an active lender in that space. They said the effective tax rate should stay roughly the same, around 22%. On growth and margins, management said they expect end-of-year growth in the mid- to higher-single-digits and to settle in mid-single-digits in 2027, with origination skewing to lower-risk categories and deposit growth adequate to fund loan growth.
"I would say yes, the next quarter or two is a reasonable expectation for how we're working it." — Keene Turner (CFO)
Why growth might slow next year
Q (Andrew Liesch · StoneX Financial): He asked why loan growth might slow in 2027 versus this year given positive momentum and products with steady demand.
A: Management said their growth pattern includes a slower first quarter and pickup later in the year, so on a full-year basis they see a mid-single-digit run rate. They said they do not want to run the business 'too hot' and resolving NPAs and criticized credits will level growth, and to reach a 5%-6% growth rate they'd need roughly $900 million-$1 billion of net new production.
"That will require us, if we are going to grow in that 5%-6% range, we are going to have to be close to $900 million-$1 billion net in order to achieve that rate." — Jim Lally (CEO)
Hike impact, deposit beta, fees, NPAs
Q (Brian Martin · Brean Capital): He asked how much each rate hike would affect margin now, what deposit betas they model, how the $7 million non-core fee hit breaks down, timing for exiting certain California credits, and whether operating leverage will improve into 2027.
A: Management said each hike would impact margin by about $1 million-$2 million if betas come through and they model a 55% deposit beta but expect to perform better. They said the $7 million non-core hit was mostly a loss on ORE including $1.5 million on that item plus smaller miscellaneous items, and Doug said they expect to exit a $7 million real estate loan and a $5 million C&I credit likely in 4Q while Laguna monetization likely comes in Q1. On efficiency, they said they are focused on driving it below 60%, are working daily on costs and growth, and are methodical in making progress.
"It's mostly the loss on ORE, and then there's a couple miscellaneous line items." — Keene Turner (CFO)