Oct 22, 2026 earnings call — Bought agency mortgage securities; loan payoffs
Reported net income of $14 million and said operating net income was $16.5 million excluding a $3.5 million hedge accounting adjustment.
Revenue $0.1B (est $0.1B) · EPS $1.27 (est $1.39)
Key quotes
"During the quarter, we also took advantage of higher market yields, adding approximately $400 million of fixed-rate agency mortgage-backed securities and collateralized mortgage obligations."
"Elevated payoff activity in commercial real estate and multifamily loans led to a $59.3 million decline in net loans compared to June 30, 2026."
"The banking center consolidations and workforce reductions are expected to result in approximately $4.4 million to $4.8 million in non-interest expense savings beginning in the fourth quarter of 2026."
Analyst Q&A 2
Timing and margin impact of securities
Q (John Rodis · Brean Capital): He asked when the roughly $400 million securities were bought, what net spread they earned and whether the purchases had a full-quarter impact. He also asked if they plan to buy more, and how the accretion and hedging affect interest income and margin (including a possible 3.65%–3.70% range).
A: They bought some in July, more in August, and some in September, with the biggest chunk in August. Yield on the purchases was about 4.8% to 5% and initial borrowing costs at the Home Loan Bank were a little less than 3.90%, 3.95% then about 4.25% now, so the spread is roughly 100 basis points or less; they do not plan to buy more at this time. They recorded an initial $500,000 benefit to interest income plus another $279,000 of accretion this quarter and expect about roughly $170,000 a month of accretion income to recapture the $3.5 million one-time hit; margin should decrease modestly and a 3.65% to 3.70% range seems reasonable; loan growth is hard to predict and could improve if payoff activity slows; buybacks will continue in-and-out and management sees them as positive for shareholders.
"So we bought a little bit of it in July, more in August, and some more in September." — Rex Copeland (CFO)
Why loans are paid off and expense outlook
Q (Damon Del Monte · KBW): He asked whether their lending approach causes more payoffs than originations and if payoffs are concentrated in any region. He also asked if cost saves will lower expenses next quarter or if planned expense growth will offset them.
A: Payoffs usually happen because borrowers refinance on terms the bank would not accept (bigger loans, removed guarantees) or because projects finish and sponsors sell; this occurs across their footprint, not in any particular region. They expect lower expenses in the fourth quarter as most charges drop out (with a little cost remaining in October), though there could be small offsets, and one or two remaining Jack Henry system rollouts could add some additional expense.
"No, I mean, like usually when we see a payoff, Damon, it's coming on terms that are from the borrower's perspective, just, terms that we wouldn't be interested in." — Joseph Turner (CEO)