Oct 22, 2026 earnings call — Kitsap conversion and loan, deposit growth
Total loans rose $133 million in Q3, with deposits up $148 million and NIM improving to 4.05%.
Revenue $0.1B (est $0.1B) · EPS $0.55 (est $0.51)
Key quotes
"The Kitsap Bank systems conversion was completed as planned in late September."
"For the quarter, our commercial teams closed $388 million in new loan commitments, up from $339 million last quarter, $166 million in the first quarter and $316 million closed in the third quarter of 2025."
"During the third quarter, we saw a meaningful increase in our level of nonaccrual loans, increasing by $16.6 million to just over $32 million at quarter end."
Analyst Q&A 6
FHLB borrowings and reinvestment plan
Q (Matthew Clark · Piper Sandler): He asked what they plan to do with FHLB borrowings that mature in Q4, the average rate of the securities cash flows, and the spot deposit rate plus expected deposit beta.
A: Donald said they plan to reinvest principal payments from the investment portfolio and use FHLB borrowings to offset the remainder, but could slow reinvestment if cash needs rise. He said the securities rolled off at rates in the low 4s and were re-invested in the low- to mid-5s, picking up about 100 basis points last quarter. He gave the spot interest-bearing deposit rate as 1.66% at quarter end and said a 20% beta is a reasonable estimate unless the Fed acts more aggressively.
"So unless things change a lot, we'll just use the FHLB borrowings to offset the remainder." — Donald Hinson (CFO)
New nonaccruals and provision breakdown
Q (Jeff Rulis · D.A. Davidson): He asked how much of the provision was due to new nonaccruals versus other credit items, the expected resolution timeline and loss content on those nonaccruals, and the expense outlook into 2027 including planned investments.
A: Donald said about $1 million of provision expense was due to new nonaccrual loans. Tony said the largest transportation nonaccrual is early in workout, with the company operating modestly and $11.8 million of exposure that includes just over $4.4 million in government guarantees, so they feel comfortable about limited loss potential; the quarter included one small $91,000 loss. Don said they are building the '27 budget, expect core expenses to rise (compensation, benefits, third-party costs), and detailed conversion costs of about $500,000 in Q4 and $1.5 million in each of Q1 and Q2 of 2027 to finish by mid-'27.
"For the provision expense, about $1 million was due to the new nonaccrual loans." — Donald Hinson (CFO)
Cost savings and loan growth outlook
Q (Andrew Terrell · Stephens): He asked whether they hit the announced 35% cost savings target and asked what gives them confidence in mid-single-digit loan growth given rate moves.
A: Donald said they hit the 35% cost savings target, though other investments have added some expense. Bryan said visibility is good for a couple quarters and the pipeline plus unfunded commitments support confidence for Q4 and Q1; he noted competition and higher rates have shelved some deals and payoffs were strong, but he still thinks mid-single-digit growth is reasonable for the near term.
"Yes, I would say we hit that target." — Donald Hinson (CFO)
What’s driving production and deposit trends
Q (David Feaster · Raymond James): He asked what is driving higher loan production (productivity, hires, new office) and asked for details on competitive behavior and how they defend and grow their low-cost core deposits.
A: Bryan said production is from multiple factors: a net 10 added bankers this year, strong calling activity, momentum in the new Spokane office, and progress after the Kitsap conversion. He said competition has become more aggressively priced as deal flow moderated. Don said new deposit relationships came in around a 2% average cost (interest-bearing 1.68%, money markets 2.11%, CDs 3.50%) and they focus on winning and defending operating relationships through service and technology rather than price.
"So for instance, interest-bearing was -- the average cost was 1.68%, money markets 2.11%, but CDs were 3.50%." — Donald Hinson (CFO)
Share buyback activity and limits
Q (Kelly Motta · KBW): She asked about the appetite and plans for the new buyback program.
A: Donald said they established a new buyback program but expect to be less active in Q4. He cited a rise in CRE concentration to about 308% at quarter end and said they will slow buybacks while watching market conditions and other capital priorities.
"I will say that we're probably going to be less active in Q4 than we have been." — Donald Hinson (CFO)
Online banking costs and loan repricing retention
Q (Timothy Coffey · Brean Capital): He asked whether the online banking investment expenses roll off after completion and what retention they expect when adjustable loans reprice in coming quarters.
A: Donald said the commercial online banking project would be complete when finished, though other projects could follow and the full capital budget is still being set. Bryan pointed to the adjustable-rate repricing schedule, noting those loans are repricing up into the 7s (7.25%, 7.35%) versus lower prior rates, and said some customers with liquidity may pay off loans but most will not, so they expect some payoffs on the margin.
"If you look at the adjustable rate loan repricing schedule on the left side of that, those rates repricing have moved up into the 7s, 7.25%, 7.35%, that sort of thing." — Bryan McDonald (CEO)