Oct 28, 2026 earnings call — Loan losses, cost cuts, and Q4 outlook
Recorded $46.3 million of third quarter net charge-offs and expect core non-interest expense of $75 million-$77 million in Q4.
Revenue $0.1B (est $0.1B) · EPS $0.06 (est $0.79)
Key quotes
"As Tim shared, this was a disappointing quarter for us, and we recognize the importance of addressing both the immediate issues and their underlying causes."
"We expect these organizational changes to reduce our operating expenses by approximately $4 million annually."
"This favorable deposit mix, combined with disciplined balance sheet management, contributed to a strong 4% net interest margin for the quarter."
Analyst Q&A 3
credit losses and margin impact
Q (Jeff Rulis · D.A. Davidson): He asked for the size and makeup of the credits (franchise vs healthcare), the resolution path, and whether net charge-offs are now behind them. He also asked about lost interest from loans placed on non-accrual, margin outlook (around 4%), and the impact of further rate hikes, plus where merger costs hit the P&L.
A: They said they addressed a principal balance of credits totaling about $65 million and took net charge-offs of about $47 million, leaving about $18 million on the books supported by collateral and personal guarantees. Management said the losses were driven mainly by two credits (one franchise, one healthcare), and Aldis said approximately 45% is healthcare and 45% is franchise. They expect normalized net charge-off levels going forward, exited September with a 4% margin they expect to hold for Q4, noted prior deposit beta was under 40%, and said merger costs hit mostly compensation and benefits.
"Related to your charge-off question on the credits that we addressed in the third quarter, we addressed a principal balance of credits totaling about $65 million, and we took net charge-offs on those credits of about $47 million." — Nicole Van Denabeele
expense savings and Palm Beach sale
Q (Kelly Motta · KBW): She asked whether the $4 million annual benefit is already included in the Q4 core expense guide. She also asked if a third-party review was done after the credit issues, the expected financial impact of the Palm Beach sale, and why fee guidance is lighter.
A: Aldis said the $4 million benefit is embedded in the Q4 expense guide and will show up mostly in benefits and salaries. They said no third-party review was done; internal teams (loan review, SAG, Chief Credit Officers) reviewed the portfolio and they have been churning the franchise book (about $150 million year-to-date). On Palm Beach, they said the transaction has minimal EPS impact and will remove about $2 million of operating expense on an annualized basis; Aldis said the fee outlook weakness is driven mainly by residential mortgage gain-on-sale pressure.
"It is, Kelly. That $4 million that I talked about in terms of the reorganization and how we go to market for business banking or small business is embedded." — Aldis Birkans
healthcare loan exits and credit review
Q (Matthew Clark · Piper Sandler): He asked how much they de-risked in the healthcare portfolio, whether the new Chief Credit Officer has reviewed and blessed the portfolio, the level of criticized/classified assets at September end, and the dollar impact of purchase accounting accretion and interest reversals.
A: Aldis said they exited a similar dollar amount in healthcare — $150 million — and the healthcare portfolio is down $100 million year-to-date. Tim said they hired a new Chief Credit Officer over the last year and a half who has been deeply engaged in detailed reviews, and they removed several senior credit officers. Nicole said criticized assets at the end of September were 3.4% and classified were 1.38%, and they do not provide a historical dollar split of accretion versus interest reversals because it has not been material.
"Criticized assets at end of September were 3.4%, so a slight uptick, but classified, I will say, were flat to prior quarter at 1.38%." — Nicole Van Denabeele