Oct 20, 2026 earnings call — Loan growth and Brooklyn building sale
Net income rose 25% from prior quarter to $12.6 million, driven by higher net interest income, loan growth, and a Brooklyn building sale.
Revenue $0.0B (est $0.0B) · EPS $0.74 (est $0.58)
Key quotes
"Loans held for investment increased $90 million or 11% annualized driven by steady origination volume and lower payoffs in loan sales."
"Credit quality continue to improve. Nonperforming assets declined 11% during the quarter, and over the past 2 years NPAs are down 36%, while criticized and classified loans are down 48%."
"Our net interest margin expanded 10 basis points to 3.6% for the third quarter and increased 18 basis points from the third quarter of 2025."
Analyst Q&A 6
rate hikes and originations
Q (Hub Group): He asked if recent rate hikes hurt borrower demand and if further hikes will reduce originations. He also asked where they are comfortable keeping the loan-to-deposit ratio.
A: Management said the rate hikes are a little headwind but many borrowers are commercial and understand the high rate environment, so competition from very low rates has eased. They expect payoffs to slow and be tempered in the current environment. They are managing the loan-to-deposit ratio around 100% and expect more loan sales in the fourth quarter.
"Certainly, little bit of headwind, but overall, I think many of our borrowers are now on commercial side particularly recognizes the high rate environment." — Johnny Lee (CEO)
loan sales, loan types, margin sensitivity
Q (Matthew Clark · Piper Sandler): He asked if gain on sale will step back to roughly $500 thousand run rate. He also asked what types of loans made up the $154 million new originations and how much of the portfolio resets with Fed moves and deposit beta sensitivity.
A: They said loan sales mix includes SBA sales, which can produce sizable premiums, and mortgage loan sale premiums remain thin but there is an opportunity to return to earlier sale levels. About 52% of loans are variable and roughly 2/3 of that variable group is eligible to reprice in the first year, which should make the balance sheet more asset sensitive over time. Deposit betas have been around 50% over the last year but may be higher in the near term as markets price in rate increases; margin could stay above 3% if loan yields rise and originations continue.
"I would share that about 2/3 of that population is eligible to reprice in the first year." — Lynn Hopkins (CFO)
interest recovery and credit trends
Q (Kelly Motta · KBW): She asked how much the interest recovery added to NIM this quarter. She also asked whether higher-for-longer rates are causing new credit headwinds in the portfolio.
A: They said the interest recapture was around $700 thousand from the payoff of a nonperforming loan. On credit, they said criticized and classified loans have continued to decrease, are monitored carefully, and are generally under control though they always manage credit risk.
"Kelly, it was around $700 thousand we were able to recapture some interest on the payoff of a nonperforming loan." — Lynn Hopkins (CFO)
pipeline and loan mix change
Q (Kelly Motta · KBW): She asked if any remaining problem loans share common causes and whether the loan pipeline or mix will change given the rate environment.
A: They said they have not identified common threads among the assets they are managing and that criticized and classified loans are decreasing and monitored. The Northern California loan production office is fully staffed and showing strong momentum; much of the growth from that office is expected to be commercial loans (C&I, CRE, construction), which should help shift the mix away from single-family residential.
"We see a great deal of momentum there, and much of the growth from there is going to be very much all commercial." — Johnny Lee (CEO)
expenses, deposit pricing, capital use
Q (Stephens): He asked about the near-term expense run rate and where they plan to invest. He also asked where new time deposit pricing is and whether they would consider a tender offer or other capital actions.
A: They expect noninterest expense to be around $19 million, call it plus or minus $100 thousand-$200 thousand, with investments including the Northern California LPO and data processing improvements that may show benefits in Q4 or more likely Q1 2027. On deposits, 12-month money is popular, 6 month money is priced probably just over 4%, and brokered 1-year money is up over 4.50, so they are competing well above 4% in that area. On capital use, they said buybacks have been consistent and they may rightsize sub debt, but they are not planning a tender offer at this time.
"So there is a lot of different things that add up to our expectations of being around $19 million, call it plus or minus, you know, $100 thousand-$200 thousand." — Lynn Hopkins (CFO)
large REO, securities, Bay Area LPO
Q (Raymond Private Wealth Management): He asked details on the large REO project: type, completion stage, timing and exit. He also asked if there are common themes in substandard loans, whether they will add to the securities portfolio, and for an update on the Bay Area LPO.
A: They said the REO was a 60% or so completed construction project in the Los Angeles area near a major sports venue; it is listed for sale above their carrying value and they expect an opportunity to exit it in the first half of next year. They reported no common threads among the criticized assets and said they actively manage the securities portfolio, keeping some commercial paper for flexibility and noting higher market yields are a consideration for adding securities. The San Francisco Bay Area loan production office is tracking positively and the team is contributing well.
"It is now listed for sale above the carrying value that we have on our books." — Lynn Hopkins (CFO)