Summary of Conference Call Company and Industry - The call pertains to Handelsbanken, a Swedish bank, and its operations within the banking industry in Sweden and Norway. Core Points and Arguments 1. **Interest-Free Deposits Requirement** The Swedish Riksbank will require Handelsbanken to maintain interest-free deposits amounting to SEK 8.4 billion starting October 31, 2025, as part of a new regulation aimed at restoring the Riksbank's equity and funding operations [2][3] 2. **Impact of Risk Weight Changes** The Norwegian Ministry of Finance's decision to raise the average risk weight floor for Norwegian mortgages from 20% to 25% will result in an additional SEK 7 billion in risk exposure for Handelsbanken by December 31, 2025 [2][3] 3. **Volume Development** There was a slight increase in Swedish mortgage volumes in October, while corporate lending growth remains subdued. Gradual volume increases are noted in the UK and the Netherlands, but remain muted in Norway [4] 4. **Net Interest Income (NII) Sensitivity** The bank does not provide specific guidance on NII due to various influencing factors such as funding and competition. Recent policy rate cuts in the UK, Sweden, and Norway may negatively impact transaction account deposit margins [4][5] 5. **Foreign Exchange (FX) Impact** The strengthening of the Swedish krona against other currencies is expected to create headwinds for sequential NII development [5][6] 6. **Fee and Commission Trends** Savings-related fees, which constitute about two-thirds of total commissions, are influenced by stock market performance. The daily average stock market indices have shown an increase in Q4 compared to Q3 [6] 7. **Cost Management** The strengthening of the Swedish krona is anticipated to result in slightly lower costs in foreign markets when converted to Swedish kronor [7] 8. **Capital Position** The CET1 ratio reported in Q3 was 18.2%, exceeding the SREP requirement by 350 basis points. The bank aims to return to the target range of 100 to 300 basis points above the SREP over time, but no specific timeline is provided [8][9] Other Important Content - The call was primarily a housekeeping exercise to remind analysts of previously communicated information and did not include new guidance or information [1] - The bank's management expressed a commitment to transparency regarding Oktogonen provisions, although no specific guidance was provided [8] - The call concluded with an invitation for further questions, indicating a willingness to engage with analysts post-call [12]

Financial Performance - Net income increased approximately 3%[19] - Pre-Provision, Pre-Tax Income decreased approximately 2%[19] - Net Interest Margin increased six basis points to 300%[19] - Net Interest Income decreased approximately 1%[19] - Non-Interest Income decreased approximately 8%[19] Balance Sheet & Loan Portfolio - Loans Held for Investment balance remained virtually unchanged while the yield increased four basis points at September 30, 2025[46] - Total Deposits balance decreased approximately 2% and the cost decreased two basis points at September 30, 2025[46] - Total Borrowings balance remained virtually unchanged while the cost decreased four basis points at September 30, 2025[46] - As of September 30, 2025, Single-Family loans accounted for 53%, Multi-Family loans 40%, and Commercial Real Estate loans 7% of the loan portfolio[49] Capital Management - Provident Bank purchased approximately 67000 shares of common stock in the first quarter of fiscal 2026[95]

Financial Data and Key Metrics Changes - Adjusted total revenues reached $43.5 million, an increase of 30% over the second quarter [5] - Net interest income increased over 8% compared to the linked quarter and was up 40% compared to the third quarter of 2023 [6] - Net interest margin on a fully tax-equivalent basis increased 8 basis points to 2.12% [6][14] - The company reported a net loss of $41.6 million, or $0.476 per diluted share, with an adjusted net loss of $12.5 million, or $1.43 per diluted share [13] Business Line Data and Key Metrics Changes - The gain on sale of SBA loans generated $10.6 million in revenue, rebounding strongly in the third quarter [10] - Commercial loan balances were up $115 million, or 3.2%, while total loan balances increased by $105 million, or 2.4% [8] - Total revenue from fintech initiatives was up 14% compared to the second quarter and up 130% from the third quarter of 2024 [12] Market Data and Key Metrics Changes - Total delinquencies were 35 basis points as of September 30, down from 62 basis points in the second quarter [7] - Non-performing loans totaled $53.3 million at the end of the third quarter, up $9.7 million from the linked quarter [19] - The allowance for credit losses increased to $59.9 million, up $13.4 million, or almost 30% from the second quarter [20] Company Strategy and Development Direction - The company executed strategic actions that had a near-term negative impact on earnings but strengthened its financial position for future growth [6] - The focus remains on enhancing net interest margin and achieving a 1% return on average assets [7] - The company is exploring fintech opportunities and leasing opportunities that yield higher returns compared to previous investments [75] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the credit outlook, indicating that delinquencies are trending down and the worst may be behind them [30][33] - The company anticipates loan balances to increase at an unannualized rate of 4% to 6% in the fourth quarter [23] - The macro environment remains uncertain, but customer activity is stabilizing, and lending teams are performing well [80] Other Important Information - The company completed the sale of $837 million of single-tenant lease financing loans, which had a net loss of $37.8 million [22] - The company has proactively secured SBA authorizations for loans in its pipeline prior to the government shutdown [10] Q&A Session Summary Question: What is the credit outlook? - Management indicated that delinquencies are decreasing, with only four delinquent accounts in the franchise finance portfolio [30] Question: How are you managing the government shutdown's impact? - The company secured authorizations for loans before the shutdown and can continue to fund loans where authorization exists [41] Question: Can you provide insights on the franchise finance portfolio? - An external audit showed no downgrades and two upgrades in the franchise finance portfolio, boosting confidence [46]

Financial Data and Key Metrics Changes - Commercial loan commitments increased to $808 million from $659 million year-over-year, but loan outstandings contracted by $41.1 million compared to a growth of $163.5 million in the prior year [2] - Deposits rose significantly by $635.5 million during the quarter, primarily due to a seasonal increase in public funds deposits of $473.2 million [2] - Reported net interest margin (NIM) for the quarter was 3.17%, slightly down from 3.20% in the previous quarter, while core NIM expanded by nine basis points to 3.33% [4] - Non-interest income increased by $1.8 million or 8.8% compared to the third quarter of 2024 [4] - Non-interest expense rose by $2.1 million or 4.4% compared to the third quarter of 2024, driven by compensation costs and other expenses [5] Business Line Data and Key Metrics Changes - The provision for credit losses recorded was $517,000, with an average ratio of 1.28% at September 30, consistent with June 30 [4] - Net charge-offs for the core NIM were $480,000, annualized at three basis points [4] Market Data and Key Metrics Changes - The company expects $75 million to $100 million of outflows of public funds per month in the fourth quarter, continuing into the first quarter [10] - Competition for deposits remains fierce, particularly in the certificate of deposit (CD) market, with a couple hundred million dollars of CDs maturing each quarter [22][24] Company Strategy and Development Direction - The company plans to maintain a flat loan growth compared to December 31, 2024, while expecting net interest income growth of 12 to 14% compared to 2024 [5] - The company is focused on internal initiatives for efficiency and digital improvements, with no immediate plans for significant M&A activity [32] Management's Comments on Operating Environment and Future Outlook - Management anticipates that the provision for credit losses will be event-driven, influenced by loan changes and economic-related assumptions [6] - The outlook for core NIM is expected to remain relatively flat, with strong new loan yields around 7% [12] - The company is cautious about the impact of potential Fed rate cuts, expecting minimal immediate effects on net interest income and NIM [25] Other Important Information - The company reported a non-interest expense of $100 million for 2024, with an expected growth of approximately 2 to 3% for 2025 [6] - The guidance for income taxes remains unchanged at 20 to 20.5% based on current statutory rates [6] Q&A Session Summary Question: What is the outlook for public funds commercial deposit inflows? - The company expects normal seasonal outflows of $75 million to $100 million per month in the fourth quarter, continuing into the first quarter [10] Question: Can you provide more details on the NIM outlook? - Core NIM is expected to be relatively flat, with new loan yields around 7% [12] Question: What is the status of the loan pipeline? - The loan pipeline is healthy, with expectations for some growth in the fourth quarter, contingent on prepayment activity [14] Question: How much of the loan book is floating rate? - Approximately one-third of the loan book remains floating rate [26] Question: What is the company's approach to capital deployment and buybacks? - The company plans to maintain buyback activity around $6 to $7 million per quarter, with flexibility based on earnings growth [29] Question: What is the company's appetite for M&A? - The appetite for M&A remains unchanged, with a focus on internal initiatives rather than pursuing acquisitions at this time [32]

Financial Performance - Net income decreased approximately 12%[17] - Pre-Provision, Pre-Tax Income decreased approximately 5%[17] - Net Interest Income decreased approximately 4%[17] - Non-Interest Income decreased approximately 3%[17] - Operating Expenses decreased approximately 3%[17] - Net Interest Margin decreased eight basis points to 2.94%[17] Balance Sheet & Asset Quality - Loans Held for Investment balance decreased approximately 1%[41] - Total Deposits balance decreased approximately 1%[41] - Total Borrowings balance decreased approximately 1%[41] - Non-Performing Assets to Total Assets Ratio was unchanged at 0.11%[60] Capital Management - The company purchased approximately 76,000 shares of common stock in the fourth quarter of fiscal 2025[90]

Financial Data and Key Metrics Changes - The company originated $27.9 million in loans held for investment, a 23% decrease from $36.4 million in the prior sequential quarter [5] - Loan principal payments and payoffs were $23 million, down 33% from $34.3 million in the previous quarter [5] - Non-performing assets decreased to $1.4 million from $2.5 million, indicating improved asset quality [6] - The allowance for credit losses to gross loans held for investment decreased from 66 basis points to 62 basis points [9] - Net interest margin increased by 11 basis points to 3.02% compared to 2.91% in the previous quarter [9] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately $5.4 million compared to the previous quarter, driven by an increase in single-family loans [6] - There were declines in multifamily, commercial real estate, construction, and commercial business loans [6] - The company has seen more consumer demand for single-family adjustable-rate mortgage products due to higher fixed-rate mortgage interest rates [6] Market Data and Key Metrics Changes - Economic uncertainty has increased due to current fiscal policy, impacting real estate investor activity [6] - The company noted a shift in consumer demand towards adjustable-rate mortgage products as fixed rates rise [6] Company Strategy and Development Direction - The company aims for disciplined growth of the loan portfolio, recognizing the shift to looser monetary policy [13] - The strategy includes maintaining cash dividends and utilizing stock buyback programs as a capital management tool [14] - The company is focused on improving operating efficiencies to lower operating expenses [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for net interest margin expansion in the upcoming quarter, albeit at a slower pace than the current quarter [11] - The company is monitoring commercial real estate loans, particularly those secured by office buildings, and remains confident in their performance [7] - Management acknowledged the challenges posed by higher mortgage rates and economic uncertainty but indicated a commitment to growth [6][13] Other Important Information - The company repurchased approximately 52,000 shares of common stock in the March quarter [14] - For the fiscal year to date, the company has distributed approximately $2.8 million in cash dividends and repurchased approximately $3.1 million worth of common stock [14] Q&A Session Summary Question: Inquiry about CD growth in the quarter - Management indicated that the growth was due to a remix of the liability profile and the opening of a government deposit desk, allowing for liquidity to pay down Federal Home Loan Bank advances [17] Question: Were new CDs at a better rate than wholesale market? - Management noted that the rates were similar to wholesale, and the strategy was adjusted due to lower short-term rates [18] Question: Thoughts on prepayment activity over the next twelve months? - Management stated that prepayment activity is difficult to predict, with lower prepayments observed in the March quarter due to mortgage rate volatility [28] Question: Capital allocation and potential buyback adjustments? - Management emphasized the importance of maintaining capital during uncertainty but indicated that if stock prices decline, they would consider repurchasing more shares [32][34] Question: Changes in loan competition behavior? - Management noted no significant changes in competition but acknowledged aggressive pricing in the multifamily loan market [35][36]

Financial Data and Key Metrics Changes - The company originated $27.9 million in loans held for investment, a 23% decrease from $36.4 million in the prior sequential quarter [6] - Loan principal payments and payoffs were $23 million, down 33% from $34.3 million in the previous quarter [6] - Non-performing assets decreased to $1.4 million from $2.5 million in the prior quarter [8] - The allowance for credit losses to gross loans held for investment decreased from 66 basis points to 62 basis points [10] - Net interest margin increased by 11 basis points to 3.02% compared to 2.91% in the previous quarter [10] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately $5.4 million compared to the previous quarter, with an increase in single-family loans [7] - There were declines in multifamily, commercial real estate, construction, and commercial business loans [7] - The company has seen more consumer demand for single-family adjustable-rate mortgage products due to higher fixed-rate mortgage interest rates [7] Market Data and Key Metrics Changes - Economic uncertainty has increased due to current fiscal policy, impacting real estate investor activity [7] - The company noted that the current credit quality remains strong, with only $199,000 of early-stage delinquencies reported [9] Company Strategy and Development Direction - The company aims for disciplined growth of the loan portfolio, recognizing a shift to looser monetary policy [14] - The strategy includes maintaining cash dividends and utilizing stock buyback programs as a responsible capital management tool [16] - The company is focused on improving operating efficiencies to lower operating expenses [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for net interest margin expansion in the upcoming quarter, albeit at a slower pace than the current quarter [12] - The company is monitoring the impact of mortgage rate volatility on prepayment activity, which has historically affected their loan portfolio [31] - Management indicated that they are prepared to adjust their lending strategy based on market conditions and competitive pricing [43] Other Important Information - The company repurchased approximately 52,000 shares of common stock in the March quarter [16] - For the fiscal year to date, the company has distributed approximately $2.8 million in cash dividends and repurchased approximately $3.1 million worth of common stock [16] Q&A Session Summary Question: Inquiry about CD growth in the quarter - Management explained that they remixed the liability profile and opened their government deposit desk, accumulating government deposits which provided liquidity to pay down Federal Home Loan Bank advances [19] Question: Were the new CDs at a better rate than wholesale market? - Management noted that the rates were similar to wholesale, and the strategy change was due to a decrease in short-term rates [20] Question: Thoughts on prepayment activity over the next twelve months? - Management indicated that prepayment activity is difficult to predict, but lower mortgage rates tend to increase activity [31] Question: Capital allocation and potential buyback adjustments? - Management stated that while having more capital is preferable during uncertainty, they have already set their capital plans for the fiscal year [37] Question: Changes in loan competition behavior? - Management noted that they have not seen significant changes in competition, although some aggressive pricing in multifamily loans has been observed [39]