Financial Data and Key Metrics Changes - Third quarter net income totaled $10,100,000 or $0.59 per share, representing a 9% increase from the previous quarter and a 45% increase year-over-year [3][5] - Net interest margin increased by six basis points to 2.98% compared to the prior quarter, and has increased by 30 basis points over the last four quarters [4][6] - Net interest income rose for the fifth consecutive quarter, up $1,900,000 to $29,300,000, driven by higher interest income [6][11] Business Line Data and Key Metrics Changes - Loans held for investment grew by $68,000,000 or 8% on an annualized basis, with significant growth from the in-house mortgage origination business [4][6] - Third quarter loan originations totaled $188,000,000 at a blended yield of 6.7%, which is 67 basis points above the prior quarter's blended loan portfolio yield [4][8] - Nonperforming loans decreased by $11,300,000 or 20% to $44,500,000, indicating improved asset quality [9][10] Market Data and Key Metrics Changes - Total deposits increased by $178,000,000 to $3,400,000,000, with growth across all deposit categories [11] - The average loan portfolio yield expanded by nine basis points to 6.12% due to strong origination yields and repricing of loans [8] Company Strategy and Development Direction - The company is focused on addressing nonperforming loans while minimizing the impact on earnings and capital [4][10] - There is an ongoing effort to manage operating costs to be below 2% of average assets while maintaining loan growth [7][11] - The company is considering opportunities for share buybacks and refinancing of subordinated debt in the future [21][53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about core earnings growth and lower credit costs, viewing these as positive signs for the future [3][6] - The company remains vigilant in addressing remaining credit issues and is focused on improving asset quality [16][18] - Management indicated that competition for liquidity remains stiff, impacting the ability to reduce funding costs significantly [6][28] Other Important Information - The allowance for loan losses to total loans held for investment ratio stood at 1.36% as of September 30, which management believes appropriately addresses the risk in the loan portfolio [10] - The tangible book value per share increased to $25.89, reflecting a 12% annualized increase [11] Q&A Session Summary Question: What inning do you think you're in regarding credit resolution? - Management acknowledged that while progress has been made, there is still work to do and they are focused on resolving remaining credit issues [16][18] Question: How much is left in the current share repurchase authorization? - Approximately $4,000,000 remains in the current program, and management is considering future buyback opportunities [21][22] Question: What is the expected deposit beta with potential rate cuts? - Management indicated that deposit beta has slowed due to fierce competition for liquidity, and they expect to capitalize on maturing time deposits [25][28] Question: Was there any interest recovery during the third quarter? - Management confirmed that there were no significant anomalies in net interest income related to interest recovery during the quarter [38] Question: What rates were the FHLB advances maturing at? - The FHLB advances matured at a rate of approximately 3.40%, and were replaced with brokered deposits at rates closer to 4% [40][41]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported net investment income before taxes of $800,000, or 6¢ per share, an increase of 1% from the previous quarter, representing an annualized return on equity of 4.3%, up approximately 80 basis points sequentially [5] - Net assets decreased modestly to $76,000,000, down $2,100,000 from the prior quarter, with net asset value per share decreasing to $5.27 from $5.42 [5][12] - The weighted average yield of the portfolio was 10.6%, a slight decrease from 11% in the previous quarter [13] Business Line Data and Key Metrics Changes - The portfolio consisted of 43 borrowers, with approximately 79% in first lien debt and 21% in equity warrants and other positions [13] - The weighted average net leverage declined to approximately 4.8 times from 4.9 times, while the weighted average loan-to-value (LTV) remained stable at approximately 46% [6] Market Data and Key Metrics Changes - Market spreads remained relatively stable throughout the quarter, with disciplined pricing across the middle market [8] - The company experienced a pickup in origination activity, with $19,000,000 in originations this quarter, up from $5,000,000 in the previous quarter [6] Company Strategy and Development Direction - The company remains focused on maintaining net asset value stability, delivering sustainable net investment income, and selectively deploying capital into high-quality opportunities with attractive risk-adjusted returns [18] - The board authorized a share repurchase program of up to $5,000,000, expected to be in effect until 08/07/2026 [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about renewed momentum in the middle market, with expectations for increased activity in the second half of the year [7][18] - The company is focused on resolving legacy credit issues and repositioning the portfolio to support long-term performance [8] Other Important Information - The company declared a distribution of 12¢ per share and a supplemental distribution of 2¢ per share payable in cash on 10/09/2025 [16] - As of June 30, the company had approximately $17,300,000 in cash, with $14,400,000 being restricted cash [17] Q&A Session Summary Question: What was the spillover income for the quarter? - The CFO indicated that the spillover income was a significant reason for the distribution to shareholders being in excess of the change in assets from operations, with net income before taxes at 6¢ a share [22] Question: What is the strategy to improve returns given high leverage and low profitability? - Management noted that improving profitability involves absorbing expenses across a broader asset base as the private credit business grows, while maintaining a cautious approach to leverage [24][27] Question: Should we expect portfolio contraction in coming quarters to reduce leverage? - Management expects repayments to increase in the second half of the year, which could lead to a deleveraging event if decent assets are not found to replace them [28] Question: Has the company considered wrapping up the BDC and converting to cash to improve returns? - Management emphasized that their primary focus is on improving shareholder value and stabilizing the portfolio before considering such actions [31]