Core Insights - The company reported a strong financial performance for the third quarter of 2025, with significant growth in loans and core deposits, resulting in a net income of $16.3 million and earnings per share of $0.77 [4] - The total assets increased by $228.3 million, primarily driven by loan growth in the commercial real estate portfolio, which grew by $77.7 million [2] - The company maintains a low volume of nonperforming loans, which decreased by $149,000 during the quarter, reflecting strong credit quality [1][3] Financial Performance - The net interest margin expanded by 3 basis points to 3.56%, while the cost of total deposits declined by 2 basis points to 2.44% [3] - Total deposits increased by approximately $208.8 million or 21% on an annualized basis, with non-wholesale deposits growing by $359 million or 11% [3] - Noninterest income rose to $2 million from $1.8 million, mainly due to an increase in swap referral fees [6] Deposit Growth - The company experienced substantial growth in interest-bearing deposits, contributing $171.6 million to overall growth, while non-interest-bearing deposits added $28.8 million [1] - Approximately 60% of deposit relationships exceed $5 million, indicating a stable funding base for future growth [1][5] - The average age of deposits is 8 years, suggesting a stable deposit portfolio [5] Loan Growth and Quality - Loans held for investment grew by $129.2 million or 14% on an annualized basis, with a strong loan pipeline remaining in place [3] - The credit quality of loans is maintained through conservative underwriting practices and robust monitoring [2] - Nonperforming loans represent only 5 basis points of total loans held for investment, indicating strong asset quality [3] Strategic Initiatives - The company opened a new full-service office in Walnut Creek, enhancing its presence in the San Francisco Bay Area, which now has 36 employees and $548.9 million in deposits [7] - Continued investment in technology and operational efficiencies is expected to benefit customers and shareholders [9] - The company is focused on organic growth and maintaining a strong relationship-based service model [8][9] Future Outlook - The company anticipates deposit growth of 1% to 2% in the fourth quarter, with a focus on optimizing the funding base [12] - There is potential for continued margin expansion in a down rate environment, with expectations of 1 to 3 basis points improvement in the fourth quarter [22] - The loan-to-deposit ratio is targeted at 95%, with flexibility to adjust based on market conditions [27]

Financial Data and Key Metrics Changes - The company reported a net income of $16.3 million for Q3 2025, with earnings per share of $0.77, a return on average assets of 1.44%, and a return on average equity of 15.35% [4] - The net interest margin expanded by three basis points to 3.56%, while the cost of total deposits declined by two basis points to 2.44% [4][5] - The efficiency ratio was reported at 40.13% for the third quarter [4] Business Line Data and Key Metrics Changes - Loans held for investment grew by $129.2 million, or 14% on an annualized basis, while total deposits increased by approximately $208.8 million, or 21% on an annualized basis [5] - Non-wholesale deposits increased by $359 million, or 11%, while wholesale deposits decreased by $150.2 million, or 23% [5] - Non-performing loans represented only five basis points of total loans held for investment, indicating strong asset quality [5][6] Market Data and Key Metrics Changes - Total assets increased by $228.3 million, primarily driven by loan growth within the commercial real estate portfolio, which grew by $77.7 million [6] - Non-interest-bearing deposits remained consistent at 26% of total deposits as of September 30, 2025, with approximately 60% of deposit relationships totaling more than $5 million [7] Company Strategy and Development Direction - The company is focused on organic growth and maintaining a differentiated client experience, with a commitment to community partners throughout Northern California [4] - The opening of a new full-service office in Walnut Creek is part of the company's strategy to expand its presence in the San Francisco Bay Area [9] - The company aims to eliminate brokered deposits over the long term while continuing to grow core deposits [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to adapt to changing economic conditions while focusing on long-term strategy execution [10] - The company anticipates deposit growth in the fourth quarter to be between 1% to 2% on an absolute basis, acknowledging that replicating the strong growth seen in Q3 may be challenging [15][16] - Management highlighted the importance of maintaining a stable funding base through a strong deposit portfolio [7] Other Important Information - The company declared a cash dividend of $0.20 per share, expected to be paid in November [5] - A provision for credit losses of $2.5 million was recorded during the quarter, primarily due to loan growth [6] Q&A Session Summary Question: Core deposit growth and optimization - Management noted exceptional core deposit growth in Q3, driven by new clients across all platforms, but anticipates more modest growth of 1% to 2% in Q4 due to efforts to eliminate brokered deposits [15][16] Question: Loan payoffs and paydowns - Management explained that payoffs and paydowns are influenced by the business model, particularly in MHC and RV park lending, and expect this trend to continue [21][22] Question: Growth opportunities and team expansion - Management highlighted growth in the ag team and other segments like MHC and RV business, with a strong loan pipeline in the Bay Area [25][28] Question: Net interest margin outlook - Management expressed optimism about margin expansion in a down rate environment, estimating a potential increase of one to three basis points in Q4 [34][39] Question: M&A landscape - Management indicated a preference for organic growth but remains open to opportunistic M&A if a compelling opportunity arises [68][70]