Financial Data and Key Metrics Changes - The company reported net income of $4.9 million for Q3 2025, a 19% increase from $4.1 million in the prior quarter and a 42% increase year over year [16] - Diluted earnings per share rose to $0.34, up from $0.29 in the previous quarter and $0.25 in the same quarter last year [16] - Total end-of-period assets reached nearly $900 million for the first time in the company's history, reflecting robust balance sheet expansion [18] Business Line Data and Key Metrics Changes - Loan originations totaled $1.8 billion, a 21% increase quarter over quarter and a 24% increase year over year [8] - Credit-enhanced balances reached $41 million at the end of Q3 2025, with projections of approximately $115 million by the end of Q4 2025 [9][10] - Quarterly SBA 7(a) loan originations declined 7.8% quarter over quarter but increased 68% year over year [10] Market Data and Key Metrics Changes - Average loan balances totaled $683 million for the quarter, compared to $634 million in the prior quarter [18] - Average interest-bearing deposits increased to $524 million from $494 million in the prior quarter [18] - Net interest margin increased to 9.01% compared to 7.81% in the prior quarter [19] Company Strategy and Development Direction - The company is focused on disciplined growth and operational excellence as key drivers of sustained progress and meaningful returns for shareholders [7] - Strategic partnerships with DreamFi and Tally Technologies are expected to enhance product offerings and support growth in credit-enhanced portfolios [4][5] - The company is evaluating a measured increase in higher-yielding loans while maintaining internal limits established in 2018 [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum across the business, despite potential macroeconomic shifts [8] - The recent federal government shutdown may impact SBA lending operations, particularly loan approvals and closings [10][11] - The company anticipates a gradual moderation in non-performing loan (NPL) migration, with expectations of approximately $10 to $12 million in watchlist loans migrating to NPL in Q4 [15] Other Important Information - The total provision for credit losses was $12.8 million in Q3, compared to $4.7 million in the prior quarter [12] - Non-interest income for the quarter was $18.1 million, driven by a substantial increase in strategic program fees and higher gains on loan sales [22] - The efficiency ratio improved to 47.6% from 59.5% in the prior quarter, reflecting strong revenue growth and disciplined expense management [23] Q&A Session Summary Question: Can you discuss the level of concentration you're comfortable with for credit-enhanced loans in your portfolio? - The concentration policies limit each program to about 15% of the portfolio [26] Question: Can you elaborate on the net reductions in FTEs in compliance and risk functions? - The reduction is due to disciplined management rather than automation; the company is analyzing potential efficiency impacts from AI [28] Question: What is the difference between credit enhancement program expenses and credit enhancement guaranteed expenses? - Credit enhancement expenses refer to guarantees, while servicing costs related to those loans are included but not specified [29] Question: Can you quantify the impact of accrued interest reversals in the quarter? - The accrued interest reversal was about $175,000 this quarter compared to $514,000 last quarter [31] Question: Should we expect the entirety of loan growth to come from credit-enhanced products? - Growth will primarily come from credit-enhanced products, but there will also be growth in other areas like SBA and equipment leasing [33] Question: What could cause deviations from the established baseline for credit-enhanced growth in 2026? - Positive deviations could come from improved performance in existing programs, while negative deviations could arise from material weaknesses in performance [36] Question: Can you break apart the decision on credit-enhanced and non-guaranteed loans? - The company has both credit enhancement programs and full risk retention programs, with the latter capturing all yield and credit risk [44] Question: How much margin decrease is expected in Q4? - The margin could fluctuate due to the new partnership with Tally Technologies, which has a different revenue structure [49]