Financial Data and Key Metrics Changes - In Q3 2025, the company experienced a strong core deposit growth of 11.5% annualized, contributing to a steady net interest income growth [5][6] - Net interest income increased by $1.6 million during the quarter, with net interest margin expanding by 1 basis point to 2.63% [7][12] - Tangible book value per share increased by 20% annualized in Q3 and is up 14% annualized year to date [7] Business Line Data and Key Metrics Changes - Loan growth was strong at 6.6% annualized in Q3, with growth across multiple asset classes, including affordable housing [5][10] - Core deposits are now up 7.4% annualized year to date, indicating a solid deposit pipeline [19] - Loan origination activity decreased slightly in Q3 but is expected to pick up in Q4 due to a strong pipeline [22] Market Data and Key Metrics Changes - The company noted favorable trends in the Twin Cities market, which supports continued strong asset quality [11][30] - The cost of total deposits stabilized at 3.19%, with expectations for a decline in deposit costs in Q4 [16] Company Strategy and Development Direction - The company aims to grow to a $10 billion bank by 2030, with a focus on taking advantage of M&A disruptions in the Twin Cities [10][30] - A new retail and small business online banking platform was launched, enhancing client financial management [8] - The company plans to close one of the two branches acquired from First Minnetonka City Bank to improve efficiency [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about net interest margin expansion in the coming quarters, with a target of reaching a 3% margin by early 2027 [10][28] - The overall credit profile remains strong, with low non-performing assets and net charge-offs [25][28] Other Important Information - The company has successfully completed significant initiatives, including the systems conversion of the First Minnetonka City Bank acquisition [8] - Management transitions were announced, with key leadership changes planned for 2026 [9][10] Q&A Session Summary Question: Margin path towards 3% - Management expects a steady improvement of 2 to 3 basis points per month towards the 3% margin target, assuming two rate cuts in October and December [36][38] Question: Impact of rate cuts on borrowers - Management has not quantified the tangible benefits of rate cuts but is proactively addressing loans with repricing risk [39] Question: Merger costs and future expenses - Management clarified that merger costs were highlighted separately and expects expenses to normalize post-conversion [40][42] Question: Affordable housing growth comfort level - The company has a strong history in affordable housing and is comfortable growing this segment, focusing on top-tier borrowers [51][53] Question: Loan growth outlook and hiring impact - Management is optimistic about loan growth and is strategically hiring to align loan growth with deposit growth [60][62]

Financial Data and Key Metrics Changes - In Q3 2025, the company reported a strong core deposit growth of 11.5% annualized, contributing to a steady net interest income growth [6][7] - Net interest income increased by $1.6 million during the quarter, with a net interest margin expansion of one basis point to 2.63% [7][14] - Tangible book value per share increased by 20% annualized in Q3 and is up 14% annualized year to date [8] Business Line Data and Key Metrics Changes - Loan growth was strong at 6.6% annualized in Q3, with significant contributions from various asset classes, including affordable housing [7][23] - Core deposits are now up 7.4% annualized year to date, indicating a solid deposit pipeline [21] - The company experienced a decline in fee income in Q3 due to a lack of swap fee income, although it expects a rebound in Q4 [18] Market Data and Key Metrics Changes - The company noted favorable trends in the Twin Cities market, which supports continued strong asset quality [12][27] - Nonperforming assets remained low at 0.19% of total assets, and net charge-offs were just 0.03% of average loans [29] Company Strategy and Development Direction - The company aims to grow to a $10 billion bank by February 2030, with a focus on loan and deposit growth driven by M&A opportunities in the Twin Cities [12][36] - The successful launch of a new online banking platform and the completion of a systems conversion from an acquisition are seen as strategic initiatives to enhance customer experience and operational efficiency [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan and deposit growth, anticipating continued opportunities from M&A disruptions in the Twin Cities [12][36] - The company expects net interest margin expansion to reach 3% by early 2027, driven by loan yield repricing and declining deposit costs [33][34] Other Important Information - The company has elevated several internal leaders to key positions, ensuring continuity in its credit culture and strategic direction [11] - The overall credit profile remains strong, with a conservative reserve level of 1.34% compared to peers [29][32] Q&A Session Summary Question: Margin path towards 3% - Management indicated that margin improvement is expected to be steady, with a potential increase of two to three basis points per month, assuming rate cuts occur as anticipated [41][42] Question: Impact of rate cuts on borrowers - Management noted that while they do not have quantified data, they are proactively addressing loans with repricing risk, which should improve with further rate cuts [44] Question: Merger costs and expense normalization - Management clarified that merger-related costs were highlighted separately and that they expect expenses to normalize following the systems conversion [46][47] Question: Loan growth outlook and hiring impact - Management expressed confidence in loan growth, emphasizing a strategy to align loan growth with core deposit growth for profitability [65][66] Question: Securities yield trajectory - Management indicated that securities yields increased due to opportunities in the market and that they remain active in redeploying funds to support loan growth [72] Question: Specific reserves on loans - Management confirmed that specific reserves for certain loans remain unchanged, with no planned charge-offs at this time [75]