Financial Data and Key Metrics Changes - The company reported net earnings of $6.8 million, or $0.28 per share, compared to core income of $2 million and $0.08 per share in Q3 2024 [5] - Return on Assets (ROA) improved to 70 basis points, and Return on Tangible Common Equity (ROTCE) improved to 9.45% [5] - Core ROA adjusted for certain non-permanent items is closer to 90 basis points, aligning with the target of 1% ROA [6] - Net interest margin increased to 3.18%, up from 2.86% in the previous quarter and 2.97% year-over-year [21] Business Line Data and Key Metrics Changes - The mortgage division's production increased from $20 million per month to $100 million - $120 million per month over the past few years, with a 10% annual production increase in Q3 [11] - Mortgage warehouse average balances grew to $210 million, with ending balances at $327 million, and pretax earnings of $1.6 million [12] - Panacea's loan balances increased to $530 million, with deposits growing 50% year-over-year to $132 million [13] Market Data and Key Metrics Changes - Non-interest bearing checking accounts grew by 16% year-over-year, improving the deposit mix and reducing the cost of deposits by almost 20% [7] - Average earning assets increased by 10% annualized in Q3, positioning the company to replace earning assets sold a year ago [20] Company Strategy and Development Direction - The company is focused on increasing the proportion of non-interest bearing deposits to 20% of total deposits, currently at about 20% in the core bank [36] - The strategy emphasizes core funding through checking accounts rather than brokered CDs or institutional borrowings, aiming for sustainable growth and profitability [46] - The company is leveraging technology and customer service to enhance deposit growth and maintain competitive margins [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 1% ROA, citing strong operational leverage and a focus on core relationships [6][26] - The company anticipates continued growth in profitability with minimal operating expense increases, despite inflationary pressures [24] - Management noted that the current quarter's results reflect a positive trend, with expectations for further improvements in the coming quarters [26] Other Important Information - The company experienced limited impacts on net interest margin due to interest reversals on loans moving to non-accrual status [22] - The provision for the quarter was a small release, driven by growth in the loan portfolio and low core charge-off activity [23] Q&A Session Summary Question: Thoughts on overall loan growth for Q4 and 2026 - Management indicated potential runoff in mortgage warehouse but expects to sustain levels, with Panacea loans projected to reach $150 million in annual production [30][32] Question: Timing for reaching a 3.3% margin - Management expects to be closer to a 3.3% margin by the first quarter of next year, focusing on increasing non-interest bearing deposits [35][36] Question: Impact of interest rates on deposit costs - Management noted that competition is likely to use falling rates to drive margins, but the company's growth in checking accounts allows for competitive positioning [45] Question: Stickiness of digital customers - Management confirmed that digital customers are stickier than expected, with high retention rates and strong deposit relationships [47][51] Question: Resolution of asset quality issues - Management indicated that one loan could be resolved in the current quarter, while others may take longer, with expectations for improved debt coverage [56][57] Question: Future expense trends - Management anticipates continued improvement in expense management over the next few quarters [59]