Financial Data and Key Metrics Changes - The company reported net earnings of $6.8 million and earnings per share of $0.28 for the third quarter, compared to core income of $2 million and $0.08 per share in the same quarter of 2024 [4] - Return on Assets (ROA) improved to 70 basis points, and Return on Tangible Common Equity (ROTCE) improved to 9.45% [4] - Core ROA adjusted for certain non-permanent items is closer to 90 basis points, aligning with the target of 1% ROA [5] - Net interest margin for the third quarter was 3.18%, up from 2.86% in the previous quarter and 2.97% in the same period last year [19] Business Line Data and Key Metrics Changes - The mortgage division's production increased from approximately $20 million per month to $100-$120 million per month, with pre-tax earnings of about $1.9 million for the quarter [10] - The Mortgage Warehouse division showed average balances of $210 million, ending balances of $327 million, and pre-tax earnings of about $1.6 million [11] - Panacea Financial Division's loan balances increased to $530 million, with deposits growing to $132 million, a 50% increase year-over-year [12] Market Data and Key Metrics Changes - Non-interest-bearing checking accounts grew by about 16% compared to a year ago, improving the deposit mix and reducing the cost of deposits by almost 20% [7] - Average earning assets increased by 10% annualized in the third quarter, positioning the company to replace earning assets sold a year ago [18] - Non-interest income was $12 million in the quarter, up from $10.6 million in the previous quarter, driven primarily by increased mortgage revenue [21] Company Strategy and Development Direction - The company is focused on increasing the proportion of non-interest-bearing deposits to around 20% of total deposits, which is currently about 20% in the core bank [34] - The strategy emphasizes core funding through checking accounts rather than relying on brokered CDs or institutional borrowings [42] - The company aims to maintain a competitive edge by driving checking account growth at rates better than 10% [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 1% ROA target, citing strong margins and a favorable deposit mix [5][23] - The company anticipates continued growth in profitability with minimal operating expense increases, despite inflationary pressures [22] - Management noted that the current quarter's results reflect a trend towards improved profitability, with fewer one-time items affecting core earnings [23] Other Important Information - The company has a pipeline of new opportunities in the Mortgage Warehouse division, with over $1 billion of uncommitted lines approved [11] - The company is actively managing credit quality, with a focus on resolving non-accrual loans and maintaining strong debt coverage ratios [15][50] Q&A Session Summary Question: Thoughts on overall loan growth for the fourth quarter and into 2026 - Management indicated potential runoff in the Mortgage Warehouse division but expressed confidence in sustaining levels and achieving 6-8% growth in the core bank [30][31] Question: Timing for reaching a 3.30% margin - Management expects to reach a 3.30% margin by the first quarter of next year, focusing on increasing non-interest-bearing deposits [32][34] Question: Impact of interest rates on deposit costs - Management noted that while competition may drive rates down, their growth in checking accounts allows for competitive positioning on deposit rates [41][42] Question: Evidence of customer stickiness in digital banking - Management confirmed that digital customers are stickier than expected, with over 90% having multiple accounts or referrals [43][44] Question: Resolution of asset quality issues - Management indicated that some loans may be resolved in the near term, potentially improving margins [49][50]

Financial Data and Key Metrics Changes - Year-to-date net income totaled $167.5 million, an increase of $31.9 million or 23.5% from the nine months ended February 2024 [6] - Earnings per share totaled $2.90, an increase of $0.59 or 25.5% during the same period [6] - Return on assets (ROA) was 1.22%, consistent with year-to-date performance [4] - Efficiency ratio was 55%, reflecting high performance [4] - Total revenues in Q3 showed meaningful growth with net interest income increasing by $700,000 and non-interest income increasing by $1.2 million [16] Business Line Data and Key Metrics Changes - Commercial loan growth for the quarter was $268 million, over 10% annualized, with year-to-date growth of $699 million, over 9% annualized [10] - Consumer segment contributed $21 million in loan growth for the quarter, driven by residential mortgage, HELOC, and private banking relationships [11] - Total loan portfolio yield increased to 6.4%, driven by loan originations and refinances at an average yield of 6.84% [19] Market Data and Key Metrics Changes - Total deposits increased by $96 million during the quarter, with non-maturity categories growing at nearly 5% annualized [11] - Maturity deposit balances decreased by $198 million year-to-date, while non-maturity deposit balances increased by $178 million [12] Company Strategy and Development Direction - The company announced the acquisition of First Savings Financial Group, adding approximately $2.4 billion in assets and expanding into Southern Indiana [4] - The strategy remains focused on commercial lending across Indiana, Michigan, and Ohio, with an emphasis on enhancing fee income through SBA loans and other products [9] - The company aims to build on the acquired deposit franchise to create a community bank model similar to previous successful acquisitions [4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth and increasing market share activities into the fourth quarter [10] - The company anticipates a mid-first quarter closing for the acquisition and a mid-second quarter integration [5] - Management noted that the Midwest economies continue to expand, contributing to positive business outlooks [10] Other Important Information - The tangible common equity ratio increased to 9.18%, providing meaningful capital flexibility [6] - The company repurchased 162,474 shares totaling $6.5 million during the quarter, with total share repurchases year-to-date reaching $36.5 million [23] Q&A Session Summary Question: Expense outlook for Q4 and 2026 - Management expects Q4 core expenses to be in line with Q3, with no meaningful increase anticipated [33][34] Question: Impact of potential rate cuts on margins - Management predicts a few basis points of margin compression if rate cuts occur, but they are actively managing deposit rates to mitigate this [35][36] Question: Deposit cost increase during the quarter - The increase was primarily due to competitive pressures requiring higher rates on specials [38] Question: Future M&A ambitions - Management indicated that while they are busy with the current acquisition, they are not prioritizing additional M&A at this time [51] Question: Sustainability of loan growth - Management believes the current loan growth is sustainable, driven by normal business activity and strong pipelines [59][62] Question: Capital generation and uses of excess capital - Management plans to continue using capital for asset generation, dividends, and share buybacks, while optimizing the balance sheet [106][108] Question: Asset quality and reserve levels - Management maintains a conservative approach to reserves, reflecting a higher coverage ratio compared to peers [109] Question: Progression of net interest income (NII) - Management is confident in the ability to grow NII dollars even with anticipated rate cuts, due to effective management of deposit costs [113]

Financial Data and Key Metrics Changes - First quarter net income declined to $2.3 million or $0.13 per share, primarily due to strategic actions taken to address non-performing assets [3] - Non-performing assets were reduced by 20% and net exposure to non-performing loans decreased by 32% to $51 million [3] - Net interest income before provisions increased for the third consecutive quarter to $26.2 million [8] - Net interest margin increased by 12 basis points to 2.88% due to a decline in the cost of interest-bearing deposits [6][10] Business Line Data and Key Metrics Changes - Loans held for investment grew by $90 million or 12% on an annualized basis, driven by growth in commercial, SBA, and SFR balances [5] - Total first quarter loan originations amounted to $201 million at a blended yield of 6.77% [6] - Non-interest income declined by $4.34 million to $2.3 million due to lower gains on the sale of loans [10] Market Data and Key Metrics Changes - Total deposits increased at an 8% annualized rate to $3.14 billion, with growth in money market accounts and CDs offsetting a decline in non-interest bearing accounts [13] - The loan portfolio yield remained stable at 6.03% [12] Company Strategy and Development Direction - The company is focusing on resolving non-performing loans quickly while minimizing the impact on earnings and capital [3] - There is an ongoing effort to reduce reliance on wholesale funding, with a successful CD campaign in the first quarter [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in resolving remaining non-performing assets and expects to report additional progress in upcoming quarters [4] - The company anticipates continued loan growth, albeit at a more moderate pace than the first quarter [6] - Management believes that by the second half of 2025, there could be a target for reducing non-performing loans to a normal baseline [54] Other Important Information - The company’s tangible book value per share increased to $24.63 [13] - Capital ratios remain strong, with all capital ratios above regulatory well-capitalized levels [14] Q&A Session Summary Question: Thoughts on potential share repurchase - Management recognizes that a buyback is one of the best uses of excess capital and is working to put a buyback in place [19] Question: Dynamics within the margin and FHLB advances - The FHLB advances are fully priced into the March net interest margin, and the net interest margin is slightly below the quarter's average [21] Question: Margin drag from non-accrual loans - There is a drag on net interest margin from non-accrual loans, with $20 million potentially returning to accrual status [24] Question: Appetite for more problem loan sales - Management is open to sales but believes they are well reserved for future write-offs [29] Question: Exposure to tariff impacts - Management has reached out to top customers and does not observe any potential financial impact from tariffs at this time [34] Question: Loan growth expectations and deposit trends - Management expects to fund loan growth organically and noted some migration into higher-yielding products [46] Question: Non-interest expenses outlook - Management estimates operating expenses to be around $17.5 million to $18 million, with some moderation expected [66]