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01/11 09:52
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong financial performance with a 110% YoY EPS increase, deposit growth, and improved loan quality. The Q&A reveals management's confidence in handling credit cycles and potential benefits from rate cuts. Despite slight expense overruns, the company's robust capital position and potential stock repurchases signal a positive outlook. Guidance suggests continued growth, and the market may react positively, especially given the improved NIM projections and capital ratios.
Core pretax pre-provision income $54.4 million for the third quarter of 2025 compared to $49.4 million in the second quarter of '25 and $29.8 million a year ago. The increase is attributed to the company's significant upward trajectory in core earnings power.
Core deposits Up $1 billion on a year-over-year basis. The increase is due to the deposit teams hired since 2023, which have grown their deposit portfolios to approximately $2.6 billion.
Cost of total deposits 2.09% in the third quarter, unchanged versus the second quarter. The stability is due to a strong focus on cost of funds.
Net Interest Margin (NIM) Increased for the sixth consecutive quarter, surpassing the 3% mark. The increase is driven by the Fed rate cut in September, which allowed for a meaningful reduction in deposit costs while maintaining loan yields.
Business loans Grew over $160 million in the third quarter compared to $110 million in the second quarter. On a year-over-year basis, business loan growth was in excess of $400 million. The growth is attributed to the company's execution of its plan to grow business loans and manage its CRE concentration ratio.
Loan originations Increased to $535 million in the third quarter. The weighted average rate on new originations and lines was approximately 6.95%. The increase is due to strong loan pipelines and new lines of credit.
Core EPS $0.61 per share for the third quarter, representing a 110% year-over-year increase. The increase reflects the company's enhanced earnings power.
Total deposits Up approximately $320 million at September 30 versus the prior quarter. The increase is due to strong inflows across the branch network and the Private and Commercial Bank.
Core cash operating expenses $61.9 million, marginally above prior guidance of $61.5 million for the third quarter. The variance is due to additional hires made in the third quarter.
Noninterest income $12.2 million, inclusive of a $1.5 million positive benefit tied to a fraud recovery. The increase is due to the fraud recovery benefit.
Credit loss provision $13.3 million for the quarter, with the allowance to loans increasing to 88 basis points. The increase is tied to charge-offs on loans in the owner-occupied and nonowner-occupied real estate segments.
Criticized loans Down approximately $30 million on a linked-quarter basis. The decrease reflects improved loan quality.
Loans 30 to 89 days past due Down approximately 33% on a linked-quarter basis. The decrease indicates improved loan performance.
Common equity Tier 1 ratio Grew to over 11.5%. The increase highlights the company's strong capital position.
Total capital ratio Grew to over 16%. The increase underscores the company's robust capital base.
Business Loan Growth: Business loans grew over $160 million in the third quarter compared to $110 million in the second quarter. Year-over-year growth exceeded $400 million.
Loan Originations: Loan originations, including new lines of credit, increased to $535 million with a weighted average rate of approximately 6.95%.
Branch Expansion: Opened a new branch in Manhattan and plans to open branches in Lakewood, New Jersey, and North Shore of Long Island in early 2026.
Core Deposits: Core deposits increased by $1 billion year-over-year, with deposit portfolios growing to approximately $2.6 billion.
Net Interest Margin (NIM): NIM increased for the sixth consecutive quarter, surpassing 3%, with further expansion expected in Q4 2025.
Loan Repricing Opportunity: Significant back book loan repricing opportunity in 2026 and 2027, with $1.35 billion of loans repricing in 2026 and $1.7 billion in 2027.
Recruitment of Talent: Hired a number of talented bankers in Q3 to support business loan growth and C&I business expansion.
Focus on C&I Business: Continued focus on building out C&I businesses amidst high market disruption.
Loan Loss Provisions: Increase in loan loss provisions tied to charge-offs on loans in the owner-occupied and nonowner-occupied real estate segments, indicating potential credit quality issues.
Non-Performing Assets (NPAs): Slight increase in NPAs, though still low, could signal emerging credit risks.
Criticized Loans: Despite a decline in criticized loans, their presence indicates ongoing credit risk concerns.
Deposit Costs: Pressure to maintain low deposit costs while managing loan yields, especially in a competitive rate environment.
Fraud Recovery: Non-recurring fraud recovery benefit in noninterest income, which will not repeat in future quarters, potentially impacting income stability.
Regulatory and Economic Uncertainty: Potential impact of government shutdown on SBA fees and broader economic uncertainties affecting operations.
Expense Management: Higher-than-expected operating expenses due to additional hires, which could pressure margins if not offset by revenue growth.
CRE and Multifamily Loan Attrition: Planned attrition in transactional CRE and multifamily loans could mask growth in other loan segments, impacting overall balance sheet growth.
Net Interest Margin (NIM) Expansion: The company expects more substantial NIM expansion in the fourth quarter of 2025 due to reduced deposit costs and maintained loan yields. A significant back book loan repricing opportunity is anticipated to drive NIM growth in 2026 and 2027, with projections of a 20 basis point increase in NIM by the end of 2026 and continued expansion in 2027.
Loan Portfolio Repricing: Approximately $1.35 billion of adjustable and fixed-rate loans at a weighted average rate of 4% are expected to reprice or mature in 2026, with another $1.7 billion at a weighted average rate of 4.25% in 2027. This repricing is expected to contribute to NIM expansion.
Business Loan Growth: The company plans to continue growing its business loan portfolio, with a strong pipeline of $1.2 billion in loans at weighted average rates between 6.50% and 6.75%. New hires and branch openings are expected to support this growth.
Branch Expansion: A new branch in Manhattan has recently opened, with additional branches planned for Lakewood, New Jersey, in Q1 2026, and North Shore of Long Island in early 2026.
Operating Expenses: Fourth quarter core cash operating expenses are expected to be around $63 million, with no significant additions to production staff until Q1 2026.
Noninterest Income: Noninterest income for Q4 2025 is projected to be around $10 million to $10.5 million, excluding one-time items like fraud recovery.
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The earnings call shows strong financial performance with a 110% YoY EPS increase, deposit growth, and improved loan quality. The Q&A reveals management's confidence in handling credit cycles and potential benefits from rate cuts. Despite slight expense overruns, the company's robust capital position and potential stock repurchases signal a positive outlook. Guidance suggests continued growth, and the market may react positively, especially given the improved NIM projections and capital ratios.
The earnings call summary presents a mixed outlook. Financial performance and capital ratios are strong, but guidance is unclear, especially for loan growth beyond 2026. While shareholder returns are deferred, the market expansion and new verticals show promise. The Q&A section reveals stable deposit costs and cautious optimism in new verticals, but no immediate catalysts. Overall, the lack of specific guidance and deferred shareholder returns balance out the positive aspects, leading to a neutral sentiment.
The earnings call summary shows mixed signals: strong financial metrics like EPS growth and capital ratios are offset by competitive pressures and risks in loan growth. The Q&A reveals management's cautious approach to deposit growth and margin improvement, with no share repurchase program announced. Despite the positive EPS and NIM increase, uncertainties in guidance and competitive pressures suggest a neutral impact on stock price, especially given the lack of market cap data to assess volatility.
The earnings call presents mixed signals. The financial performance shows improvement in NIM and EPS, but guidance is cautious with low single-digit growth. The Q&A reveals concerns about loan growth risks and recruitment challenges, and the absence of a share repurchase program. However, the strong capital ratios and improved profitability are positive. The cautious guidance and management's reluctance to commit to buybacks or more bullish loan yields indicate a balanced sentiment, leading to a neutral prediction for the stock price movement.
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