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01/11 16:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong financial performance with increased deposits, reduced classified loans, and improved tangible book value. The Q&A indicates positive growth in the lending team and a strategic focus on expansion. Despite some concerns about credit score migration, the overall sentiment is positive due to stable net interest margins and a strong capital position. The company's proactive hiring strategy and strategic M&A criteria further support a positive outlook. Given these factors, a positive stock price movement is likely over the next two weeks.
Loans held for investment Decreased by $45.5 million to $3.05 billion in the third quarter compared to the linked quarter. The decline was primarily due to a decrease of $46.5 million in multifamily property loans, mainly from the payoff of 2 loans totaling $39.6 million.
Yield on loans 6.92% in the third quarter compared to 6.99% in the linked quarter. Excluding one-time gains, the yield was 6.84% in the third quarter, up from 6.76% in the second quarter, representing an increase of 8 basis points.
Indirect auto loan portfolio Totaled $239 million at the end of the third quarter, relatively unchanged from $241 million in the linked quarter. Declined by $57 million since the third quarter of 2023 when the portfolio was $296 million, due to tightened credit standards and competitors becoming more aggressive.
Net charge-offs for consumer autos Approximately $160,000 for the quarter compared to $350,000 in the linked quarter, showing improvement.
Noninterest income $11.2 million in the third quarter compared to $12.2 million in the linked quarter. The decrease was primarily due to a $1 million decline in mortgage banking revenues, mainly from a $769,000 quarter-over-quarter decline in the fair value adjustment of the mortgage servicing rights asset.
Diluted earnings per share $0.96 in the third quarter compared to $0.86 in the linked quarter. The increase was primarily due to a reduction in provision for credit losses and an increase in net interest income, partially offset by a decrease in MSR fair value adjustment.
Net interest income $43 million in the third quarter compared to $42.5 million in the linked quarter. Excluding one-time items, the net interest margin increased by 9 basis points to 3.99%.
Deposits Increased by $142.2 million to $3.88 billion at the end of the third quarter due to organic growth in both retail and commercial deposits. Noninterest-bearing deposits increased by $50.7 million, and the cost of deposits declined by 4 basis points to 210 basis points.
Classified loans Decreased by $21.1 million during the quarter, including the full collection of a $32 million multifamily property loan.
Provision for credit losses $500,000 in the third quarter compared to $2.5 million in the linked quarter. The decrease was largely attributable to a decrease in specific reserves, decreased loan balances, and improved credit quality.
Noninterest expense $33 million in the third quarter compared to $33.5 million in the linked quarter. The $519,000 decrease was largely due to a reduction in professional service expenses related to consulting on technology projects.
Tangible book value per share Increased to $28.14 as of September 30, 2025, compared to $26.70 as of June 30, 2025. The increase was driven by $13.7 million of net income after dividends paid and an increase in accumulated other comprehensive income of $9.1 million.
Expansion of lending team: The company plans to increase its lending team by up to 20% to accelerate loan growth. Lenders have already been added in Houston and Midland, with further recruitment ongoing in metropolitan markets like Dallas, Houston, and El Paso.
Market dislocation opportunities: The company is capitalizing on dislocation from recent acquisitions in Texas to expand its platform.
Loan portfolio management: Loans held for investment decreased by $45.5 million, primarily due to payoffs in multifamily property loans. The company expects loan paydowns to moderate in 2026.
Indirect auto loan portfolio: The portfolio totaled $239 million, with tightened credit standards and a focus on maintaining credit quality. 86% of borrowers have super prime or prime credit ratings.
Deposit growth: Deposits increased by $142.2 million to $3.88 billion, driven by organic growth in retail and commercial deposits.
Cost management: Noninterest expense decreased by $519,000 due to reduced professional service expenses related to technology projects.
M&A opportunities: The company is exploring acquisitions of banks in core markets that align with its conservative culture and criteria. Discussions with potential targets are ongoing.
Capital management: The company redeemed $50 million in subordinated debt and maintains a strong capital position with a common equity Tier 1 risk-based capital ratio of 14.41%.
Loan Paydowns and Payoffs: Higher-than-normal loan paydowns and payoffs have been a headwind to loan growth, impacting the bank's ability to expand its loan portfolio.
Interest Rate Environment: Loan yields are expected to moderate due to the FOMC's interest rate reduction, which could impact net interest margins and overall profitability.
Mortgage Banking Revenues: Persistently high mortgage rates and low housing supply have led to flat mortgage banking revenues, limiting growth in this segment.
Indirect Auto Loan Portfolio: Competitors are becoming more aggressive in the higher end of the credit spectrum, and the bank has tightened loan-to-value requirements to manage credit quality, which could limit growth in this portfolio.
Economic Uncertainty: While cautiously optimistic about economic growth in Texas markets, potential economic challenges could impact loan growth and overall financial performance.
Mergers and Acquisitions (M&A) Risks: The bank is exploring M&A opportunities but faces risks in identifying suitable targets that align with its conservative nature and culture, which could delay growth plans.
Noninterest Income: Noninterest income has been relatively flat, with a decline in mortgage banking revenues being a contributing factor, which could limit diversification of revenue streams.
Loan Growth: The company expects an acceleration in loan growth next year through increasing its lending team by up to 20%. Additionally, loan growth is projected to gradually accelerate to a mid- to high single-digit rate through 2026, supported by new hires and diminishing loan payoffs.
Mergers and Acquisitions (M&A): The company is exploring further acquisitions in its core markets, focusing on banks that align with its conservative nature and culture. However, M&A will only be pursued if it makes sense for the bank and its shareholders.
Capital Position: The company is well-capitalized, with a consolidated common equity Tier 1 risk-based capital ratio of 14.41% and a Tier 1 leverage ratio of 12.37% as of September 30, 2025. This strong capital position supports both growth initiatives and shareholder returns.
Economic Activity and Market Conditions: The company remains cautiously optimistic about economic growth across its Texas markets, which is expected to provide a tailwind to growth. It also anticipates a resilient economic environment to support its lending activities.
Deposit Growth and Cost Management: Deposits increased by $142.2 million in the third quarter, with a focus on organic growth in retail and commercial deposits. The company expects to continue managing deposit costs effectively as market rates decline.
Mortgage Banking Revenues: The company believes it is well-positioned for an eventual upturn in mortgage banking volumes as market interest rates are expected to decline further.
Quarterly Dividend: The Board of Directors authorized a $0.16 per share quarterly dividend, marking the 26th consecutive dividend.
Share Buyback Program: The company is keeping a share buyback program in place as part of its strategy to return income to shareholders.
The earnings call shows strong financial performance with increased deposits, reduced classified loans, and improved tangible book value. The Q&A indicates positive growth in the lending team and a strategic focus on expansion. Despite some concerns about credit score migration, the overall sentiment is positive due to stable net interest margins and a strong capital position. The company's proactive hiring strategy and strategic M&A criteria further support a positive outlook. Given these factors, a positive stock price movement is likely over the next two weeks.
The earnings call presents a mixed picture: while there are positives like increased net interest income, tangible book value, and noninterest-bearing deposits, there are concerns about deposit outflows, increased credit losses, and a conservative loan growth outlook. The Q&A highlights management's cautious optimism but also reveals challenges in loan growth and M&A. The sentiment is tempered by uncertainties in deposit costs and loan yields. Overall, the positives and negatives balance out, resulting in a neutral sentiment.
The earnings call presents a mixed picture: stable loan yields and deposit growth are positive, but declining non-interest income and EPS are concerning. The dividend increase and stock repurchase are positives, but the Q&A reveals uncertainties in deposit cost reductions and unclear management responses. The hiring strategy indicates cautious growth. Overall, the sentiment is neutral, as positives are offset by negatives, and the lack of market cap information limits precise prediction.
The earnings call presents a mixed picture: while there are positives like increased dividends and stock repurchases, as well as stable credit quality and deposit growth, there are also challenges such as decreased non-interest income, lower EPS, and economic uncertainties affecting loan growth and M&A activity. The Q&A highlighted some uncertainties, particularly regarding deposit costs and payoffs. Overall, the sentiment is neutral as positive shareholder returns and stable financial health are counterbalanced by economic and operational challenges.
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