Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net interest margin improved by 17 basis points to 3.77% in the first quarter.
- Growth in interest-bearing and non-interest-bearing checking account balances contributed positively.
- Loans held for investment increased by $18 million or 2% during the first quarter.
- The company's government-guaranteed loan origination platform originated $106.3 million in new loans during the first quarter.
- The conventional loan portfolio grew by $140 million or 26% over the past year, indicating strong asset quality metrics and yields.
Negative Points
- Reported a net loss of $335,000 for the quarter, driven by higher provision expense and write-downs on loan portfolios.
- Businesses are experiencing slowing demand due to sustained higher interest rates and rising inflation.
- Loan demand was lower than expected during the first quarter, contributing negatively to results.
- Non-interest income decreased significantly from $22.3 million in Q4 2024 to $8.8 million in Q1 2025.
- Non-performing assets to total assets increased to 1.94% as of March 31, 2025, up from 1.47% at the end of the previous quarter.
Q & A Highlights
Q: Can you provide more details on the net loss reported this quarter and the factors contributing to it?
A: Thomas Zernick, CEO, explained that the net loss of $335,000 was primarily due to higher provision expenses and write-downs on the loan portfolio measured at fair value. The challenging economic environment, including higher interest rates and inflation, has stressed cash flows for small businesses, leading to lower loan demand and higher loan loss rates.
Q: How did the net interest margin perform in the first quarter, and what factors contributed to its improvement?
A: Scott McKim, CFO, noted that the net interest margin improved by 17 basis points to 3.77% in the first quarter. This improvement was driven by growth in interest-bearing and non-interest-bearing checking account balances, while allowing some runoff in high-rate CDs and promotional money market balances.
Q: What steps are being taken to improve the credit quality of SBA 7A small loans?
A: Robin Oliver, President and COO, highlighted that the company has revised credit underwriting parameters and strengthened the analysis of bank statements to improve credit quality. Additionally, a new Chief Credit Officer and Director of Credit Administration have been added to enhance credit risk management and oversight.
Q: Can you elaborate on the strategic review being initiated by the leadership and board?
A: Thomas Zernick, CEO, mentioned that a comprehensive strategic review is being initiated to de-risk the balance sheet and position the company for long-term growth and enhanced shareholder value. This includes addressing challenges and leveraging opportunities for products and services.
Q: How is the company performing in terms of loan origination and sales of government-guaranteed loans?
A: Scott McKim, CFO, reported that the company originated $106.3 million in new loans during the first quarter, with $60.5 million being SBA 7A loans. However, the production totals fell below targeted expectations, impacting results negatively. The bank sold $72.5 million of government-guaranteed loan balances in the first quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
