Executive Summary

Q3 2025 results showed continued core improvement: adjusted EPS of $0.56 and GAAP EPS of $0.55, with net interest margin expanding 13 bps QoQ to 3.64% and efficiency ratio improving to 63.3% (from 72.7% in Q2) .
Versus S&P Global consensus, EPS was essentially in line/slightly above ($0.56 vs $0.552*) while revenue was modestly below ($63.9m vs $65.3m*, -2.1%); net revenue framing (NII after provision + noninterest income) explains the delta versus gross NII + fees . Values retrieved from S&P Global*.
Deposits grew $73m QoQ with a richer mix (noninterest demand +2.1%), funding costs declined (interest-bearing deposit cost 1.89%), and FHLB borrowings were reduced by $125m, all supporting the NIM uplift .
Credit remained solid despite a rise in nonaccruals tied to two construction loans expected to resolve without loss; ACL/loans increased to 1.13% while NCOs remained de minimis .
Strategic catalysts: pending acquisition of Olympic Bancorp (Kitsap Bank) tracking to close in Q1 2026 and a maintained $0.24 dividend support medium-term profitability and capital return narrative .

What Went Well and What Went Wrong

What Went Well
- Margin and earnings momentum: “Improving net interest margin and tight controls on non-interest expense growth continue to incrementally drive earnings higher,” with adjusted EPS +5.7% QoQ and adjusted ROA at 1.11% .
- Funding mix/price improved: cost of interest-bearing deposits fell 5 bps QoQ to 1.89%; deposits rose $73.1m with NIBs +2.1% QoQ; borrowings cut by $125m .
- Solid credit tone: management highlighted nonaccrual additions (two construction loans) are near completion with “no loss expected,” and criticized loans declined QoQ .
What Went Wrong
- Revenue miss vs consensus: SPGI “revenue” (NII after provision + noninterest income) was ~$1.37m below Street; security-loss noise from prior quarters still affects YoY comps framing . Values retrieved from S&P Global*.
- Nonaccruals up: nonaccrual loans rose to $17.6m (0.37% of loans) from $9.9m (0.21%); NPL/loans to 0.44% (from 0.39%) .
- Expense puts: professional fees included ~$0.63m merger costs and state revenue tax increases add ~$0.3m per quarter to expenses going forward per CFO .

Financial Results

Revenue/EPS/Margins vs prior periods and estimates

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue (SPGI “net revenue”) ($m)	$50.52	$55.54	$63.92 vs $65.29e (-2.1%)*
Net Interest Income ($m)	$52.96	$54.98	$57.37
Provision for Credit Losses ($m)	$2.44	$0.96	$1.78
Noninterest Income ($m)	$1.84	$1.52	$8.33
Diluted EPS (GAAP)	$0.33	$0.36	$0.55
Adjusted Diluted EPS	$0.45	$0.53	$0.56 vs $0.552e (inline)*
Net Interest Margin (%)	3.30	3.51	3.64
Efficiency Ratio (%)	71.7	72.7	63.3

Notes: SPGI “Revenue” presented as Net interest income after provision plus noninterest income (i.e., net revenue), aligning with SPGI “actual.” Values retrieved from S&P Global* for estimates.

Segment/Loan Mix (Balances, $m)

Category	Q2 2025	Q3 2025	QoQ $	QoQ %
Commercial & Industrial	$831.10	$819.08	-$12.02	-1.4%
Owner-occupied CRE	$1,014.89	$1,022.73	$7.84	0.8%
Non-owner occupied CRE	$1,939.75	$1,938.19	-$1.56	-0.1%
Residential RE	$383.93	$374.88	-$9.05	-2.4%
Residential Construction	$78.07	$90.44	$12.37	15.8%
Comm/Multifam Construction	$355.27	$351.20	-$4.07	-1.1%
Consumer	$171.85	$172.66	$0.81	0.5%
Total Loans	$4,774.86	$4,769.16	-$5.70	-0.1%

Key KPIs

KPI	Q3 2024	Q2 2025	Q3 2025
Cost of Interest-bearing Deposits (%)	2.02	1.94	1.89
Cost of Total Deposits (%)	1.42	1.40	1.37
Noninterest-bearing Deposits ($b)	$1.68	$1.58	$1.62
Loan-to-Deposit Ratio (%)	82.0	82.5	81.4
ROAA (%)	0.63	0.70	1.09
ROATCE (%)	7.62	7.85	11.86
ACL / Loans (%)	1.10	1.10	1.13
Nonaccrual / Loans (%)	0.09	0.21	0.37
NPL / Loans (%)	0.21	0.39	0.44
Liquidity Coverage of Uninsured Deposits (%)	—	100.4	100.6

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net interest margin trajectory	Near-term	Not quantified	Modest further improvement possible; help from deposit costs, loan yields flattish; September NIM 3.66% vs 3.64% for Q3	Directionally positive
Deposit costs	Near-term	Not quantified	Expect continued decreases, focus on ~$1bn exception-priced deposits (~3%) to work down over time	Lower
Organic loan growth	FY 2025 Q4	Prior commentary implied potential pickup	Now expect Q4 balances flat from continued larger payoffs; growth to resume in 2026	Lower for Q4; 2026 higher
Organic loan growth	FY 2026	Not previously quantified	Mid-to-high single digit outlook	Introduced
Expenses (core)	Near-term	~$41–42m run-rate (prior quarter)	Low $41m core plus ~$0.3m/qtr incremental state revenue tax; additional merger costs to continue	Slightly higher baseline
Capital actions	2025	Opportunistic	Repurchases paused for remainder of 2025; preserve capital ahead of merger	Lower buybacks
LDR target	Medium-term	Not specified	Target ~85% and comfortable modestly above	Introduced
Olympic Bancorp (Kitsap) close	Timing	Announced 9/25/25	Tracking to close in Q1 2026; integration planning on track	Timed

No formal numerical top-line or EPS guidance issued.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Net interest margin	Q1: NIM +8 bps to 3.44% QoQ; Q2: NIM +7 bps to 3.51%	NIM 3.64% (+13 bps); September 3.66%	Improving
Deposit costs/competition	Q1: cost of IBD down to 1.92% ; Q2: 1.94%, strong competition	IBD cost 1.89%; working down exception-priced deposits; competition varies by market	Improving mix; competitive
Loan growth/pipelines	Q1: commitments $201m; Q2: $268m; payoffs elevated	Commitments $341m; pipeline $511m; expect Q4 flat balances, 2026 mid-to-high single-digit growth	Building pipeline; balances flat near-term
Credit quality	Q1: stable classifieds 1.4% ; Q2: classifieds up to 2.1%; nonaccruals up to $9.9m	Nonaccruals $17.6m (two construction loans, no expected loss); criticized declined; NCOs minimal	Mixed: NPA up, losses low
Expenses	Q1–Q2: core ~41–41.4m	Core low $41m, +$0.3m/quarter from state revenue tax; merger costs ongoing	Slight upward pressure
Liquidity/capital	Q1–Q2: liquidity ~100%+ of uninsured; borrowings trending down	Liquidity 100.6% of uninsured; FHLB borrowings cut $125m QoQ	Strengthened
M&A (Olympic/Kitsap)	Announced 9/25/25	On schedule; closing targeted Q1 2026	On track

Management Commentary

“Improving net interest margin and tight controls on non-interest expense growth continue to incrementally drive earnings higher... Adjusted ROA improved to 1.11%” – Bryan McDonald, CEO .
“Spot rate on cost of deposits... interest-bearing 1.87%; total cost 1.35%. NIM for September was 3.66%” – Don Hinson, CFO .
“We halted loss trade activity in Q3… and did not purchase any securities” – CFO .
“Two loans totaling $6.7 million… townhome construction… nearly complete… no loss expected” – Chief Credit Officer .
“Average third quarter interest rate for new commercial loans was 6.67%… all new loans 6.71%” – CEO .
“Repurchases are paused for remainder of the year… unlikely to resume this calendar year” – CFO .
“State raised their revenue tax rate… impact about $300,000 per quarter” – CFO .
“Target [loan-to-deposit ratio] ~85% and be comfortable a bit higher” – Management .

Q&A Highlights

Margin outlook: Expect muted further NIM improvement as deposit costs decline with rate cuts; loan yields flattish near-term; fully-floating exposure tempers upside .
Deposit pricing: Focus on working down ~$1bn of exception-priced deposits (~3%) over time; new accounts often price above portfolio average given competition .
Loan growth: Q4 balances likely flat due to chunky payoffs; expect 2026 mid-to-high single-digit growth as payoffs normalize and net advances turn positive .
Expenses: Core expense baseline in low $41m per quarter plus ~$0.3m/qtr state revenue tax; merger costs to persist through close/integration .
Capital & buybacks: Preserving capital around the transaction; buybacks paused; stance post-close TBD .
M&A integration: Olympic/Kitsap on track for early Q1 2026 close; integration progressing as planned .

Estimates Context

Metric	Consensus*	Actual/Company	Surprise
EPS (Adjusted)	$0.552* (6 est.)	$0.56	+$0.008 (~+1.5%)*
Revenue (Net revenue)	$65.29m* (5 est.)	$63.92m	-$1.37m (~-2.1%)*

Notes: SPGI “Revenue” aligns to net interest income after provision plus noninterest income; company GAAP diluted EPS was $0.55, adjusted $0.56 . Values retrieved from S&P Global*.

Implications: Slight EPS beat/in-line with a modest revenue miss suggests better-than-modeled provision/fee mix and disciplined funding costs. Street models may adjust future quarters toward: slightly higher NIM trajectory, slightly lower provision path, and flattish late-2025 loan balances.

Key Takeaways for Investors

Core profitability inflects: NIM 3.64% (+34 bps YoY) and efficiency 63.3% underpin expanding returns (ROAA 1.09%, ROATCE 11.86%) .
Funding tailwinds: Deposit growth and mix, falling deposit costs, and $125m borrowing reduction support further (albeit muted) NIM gains near-term .
Credit stable despite higher NPAs: Nonaccrual uptick tied to two construction loans with no expected loss; NCOs remain very low; ACL/loans up to 1.13% .
Near-term balance sheet: Expect Q4 loans flat as payoffs persist; 2026 organic growth targeted mid-to-high single digits .
Expense run-rate watch: Core low-$41m/qtr plus ~$0.3m/qtr state tax increase; merger costs to continue through close/integration .
Strategic catalyst: Olympic/Kitsap deal on track for Q1 2026; expected to bolster profitability and balance sheet positioning in Puget Sound .
Trading lens: Modest margin upside, strong credit performance, and M&A visibility provide support; key sensitivities include deposit competition, pace of rate cuts, and construction loan exits .

Additional detail and source tables:

Consolidated results (Income Statement, NIM and yields):
Balance sheet, deposits/mix, borrowings, capital:
Credit metrics (ACL, nonaccrual, NPL ratios):
Dividend announcement: $0.24 per share (declared 10/22/25) .
Management quotes and Q&A references: .

S&P Global estimate data used in “Estimates Context” and revenue line items marked with an asterisk (*) are Values retrieved from S&P Global.

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