Operator: Good morning, ladies and gentlemen, and welcome to the Q3 2026 earnings conference call for CVB Financial Corp. and its subsidiary, Citizens Business Bank. My name is Cherie, and I am your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer period. Please note this call is being recorded. I would now like to turn the presentation over to your host for today's call, E. Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.
Allen Nicholson: Thank you, Cherie, and good morning, everyone. Thank you for joining us today to review our financial results for the Q3 2026. Joining me this morning is our Chief Executive Officer, Dave Brager, and our President, Clay Jones. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab. Speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended 31 December 2025, and in particular, the information set forth in Item 1A Risk Factors therein.
Allen Nicholson: For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call. I will now turn the call over to Dave Brager. Dave?
Dave Brager: Thank you, Allen. Good morning, everyone. For Q3 2026, we reported net earnings of $78.1 million, or $0.44 per share, representing our 198th consecutive quarter of profitability, which is every quarter for over 49 years. We previously declared a $0.20 per share dividend for Q3 2026, representing our 148th consecutive quarter of paying a cash dividend to our shareholders. Our net earnings of $78.1 million or $0.44 per share compared with $48.3 million for Q2 2026, or $0.29 per share, and $52.6 million or $0.38 per share for the prior year quarter. Pre-tax income in Q3 2026 was $106.1 million, compared to $65 million in Q2 2026.
Dave Brager: The third quarter was the first calendar quarter with the full benefit of the acquisition of Heritage Bank of Commerce as Q2 2026 reflected 74 days of combined operations with Heritage. The core banking systems of the two banks were integrated at the end of Q2, and we incurred $31.4 million in acquisition expenses during Q2, compared to $8.1 million for Q3. Now that we have completed a full quarter post-merger and systems conversion, I would like to highlight some key financial measurements we have achieved at this time by comparing Q3 2026 to the same quarter of 2025. We announced with the merger that we would generate EPS growth of 13% by 2027. For Q3, earnings per share grew by $0.06 or 16%.
Dave Brager: Upon announcement, we highlighted a return on average assets targeted to exceed 150 basis points by 2027. For Q3 2026, the reported return on average assets was 1.48%, but after adjusting for acquisition expense, it was 1.59%. We also achieved a 16.2% return on average tangible common equity in Q3 2026 which compares to the 17% target we announced in 2027. I will now turn the call over to Clay to discuss loans and deposits.
Clay Jones: Thank you, Dave. Total loans were $12.1 billion at 30 September 2026, an increase of $105 million from 30 June. Loan originations continued at a strong pace in Q3. However, originations decreased by 15% from Q2 2026, but were approximately 20% higher than Q1 of this year. Q3 loan origination yields were approximately 20 basis points higher than the prior quarter, with new loan origination yields approaching 6.25%. Rate competition for high-quality loans continues to be intense, and the recent rise in interest rates has resulted in some customers rethinking transactions or just utilizing internal cash funds. Our loan pipelines remain relatively strong, but demand is slowing down among our customers and prospects due to higher interest rates.
Clay Jones: Our average loan portfolio yield was 5.66% for Q3 2026, compared to 5.53% for Q2 2026 and 5.25% for Q3 2025. Excluding loan fees and discount accretion on acquired loans, our base loan yield increased from 5.37% at 30 June to 5.46% at 30 September. The overall line utilization rate at 30 September 2026 was 42%, compared to 41% at 30 June 2026. However, the C&I line utilization decreased quarter-over-quarter from 32% to 31%. Dairy and livestock line utilization increased from 53% at the end of the prior quarter to 66% at 30 September, which compares to 64% in Q2 of last year. We experienced $20,000 of net charge-offs during Q3, compared to $137,000 of net charge-offs during Q2 2026.
Clay Jones: Total non-performing assets increased from $16.8 million to $18.7 million at 30 September 2026, which represents 9 basis points of total assets. Classified loans were 94 basis points of total loans for $113.9 million at 30 September, compared to $109.7 million at 30 June 2026. The $4.2 million increase from 30 June 2026 was due to the addition of two classified CRE loans totaling approximately $5 million. Now on to deposits. Our total deposits and customer repurchase agreements as of 30 September were $16.3 billion, which compares to $16.9 billion on 30 June 2026. The $550 million decrease was the result of interest-bearing deposits and repos declining by $360 million and non-interest-bearing deposits decreasing by $190 million. Our non-interest-bearing deposits were 53.5% of total deposits on 30 September, compared to 52.8% on 30 June 2026.
Clay Jones: Total deposits and customer repurchase agreements increased on average by $578 million from Q2 2026, net of a $256 million decline in average time deposits, concentrated in the $240 million average decrease in brokered CDs. If Q2 is adjusted on a pro forma basis to include the deposits acquired from Heritage for the full 91 days in the quarter, total deposits and customer repurchase agreements would have decreased in Q3 by approximately $300 million, including the $240 million average decrease in brokered CDs. Non-interest-bearing deposits have been stable. On a pro forma basis, they would have increased by $100 million on average in Q3. However, we did experience some late quarter drawdowns on interest-bearing deposits that on a pro forma basis reflect an average decrease in customer interest-bearing deposits and repos of $170 million.
Clay Jones: Interest-bearing deposit levels have stabilized in October to date, while non-interest-bearing deposit levels have strengthened modestly. With the Fed increasing interest rates, we anticipate continued deposit pressure, which could impact our near-term level of interest-bearing deposits. Our cost of deposits and repos was 83 basis points for Q3 2026 compared to 86 basis points for Q2 2026 and 90 basis points for the year ago quarter. I will now turn the call over to Allen to further discuss balance sheet and net interest income.
Allen Nicholson: Thanks, Clay. Our total assets decreased from $21.2 billion at 30 June 2026 to $20.5 billion as of 30 September. Average earning assets for Q3 2026 were $18.5 billion, an increase over Q2 of $900 million. The growth in earning assets, combined with a 16 basis point expansion in our earning asset yield, drove a 9% or $18.5 million increase in interest income compared to Q2 2026. Our cost of funds was 0.96% for both Q3 and Q2 of this year. Interest expense for Q3 increased by $1.9 million from Q2 of this year as average interest-bearing deposits grew by $213 million and borrowings increased by $116 million related to the transition of our cash flow hedges from brokered CDs to FHLB advances during Q2.
Allen Nicholson: Our allowance for credit loss decreased from $126.7 million at 30 June 2026 to $125.6 million at 30 September, resulting from a $1 million recapture of credit losses. The ACL, as a percentage of loans, decreased from 1.05% at 30 June to 1.04% at 30 September. Our ACL is based on our economic forecast that is a blend of multiple forecasts produced by Moody's. We continue to have the largest individual scenario weighting on Moody's baseline forecast, with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at 30 September 2026 was generally consistent with our Q2 forecast. Real GDP growth is forecasted to stay below 2% through H1 2028. The unemployment rate is forecasted to reach 5% by the beginning of 2027 and remain above 5% through 2028.
Allen Nicholson: Commercial real estate prices are forecast to continue their decline through the end of 2027 before experiencing growth in 2028. Now turning to our capital position. At 30 September 2026, our shareholders' equity was $3.13 billion compared to $3.17 billion at 30 June 2026. The $39 million decrease in shareholder equity includes a $67 million decline in accumulated other comprehensive income resulting from rising interest rates at the end of Q3. We also repurchased 775,000 shares for approximately $17.5 million during Q3, compared to 241,000 shares repurchased in Q2 of this year. From 18 June through 19 October of this year, we repurchased 1.8 million shares for approximately $40 million at an average share price of $22.05. Our tangible book value per share at 30 September 2026 was $10.92 compared to $11.07 at 30 June 2026.
Allen Nicholson: The company's tangible common equity ratio was 9.9% at 30 September, compared to 9.8% at 30 June 2026. While our common equity Tier 1 capital ratio was 14.8% at 30 September, compared to 14.7% at 30 June 2026. I'll now turn the call back to Dave for further discussion of non-interest income and expense.
Dave Brager: Thank you, Allen. Non-interest income was $16.5 million in Q3 2026, compared to $17 million in Q2 of this year. The quarter-over-quarter decrease of $500,000 includes a $509,000 decrease in the fair value of a CRA bond investment fund, a $360,000 decrease in trust and investment fees, and losses on the sale of 2 OREO properties totaling $134,000. Partially offsetting these decreases in non-interest income were increases in deposit services of $226,000 and BOLI income of $580,000. Non-interest expense for Q3 2026 was $90.5 million, compared to $114.4 million for Q2. Acquisition expense related to the Heritage merger was $8.1 million in Q3, compared to $31.4 million in Q2 of this year.
Dave Brager: Core non-interest expense, which excludes acquisition expense and provision for unfunded commitments, increased from Q2 2026 by $3.6 million, as Q3 included 18 more calendar days of combined operations compared to Q2. Areas of expense growth included staff expense growing by $1 million and marketing and promotion expense increasing by approximately $600,000. After excluding acquisition expense and provision for unfunded commitments, our adjusted efficiency ratio is 42.1%, compared to 43.9% in Q2 2026 and 45.2% in Q3 2025. In conclusion, we continue to focus on increased opportunities for growth in the Bay Area while achieving the projected returns we outlined for this acquisition. This concludes today's presentation. We are now happy to take any questions that you might have.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Due to time restraints, we ask that you please limit yourself to 1 question and 1 follow-up. Please stand by while we compile the Q&A roster. Our first question will come from the line of Matthew Clark with Piper Sandler. Your line is open.
Matthew Clark: Good morning, guys.
Allen Nicholson: Good morning.
Matthew Clark: Just a couple questions embedded in one around the margin. Can you update us on the securities cash flows that you expect on a quarterly basis and kind of the roll off, roll on rates? Then as a follow-on to that, the deposit beta assumption you are making, assuming we get a couple more rate hikes here.
Allen Nicholson: Matthew, if you look at the investor presentation that is out on the website on page 33 on the investment portfolio, you will see the projected principal runoff and the coupons associated with that. So it is roughly $160 million a quarter, I would say. Those are running off in the 2% range. The overall portfolio is about 3%. We do not really announce any betas. Obviously, you know from a historical perspective, our beta is very low. So I do not know if I have any more comments for you on that.
Dave Brager: Yeah, the only thing I would say, Matthew, is with the last rate increase, we did not move any rates specifically and really have not had a lot of conversation with any of our relationships regarding increasing their rates outside of sort of a normal flow of those requests. So at least at this point, we are not planning to do anything, and we will see what happens with the Fed.
Matthew Clark: Okay. On expenses, how much in cost saves do you have left that might come out of the run rate? Just trying to get a good sense for the run rate going forward.
Matthew Clark: Okay. On expenses, how much in cost saves do you have left that might come out of the run rate? Just trying to get a good sense for the run rate going forward.
Allen Nicholson: So in Q4, there will still be some technology expenses that will go away by the end of the year. There is a few things on the people side that still have to transpire. But I think you will see a Q4 number that is pretty close to the run rate. So it will not be significantly different than Q3. We will have minimal acquisition expense. Staff expense came down throughout the quarter and will normalize by the end of the year.
Matthew Clark: Okay, thanks again.
Operator: One moment for our next question. That will come from the line of David Feaster with Raymond James. Your line is open.
David Feaster: Hey, good morning, everybody.
Allen Nicholson: Good morning, David.
Dave Brager: Good morning.
David Feaster: I wanted to start on the deposit side. Obviously, there are a lot of moving parts here. It sounds like this was more strategic actions, just with some brokered CD declines versus true client outflows. I was hoping you could maybe just touch on the deposit flows that you are seeing, what you are hearing from clients on pricing and money movement, and just how you think about defending deposit costs today versus retaining and growing deposit balances as rates rise and competition intensifies.
Dave Brager: Yeah. I will start and then let Clay jump in as well. I think there is a couple of things here. Number one, there are a lot of moving parts. I think your assessment is very accurate. As we continue to align the former Heritage relationships into the CVB deposit pricing structure, account setup structure, all of those things take a little bit of time. I think it is pretty typical when you look at the deals we have done in our history, and specifically those deals we have done over the last 10, 15 years. You see a little bit of this movement where things sort of settle out, and then we can really focus on growing again. I think we are almost there from that perspective. There was a lot of heavy lifting by the teams during Q2 and Q3, and we will continue to work on that.
Dave Brager: I think the other bigger thing that is happening, as Clay mentioned in the prepared remarks, what is happening right now is there are a lot of people that are deciding, "Hey, I am not going to pay a 7%-plus loan rate when I can utilize my cash." There has not been any significant deposit relationships that have left the bank. As a matter of fact, the largest deposit relationships as measured by the top 150 have grown slightly from Q2 to Q3. That gives me some comfort. I think as you look forward with where we are going to be, there is some seasonality that is going to start to hit probably in Q4 and Q1 like typical. I am very confident on where we are. Clay, anything you want to add?
Clay Jones: The only thing I would add, David, is we are now 90 days plus past the conversion weekend. We have done a lot of work to make sure that those customers and relationships have kind of put themselves in a good position from a costing standpoint. Yes, when interest rates do rise, it does bring attention to the interest-bearing account load and pricing on those, but it is really only a handful. We have true relationships with deep operating relationships, so we just do not feel the interest-bearing pressure that others might.
David Feaster: That is helpful. Then maybe I just want to follow up on your comments, Dave. We included. You talked about a focus on growth opportunities in the Bay Area, and I think the strength of that market is underappreciated broadly. First off, I am just curious what you are seeing in that market, how client reception has been thus far, like Clay you were talking about, we are 90 days in. Then just broadly, it sounds like we are seeing some pressure on loan demand. Pipelines are holding up. Obviously, some push and pull with rising rates as demand may be slowing, but payoffs and pay downs may slow. Just curious how you think about growth as we look forward.
Dave Brager: Yeah. I think there is a couple of things, and I would want Clay to jump in on this as well. We have seen a lot of synergies that were not modeled originally in this opportunity. Whether that is in international, the capacity to expand with existing customers that maybe had some lending limit challenges with the former Heritage.
Dave Brager: We are seeing a lot of opportunity in all of those areas. I do believe that the Bay Area market, especially with what is going on with technology, has really accelerated. I think that we are in a really good spot. We have the capacity. We have the product array. We have the ability to do more with the former Heritage customers than they could do with Heritage and bring all of that in-house. I think there is a lot of tailwinds for us there. We still need to build our brand.
Dave Brager: We still need to do the things and the hard work as far as getting our name out there. But we have done a really good job in that. I know Clay and the team that is up in those 16 offices are working hard. It always takes a little bit of time. I am very confident about our ability to compete in that market in a much bigger way than Heritage did independently. Clay, anything you want to add?
Clay Jones: The only thing I would add is just economically, the Bay Area has rebounded very nicely, and we continue to see good growth there. I would add to that just the process throughput of accelerating and moving the pipeline to conversion and onto the boarding and booking stage really went very seamlessly through the conversion process, and the team should be commended on just making sure they converted that existing very strong pipeline and continuing the pipeline. Economically very strong and continued momentum on the conversion.
David Feaster: Okay. That is great. Then maybe just touching on the credit side quickly as rates rise. You all are very good at aggressively managing credit and being proactive, and you have always had a good pulse. I am curious, what are you seeing on the credit front? Obviously, there is a slight increase in NPAs and a little bit of migration in classified. Broadly, I am just curious, as you look at your book, is there anything that you are watching closely? Are you seeing any pressure in certain areas? Just how is the health of your clients as you talk to those folks as rates are rising?
Dave Brager: Yeah. I will sort of answer that a couple of different ways. I think first and foremost, as evidenced by our ACL and the math that goes into calculating the ACL would demonstrate that overall the credit portfolio remains strong. We have, as you mentioned, a very proactive approach to solving these problems. It seems that for the majority of the time that I have been here, classifies move faster in these types of situations, but then the charge-offs never materialize from the classifies or the non-performing assets. So I feel very good about the credit quality. We underwrite correctly at the origination of these loans. It doesn't mean things won't happen. There could always be challenges in certain areas, and I would characterize those areas as smaller C&I, SBA 7(a), the more rate-sensitive stuff, and we pay a lot of attention to that.
Dave Brager: There is pros and cons sometimes when people look at the overall loan portfolio and say, "Oh, yeah, 77%, 78% of your loans are secured by real estate." We don't view that as a bad thing, especially when we originate loans that are below 50% loan-to-value at origination. That gives us a lot of cushion for some of these challenges, especially on rate resets if rates are going up and debt service coverage is challenged or whatever the case may be. So I feel pretty good about it. I think that as we look forward, we do annual term loan reviews on every loan over $1 million every year. We get updated information in the interim period, depending on the annual cycle.
Dave Brager: So there is a lot of portfolio management that goes on with our bankers and our credit management team to make sure that we are ahead of any of those problems. There is always movement and stuff, but all in all, I feel pretty good about it. I don't know, Clay, if you want to add anything to that.
Clay Jones: Yeah, no, it is well said. Based on our underwriting criteria and client selection on the front end, discipline, credit management, I mean, that is the hallmarks of how we run credit here.
Dave Brager: Yeah. David, just one more anecdotal thing. Clay and I have finished visiting all 79 locations. While we have been doing that, we have also been doing customer receptions throughout the bank. We do customer luncheons a couple times a month. Candidly, I would say the majority of people still think things are going to be better six months from now. Maybe that is just hope. All in all, people say they are doing pretty well. There are some that have been impacted more by rising prices, whether that is energy, whether that is other things. I think all in all, our customers on the street are still pretty positive.
David Feaster: That is terrific. Thanks, everybody.
Operator: Thank you. One moment for our next question. That will come from the line of Andrew Terrell with Stephens. Your line is open.
Andrew Terrell: Hey, good morning.
Dave Brager: Good morning, Andrew.
Andrew Terrell: Maybe just to start on the margin, not necessarily looking for a guide, but it seems like you were 389 this quarter, obviously a very strong quarter. It seems like there is a lot of tailwinds, especially given your commentary about the deposit costs and not much move so far, and then you have got a little more in floating rate assets now and a good repricing story overall. Just help us understand any headwinds we should be thinking about as it relates to the margin, either kind of going into Q4 as we work into next year.
Allen Nicholson: It is hard to see with where the interest rates are too much in the way of headwinds. We have a page 39 there that gives you a sense of the sort of embedded improvement in our net interest margin. We are still modestly asset sensitive, as that page would also show you. I would say the other thing to keep in mind as we get into 2027, we do have some wholesale funding that is maturing both cash flow hedges, putable FHLB advances, some sub-debt, and relatively that is much more costly than our deposits. So we will be looking at evaluating that and that could be an opportunity to further reduce cost of funds as we get into 2027.
Dave Brager: Yeah, Allen, the only thing I would add to that is we have been kind of talking about this story for a little while, and I think with the information that we have included in our deck, it does give a lot of information about the investment portfolio repricing and what is rolling off. It gives a lot of information on the loan resets or maturities and at what rates it is rolling off. And we are, as Allen mentioned, slightly asset sensitive. So I think there are a lot of tailwinds for us. The only thing that I could see as a headwind would be just depending on how many rate increases they are and how that impacts the overall deposit pricing and the demands that our customers might put on us from a pricing perspective. I think that is probably the major headwind.
Dave Brager: But assuming everything sort of stays around where it is, or even if there is one or two more rate hikes in the next 4 months or something, I think we are in a really good spot.
Andrew Terrell: Great. I appreciate it. Thanks for calling it out, but you guys are clearly outperforming the ROA expectation you set originally with the Heritage Commerce merger. Any interest in rehashing or refreshing that ROA target now that you are past 150?
Dave Brager: You mean lower or higher? I am just kidding.
Andrew Terrell: Which way do you want to go?
Dave Brager: No. I think, look, those numbers were obviously by the end of 2027, and we're exceeding that. So I think we're on a good trajectory as mentioned with the margin and other things, the net interest margin and other things. So I think we're in a good spot. We have internal goals that we look at and what we want to accomplish, and we always want to improve the financial performance of the bank. So you can draw whatever conclusion you want from that.
Andrew Terrell: Okay, great. Thanks for any other questions.
Operator: Thank you. Our next question will come from the line of Gary Tenner with D.A. Davidson. Your line is open.
Gary Tenner: Thanks. Good morning, guys.
Dave Brager: Morning.
Gary Tenner: I have a couple of questions. You talked about the Bay Area opportunities already from an organic perspective. Could you talk a little about your acquisition appetite now, 3-plus months from the Heritage deal? Again, it is early 2027, you are 6 months out. Just thoughts around the market and appetite.
Dave Brager: Yeah. Look, I think as you know, and I think everybody on this call knows, we do have a short list of banks that we would be interested in. We want to make sure we continue to integrate the former Heritage folks and the processes and the relationships and the culture maybe even more importantly. We will continue to do that as we go forward. If an opportunity presented itself, we could be ready to do that. It would have to be the right opportunity and at the right price. I think all of those things sort of lead to the window I believe we are in from a deal perspective, from the regulatory perspective, from how we are performing. It depends on the size of any opportunity. All of those things would go into any equation.
Dave Brager: We are open for business if one of those opportunities presented itself.
Gary Tenner: Thanks for that. I just want to make sure I am looking at this correctly in the slide deck. Looks like you have already repurchased as many shares roughly in the H1 of October as you did in all of the Q2, or excuse me, the Q3. Just kind of asking also follow up there in terms of the ongoing appetite given how much it looks like you have done in October.
Allen Nicholson: Gary, similar to what we were doing prior to the announcement of Heritage, we built our 10b5-1 repurchases to increase, I would say, in volume and aggressiveness over time. You can look at some of our graphs in there about how quickly our capital levels rebuild after we do an acquisition. If an opportunity comes around, as you were just talking about with Dave, we would put a stop to it likely. But if there's nothing in the near term on an acquisition, we'll continue to be slightly more aggressive as time goes on.
Gary Tenner: Perfect. Thank you.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star one. Our next question will come from the line of Tim Coffey with Brean Capital. Your line is open.
Tim Coffey: Thanks. Morning, everybody.
Dave Brager: Morning.
Tim Coffey: Dave, just kind of going to come back to the deposit questions a little bit. Are you seeing any movement of customer funds from the bank to the wealth management unit?
Dave Brager: That always happens to a degree. It has been pretty flat over the last, other than 2023 and early 2024, it has really been sort of just normal activity. The simple answer is no, there has not been a lot. There has been some. But really I think the deposit story is more about just getting everything in our pricing model and our structure model and working through that.
Dave Brager: Look, there are banks out there that are offering rates that they could probably borrow cheaper from the FHLB or the Fed overnight than they are paying in interest rates. Excuse me, I choked. But no, I just think we are going to be disciplined in how we look at that. For relationships, we will protect it. But outside of that, if it is hot money, we are not interested. So we will continue to evaluate that as we go along. Clay, anything?
Clay Jones: Yeah. No, as Dave said, we are seeking and banking true operating companies with deep relationships. As customers come to us seeking the ultimate in high yield deposit accounts, it is just not a great fit for us. We want to be deep into the relationship and make sure that we can add true value as a community business bank.
Dave Brager: Yeah. To your point, we will refer to trust initially, and if that is an option, then that has happened. So that has happened a little bit, but not in a material way.
Tim Coffey: Okay. I appreciate that. Understood. As we roll forward, your deposits are going to be a little more sensitive to tax payments and partnership distributions in the beginning part of next year. Do you see the loan deposit ratio going higher, and what is your comfort level on that ratio?
Allen Nicholson: Yeah, we agree, Tim. Certainly at the end of the year and into the Q1, we see usually seasonal lows around all those things, bonus payments as well. Obviously we see a spike in dairy. Technically, yes. At the end of the year, you definitely see an increase in the loan deposit ratio. That will be temporary. I think we've always operated for the most part at about 80% or between 80% and 75%. I think that's just the model we have, and I don't foresee us seeing a lot of changes to that.
Tim Coffey: Okay. Then follow on, what's kind of the interest in remixing the earning assets? You are carrying a bit more liquidity than you have historically.
Allen Nicholson: I think in terms of if you're getting at doing anything in terms of the bond portfolio, this strategy has been for some time, will continue to be. If there's opportunities where there's some one-off wins that no one counts for it, we may take the opportunity to take some losses and pare back some of the AFS portfolio that's low yielding. Besides that, the heavy lifting was done with the merger repositioning the bond portfolio from Heritage, as well as selling those mortgage pools and reinvesting in then higher yielding securities. Most of that's complete. There could be little opportunities here and there, though.
Tim Coffey: Yeah. What about loans as a percentage of earning assets? Because that has been higher historically than it is right now. Is there interest in taking that back to kind of the 70% range?
Allen Nicholson: Yeah. So a couple of things on that. We do need to maintain a little bit higher level of investment securities just because we have a significant amount of deposits that are collateralized by those securities. Absolutely, we would want to remix it and continue to increase the loans as a percentage of earning assets. That helps and is another tailwind to our net interest margin as well. That is somewhat dependent on loan demand and the cash flow from the investment portfolio and deposits and all those moving parts. But yes, generally speaking, we believe that we can continue to move that a little bit higher, especially if demand stays towards that.
Tim Coffey: Okay. I appreciate it. Those are my questions. Thank you.
Dave Brager: Thanks. Thanks, Tim.
Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Brager for any closing remarks.
Dave Brager: Great. Thank you, Cherie. Our Q3 results reflect solid financial performance, including increased profitability, net interest margin expansion, and disciplined expense management following the Heritage Bank of Commerce acquisition. The Q3 represented our 198th consecutive quarter of profitability, and we remain focused on the integration, serving our customers, supporting our communities and associates as we extend our relationship-focused banking model across California's major economic centers. We are grateful for the continued trust of our customers and the dedication of our associates. Thank you for joining us this quarter. We appreciate your interest and look forward to speaking with you in January of 2027 for our Q4 2026 earnings call. Have a great day.
Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
