Financial Data and Key Metrics Changes - For Q4 2018, the company reported a net income of $40.4 million, a 34% increase from $30.1 million in Q4 2017, marking the 40th consecutive quarter of record operating earnings [7][9] - The annual income for 2018 reached $152.3 million, a 33% increase over the previous year [9] - Earnings per share for Q4 2018 were $1.17, up 33% from $0.88 in Q4 2017, while the full-year EPS was $4.42, a 32% increase from $3.35 in 2017 [10] - Return on average assets (ROAA) was 1.9% for Q4 2018, up from 1.6% in Q4 2017 [11] - Return on average tangible common equity (ROATCE) was 16.46% for Q4 2018, compared to 12.57% in Q4 2017 [12] Business Line Data and Key Metrics Changes - The company experienced strong deposit growth of $602 million or 9.4% in Q4 2018, reaching $6.97 billion [24] - Average loans grew by 12% for the full year of 2018, with net growth of $580 million or 9% from December 31, 2017, to December 31, 2018 [21] - C&I lending grew 14% over the past year, while CRE lending grew by 7% [19] Market Data and Key Metrics Changes - The Washington area saw employment growth of over 60,000 jobs in 2018, significantly above the 10-year average of 42,000 [29] - The company holds $100 million in loans outstanding to government contractors, indicating potential exposure to the impacts of the government shutdown [58] Company Strategy and Development Direction - The company is strategically shifting its loan portfolio to increase the percentage of income-producing CRE and C&I loans [19] - The focus remains on maintaining a balance of yield, credit quality, and duration in the loan portfolio [20] - The company aims to normalize its net interest margin (NIM) in 2019, similar to past experiences with excess liquidity [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the local economy, citing strong employment growth and a robust market despite potential recession fears [49] - The impact of the government shutdown is expected to be minimal if resolved quickly, with proactive measures in place to support affected customers [30][59] - The company anticipates a slight improvement in NIM as excess liquidity is redeployed into higher-yielding loans [17][20] Other Important Information - The efficiency ratio for Q4 2018 was 36.09%, reflecting a focus on productivity and operating leverage [37] - The company added $152 million in capital during 2018, strengthening its capital position [39] Q&A Session Summary Question: Outlook for margin improvement and loan growth - Management expects high-single-digit loan growth to continue, with some normalization in construction loan payoffs [42][43] Question: Deposit costs and market expectations - Deposit costs are expected to stabilize, with a tapering of aggressive deposit marketing observed in the market [51] Question: Impact of government shutdown on FHA and SBA business - The FHA pipeline is good for 2019, but processing is currently delayed due to the shutdown [53] Question: Exposure to government contractors during shutdown - The company has $100 million in loans to government contractors and is proactively reaching out to ensure they have adequate support [58][59] Question: Operating expenses outlook for 2019 - Management anticipates mid-to-high-single-digit growth in operating expenses, focusing on expense control relative to revenue growth [72]