Financial Data and Key Metrics Changes - The fourth quarter of 2025 saw an 8% year-over-year improvement in EPS, a 6% growth in PP&R, and a 12% increase in tangible book value per share [5] - Fourth quarter earnings were $126 million, or $1.49 per share, compared to $127 million, or $1.49 per share in the third quarter [10] - The efficiency ratio improved to 54.9% for the quarter, down from 55.4% in 2024 [10][11] Business Line Data and Key Metrics Changes - Loans grew by $362 million, or 6% annualized, with strong production offsetting an increase in prepayments [7] - Fee income totaled $107 million in the fourth quarter, with growth across all categories driven by higher specialty income [11] - Retail time deposits decreased by $90 million due to maturities, while DDA balances increased by $70 million [8] Market Data and Key Metrics Changes - Deposits increased by $620 million, or 9% annualized, largely due to seasonal activity in public fund DBA and interest-bearing accounts [7] - Interest-bearing transaction balances rose by $223 million, driven by competitive products and pricing [8] - The cost of deposits decreased by 7 basis points to 1.57% for the quarter [12] Company Strategy and Development Direction - The company plans to hire up to 50 additional revenue-generating associates in 2026 to support growth targets [5] - A bond portfolio restructuring was completed, expected to benefit NEM by seven basis points and improve EPS by $0.23 per share [6][14] - The company aims for loan growth in 2026 to be mid-single digits compared to the previous year-end [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, highlighting solid capital levels, robust allowance for credit losses, and positive trends in balance sheet growth [9] - The company expects NII to increase by 5% to 6% from 2025, with modest NEM expansion [14] - Management noted that the economic environment is rapidly evolving, impacting projections and strategies [2][3] Other Important Information - The company fully exhausted its share buyback authority last quarter, impacting capital ratios, but a new 5% buyback plan was approved for 2026 [8] - The company maintains strong capital ratios, with TCE over 10% and a Common Equity Tier 1 ratio of 13.66% [8] Q&A Session Summary Question: Expectations for loan production versus paydowns - Management indicated that loan production increased for the third consecutive quarter, with expectations for sustained fundings throughout 2026 despite anticipated paydowns in commercial real estate [21][25] Question: Clarification on ROA target and TCE ratio - Management explained that consistent balance sheet growth and reinvestment in the company are key to achieving higher ROA targets while maintaining a strong TCE ratio [27][29] Question: Insights on NIM expansion - Management discussed that NIM improvement is expected from organic balance sheet growth and the bond portfolio restructuring, with a modest expansion anticipated [40][42] Question: Confidence in hiring plans for bankers - Management expressed confidence in hiring 50 new bankers in 2026, citing enhanced hiring processes and strong performance from recently hired bankers [48][50] Question: Fee income growth expectations - Management provided insights into fee income growth, emphasizing the potential for 4%-5% growth in 2026, supported by improvements in various banking segments [56][58] Question: M&A appetite and strategy - Management reiterated a focus on organic growth and described their M&A strategy as opportunistic, with no immediate plans for acquisitions [62][63]

Financial Data and Key Metrics Changes - The company reported net income of $65.6 million and diluted earnings per share of $1.20, representing an 18% increase from the same quarter last year [9][10] - Pre-provision net revenue was $88.3 million, with a return on average assets of 1.47% and a return on common equity of 14.9% [9][10] - The book value grew by an annualized 14% from the previous quarter, ending at $32.37 per share [10] Business Line Data and Key Metrics Changes - Loan growth was below expectations, with loan paybacks increasing by $500 million over the prior two quarters [3][4] - The loan pipeline increased by over 10% in October compared to September and is 40% higher than a year ago [3][4] - Non-performing assets rose to $930 million, an increase of approximately $96 million during the quarter [8] Market Data and Key Metrics Changes - The company experienced a reduction in high-cost municipal deposits, offset by large corporate deposit inflows [4][5] - All markets are now profitable, a first for the company since its inception [5] Company Strategy and Development Direction - The company aims to manage down total deposit costs as the Federal Reserve reduces the Fed Funds rate [4][5] - There is a focus on organic loan and deposit growth, with competitive and profitable pricing strategies [14] - The company is exploring opportunities in Texas, emphasizing the importance of local relationships in that market [48] Management's Comments on Operating Environment and Future Outlook - Management noted that lending activity softened in the third quarter but has been robust moving into the fourth quarter [7] - The company expects continued margin expansion due to anticipated rate cuts by the Federal Reserve [11][26] - Management expressed confidence in resolving several material credits in the near future [8] Other Important Information - The company recognized a loss of $7.8 million on the sale of bonds and invested in a solar tax credit, benefiting from a reduced tax provision [9][10] - The efficiency ratio improved from 36.90% in the third quarter of 2024 to 35.22% in the third quarter of 2025 [13] Q&A Session Summary Question: What pushed the borrower to non-performing status? - Management indicated that substantial additional collateral was taken, and a large payment expected before quarter-end did not materialize, leading to the non-accrual status [21] Question: What is the loan-to-value on the loans? - The loan-to-value is currently below one-to-one, with adequate security to cover the loans [23] Question: What is the expectation for margin improvement? - Management expects a 7 to 10 basis points improvement in margin each quarter, with a normalized spot rate for September at 3.28% [25][47] Question: Where is loan demand currently? - Loan demand is described as "okay," with a desire for more commercial and industrial loans rather than commercial real estate [31] Question: What is the effective tax rate going forward? - The effective tax rate is expected to remain around 18.9% for the year, with a goal to keep it below 20% [40]