Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $42 million for Q4 2025, equating to $0.69 per diluted share, with a return on average assets of 1.1% and return on average equity of 7.6% [7] - For the full year 2025, consolidated income attributable to common stockholders was $165.6 million, representing a 46% increase compared to the prior year [15] - Total revenues for 2025 increased by 8% to approximately $1.3 billion, while expenses grew by only 2%, resulting in positive operating leverage of 6% [15] Business Line Data and Key Metrics Changes - PlainsCapital Bank experienced an expansion in net interest margin, increasing by 12 basis points year-over-year, and generated $43.5 million in pre-tax income [4][7] - PrimeLending reported a pre-tax loss of $5 million in Q4 2025, with origination volume of $2.4 billion, indicating a seasonal rebound despite ongoing industry challenges [9][10] - Hilltop Securities achieved a pre-tax margin of 18% on net revenues of $138 million, with public finance services seeing a 20% year-over-year increase in net revenues [10][11] Market Data and Key Metrics Changes - The average total deposits for Q4 2025 were approximately $10.7 billion, a decline of $233 million compared to Q4 2024, driven by the return of sweep deposits [19] - The interest-bearing deposit cost decreased to 269 basis points, down 44 basis points from the prior year [20] - Mortgage-related income and fees increased by $2.5 million compared to Q4 2024, driven by improvements in lock and originated volumes [20] Company Strategy and Development Direction - Hilltop aims to be a full solution provider to clients, focusing on executing strategic initiatives while maintaining solid capital levels with a Common Equity Tier 1 capital ratio of 19.7% [12] - The company is actively evaluating acquisition opportunities while also focusing on organic growth amidst a competitive market environment [47][48] - Management emphasized the importance of operational cost reductions and efficiency improvements to navigate the challenging mortgage industry landscape [10][25] Management Comments on Operating Environment and Future Outlook - Management noted a positive interest rate environment supporting expanded net interest margins, despite increasing competition [8] - The outlook for 2026 anticipates average bank loan growth of 4%-6%, excluding the impact of loans retained from PrimeLending [26] - There is uncertainty regarding interest rates and inflation, but management remains optimistic about the company's positioning for long-term success [28] Other Important Information - Hilltop returned $229 million to stockholders through share repurchases and dividends in 2025 [6] - The allowance for credit losses decreased by $3.6 million to $91.5 million, with net charge-offs of $11.5 million recorded in Q4 2025 [15][17] Q&A Session Summary Question: Expectations for broker-dealer fees and pre-tax margin for 2026 - Management expressed confidence in the stability of broker-dealer fees and indicated that a pre-tax margin of 13.5% is a reasonable baseline for 2026 [33][38] Question: Sensitivity of NII to potential Fed rate cuts - Management noted that every 25 basis points reduction in rates could impact NII by approximately $4.5 million, with broker fee income being more variable [39][41] Question: Discussion on capital priorities and M&A opportunities - Management highlighted the increase in dividends and standard share repurchase authorization, while also evaluating acquisition opportunities amidst a competitive landscape [46][48] Question: Loan growth pipeline and pricing competition - The loan pipeline entering 2026 is approximately $2.6 billion, with management noting increased competition in loan pricing due to the current rate environment [58] Question: Expectations for gain on sale margins in the mortgage sector - Management expects stable revenue from gain on sale margins and mortgage origination fees, with a projected range of 350-360 basis points [59][60]

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $42 million or $0.69 per diluted share for Q4 2025, with a return on average assets of 1.1% and return on average equity of 7.6% [6] - For the full year 2025, consolidated income attributable to common stockholders was $165.6 million, equating to $2.64 per diluted share, representing a growth of 46% [13] - Net interest income grew by 7% year-over-year, while non-interest income increased by 11%, contributing to a 26% improvement in diluted EPS [12] Business Line Data and Key Metrics Changes - PlainsCapital Bank saw an expansion in net interest margin, with a pre-tax income of $43.5 million and a return on average assets of 1.05% [6] - PrimeLending reported a pre-tax loss of $5 million in Q4 2025, despite a seasonally healthy origination volume of $2.4 billion [8] - Hilltop Securities generated pre-tax income of $26 million on net revenues of $138 million, achieving a pre-tax margin of 18% [10] Market Data and Key Metrics Changes - The average total deposits for Q4 2025 were approximately $10.7 billion, declining by $233 million compared to Q4 2024 [18] - Mortgage-related income and fees increased by $2.5 million year-over-year, driven by improvements in lock and originated volumes [20] - Public Finance, Wealth Management, and Structured Finance business lines within Hilltop Securities all generated higher fee income compared to the prior year [21] Company Strategy and Development Direction - Hilltop aims to be a full solution provider to clients, focusing on executing strategic initiatives [11] - The company is actively evaluating acquisition opportunities while also focusing on organic growth [44] - Management expressed optimism about the performance of Public Finance and Wealth Management, expecting continued improvement in these areas [32] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainty in the market regarding interest rates, inflation, and overall economic health, but remains optimistic about the company's positioning for long-term success [14][27] - The company expects full-year average bank loan growth of 4%-6% for 2026, excluding the impact of loans retained from PrimeLending [25] - Management anticipates that interest-bearing deposit costs will decrease somewhat over the coming quarters [19] Other Important Information - Hilltop returned $229 million to stockholders through share repurchases and common dividends in 2025 [5] - The allowance for credit losses decreased by $3.6 million to $91.5 million during the quarter [14] Q&A Session Summary Question: Expectations for broker-dealer fees and pre-tax margin for 2026 - Management expressed confidence in the stability of broker-dealer fees and indicated that a pre-tax margin of 13.5% is a reasonable baseline for 2026 [31][36] Question: Sensitivity of NII and broker-dealer fees to Fed cuts - Management noted that every 25 basis points reduction in rates could impact NII by about $4.5 million annually, with broker fee income being more variable [38] Question: Capital priorities and M&A opportunities - Management highlighted the increase in dividends and the standard share repurchase authorization, while also evaluating acquisition opportunities in a competitive market [44][45] Question: Loan growth and pricing competition - The loan pipeline entering 2026 is approximately $2.6 billion, with management feeling optimistic about organic loan growth despite pricing competition [55] Question: Gain on sale margins expectations - Management expects total revenue from gain on sale margins and mortgage origination fees to remain stable, with a projected range of 350-360 basis points [57]

Core Viewpoint - First Capital, Inc. reported significant growth in net income for the year ended December 31, 2025, reaching $16.4 million, or $4.89 per diluted share, compared to $11.9 million, or $3.57 per diluted share, for the previous year [1]. Financial Performance Summary - **Net Interest Income**: Increased by $6.7 million for the year ended December 31, 2025, driven by a rise in interest income of $6.4 million due to higher average tax-equivalent yield on interest-earning assets (from 4.49% to 4.85%) and an increase in average balance of interest-earning assets (from $1.14 billion to $1.19 billion) [2]. - **Provision for Credit Losses**: Decreased from $1.4 million in 2024 to $1.1 million in 2025, reflecting lower estimated lifetime expected credit losses [3]. - **Noninterest Income**: Increased by $809,000, primarily due to a gain on equity securities of $149,000 in 2025 compared to a loss of $374,000 in 2024, along with increased gains on loan sales and ATM fees [4]. - **Noninterest Expenses**: Increased by $1.7 million, mainly due to higher compensation and benefits ($1.3 million) and occupancy and equipment expenses ($472,000) [5]. - **Income Tax Expense**: Increased by $1.3 million, resulting in an effective tax rate of 17.7% for 2025, up from 15.6% in 2024 [6]. Quarterly Performance Summary - **Net Income for Q4 2025**: Reported at $4.9 million, or $1.46 per diluted share, compared to $3.3 million, or $0.97 per diluted share, for Q4 2024 [7]. - **Net Interest Income for Q4 2025**: Increased by $1.8 million, with interest income rising by $1.6 million due to higher average tax-equivalent yield (from 4.64% to 4.99%) and an increase in average balance of interest-earning assets (from $1.15 billion to $1.20 billion) [8]. - **Provision for Credit Losses in Q4 2025**: Slightly increased from $346,000 in Q4 2024 to $350,000 in Q4 2025 [9]. - **Noninterest Income for Q4 2025**: Increased by $358,000, driven by higher gains on loan sales and ATM fees [10]. - **Noninterest Expenses for Q4 2025**: Increased by $276,000, primarily due to higher compensation and benefits [11]. - **Income Tax Expense for Q4 2025**: Increased by $254,000, resulting in an effective tax rate of 16.1% for Q4 2025, down from 17.3% in Q4 2024 [12]. Financial Condition Comparison - **Total Assets**: Increased to $1.27 billion at December 31, 2025, from $1.19 billion at December 31, 2024 [13]. - **Deposits**: Increased by $56.6 million, from $1.07 billion to $1.12 billion [13]. - **Nonperforming Assets**: Remained stable, with nonperforming assets at $4.3 million in 2025 compared to $4.4 million in 2024 [13].

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $46 million or $0.74 per diluted share for Q3 2025, with a return on average assets of 1.2% and return on average equity of 8.35% [4] - Net interest income increased by $7.4 million or 7% year-over-year, driven by improving deposit costs and growth in higher yielding commercial loans [14] - The allowance for credit losses declined by $2.8 million to $95 million, resulting in a coverage ratio of 1.16% [12][13] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $55 million of pre-tax income on $12.6 billion of average assets, with a return on average assets of 1.34% [4] - PrimeLending reported a pre-tax loss of $7 million due to subdued mortgage origination volumes, with existing home sales at their lowest level in over 30 years [6][7] - Hilltop Securities Inc. generated pre-tax income of $26.5 million on net revenues of $144.5 million, with a pre-tax margin of 18% [7][8] Market Data and Key Metrics Changes - Total core deposits at PlainsCapital increased by 6% on a linked quarter basis, attributed to seasonal cash inflows from large balance customers [5] - Mortgage revenues declined by $3.4 million year-over-year, with origination volumes stable but gain on sale margins improving by 8 basis points [17][18] - The fixed income business showed a 13% increase in net revenues year-over-year, reflecting robust industry volumes [8] Company Strategy and Development Direction - The company aims to increase market share despite elevated competition in Texas, focusing on core loan growth and managing interest expenses [5][22] - Hilltop Securities continues to invest in core areas of expertise, leveraging its national brand built on trust [9] - The leadership transition at PlainsCapital Bank is seen as an opportunity for continued growth while maintaining the bank's legacy and credit culture [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's ability to manage credit risks and maintain a conservative credit culture despite competitive pressures [22][23] - The outlook for 2025 reflects current assessments of the economy and market conditions, with a focus on producing quality outcomes for clients and communities [24] - Management anticipates continued challenges in the mortgage market but expects gradual improvement into 2026 [18] Other Important Information - Hilltop maintains strong capital levels with a common equity tier one capital ratio of 20% and tangible book value per share increased by $0.67 to $31.23 [9] - The company returned $11 million to stockholders through dividends and repurchased $55 million in shares during the quarter [9] Q&A Session Summary Question: NII guidance and near-term outlook - Management explained that the NII guidance was not increased due to expected rate cuts and potential paydowns impacting loan growth [26][28] Question: Stock buyback strategy and M&A outlook - Management confirmed a consistent approach to share repurchases given excess capital and discussed opportunities in the Texas market for potential M&A [30][31] Question: Auto portfolio exposure - Management addressed concerns regarding the auto portfolio, noting a reduction in commitments and ongoing workout efforts for non-accrual clients [32][33] Question: Broker-dealer fee income - Management highlighted strong performance in public finance and other segments, but anticipated a reversion to lower pre-tax margins in the future [42][44] Question: Effects of government shutdown - Management indicated no primary effects on the broker-dealer from the government shutdown, but noted potential processing delays in mortgage and SBA areas [51][52]

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $46 million or $0.74 per diluted share for Q3 2025, with a return on average assets of 1.2% and return on average equity of 8.35% [4] - Net interest income increased by $7.4 million or 7% year-over-year, totaling $112 million, driven by improved deposit costs and growth in higher yielding commercial loans [14] - The allowance for credit losses declined by $2.8 million to $95 million, resulting in a coverage ratio of 1.16% [12] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $55 million of pre-tax income on $12.6 billion of average assets, with a return on average assets of 1.34% [4] - PrimeLending reported a pre-tax loss of $7 million due to subdued mortgage origination volumes, with existing home sales at their lowest level in over 30 years [6] - Hilltop Securities Inc. produced pre-tax income of $26.5 million on net revenues of $144.5 million, achieving a pre-tax margin of 18% [7] Market Data and Key Metrics Changes - Total core deposits at PlainsCapital increased by 6% on a linked quarter basis, attributed to seasonal cash inflows from large balance customers [5] - Average total deposits remained stable at approximately $10.5 billion year-over-year, with a focus on growing interest-bearing products [16] - Mortgage revenues declined by $3.4 million year-over-year, reflecting challenges in the mortgage banking sector due to higher interest rates and home prices [17][18] Company Strategy and Development Direction - The company aims to maintain strong capital levels with a common equity tier one capital ratio of 20% and plans to continue share repurchases to signal confidence in its stock [9][31] - Hilltop Securities is investing in core areas of expertise and leveraging its national brand to enhance client service [9] - The leadership team is focused on optimizing costs and productivity at PrimeLending while growing the client-facing sales team [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the bank's ability to manage competition and maintain a conservative credit culture despite elevated market competition [5][22] - The outlook for 2025 reflects ongoing uncertainties in the market regarding interest rates and inflation, with a focus on producing quality outcomes for clients [24] - Management does not anticipate significant systemic risk across the portfolio but remains vigilant in assessing potential credit risks [13] Other Important Information - The company returned $11 million to stockholders through dividends and repurchased $55 million in shares during the quarter [9] - A leadership transition is occurring at PlainsCapital Bank, with the promotion of Brent Randall to Chief Credit Officer [10] Q&A Session Summary Question: NII guidance and near-term outlook - Management explained that the NII guidance was not increased due to expected rate cuts and potential asset contraction, emphasizing the balance sheet's asset sensitivity [26][28] Question: Stock buybacks and M&A outlook - Management confirmed a consistent approach to share repurchases given excess capital and discussed opportunities for growth through M&A in the Texas market [30][31] Question: Auto portfolio exposure - Management addressed concerns about the auto portfolio, noting a reduction in commitments and ongoing workout efforts for non-accrual clients [32][33] Question: Broker-dealer fee income - Management highlighted strong performance in public finance and structured finance, while acknowledging that some fee growth may not be sustainable [42][43] Question: Effects of government shutdown - Management indicated no primary effects from the government shutdown on the broker-dealer, but noted potential processing delays in the mortgage space [51][52]

Financial Data and Key Metrics Changes - The diluted EPS for the current quarter was $1.38, down $0.01 from the linked June 2025 quarter, but up $0.28 from the September quarter a year ago [4] - Net interest margin for the quarter was 3.57%, up from 3.47% for the fourth quarter of fiscal 2025 and from 3.34% in the year-ago quarter [5][18] - Non-interest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower non-interest expense of $925,000 or a 3.6% decrease quarter over quarter [5][21] - The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 1.24% of gross loans and 200% of non-performing loans [22] Business Line Data and Key Metrics Changes - Gross loan balances increased by $91 million or 2.2% during the first quarter, which would be 8.8% annualized [6] - Loan balances increased by $225 million or 5.7% over the last 12 months, led by non-owner occupied CRE, one-to-four family residential, C&I, and multifamily loans [6][7] - Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months [7] Market Data and Key Metrics Changes - Strong growth was experienced in the east region, where much of the agricultural activity is concentrated, with the south region following closely [7] - The loan pipeline anticipated to fund in the next 90 days remains strong, totaling about $195 million at September 30 [7] Company Strategy and Development Direction - The company is optimistic about achieving mid-single-digit loan growth in the fiscal year despite expectations of a slowdown in loan growth in the upcoming quarters [7][20] - The company is focusing on improving credit quality and has been proactive in working with borrowers to assess their positions and utilize government programs to mitigate risk [17] - There is a modest uptick in M&A discussions, with the company well-positioned to act when the right partner is ready [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the performance in the new fiscal year, despite a larger provision for credit losses due to the evolving economic environment [3][23] - The company expects to remain liability-sensitive and a net beneficiary of rate cuts over the next four years [20] - Management noted that while charge-offs and non-performing loans have remained elevated, they are comparable to national averages for banks under $10 million [25] Other Important Information - The company repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000 [9] - Tangible book value increased by $5.09 or 13.3% over the last 12 months, attributed to earnings retention and improvement in the bank's unrealized loss in the investment portfolio [8][9] Q&A Session Summary Question: Outlook for provision expense and charge-offs - Management expects charge-off activity to drop from the levels of the last two quarters, with current delinquency levels running similar to historical ranges [32][33] Question: Bank's rate sensitivity and margin expansion - The bank remains overall liability-sensitive and expects to be a net beneficiary of rate cuts, estimating a 1%-3% increase in net interest income per 100 basis points of rate cuts [34][35] Question: Update on loan pipeline and growth expectations - The loan pipeline remains consistent, with expectations for mid-single-digit growth for the fiscal year, though seasonal slowdowns are anticipated [41][43] Question: Appetite for buybacks and M&A activity - Management anticipates being more active in buybacks given current pricing and is exploring M&A opportunities, ideally targeting banks in the billion-dollar asset range [48][49]

Financial Data and Key Metrics Changes - The diluted EPS for the current quarter was $1.38, down $0.01 from the linked June 2025 quarter, but up $0.28 from the September quarter a year ago [4] - Net interest margin for the quarter was 3.57%, up from 3.47% for the fourth quarter of fiscal 2025 and from 3.34% in the year-ago quarter [5][6] - Reported non-interest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower non-interest expense of $925,000 or a 3.6% decrease quarter over quarter [5][21] Business Line Data and Key Metrics Changes - Gross loan balances increased by $91 million or 2.2% during the first quarter, which would be 8.8% annualized, with significant growth in non-owner occupied commercial real estate, one-to-four family residential, commercial & industrial, and multifamily loans [6][7] - Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months [7][8] - The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 1.24% of gross loans and 200% of non-performing loans [23] Market Data and Key Metrics Changes - The company experienced strong growth in its east region, particularly in agricultural activity, while the south region also showed good growth [7] - The loan pipeline anticipated to fund in the next 90 days remains strong, totaling about $195 million at September 30 [7] Company Strategy and Development Direction - The company is optimistic about achieving mid-single-digit loan growth in the fiscal year despite expectations of a slowdown in loan growth due to seasonal factors [7][20] - The management highlighted a modest uptick in M&A discussions, indicating a potential for attractive opportunities in the market [26][27] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance in the new fiscal year, citing good momentum on pre-provision net revenue [3] - The company is focused on improving credit quality and has been proactive in working with borrowers to mitigate risks [13][17] Other Important Information - The company repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000, with plans for more buybacks given current pricing [9][48] - The company has seen a general increase in agricultural production line utilization due to increased input costs, impacting the agricultural loan portfolio [15][16] Q&A Session Summary Question: Outlook for provision expense and charge-offs - Management expects charge-off activity to drop from the levels of the last two quarters, with current delinquency levels trending back to historical ranges [32][33] Question: Bank's rate sensitivity and margin expansion - Management indicated that the bank remains liability-sensitive but expects to benefit from net interest income growth with potential rate cuts [34][35] Question: Update on loan pipeline and growth expectations - The company has a consistent pipeline and anticipates mid-single-digit growth for the fiscal year, with seasonal slowdowns expected [41][43] Question: Buyback activity and M&A discussions - Management anticipates being more active in buybacks due to current pricing and is exploring M&A opportunities, ideally targeting banks with assets around $1 billion [48][49]

Financial Performance - Net income increased by $1 million to $211 million in Q3 2025 compared to Q2 2025[3] - Net interest income increased by $15 million to $647 million in Q3 2025[4, 18] - Earnings per share (EPS) increased by $006 to $315 in Q3 2025[3] - Tangible book value per share increased by $371 to $7912[6] Balance Sheet - Loans held in portfolio grew by $502 million or 13% to $38687 million[3, 4, 62] - Total deposits decreased by $704 million or 11% to $66513 million[3, 4] - Common Equity Tier 1 decreased 12 bps to 1579%[6] Credit Quality - Non-performing loans (NPLs) increased by $190 million to $502 million, with the NPL ratio at 130% versus 082% in Q2 2025[3, 6] - The ACL-NPL ratio decreased to 157% from 247% in Q2 2025[3, 6] - Net charge-offs (NCO) ratio increased to 060% from 045% in Q2 2025[3, 6] Business Segment Performance - BPPR's loans held in portfolio increased by $357 million to $27131 million[7, 9] - Popular US's loans held in portfolio increased by $145 million to $11525 million[7, 9]

Core Insights - BankUnited, Inc. reported improved profitability for Q3 2025, achieving net income of $71.9 million, or $0.95 per diluted share, with an annualized return on average assets of 0.82% [2][6] - The company achieved a net interest margin of 3.00%, an increase from 2.93% in the previous quarter, driven by a favorable funding mix and a decrease in interest expenses [6][14] - Total loans decreased by $231 million in Q3 2025, with a notable decline in residential loans by $173 million, while the mortgage warehouse lending segment grew by $83 million [6][10] Financial Performance - For the nine months ended September 30, 2025, net income reached $199.1 million, or $2.63 per diluted share, representing a 21% increase in diluted earnings per share compared to the same period in 2024 [2][10] - The company’s total assets were reported at $35.1 billion as of September 30, 2025, with total deposits remaining relatively flat, declining by $28 million quarter-over-quarter [15][17] - The average cost of total deposits decreased to 2.38% from 2.47% in the previous quarter, reflecting a proactive approach to reduce deposit pricing [6][14] Loan Portfolio and Asset Quality - The core commercial and industrial (C&I) and commercial real estate (CRE) portfolio segments saw a net decline of $69 million, with the CRE portfolio growing by $61 million and the C&I portfolio declining by $130 million [4][5] - The allowance for credit losses (ACL) was $219.9 million, representing 0.93% of total loans, consistent with the previous quarter [7][8] - The annualized net charge-off ratio for the nine months ended September 30, 2025, was 0.26%, with total criticized and classified loans declining by $3 million [6][7] Capital Position - The Common Equity Tier 1 (CET1) ratio was reported at 12.5% as of September 30, 2025, indicating a robust capital position [6][8] - Book value per common share increased to $40.30, reflecting an 8% year-over-year increase in tangible book value per share [6][8] Interest Income and Expenses - Net interest income for Q3 2025 was $250.1 million, an increase from $246.1 million in the previous quarter, despite a slight decrease in interest income [10][18] - The yield on interest-earning assets remained stable at 5.38%, while the average rate paid on interest-bearing deposits decreased to 3.40% [14][18]

Financial Data and Key Metrics Changes - The third quarter reflected continued momentum in core earnings with net interest margin expanding by 11 basis points to 3.28% [4] - Customer fees, excluding net credit valuation adjustment, grew by $10 million, while adjusted expenses declined by $1 million, leading to an improved efficiency ratio of 59.6% [4] - Average loans and customer deposits increased by annualized rates of 2.1% and 3.1% respectively compared to the prior quarter [4] - Diluted earnings per share was $1.48 compared to $1.63 in the prior period and $1.37 in the year-ago period [5][6] - Adjusted non-interest income was $174 million for the quarter, representing a 6% increase versus the second quarter and an 8% increase versus the year-ago quarter [10] Business Line Data and Key Metrics Changes - Net interest income increased by $52 million, or 8%, relative to the third quarter of 2024, benefiting from fixed asset repricing and favorable shifts in the composition of average interest-earning assets [7][8] - Customer-related non-interest income was $163 million for the quarter, slightly down from $164 million in the prior period but up from $158 million one year ago [10] - Capital market fees, excluding net CVA, increased by 25% compared to the prior year period, driven by higher loan syndications and customer swap fee revenue [10] Market Data and Key Metrics Changes - Average loans increased by 2.1% annualized over the previous quarter and 3.6% over the year-ago period [12] - Average non-interest-bearing deposits grew approximately $192 million, or 0.8% compared to the prior quarter [13] - Total borrowings declined by $1.8 billion during the quarter, with short-term FHLB advances decreasing by $2.3 billion [14] Company Strategy and Development Direction - The company expects to continue producing positive operating leverage as revenue growth outpaces non-interest expense growth [19] - The outlook for customer-related fee income in the third quarter of 2026 is moderately increasing relative to the third quarter of 2025, driven by increased customer activity and new client acquisitions [11] - The company is focused on maintaining a strong capital position and is open to M&A opportunities, particularly smaller deals that enhance market density [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the recent credit issues are isolated incidents and emphasized the strength of their credit history [22][24] - The company anticipates continued loan growth driven by commercial loans, despite some recent paydowns and payoffs [56][59] - Management noted that the current regulatory environment is shifting towards a focus on solid regulation, which they view positively [72][74] Other Important Information - The company recorded a $49 million provision for credit loss, with net charge-offs in the quarter at $56 million, or 37 basis points of loans on an annualized basis [4][16] - The allowance for credit losses as a percentage of loans remains stable at 1.2% [17] - The common equity tier one ratio this quarter was 11.3%, indicating a strong capital position [18] Q&A Session Summary Question: Can you talk about the isolated incident regarding the charge this quarter? - Management reviewed the portfolio and believes it is an isolated incident, with no similar loans found [22][23] Question: How much fixed-rate asset repricing is factored into the NII guide outlook? - The guidance includes expectations for fixed-rate loans and securities, with potential yield increases embedded [27][28] Question: What is the outlook for operating leverage? - Management expects positive operating leverage but did not provide a specific range at this time [34][35] Question: How has loan demand changed over the last 90 days? - Loan spreads have improved slightly, and production has been up in most months this year compared to 2024 [65][66] Question: What is the company's current risk appetite? - The company will continue its historical underwriting practices, and the recent credit issues will not impact loan growth [80][81]