Core Insights - The company reported a net income of $200 million for the full year of 2024, with earnings per share at $3.41, indicating a return to pre-Silicon Valley performance levels [1][4] - The tangible common equity ratio improved to 8.81%, and tangible book value per share increased by 25% over the last two years, reaching $26.78 [1][17] - The company achieved a 4% growth in pre-tax pre-provision earnings on a linked basis, supported by a net interest margin improvement of five basis points [1][22] Financial Performance - The fourth quarter earnings per share totaled $1.10, adjusted for a $20 million gain from the sale of branches and an $11.6 million bond loss [2] - Loan growth for the quarter was 6%, aligning with the company's expectations for 2025 [2][6] - Non-interest income increased by $17.9 million, reflecting strong core performance despite losses from bond sales [15][22] Operational Developments - The company completed several upgrades to its technology platforms, including account origination and online banking systems, enhancing client experience [3][5] - The sale of five non-core branches and restructuring of the securities portfolio were completed, contributing to a more focused operational strategy [3][16] - The company maintained a disciplined approach to managing deposit costs, with total deposits growing at a 4.4% annualized rate in the fourth quarter [12][21] Market Position and Strategy - The company is focusing on core markets in Indiana, Ohio, and Michigan, implementing innovative customer acquisition strategies [2][5] - The Commercial and Industrial (C&I) segment remains the largest part of the loan portfolio, comprising 50% of total loans, with strong growth expected in this area [10][25] - The company is optimistic about future growth opportunities in commercial real estate, particularly in multi-family and industrial segments [47][56] Asset Quality and Risk Management - The allowance for credit losses was $192.8 million, with a coverage ratio of 1.5%, indicating strong reserves compared to peers [20] - Non-accrual loans increased by $14.7 million, primarily due to a specific multi-family housing loan, but overall asset quality remains stable [30][32] - The company anticipates charge-offs to remain between 15 and 20 basis points, reflecting a stable credit environment [62]

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] - 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] - The book value grew by an annualized 14% from the previous quarter, ending at $32.37 per share [10] - Net interest income for the quarter was $133.4 million, with a normalized net interest margin of 3.19% [10][12] 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] - 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 [7] Market Data and Key Metrics Changes - The company experienced a reduction in high-cost municipal deposits, offset by large corporate deposit inflows [4] - All markets are now profitable, a first since the company's 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] - Focus on organic loan and deposit growth while maintaining competitive pricing [14] - The company is exploring opportunities in Texas, emphasizing the importance of local relationships [43] Management's Comments on Operating Environment and Future Outlook - Management noted that lending activity softened in Q3 but has been robust moving into Q4 [6] - The company expects continued margin expansion due to anticipated Federal Reserve rate cuts [11][26] - Management expressed confidence in resolving non-performing loans and maintaining credit quality [8][18] 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][15] - The company has a total NDFI exposure of $71 million, which is less than 1% of the loan portfolio, indicating a cautious approach to risk [16][17] 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 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 believed to be below one-to-one, with adequate security to cover the loans [23] Question: What is the expected margin improvement with upcoming Federal Reserve cuts? - Management expects a 7 to 10 basis points improvement in margin each quarter, with current normalized rates at 3.28% [25][41] Question: Are there new markets of interest for the company? - The company is particularly interested in Texas, emphasizing the need for local relationships to succeed in that market [43] Question: What is the effective tax rate going forward? - The effective tax rate is expected to remain around 18.9% for the year, with efforts to keep it below 20% [39]