Financial Data and Key Metrics Changes - Net income for Q4 2025 was $7.4 million, compared to $9.3 million in Q3 2025 and $7.1 million in Q4 2024, while net income for the full year 2025 was $32.6 million, up from $24.1 million in 2024, representing a 35% increase year-over-year [4][13] - The company executed a securities loss trade, realizing a pre-tax net loss of $4 million from the sale of $64 million in securities available for sale, which is expected to improve the balance sheet flexibility [4][14] - Net interest income improved, with the net interest margin increasing by 11 basis points compared to Q3 and 49 basis points compared to Q4 last year [15] Business Line Data and Key Metrics Changes - Loan outstandings were slightly down at just under $3 billion due to larger payoffs from asset sales and refinancing activity, with a notable payoff of over $50 million from a medical office building sale [9][21] - Deposit balances increased by over $162 million during the quarter, with growth in core, commercial, and retail deposits [9][15] Market Data and Key Metrics Changes - The watch list for loans increased but remains low at 1.7% of total loans, with 70% of the watch list related to the trucking industry, which is currently facing challenges [7] - The commercial real estate portfolio continues to perform well, indicating a diversified and secure asset base [7] Company Strategy and Development Direction - The company is focused on strong underwriting practices and building customer relationships with multiple sources of repayment, which supports credit quality [8] - There is an emphasis on attracting new business opportunities, particularly in the Minnesota region, leveraging community relationships and a disciplined approach to business banking [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position for growth in 2026, anticipating an increase in loan growth as economic expansion begins [4] - The outlook for deposits is uncertain due to potential volatility from public funds, but there is an expectation of continued mid-single-digit growth in loans and deposits [26] Other Important Information - A dividend of $0.25 was declared, payable on February 25th to shareholders of record as of February 11th [4] - The company has no provisions for credit losses recorded this quarter, indicating strong credit quality [15] Q&A Session Summary Question: Loan growth dynamics and pipeline outlook - Management noted elevated payoffs in Q4, particularly from a specific customer selling medical office buildings, and indicated efforts to replace those loans [20][21] Question: Update on loans repricing and yield pickup - The fixed-rate portfolio that reprices in 2026 is just under $400 million, with an expected yield pickup of around 1.5%-2% [25] Question: Deposit growth and seasonality - Management indicated that deposit growth may be offset by public fund volatility, but they expect continued growth in retail and commercial deposits [26] Question: Future securities portfolio repositioning - The company regularly evaluates its securities portfolio and does not have set goals for 2026 but will continue to assess opportunities [28] Question: Margin starting point and deposit cost reduction - The current margin is around 2.5%, with expectations for improvement throughout the year without changes in the rate environment [30]

Financial Data and Key Metrics Changes - The company reported net income of $4.9 million, a decrease of $16.9 million or 77.5% compared to the previous quarter [10] - Diluted earnings per share were $0.16, down from $0.72 linked quarter [10] - Net interest income increased by $1.45 million or 2.7% compared to the linked quarter [14] - The tax equivalent net interest margin decreased by one basis point to 2.94% [14] Business Line Data and Key Metrics Changes - Loans increased to $4.77 billion, a linked quarter increase of $163.4 million or 3.5% [10] - The increase in loans was driven by $82.6 million in commercial real estate loans, $49.3 million in commercial loans, and $49.1 million in construction loans [10] - Non-performing assets increased to approximately $2.7 million, representing 0.42% of total assets [9][11] Market Data and Key Metrics Changes - The company’s securities portfolio was $2.56 billion, a decrease of $174.2 million or 6.4% from the previous quarter [11] - Deposits increased by $329.6 million or 5% on a linked quarter basis [13] Company Strategy and Development Direction - The company is focused on repositioning its available-for-sale (AFS) securities portfolio to enhance future net interest income and provide balance sheet flexibility [3] - There is an ongoing interest in potential acquisitions and hiring due to market disruptions caused by larger banks [24] Management's Comments on Operating Environment and Future Outlook - The Texas economy is expected to grow at a faster pace than the overall U.S. growth rate [5] - Management anticipates a slight increase in net interest margin for the fourth quarter, driven by loan growth and securities restructuring [19][20] Other Important Information - The company issued $150 million of subordinated notes at a fixed to floating rate [4] - The allowance for credit losses increased to $48.5 million, while the allowance for loan losses as a percentage of total loans decreased to 0.95% [11] Q&A Session Summary Question: What is the expected net interest margin for the fourth quarter? - Management expects the net interest margin to be up slightly due to the impact of subordinated notes and loan growth [19][20] Question: Any updates on potential acquisitions or hiring? - Management is looking at a few institutions for potential acquisition and has made some new hires due to market disruptions [24] Question: How is the loan pipeline looking entering the fourth quarter? - The loan pipeline rebounded to $1.8 billion, indicating strong future loan production [32] Question: What is the pricing competition like in the market? - There is intense competition in both commercial real estate and C&I lending, but the company is maintaining a disciplined pricing approach [34] Question: What are the expectations for trust fee growth? - Management anticipates double-digit revenue growth in trust fees due to a strong team and new client acquisitions [42] Question: How many rate cuts are expected through year-end and into 2026? - Management anticipates at least two rate cuts next year, depending on inflation and employment conditions [44]