Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong year-over-year growth [8] - Net income for the first nine months of 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the same period of 2024 [8] - The return on average assets was 1.5% and return on average equity was 14.7% for Q3 2025, with a 20% quarter-over-quarter earnings per share growth [7][8] Business Line Data and Key Metrics Changes - Annualized deposit growth for Q3 2025 was 9%, with a compounded annual growth rate of 11.8% over the last six year-end periods [5] - Loan growth contracted an annualized 7% in Q3 2025, attributed to anticipated loan paydowns, but commitments to make loans totaled $307 million, an all-time high [5][6] - Mortgage banking income grew by 12% during the first nine months of 2025 compared to the same period in 2024 [6] Market Data and Key Metrics Changes - Average loans totaled $4.6 billion in Q3 2025, an increase of $201 million or over 4% from Q3 2024 [9] - Average deposits increased to $4.83 billion in Q3 2025, up $489 million or over 11% from Q3 2024 [11] - The loan-to-deposit ratio improved to 96% from 102% a year earlier, indicating better liquidity management [4] Company Strategy and Development Direction - The company is focused on maintaining a strong and stable net interest margin, with a current margin of 3.5% despite a decline in the SOFR rate [3] - The planned acquisition of Eastern Michigan Financial Corporation is expected to positively impact net interest margin and overall financial metrics [7][20] - The company aims to manage its balance sheet to minimize the impact of changing interest rate environments on net interest margin [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions, highlighting strong asset quality and a commitment to excellence in underwriting [22] - The company projects loan growth in the range of 5% to 7% annualized for Q4 2025, despite potential headwinds from federal funds rate cuts [21] - Management anticipates that net interest margin will remain steady, supported by strategic initiatives and the upcoming acquisition [30] Other Important Information - The company recorded a provision expense of $0.2 million for Q3 2025, reflecting strong credit quality and net recoveries [16] - Non-interest expenses increased by $2.4 million in Q3 2025, primarily due to higher salary and benefit costs [18] - The effective tax rate for Q3 2025 was 13%, influenced by the acquisition of transferable energy tax credits [19] Q&A Session Summary Question: Inquiry on credit quality and normalized charge-off ratio - Management noted a conservative approach to charge-offs and a typical budget of 5% to 10% for net charge-offs [26][27] Question: Discussion on net interest margin and future rate cuts - Management acknowledged that while rate cuts may pose a headwind, the acquisition will provide benefits to net interest margin [28][30] Question: Clarification on loan paydowns and growth guidance - Management explained that paydowns were recognized in Q3 and indicated that loan growth guidance remains at 5% to 7% for Q4 [38][41] Question: Inquiry on expense expectations and acquisition costs - Management confirmed that the guidance for Q4 includes about $1 million in acquisition costs, with other expenses expected to stabilize [42][70] Question: Discussion on fee income growth and commercial card programs - Management highlighted strong growth in debit and credit card income, driven by increased transaction volumes [71][73]

Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong year-over-year growth [9] - Net income for the first nine months of 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the prior year [9] - The return on average assets was 1.5% and return on average equity was 14.7% for Q3 2025, with a 20% quarter-over-quarter earnings per share growth [8] Business Line Data and Key Metrics Changes - Annualized deposit growth for Q3 2025 was 9%, with a compounded annual growth rate of 11.8% over the last six year-end periods [5] - Loan growth contracted an annualized 7% in Q3 2025, attributed to anticipated loan paydowns, but commitments to make loans totaled $307 million, an all-time high [5][8] - Mortgage banking income grew by 12% during the first nine months of 2025 compared to the same period in 2024 [7] Market Data and Key Metrics Changes - Average loans totaled $4.6 billion in Q3 2025, an increase of $201 million or over 4% from Q3 2024 [10] - Average deposits increased to $4.83 billion in Q3 2025, up $489 million or over 11% from the prior year [12] - The loan-to-deposit ratio improved to 96% from 102% a year earlier, indicating better liquidity management [4] Company Strategy and Development Direction - The company is focused on maintaining a strong net interest margin, which stood at 3.5%, despite a decline in the SOFR rate [3] - The planned acquisition of Eastern Michigan Financial Corporation is expected to positively impact key financial metrics, including earnings accretion and tangible book value [8] - The company aims to manage its balance sheet to minimize the impact of changing interest rate environments on its net interest margin [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions and highlighted a strong pipeline for loan growth [24] - The company anticipates loan growth in the range of 5% to 7% annualized for Q4 2025, despite potential headwinds from rate cuts [23] - Management noted that credit quality remains strong, with expectations for continued net recoveries [29] Other Important Information - The company’s total risk-based capital ratio was 14.3% as of September 30, 2025, indicating a well-capitalized position [22] - The effective tax rates for Q3 and year-to-date 2025 were 13% and 15%, respectively, benefiting from transferable energy tax credits [20] Q&A Session Summary Question: Credit quality and normalized charge-off ratio - Management noted net recoveries in seven of the past eight quarters and budgeted for net charge-offs between 5% and 10% historically [29][31] Question: Net interest margin outlook - Management indicated that the acquisition will benefit the net interest margin, despite potential headwinds from rate cuts [32][34] Question: Loan growth guidance and paydowns - Management clarified that paydowns recognized in Q3 were anticipated and that loan growth guidance remains at 5% to 7% for Q4 2025 [42][45] Question: Expense expectations - Management confirmed that the expense guidance for Q4 includes merger charges but not operational costs from the acquisition [46][75] Question: Tax rate expectations for 2026 - Management projected a tax rate of around 17.5% to 18% without additional energy tax credits, but closer to 16% if credits are maximized [57] Question: Credit trends and provision expectations - Management suggested that the provision for Q4 could be similar to earlier quarters, given strong credit quality [59]

Core Viewpoint - APA Corporation reported a decline in adjusted earnings for Q4 2024, primarily due to lower commodity prices and increased costs, despite a significant rise in revenues driven by acquisitions and production increases [1][2]. Financial Performance - Adjusted earnings per share for Q4 2024 were 79 cents, missing the Zacks Consensus Estimate of 97 cents and down from $1.15 in the previous year [1]. - Revenues reached $2.5 billion, a 32% increase from the same quarter last year, and exceeded the Zacks Consensus Estimate by 10% [2]. - The company generated $1 billion in cash from operating activities and reported a free cash flow of $420 million, up from $292 million a year ago [7]. Production & Selling Prices - Average production of oil and natural gas was 488,308 BOE/d, a 17.8% increase year-over-year, surpassing expectations [3]. - U.S. output increased by 37% year-over-year to 313,227 BOE/d, while international production decreased by 5.7% to 175,081 BOE/d [4]. - The average realized crude oil price was $72.42 per barrel, down 11% from $81.36 a year ago, but above the projected $68 [5]. Costs & Financial Position - Lease operating expenses totaled $474 million, a 31.7% increase from $360 million in the previous year [6]. - Total operating expenses surged 48.1% year-over-year to $2 billion, significantly higher than the model estimate of $2.9 billion [6]. - As of December 31, APA had approximately $625 million in cash and cash equivalents and $6 billion in long-term debt, resulting in a debt-to-capitalization ratio of 53.2% [8]. Guidance - APA expects adjusted production to average 399,000 BOE/d in Q1 2025 and 396,000 BOE/d for the full year, representing a 3% year-over-year increase [9]. - The company has set its upstream capital expenditure for the year at $2.5-$2.6 billion [9].