Financial Data and Key Metrics Changes - The net interest margin (NIM) for Q4 2025 was 3.74%, an increase of 20 basis points from Q4 2024, while the full-year NIM was 3.69% compared to 3.57% in 2024 [4] - Return on average assets for Q4 2025 was 1.21%, up from 1.10% in Q4 2024, and return on tangible common equity improved to 12.58% from 11.82% [4] - Net income for Q4 2025 was $12.3 million, or 49 cents per diluted share, with total loans declining by $81 million from the end of Q3 2025 [11] Business Line Data and Key Metrics Changes - Small business loan performance was disappointing, with delinquency and charge-off levels exceeding acceptable limits, prompting changes in credit parameters [5] - Non-interest income increased by almost $2 million year-over-year, with gains from SBA loan sales higher in 2025, although residential mortgage sales remained muted [5][6] - The non-interest expense to average asset ratio improved to 1.97% for 2025 from 2.01% in 2024, reflecting effective expense management [6] Market Data and Key Metrics Changes - Deposit balances decreased by $21 million in Q4 2025, primarily due to a $27.1 million decline in broker deposits, but new customer acquisition was strong [11] - The bank's focus on relationship-based customers helped grow interest-bearing demand deposits by $47 million, or 33% annualized, compared to September 30 [19] - The lending pipeline at year-end stood at $284 million, with C&I loans making up 61% of the pipeline [27] Company Strategy and Development Direction - The company aims to close the gap with peers in cost of funds, increase non-interest income generation, and reduce non-interest expense to average asset ratio [10] - The strategy includes optimizing the deposit portfolio by lowering costs while deepening high-quality relationships [22] - The company is evolving into a middle-market commercial bank, focusing on profitability rather than growth for its own sake [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, expecting to achieve a $200 million net loan growth goal, driven by growth in asset-based lending and community banking [9] - The company anticipates stabilization of credit costs in the small business portfolio due to implemented changes [7] - Management noted that while there were challenges, overall credit quality in core CRE and community banking divisions remained strong [7] Other Important Information - The efficiency ratio improved to 49.46%, remaining below 60% for the 26th consecutive quarter, and tangible book value per share grew more than 12% annualized to $15.81 [17] - The company announced a 50% increase in its quarterly cash dividend, reflecting strong capital ratios [17] - A new share repurchase plan was approved for up to 1.2 million shares, totaling $20 million, although no buybacks were executed in Q4 [48] Q&A Session Summary Question: Discussion on loan growth outlook - Management acknowledged the unpredictability of payoffs but noted that high payoff activity was not indicative of broader macro conditions, expecting a return to strong growth [34][35] Question: Details on downgraded C&I credit - The downgraded loan was from a multi-location consumer-based business facing performance declines, with management closely monitoring the situation [41] Question: Thoughts on expense run rate - Management indicated a focus on keeping expense growth limited while driving revenue growth to improve efficiency ratios [42][45] Question: Status of share buyback plan - A new share buyback plan was approved, but no activity occurred in Q4 due to timing issues with regulatory approvals [46][48]