Financial Data and Key Metrics Changes - The company reported net income for Q4 2025 of $12.3 million, or $0.61 per diluted share, a 24% increase from Q4 2024 [3] - For the full year, net income was $46.2 million, or $2.64 per diluted share, compared to $31.7 million, or $2.01 per diluted share for 2024 [4] - The return on assets (ROA) for Q4 was 1.14%, improving to 1.42% when excluding one-time expenses [5] - The efficiency ratio improved to 57.7% for the quarter, compared to 61.4% for the linked quarter and 68.3% for the prior year [10] Business Line Data and Key Metrics Changes - Net interest income for Q4 totaled $36.5 million, a 5.5% increase over the linked quarter and a 16% increase over Q4 2024 [5] - Non-interest income increased by $251,000, or 2.6%, from the linked quarter, but decreased by $3.8 million, or 10%, for the year compared to 2024 [8][9] - The loan and lease portfolio grew by $68.7 million, representing an annualized growth rate of 8.7% during Q4 [6] Market Data and Key Metrics Changes - The company added $106 million in loans and $236 million in low-cost deposits from the acquisition of Farmers Savings Bank [5] - The loan-to-deposit ratio was 94.3%, slightly down from the linked quarter, with a target range of 90%-95% [15] - The security portfolio totaled $685 million, representing 15.8% of the balance sheet, with 100% classified as available for sale [16] Company Strategy and Development Direction - The company aims to maintain a strong capital position to support organic growth and invest in technology and infrastructure [17] - There is a focus on reducing reliance on wholesale funding, with a successful reduction in brokered deposits for four consecutive quarters [7] - The company plans to leverage the excess deposits from Farmers Savings Bank to support future loan growth [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic conditions across Ohio and Southeastern Indiana, noting no systemic signs of deterioration [17] - The company anticipates mid-single-digit loan growth in 2026, with a focus on commercial and industrial lending [6][22] - Credit quality remains solid, with low delinquencies and a stable allowance for credit losses [18] Other Important Information - The company announced an increase in its quarterly dividend to $0.18 per share, representing a 3.2% annualized yield [7] - The tangible common equity ratio increased from 9.21% at September 30 to 9.54% at year-end [17] - The company is investing in technology and personnel to enhance its operations and growth potential [28] Q&A Session Summary Question: Loan growth outlook and composition - Management expects commercial lending to lead growth in 2026, with a focus on C&I and commercial real estate [22][23] Question: Margin trends and interest rate assumptions - The company anticipates a slight margin expansion in Q1 and further increases in subsequent quarters, assuming rate cuts [26][27] Question: Credit quality and non-performing loans - The increase in non-performing loans was attributed to one specific credit issue, with overall credit quality remaining stable [30][31] Question: Capital optimization and share repurchase plans - The company has a $13.5 million share repurchase authorization and will consider repurchases if they see value [39] Question: Leasing revenue expectations - Leasing revenue is expected to be lumpy, with a potential drop in the first quarter but an increase in subsequent quarters [40]

Financial Data and Key Metrics Changes - The company reported a 14% increase in adjusted EPS to $9.61 for the fourth quarter, and a 16% increase for the full year, exceeding previous guidance [5][6] - Organic growth reached 5% in the fourth quarter, the highest level of the year, with bookings up 10% in the quarter and 6% for the full year [4][12] - Segment EBITDA margins improved by 60 basis points to 24.8% in the fourth quarter, driven by volume leverage and productivity initiatives [4] Business Line Data and Key Metrics Changes - Engineered Products revenue declined due to lower volumes in vehicle services, but margins improved by over 200 basis points due to cost management and product mix [7] - Clean Energy & Fueling segment saw a 4% organic growth, led by strong shipments in clean energy components and North American retail fueling software [7][8] - Imaging and ID segment grew 1% organically, maintaining a strong EBITDA margin of 28% despite some margin pressure from foreign currency translation [8] - Pumps & Process Solutions experienced an 11% organic growth, driven by demand in biopharma components and digital controls [9] Market Data and Key Metrics Changes - Climate and Sustainability Technologies posted a 9% organic growth, with significant demand for CO2 refrigeration systems and record shipments in the U.S. [9] - The company noted robust demand across all geographies for brazed plate heat exchangers, particularly in North America [17] Company Strategy and Development Direction - The company is focused on organic investment as the highest priority for capital spending, with a significant increase in capital spending in 2025 [12][14] - The outlook for 2026 is positive, with expectations of double-digit EPS growth and strong demand trends across the portfolio [6][19] - The company is exploring both organic growth and acquisitions, with a current acquisition pipeline focused on proprietary opportunities [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, with no significant headwinds expected in individual end markets [6][19] - The company anticipates solid volume leverage and carryover benefits from prior restructuring efforts, supporting its long-term growth trajectory [19] - Management highlighted the importance of monitoring input costs and potential pricing actions to maintain margins [30][42] Other Important Information - Free cash flow for the fourth quarter was $487 million, representing 23% of revenue, with a full-year free cash flow result of 14% of revenue [11] - The company initiated a $500 million accelerated share repurchase program, reflecting a disciplined approach to capital deployment [6] Q&A Session Summary Question: Price cost management for the year - Management expects to manage raw material costs with a price increase of 1.5-2% embedded in guidance [28] Question: Changes in positive outlook for the economy - Management confirmed no changes to their positive outlook, citing strong organic growth and good backlog performance [30] Question: Operating leverage expectations for segments - Management indicated that DCEF will benefit from prior restructuring, with margin enhancements expected to be back-end loaded [35] Question: Growth outlook for the year - Management acknowledged a conservative growth forecast of 4%, considering input costs and backlog visibility [41] Question: Retail fueling CapEx cycle details - Management noted that the retail fueling market is experiencing a CapEx cycle primarily in North America, with increased spending expected [61] Question: Portfolio management and potential divestitures - Management is currently comfortable with the portfolio but remains open to considering divestitures if beneficial [121] Question: Incremental margins and growth factors - Management indicated that incremental margins are expected to remain strong, with potential upside from various segments [72] Question: Capacity expansion and internal initiatives - Management confirmed that CapEx is decreasing as restructuring efforts are completed, with a new plant in North Carolina planned for future growth [90]

Financial Data and Key Metrics Changes - For the fourth quarter, the company reported net income of $21 million, an increase of $16.1 million or 327.2% compared to the previous quarter [9] - Diluted earnings per share for the fourth quarter were $0.70, an increase of $0.54 per share linked quarter [9] - The company reported net income of $69.2 million for 2025, a decrease of $19.3 million or 21.8% compared to $2.91 for 2024 [10] - The net interest margin expanded to 2.98%, an increase of 4 basis points from the previous quarter [16] Business Line Data and Key Metrics Changes - Fourth quarter new loan production totaled approximately $327 million, compared to $500 million in the third quarter [4] - Loans as of December 31st were $4.18 billion, a linked-quarter increase of $52.7 million or 1.1% [10] - Non-performing assets increased by $2.6 million during the fourth quarter but remained low at 0.45% of total assets [7][11] Market Data and Key Metrics Changes - The Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate [8] - The loan pipeline rebounded to just over $2 billion after dipping to $1.5 billion mid-quarter [6] Company Strategy and Development Direction - The company is focused on restructuring its available-for-sale securities to enhance future net interest income and provide balance sheet flexibility [3] - There is an ongoing initiative to build out a data platform to improve insights into raw data across multiple systems [24] - The company remains open to strategic acquisitions, particularly in areas where it has a limited presence [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2026, anticipating loan production to exceed 2025 levels despite headwinds from payoffs [41] - The company is actively monitoring market conditions for potential opportunities arising from M&A activity in Texas [51] Other Important Information - The company plans to redeem $93 million of subordinated notes due in 2030, which is expected to positively impact net interest margin [15] - The efficiency ratio improved to 52.28% as of December 31st, down from 52.99% [18] Q&A Session Summary Question: Details on 2026 expense growth and software projects - Management indicated that the 7% expense growth includes costs related to software initiatives and hiring strategies [21][22] Question: Thoughts on M&A activity in Texas - Management confirmed that they are open to strategic acquisitions, particularly in Dallas and Houston, to expand their presence [29][30] Question: Expectations for first quarter margin - Management expects a positive margin outlook for the first quarter, with improvements anticipated as the year progresses [36][39] Question: Fee income outlook for 2026 - The company is budgeting for a $1.5 million increase in fee income, primarily driven by trust income and brokerage services [47][48] Question: Thoughts on disruption from recent M&A activity - Management is actively looking for opportunities arising from employee and customer displacement due to recent acquisitions in the market [51]

Financial Data and Key Metrics Changes - The company reported a core return on assets (ROA) of 1.62% for the quarter and an adjusted ROA of 1.35% with an adjusted efficiency ratio of 64.45% [3][4] - Net interest income increased by 4.7% over the prior quarter, while adjusted non-interest income rose by 8.3% [17] - The tangible common equity (TCE) ratio improved to 8.72%, up from 8.24% in the prior quarter [25] Business Line Data and Key Metrics Changes - The retirement division generated total revenue of $17.3 million, a 4.6% increase over the prior quarter, driven by growth in asset and transaction-based fees [22] - The wealth management business saw revenues increase by 13.4% to $7.4 million, with end-of-quarter assets under management rising by 0.8% [24] - Core revenues from fee income grew by 7% year-over-year, maintaining over 40% of total revenues [9] Market Data and Key Metrics Changes - The company experienced a decline in loans by 1.3% over the previous quarter due to strategic downsizing of the loan portfolio [19] - Deposits decreased by 5%, primarily due to the calling in of broker deposits and other wholesale funding [20] - The loan-to-deposit ratio stood at 96.6%, with a deposit retention rate close to 95% since the acquisition of Home Federal [21] Company Strategy and Development Direction - The company aims for sustainable organic growth and a return to top-tier profitability, focusing on enhancing its commercial bank and improving returns [5][6] - A strategic entry into the mid-market commercial and industrial (C&I) space is expected to drive growth, with strong pipelines entering 2026 [7] - The company plans to double the number of wealth management advisors and invest in technology and AI to enhance scalability and improve margins [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic position and momentum as it enters 2026, highlighting strong core financial performance and successful execution of strategic initiatives [3][4] - The company anticipates loan growth in the mid-single digits and deposit growth in the low single digits for 2026, with a projected net interest margin of around 3.5% to 3.6% [26][27] - Management noted that the competitive environment for deposits is expected to remain strong, impacting net interest margin [79] Other Important Information - The company successfully converted its entire wealth business onto a new system, achieving 100% client retention [11] - The allowance for loan losses remained robust at 1.53% of total loans, with net recoveries reported [9] - The company has close to $2.8 billion in liquidity to support loan growth and other liquidity events [25] Q&A Session Summary Question: Balancing dynamics for 2026 regarding loan and deposit growth - Management aims to maintain a loan-to-deposit ratio around 95% to 96%, acknowledging potential seasonal fluctuations [34] Question: Insights on expenses and technology investments - Guidance includes team additions and variable costs related to technology investments [36][37] Question: Loan growth expectations and credit trimming - A significant portion of loan runoff was intentional, focusing on reducing marginal credits and enhancing C&I relationships [42] Question: Non-performing loans and resolution expectations - An increase in non-performing loans was related to a multifamily loan, with expectations for resolution in the first half of the year [45] Question: Margin trajectory and expectations for 2026 - Management expects gradual improvement in net interest margin, influenced by deposit flows [46] Question: Update on capital and acquisition opportunities - The company continues to explore potential acquisitions in the retirement and HSA space while prioritizing organic growth [54] Question: Competition in deposit pricing - The deposit market remains competitive, with rational pricing generally observed [79]

Financial Data and Key Metrics Changes - The company reported a core return on assets (ROA) of 1.62% for the quarter and an adjusted ROA of 1.35% with an adjusted efficiency ratio of 64.45% [3][4] - Net interest income increased by 4.7% over the prior quarter, while adjusted non-interest income rose by 8.3% [17] - The tangible common equity (TCE) ratio improved to 8.72%, up from 8.24% in the prior quarter [25] Business Line Data and Key Metrics Changes - The retirement division generated total revenue of $17.3 million, a 4.6% increase over the prior quarter, driven by growth in asset and transaction-based fees [22] - The wealth management business saw revenues increase by 13.4% to $7.4 million, with end-of-quarter assets under management rising by 0.8% [24] - Core revenues from fee income grew by 7% year-over-year, maintaining over 40% of total revenues [9] Market Data and Key Metrics Changes - The company experienced a decline in loans by 1.3% over the previous quarter due to strategic downsizing of the loan portfolio [19] - Deposits declined by 5%, primarily due to the calling in of broker deposits and other wholesale funding [20] - The loan-to-deposit ratio was reported at 96.6%, with a deposit retention rate close to 95% since the acquisition of Home Federal [21] Company Strategy and Development Direction - The company aims for sustainable organic growth and a return to top-tier profitability, focusing on enhancing its commercial bank and improving returns [5][6] - A strategic entry into the mid-market commercial and industrial (C&I) space is expected to drive growth, with strong pipelines entering 2026 [7] - The company plans to double the number of wealth management advisors and invest in technology and AI to enhance scalability and improve margins [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic position and momentum as it enters 2026, highlighting strong core financial performance and successful execution of strategic initiatives [3][4] - The company anticipates loan growth in the mid-single digits and deposit growth in the low single digits for 2026, with a net interest margin projected around 3.5%-3.6% [26][27] - Management noted that the competitive environment for deposits remains strong, with expectations of continued pressure on margins [80] Other Important Information - The company successfully converted its entire wealth business onto a new system, achieving 100% client retention [11] - The allowance for loan losses remained robust at 1.53% of total loans, with net recoveries reported [9] - The company has close to $2.8 billion in liquidity to support loan growth and other liquidity events [25] Q&A Session Summary Question: Balancing dynamics for 2026 regarding loan and deposit growth - The company aims to manage a loan-to-deposit ratio around 95%-96%, acknowledging potential seasonal fluctuations [34] Question: Insights on expenses and technology investments - The guidance incorporates team additions and variable costs related to technology investments [36][37] Question: Loan growth expectations and credit trimming - A significant portion of loan runoff was intentional, focusing on reducing marginal credits and enhancing C&I relationships [42] Question: Non-performing loans and resolution expectations - The increase in non-performing loans was related to a multifamily loan, with expectations for resolution in the first half of the year [45] Question: Tax rate expectations for 2026 - The anticipated tax rate for 2026 is 24% [73]

Financial Data and Key Metrics Changes - The company reported a 14% increase in adjusted EPS to $9.61 for the quarter and a 16% increase for the full year, exceeding the raised guidance from the third quarter [5][6] - Organic growth reached 5% in the fourth quarter, marking the highest level of the year, with bookings up 10% in the quarter and 6% for the full year [4][12] - Segment EBITDA margins improved by 60 basis points to 24.8% in the quarter, driven by volume leverage and productivity initiatives [4] Business Line Data and Key Metrics Changes - Engineered Products revenue declined due to lower volumes in vehicle services, but margins improved by over 200 basis points due to cost management and product mix [7] - Clean Energy & Fueling segment saw a 4% organic growth, led by strong shipments in clean energy components and North American retail fueling software [7][8] - Imaging and ID segment grew 1% organically, maintaining a strong EBITDA margin of 28% despite some margin pressure from foreign currency translation [8] - Pumps and Process Solutions experienced an 11% organic growth, driven by demand in biopharma components and digital controls for energy infrastructure [9] Market Data and Key Metrics Changes - Climate and Sustainability Technologies posted a 9% organic growth, with significant demand for CO2 refrigeration systems and record shipments in the U.S. [9] - The company reported a book-to-bill ratio of 1.21 in the Climate and Sustainability Technologies segment, indicating a strong outlook for 2026 [9] Company Strategy and Development Direction - The company is focused on organic investment as the highest priority for capital spending, with a significant increase in capital spending in 2025 [12][14] - The acquisition strategy remains strong, with $700 million deployed across four strategic acquisitions in high-growth markets [14] - The company aims for double-digit EPS growth in 2026, supported by solid demand trends and a strong order book [6][19] Management's Comments on Operating Environment and Future Outlook - Management expressed a constructive outlook for 2026, with no individual end market presenting a material headwind based on current visibility [6][19] - The company anticipates solid volume leverage and carryover benefits from prior restructuring efforts, contributing to a positive setup for 2026 [19] - Management noted that the demand for single-use biopharma components remains strong, driven by production growth and a shift to single-use manufacturing methods [17] Other Important Information - Free cash flow in the fourth quarter was $487 million, representing 23% of revenue, with a full-year free cash flow result of 14% of revenue, an increase of nearly $200 million over the prior year [11] - The company is in a strong position to deploy capital for growth opportunities while maintaining balance sheet flexibility [6][14] Q&A Session Summary Question: What are the expectations for price cost management this year? - Management expects to manage raw material costs with a price increase of 1.5-2% embedded in the guidance [27][28] Question: Has anything changed in the economic outlook recently? - Management remains positive, citing strong organic growth and good backlog performance [30] Question: What is the expected operating leverage for the Clean Energy & Fueling segment? - Management indicated that the segment will benefit from prior restructuring, with margin enhancements expected to be back-end loaded [35] Question: What is the growth outlook for the retail fueling CapEx cycle? - Management noted that the growth is primarily a North American phenomenon, with increasing CapEx in retail fueling expected to drive returns [61] Question: How does the company view potential divestitures? - Management is currently comfortable with the portfolio but remains open to considering divestitures if they align with shareholder interests [121] Question: What is the expected contribution of backlog to 2026 revenues? - Management indicated that the backlog is strong, particularly in refrigeration, and will be a key factor in revenue performance [134]

Financial Data and Key Metrics Changes - For the fourth quarter, the company reported net income of $21 million, an increase of $16.1 million or 327.2% compared to the previous quarter [9] - Diluted earnings per share for the fourth quarter were $0.70, an increase of $0.54 per share linked quarter [9] - For the full year 2025, net income was $69.2 million, a decrease of $19.3 million or 21.8% compared to 2024 [10] - The net interest margin expanded to 2.98%, an increase of four basis points from the previous quarter [16] Business Line Data and Key Metrics Changes - Loans as of December 31 totaled $4.18 billion, a linked-quarter increase of $52.7 million or 1.1% [10] - New loan production for the fourth quarter was approximately $327 million, down from $500 million in the third quarter [4] - Non-performing assets increased by $2.6 million during the fourth quarter but remained low at 0.45% of total assets [7] Market Data and Key Metrics Changes - The Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate [8] - The loan pipeline rebounded to just over $2 billion after dipping to $1.5 billion mid-quarter [6] Company Strategy and Development Direction - The company is focused on restructuring its available-for-sale securities to enhance future net interest income and provide balance sheet flexibility [3] - There is an ongoing initiative to build out a data platform to improve insights into raw data across multiple systems [24] - The company remains open to strategic acquisitions, particularly in key markets like Dallas and Houston [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the loan growth environment, despite challenges from payoffs and construction project maturities [41] - The company anticipates a positive margin outlook for the first quarter, with expectations for improvement as the year progresses [39] Other Important Information - The company plans to redeem $93 million of subordinated notes due in 2030, which is expected to positively impact net interest margin [15] - The efficiency ratio improved to 52.28% as of December 31, down from 52.99% [18] Q&A Session Summary Question: Details on the 7% expense growth budget for 2026 - Management indicated that the budget includes additional expenses related to software projects and hiring strategies [21][22] Question: Thoughts on M&A activity in Texas - Management confirmed that they are open to strategic acquisitions, particularly in areas where they have loan production offices [29][30] Question: Expectations for first quarter margin - Management expects a positive margin outlook, although it may be muted initially due to a one-time charge [36][39] Question: Loan growth expectations - Management anticipates loan production to exceed previous levels, despite headwinds from payoffs [41][42] Question: Buyback strategy moving forward - Management plans to be opportunistic with stock buybacks, balancing this with potential acquisitions [44] Question: Fee income outlook for 2026 - Management expects a significant increase in fee income, particularly from trust and brokerage services [47][48] Question: Future actions regarding the securities portfolio - Management will continue to be opportunistic with the securities portfolio, monitoring rates closely [50] Question: M&A opportunities related to market disruptions - Management is actively looking for opportunities arising from market disruptions, both in terms of clients and talent [51]

Financial Data and Key Metrics Changes - Alerus Financial reported a core return on assets (ROA) of 1.62% for Q4 2025, with an adjusted ROA of 1.35% and an adjusted efficiency ratio of 64.45% [3][4] - Net interest income increased by 4.7% over the prior quarter, reaching $45.2 million, while adjusted non-interest income grew by 8.3% [17][19] - The reported net interest margin (NIM) increased to 3.69%, with a core interest margin of 3.17%, reflecting a 12-basis point improvement from the previous quarter [18][19] Business Line Data and Key Metrics Changes - The retirement division generated total revenue of $17.3 million, a 4.6% increase over the prior quarter, driven by growth in asset and transaction-based fees [22] - The wealth management business saw revenues increase by 13.4% to $7.4 million, with end-of-quarter assets under management rising by 0.8% [23] - Core revenues from fee income businesses grew by 7% year-over-year, maintaining over 40% of total revenues [9][10] Market Data and Key Metrics Changes - Organic loan growth for 2025 would have been mid-single digits if not for strategic reductions in commercial real estate (CRE) and targeted loan sales [6] - The company experienced a 5% decline in deposits, primarily due to the calling in of broker deposits and other wholesale funding [20] - The deposit retention rate since the acquisition of Home Federal remains close to 95% [20] Company Strategy and Development Direction - Alerus aims to enhance its commercial banking operations and improve returns while focusing on long-term strategies, including a purposeful deleveraging plan [5][6] - The company is committed to organic growth and strategic hiring, particularly in the mid-market commercial and industrial (C&I) space [13] - Alerus plans to double the number of wealth management advisors and expand its national presence through partnerships and technology investments [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic position and momentum entering 2026, highlighting strong financial performance and integration capabilities [3][4] - The outlook for 2026 includes expectations for mid-single-digit loan growth and low single-digit deposit growth, with a projected net interest margin of 3.5%-3.6% [26][27] - Management noted that the economic environment appears favorable for businesses in 2026, with expectations of continued improvement in core businesses [68] Other Important Information - The tangible common equity ratio improved to 8.72%, providing a strong position for organic loan growth [25] - The company has approximately $2.8 billion in liquidity to support loan growth and other liquidity events [25] - Alerus is focused on maintaining a diversified revenue engine across banking, wealth, and retirement sectors [14] Q&A Session Summary Question: Balancing dynamics for 2026 regarding loan and deposit growth - Management aims for a loan-to-deposit ratio around 95%-96%, acknowledging potential increases during seasonal outflows [33] Question: Insights on expenses and technology investments - Guidance includes team additions and variable costs related to new technology platforms [35][36] Question: Loan growth expectations and credit trimming - A significant portion of loan runoff was intentional, focusing on improving the risk profile by reducing marginal credits [40] Question: Non-performing assets and resolution expectations - Management expects resolution of several non-performing assets in the first half of the year [72] Question: Tax rate expectations for 2026 - The anticipated tax rate for 2026 is 24% [73]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported net income of $21 million, an increase of $16.1 million or 327.2% compared to the previous quarter [9] - Diluted earnings per share for Q4 were $0.70, an increase of $0.54 per share linked quarter [9] - For the full year 2025, net income was $69.2 million, a decrease of $19.3 million or 21.8% compared to 2024 [10] - The net interest margin expanded to 2.98%, up 4 basis points from the previous quarter [15] - Non-interest income, excluding the net loss on the sale of AFS securities, increased by $494,000 or 4% for the linked quarter [16] Business Line Data and Key Metrics Changes - New loan production in Q4 totaled approximately $327 million, down from $500 million in Q3 [5] - Loans as of December 31 were $4.18 billion, a linked-quarter increase of $52.7 million or 1.1% [10] - The average rate of loans funded during Q4 was approximately 6.6% [10] - Non-performing assets increased by $2.6 million but remained low at 0.45% of total assets [7][11] Market Data and Key Metrics Changes - The Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate [8] - The loan pipeline rebounded to just over $2 billion after dipping to $1.5 billion mid-quarter [6] Company Strategy and Development Direction - The company is focused on restructuring its available-for-sale securities to enhance future net interest income and provide balance sheet flexibility [4] - There is an ongoing initiative to move core systems to OutLink and build a data platform to improve operational efficiency [22][23] - The company remains open to strategic acquisitions, particularly in targeted areas like Dallas and Houston [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2026, anticipating a good year for loan growth despite some headwinds from payoffs [43] - The company is actively monitoring market conditions for potential opportunities arising from M&A activity in Texas [51] Other Important Information - The company plans to redeem $93 million of subordinated notes on February 15, 2026, which is expected to positively impact net interest margin [14] - The efficiency ratio improved to 52.28% as of December 31, down from 52.99% [18] Q&A Session Summary Question: Details on 2026 expense growth and software projects - Management indicated a 7% increase in expenses for 2026, with a portion related to software initiatives aimed at improving efficiency [21][22] Question: Expectations for first quarter margin - Management expects a positive margin in Q1, though muted, with improvements anticipated as the year progresses [35][40] Question: Loan growth expectations - Management is optimistic about exceeding loan production targets, despite potential payoffs impacting growth [41][43] Question: Buyback strategy - The company will continue to be opportunistic with stock buybacks, balancing this with potential acquisitions [45] Question: Fee income outlook - An increase of approximately $1.5 million in fee income is budgeted for 2026, driven by trust income and brokerage services [48][49] Question: M&A activity and target asset size - The company is looking for opportunities in the lower asset size range, with a focus on strategic acquisitions that could help cross the $10 billion threshold [56]

Financial Data and Key Metrics Changes - The fourth quarter results showed organic growth of 5%, the highest level of the year, with revenue performance driven by strong trends in secular growth markets and improving retail conditions [3] - Adjusted EPS for the quarter was $9.61, up 14%, and 16% for the full year, indicating solid operational results [4] - Free cash flow in the fourth quarter was $487 million, or 23% of revenue, with full-year free cash flow at 14% of revenue, an increase of nearly $200 million over the prior year [10] Business Line Data and Key Metrics Changes - Engineered Products revenue declined due to lower volumes in vehicle services, but margins improved over 200 basis points due to cost management and product mix [5] - Clean Energy & Fueling saw a 4% organic growth driven by strong shipments and new orders, although margins were slightly down due to lower vehicle wash solutions [6] - Climate and Sustainability Technologies posted a 9% organic growth, with margins up 250 basis points, indicating strong demand for CO2 refrigeration systems [8] Market Data and Key Metrics Changes - Bookings were up 10% in the fourth quarter, with all five segments showing growth, indicating broad-based demand strength for 2026 [11] - The North American retail fueling market is expected to enter a new CapEx cycle, with strong demand for clean energy components [14] - Demand for brazed plate heat exchangers in North America is robust, particularly for liquid cooling applications in data centers [16] Company Strategy and Development Direction - The company is focused on organic investment as the highest priority for capital spending, with a significant increase in capital spending in 2025 [12] - The acquisition strategy remains strong, with $700 million deployed across four strategic acquisitions in high-growth markets [12] - The company aims for double-digit EPS growth in 2026, supported by solid demand trends and a strong order book [5][18] Management's Comments on Operating Environment and Future Outlook - Management expressed a constructive outlook for 2026, with no individual end market presenting a material headwind based on current visibility [4] - The company anticipates solid volume leverage on incremental revenue and carryover benefits from prior restructuring efforts [18] - Management remains optimistic about the overall economic environment, with strong bookings momentum and good production performance expected [25] Other Important Information - The company initiated a $500 million accelerated share repurchase program, highlighting its disciplined approach to capital deployment [4] - The balance sheet remains flexible, allowing the company to respond dynamically to market conditions [5] Q&A Session Summary Question: What are the expectations for price cost management this year? - Management expects to manage raw material costs with a price increase embedded in the guidance of 1.5-2% [22][24] Question: Has anything changed in the economic outlook recently? - Management has not seen any changes that would alter their positive view on the economy and business [25] Question: What is the expected operating leverage for DCEF and DCST segments? - Management indicated that DCEF will benefit from prior restructuring, while DCST saw a margin jump in Q4 and expects further improvements [30] Question: What is the growth outlook for 2026? - Management is guiding for 4% growth, which is considered conservative based on current visibility and backlog [36] Question: How is the retail fueling CapEx cycle developing? - The retail fueling market is experiencing a resurgence in North America, with expectations for accelerating demand [54] Question: What is the outlook for the natural gas power generation side? - The company supplies components for both large and small turbines, with significant follow-on CapEx expected in the back half of 2026 [87] Question: Are there any plans for divestitures? - Currently, the company is comfortable with its portfolio but remains open to considering divestitures if they align with shareholder interests [113]