Q4 2024 First Business Financial Services Inc Earnings Call
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Speaker Change: Good afternoon. Welcome to the First Business Financial Services 4th Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: Please note that this event is being recorded. I would now like to turn the conference over to First Business Financial Services, Inc. CEO, Corey Chambas. Please go ahead, sir.
Corey Chambas: Good afternoon everyone and thank you for joining us. We appreciate your time and your interest in First Business Bank. Joining me today is our President and Chief Operating Officer Dave Seiler and our CFO Brian Spielmann. Today we'll discuss our financial performance along with some operational highlights followed by a Q&A session.
Corey Chambas: I'd like to direct you to our 4th quarter earnings release and investor presentation, which are available through our website at ir.firstbusiness.bank. We encourage you to review these alongside our other investor materials.
Corey Chambas: Before we begin, please note this call may include forward-looking statements, and the company's actual results may differ materially from those indicated in any forward-looking statements.
Corey Chambas: Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are listed in the earnings release and the company's most recent annual report on Form 10-K, and as may be supplemented from time to time in the company's other filings with the SEC.
all of which are expressly incorporated herein by reference.
Corey Chambas: We are pleased to report an outstanding quarter. You'll see that we had some unusual items which boosted our reported earnings by about 28 cents. Even stripping that away our earnings were excellent, up 15% from the third quarter and 24% from Q4 2023.
Corey Chambas: Our operating model continued to do what it's built to do. It produced strong loan growth, a strong and consistent net interest margin, and thus strong revenue growth, as well as positive operating leverage.
Corey Chambas: As a result, we posted record earnings on both a pre-tax, pre-provision basis in addition to the bottom line. Our priority is always to grow shareholder value, and we saw continued growth in tangible book value per share, which was up 23% annualized from the third quarter.
Corey Chambas: These results capped off a solid year and at the end of the call I'll cover how we performed overall for the first full year of our current five-year plan Now I'd like to pass it over to Dave to walk you through some of the business activity that drove our strong fourth quarter results
Dave?
Dave Seiler: Thanks Corey. You saw in our press release that our loan and deposit growth was strong. Loan balances grew $264 million over the same period last year. That's up approximately 10% which is our long-term growth goal.
Dave Seiler: Total deposits grew $310 million, or 11% from last year's fourth quarter. That included moderate growth of $57 million in core deposits, which was supplemented by our continued use of wholesale deposits to execute our match funding strategy.
Dave Seiler: The period end core deposit numbers are a point-in-time reflection, so you can expect to see some variance there as clients move money around as part of their business activity, such as paying out year-end bonuses or buying real estate and equipment. This is not unusual activity for our clients, especially at year-end.
We have a consistent, sticky base of core client deposits.
Dave Seiler: Because we are a business-only bank, our account balances are larger than average. The strength and stability of these relationships is reflected in our Net Promoter Score.
Dave Seiler: Updated scores were recently released and First Business Bank earned a score of 70 from our clients which is nearly three times the average score of 24 reported for the banking industry. This reflects our outstanding team and our recent employee engagement metrics validate this.
Dave Seiler: This ability to attract and retain engaged employees who develop deep client relationships is critically important to our proven ability to achieve our growth goals.
Dave Seiler: For the reasons I just stated, we managed to average core deposits for a period rather than ending balances. On average, our core deposits were up 13% year over year, and over the last 5 years, deposits have grown at a 12% compound annual rate.
Dave Seiler: Over the past few quarters, we've further increased our focus on deposit relationship generation, enhancing how we incent our bankers, and adding new treasury management experts in our Southeast and South Central markets, and we're seeing great results.
Dave Seiler: Slide 19 in our investor presentation shows 11% year-over-year growth in Treasury management fees which is an indicator that we are adding new commercial relationships and we continue to expect 10% growth on an annual basis.
Dave Seiler: Our pricing initiatives and commitment to high quality growth have supported our goal to maintain a stable net interest margin in the range of 360 to 365 basis points, and we continue to view this as an appropriate range looking ahead.
Dave Seiler: As we look into 2025, we see opportunities for strong growth in several areas. Our southeast Wisconsin and Kansas City markets should see continued improvement, as we have grown our teams in both of these markets.
Dave Seiler: Our SBA lending team is showing solid traction under its new leadership. In 2023, we hired a new leader for this team. And with the expanded team he's put in place, we are seeing our pipelines improve.
Dave Seiler: You can see the flow through to gains on SBA loan sales and fee income, which more than doubled compared to the third quarter and was up over three times from the fourth quarter of 2023.
Dave Seiler: Since we've shifted our mix toward loans with a construction component, a greater portion of SBA loans in our pipeline need to complete construction and fully fund before they are eligible for sale.
Dave Seiler: This can create variability in terms of the amount of loans available for sale in a given quarter.
Dave Seiler: Additionally, our sell versus hold strategy for SBA loans, which is largely dependent on premium levels, may also impact our gains in a given quarter. However, on an annual basis, we expect 2025 to be stronger for production and gain on sale volume.
Dave Seiler: That's a nice segue to total revenue. Revenue growth is a real highlight this quarter, and fee income in particular, which was up 13% compared to both last quarter and the prior year quarter.
Dave Seiler: You can see the growth in fee income contribution over time on slide 12 of the investor presentation. We see this strong momentum as an outcome of our team's solid execution of our strategic plan that is focused on revenue diversification and 10% annual revenue growth.
Dave Seiler: In the fourth quarter, we saw meaningful pickups in SBA gains and deposit service charges, as I just mentioned.
Dave Seiler: Private wealth fees, which now comprise 43% of our fee income and represent an ever-growing annuity stream for our bank, continue to expand due to our private wealth team's consistent growth.
Dave Seiler: Swap fees were strong as clients utilized swaps to lower their interest rate risk.
Dave Seiler: Income earned from SBIC fund investments continue to reflect the value of these relationships as well as the inherent variability in the timing of income recognition.
Dave Seiler: Given the historically strong returns from these investments, we plan to continue investing in SBIC funds, fully investing our 5% of total capital allowed over time.
Dave Seiler: The diversification we've built into our revenue profile provides a buffer against reliance on any one source.
I'd like to talk briefly on asset quality.
Dave Seiler: As we said last quarter, we are pleased with how our portfolio is performing and have no areas of particular concern.
Dave Seiler: The tick up in NPAs reflects what we believe to be a normalization from the unusually low level in recent years.
Dave Seiler: We do continue to see isolated weakness in the transportation sector of the equipment finance portfolio. At December 31st, we had 41 million of transportation loans in the portfolio, down from 61 million at the start of the year.
Dave Seiler: As a reminder, we stopped lending to the transportation sector in the first quarter of 2023 and the remaining transportation loans in the portfolio have an average remaining life of only 34 months.
Dave Seiler: Based on what we are seeing today with continued low spot rates for trucking and depressed equipment values, we expect the credit impact of this portfolio to be in line with the past several quarters for this foreseeable future.
Dave Seiler: The non-transportation portion of the Equipment Finance Portfolio has performed better than our expectations.
Dave Seiler: Of course, we're always looking closely at the migration in the portfolio. Our weighted average risk rating has barely moved.
Dave Seiler: We continue to wait out the bankruptcy proceedings process for the 6.2 million ABL credit mentioned in previous quarters. We continue to expect full repayment on this credit, but unfortunately it continues to inflate our otherwise healthy level of NPAs.
Dave Seiler: We have one 6.9 million dollar loan to a borrower in the equipment wholesale business that we moved to non-performing status during the quarter.
Dave Seiler: This is a specific business situation and is not indicative of any trend.
Dave Seiler: Looking at our accruing past due loans, there is a modest uptick related to one client whose payment was delayed and was paid in full in January but missed the 1231 reporting date.
Dave Seiler: Our asset quality measures continue to reflect the diversified and solid risk profile of our portfolio in 2024.
Brian Spielmann: I'll wrap up and reiterate that our bankers are hard at work executing our strategic initiatives. We see opportunity across our franchise and are executing to earn that business. We always say that the best team wins and our team is delivering. Now I'll hand it off to Brian.
Brian Spielmann: Thanks, Dave. I'll go a little deeper into our financial highlights for the fourth quarter.
Brian Spielmann: To start, let's cover the tax and recourse benefits that boost our reported net income.
Brian Spielmann: The table on the front page of the earnings release breaks out these items at a high level.
Brian Spielmann: The first is the update to our SBA recourse reserve estimate, which was large for the quarter, but basically nets to zero for the full year. The fourth quarter change in estimate amounted to about $686,000, or 7 cents on EPS.
Brian Spielmann: As of year-end, the SBA recourse reserve outstanding is $645,000. This one-time change is not indicative of future expectations, and we believe the recourse provision run rate will remain consistent with the past several quarters going forward.
Brian Spielmann: The bigger item is the income tax adjustment resulting from the semi-annual review of our state deferred tax asset valuation allowance related to the 2023 Wisconsin Commercial Loan Income Exemption.
Brian Spielmann: This rule, which significantly reduces FBB's state income tax, allows financial institutions to exclude from their income any interest fees and penalties from commercial loans of $5 million or less provided to Wisconsin residents for business or agricultural purposes.
Brian Spielmann: Fourth quarter review included adjustments to our 10-year state taxable income forecast based on the 2023 actual tax return, as well as updates on other variables.
Brian Spielmann: As a result of this analysis, we reversed about half of the DTA valuation allowance that was established in 2023 when the law change was enacted.
Brian Spielmann: As you saw in the release, this amounted to about 21 cents of EPS for the quarter.
Brian Spielmann: As Dave mentioned, our ability to produce net interest margin that is strong and stable compared to peers contributed to our solid performance.
Brian Spielmann: Fourth quarter margin of $3.77 benefited from high fees earned in lieu of interest that grew $1.4 million from the linked quarter.
Brian Spielmann: Fees in lieu of interest refers to the significant and recurring but variable amount of interest income we earn from items like prepayment fees and asset based loan fees.
Brian Spielmann: They contributed 27 basis points to the reported margin for the fourth quarter, compared to 12 basis points in the third quarter and 14 basis points in the fourth quarter of 2023, which are more typical levels.
Brian Spielmann: Exploiting these fees, our adjusted NIM was $348 for the fourth quarter compared to $350 in the late quarter.
Brian Spielmann: Margin remains strong and consistent due to our successful management of rates on both sides of the balance sheet, before and after the Fed's rate cuts in the third and fourth quarters.
Brian Spielmann: We continue to see our differentiator match funding strategy and relatively neutral balance sheet sensitivity set us apart in the industry.
Brian Spielmann: Dave covered fee income and the great activity we're seeing there. Just a few additional notes.
Brian Spielmann: Ongoing variability in swap fees and returns on SPIC funds are expected.
Brian Spielmann: Our SWOT fee income will continue to vary quarterly based on the CRE activity, the rate environment, and client preference.
Brian Spielmann: SBI's fee income is driven by an interest income in the portfolio and unrealized, unrealized gains.
Brian Spielmann: While they experienced a strong year in 2023 for realized gains, 2024 was slower and more reliant on interest income only as the funds continued to invest in new companies.
Brian Spielmann: We saw an uptick in Q4 and expect realized gains will pick up again in 2025 as existing funds mature.
Our expenses had some moving parts this quarter.
Brian Spielmann: Total expenses were up modestly, about $45,000 compared to the third quarter.
This includes two off-setting items.
Brian Spielmann: The $687,000 SBA recourse reserve release and about $500,000 in costs related to a change in credit card vendors.
Brian Spielmann: We don't expect any additional future expenses related to this conversion.
Brian Spielmann: We believe compensation expense for Q4 is a decent starting point for looking at a 2025 run rate.
from that starting point.
Brian Spielmann: We expect we'll see a pickup due to vacancies for existing positions we expect to fill throughout the year anticipated new hires The new year reset on Social Security and merit increases of approximately 3.5% which is lower than the previous two years
Brian Spielmann: When we think about expenses, our primary objective is achieving annual positive operating leverage. Expense growth at some level below revenue growth, which is targeted at 10% or above.
Brian Spielmann: We're able to pull levers to manage this on a long-term basis.
Brian Spielmann: On slide 15 of the investor presentation, you can see our historic success in not only achieving this goal, but far outperforming our peers.
Next, Texas.
Brian Spielmann: As I mentioned, the fourth quarter saw a significant change in estimated state taxes, which brought our effective tax rate down to 5.8%.
Brian Spielmann: Excluding the evaluation allowance adjustment, our effective tax rate would have been 16.7% for the quarter, compared to 18.3% in the late quarter.
Brian Spielmann: We believe our effective tax rate will be between 16% and 18% in 2025.
Brian Spielmann: Finally, we feel good about our capital levels and our strong earnings are generating capital to facilitate our expected organic growth.
Brian Spielmann: With CET1 above 9% as of year-end, we will balance asset growth with the potential use of our shared buyback program to optimize long-term shareholder return.
And now I'll hand it back over to Corey.
Corey Chambas: Thank you, Brian. I want to provide a brief update on our progress against our strategic plan for 2024 through 2028, which is now one full year in.
Corey Chambas: As you know, we kicked off our current five-year plan last January, and we're very happy with our results to date. You can see our strategies and the goals we used to measure the success on slides 7 and 8 of our investor presentation.
Corey Chambas: We are far exceeding our 10% plus target on tangible book value growth. Our full year 2024 return on average tangible common equity was strong at 15.4%.
Corey Chambas: It was 14.6% after excluding the effect of this quarter's unusual items, marching toward our goal of 15% plus.
Corey Chambas: Total revenue growth for 2024 was 6.6 percent. This reflected strong growth in net interest income of 10.3 percent, which was offset by lower levels of SBIC and swap fee income throughout the year.
Speaker Change: As Dave and Brian laid out, we believe the momentum we saw in the fourth quarter positions us nicely to achieve our targeted 10% revenue growth in 2025. While not a specific target, we aim for positive operating leverage on an annual basis. It allows us to achieve our efficiency goals.
Speaker Change: For full year 2024, we reported an efficiency ratio of 60.61%, very nearly approaching our five-year plan target of less than 60% by 2028.
Speaker Change: Finally, Dave mentioned our updated Net Promoter Score and Employee Engagement Metrics. It bears repeating that we are very proud of this. More importantly, the relative measure compared to our banking industry peers shows that we are an outlier by a long shot and in the right way.
Speaker Change: This is a testament to our culture and our team. We can't say it enough the best team wins
Speaker Change: I beat the strum quarter after quarter. Our strategic plan goes hand in hand with maintaining our entrepreneurial culture and it matters. The strategies we put in place to achieve our financial goals are working and we will continue to execute regardless of what the economy brings us in 2025 and beyond.
Speaker Change: We believe this will deliver on our ultimate goal to generate top-tier total shareholder returns, a goal we've overachieved on again in 2024.
Speaker Change: I want to thank you for taking time to join us today. We're happy to take your questions now.
Thank you, sir.
Speaker Change: Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And should you wish to decline from the polling process, please press star followed by 2. If you're using a speakerphone, you will need to lift the handset first before pressing any keys.
Speaker Change: Please go ahead and press star 1 now if you do have any questions.
Speaker Change: First we will hear from Daniel Tamayo at Raymond James. Please go ahead.
Thank you. Good afternoon, everybody.
Danny, Danny, please start.
Speaker Change: Maybe starting on the loan growth, so I think I heard you guys reiterate the the 10% annual loan growth guidance. Just kind of within that, I'm looking at the the C&I bucket which was down a bit in the fourth quarter, so maybe you could give a little color around that and then your thoughts on, you know, within that 10% growth next year, where C&I fits and kind of...
Speaker Change: what the mix you're looking at or you're expecting is next year, this year.
Speaker Change: Yeah, Danny, I would say next year we think C&I will be the bigger portion. CRE is still a little slower, as it has been. You know, we continued to fund up some things this last year that were projects.
Speaker Change: multi-family projects, things like that that were in the construction phase and that that still flowed through to last year but that's you know that activity slowed throughout the year so I think that's going to continue to be the case.
Speaker Change: you know given the rate environment and cost environment and we would expect that CNI would have a higher percentage of the growth
you know, faster growth rate.
Okay, and any color on the fourth quarter decline?
Speaker Change: Well we had, you know, in the fourth quarter we had some asset-based lending loans pay off, so we went down a little bit there. That's probably...
Speaker Change: The only unusual, you know, or atypical item that I can think of off the top of my head.
Speaker Change: Got it. Okay, so just a little bit of volatility and then maybe on the other side on the funding side
Speaker Change: Just, you know, you talked about your ability to continue to grow core deposits and then kind of fill the gap with
Speaker Change: with the wholesale, but, you know, curious where you see opportunities to grow core deposits and where maybe in your mind that that wholesale versus core mix ends up longer term.
Dave Seiler: I'll start on the mix and then Dave can talk about growing the core. I would say on the mix, it's really dependent on the other side of our balance sheet because we're going to use wholesale to match fund.
Dave Seiler: And that's, you know, so that's always going to be a part of what we do because, as you know, we don't like taking interest rate risk. We like a match-funded balance sheet. So we'll always be using some of that, you know, probably in the same proportion that we've been doing over the last several years, where it's...
Dave Seiler: you know, 70 to 80% of our funding is in market deposits.
Dave Seiler: you know, 20 to 30 is wholesale so that we can match on the balance sheet.
Dave Seiler: Dave, why don't you talk about initiatives relative to that. Right. Well, it's a little bit in terms of growing our core deposits, it's really doing what we have been doing over the last five years. I mean, if you look over the last five years,
Dave Seiler: We've grown our core deposits at a 12% annual rate, and we do that by having treasury management folks that are outbound and they are far more sales oriented, I think, than you'll find in other organizations.
And it's just adding new relationships.
Dave Seiler: Kind of check to see that we're adding new relationships is our Treasury management fee income
that grew 11% for us.
Dave Seiler: We just stay focused on it and add the people we need and we've also in the company put the right incentives around deposits so it's very attractive for bankers to bring in deposits.
Dave Seiler: and Danny, we've added sales people on that side, on the treasury management side, and we also did something I think is pretty unusual in banking, is to take a really successful
Dave Seiler: commercial lender, and that person flipped over to the treasury management side to lead one of our treasury management teams.
Dave Seiler: and is focused on TM. As you know, most banks treat treasury as...
Dave Seiler: more like order takers, and they don't have sales oriented people with the same kind of new business development goals and activities, expectations that they do on the lending side, but we do. So
Dave Seiler: We just have a different mindset about it, and we continue to work on adding talent because it's all about the people and the talent.
Speaker Change: Great. Well, it sounds like you guys are set up for another good year. Thank you.
Thanks.
Speaker Change: Thank you. Next question will be from Jeff Rulis at D.A. Davidson. Please go ahead.
Thanks. Good afternoon.
Jeff Rulis: ask you about your outlook on the kind of loan yields repricing, some headwinds there. I want to, if you think about kind of maturities and what's sort of upcoming, you get back to sort of neutral by quarter or maybe new production begins to lift that average loan yield. Any thoughts there?
Jeff Rulis: Well, we'd like to think about it more in our 360-365 margin, but specific to the earn-as-a-yield, I would say we have some reinvestment opportunity left.
Jeff Rulis: To improve that as long as well as with our C&I lending mix improving to that came down a little bit we talked about the ABL
Jeff Rulis: Payoffs and amortization there. We think that mix of C&I business improves as well in 25 driving those those yields
Jeff Rulis: Higher and offsetting any remaining downward pressure from the short-term market rates on the floating side of the balance sheet
Jeff Rulis: And just jumping in there, Jeff, and again, anything that's going to be fixed rate that's maturing, we're going to be match funding it again. So those, those
Jeff Rulis: Those yields correlate and we'll, you know, they're moving together. So the repricing there would be repricing down the fixed rates on the Deposit side, match funded deposit side if we have some something ballooning and we're rewriting that
Jeff Rulis: Got it. So if we kind of slam that together in the 348 core, your expectations ahead. I appreciate the 360, 365 guide and I guess if the...
tease and lou are
Jeff Rulis: I guess the expectation is that you're pretty stable margin, or are you optimistic that maybe you've been through some of the rate cut impact?
Jeff Rulis: I guess the expectation on the core margin relative to 348, what would that be?
Jeff Rulis: Yeah, we like stable, we think stable is possible, and any...
Dave Seiler, Brian Spielmann
Expect that to continue.
Speaker Change: Okay, and Brian, while I have you, just confirming the, you said the tax rate was, was...
Brian Spielmann: 1616 to 18 or one six yeah one six I wrote that 16.7
Brian Spielmann: And then if we're thinking about kind of your guides of loan growth and asset growth and operating leverage, feel safe to say the expense implied rate is
Brian Spielmann: and a high single-digit mid-to-high to some margin of improvement there is that is that fair? Correct, that's fair.
Brian Spielmann: okay last one if I could squeeze it in there just the the non-accrual increase in the quarter
You know outside of the
Brian Spielmann: The one loan you had identified, could you just review that again with the pieces that came in?
in the fourth quarter.
Brian Spielmann: Yeah, the largest one was a single C&I relationship in the wholesale equipment industry that we've evaluated and reserved for, if we think appropriately, a specific reserve for that, and that was the biggest chunk of the increase, was that one C&I.
See you night loan in the wholesale equipment industry
Speaker Change: Other equipment finance or trying to get yes, so what else is it? I'll take it a small ticket. Yep, correct
Okay, thank you
Speaker Change: Thank you. Next question will be from Damon Del Monte at KBW. Please go ahead.
Speaker Change: Hey, good afternoon, guys. Hope everybody's doing well today. Just to kind of follow up on the last questions on credit, just curious as to how you guys are looking at the reserve level right now. You know, is there any concern that
the remaining maturities, you know in
uh
Speaker Change: sorry the remaining maturities in the transportation book that there could be a need to build reserve levels a little bit so just kind of curious trying to back into kind of the outlook for the for the provision you know given potential charge off volatility that would require maybe some additional reserving
Speaker Change: As of 12-31, we think we're adequately reserved, in particular in the small ticket space where we have a more of a methodical process around past dues, where the charges we are having on a quarterly basis we are reserved for. There's a kind of an in and out within the reserve as we're going through that process.
Speaker Change: to absorb those as we go forward. And so the rate that we're at right now around that 120 all in, including the unfunded, the pickup there from the prior quarter was more towards that specific reserve on the one CNI loan that we added this quarter.
Got it, okay.
Speaker Change: Okay, great. And then maybe help us think a little bit about fee income. I think the commentary was that, you know, gains from the SBIC investments were lower this year, but you would expect to pick up here in 25. So, you know, can you give a ballpark on what you might expect for that benefit to fee income going forward?
Speaker Change: Yeah, so kind of sticking with the 10% mantra, we think that 10% holds true for all parts of revenue, same with fee income while we were down this year. We think that that Q4...
Speaker Change: place of about 8 million is a good place to start and 25 We like the components that are going into that total 8 million dollars And they'll be you know puts and takes throughout the year, but that's a great place to be and we think year over year We can we can Grow that 10% along with our other revenue items
Speaker Change: Okay, great. That's all that I had. Everything else was asked and answered. So, thank you very much.
Thanks, Danny.
Thank you.
Speaker Change: As a reminder, ladies and gentlemen, if you have a question, please press star followed by one on your telephone keypad. Next, we will hear from Nathan Race at Piper Sandler. Please go ahead.
Nathan Race: Hey guys, good afternoon. Thanks for taking the question. You obviously had a nice funding basis in the quarter. I think you kind of shook out around 32% when I look at your total cost of interest, bearing liabilities. You know, just curious if the Fed remains on hold over the course of this year, kind of where you see your funding
Beta is shaking out over the next few quarters here.
Nathan Race: I think on the variable side of the balance sheet we have good opportunity and we are relatively matched in terms of we think about our SOFR products and our prime asset products. We also then have our SOFR indexed liability accounts. Remaining non-managed deposits we feel our ability to maintain
Nathan Race: maintain those where our betas are consistent on the liability side with the asset side and that gets back to our our kind of message of adjusted interest margin neutrality.
Nathan Race: Okay, got it. And then, you know, just curious, you know, in terms of how you guys are thinking about capital deployment this year, you know, Corey, you mentioned, you know, sharing purchases may be an ongoing consideration, but just curious if it's just mostly going to be kind of orientated towards organic growth, if you see, you know, room or opportunities to increase the common going forward as well.
Nathan Race: using the capital for that. We always look at our dividends. We've had dividend increases, you know, for a lot of years since we 12 years, I think, since
Nathan Race: the great financial crisis where we held it steady through that we didn't cut we held it steady and then have grown consistently since.
Nathan Race: on an annual basis. So that's been our pattern, and I think over the last five years,
The CAGR on dividend growth is double digits as well.
were the double-digit people, I guess, and so...
Nathan Race: That's something we'll always look at. And then if we keep doing really well, like we did this last quarter, then we'll be generating capital in addition to those needs beyond.
Nathan Race: growth and beyond the dividend, and then we can be opportunistic on buybacks, should that be, you know, should that make sense. And you might recollect that we
Nathan Race: We put a buyback in place about a year ago, and on that one, that's perpetual, so it's not one that, you know...
Nathan Race: is rolling off on an annual basis. That's what we have done in the past so it's always out there for us and we'll constantly be monitoring it.
Speaker Change: Okay, that's really helpful. If I could just ask one more. I mean, you're tracking kind of ahead of your target plan on the efficiency ratio, you know, coming out of the fourth quarter.
Speaker Change: Yeah I would say it's a march downward. We had our board meeting this morning and
Speaker Change: That's a graph that we have in there and it's a it's been a pretty steady march downward Because we've had positive operating leverage for the last six years in a row So if you keep generating positive operating leverage, you're going to keep
Speaker Change: driving that down incrementally. We're always going to be investing in technology, people, etc. as a growth company, but
Speaker Change: and Dave Chambas, Dave Seiler, Brian Spielmann, Dave Chambas, Brian Spielmann, Dave Chambas,
Speaker Change: We're never going to be super, super low on efficiency ratio. But the math just causes it to go down if you have positive operating leverage every year.
Right, that's helpful. I appreciate the color. Thanks guys.
Thanks.
Speaker Change: Thank you. And at this time, gentlemen, we have no other questions registered. Please proceed.
Thanks for joining the call today, we appreciate it.
everyone taking the time to...
Speaker Change: get an update on the company, how we're doing, and we're looking forward to speaking to you again next quarter as we move forward in 2025. Thank you.
Speaker Change: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have yourselves a good weekend.
Speaker Change: Both of which they embraced at the far end of their lives, winning the prize on their own.