Atlantic Union Bankshares Q4 2025 Atlantic Union Bankshares Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Atlantic Union Bankshares Corp Earnings Call
Speaker #1: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone.
Operator: To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Bill Cimino, Senior Vice President of Investor Relations. Please go ahead.
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Speaker #1: Please go Ahead .
Bill Cimino: Thank you, Livia, and good morning, everyone. I have Atlantic Union Bankshares President and CEO John Asbury, and Executive Vice President and CFO Rob Gorman with me today. We also have other members of our Executive Management Team with us for the question-and-answer period.
Speaker #2: Thank you . Olivia , and good morning , everyone . I've Atlantic Union Bankshares Corp president and CEO John Asbury and Executive Vice President and CFO Robert Gorman and Executive Vice President CFO , and Rob Gorman .
Speaker #2: With me today . We other members of our executive management team with us for the question and answer period . Please note that today's earnings release and the accompanying slide we are presentation , going through on this webcast are available to download on our investor website .
Bill Cimino: Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation, and in our earnings release for the Q4 and full year 2025. You'll also make forward-looking statements which were not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement except as required by law.
Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation, and in our earnings release for the Q4 and full year 2025. You'll also make forward-looking statements which were not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement except as required by law.
Q4 2025 Atlantic Union Bankshares Corp Earnings Call
Speaker #2: Investors, Atlantic Union Bankshares Corp. During today's call, we will comment on our financial performance using both GAAP and non-GAAP financial measures.
Speaker #2: Important information about these non-GAAP financial measures measures including reconciliations to comparable GAAP measures , is included in the appendix to our slide presentation and in our earnings release for the fourth quarter and full year 2025 .
Speaker #2: You will also make forward looking statements , which are not statements of historical fact and are subject to risks and uncertainties . There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward looking statements .
Speaker #2: We undertake no obligation to publicly revise or update any forward looking statement except as required by law . Please refer to our earnings release and our slide presentation issued today , as well as our other SEC filings for further discussion of the company's risk factors , including and other information regarding forward looking statements , including factors that could cause actual results to differ from those expressed or implied in the forward looking statement .
Bill Cimino: Please refer to our earnings release and our slide presentation issued today, as well as our other SEC filings for further discussion of the company's risk factors, including, and other information regarding the forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in a forward-looking statement. All comments made during today's call are subject to that safe harbor statement. At the end of today's call, we will take questions from the research analyst community. I'll now turn the call over to John. Thanks, Bill. Good morning, everyone, and thank you for joining us today. Atlantic Union Bankshares reported strong Q4 financial results, reflecting disciplined execution and successful integration of the Sandy Spring acquisition. We believe the adjusted operating financial results for the quarter showcase the organization's earning capacity.
Please refer to our earnings release and our slide presentation issued today, as well as our other SEC filings for further discussion of the company's risk factors, including, and other information regarding the forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in a forward-looking statement. All comments made during today's call are subject to that safe harbor statement. At the end of today's call, we will take questions from the research analyst community. I'll now turn the call over to John.
Speaker #2: All comments made during today's call are subject to that safe harbor statement , and at the end of today's call , we will take questions from the research analyst community .
John Asbury: Thanks, Bill. Good morning, everyone, and thank you for joining us today. Atlantic Union Bankshares reported strong Q4 financial results, reflecting disciplined execution and successful integration of the Sandy Spring acquisition. We believe the adjusted operating financial results for the quarter showcase the organization's earning capacity.
Speaker #2: I'll now turn the call over to John . Thanks , Bill . Good morning , everyone , and thank you for joining us today .
Speaker #2: Atlantic Union Bankshares Corp reported strong fourth quarter financial results, reflecting disciplined execution and successful integration of the Sandy Springs acquisition. We believe the adjusted operating financial results for the quarter showcased the organization's earning capacity, while merger-related charges continued to affect this quarter's results.
Bill Cimino: While merger-related charges continue to affect this quarter's results, the underlying operating performance supports our continued confidence in achieving the strategic goals associated with the Sandy Spring acquisition, namely the targets for adjusted operating return on assets, return on tangible common equity, and efficiency ratio. With the core systems conversion completed in October and only modest residual merger-related expenses anticipated in the Q1, we expect the noise associated with our merger-related expenses to decline. This means that we will be positioned, beginning with Q1 2026, to report unadjusted results that more clearly demonstrate the financial strength and operating efficiency we are committed to delivering for our shareholders. Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance, and long-term value creation for our shareholders.
While merger-related charges continue to affect this quarter's results, the underlying operating performance supports our continued confidence in achieving the strategic goals associated with the Sandy Spring acquisition, namely the targets for adjusted operating return on assets, return on tangible common equity, and efficiency ratio. With the core systems conversion completed in October and only modest residual merger-related expenses anticipated in the Q1, we expect the noise associated with our merger-related expenses to decline. This means that we will be positioned, beginning with Q1 2026, to report unadjusted results that more clearly demonstrate the financial strength and operating efficiency we are committed to delivering for our shareholders. Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance, and long-term value creation for our shareholders.
Speaker #2: The underlying operating performance supports our confidence in strategic continued achieving the goals associated with the Sandy spring acquisition , namely , the targets for adjusted operating return on assets , return on tangible common equity and efficiency ratio , with the core systems conversion completed in October and only modest residual merger related expenses anticipated in the first quarter .
Speaker #2: We expect the noise associated with our merger related expenses to decline . This means that we will be positioned beginning with Q1 2026 , to report unadjusted results that more clearly financial demonstrate the strength and operating efficiency .
Speaker #2: We are committed to delivering for our shareholders . Our commitment to creating shareholder value remains unwavering . We believe Atlantic Union is well positioned to deliver sustainable growth .
Speaker #2: Top tier financial performance and long term value creation for our shareholders . We believe the strategic advantages gained from the Sandy spring acquisition , combined with continued organic growth opportunities due to our robust presence and attractive markets , reinforce our status as the premier bank regional headquartered in the lower Mid-Atlantic .
Bill Cimino: We believe the strategic advantages gained from the Sandy Spring acquisition, combined with continued organic growth opportunities due to our robust presence and attractive markets, reinforce our status as the premier regional bank headquartered in the Lower Mid-Atlantic. I'll briefly cover our Q4 and full year 2025 highlights and share market insights before Rob presents the financial review. Here are the highlights for our Q4. Quarterly loan growth was approximately 6.3% annualized, ending the year at $27.8 billion. Our pipelines were higher at the end of the Q4 than they were at the start of the quarter, which suggests we are on track for loan growth consistent with our full year 2026 outlook.
We believe the strategic advantages gained from the Sandy Spring acquisition, combined with continued organic growth opportunities due to our robust presence and attractive markets, reinforce our status as the premier regional bank headquartered in the Lower Mid-Atlantic. I'll briefly cover our Q4 and full year 2025 highlights and share market insights before Rob presents the financial review. Here are the highlights for our Q4. Quarterly loan growth was approximately 6.3% annualized, ending the year at $27.8 billion. Our pipelines were higher at the end of the Q4 than they were at the start of the quarter, which suggests we are on track for loan growth consistent with our full year 2026 outlook.
Speaker #2: I'll briefly cover our Q4 and full year 2025 highlights and share market insights before Rob presents the Financial Review . And here are the highlights for our fourth quarter .
Speaker #2: Quarterly loan growth was approximately 6.3% annualized , ending the year at 27.8 billion . Our pipelines were higher at the end of the fourth quarter than they were at the start of the quarter , which suggests we are on track for loan growth consistent with our full year 2026 outlook .
Bill Cimino: While forecasting loan growth remains challenging in the still uncertain economic environment, we continue to expect 2026 year-end loan balances to range between $29 and $30 billion, inclusive of the negative impact from loan fair value marks. We observed a return to more typical commercial line utilization levels in the Q4. Loan production reached a record high in Q4 as our team gained momentum despite ongoing economic uncertainty, the Sandy Spring core systems conversion, and the CRE loan sale executed at the end of the Q2 of 2025. Additionally, we observed growing confidence among our client base, which, combined with seasonally strong lending trends, further supported our robust performance in the quarter. Our deposit base experienced typical year-end fluctuations due to activity from large commercial depositors, with some of these balances returning during the early weeks of the Q1. Our FTE net interest margin increased by 13 basis points to 3.96%.
While forecasting loan growth remains challenging in the still uncertain economic environment, we continue to expect 2026 year-end loan balances to range between $29 and $30 billion, inclusive of the negative impact from loan fair value marks. We observed a return to more typical commercial line utilization levels in the Q4. Loan production reached a record high in Q4 as our team gained momentum despite ongoing economic uncertainty, the Sandy Spring core systems conversion, and the CRE loan sale executed at the end of the Q2 of 2025. Additionally, we observed growing confidence among our client base, which, combined with seasonally strong lending trends, further supported our robust performance in the quarter. Our deposit base experienced typical year-end fluctuations due to activity from large commercial depositors, with some of these balances returning during the early weeks of the Q1. Our FTE net interest margin increased by 13 basis points to 3.96%.
Speaker #2: While forecasting loan growth remains challenging and was still uncertain , economic environment , we continue to expect 2026 year end loan balances to range between 29 and $30 billion , inclusive of the negative impact from loan fair value marks .
Speaker #2: We observed a return to more typical commercial line utilization levels in the fourth quarter. Loan production reached a record high in Q4 as our team gained momentum despite ongoing economic uncertainty.
Speaker #2: The Sandy spring Core systems conversion and the CRE loan sale executed at the second end of the quarter of 2025 . Additionally , we observed growing confidence among our client base , which , combined with seasonally strong lending trends , further supported our robust performance in the quarter .
Speaker #2: Our deposit base experienced typical year end fluctuations due to activity from large commercial depositors , with some of these balances returning during the early weeks of the first quarter .
Speaker #2: Our FTE net interest margin increased by 13 basis points to 3.96%, while improvement in accretion income contributed modestly. The main driver was our ability to reduce deposit costs while holding loan yields relatively flat compared to the prior quarter.
Bill Cimino: While improvement in accretion income contributed modestly, the main driver was our ability to reduce deposit costs while holding loan yields relatively flat compared to the prior quarter. Loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable-rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates. Importantly, this also demonstrates we are putting our interest rate accretion income and principal repayments from the acquired fixed-rate loan portfolios to work as those loans renew or reprice to higher market rates. Fee income was strong, primarily driven by loan-related interest rate swap fees and fiduciary and asset management fees, with both benefiting from the Sandy Spring acquisition. About 27% of interest rate swap income this quarter came from former Sandy Spring customers.
While improvement in accretion income contributed modestly, the main driver was our ability to reduce deposit costs while holding loan yields relatively flat compared to the prior quarter. Loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable-rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates. Importantly, this also demonstrates we are putting our interest rate accretion income and principal repayments from the acquired fixed-rate loan portfolios to work as those loans renew or reprice to higher market rates. Fee income was strong, primarily driven by loan-related interest rate swap fees and fiduciary and asset management fees, with both benefiting from the Sandy Spring acquisition. About 27% of interest rate swap income this quarter came from former Sandy Spring customers.
Speaker #2: Loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable rate loan yields due to increased accretion income, higher loan fees, and a repricing of renewed and new fixed rate loans at current market rates.
Speaker #2: Importantly, this also demonstrates we are putting our interest rate accretion income and principal repayments from the acquired fixed-rate loan portfolios to work as those loans renew or reprice to higher market rates.
Speaker #2: CNN.com was strong , primarily driven by loan related interest rate swap fees and fiduciary and asset management fees , with both benefiting from the Sandy spring acquisition .
Speaker #2: About 27% of interest rate swap income this quarter came from former Sandy spring customers , while Sandy spring had a asset swap program swap swap program as well established and mature .
Bill Cimino: While Sandy Spring had a nascent swap program, the AUB swap program is well established and mature. We expect ongoing growth in this area, though it's important to note that swap income may vary from quarter to quarter. Overall, credit quality showed continued strength and improvement, with our Q4 annualized net charge-off ratio coming in at one basis point. The net charge-off ratio for the full year was within our guidance at 17 basis points. Leading asset quality indicators remain encouraging. Q4 non-performing assets, as a percentage of loans held for investment, declined a further seven basis points to 0.42% from 0.49% in the prior quarter. Criticized and classified assets remained low at 4.7%. We believe credit underwriting, client selectivity, and loan loss performance have consistently been traditional strengths of AUB, Sandy Spring Bank, and American National Bank, reinforcing our continued confidence in asset quality.
While Sandy Spring had a nascent swap program, the AUB swap program is well established and mature. We expect ongoing growth in this area, though it's important to note that swap income may vary from quarter to quarter. Overall, credit quality showed continued strength and improvement, with our Q4 annualized net charge-off ratio coming in at one basis point. The net charge-off ratio for the full year was within our guidance at 17 basis points. Leading asset quality indicators remain encouraging. Q4 non-performing assets, as a percentage of loans held for investment, declined a further seven basis points to 0.42% from 0.49% in the prior quarter. Criticized and classified assets remained low at 4.7%. We believe credit underwriting, client selectivity, and loan loss performance have consistently been traditional strengths of AUB, Sandy Spring Bank, and American National Bank, reinforcing our continued confidence in asset quality.
Speaker #2: We expect ongoing growth in this area , although it's important to note that swap income may vary from quarter to quarter . Overall , credit quality showed continued strength in improvement with our fourth quarter annualized net charge off ratio coming in at one basis point .
Speaker #2: The net charge off ratio for the full year was within our guidance at 17 basis points , leading asset quality indicators remain encouraging .
Speaker #2: Fourth quarter non-performing assets as a percentage of loans held for investment declined a further seven basis points to 0.42% from 0.49% in the prior quarter .
Speaker #2: And criticized classified assets remain low at 4.7%. We believe credit underwriting, client selectivity, and loan loss performance have consistently been traditional strengths of AUB.
Speaker #2: Sandy spring Bank and American National Bank , reinforcing our continued confidence in asset quality . Before we discuss unemployment rates , I want to clarify we are comparing November to September figures since October data is unavailable due to the government shutdown .
Bill Cimino: Before we discuss unemployment rates, I want to clarify we are comparing November to September figures since October data is unavailable due to the government shutdown. Taking a step back, Virginia's unemployment rate remained unchanged at 3.5% in November compared to September, demonstrating notable resilience, especially since the national unemployment rate rose by 0.2 percentage points to 4.6% during the same timeframe. Maryland's unemployment rate rose to 4.2%, a 0.4 percentage point increase in September. This change aligns with our expectations, particularly considering the November data now includes federal government workers who took buyout plans. Despite the uptick, Maryland continues to outperform the national average during the same period. North Carolina's unemployment rate edged up 0.1 percentage points to 3.8%, remaining well below the national average.
Before we discuss unemployment rates, I want to clarify we are comparing November to September figures since October data is unavailable due to the government shutdown. Taking a step back, Virginia's unemployment rate remained unchanged at 3.5% in November compared to September, demonstrating notable resilience, especially since the national unemployment rate rose by 0.2 percentage points to 4.6% during the same timeframe. Maryland's unemployment rate rose to 4.2%, a 0.4 percentage point increase in September. This change aligns with our expectations, particularly considering the November data now includes federal government workers who took buyout plans. Despite the uptick, Maryland continues to outperform the national average during the same period. North Carolina's unemployment rate edged up 0.1 percentage points to 3.8%, remaining well below the national average.
Speaker #2: Taking a step back , Virginia's unemployment rate remained unchanged at 3.5% in November compared to September , demonstrating notable resilience , especially since the national unemployment rate rose by 0.2 percentage points to 4.6% during the same time frame .
Speaker #2: Maryland's unemployment rate rose to 4.2% , a point 0.4 percentage increase since September . This change aligns with our expectations , particularly considering the November data now includes federal government workers who took buyout plans .
Speaker #2: the Despite uptick , Maryland continues to outperform the national average . During the same period . North Carolina's unemployment rate edged up 0.1 percentage point to 3.8% , remaining well below the national average .
Bill Cimino: Although we do anticipate some further increases in unemployment across our markets in our CECL modeling, we expect these levels in Virginia, Maryland, and North Carolina to stay manageable and below the national average, consistent with Moody's current state-level forecast. We remain confident in our markets and consider them among the most attractive in the country. For those who missed our Investor Day last month, I want to revisit a key slide from our Investor Day presentation, as its message remains essential. We have deliberately and thoughtfully built the distinctive, valuable franchise outlined in our strategic plan, delivering on our commitments and establishing the banking platform we set out to create. With this strong foundation, we believe we're well positioned to capitalize on the expanded markets gained through the Sandy Spring acquisition, drive continued growth in Virginia, and pursue new organic opportunities in North Carolina and across our specialty lines.
Although we do anticipate some further increases in unemployment across our markets in our CECL modeling, we expect these levels in Virginia, Maryland, and North Carolina to stay manageable and below the national average, consistent with Moody's current state-level forecast. We remain confident in our markets and consider them among the most attractive in the country. For those who missed our Investor Day last month, I want to revisit a key slide from our Investor Day presentation, as its message remains essential. We have deliberately and thoughtfully built the distinctive, valuable franchise outlined in our strategic plan, delivering on our commitments and establishing the banking platform we set out to create. With this strong foundation, we believe we're well positioned to capitalize on the expanded markets gained through the Sandy Spring acquisition, drive continued growth in Virginia, and pursue new organic opportunities in North Carolina and across our specialty lines.
Speaker #2: Although we do anticipate some further increases in unemployment across our markets and in our seasonal modeling, we expect these levels in Virginia, Maryland, and North Carolina to be manageable and below the national average, consistent with Moody's current state-level forecast.
Speaker #2: We remain confident in our markets and consider them among the most attractive in the country . For those who . Missed our Investor Day last month , I want to revisit a key slide from our Investor Day presentation as its message remains essential .
Speaker #2: We have deliberately and thoughtfully built a distinctive, valuable franchise outlined in our strategic plan, delivering on our commitments and establishing the banking platform we set out to create.
Speaker #2: With this strong foundation , we believe we're well positioned to capitalize on the expanded markets gained through the Sandy spring acquisition drive . Continued growth in Virginia and pursue new organic opportunities in North Carolina and across our specialty lines .
Bill Cimino: Our full Investor Day presentation details our market approach for the next three years, and I encourage everyone to watch it. With discipline execution of our prior acquisitions and no additional acquisitions currently planned during this phase of our strategic plan, our focus now shifts to demonstrating the franchise's earnings power and capital generation ability. It's time to show that our efforts and investments have been worthwhile. After dedicating capital to strategic investments over the past two years to complete the company we envisioned and worked so diligently to build and consistently communicated our plans to do so, we believe we are now seeing clear, tangible benefits from these efforts. In summary, 2025 was a pivotal year for AUB. We remained agile and responsive while managing a significant merger integration, a major CRE loan sale, and navigating macroeconomic headwinds, including federal government restructuring and unpredictable tariff policies.
Our full Investor Day presentation details our market approach for the next three years, and I encourage everyone to watch it. With discipline execution of our prior acquisitions and no additional acquisitions currently planned during this phase of our strategic plan, our focus now shifts to demonstrating the franchise's earnings power and capital generation ability. It's time to show that our efforts and investments have been worthwhile. After dedicating capital to strategic investments over the past two years to complete the company we envisioned and worked so diligently to build and consistently communicated our plans to do so, we believe we are now seeing clear, tangible benefits from these efforts. In summary, 2025 was a pivotal year for AUB. We remained agile and responsive while managing a significant merger integration, a major CRE loan sale, and navigating macroeconomic headwinds, including federal government restructuring and unpredictable tariff policies.
Speaker #2: Our Investor Day presentation details our market approach for the next three years, and I encourage everyone to watch it with discipline, execution of our prior acquisitions, and no additional acquisitions.
Speaker #2: Currently planned during this phase of our strategic plan , our focus now shifts to demonstrating the franchise's earnings power and capital generation ability .
Speaker #2: It's time to show that our efforts and investments have been worthwhile . After dedicating capital to strategic investments over the past two years to complete , the company , we envisioned and work so diligently to build and consistently communicated our plans to do so , we believe we are now seeing clear , tangible benefits from these efforts .
Speaker #2: In summary , 2025 was a pivotal year for AUB . We remained agile and responsive while managing a significant merger , integration , a major CRE loan sale and navigating macroeconomic headwinds , including federal government restructuring and unpredictable tariff policies .
Bill Cimino: Despite these challenges, we delivered operating results that we believe will stand out among our peers. With that, I'll turn the call over to Rob for a detailed review of our Q4 financial results before we open the floor for questions. Rob? Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for Q4 and full year 2025.
Despite these challenges, we delivered operating results that we believe will stand out among our peers. With that, I'll turn the call over to Rob for a detailed review of our Q4 financial results before we open the floor for questions. Rob?
Speaker #2: Despite these challenges, we delivered operating results that we believe will stand out among our peers. With that, I'll turn the call over to Rob for a detailed review of our quarterly financial results before we open the floor for questions.
Rob Gorman: Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for Q4 and full year 2025.
Speaker #2: Rob . Well .
Speaker #3: Thank you , John , and good morning , everyone . I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for the fourth quarter and full year 2025 .
Bill Cimino: My commentary today will primarily address Atlantic Union's Q4 and 2025 financial results presented on a non-GAAP adjusted operating basis, which for Q4 excludes $38.6 million in pre-tax merger-related costs from the Sandy Spring acquisition, and for the full year 2025 excludes the following items: pre-tax merger-related costs of $157.3 million, pre-tax gain on the sale of CRE loans of $10.9 million, and the pre-tax gain on the sale of our equity interest in Cary Street Partners of $14.8 million. That said, in the Q4, reported net income available to common shareholders was of $109 million, and earnings per common share were $0.77. For the full year 2025, reported net income available to common shareholders was $261.8 million, and earnings per common share were $2.03.
My commentary today will primarily address Atlantic Union's Q4 and 2025 financial results presented on a non-GAAP adjusted operating basis, which for Q4 excludes $38.6 million in pre-tax merger-related costs from the Sandy Spring acquisition, and for the full year 2025 excludes the following items: pre-tax merger-related costs of $157.3 million, pre-tax gain on the sale of CRE loans of $10.9 million, and the pre-tax gain on the sale of our equity interest in Cary Street Partners of $14.8 million. That said, in the Q4, reported net income available to common shareholders was of $109 million, and earnings per common share were $0.77. For the full year 2025, reported net income available to common shareholders was $261.8 million, and earnings per common share were $2.03.
Speaker #3: My commentary today will primarily address Atlantic Union's fourth quarter and 2020 financial results, presented on a non-GAAP adjusted operating basis, which for the fourth quarter excludes $38.6 million in pre-tax merger-related costs from the Sandy Spring acquisition.
Speaker #3: And for the full year 2025, excludes the following items: pre-tax merger related costs of $157.3 million, pre-tax gain on the sale of the CRE loans of $10.9 million, and pre-tax gain on the sale of our equity interest in Cary Street Partners of $14.8 million.
Speaker #3: That said, in the fourth quarter, reported net income available to common shareholders was $109 million, and earnings per common share were $0.77.
Speaker #3: For the full year 2025 reported net income available to common shareholders was $261.8 million , and earnings per common share were $2.03 . Adjusted operating earnings to common available shareholders were $138.4 million , or $0.97 per common share , in the fourth quarter , resulting in an adjusted operating return on tangible common equity of 22.1% and adjusted operating return on assets of 1.5% , and adjusted operating efficiency ratio of 47.8% .
Bill Cimino: Adjusted operating earnings available to common shareholders were $138.4 million, or $0.97 per common share in the Q4, resulting in an adjusted operating return on tangible common equity of 22.1%, an adjusted operating return on assets of 1.5%, and an adjusted operating efficiency ratio of 47.8% in the quarter. For the full year 2025, adjusted operating earnings available to common shareholders were $444.8 million, or $3.44 per common share, resulting in an adjusted operating return on tangible common equity of 20.4%, an adjusted operating return on assets of 1.33%, and an adjusted operating efficiency ratio of 49.7%. As John mentioned, we believe these adjusted operating results for return on tangible common equity and the efficiency ratio puts us in the upper quartile of our peer group for the full year of 2025.
Adjusted operating earnings available to common shareholders were $138.4 million, or $0.97 per common share in the Q4, resulting in an adjusted operating return on tangible common equity of 22.1%, an adjusted operating return on assets of 1.5%, and an adjusted operating efficiency ratio of 47.8% in the quarter. For the full year 2025, adjusted operating earnings available to common shareholders were $444.8 million, or $3.44 per common share, resulting in an adjusted operating return on tangible common equity of 20.4%, an adjusted operating return on assets of 1.33%, and an adjusted operating efficiency ratio of 49.7%. As John mentioned, we believe these adjusted operating results for return on tangible common equity and the efficiency ratio puts us in the upper quartile of our peer group for the full year of 2025.
Speaker #3: In the quarter . For the full year 2025 adjusted operating earnings available to common shareholders were $444.8 million , or $3.44 per common share , resulting in an adjusted operating return on tangible common equity of 20.4% and adjusted operating return on assets of 1.33% and an adjusted operating efficiency ratio of 49.7% .
Speaker #3: As John mentioned, we believe these adjusted operating results for return on tangible common equity and the efficiency ratio put us in the upper quartile of our peer group for the full year of 2025.
Bill Cimino: Turning to credit loss reserves at the end of the Q4, the total allowance for credit losses was $321.3 million, which was an increase of approximately $1.3 million from the Q3, primarily driven by loan growth in the Q4. As a result, the total allowance for credit losses as a percentage of total loans held for investment decreased one basis point to 116 basis points at the end of the Q4. Net charge-off decreased to $916,000, or one basis point annualized in the Q4, from $38.6 million, or 56 basis points annualized in the Q3, due to the charge-off of two commercial and industrial loans in the Q3. Net charge-off ratio for the year came in at 17 basis points, in line with our 15 to 20 basis points guidance.
Turning to credit loss reserves at the end of the Q4, the total allowance for credit losses was $321.3 million, which was an increase of approximately $1.3 million from the Q3, primarily driven by loan growth in the Q4. As a result, the total allowance for credit losses as a percentage of total loans held for investment decreased one basis point to 116 basis points at the end of the Q4. Net charge-off decreased to $916,000, or one basis point annualized in the Q4, from $38.6 million, or 56 basis points annualized in the Q3, due to the charge-off of two commercial and industrial loans in the Q3. Net charge-off ratio for the year came in at 17 basis points, in line with our 15 to 20 basis points guidance.
Speaker #3: Turning to credit loss reserves at the the fourth end of quarter , the allowance of the total allowance for credit losses was $321.3 million , which was an increase of approximately $1.3 million from the third quarter , primarily driven by loan growth in the fourth quarter .
Speaker #3: As a result of total allowance for credit losses . As percentage of total loans held for investment decreased one basis point to 116 basis points .
Speaker #3: At the end of the fourth quarter , net charge offs decreased to $916,000 , or one basis point annualized in , the fourth quarter from $38.6 million , or 56 basis points annualized in the third quarter .
Speaker #3: Due to the charge off of two commercial and industrial loans in the third quarter , net charge off ratio for the year came in at 17 basis points , in line with our 15 to 20 basis points guidance .
Bill Cimino: Now turning to the pre-tax pre-provision components of the net of the income statement for the Q4, tax equivalent net interest income was $334.8 million, which was an increase of $11.2 million from the Q3, primarily driven by a decrease in interest expense resulting from lower deposit costs and increases in interest income on loans held for investment and the securities portfolio, which was partially offset by a decline in other earning asset interest income, primarily driven by lower average cash and cash equivalent balances in the Q4. As John noted, the Q4 tax equivalent net interest margin increased 13 basis points from the prior quarter to 3.96%, primarily due to lower cost of funds, partially offset by a slight decrease in earning asset yields.
Now turning to the pre-tax pre-provision components of the net of the income statement for the Q4, tax equivalent net interest income was $334.8 million, which was an increase of $11.2 million from the Q3, primarily driven by a decrease in interest expense resulting from lower deposit costs and increases in interest income on loans held for investment and the securities portfolio, which was partially offset by a decline in other earning asset interest income, primarily driven by lower average cash and cash equivalent balances in the Q4. As John noted, the Q4 tax equivalent net interest margin increased 13 basis points from the prior quarter to 3.96%, primarily due to lower cost of funds, partially offset by a slight decrease in earning asset yields.
Speaker #3: Now turning to the pre-tax Pre-provision components of the net of the income statement for the fourth quarter , tax equivalent net interest income was $334.8 million , which was an increase of $11.2 million from the primarily driven third quarter , by a decrease in interest expense resulting from lower deposit costs and increases in interest income on loans held for investment and the securities portfolio , which was partially offset by a decline in other earning assets .
Speaker #3: Interest income , primarily driven by lower average cash and cash equivalent balances . In the fourth quarter , as John noted , the fourth quarter tax equivalent net interest margin increased 13 basis points from the prior 2:45 .96 percent , primarily due to lower cost of funds , partially offset by a slight decrease in earning asset yields .
Bill Cimino: Cost of funds decreased 14 basis points from the prior quarter to 2.03% for the Q4, due primarily to lower deposit costs reflecting the impact of Fed funds rate decreases starting in September of 2025. Earning asset yields for the Q4 decreased one basis point to 5.99% as compared to the Q3, due primarily to lower investment and other earning asset yields partially offset by slightly higher loan yields. As John mentioned, loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable-rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates.
Cost of funds decreased 14 basis points from the prior quarter to 2.03% for the Q4, due primarily to lower deposit costs reflecting the impact of Fed funds rate decreases starting in September of 2025. Earning asset yields for the Q4 decreased one basis point to 5.99% as compared to the Q3, due primarily to lower investment and other earning asset yields partially offset by slightly higher loan yields. As John mentioned, loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable-rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates.
Speaker #3: Cost of funds decreased 14 basis points from the prior 1:45 .03 percent for the fourth quarter , due primarily to lower deposit costs , reflecting the impact of fed funds rate decreases .
Speaker #3: Starting in September of 2025, earning asset yields for the fourth quarter decreased one basis point to 5.99% as compared to the third quarter, due primarily to lower investment in other earning asset yields, partially offset by slightly higher loan yields.
Speaker #3: As John mentioned , loan yields stayed relatively steady despite the fed rate cuts and its impact on our variable rate loan yields due to increased accretion income , higher loan fees and the repricing of renewed and new fixed rate loans at current market rates , non-interest income increased $5.2 million to $57 million for the fourth quarter , from 51.8 million in the prior quarter , primarily driven by a $4.8 million pre-tax loss in the prior quarter .
Bill Cimino: Non-interest income increased $5.2 million, or to $57 million for the Q4, from $51.8 million in the prior quarter, primarily driven by a $4.8 million pre-tax loss in the prior quarter related to the final settlement of the sale of CRE loans executed at the end of the Q2 of 2025 as part of the Sandy Spring acquisition.
Non-interest income increased $5.2 million, or to $57 million for the Q4, from $51.8 million in the prior quarter, primarily driven by a $4.8 million pre-tax loss in the prior quarter related to the final settlement of the sale of CRE loans executed at the end of the Q2 of 2025 as part of the Sandy Spring acquisition.
Speaker #3: Related to the final settlement sale of the CRA loans executed at the end of the second quarter of 2025 as part of the spring acquisition.
Bill Cimino: Adjusted operating non-interest income, which excludes the pre-tax loss on the CRE loan sale in the Q3, the pre-tax gain on sale of our equity interest in Cary Street Partners in the Q4, and the pre-tax gains on the sale of securities in both the Q3 and Q4, remained relatively consistent with the prior quarter at $56.5 million, primarily due to a decline in service charges on deposit accounts of $1.1 million, $400,000 of which was driven by temporary post-conversion fee waivers for Sandy Spring customers, a decrease in other operating income of $807,000, primarily due to lower equity method investment income, and seasonally lower mortgage banking income of $727,000, offset by higher loan-related interest rate swap fees of $2.5 million due to higher transaction volumes, and increases in fiduciary and asset management fees of $1.3 million, primarily due to increases in estate fees, personal trust income, and investment advisory fees.
Adjusted operating non-interest income, which excludes the pre-tax loss on the CRE loan sale in the Q3, the pre-tax gain on sale of our equity interest in Cary Street Partners in the Q4, and the pre-tax gains on the sale of securities in both the Q3 and Q4, remained relatively consistent with the prior quarter at $56.5 million, primarily due to a decline in service charges on deposit accounts of $1.1 million, $400,000 of which was driven by temporary post-conversion fee waivers for Sandy Spring customers, a decrease in other operating income of $807,000, primarily due to lower equity method investment income, and seasonally lower mortgage banking income of $727,000, offset by higher loan-related interest rate swap fees of $2.5 million due to higher transaction volumes, and increases in fiduciary and asset management fees of $1.3 million, primarily due to increases in estate fees, personal trust income, and investment advisory fees.
Speaker #3: Adjusted operating non-interest income , which excludes the pre-tax loss on the CRE loan sale in the third quarter . The pre-tax gain on sale of our equity interest in Kerry Street Partners in the fourth quarter , and pre-tax gains on the sale of securities in both the third and fourth quarters , remained relatively consistent with the prior quarter at $56.5 million , primarily due to a decline in service charges on deposit accounts of $1.1 million , 400,000 of which was driven by temporary post conversion fee waivers for Sandy spring customers .
Speaker #3: A decrease in other operating income of $807,000 , primarily due to lower equity method investment income and seasonally lower mortgage banking income of $727,000 , by offset higher loan related rate interest swap fees $2.5 million due to higher of transaction volumes and increases in fiduciary and asset management fees of $1.3 million , primarily due to increases in estate fees , personal trust income , and investment investment advisory fees recorded non-interest expense increased 4.8 million to $243.2 million for the fourth quarter of 2025 , primarily driven by a $3.8 million increase in merger related costs associated with the Sandy spring acquisition .
Bill Cimino: Reported non-interest expense increased $4.8 million to $243.2 million for the Q4 of 2025, primarily driven by a $3.8 million increase in merger-related costs associated with the Sandy Spring Bank acquisition. Adjusted operating non-interest expense, which excludes merger-related costs in the Q3 and Q4, and amortization of intangible assets in both quarters, increased $1.4 million to $186.9 million for the Q4, up from $185.5 million in the prior quarter. This was primarily due to a $2.4 million increase in other expenses, which was driven by an increase in non-credit-related losses on customer transactions, and a $1.7 million increase in marketing and advertising expense.
Reported non-interest expense increased $4.8 million to $243.2 million for the Q4 of 2025, primarily driven by a $3.8 million increase in merger-related costs associated with the Sandy Spring Bank acquisition. Adjusted operating non-interest expense, which excludes merger-related costs in the Q3 and Q4, and amortization of intangible assets in both quarters, increased $1.4 million to $186.9 million for the Q4, up from $185.5 million in the prior quarter. This was primarily due to a $2.4 million increase in other expenses, which was driven by an increase in non-credit-related losses on customer transactions, and a $1.7 million increase in marketing and advertising expense.
Speaker #3: Adjusted operating expense , which excludes merger related costs in the third and fourth quarters and amortization of intangible assets in both quarters , increased $1.4 million to $186.9 million for the fourth quarter , up from $185.5 million in the prior quarter .
Speaker #3: This was primarily due to another $2.4 million increase in expenses, which was driven by an increase in non-credit-related losses on customer transactions and a $1.7 million increase in marketing and advertising expense.
Bill Cimino: These increases were partially offset by a $1.4 million decrease in FDIC assessment premiums due to lower assessments in the Q4 of 2025, and a $1.2 million decline in furniture and equipment expenses, which was primarily driven by lower software amortization expense related to the integration of Sandy Spring Bank. At December 31, loans held for investment net of deferred fees and costs were $27.8 million, which was an increase of $435 million, or 6.3% annualized from the prior quarter. At December 31, total deposits were $30.5 billion, a decrease of $193.7 million, or 2.5% annualized from the prior quarter, primarily due to decreases of $260 million in demand deposits, largely driven by typical seasonal patterns, and $14.5 million in interest-bearing customer deposits, which were partially offset by an increase of approximately $81 million in broker deposits.
These increases were partially offset by a $1.4 million decrease in FDIC assessment premiums due to lower assessments in the Q4 of 2025, and a $1.2 million decline in furniture and equipment expenses, which was primarily driven by lower software amortization expense related to the integration of Sandy Spring Bank. At December 31, loans held for investment net of deferred fees and costs were $27.8 million, which was an increase of $435 million, or 6.3% annualized from the prior quarter. At December 31, total deposits were $30.5 billion, a decrease of $193.7 million, or 2.5% annualized from the prior quarter, primarily due to decreases of $260 million in demand deposits, largely driven by typical seasonal patterns, and $14.5 million in interest-bearing customer deposits, which were partially offset by an increase of approximately $81 million in broker deposits.
Speaker #3: These increases were partially offset by a $1.4 million decrease in FDIC assessment premiums , due to lower assessment assessments in the fourth quarter of 2025 , and a $1.2 million decline in furniture and equipment expenses , which was primarily driven by lower software amortization expense related to the integration of CME spring .
Speaker #3: At December 31st , loans held for investment , net of deferred fees and costs , were $27.8 billion , which was an increase of $435 million , or 6.3% annualized from the prior quarter .
Speaker #3: At December 31st . Total deposits were $30.5 billion , a decrease of $193.7 million , or 2.5% annualized from the prior quarter , primarily due to decreases of $260 million in demand .
Speaker #3: Deposits , largely driven by typical seasonal seasonal patterns and $14.5 million in interest bearing customer deposits , which were partially offset by an increase of approximately $81 million in brokered deposits at the end of the fourth quarter .
Bill Cimino: At the end of the Q4, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well-capitalized as of the end of the Q4 if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios. During the Q4, the company paid a common stock dividend of $0.37 per share, which was an increase of 8.8% from the Q3's and previous year's Q4 dividend amount. Of note, on a linked quarterly basis, tangible book value per common share increased approximately 4% to $19.69 per share in the Q4. As noted on slide 17, we are maintaining our full year 2026 financial outlook for AUB that was provided at our Investor Day in December.
At the end of the Q4, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well-capitalized as of the end of the Q4 if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios. During the Q4, the company paid a common stock dividend of $0.37 per share, which was an increase of 8.8% from the Q3's and previous year's Q4 dividend amount. Of note, on a linked quarterly basis, tangible book value per common share increased approximately 4% to $19.69 per share in the Q4. As noted on slide 17, we are maintaining our full year 2026 financial outlook for AUB that was provided at our Investor Day in December.
Speaker #3: Atlantic Union Bankshares Corp Atlantic unions , Bank's regulatory capital ratios were comfortably above well-capitalized levels . In addition , on an adjusted basis , we remain well capitalized as of the end of the fourth quarter .
Speaker #3: If you include the negative impact of Aoci and held to maturity securities , unrealized losses in the calculation of the regulatory capital ratios during the fourth quarter , the company paid a common stock dividend of $0.37 per share , which was an increase of 8.8% from the third quarter in previous years .
Speaker #3: Fourth quarter dividend amount of note on a quarterly basis , tangible book value per common share increased approximately 4% to 19.69 . $19.69 per share in the fourth quarter .
Speaker #3: As on slide 17, we are maintaining our full-year 2020 financial outlook for Orb that was provided at our Investor Day in December.
Bill Cimino: We expect loan balances to end the year between $29 to $30 billion, while year-end deposit balances are projected to be between $31.5 to $32.5 billion. On the credit front, the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis points range, and the net charge-off ratio is expected to fall between 10 and 15 basis points in 2026. Fully tax equivalent net interest income for the full year is projected to come in between $1,350 to $1,375 million, inclusive of accretion income.
We expect loan balances to end the year between $29 to $30 billion, while year-end deposit balances are projected to be between $31.5 to $32.5 billion. On the credit front, the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis points range, and the net charge-off ratio is expected to fall between 10 and 15 basis points in 2026. Fully tax equivalent net interest income for the full year is projected to come in between $1,350 to $1,375 million, inclusive of accretion income.
Speaker #3: We expect loan balances to end the year between 29 and $30 billion , while year end deposit balances are projected to be between $31.5 billion and $32.5 billion on the credit front , the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis point range , and the net charge off ratio expected is expected to fall between 10 and 15 basis points in 2026 .
Speaker #3: Full T&Cs equivalent net interest income for the full year is projected to come in between $1,000,000,350 million and $1,000,000,375 million . Inclusive of accretion income .
Bill Cimino: As a reminder, we consider accretion income resulting from acquired loan interest rate marks as a built-in scheduled accounting tailwind to our GAAP earnings, and net interest margin as the accretion income related to the loan interest rate marks gradually transitions to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed at current market rates. As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.90% and 4% for the full year, driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in April and in September in 2026, and that term rates will remain stable at current levels.
As a reminder, we consider accretion income resulting from acquired loan interest rate marks as a built-in scheduled accounting tailwind to our GAAP earnings, and net interest margin as the accretion income related to the loan interest rate marks gradually transitions to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed at current market rates. As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.90% and 4% for the full year, driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in April and in September in 2026, and that term rates will remain stable at current levels.
Speaker #3: As a reminder, we consider accretion income resulting from acquired loan interest rate marks as a built-in, scheduled accounting tailwind to our GAAP earnings and net margin.
Speaker #3: Interest as the accretion income related to the loan interest rate marks gradually transitions to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed.
Speaker #3: At current market rates . As a result , we are projecting that the full year fully tax equivalent interest margin will fall in the range between 3.90% and 4% for the full year , driven by our baseline assumption that the Federal Reserve Bank will cut the fed funds rate by 25 basis points in April and in September .
Speaker #3: In 2026 . And that term rates will remain stable at current levels on a full year basis . Non-interest income is expected to be between 220 and $230 million , while adjusted not adjusted operating expense non-interest is expected to fall in the range of 750 to $760 million , which includes the expense impact of our North Carolina investment and other 2026 strategic initiatives .
Bill Cimino: On a full year basis, non-interest income is expected to be between $220 and $230 million, while adjusted operating non-interest expense is expected to fall in the range of $750 to $760 million, which includes the expense impact of our North Carolina investment and other 2026 strategic initiatives. Based on these projections, we expect to generate annual growth in tangible book value per share of between 12% and 15%, produce financial returns that will place us within the top quartile of our proxy peer group, and meet our objective of delivering top-tier financial performance for our shareholders. In summary, Atlantic Union delivered strong operating financial results in the Q4 and in 2025, and we remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable, profitable growth and to build long-term value for our shareholders in 2026 and beyond.
On a full year basis, non-interest income is expected to be between $220 and $230 million, while adjusted operating non-interest expense is expected to fall in the range of $750 to $760 million, which includes the expense impact of our North Carolina investment and other 2026 strategic initiatives. Based on these projections, we expect to generate annual growth in tangible book value per share of between 12% and 15%, produce financial returns that will place us within the top quartile of our proxy peer group, and meet our objective of delivering top-tier financial performance for our shareholders. In summary, Atlantic Union delivered strong operating financial results in the Q4 and in 2025, and we remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable, profitable growth and to build long-term value for our shareholders in 2026 and beyond.
Speaker #3: Based on these projections, we expect to generate annual growth in tangible book value per share of between 12% and 15%, produced by returns that will place us within the top quartile of our proxy peer group and meet our objective of delivering top-tier financial performance for our shareholders.
Speaker #3: In summary , Atlantic Union delivered strong operating financial results in the fourth quarter and in 2025 , and we remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable , profitable growth and to build long term value for our shareholders in 2026 and beyond .
Bill Cimino: I'll now turn the call over to Bill to see if there are any questions from our research analyst community. Thanks, Rob. And Livia, we're ready for our first caller, please. Thank you, ladies and gentlemen. Just as a reminder, if you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the caller roster. Now, first question coming from the line of Janet Lee with TD Cowen. Your line, it's now open. Good morning, Janet. Good morning. I want some more clarifications on your 2026 guide, which was reiterated from your Investor Day in December.
I'll now turn the call over to Bill to see if there are any questions from our research analyst community.
Speaker #3: I'll now turn the call over to Bill to see if there are any questions from our research analysts community.
Bill Cimino: Thanks, Rob. And Livia, we're ready for our first caller, please.
Speaker #2: Thanks , Rob . And Livia . We're ready for our first caller . Please .
Operator: Thank you, ladies and gentlemen. Just as a reminder, if you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the caller roster. Now, first question coming from the line of Janet Lee with TD Cowen. Your line, it's now open.
Speaker #1: Thank you , ladies and gentlemen . Just as a reminder , if you'd like to ask a question at this time , please press star one one on your telephone and wait for your name to be announced .
Speaker #1: To withdraw your question , simply press star one Please stand by while we compile the roster . Now , first question coming from the line of Janet Lee with TD Cowan .
John Asbury: Good morning, Janet.
Janet Lee: Good morning. I want some more clarifications on your 2026 guide, which was reiterated from your Investor Day in December.
Speaker #1: Your line is now open .
Speaker #2: Good morning Janet . Good .
Speaker #4: Good morning. To give some—I want some more clarifications on your 2026 guide, which was reiterated from your Investor Day in December.
Bill Cimino: Is there any sort of range that you're gravitating towards, whether that's higher end or lower end of net interest income, given the higher launching point for Q1 NIM, but although I do expect that NIM will grind down from there in 2026? And it looks like there are different puts and takes in terms of deposits were coming in below, given seasonality, and loans were a little bit above what you guided. So I wanted to see what would put you at the higher end versus lower end and what your baseline expectation is. Yeah. So as we've said, Janet, we're guiding to net interest income between $1.35 billion and $1.375 billion. To come on the higher end of that, it's really going to depend on somewhat of do we get elevated accretion income as we saw this quarter. We're not modeling that going forward into 2026.
Is there any sort of range that you're gravitating towards, whether that's higher end or lower end of net interest income, given the higher launching point for Q1 NIM, but although I do expect that NIM will grind down from there in 2026? And it looks like there are different puts and takes in terms of deposits were coming in below, given seasonality, and loans were a little bit above what you guided. So I wanted to see what would put you at the higher end versus lower end and what your baseline expectation is.
Speaker #4: Is there any sort of range that you're gravitating towards , whether that's higher end or lower end of net interest income , given , you know , the higher launching for for point Kunin , but although I do expect that Nim will grind down from there in 2026 , and it looks like there are different puts and takes in terms of deposits , were coming in below given seasonality and loans .
Speaker #4: Loans were a little bit above what you guided. So I wanted to see what you would put at the higher end versus the lower end, and what your baseline expectation is.
John Asbury: Yeah. So as we've said, Janet, we're guiding to net interest income between $1.35 billion and $1.375 billion. To come on the higher end of that, it's really going to depend on somewhat of do we get elevated accretion income as we saw this quarter. We're not modeling that going forward into 2026.
Speaker #3: Yeah . So as as we've said , Janet , you know , we're guiding to a net interest income between 1.3 5,000,000,001.375 billion .
Speaker #3: So come on the higher end of that , it's really going depend to on somewhat of do we get elevated accretion income as we saw this quarter .
Speaker #3: We're not we're not modeling that going forward into 2026 . We've got that coming down a bit . Also I think the the other component there is can we continue to lower deposit costs as the fed reduces the fed funds rate ?
Bill Cimino: We've got that coming down a bit. Also, I think the other component there is, can we continue to lower deposit costs as the Fed reduces the Fed funds rate? We're taking a bit of a conservative approach on that. Of course, that's dependent on the competition out there and the need for funding loan growth that we anticipate. So really, we're kind of in that range, but on the higher end, if we could see cost of funds come down a bit more than we're projecting, that would probably lead us to the higher end, and accretion income would also add to that confidence if we see that coming in a bit higher. Also, as you know, loan growth would also play a part in that. We're guiding to mid-single digits.
We've got that coming down a bit. Also, I think the other component there is, can we continue to lower deposit costs as the Fed reduces the Fed funds rate? We're taking a bit of a conservative approach on that. Of course, that's dependent on the competition out there and the need for funding loan growth that we anticipate. So really, we're kind of in that range, but on the higher end, if we could see cost of funds come down a bit more than we're projecting, that would probably lead us to the higher end, and accretion income would also add to that confidence if we see that coming in a bit higher. Also, as you know, loan growth would also play a part in that. We're guiding to mid-single digits.
Speaker #3: We're taking a bit of a conservative approach on that . Of course , that's dependent on , you know , the competition out there and the need for funding loan growth that we anticipate .
Speaker #3: So really we're kind of in that range . But on the if we higher see cost of funds come down more than we're projecting , that would probably lead us to the higher end .
Speaker #3: And accretion income would also add to that confidence . If we see that coming in a bit higher . Also , as you know , loan growth would also play a part in that .
Bill Cimino: If we see a higher loan growth and term rates kind of remain high with a steep curve, we could see that being coming in at the higher end as well. Got it. Thanks for the color. If my calculation is correct, I see the cumulative interest-bearing deposit beta to the rates coming down in the high 40% range. Do you still forecast that mid-50s beta, or is that a little lower heading into 2026? And also, I see that there was a deposit remix into more interest-bearing checking, which I assume are lower cost than the other ones. I wanted to see what drove that remix in the quarter and whether that's going to reverse in the quarters ahead. Thank you. Yeah.
If we see a higher loan growth and term rates kind of remain high with a steep curve, we could see that being coming in at the higher end as well.
Speaker #3: You know , we've got into mid-single digits . If we see a higher , higher loan growth and in turn rates kind of remain high with a steep , steep curve .
Speaker #3: We could see that that be coming in at the higher end as well.
Janet Lee: Got it. Thanks for the color. If my calculation is correct, I see the cumulative interest-bearing deposit beta to the rates coming down in the high 40% range. Do you still forecast that mid-50s beta, or is that a little lower heading into 2026? And also, I see that there was a deposit remix into more interest-bearing checking, which I assume are lower cost than the other ones. I wanted to see what drove that remix in the quarter and whether that's going to reverse in the quarters ahead. Thank you.
Speaker #4: Got it . Thanks for the color . And my if calculation is correct , I see the the cumulative interest bearing deposit beta .
Speaker #4: To the rates coming down and the high 40% range . Do you still forecast that mid 50s beta or is that a little lower heading into 2026 .
Speaker #4: And also I see that there a remix deposit into more interest bearing checking , which I assume are lower cost than the other ones .
Speaker #4: kind of What wanted to see what kind what what drove that remix and the quarter and whether that's going to reverse in the quarters ahead ?
John Asbury: Yeah.
Bill Cimino: So on that, Janet, in terms of the betas, we're still guiding to an interest-bearing deposit guiding to mid-50s, 50 to 55%, which was in line with when rates were going up. I think we ended up the prior through the cycle beta was around 55% for interest-bearing deposits. On a total deposit basis, we're in that 40 to 45 range. I calculate that we're about 50% betas to date if you go back to when the Fed started cutting in September and about 40% total deposits. So we're kind of staying in that range. We have seen we've been aggressive on lowering deposit rates, about $12 to $13 billion. We've been able to reprice fairly quickly as the Fed's come down. That's been a good thing to offset our variable rate loan book that reprices with Fed funds. So that kind of is a balancing act there.
So on that, Janet, in terms of the betas, we're still guiding to an interest-bearing deposit guiding to mid-50s, 50 to 55%, which was in line with when rates were going up. I think we ended up the prior through the cycle beta was around 55% for interest-bearing deposits. On a total deposit basis, we're in that 40 to 45 range. I calculate that we're about 50% betas to date if you go back to when the Fed started cutting in September and about 40% total deposits. So we're kind of staying in that range. We have seen we've been aggressive on lowering deposit rates, about $12 to $13 billion. We've been able to reprice fairly quickly as the Fed's come down. That's been a good thing to offset our variable rate loan book that reprices with Fed funds. So that kind of is a balancing act there.
Speaker #4: Thank you .
Speaker #3: Yeah . So on again , in terms of the betas , we're we're still guiding to an interest bearing deposits , guidance of mid 50s , 50 to 55% , which is in line with when rates were going up .
Speaker #3: I think we ended up the prior through the cycle . Beta was around 55% for interest bearing deposits on a total deposit basis .
Speaker #3: In that 40 to 45 range. I calculate that we're about 50% betas to date. If you go back to when the Fed started cutting in September, it's about 40% total deposits.
Speaker #3: We're so kind of staying in that range. We have seen we've been aggressive on lowering deposit rates—about $12 to $13 billion.
Speaker #3: We’ve been able to reprice fairly quickly as the Fed’s come down. That’s been a good thing to offset our variable rate loan book that reprices with Fed funds.
Speaker #3: So that kind of is a balancing act there . So but in terms of what was the other at the end of the other question , you had deposit .
Bill Cimino: But in terms of what was the other question you had there? Deposit remix. Oh, yeah. So there has been some reclasses that have occurred post the Sandy Spring conversion. So there's some of that that's kind of moved in one category to another. That's primarily probably the main driver of that. So don't expect that that's a shift too much going forward. Kind of level set that now. Got it. Thank you. Thanks, Janet. And Livia, we're ready for our next caller, please. Our next question coming from the line of David Bishop with Hovde Group. Your line is now open. Hi, Dave. Hey, John. How are you doing? Good. Thank you. I think I heard you say during the preamble that the loan pipeline had increased relative to that coming into the quarter.
But in terms of what was the other question you had there?
Janet Lee: Deposit remix.
John Asbury: Oh, yeah. So there has been some reclasses that have occurred post the Sandy Spring conversion. So there's some of that that's kind of moved in one category to another. That's primarily probably the main driver of that. So don't expect that that's a shift too much going forward. Kind of level set that now.
Speaker #4: Deposit remix .
Speaker #3: Oh yeah. So, there have been some releases that have occurred post the Sandy Spring conversion. So there's some of that that's kind of moved in one category to another.
Speaker #3: That's primarily probably the the main driver of that . So don't expect that that to shift too much going forward . Got a level set that now .
Janet Lee: Got it. Thank you.
Bill Cimino: Thanks, Janet. And Livia, we're ready for our next caller, please.
Speaker #4: Got it . Thank you .
Speaker #2: Thanks , and ready for our We're Janet next caller please .
Operator: Our next question coming from the line of David Bishop with Hovde Group. Your line is now open.
Speaker #1: Our next question coming from the line of David Bishop with Humpty Group . You line is now open .
John Asbury: Hi, Dave.
David Bishop: Hey, John. How are you doing?
Speaker #2: Hi , Dave .
John Asbury: Good. Thank you.
David Bishop: I think I heard you say during the preamble that the loan pipeline had increased relative to that coming into the quarter.
Speaker #5: Hey, John. How are you doing?
Speaker #2: Good . Thank you .
Speaker #5: Hey, I think I heard you say during the preamble that the loan pipeline had, had, had increased relative to that coming into the quarter.
Bill Cimino: Just curious if there's any numbers you can put around it or percent increase and how you're thinking about near-term loan growth here as you talk to your commercial clients, or you're starting to see some traction across the legacy Sandy Spring portfolio. And is that some of the drivers we saw in the C&I growth this quarter? Yeah. I would say that we had a modest increase in the total pipeline by end of year, end of quarter versus beginning of quarter. That's really important and a bit unusual for Q4 because, as you can see, Q4 was a big quarter. Now, as we expected, it was very much back-end loaded. Teams were super busy over the month of December. The typical phenomenon is you would expect to see the pipeline somewhat cleaned down. In other words, normally, it takes a while for it to rebuild.
Just curious if there's any numbers you can put around it or percent increase and how you're thinking about near-term loan growth here as you talk to your commercial clients, or you're starting to see some traction across the legacy Sandy Spring portfolio. And is that some of the drivers we saw in the C&I growth this quarter?
Speaker #5: Just curious if there's any any numbers you can put around it or percent increase and how you're thinking about near term loan growth here as you as you talk to your commercial clients or you're starting to see some traction across the legacy .
Speaker #5: Sandy spring portfolio and that some of the drivers we saw in the CNI growth this quarter .
John Asbury: Yeah. I would say that we had a modest increase in the total pipeline by end of year, end of quarter versus beginning of quarter. That's really important and a bit unusual for Q4 because, as you can see, Q4 was a big quarter. Now, as we expected, it was very much back-end loaded. Teams were super busy over the month of December. The typical phenomenon is you would expect to see the pipeline somewhat cleaned down. In other words, normally, it takes a while for it to rebuild.
Speaker #2: Yeah, I would say that we had a modest increase in the total pipeline by end of year, end of quarter, versus beginning of quarter.
Speaker #2: That's really important . And a bit unusual for Q4 because as you can see , Q4 was a big quarter . Now , as we expected .
Speaker #2: It was very much back . End We were teams were super busy over the month of December . The typical phenomena is you would expect to see the pipeline somewhat cleaned down .
Speaker #2: In other words, normally it takes a while for it to rebuild. So we were pretty excited to see that it was continuing to refill, so to speak.
Bill Cimino: So we were pretty excited to see that it was continuing to refill, so to speak, over the course of the quarter. And I would just say that what we're hearing, we can see the pipeline. The feedback we're getting from our market leaders is quite encouraging. So we feel pretty good about things in terms of the outlook. That's part of what's giving us confidence in our mid-single digit guidance. And it feels pretty—they, Brian, you can comment on this, but what we heard is pretty broad-based in what we see. Yeah. I guess I'd only add that our folks are very optimistic going into the year with good pipelines across the footprint. It's not in one place. Yeah, including the former Sandy Spring franchise, to be clear. Great. And then, John, maybe a holistic question. Change in the governor's mansion there.
So we were pretty excited to see that it was continuing to refill, so to speak, over the course of the quarter. And I would just say that what we're hearing, we can see the pipeline. The feedback we're getting from our market leaders is quite encouraging. So we feel pretty good about things in terms of the outlook. That's part of what's giving us confidence in our mid-single digit guidance. And it feels pretty—they, Brian, you can comment on this, but what we heard is pretty broad-based in what we see.
Speaker #2: Over the course of the quarter . And I would just say that what we're hearing , we can see the pipeline , the feedback we're getting from our market leaders is quite encouraging .
Speaker #2: So we feel pretty good about things in terms of the outlook . That's part of what's giving us confidence in our mid-single digit guidance , and it feels pretty .
Speaker #2: They bring you can comment on this , but what we heard is pretty broad based . And what we see . Yeah , I guess I would .
Rob Gorman: Yeah. I guess I'd only add that our folks are very optimistic going into the year with good pipelines across the footprint. It's not in one place.
Speaker #2: I'd only add that our folks are very optimistic going into the year, with good pipelines across the footprint. It's not in one place.
John Asbury: Yeah, including the former Sandy Spring franchise, to be clear.
Speaker #2: Yeah, yeah. Including the former Sandy Spring franchise. To be clear.
David Bishop: Great. And then, John, maybe a holistic question. Change in the governor's mansion there.
Speaker #5: Great . And then , John , maybe a holistic question change in the the governor's mansion . There . Just your view here from a business friendly climate .
Bill Cimino: Just your view here from a business-friendly climate, do you think that's going to have much of an impact in terms of the Commonwealth's growth capacity and business climate? Thanks. Yeah. Thank you. Now, we feel good about the outlook here in our home state of Virginia. Virginia has a long tradition of business-oriented moderates in these statewide offices, governor, US Senate. I feel quite confident that the new governor will continue that tradition. Great. I'll stop there and hop back in with you. Thank you, David. And Livia, we're ready for our next caller, please. Our next question coming from the line of Steve Moss with Raymond James. Your line is now open. Hi, Steve. Good morning, John, Rob, Bill. Maybe just following up on the loan pipeline here, just kind of curious where are you guys seeing loan pricing shake out these days?
Just your view here from a business-friendly climate, do you think that's going to have much of an impact in terms of the Commonwealth's growth capacity and business climate? Thanks.
Speaker #5: Do you think that's going to have much of an impact in terms of the Commonwealth, you know, growth capacity and business climate?
John Asbury: Yeah. Thank you. Now, we feel good about the outlook here in our home state of Virginia. Virginia has a long tradition of business-oriented moderates in these statewide offices, governor, US Senate. I feel quite confident that the new governor will continue that tradition. Great. I'll stop there and hop back in with you.
Speaker #5: Thanks .
Speaker #2: Yeah . Thank you . No , we we feel good about the outlook here in our home state of Virginia . Virginia has a long tradition of business oriented moderates in these statewide offices .
Speaker #2: Governor US Senate . And I feel quite confident you know , the that , new governor will continue that tradition .
Bill Cimino: Thank you, David. And Livia, we're ready for our next caller, please.
Speaker #5: I'll stop there, Great, and hop back in the Q.
Operator: Our next question coming from the line of Steve Moss with Raymond James. Your line is now open.
Speaker #2: Thank you . And , Libby , we're ready for our next caller , please .
Speaker #1: Our next question comes from the line of Steve Moss with Raymond James. Your line is now open.
John Asbury: Hi, Steve.
Steve Moss: Good morning, John, Rob, Bill. Maybe just following up on the loan pipeline here, just kind of curious where are you guys seeing loan pricing shake out these days?
Speaker #2: Hi, Steve. Steve, good morning.
Speaker #6: John . Rob . Bill , maybe just following up on the loan pipeline here . Just curious , you know , where you where guys seeing kind of loan pricing shake out these days and also where are you wondering where deposit costs were at quarter end .
Bill Cimino: And also, I'm wondering where deposit costs were at quarter end. Yeah. So on the loan pricing side, we're seeing about 6% to 6.20% loan pricing, both on the variable and the fixed-rate loans. So we expect that will continue. It really depends on where short-term rates are, obviously, on the variable rate side and where term rates are. But the spreads seem to be holding up pretty well on top of those indexes. And in terms of the deposit costs at the end of December, is what you're asking, Steve? Yeah, we're below 2% on that. It's about 1—I think it was about 1.96% coming out of December. Okay. Appreciate that.
And also, I'm wondering where deposit costs were at quarter end.
John Asbury: Yeah. So on the loan pricing side, we're seeing about 6% to 6.20% loan pricing, both on the variable and the fixed-rate loans. So we expect that will continue. It really depends on where short-term rates are, obviously, on the variable rate side and where term rates are. But the spreads seem to be holding up pretty well on top of those indexes. And in terms of the deposit costs at the end of December, is what you're asking, Steve? Yeah, we're below 2% on that. It's about 1—I think it was about 1.96% coming out of December.
Speaker #3: Yeah. So, loan pricing side, we're seeing about 6% to 6.20% loan pricing, you know, both on the variable and fixed rate loans.
Speaker #3: So we expect that will continue . Really depends on you know , where short term rates are obviously on the variable rate side .
Speaker #3: And and where term rates are . But the but the spreads seem to be holding up pretty well on top of these , those indexes .
Speaker #3: And in terms of the the the deposit costs at the end of the at December is what you're asking . Steve . Yeah , we're below 2% on that .
Speaker #3: It's about one , I think it was about 196 of coming out December .
Steve Moss: Okay. Appreciate that.
Bill Cimino: And then in terms of just kind of thinking about the core margin here, I apologize if I missed it, but just curious, do you continue to expect core margin expansion here throughout the year, and kind of just how you're thinking about the cadence, if that's the case? Yeah. We think core margin will expand a bit. Some of that's coming off where we talked about the acquired loan book is repricing and coming back into core. So from a loan yield point of view, that's helpful in terms of fixed-rate loans coming on about 100 basis points or so higher than what the portfolio yield is. If the Fed cuts more than a couple of times, we probably will see some stable loan yields or margin, or we could see some contraction a bit. But our call is a couple of cuts next year, which is manageable.
And then in terms of just kind of thinking about the core margin here, I apologize if I missed it, but just curious, do you continue to expect core margin expansion here throughout the year, and kind of just how you're thinking about the cadence, if that's the case?
Speaker #6: Okay . Appreciate that . And terms of just then in kind of thinking about , you know , the core margin here , I apologize if I missed it , but just curious , you know , do you continue to expect core margin expansion here throughout the year and kind of just how you're thinking about the cadence , if that's the case ?
John Asbury: Yeah. We think core margin will expand a bit. Some of that's coming off where we talked about the acquired loan book is repricing and coming back into core. So from a loan yield point of view, that's helpful in terms of fixed-rate loans coming on about 100 basis points or so higher than what the portfolio yield is. If the Fed cuts more than a couple of times, we probably will see some stable loan yields or margin, or we could see some contraction a bit. But our call is a couple of cuts next year, which is manageable.
Speaker #2: Yeah , we think .
Speaker #3: Core margin will bit expand some. Some of that's coming off, you know, where we talked about the acquired loan book is repricing and coming back into core.
Speaker #3: So, from a loan yield point of view, that's helpful in terms of fixed-rate loans coming on about 100 basis points or so higher than what the portfolio yield is.
Speaker #3: If the fed if the fed cuts , you know , more than a couple of times , we see probably will some stable , stable loan yields or , or margin .
Speaker #3: Or we could see some contraction a bit , but our call is of couple couple a of cuts next year , which is , which is manageable .
Bill Cimino: As I mentioned, we're able to reduce some of our deposit costs, which are indexed to Fed funds fairly quickly, which will offset some of the variable rate loan impacts of further cuts. So all in all, I think we'll see some modest core margin expansion based on those factors. Okay. Appreciate that. And then just in terms of following up on the purchase accounting accretion, just curious, any updated thoughts around the full year number for that. In terms of 2026, Steve. Yeah. We're currently modeling between $150 and 160 million in 2026. As you know, that can fluctuate. We saw a bit higher than expected in the fourth quarter. So that can fluctuate. But give or take, our baseline modeling and the guidance we're providing from a margin perspective and net interest income perspective is in the $150 to 160 range. Okay. Appreciate that.
As I mentioned, we're able to reduce some of our deposit costs, which are indexed to Fed funds fairly quickly, which will offset some of the variable rate loan impacts of further cuts. So all in all, I think we'll see some modest core margin expansion based on those factors.
Speaker #3: And as I mentioned , we're able to reduce some some of our deposit costs , which are indexed to fed funds fairly quickly , which will offset some of the variable rate loan impacts of further cuts .
Speaker #3: So, on all, I think we'll see some modest core margin expansion based on those factors.
Steve Moss: Okay. Appreciate that. And then just in terms of following up on the purchase accounting accretion, just curious, any updated thoughts around the full year number for that.
Speaker #6: Okay . Appreciate that . And then just in terms of following up on the , you know . Purchase accretion , just curious , any updated thoughts around the full year that number for .
John Asbury: In terms of 2026, Steve. Yeah. We're currently modeling between $150 and 160 million in 2026. As you know, that can fluctuate. We saw a bit higher than expected in the fourth quarter. So that can fluctuate. But give or take, our baseline modeling and the guidance we're providing from a margin perspective and net interest income perspective is in the $150 to 160 range.
Speaker #3: In terms of 2026 ? Steve . Yeah , you know , we're currently modeling between 150 and $160 million in 2026 . We'll , you know , as you know , that can that can fluctuate .
Speaker #3: We saw a bit higher up than than expected in the fourth quarter . So that can fluctuate . But give or take , you know our baseline modeling in the guidance we're providing from a margin perspective and net interest income perspective is in the 150 to 160 range .
Steve Moss: Okay. Appreciate that.
Bill Cimino: And John, maybe just one for you on North Carolina's expansion. I know you talked about it a fair amount last month. Just kind of curious, as you continue to expand down there in the markets, what are the good things you're seeing? Maybe what are some of the challenges as you're building out down there? Yeah. Well, I think that we're making good progress in terms of the efforts to expand the commercial teams. And Sean O'Brien is here, Head of Consumer and Business Banking. Sean, you can speak to just sort of the latest in terms of the branch build-out. Yeah. We continue to move quickly, have plans for our 10 branches to be open in Raleigh and Wilmington here in the next year and a half, two years.
And John, maybe just one for you on North Carolina's expansion. I know you talked about it a fair amount last month. Just kind of curious, as you continue to expand down there in the markets, what are the good things you're seeing? Maybe what are some of the challenges as you're building out down there?
Speaker #6: Okay. Appreciate that. And John, maybe just one for you on North Carolina's expansion. I know you talked about it a fair amount last month.
Speaker #6: Just kind of curious . know , You as you continue to expand down there in the markets , you know , what what are the good things you're seeing ?
Speaker #6: Maybe what are some of the challenges ? You know , as , as , as you're building out down there ?
John Asbury: Yeah. Well, I think that we're making good progress in terms of the efforts to expand the commercial teams. And Sean O'Brien is here, Head of Consumer and Business Banking. Sean, you can speak to just sort of the latest in terms of the branch build-out. Yeah. We continue to move quickly, have plans for our 10 branches to be open in Raleigh and Wilmington here in the next year and a half, two years.
Speaker #2: Yeah . Well , I think that we're making good progress in in terms of the efforts to expand the commercial teams and Sean O'Brien is here , head of consumer and business banking .
Speaker #2: Sean , you can speak to just sort of the latest in terms of the branch , you know , build out .
Speaker #3: Yeah , we continue .
Speaker #2: To move .
Speaker #3: Quickly , have plans for our ten branches to be open in in Raleigh and Wilmington here in the next year and a half , two years .
Bill Cimino: And we're hiring staffing across the bank to make sure there's teams to support on both the wholesale and consumer side. So progress has been very good there as far as finding good sites and finding teammates. So we think we're on track, Steve. Okay. Great. I appreciate all the color here, and I'll step back. Thank you. And Livia, we're ready for our next caller, please. Our next question coming from the line of Brian Wozinski with Morgan Stanley. Your line, it's now open. Hey. Good morning, John. Hi. Good morning. So sticking with the loan growth, so at Investor Day last month, you talked about several different focus areas for organic loan growth over the next few years. There's the Sandy Spring footprint, North Carolina, and also the specialty banking businesses.
And we're hiring staffing across the bank to make sure there's teams to support on both the wholesale and consumer side. So progress has been very good there as far as finding good sites and finding teammates. So we think we're on track, Steve.
Speaker #3: We're hiring, and we're staffing across the bank to make sure there are teams to support on both the wholesale and consumer side. So progress has been very good there as far as finding good associates and finding teammates.
Steve Moss: Okay. Great. I appreciate all the color here, and I'll step back.
Speaker #3: So we think we're .
Speaker #2: On track .
Speaker #3: Steve okay , great .
Bill Cimino: Thank you. And Livia, we're ready for our next caller, please.
Speaker #6: I appreciate all the color here and I'll step back .
Operator: Our next question coming from the line of Brian Wozinski with Morgan Stanley. Your line, it's now open.
Speaker #2: Thank you. Thank you. And Lydia, we're ready for our next caller, please.
Speaker #1: Our next question comes from the line of Brian Wilson with Morgan Stanley . Your line is now open .
Hey. Good morning, John.
John Asbury: Hi. Good morning.
So sticking with the loan growth, so at Investor Day last month, you talked about several different focus areas for organic loan growth over the next few years. There's the Sandy Spring footprint, North Carolina, and also the specialty banking businesses.
Speaker #2: Hey . Good morning .
Speaker #7: Hi . Good morning . So sticking with sticking with the loan growth . So at Investor Day last month , you talked about several different focus areas for organic loan growth over the next few years .
Speaker #7: There's the Sandy spring footprint . North Carolina and also the specialty banking businesses . I was wondering if you could talk a little bit about where you're seeing the most traction in the given how fourth quarter , strong growth was ?
Bill Cimino: I was wondering if you could talk a little bit about where you're seeing the most traction in the fourth quarter, given how strong growth was. What you see as sort of the near-term driver across those three buckets versus what may take some more time to materialize? Dave Ring, do you want to give some color on that? Yeah. We could talk for hours on this one. Let's not do that. But I will. We've seen the Sandy Spring part of the franchise really turn the corner from integrating the bank and getting trained up to positive results in the fourth quarter and a really good pipeline going into the first quarter. North Carolina, steady as she goes there. We're hiring into that market. So there's ramp-up periods for folks that we'll see, I think, really nice results over the course of 2026.
I was wondering if you could talk a little bit about where you're seeing the most traction in the fourth quarter, given how strong growth was. What you see as sort of the near-term driver across those three buckets versus what may take some more time to materialize?
Speaker #7: You know, what you see is sort of the near-term driver across those three buckets, versus what may take some more time to materialize.
John Asbury: Dave Ring, do you want to give some color on that?
Dave Ring: Yeah. We could talk for hours on this one.
Speaker #2: Do you want to give some color on that? Yeah, we could talk for hours on this one. Let's not do that.
John Asbury: Let's not do that.
Dave Ring: But I will. We've seen the Sandy Spring part of the franchise really turn the corner from integrating the bank and getting trained up to positive results in the fourth quarter and a really good pipeline going into the first quarter. North Carolina, steady as she goes there. We're hiring into that market. So there's ramp-up periods for folks that we'll see, I think, really nice results over the course of 2026.
Speaker #2: won't I you know , we've seen the Sandy spring part of the franchise . Really turn the corner from integrating the bank and getting trained up to positive results in the fourth quarter .
Speaker #2: And a really good pipeline going into the first quarter . North Carolina , you know , steady as she goes there . We're hiring into that market .
Speaker #2: So there's ramp up periods for folks that we'll see . I think really nice results over the course of 26 . But they also have turned the corner there also growing .
Bill Cimino: They also have turned the corner. They're also growing, and their pipelines are good as well. On the specialty side, we have hired the head of healthcare banking, which we talked about in that meeting. The other specialty businesses actually contributed largely to some of the growth we've had in the fourth quarter. Then here in Virginia, which would be the single largest concentration, what we were so pleased to hear this week as we did our check-in with all of the commercial market leaders and credit officers is we're seeing strength across the state. So that's actually really good to see. We feel pretty good about the setup, Brian. It feels pretty well diversified. That's great to hear. You highlighted the 6% annualized growth in the fourth quarter pipelines up. Sounds like production is up.
They also have turned the corner. They're also growing, and their pipelines are good as well. On the specialty side, we have hired the head of healthcare banking, which we talked about in that meeting. The other specialty businesses actually contributed largely to some of the growth we've had in the fourth quarter. Then here in Virginia, which would be the single largest concentration, what we were so pleased to hear this week as we did our check-in with all of the commercial market leaders and credit officers is we're seeing strength across the state. So that's actually really good to see. We feel pretty good about the setup, Brian. It feels pretty well diversified.
Speaker #2: And their pipelines are good well . And on the specialty side , we have hired the head of healthcare banking , which we talked in about that meeting .
Speaker #2: And the other specialty businesses actually contributed largely to some of the growth we've had in the fourth quarter. And then here.
Speaker #5: In Virginia .
Speaker #2: Which would be the single largest concentration , what we were so pleased to hear this week , as we we did our check in with all of the commercial market leaders in credit officers , we're seeing strength across the state .
Speaker #2: Not, and so that's actually really good to see. So we feel pretty good about the setup, Brian. It feels pretty well diversified.
That's great to hear. You highlighted the 6% annualized growth in the fourth quarter pipelines up. Sounds like production is up.
Speaker #7: That's great to hear . And you highlighted the 6% annualized growth in the fourth quarter . Pipelines up . Sounds like production is up at any puts and takes terms of how in we think about , say , the first of half 2026 relative to what you just did in the fourth quarter .
Bill Cimino: At any puts and takes in terms of how we think about, say, the first half of 2026 relative to what you just did in the fourth quarter, is there any seasonal benefit in the fourth quarter? Was the end of the government shutdown a material tailwind, or does it feel like you can sort of maintain this cadence over the course of the year? Q4 is traditionally seasonally strong in my experience across the industry. And that's because businesses are strongly motivated to get things done before year-end for reporting purposes, planning purposes, tax purposes, you name it. So you can always expect to see a seasonally high Q4. Q1, traditionally, is somewhat slow, normally just because so much goes on at the very end of the year. So we would expect to see the typical pattern, which is it'll kind of build as the year goes on.
At any puts and takes in terms of how we think about, say, the first half of 2026 relative to what you just did in the fourth quarter, is there any seasonal benefit in the fourth quarter? Was the end of the government shutdown a material tailwind, or does it feel like you can sort of maintain this cadence over the course of the year?
Speaker #7: Is there any seasonal benefit in the fourth quarter? Was the end of the government shutdown a material tailwind, or does it feel like you can sort of maintain this cadence over the course of the year?
Dave Ring: Q4 is traditionally seasonally strong in my experience across the industry. And that's because businesses are strongly motivated to get things done before year-end for reporting purposes, planning purposes, tax purposes, you name it. So you can always expect to see a seasonally high Q4. Q1, traditionally, is somewhat slow, normally just because so much goes on at the very end of the year. So we would expect to see the typical pattern, which is it'll kind of build as the year goes on.
Speaker #2: Q4 is traditionally seasonally strong in my experience , across the industry . And that's because businesses are strongly motivated to get things done before year end for reporting purposes .
Speaker #2: Planning purposes , tax purposes , you name it , so you can always expect to see a seasonally high Q4 Q1 traditionally is somewhat slow , normally just because so much goes on at the very end of the year .
Speaker #2: So we would expect to see the typical pattern, which is kind of a build as the year goes on. There's usually a little dip in Q3 as people go on vacation.
Bill Cimino: There's usually a little dip in Q3 as people go on vacation, frankly. But there are some, yeah, there's normally some element of seasonality, but we see the opportunities there. So we'll see what happens. Really appreciate the detail, and thanks for taking my questions. Thank you. Thanks, Brian. And we're ready for our next caller, please. Our next question coming from the line of Catherine Mealor with KBW. Your line is now open. Good morning. Good morning. This is Hanna Wen stepping in for Catherine. Thank you for taking my question. Of course. I had a question on deposits. We saw a decline in deposits this quarter, and I was wondering if you could provide any guidance on the outlook for deposit growth into next year. Yeah.
There's usually a little dip in Q3 as people go on vacation, frankly. But there are some, yeah, there's normally some element of seasonality, but we see the opportunities there. So we'll see what happens.
Speaker #2: Frankly , but there are some yeah , there are . There's normally some element of but we see the opportunities there . So we'll we'll see what happens .
Really appreciate the detail, and thanks for taking my questions.
Speaker #7: Really appreciate the detail, and thanks for taking my questions.
Dave Ring: Thank you.
Bill Cimino: Thanks, Brian. And we're ready for our next caller, please.
Speaker #2: Thank you . Thanks , Brian . And we're ready for our next caller . Please .
Operator: Our next question coming from the line of Catherine Mealor with KBW. Your line is now open.
Speaker #1: Our next question comes from the line of Katherine with KB . Ellen is now open .
John Asbury: Good morning.
[Analyst] (KBW): Good morning. This is Hanna Wen stepping in for Catherine. Thank you for taking my question. Of course. I had a question on deposits. We saw a decline in deposits this quarter, and I was wondering if you could provide any guidance on the outlook for deposit growth into next year.
Speaker #2: Good morning .
Speaker #8: Good morning . This is Hannah Wynn stepping in for Katherine . Thank you for taking my question . Of course I had a question on deposits .
Speaker #8: We saw a decline in deposits this quarter . And I was wondering if you could provide any guidance on the outlook for deposit growth into next year .
John Asbury: Yeah.
Bill Cimino: Let me start by saying we saw the typical, for us, end-of-year decline that happens really in the last two weeks, if not last week of December. It's not at all uncommon, and we saw it again to where some of the larger commercial depositors will have various payments that they're making. So you see this downdraft in non-interest-bearing deposits that happens late. That's what was going on. Over the course of the quarter, we did continue to run down some higher-cost, sort of less relationship-oriented deposits that came out of Sandy Spring in particular. You've got a seasonal element going in there, and you see the deposit base kind of settling in. Rob, do you want to speak to the outlook for the, I guess, for the 2026? Yeah.
Let me start by saying we saw the typical, for us, end-of-year decline that happens really in the last two weeks, if not last week of December. It's not at all uncommon, and we saw it again to where some of the larger commercial depositors will have various payments that they're making. So you see this downdraft in non-interest-bearing deposits that happens late. That's what was going on. Over the course of the quarter, we did continue to run down some higher-cost, sort of less relationship-oriented deposits that came out of Sandy Spring in particular. You've got a seasonal element going in there, and you see the deposit base kind of settling in. Rob, do you want to speak to the outlook for the, I guess, for the 2026?
Speaker #2: Yeah . Let me start by saying we saw the typical for us end of year decline . That happens really in the last two weeks .
Speaker #2: If not last week of December . It's not at all uncommon . And we saw it again to where some of the larger commercial depositors will have various payments that they're making .
Speaker #2: And so you see this downdraft in noninterest bearing deposits that happens late that's . And what was going on over the We did of the quarter .
Speaker #2: course continue to run down some higher costs , sort of less relationship oriented deposits that came out of Sandy spring in particular . So you've got a seasonal element going in there , and you see the deposit base kind of settling in .
Speaker #2: Rob , want to speak do you to outlook for the I guess , for the 2026 ?
Rob Gorman: Yeah.
Bill Cimino: So if you look at our guidance, we're really guiding to about, off the fourth-quarter base, about 3% to 4% deposit growth for the year. We think that's achievable both on the commercial and on the consumer side. We've got more treasury management opportunities in the former Sandy Spring footprint, so there's some opportunities to grow there. So we're feeling pretty good because really low single digits is what we're calling for. Okay. Thank you. Thank you. Thanks, Hanna. And Livia, we're ready for our next caller, please. Our next question coming from the line of Stephen Scouten with Piper Sandler. Your line is now open. Hi, Stephen. Good morning. Yeah. Good morning, guys. Thanks. So one quick clarification, John. I think you said most of the cost savings related to the Sandy Spring deal are kind of in the numbers here, maybe some marginal benefit in Q1.
So if you look at our guidance, we're really guiding to about, off the fourth-quarter base, about 3% to 4% deposit growth for the year. We think that's achievable both on the commercial and on the consumer side. We've got more treasury management opportunities in the former Sandy Spring footprint, so there's some opportunities to grow there. So we're feeling pretty good because really low single digits is what we're calling for.
Speaker #3: Yeah . So , you know , if you look at our guidance , we're really guiding to about , you know , off the fourth quarter base , deposit about 3 to 4% growth for the year .
Speaker #3: We think that's achievable both on the commercial and on the consumer side . You know , we've got you know , more Treasury management opportunities in the former Sandy spring footprint .
Speaker #3: So there's some opportunities to grow there . So we're feeling pretty You know good . digits really low single is what we're what we're calling for .
[Analyst] (KBW): Okay. Thank you.
Bill Cimino: Thank you. Thanks, Hanna. And Livia, we're ready for our next caller, please.
Speaker #8: Okay . Thank you .
Speaker #2: Thank you .
Speaker #3: Thanks Hannah . And .
Speaker #2: Olivia . We're ready for our next caller . Please .
Operator: Our next question coming from the line of Stephen Scouten with Piper Sandler. Your line is now open.
Speaker #1: Our next question comes from the line of Stephens Piper Cowan with Sandler. Let's now open.
John Asbury: Hi, Stephen. Good morning.
Stephen Scouten: Yeah. Good morning, guys. Thanks. So one quick clarification, John. I think you said most of the cost savings related to the Sandy Spring deal are kind of in the numbers here, maybe some marginal benefit in Q1.
Speaker #2: Hi , Stephen .
Speaker #3: Morning .
Speaker #6: Yeah . Good morning guys . Thanks . So one one quick clarification , John . I think you said most of the cost savings related to Sandy spring are kind of in the numbers here .
Speaker #6: Maybe some marginal benefit in one . Q how should we think about I know we've got the full year guide , but just the run rate for expenses in the first quarter off of you know , this , what I think was around 204 , 205 million here this quarter on a on an adjusted basis .
Bill Cimino: How should we think about—I know we've got the full-year guide, but just the run rate for expenses in Q1 off of this, what I think was around $204 to 205 million here this quarter on an adjusted base? Yeah. So Stephen, the way I think about it is you're going to see kind of a flattish quarter in the way we're modeling it. Flattish quarter, Q1, and it starts coming down a bit over the remainder of the year. Of course, you understand there are some seasonality in Q1 as FICA resets, bonus payments are made, unemployment taxes go up, and then we have some merit increases going in. So that'll be kind of the high watermark, if you will, which is typical, and then start to come down.
How should we think about—I know we've got the full-year guide, but just the run rate for expenses in Q1 off of this, what I think was around $204 to 205 million here this quarter on an adjusted base?
John Asbury: Yeah. So Stephen, the way I think about it is you're going to see kind of a flattish quarter in the way we're modeling it. Flattish quarter, Q1, and it starts coming down a bit over the remainder of the year. Of course, you understand there are some seasonality in Q1 as FICA resets, bonus payments are made, unemployment taxes go up, and then we have some merit increases going in. So that'll be kind of the high watermark, if you will, which is typical, and then start to come down.
Speaker #3: Yeah . So the way I Stephen , think about that is you're going to see kind of a flattish quarter in the way we're modeling it .
Speaker #3: Last quarter . First quarter it starts coming down a bit . The over the remaining of the years . You know , of course you understand the there are some seasonality in the first quarter .
Speaker #3: As you know, FICA resets, bonus payments are made, unemployment taxes go up, and then we have some merit increases going in.
Speaker #3: So that'll be kind of the high water , if you will , which is typical . And then start to come down . If you look at it from an operating excluding the amortization of intangible expense , we're calling on for average , call it about 188 million a quarter going forward .
Bill Cimino: If you look at it from an operating, excluding the amortization of intangible expense, we're calling for, on average, call it about $188 million a quarter going forward, but it will skew a bit higher in the first quarter and starts to drop off in the subsequent quarters. Rob, what can we say about what's left of Sandy Spring-related expenses? Yeah. Well, I think it's not all in the numbers yet, but we've achieved the cost savings. About $80 million is what we had projected, 27.5%. In the numbers, it's probably about annualized, about $60-some-odd million there. Call it $60. We're getting another $5 coming out of the fourth quarter. So that will get you to that $80 million mark. So there is some benefit that you'll see in the first quarter.
If you look at it from an operating, excluding the amortization of intangible expense, we're calling for, on average, call it about $188 million a quarter going forward, but it will skew a bit higher in the first quarter and starts to drop off in the subsequent quarters. Rob, what can we say about what's left of Sandy Spring-related expenses?
Speaker #3: But those skew a bit higher in the first quarter and start to drop off in the subsequent quarters.
Speaker #2: Can we, Rob, what say about what's left of Sandy Spring-related expenses?
Rob Gorman: Yeah. Well, I think it's not all in the numbers yet, but we've achieved the cost savings. About $80 million is what we had projected, 27.5%. In the numbers, it's probably about annualized, about $60-some-odd million there. Call it $60. We're getting another $5 coming out of the fourth quarter. So that will get you to that $80 million mark. So there is some benefit that you'll see in the first quarter.
Speaker #3: Yeah . So our well , I think it's not all in the numbers yet , but we've achieved the cost savings . About $80 million is what we had projected , 27.5% in the numbers is probably about annualized .
Speaker #3: 60 some About odd million there . Call it 60 . We're getting another five coming out of the fourth quarter . So that will get you to that $80 million mark .
Bill Cimino: That's why we're kind of calling for flattish in the first quarter because it's offset by some of these other seasonal items. But you should see that come through going out in the second to fourth quarter. Of course, we also have investments that are being made in North Carolina and some strategic investments we made, which we noted in Investor Day. So those are kind of all in the numbers that I'm talking about. And I referenced there's some residual remaining expenses in Q1, which is, I think, maybe from a merger-related. Yeah. Like merger ones. Yeah. We have a couple of; there's some IT decommissioning expenses and a few related to some leases that we're getting out of. It's going to be less than $5 million is our projection for the first quarter for merger-related. That's it. It's all over. That is done. Yeah. That's great.
That's why we're kind of calling for flattish in the first quarter because it's offset by some of these other seasonal items. But you should see that come through going out in the second to fourth quarter. Of course, we also have investments that are being made in North Carolina and some strategic investments we made, which we noted in Investor Day. So those are kind of all in the numbers that I'm talking about. And I referenced there's some residual remaining expenses in Q1, which is, I think, maybe from a merger-related. Yeah. Like merger ones. Yeah. We have a couple of; there's some IT decommissioning expenses and a few related to some leases that we're getting out of. It's going to be less than $5 million is our projection for the first quarter for merger-related. That's it. It's all over. That is done.
Speaker #3: So there is some benefit that you'll see in the first quarter that'll that's why we kind of calling for flattish in the first quarter , because it's offset by some of these other seasonal items .
Speaker #3: But you should see that come through going out in the second to fourth quarter . Of course , we also have investments that are being made in North Carolina in some strategic investments we made , which we noted in Investor Day .
Speaker #3: So those are kind of all in the numbers that I'm talking about .
Speaker #2: Referenced, and there's some residual remaining expenses in Q1, which is, I think, mostly.
Speaker #3: From a merger related .
Speaker #2: Merger .
Speaker #3: Yeah , we have a couple of some it'd commissioning expenses in a few related to some leases that we're getting out of . It's gonna be less than 5 million is our projection for the first quarter for
Stephen Scouten: Yeah. That's great.
Speaker #3: merger That related .
Speaker #2: That's
Speaker #2: it . It's all
Speaker #3: it's done .
Bill Cimino: That's extremely helpful detail. Appreciate it. And maybe I know you kind of noted the progression in North Carolina, and that potential expansion is still pretty much on path for build-out over the next year and a half to two years. Is there any impetus to kind of accelerate any of your plans or push maybe deeper into hiring activity? That seems to be the norm across the spectrum today. Everybody seems to want to hire as many people as they can with the dislocation we're seeing across the industry. So just wondering if any of your plans there could accelerate or if you feel like there's a lot of capacity still within the team, just given the integration with legacy Sandy Spring into the AUB platform. That would principally be, I think, a commercial or wholesale banking question. Do you want to answer that, Dave? Yeah.
That's extremely helpful detail. Appreciate it. And maybe I know you kind of noted the progression in North Carolina, and that potential expansion is still pretty much on path for build-out over the next year and a half to two years. Is there any impetus to kind of accelerate any of your plans or push maybe deeper into hiring activity? That seems to be the norm across the spectrum today. Everybody seems to want to hire as many people as they can with the dislocation we're seeing across the industry. So just wondering if any of your plans there could accelerate or if you feel like there's a lot of capacity still within the team, just given the integration with legacy Sandy Spring into the AUB platform.
Speaker #2: Yeah .
Speaker #6: That's great . That's extremely helpful detail . Appreciate it . And maybe I know you kind of noted the progression in North Carolina .
Speaker #6: That potential expansion is still pretty much on on path for , you know , build out over the next year and a half to two years .
Speaker #6: Is there any impetus to accelerate any of your plans, or to push maybe deeper into hiring activity? That seems to be the norm across the spectrum today.
Speaker #6: Everybody seems to want to hire as many people as they can with with the dislocation we're seeing across across the industry . So just wondering if that any of your plans there could accelerate or if you feel like there's a lot of capacity still within the team , just , you know , given the integration with legacy Sandy Springs into the AUV .
John Asbury: That would principally be, I think, a commercial or wholesale banking question. Do you want to answer that, Dave?
Speaker #6: platform
Speaker #2: That would principally be , I think , a commercial or wholesale banking question . Do you answer that , want to Dave ? Yeah , I mean , this is not the time you necessarily want to hire a banker because you're going to have to pay their You mean this time bonus .
Dave Ring: Yeah.
Bill Cimino: I mean, this is not the time you necessarily want to hire a banker because you're going to have to pay their bonus. You mean this time of year. Yeah. This time of year. But we have a pipeline, a strong pipeline of people that we would expect to bring on board after bonuses are paid at the other institutions. And we currently have a lot of capacity within the team. We have 20 bankers sitting in the market already. In the Carolinas. In the Carolinas. And they're very active. And so we're going to continue to grow using those bankers, but also build out the rest over time. But you should expect to hear about more hiring between March and August during the year. We do feel good about the team and our capacity.
I mean, this is not the time you necessarily want to hire a banker because you're going to have to pay their bonus. You mean this time of year. Yeah. This time of year. But we have a pipeline, a strong pipeline of people that we would expect to bring on board after bonuses are paid at the other institutions. And we currently have a lot of capacity within the team. We have 20 bankers sitting in the market already. In the Carolinas. In the Carolinas. And they're very active. And so we're going to continue to grow using those bankers, but also build out the rest over time. But you should expect to hear about more hiring between March and August during the year. We do feel good about the team and our capacity.
Speaker #2: of year ? Yeah , this time of year . But we have a pipeline , a strong pipeline of people that we would expect to bring on board .
Speaker #2: You know , after bonuses are paid at the other institutions and we currently have a lot of capacity within the team . We have 20 bankers sitting in the market already , and Carolina in the Carolinas , and they're very active .
Speaker #2: And so , you know , we're going to we're going to continue to grow using those bankers , but also build out the rest over time .
Speaker #2: But you should hear about expect to more hiring . You know , March between March and August during the year . We still we do feel good about the team and our capacity .
Bill Cimino: We're sort of always in the market to some extent, but yeah, we would expect to see some big announcement that there's some big expansion per se. But we'll see how it goes. But there's no constraints on hiring. It's just hire as you can. We have a long track record of, as we can expand with the right talent, we tend to do that and make it work out. A little harder to accelerate on the consumer side because you got the branch build-outs and things. So it's more on the wholesale side. We'll push as hard as we can, but it's depending on the hiring capabilities there. Great. And then just maybe lastly for me, I mean, you've got a lot on your plate clearly in terms of this North Carolina expansion. Obviously, hoping to accelerate growth overall in terms of uses of capital.
We're sort of always in the market to some extent, but yeah, we would expect to see some big announcement that there's some big expansion per se. But we'll see how it goes. But there's no constraints on hiring. It's just hire as you can. We have a long track record of, as we can expand with the right talent, we tend to do that and make it work out. A little harder to accelerate on the consumer side because you got the branch build-outs and things. So it's more on the wholesale side. We'll push as hard as we can, but it's depending on the hiring capabilities there.
Speaker #2: We're sort of always in the market to some extent, but we don't expect to see some big announcement that there's some big expansion per se, but we'll see how it goes.
Speaker #3: But there's no constraints on hiring.
Speaker #2: It's just .
Speaker #3: Hire
Speaker #3: Hire you .
Speaker #2: Can long we have a track record of , you know , as we can expand , you know , with , with the right talent , we tend to do that and make it out .
Speaker #3: A
Speaker #3: little harder to accelerate . On the consumer side work because you've got the branch build outs and things . So it's more of a wholesale side .
Speaker #3: Yeah , we'll push can , we as hard as but it's depending on the the on , the hiring of capabilities . There .
Stephen Scouten: Great. And then just maybe lastly for me, I mean, you've got a lot on your plate clearly in terms of this North Carolina expansion. Obviously, hoping to accelerate growth overall in terms of uses of capital.
Speaker #6: Great . And then just lastly for me , I mean you've got a lot on your , on your plate . Clearly in terms of this North Carolina expansion obviously hoping to accelerate growth overall in terms of uses of capital .
Bill Cimino: But as earnings continue to ramp higher and capital builds should accelerate here, at what point do you think you entertain maybe share repurchases or other paths for that soon to be building excess capital over time? And is there a kind of a threshold you want to hit from a capital level first before you entertain that? Yeah. I think we've been clear that we will entertain a share repurchase probably the second half of 2026 of this year. Really looking at excess capital, anything beyond the 10.5% CET1 would be what we'd be looking for to utilize or consider excess capital to be in the repurchase market. So we're on track for that as we go through the first for the second quarter of this year. So as we said, we could be in the market late in the second quarter or in the third quarter.
But as earnings continue to ramp higher and capital builds should accelerate here, at what point do you think you entertain maybe share repurchases or other paths for that soon to be building excess capital over time? And is there a kind of a threshold you want to hit from a capital level first before you entertain that?
Speaker #6: But as continue to earnings ramp higher and capital builds should accelerate here , at what point do you think you you know , entertain , maybe share repurchases or other other paths for that ?
Speaker #6: You know, soon to be building excess capital over time? And is there a kind of threshold you want to hit from a capital level first before you entertain that?
John Asbury: Yeah. I think we've been clear that we will entertain a share repurchase probably the second half of 2026 of this year. Really looking at excess capital, anything beyond the 10.5% CET1 would be what we'd be looking for to utilize or consider excess capital to be in the repurchase market. So we're on track for that as we go through the first for the second quarter of this year. So as we said, we could be in the market late in the second quarter or in the third quarter.
Speaker #3: Yeah , I think we've been clear that we we will entertain a share repurchase probably the second half of 2026 of this year .
Speaker #3: Really, looking at excess capital, anything beyond the 10.5% CET1 would be what we'd be looking for to utilize the excess capital to be in the repurchase market.
Speaker #3: So we're on track for that as we go through the first . For the second quarter of this year . So as we said , we could be in the market late in the second quarter or or in the third quarter .
Bill Cimino: I'm glad you asked that question. You saw that we grew tangible capital about 4%, approximately 4% in one quarter. We're doing exactly what we said we would do. We've invested capital to build the franchise, to secure our positioning, to put us on this profitability and capital generation footing. Now we're receiving the benefit of that. We've been clear that we are guiding toward 12% to 15% annualized tangible capital growth. So we are going to be in a good position, as Rob said, where we'll be able to consider share buybacks. Yeah. Fantastic. Feels like everything's laid out before you. Appreciate the color, guys. Thank you, Stephen. And Livia, we're ready for our last caller, please. We have a follow-up question from David Bishop. Line, it's now open. Hi, Dave. Hey, John. Real quick, I guess a question for Rob.
I'm glad you asked that question. You saw that we grew tangible capital about 4%, approximately 4% in one quarter. We're doing exactly what we said we would do. We've invested capital to build the franchise, to secure our positioning, to put us on this profitability and capital generation footing. Now we're receiving the benefit of that. We've been clear that we are guiding toward 12% to 15% annualized tangible capital growth. So we are going to be in a good position, as Rob said, where we'll be able to consider share buybacks.
Speaker #2: And I'm glad you asked that question. You saw that we grew tangible capital about 4%, approximately 4% in one quarter.
Speaker #2: And we're doing exactly what we said we would do. We've invested capital to build the franchise, to secure our positioning, to put us on this profitability and capital footing generation.
Speaker #2: And now we're receiving the benefit of that. And we've been clear that we are guiding toward 12% to 15% annualized tangible capital growth.
Speaker #2: So we are going to be in a good position , as Rob said , where able we'll be to consider share buybacks .
Stephen Scouten: Yeah. Fantastic. Feels like everything's laid out before you. Appreciate the color, guys.
Speaker #6: Yeah, fantastic. It feels like everything's laid out before you appreciate the color, guys.
Bill Cimino: Thank you, Stephen. And Livia, we're ready for our last caller, please.
Speaker #2: Thank you, Stephen and Olivia. We're ready for our last caller, please.
Operator: We have a follow-up question from David Bishop. Line, it's now open.
Speaker #1: And we have a follow-up question from David Bishop. Elon is now open.
David Bishop: Hi, Dave. Hey, John. Real quick, I guess a question for Rob.
Speaker #2: Hi , Dave .
Speaker #5: Hey , John . Real quick , I guess a question for Rob . You in other expenses , non credit related customer losses .
Bill Cimino: You noted the in other senses non-credit-related customer losses. Is that fraudulent-type losses? Just curious what sort of drove those other expenses higher. Yeah. That's mostly what that is. Fraud is episodic, and it can come in fits and spurts, and that's what you're looking at. Yeah. Because it was elevated in just a couple of items or issues that came up in Q4. Hopefully, they don't recur, but yeah, they're here. It's the common rule. Yeah. Do you get these scams that move around the industry, and then there'll be something else. But that's episodic. We don't think that's a run rate issue. Got it. So within your OpEx guidance for Q1, the flattish, would that be flattish off the reported sort of 204.6 on an adjusted basis, or would it be sort of 202 adjusting for the fraud? Yeah.
You noted the in other senses non-credit-related customer losses. Is that fraudulent-type losses? Just curious what sort of drove those other expenses higher.
Speaker #5: Is that is that fraudulent type losses . Just curious what sort of drove those other expenses higher .
Rob Gorman: Yeah. That's mostly what that is. Fraud is episodic, and it can come in fits and spurts, and that's what you're looking at. Yeah. Because it was elevated in just a couple of items or issues that came up in Q4. Hopefully, they don't recur, but yeah, they're here. It's the common rule. Yeah. Do you get these scams that move around the industry, and then there'll be something else. But that's episodic. We don't think that's a run rate issue.
Speaker #2: Yeah, mostly, that's what that is. Fraud is episodic, and, you know, it can come in fits and spurts. And that's what you're looking at.
Speaker #3: Yeah . It was elevated this couple of items issues that came up in the fourth quarter . Hopefully they But don't yeah you know they're here .
Speaker #2: It's Whac-a-mole . It's yeah you get these scams that move around the industry and and then there'll be something else . But that's episodic .
Stephen Scouten: Got it. So within your OpEx guidance for Q1, the flattish, would that be flattish off the reported sort of 204.6 on an adjusted basis, or would it be sort of 202 adjusting for the fraud?
Speaker #2: But that's what the run rate issue is.
Speaker #5: Got it . Within your opex guidance for the first quarter , the flattish . Would that be flattish off the reported know , sort of , you 204.6 on an adjusted basis , or would it be sort of 202 adjusting for the fraud ?
Rob Gorman: Yeah.
Bill Cimino: It's kind of in, yeah, kind of around that range, 203, 202, 203, including the amortization, just because there's adds. Think about it as, yeah, we may not see that level, but there's other things that'll come in from a seasonal point of view. Got it. Appreciate that, Colin. Thanks, Dave. And thanks, everyone, for calling. We will look forward to speaking with you in three months. Have a good day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
It's kind of in, yeah, kind of around that range, 203, 202, 203, including the amortization, just because there's adds. Think about it as, yeah, we may not see that level, but there's other things that'll come in from a seasonal point of view.
Speaker #3: Yeah , it kind of . Yeah , kind of around that range , you know , 203202203 including the amortization , just , just because there's , you know , adds think about it as , may not yeah , we see that that level , but there's other things that will come in from a seasonal point of view .
Stephen Scouten: Got it. Appreciate that, Colin.
Bill Cimino: Thanks, Dave. And thanks, everyone, for calling. We will look forward to speaking with you in three months. Have a good day.
Speaker #5: Got it. Appreciate that color.
Speaker #5: .
Speaker #5: And thanks, thanks, Dave.
Speaker #2: Everyone, thank you for calling. We look forward to speaking with you in three months. Have a good day.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
