RBB Bank Q4 2025 RBB Bancorp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 RBB Bancorp Earnings Call
Speaker #1: Greetings, and
Operator: Greetings, and welcome to the RBB Bancorp Q4 2025 earnings conference call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Rebeca Rico, Financial Analyst. Ma'am, the floor is yours.
Speaker #1: Welcome to the RBB Bancorp fourth quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation.
Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded.
Speaker #1: I will now turn the conference over to your host, Rebeca Rico, Financial Analyst. Ma'am, the floor is yours.
Rebecca Rico: Thank you, Ali. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for Q4 2025. With me today are President and CEO Johnny Lee, Chief Financial Officer Lynn Hopkins, Chief Credit Officer Jeffrey Yeh, and Chief Operations Officer Gary Fan. Johnny and Lynn will briefly summarize our results, which can be found in the earnings press release and investor presentation.
Speaker #2: Thank you, Arlene. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for the fourth quarter of 2025. With me today are President and CEO Johnny Lee, Chief Financial Officer Lynn Hopkins, Chief Credit Officer Jeffrey Ye, and Chief Operations Officer Gary Fan.
Speaker #2: Johnny and Lynn will briefly summarize our results, which can be found in the earnings press release and investor presentation. They're available on our investor relations website, and then we'll open up the call to your questions.
Rachel Smith: They're available on our investor relations website, and then we'll open up the call to your questions. I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company's SEC filings. Now, I'd like to turn the call over to RBB Bancorp's President and Chief Executive Officer, Johnny Lee. Johnny? Thank you, Rebeca. Good day, everyone, and thank you for joining us today. Q4 was a strong finish to 2025 with solid loan growth, improving performance ratios, and normalizing credit. The entire RBB team continues to work hard to return the bank to its historic performance, and I'm very proud of what the team has accomplished. We still have work to do, particularly with respect to resolving remaining non-performing assets, but we're confident that we've turned the corner on credit and that performance will continue to improve in future quarters.
They're available on our investor relations website, and then we'll open up the call to your questions. I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company's SEC filings. Now, I'd like to turn the call over to RBB Bancorp's President and Chief Executive Officer, Johnny Lee. Johnny?
Speaker #2: I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company's SEC filings. Now, I'd like to turn the call over to RBB Bancorp's President and Chief Executive Officer, Johnny Lee.
Speaker #2: Lee. Johnny? Thank
Johnny Lee: Thank you, Rebeca. Good day, everyone, and thank you for joining us today. Q4 was a strong finish to 2025 with solid loan growth, improving performance ratios, and normalizing credit. The entire RBB team continues to work hard to return the bank to its historic performance, and I'm very proud of what the team has accomplished. We still have work to do, particularly with respect to resolving remaining non-performing assets, but we're confident that we've turned the corner on credit and that performance will continue to improve in future quarters.
Speaker #4: Good day to you, Rebecca, everyone, and thank you for joining us today. The fourth quarter was a strong finish to 2025, with solid loan growth and improving credit.
Speaker #4: The entire RBB team continues to work hard to return the bank to its historic performance, and I'm very proud of what the team has accomplished.
Speaker #4: We still have work to do, I think, with respect to resolving remaining non-performing assets, but we're confident that we've turned the corner on credit and that performance will continue to improve in future quarters.
Speaker #4: Fourth quarter net income totaled $10.2 million, or $0.59 per share, which was stable from the third quarter, but more than doubled our earnings for the same quarter a year ago.
Rachel Smith: Q4 net income totaled $10.2 million or $0.59 per share, which was stable from Q3, but more than double our earnings for the same quarter a year ago. ROA and NIM show similar trends and were stable from Q3 while increasing sharply from a year ago. Q4 loans grew at a solid 8.6%, which we believe demonstrates the progress we have made returning RBB to its historical rate of growth. We had another quarter of strong originations at $145 million, and Q4 loan originations were 32% higher than they were in 2024. Our pipeline remains healthy and in line with this same time last year, so we are optimistic we will see another year of high single-digit growth in 2026. We continue to maintain pricing and structuring discipline with Q4 originations yielding 31 basis points above our current loan portfolio yield.
Q4 net income totaled $10.2 million or $0.59 per share, which was stable from Q3, but more than double our earnings for the same quarter a year ago. ROA and NIM show similar trends and were stable from Q3 while increasing sharply from a year ago. Q4 loans grew at a solid 8.6%, which we believe demonstrates the progress we have made returning RBB to its historical rate of growth. We had another quarter of strong originations at $145 million, and Q4 loan originations were 32% higher than they were in 2024. Our pipeline remains healthy and in line with this same time last year, so we are optimistic we will see another year of high single-digit growth in 2026. We continue to maintain pricing and structuring discipline with Q4 originations yielding 31 basis points above our current loan portfolio yield.
Speaker #4: ROA and NIM show similar trends and were stable from the third quarter, while increasing a year ago. For the year, loans grew at a solid 8.6%, which we believe demonstrates the progress we have made returning RBB to its historical rate of growth.
Speaker #4: We had another quarter of strong originations at $145 million, and for the year, loan originations were 32% higher than they were in 2024. Our pipeline remains healthy and in line with this same time last year, so we are optimistic we will see another year of high single-digit growth in 2026.
Speaker #4: We continue to maintain pricing and structuring discipline, with fourth quarter originations yielding 31 basis points above our current loan portfolio yield. Despite the Fed rate cuts of 75 basis points in 2025, we were able to drive our fourth quarter yield on loans up 4 basis points to 6.07% compared to the same quarter a year ago.
Rachel Smith: Despite the Fed rate cuts of 75 basis points in 2025, we were able to drive our Q4 yield on loans up 4 basis points to 6.07% compared to the same quarter a year ago. Deposits were another bright spot of 2025 and show the progress we made by focusing on community outreach to attract retail deposits and expanding relationships with our business clients. Q4 total deposits increased 8.6% compared to Q4 a year ago, with strong growth in interest-bearing nonmaturity deposits supporting loan growth and a reduction in FHLB advances. Average demand deposits remained stable in 2025 and currently comprise 16% of total deposits. Q4 rate on average interest-bearing deposits declined by 55 basis points from Q4 of 2024, or 73% of the rate cuts we saw last year.
Despite the Fed rate cuts of 75 basis points in 2025, we were able to drive our Q4 yield on loans up 4 basis points to 6.07% compared to the same quarter a year ago. Deposits were another bright spot of 2025 and show the progress we made by focusing on community outreach to attract retail deposits and expanding relationships with our business clients. Q4 total deposits increased 8.6% compared to Q4 a year ago, with strong growth in interest-bearing nonmaturity deposits supporting loan growth and a reduction in FHLB advances. Average demand deposits remained stable in 2025 and currently comprise 16% of total deposits. Q4 rate on average interest-bearing deposits declined by 55 basis points from Q4 of 2024, or 73% of the rate cuts we saw last year.
Speaker #4: Deposits were another bright spot of 2025 and show the progress we made by focusing on community outreach to attract retail deposits and expanding relationships with our business clients.
Speaker #4: Fourth quarter total deposits increased 8.6% year over year, with strong growth in interest-bearing non-maturity deposits supporting loan growth and a reduction in FHLB advances. Average demand deposits remained stable in 2025, and currently comprise 16% of total deposits.
Speaker #4: The fourth quarter rate on average interest-bearing deposits declined by 55 basis points from the fourth quarter of 2024, or 73% of the rate cuts we saw last year.
Speaker #4: While we were successful reducing funding costs last year, competition for deposits has been increasing, and recent rate cuts have not delivered the same pace of costs.
Rachel Smith: While we were successful reducing funding costs last year, competition for deposits has been increasing, and recent rate cuts have not delivered the same pace of reductions in our deposit costs. We made significant progress addressing our non-performing assets during 2025. Non-performing loans decreased 45%, and non-performing assets decreased 34% since the end of last year and included ongoing improvement during Q4. Criticized assets and classified assets also improved during 2025, decreasing by 43% for the full year and 25% since the end of Q3. With that, I'll hand it over to Lynn to talk about the results in more detail. Lynn? Thank you, Johnny. Please feel free to refer to the investor presentation we have provided as I share my comments on Q4 and annual 2025 financial performance.
While we were successful reducing funding costs last year, competition for deposits has been increasing, and recent rate cuts have not delivered the same pace of reductions in our deposit costs. We made significant progress addressing our non-performing assets during 2025. Non-performing loans decreased 45%, and non-performing assets decreased 34% since the end of last year and included ongoing improvement during Q4. Criticized assets and classified assets also improved during 2025, decreasing by 43% for the full year and 25% since the end of Q3. With that, I'll hand it over to Lynn to talk about the results in more detail. Lynn?
Speaker #4: We made significant progress addressing our non-performing assets during 2025. Non-performing loans decreased 45%, and non-performing assets decreased 34% since the end of last year, and included ongoing improvement during the fourth quarter.
Speaker #4: Criticized classified assets also improved during 2025, decreasing by 43% for the full year and 25% since the end of the third quarter. With that, I'll hand it over to Lynn to talk about the results in more detail.
Speaker #4: Lynn?
Lynn Hopkins: Thank you, Johnny. Please feel free to refer to the investor presentation we have provided as I share my comments on Q4 and annual 2025 financial performance.
Speaker #5: Thank you,
Speaker #5: Johnny, please feel free to refer to the investor presentation we have provided as I share my comments on the fourth quarter and annual 2025 financial performance.
Speaker #5: As Johnny mentioned, and as you can see on slide three, net income was $1 million, or $0.59 per diluted share, which is stable from the third quarter.
Rachel Smith: As Johnny mentioned, and you can see on slide 3, net income for Q4 was $10.2 million or $0.59 per diluted share, which is stable from Q3. Q4 pre-tax pre-provision income was $2.3 million, or 21% higher than a year ago, which is four times the growth rate in assets over the same time period. Net interest income increased slightly, the sixth consecutive quarterly increase, adding one basis point to the net interest margin, which was $2.99 in Q4. Asset yields declined by seven basis points, driven primarily by the four basis point decrease in loan yield due to the market decreases in the prime rate in the last four months of the year.
As Johnny mentioned, and you can see on slide 3, net income for Q4 was $10.2 million or $0.59 per diluted share, which is stable from Q3. Q4 pre-tax pre-provision income was $2.3 million, or 21% higher than a year ago, which is four times the growth rate in assets over the same time period. Net interest income increased slightly, the sixth consecutive quarterly increase, adding one basis point to the net interest margin, which was $2.99 in Q4. Asset yields declined by seven basis points, driven primarily by the four basis point decrease in loan yield due to the market decreases in the prime rate in the last four months of the year.
Speaker #5: Fourth quarter pre-tax, pre-provision income was $2.3 million, or 21% higher than a year ago, which is four times the growth rate in assets over the same time period.
Speaker #5: Interest income increased slightly, marking the sixth consecutive quarterly increase, and added one basis point to the net interest margin, which was $2.99 in the fourth quarter.
Speaker #5: Asset yields declined by seven basis points, driven primarily by the four basis point decrease in loan yield due to the market decreases in the prime rate in the last four months. Funding costs declined eight basis points year over year.
Rachel Smith: At the same time, average funding costs declined 8 basis points, driven mostly by a 7 basis point decrease in the cost of deposits, which included a 12 basis point reduction in the average cost of interest-bearing deposits. For the year, net interest income increased by 13% to $112 million due to loan growth, relatively stable asset yields, and a 38 basis point decline in funding costs. Our spot rate on deposits was $2.90 at the end of the year, which was 6 basis points lower than the average cost of deposits in Q4. To this end, we expect to see some incremental improvement in deposit costs in Q1, but as Johnny mentioned, competition remains intense, so it is difficult to quantify what the impact will be. Q4 non-interest income declined by $486,000 from Q3, which had included a half-a-million-dollar gain related to one equity investment.
At the same time, average funding costs declined 8 basis points, driven mostly by a 7 basis point decrease in the cost of deposits, which included a 12 basis point reduction in the average cost of interest-bearing deposits. For the year, net interest income increased by 13% to $112 million due to loan growth, relatively stable asset yields, and a 38 basis point decline in funding costs. Our spot rate on deposits was $2.90 at the end of the year, which was 6 basis points lower than the average cost of deposits in Q4. To this end, we expect to see some incremental improvement in deposit costs in Q1, but as Johnny mentioned, competition remains intense, so it is difficult to quantify what the impact will be. Q4 non-interest income declined by $486,000 from Q3, which had included a half-a-million-dollar gain related to one equity investment.
Speaker #5: points, driven mostly by a seven At the same time, average basis point decrease in the cost of deposits, which included a 12 basis point reduction in the average cost of interest-bearing deposits.
Speaker #5: For the year, net interest income increased by 13% to $112 million due to loan growth, relatively stable asset yields, and a 38 basis point decline in funding costs.
Speaker #5: Our spot rate on deposits was $2.90 at the end of the year, which was six basis points lower than the average cost of deposits in the fourth quarter.
Speaker #5: To this end, we expect to see some incremental improvement in deposit costs in the first quarter, but as Johnny mentioned, competition remains intense, so it is difficult to quantify what the impact will be.
Speaker #5: Fourth quarter non-interest income declined by $486,000 from the third quarter, which had included a half-million-dollar gain related to one equity investment.
Speaker #5: During the fourth quarter, in addition to SBA loans, we sold $22 million of mortgages, which drove an increase in gain on sale, and we remain optimistic that our SFR production levels will continue to support ongoing loan sale activity.
Rachel Smith: During Q4, in addition to SBA loans, we sold $22 million of mortgages, which drove an increase in gain on sale, and we remain optimistic that our SFR production levels will continue to support ongoing loan sale activity. Compared to Q4 of 2024, all categories of non-interest income increased except for other income. Q4 non-interest expenses increased by $282,000, mostly due to year-end accruals, but were in line with expectations. Our operating expense ratio was stable from Q3 at 1.80% of average total assets. Q1 expenses are expected to increase due to seasonal taxes, and salary adjustments, and then stabilize for the next few quarters in the $18 to $19 million range, as professional service fees are expected to moderate in 2026 compared to 2025. We also reduced the quarterly effective tax rate by 330 basis points in Q4 when compared to Q3 of 2025.
During Q4, in addition to SBA loans, we sold $22 million of mortgages, which drove an increase in gain on sale, and we remain optimistic that our SFR production levels will continue to support ongoing loan sale activity. Compared to Q4 of 2024, all categories of non-interest income increased except for other income. Q4 non-interest expenses increased by $282,000, mostly due to year-end accruals, but were in line with expectations. Our operating expense ratio was stable from Q3 at 1.80% of average total assets. Q1 expenses are expected to increase due to seasonal taxes, and salary adjustments, and then stabilize for the next few quarters in the $18 to $19 million range, as professional service fees are expected to moderate in 2026 compared to 2025. We also reduced the quarterly effective tax rate by 330 basis points in Q4 when compared to Q3 of 2025.
Speaker #5: Compared to the fourth quarter of 2024, all categories of non-interest income increased except for other income. Fourth quarter non-interest expenses increased by $282,000, mostly due to year-end accruals, but were in line with expectations.
Speaker #5: Our operating expense ratio was stable from the third quarter, at 1.80% of average total assets. First quarter expenses are expected to increase due to seasonal taxes and salary adjustments, and then stabilize for the next few quarters in the $18 to $19 million range, as moderate increases in professional service fees are expected to 2026 compared to 2025.
Speaker #5: We also reduced the quarterly effective tax rate by 330 basis points in the fourth quarter when compared to the third quarter of 2025. This was mostly due to a reduction in the multi-state blended tax rate and benefits from ongoing state tax planning.
Rachel Smith: This was mostly due to a reduction in the multi-state blended tax rate and benefits from ongoing state tax planning. The overall 2025 effective tax rate benefited from purchased federal tax credits and state apportionment tax planning. The effective tax rate in 2026 is expected to be between 27% and 28%. Slides 6 and 7 have additional color on our loan portfolio and yields. As Johnny mentioned, originations have been strong at $145 million in Q4 and $713 million for all of 2025, which was 32% higher than the originations we saw in 2024. Slide 7 has details about our $1.7 billion residential mortgage portfolio, which represents 50% of our total loan portfolio and consists of well-secured non-QM mortgages, primarily in New York and California, with an average LTV of 54%. Slides 10 through 12 have details on asset quality, which continues to improve.
This was mostly due to a reduction in the multi-state blended tax rate and benefits from ongoing state tax planning. The overall 2025 effective tax rate benefited from purchased federal tax credits and state apportionment tax planning. The effective tax rate in 2026 is expected to be between 27% and 28%. Slides 6 and 7 have additional color on our loan portfolio and yields. As Johnny mentioned, originations have been strong at $145 million in Q4 and $713 million for all of 2025, which was 32% higher than the originations we saw in 2024. Slide 7 has details about our $1.7 billion residential mortgage portfolio, which represents 50% of our total loan portfolio and consists of well-secured non-QM mortgages, primarily in New York and California, with an average LTV of 54%. Slides 10 through 12 have details on asset quality, which continues to improve.
Speaker #5: The overall 2025 effective tax rate benefited from purchased federal tax credits and state apportionment tax planning. The effective tax rate in 2026 is expected to be between 27% and 28%.
Speaker #5: Slides six and seven have additional color on our loan portfolio and yields. As Johnny mentioned, originations have been strong at $145 million in the fourth quarter, and $713 million for all of 2025, which was 32% higher than the originations we saw in 2024.
Speaker #5: Slide seven has details about our $1.7 billion residential mortgage portfolio, which represents 50% of our total loan portfolio and consists of well-secured non-QM mortgages, primarily in New York and California, with an average LTV of 54%.
Speaker #5: Slides 10 through 12 have details on asset quality, which continues to improve. As Johnny mentioned, we did a lot to work—we did a lot of work to stabilize and resolve our NPAs in 2025.
Rachel Smith: As Johnny mentioned, we did a lot of work to stabilize and resolve our NPAs in 2025. We believe we are appropriately reserved on our NPLs and REO assets as we work towards their resolution. The provision for credit losses totaled $600,000 in Q4 due mainly to charge-offs and loan growth, partially offset by the impact of positive changes in economic forecasts and credit quality metrics. We expect future annual credit costs to be much lower now that credit has stabilized. Slide 13 has details about our deposit franchise. The decrease in total deposits during Q4 of 2025 was due to a $42 million decrease in brokered deposits, offset by a $26 million increase in retail deposits, which has supported our loan growth.
As Johnny mentioned, we did a lot of work to stabilize and resolve our NPAs in 2025. We believe we are appropriately reserved on our NPLs and REO assets as we work towards their resolution. The provision for credit losses totaled $600,000 in Q4 due mainly to charge-offs and loan growth, partially offset by the impact of positive changes in economic forecasts and credit quality metrics. We expect future annual credit costs to be much lower now that credit has stabilized. Slide 13 has details about our deposit franchise. The decrease in total deposits during Q4 of 2025 was due to a $42 million decrease in brokered deposits, offset by a $26 million increase in retail deposits, which has supported our loan growth.
Speaker #5: We believe we are appropriately reserved on our MPL and REO assets, as we work towards their resolution. The provision for credit losses totaled $600,000 in the fourth quarter, due mainly to charge-offs and loan growth.
Speaker #5: Partially offset by the impact of positive changes in economic forecasts and credit quality metrics. We expect future annual credit costs to be much lower now that credit has stabilized.
Speaker #5: Slide 13 has details about our deposit franchise. The decrease in total deposits during the fourth quarter of 2025 was due to a $42 million decrease in brokered deposits, offset by a $26 million increase in retail deposits, which has supported our loan growth.
Speaker #5: Tangible book value per share increased 7.8% during 2025 to end the year at $2,642, while at the same time returning over $25 million in capital to our shareholders through dividends and the repurchase of approximately 4% of our outstanding shares.
Rachel Smith: Tangible book value per share increased 7.8% during 2025 to end the year at $2,642, while at the same time returning over $25 million in capital to our shareholders through dividends and the repurchase of approximately 4% of our outstanding shares. Our capital levels remain strong, with all capital ratios above regulatory and well-capitalized levels. With that, we are happy to take your questions. Operator, if you would please open up the call. Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the *keys.
Tangible book value per share increased 7.8% during 2025 to end the year at $2,642, while at the same time returning over $25 million in capital to our shareholders through dividends and the repurchase of approximately 4% of our outstanding shares. Our capital levels remain strong, with all capital ratios above regulatory and well-capitalized levels. With that, we are happy to take your questions. Operator, if you would please open up the call.
Speaker #5: Our capital levels remain strong, with all capital ratios above regulatory and well-capitalized levels. With that, we are happy to take your questions. Operator, if you would please open up the line.
Speaker #5: call. Thank
Operator: Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the *keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Matthew Clark with Piper Sandler. Your line is live.
Speaker #1: At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue.
Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.
Rachel Smith: One moment, please, while we poll for questions. Thank you. Our first question is coming from Matthew Clark with Piper Sandler. Your line is live. Hey, good morning. Thanks for the questions. Just want to start on the deposit beta this quarter, 30% in terms of interest-bearing. It sounds like competition's still pretty intense. How should we think about that beta going forward? Do you think you can hold that 30%, or do you feel like you need—might that come down throughout the year? Hi, Matthew. Thank you. So the 30% for the linked quarters, I would say we're sort of just getting started. So kind of year-over-year, we were able to achieve, I think, closer to that 70%.
Speaker #1: Thank you. Our first question is coming from Matthew Clark with Piper Sandler. Your line is open.
Speaker #1: Thank you. Our first question is coming from Matthew Clark with Piper Sandler. Your line is live. Hey, good—
Matthew Clark: Hey, good morning. Thanks for the questions. Just want to start on the deposit beta this quarter, 30% in terms of interest-bearing. It sounds like competition's still pretty intense. How should we think about that beta going forward? Do you think you can hold that 30%, or do you feel like you need—might that come down throughout the year? Hi, Matthew. Thank you. So the 30% for the linked quarters, I would say we're sort of just getting started. So kind of year-over-year, we were able to achieve, I think, closer to that 70%.
Speaker #2: Morning. Thanks for the questions. Just want to start on the deposit beta this quarter—30%. In terms of interest-bearing, it sounds like competition's still pretty intense.
Speaker #2: How should we think about that beta going forward? Do you think you can hold that 30%, or do you feel like you need—might that come down throughout the—
Speaker #2: year? Hi,
Speaker #3: Matthew, thank you. So, the 30% for the linked quarters—I would say we're sort of just getting started. So, kind of year over year, we were able to achieve, I think, closer to that 70%.
Speaker #3: And I think, given that we still have a very large portion of our funding base in deposits that will mature over the next year, I think the deposit beta will continue to increase.
Rachel Smith: I think given that we still have a very large portion of our funding base in deposits that will mature over the next year, I think the deposit beta will continue to increase. Okay. Great. And then just any update on your plans for the subdebt? Yes. Yeah. So you're right. We have $120 million of subdebt that's eligible to be redeemed and will reprice effective 1 April of this year. So I think that we're looking at the opportunities to right-size it for our balance sheet and for our capital stack. So I think if it was set just to reprice on its own, we're just under 7%. I think the market's more attractive, so we'll be looking at something maybe more holistic in addition to, like I said, right-sizing it for our balance sheet. So I think that's where we're at right now. Okay. Great.
Lynn Hopkins: I think given that we still have a very large portion of our funding base in deposits that will mature over the next year, I think the deposit beta will continue to increase. Okay. Great. And then just any update on your plans for the subdebt? Yes. Yeah. So you're right. We have $120 million of subdebt that's eligible to be redeemed and will reprice effective 1 April of this year. So I think that we're looking at the opportunities to right-size it for our balance sheet and for our capital stack. So I think if it was set just to reprice on its own, we're just under 7%. I think the market's more attractive, so we'll be looking at something maybe more holistic in addition to, like I said, right-sizing it for our balance sheet. So I think that's where we're at right now.
Speaker #2: Okay, then just any update? Great. And plans for the sub debt?
Speaker #3: Yes, yeah, so you're right. We have $120 million of sub debt that's eligible to be redeemed, and will reprice effective April 1st of this year.
Speaker #3: So, I think that we're looking at our balance sheet and for our capital stack. So, I think if it was set just to reprice on its own, we're just under 7%.
Speaker #3: I think the market's more attractive, so we'll be looking at something maybe more holistic. In addition, like I said, right-sizing it for our balance sheet.
Speaker #3: So, I think that's where we're at right now.
Matthew Clark: Okay. Great. And then just last one for me on capital. You still have a lot of excess capital. How should we think about the buyback this year?
Speaker #2: Okay, great. And then, just last one for me on capital. You still have a lot of excess capital. How should we think about the buyback this year?
Rachel Smith: And then just last one for me on capital. You still have a lot of excess capital. How should we think about the buyback this year? Yeah. I feel like once we right-size the subdebt, I think there'll be an opportunity for us to be more active on a buyback program. So I think one step at a time. I think the end of 2025 had us continuing to be a little bit more inward-facing as we resolved credit, wrapped up 2025. So I would expect both the subdebt and then returning to being more active on the buyback. Okay. Great. Thanks again. Yeah. Thank you. Our next question is coming from Brendan Nosal with Hovde Group. Your line is live. Hey, folks. Hope you're doing well. Thanks for taking the questions. Hi. Hi, Brendan. Hey, Brendan.
Lynn Hopkins: Yeah. I feel like once we right-size the subdebt, I think there'll be an opportunity for us to be more active on a buyback program. So I think one step at a time. I think the end of 2025 had us continuing to be a little bit more inward-facing as we resolved credit, wrapped up 2025. So I would expect both the subdebt and then returning to being more active on the buyback.
Speaker #3: Yeah, I feel like once we right-size the sub debt, I think there'll be an opportunity for us to be more active on a buyback program.
Speaker #3: So, I think one step at a time. I think the end of 2025 had us continuing to be a little bit more inward-facing as we resolved credit and wrapped up 2025.
Speaker #3: So I would expect both the sub debt and then returning to being more active on the buyback.
Matthew Clark: Okay. Great. Thanks again.Yeah.
Speaker #2: Okay. Great. Thanks again.
Speaker #3: Yeah.
Operator: Thank you. Our next question is coming from Brendan Nosal with Hovde Group. Your line is live.
Speaker #1: This question is coming from Brendan. Thank you. Our next question, Nozzle with Harvard Group, your line is open.
Speaker #1: live. Hey, folks.
Brendan Nosal: Hey, folks. Hope you're doing well. Thanks for taking the questions.
Speaker #4: Hope you're doing well. Thanks for taking the time to join us.
Speaker #4: questions. Hey, Okay.
Lynn Hopkins: Hi. Hi, Brendan.
Speaker #3: Hi, Brendan.
Johnny Lee: Hey, Brendan.
Speaker #4: Brendan, maybe just starting on the margin—I definitely hear your comments earlier on the pace of deposit competition. But I guess when I look at the margin, the pace of improvement is a bit muted this quarter versus recent quarters.
Rachel Smith: Maybe just starting on the margin. Definitely heard your comments earlier on the pace of deposit competition. But I guess when I look at the margin, the pace of improvement has been a bit muted this quarter versus recent quarters. Can you maybe just talk about how you view the path for the margin as we move through 2026? Sure. So let me add just a little bit more color to why we think there's an opportunity, I think, for deposit costs to continue to come down. So again, 99.5% of our $1.7 billion in CDs will mature within the next 12 months, and 40% of those are actually in Q1. I think the average price of those is in the high threes, and I think funding has come down to probably at the high end around the 370 mark.
Brendan Nosal: Maybe just starting on the margin. Definitely heard your comments earlier on the pace of deposit competition. But I guess when I look at the margin, the pace of improvement has been a bit muted this quarter versus recent quarters. Can you maybe just talk about how you view the path for the margin as we move through 2026?
Speaker #4: Can you maybe just talk about how you view the path for the margin as we move through ’26?
Lynn Hopkins: Sure. So let me add just a little bit more color to why we think there's an opportunity, I think, for deposit costs to continue to come down. So again, 99.5% of our $1.7 billion in CDs will mature within the next 12 months, and 40% of those are actually in Q1. I think the average price of those is in the high threes, and I think funding has come down to probably at the high end around the 370 mark.
Speaker #3: Sure. So let me add just a little bit more color to why we think there is an opportunity. I think for deposit costs to continue to come down.
Speaker #3: So again, 99.5% of our $1.7 billion in CDs will mature within the next 12 months, and 40% of those are actually in the first quarter.
Speaker #3: I think the average price of those is in the high threes. And I think funding has come down to probably, at the high end, around the $370 mark.
Speaker #3: So I think a portion is going to have an opportunity to reprice into the current interest rate environment, and we haven't fully seen that.
Rachel Smith: So I think a portion is going to have an opportunity to reprice into the current interest rate environment, and we haven't fully seen that. And then we've also shifted a portion of our funding from traditional CDs into non-maturity interest-bearing products. They have kind of some similar yields, but I think will give us more flexibility as rates continue to come down based on forecast. So I don't know if that's helpful, Brendan, or if you're looking for something more specific. Yeah. No, that's helpful. I mean, is it fair to say based on that outlook for downward funding cost repricing that there's room for the margin to continue to expand? Yeah. We are still, I would say, slightly liability-sensitive, maybe a little bit more neutral than we've been in the past.
So I think a portion is going to have an opportunity to reprice into the current interest rate environment, and we haven't fully seen that. And then we've also shifted a portion of our funding from traditional CDs into non-maturity interest-bearing products. They have kind of some similar yields, but I think will give us more flexibility as rates continue to come down based on forecast. So I don't know if that's helpful, Brendan, or if you're looking for something more specific.
Speaker #3: And then I think for—and then we've also shifted a portion of our funding from traditional CDs into non-maturity interest-bearing products. They have kind of some similar yields, but I think will give us more flexibility as rates continue to come down.
Speaker #3: Based on forecast. So I don't know if that's helpful, Brendan, or if you're looking for something more.
Speaker #3: specific. Yeah.
Brendan Nosal: Yeah. No, that's helpful. I mean, is it fair to say based on that outlook for downward funding cost repricing that there's room for the margin to continue to expand?
Speaker #2: No, that's helpful. I mean, it's fair to say, based on that outlook for downward funding cost repricing, that there's room for the margin to continue to expand.
Lynn Hopkins: Yeah. We are still, I would say, slightly liability-sensitive, maybe a little bit more neutral than we've been in the past.
Speaker #3: Yeah, we are still, I would say, slightly liability sensitive—maybe a little bit more neutral than we've been in the past. You're absolutely right that, from a NIM perspective, what we saw in the fourth quarter is our earning asset yield came down a little bit as liquidity repriced into the current environment.
Rachel Smith: You're absolutely right that from a NIM perspective, what we saw in Q4 is our earning asset yield came down a little bit as liquidity repriced into the current environment, and then our loan yield came down just slightly. I think there's still opportunity to hold our earning asset yield and our loan yield based on the shape of the yield curve, the repricing characteristics of our loan portfolio, but there's definitely downward pressure on it. It's not that without being very careful, especially since our loan-to-deposit ratio sits around 99%. So I think we're looking at having some attractive deposit beta. We're looking at NIM expansion. One of our biggest opportunities for NIM expansion is our non-performing assets and continuing to resolve them. They held relatively flat kind of quarter-over-quarter, but we've made progress in, I think, ultimate resolution.
You're absolutely right that from a NIM perspective, what we saw in Q4 is our earning asset yield came down a little bit as liquidity repriced into the current environment, and then our loan yield came down just slightly. I think there's still opportunity to hold our earning asset yield and our loan yield based on the shape of the yield curve, the repricing characteristics of our loan portfolio, but there's definitely downward pressure on it. It's not that without being very careful, especially since our loan-to-deposit ratio sits around 99%. So I think we're looking at having some attractive deposit beta. We're looking at NIM expansion. One of our biggest opportunities for NIM expansion is our non-performing assets and continuing to resolve them. They held relatively flat kind of quarter-over-quarter, but we've made progress in, I think, ultimate resolution.
Speaker #3: And then our loan yield came down just slightly. I think there's still opportunity to hold our earning asset yield and our loan yield based on the shape of the yield curve, and the repricing characteristics of our loan portfolio.
Speaker #3: But there's definitely downward pressure on it. It's not that, without being very careful, especially since our loan-to-deposit ratio sits around 99%. So, I think we're looking at having some attractive deposit beta.
Speaker #3: We're looking at NIM expansion. One of our biggest opportunities for NIM expansion is our non-performing assets and continuing to resolve them. They held relatively flat, kind of quarter-over-quarter, but we've made progress in, I think, ultimate resolution.
Speaker #3: So that would also have a positive impact on our net interest margin, being able to return over $50 million to an earning asset.
Rachel Smith: So that would also have a positive impact on our net interest margin, being able to return over $50 million to an earning asset status. Okay. Okay. Great, Lynn. That's helpful. One more from me just on credit. First of all, congrats on the workouts this quarter and the improvement in virtually all metrics. As we look forward, I get that there's a ton of moving pieces here, but can you just kind of talk in broad strokes on where you hope to see credit metrics by the time we sit here in 12 months and look back on 2026? Well, that's quite a far.
So that would also have a positive impact on our net interest margin, being able to return over $50 million to an earning asset status.
Brendan Nosal: Okay. Okay. Great, Lynn. That's helpful. One more from me just on credit. First of all, congrats on the workouts this quarter and the improvement in virtually all metrics. As we look forward, I get that there's a ton of moving pieces here, but can you just kind of talk in broad strokes on where you hope to see credit metrics by the time we sit here in 12 months and look back on 2026?
Speaker #2: Okay.
Speaker #2: Okay, status. Great, Lynn. That's helpful. One more for me, just on credit. First of all, congrats on the workouts this quarter and the improvement in virtually all metrics.
Speaker #2: As we look forward, I get that there's a ton of moving pieces here, but can you just kind of talk in broad strokes on where you hope to see credit metrics by the time we sit here in 12 months and look back on 2026?
Speaker #4: Awesome. That's quite far. I would just say, obviously, since a few quarters ago, we always stated that we were staying very laser-focused on resolving much of our classified criticized credit, and hopefully this quarter's results.
Johnny Lee: Well, that's quite a far. I would just say, obviously, since a few quarters ago, we always stated that we were staying very laser-focused on resolving much of our classified, criticized credits, and hopefully, this quarter's results demonstrate through our ability to continue to kind of move positively to get most of them resolved. So as long as we keep on track on what we're doing right now, I would hope that certainly 12 months out, you'll see much continuously see improvements in our credit picture.
Rachel Smith: I would just say, obviously, since a few quarters ago, we always stated that we were staying very laser-focused on resolving much of our classified, criticized credits, and hopefully, this quarter's results demonstrate through our ability to continue to kind of move positively to get most of them resolved. So as long as we keep on track on what we're doing right now, I would hope that certainly 12 months out, you'll see much continuously see improvements in our credit picture. Yeah. I think in addition to what Johnny stated, so our NPLs are well understood. 90% of them are represented by 4 relationships. Of those 4 relationships, 3 of them are continuing to make payments based on agreement, which is good because it continues to lower the balance towards what could be ultimate resolution. So we're really only focused on a few.
Speaker #4: Demonstrates our ability to continue to kind of move in positively to get most of them resolved. So that's also keeping on track with what we're doing right now. I would hope that certainly 12 months out, that you'll continuously see improvements in our credit.
Speaker #4: picture. Yeah.
Lynn Hopkins: Yeah. I think in addition to what Johnny stated, so our NPLs are well understood. 90% of them are represented by 4 relationships. Of those 4 relationships, 3 of them are continuing to make payments based on agreement, which is good because it continues to lower the balance towards what could be ultimate resolution. So we're really only focused on a few.
Speaker #3: I think, in addition to what Johnny stated, our MPLs are well understood. Ninety percent of them are represented by four relationships. Of those four relationships, three are continuing to make payments based on agreement.
Speaker #3: Which is good, because it continues to lower the balance towards what could be ultimate resolution. So we're really only focused on a few. I think that gives us a really good opportunity to get them worked out during 2026.
Rachel Smith: I think that gives us a really good opportunity to get them worked out during 2026. We're optimistic that that will happen in the first half of this year, but one of them is the partially completed construction project, which represents about half of that balance, and that one will probably take the longest. So as we sit here a year from now with credit stabilized, we look to have sold our REOs and to have these resolved. Obviously, there may be regular activity, but expect that these larger ones will have been moved out. Okay. That's a really helpful color and commentary. All right. Thanks for taking the questions. Yeah. Thanks, Brendan. Thank you. Thank you. Our next question is coming from Kelly Motta with KBW. Your line is live. Hey, good morning. Thanks for the question.
I think that gives us a really good opportunity to get them worked out during 2026. We're optimistic that that will happen in the first half of this year, but one of them is the partially completed construction project, which represents about half of that balance, and that one will probably take the longest. So as we sit here a year from now with credit stabilized, we look to have sold our REOs and to have these resolved. Obviously, there may be regular activity, but expect that these larger ones will have been moved out.
Speaker #3: We're optimistic that that will happen in the first half of this year. But one of them is the partially completed construction project, which represents balance.
Speaker #3: And that one will probably take the longest. So, as we sit here a year from now with credit stabilized, we look to have sold our REOs and to have these resolved.
Speaker #3: Obviously, there may be regular activity, but expect that these larger ones will have been moved out.
Brendan Nosal: Okay. That's a really helpful color and commentary. All right. Thanks for taking the questions.
Speaker #2: Okay, that's really helpful color and commentary. All right, thanks for taking the—
Lynn Hopkins: Yeah. Thanks, Brendan. Thank you.
Speaker #3: Yeah. Thanks, Brendan. questions.
Speaker #4: Thank
Operator: Thank you. Our next question is coming from Kelly Motta with KBW. Your line is live.
Speaker #1: Thank you. Our next question is coming from Kelly Motta with KBW. Your line is open.
Kelly Motta: Hey, good morning. Thanks for the question.
Speaker #5: Hey, good morning. Thanks for the question. Maybe on loan growth—it slowed down a bit from the past two quarters to the lowest single digits.
Rachel Smith: Maybe on loan growth, it slowed down a bit from the past two quarters to low single digits. Wondering if you could speak more as to the pipelines where you're seeing opportunity and if the decline was more of a function of payoffs, or lower demand, or just maybe some deposit constraints given your loan-to-deposit ratio and the competitive dynamics that you cited earlier in the call. Thank you. Hi, Kelly. That's Johnny. I think probably a combination of all those that you mentioned. But I mean, overall, again, obviously, we have some loan sales and we have some strategic exits on a couple of classified credits. And I mean, for our loan sort of momentum, actually, I actually certainly want to do more, but compared to previous year, overall, I think we're doing pretty well as far as keeping that momentum going.
Maybe on loan growth, it slowed down a bit from the past two quarters to low single digits. Wondering if you could speak more as to the pipelines where you're seeing opportunity and if the decline was more of a function of payoffs, or lower demand, or just maybe some deposit constraints given your loan-to-deposit ratio and the competitive dynamics that you cited earlier in the call. Thank you.
Speaker #5: Wondering if you could speak more as to the pipelines where you're seeing opportunity, and if the decline was more a function of payoffs, lower demand, or maybe some deposit constraints given your loan-to-deposit ratio and the competitive dynamics that you cited earlier in the call.
Speaker #5: Thank
Speaker #5: you. Hi, Kelly.
Johnny Lee: Hi, Kelly. That's Johnny. I think probably a combination of all those that you mentioned. But I mean, overall, again, obviously, we have some loan sales and we have some strategic exits on a couple of classified credits. And I mean, for our loan sort of momentum, actually, I actually certainly want to do more, but compared to previous year, overall, I think we're doing pretty well as far as keeping that momentum going.
Speaker #4: That's Johnny. I, of all of those that you mentioned. But I mean, overall, again, obviously, we have some loan sales, and we have some strategic exits on a couple of classified credits.
Speaker #4: And I mean, for loan sort of momentum, actually, we certainly want to do more. But compared to previous year, overall, I think we're doing pretty well as far as keeping that momentum going.
Speaker #4: The pipeline is still relatively healthy right now, both for the commercial and the residential mortgage side. So I think, even though—but I think overall, on average, our new funded loans for commercial is about $65 million per quarter, and mortgage side about $90 million per quarter.
Rachel Smith: The pipeline is still relatively healthy right now, both for the commercial and the residential mortgage side. So I think even though Q4 seems a bit light, but I think overall, on average, our new funded loans for commercial is about $65 million per quarter and mortgage size about $90 million per quarter. Looking at the pipeline right now, certainly, we feel very optimistic that we can continue to keep that pace. Got it. Sorry, Lynn. Didn't mean to cut you off. Go ahead. No, you're fine. I think as we sit here today, we are in as good of, if not better, position at the same time last year when we were able to achieve over 8% annualized growth.
The pipeline is still relatively healthy right now, both for the commercial and the residential mortgage side. So I think even though Q4 seems a bit light, but I think overall, on average, our new funded loans for commercial is about $65 million per quarter and mortgage size about $90 million per quarter. Looking at the pipeline right now, certainly, we feel very optimistic that we can continue to keep that pace.
Speaker #4: And looking at the pipeline right now, certainly we feel very optimistic that we can continue to keep that.
Kelly Motta: Got it. Sorry, Lynn. Didn't mean to cut you off. Go ahead.
Speaker #5: Got it. Sorry, Lynn. Didn't mean to cut you off.
Speaker #5: Off. Go ahead. No, you're fine.
Lynn Hopkins: No, you're fine. I think as we sit here today, we are in as good of, if not better, position at the same time last year when we were able to achieve over 8% annualized growth.
Speaker #3: I think as we sit here today, we are in as good of, if not better, position as we were at the same time last year. When we were able to achieve over 8% annualized growth, I would kind of comment that fourth quarter loan growth was a little bit muted.
Rachel Smith: I would kind of comment the Q4 loan growth was a little bit muted, but we did have a higher volume of loan sales, as Johnny mentioned, and we were working to resolve some substandard credits. So we were happy on those exits. And I think with the interest rate environment, payoffs and paydowns can tend to come up a bit, but they were actually a little bit lower than Q3. So we think that our ongoing production will fall through to net loan growth as we go forward. But I think those things just kind of had a little bit downward pressure, but I think all the metrics are healthy that sit behind it. Got it. Maybe last question for me on expenses. You've reported about $19 million in the quarter.
I would kind of comment the Q4 loan growth was a little bit muted, but we did have a higher volume of loan sales, as Johnny mentioned, and we were working to resolve some substandard credits. So we were happy on those exits. And I think with the interest rate environment, payoffs and paydowns can tend to come up a bit, but they were actually a little bit lower than Q3. So we think that our ongoing production will fall through to net loan growth as we go forward. But I think those things just kind of had a little bit downward pressure, but I think all the metrics are healthy that sit behind it.
Speaker #3: But we did have a higher volume of loan sales, as Johnny mentioned. And we were working to resolve some substandard credits, so we were happy on those exits.
Speaker #3: And I think with the interest rate environment, payoffs and paydowns can tend to come up a bit, but they were actually a little bit lower than third quarter.
Speaker #3: So, we think that our ongoing production will fall through to net loan growth as we go forward. But I think those things just kind of had a little bit of downward pressure, but I think all the metrics are healthy that sit behind it.
Kelly Motta: Got it. Maybe last question for me on expenses. You've reported about $19 million in the quarter. Just looking into 2026, I'm wondering if this is a good run rate to build off of and any kind of puts and takes. I know legal and professional has been maybe more elevated than past years, probably related to the workout, but should be presumably declining. And then any kind of thoughts for additional things we should be baking in as we look ahead to next this year. Sorry, I keep saying next year. This year, 2026.
Speaker #5: Got it. Maybe last question for me on expenses. You've reported about $19 million in the quarter. Just looking into '26, I'm wondering if this is a good run rate to build off of, and any kind of puts and takes.
Rachel Smith: Just looking into 2026, I'm wondering if this is a good run rate to build off of and any kind of puts and takes. I know legal and professional has been maybe more elevated than past years, probably related to the workout, but should be presumably declining. And then any kind of thoughts for additional things we should be baking in as we look ahead to next this year. Sorry, I keep saying next year. This year, 2026. I know. I'm doing the same thing. I think that the run rate in Q4 is a pretty good indication of our overhead or quarterly overhead to achieve the production levels we were able to achieve in 2026. So I think what we saw is compensations a bit higher to reflect the growth inside of the company.
Speaker #5: I know legal and professional has been maybe more elevated than past years, probably related to the workout, but should be, presumably, declining. And then, any kind of thoughts for additional things we should be baking in as we look ahead to next this year?
Speaker #5: Sorry, I keep seeing next
Speaker #5: year.
Lynn Hopkins: I know. I'm doing the same thing. I think that the run rate in Q4 is a pretty good indication of our overhead or quarterly overhead to achieve the production levels we were able to achieve in 2026. So I think what we saw is compensations a bit higher to reflect the growth inside of the company.
Speaker #3: I think that, you know, I'm doing the same. The run rate in the fourth quarter is a pretty good indication of our overhead, or our quarterly overhead, to achieve the production levels we were able to achieve in 2026.
Speaker #3: So I think what we saw is compensation's a bit higher to reflect the growth inside of the company. We also had some management transition this year that we wouldn't necessarily expect to reoccur, and we can reallocate those dollars into higher costs of doing business.
Rachel Smith: We also had some management transition this year that we wouldn't necessarily expect to reoccur, and we can reallocate those dollars into higher costs of doing business. You're exactly right. Legal and professional, we think there's an opportunity for those costs to come down as credit is stabilized. So while there's a step up when I look from 2024 to 2025, I don't know that it requires that same step up in order to achieve mid- to high single-digit loan growth. I think there's also other opportunities to grow top line if for some reason expenses go higher. But I think just when you look at just that part of it, we're looking in that $18 to 19 million range. I think you can tell.
We also had some management transition this year that we wouldn't necessarily expect to reoccur, and we can reallocate those dollars into higher costs of doing business. You're exactly right. Legal and professional, we think there's an opportunity for those costs to come down as credit is stabilized. So while there's a step up when I look from 2024 to 2025, I don't know that it requires that same step up in order to achieve mid- to high single-digit loan growth. I think there's also other opportunities to grow top line if for some reason expenses go higher. But I think just when you look at just that part of it, we're looking in that $18 to 19 million range. I think you can tell.
Speaker #3: You're exactly right. Legal and professional, we think there's an opportunity for those costs to come down as credit is stabilized. So, while there's a step up when I look from 2024 to 2025, I don't know that it requires that same step up in order to achieve mid to high single-digit loan growth.
Speaker #3: I think there's also other opportunities to grow top line if, for some reason, the expenses go higher. But I think just when you look at just that part of it, we're looking in that $18 to $19 million range, I think you can tell.
Speaker #3: So, first quarter, based on kind of pay raises and taxes, kind of has an extra, kind of, three-quarters of a million, I think, is kind of what pops through in the first quarter.
Rachel Smith: So Q1, based on kind of pay raises, and taxes, kind of has an extra kind of $0.75 million, I think, is kind of what pops through in Q1, and then it normalizes after that. Got it. That's great. Thank you so much for the help. Yep. Thank you. Thank you. Our next question is coming from Tim Coffey with Janney. Your line is live. Thanks. Morning, everybody. Hey, Tim. Lynn, I guess my first question for you would be, do you see this year as an opportunity to lower the loan-to-deposit ratio considering the potential to reduce interest expense through the course of the year as well as grow interest income? Great question. So I would say a couple of things. One, we lowered our reliance on wholesale funding, and I think it's relatively low and very manageable.
So Q1, based on kind of pay raises, and taxes, kind of has an extra kind of $0.75 million, I think, is kind of what pops through in Q1, and then it normalizes after that.
Speaker #3: And then it normalizes after
Speaker #3: that. Got it.
Kelly Motta: Got it. That's great. Thank you so much for the help. Yep. Thank you.
Speaker #5: That's great. Thank you so much for the help.
Speaker #3: Yep.
Speaker #4: Thank
Operator: Thank you. Our next question is coming from Tim Coffey with Janney. Your line is live.
Speaker #1: Thank you. Our next question is coming from Tim Coffey with Johnny. Your line is open.
Speaker #1: live. Thanks.
Tim Coffey: Thanks. Morning, everybody.
Speaker #6: Morning,
Speaker #6: Everybody, hey, Tim. Lynn, I guess my first question for you would be: Do you see this year as an opportunity to lower the loan-to-deposit ratio, considering the potential to reduce interest expense through the course of the year as well as grow interest income?
Lynn Hopkins: Hey, Tim.
Tim Coffey: Lynn, I guess my first question for you would be, do you see this year as an opportunity to lower the loan-to-deposit ratio considering the potential to reduce interest expense through the course of the year as well as grow interest income?
Lynn Hopkins: Great question. So I would say a couple of things. One, we lowered our reliance on wholesale funding, and I think it's relatively low and very manageable.
Speaker #3: Great question. So, I would say a couple of things. One, we lowered our reliance on wholesale funding, and I think it's relatively low and very manageable.
Speaker #3: So, obviously, to lower the loan-to-deposit ratio, deposit growth would have to outpace our loan growth. And I think we're looking at some attractive loan growth in 2026.
Rachel Smith: So obviously, to lower the loan-to-deposit ratio, deposit growth would have to outpace our loan growth, and I think we're looking at some attractive loan growth in 2026. Our retail deposit growth did keep pace with our loan growth in 2025, so we would expect the same. I think pushing down significantly would maybe take some opportunistic loan sales that we would then put that benefit into the equity. But I would say generally, I think there's some opportunity to maybe get into the mid-90s, but I don't know if it would get much lower than that, Tim. Okay. Yeah. I wasn't contemplating to use sell loans to get there. I thought that you'd be able to grow retail deposits faster.
So obviously, to lower the loan-to-deposit ratio, deposit growth would have to outpace our loan growth, and I think we're looking at some attractive loan growth in 2026. Our retail deposit growth did keep pace with our loan growth in 2025, so we would expect the same. I think pushing down significantly would maybe take some opportunistic loan sales that we would then put that benefit into the equity. But I would say generally, I think there's some opportunity to maybe get into the mid-90s, but I don't know if it would get much lower than that, Tim.
Speaker #3: Our retail deposit growth did keep pace with our loan growth in 2025, so we would expect the same. I think pushing down significantly would maybe take some opportunistic loan sales, that we would then put that benefit into the equity.
Speaker #3: But I would say, generally, I think there's some opportunity to maybe get into the mid-90s, but I don't know if it would get much lower than that.
Speaker #3: that, Tim. Okay.
Tim Coffey: Okay. Yeah. I wasn't contemplating to use sell loans to get there. I thought that you'd be able to grow retail deposits faster. Then Johnny, we talked a little bit about the pipeline for this year in terms of loan growth, and it's good to see another year just like the past one. What is the competition like for commercial real estate loans right now in your footprint?
Speaker #6: Yeah, I wasn't contemplating that you'd sell loans to get there. I thought that you'd be able to grow retail deposits faster. And then, Johnny, as we talked a little bit about the pipeline for this year in terms of loan growth, it's good to see another year just like the past one.
Rachel Smith: Then Johnny, we talked a little bit about the pipeline for this year in terms of loan growth, and it's good to see another year just like the past one. What is the competition like for commercial real estate loans right now in your footprint? Hey, Tim. Actually, still, competition is always there. But again, we want to be very strategic about the kind of relationships that we bring in. Certainly, the rate has a little bit more challenge as far as trying to maintain the yield that we had in, let's say, Q2, prior first half of the year last year. But overall, I think we've been able to, I think, hold our ground pretty well because, again, we're a very relationship-driven bank, and so we look at each one of these prospects or contracts that we are considering lending to.
Speaker #6: What is the competition like for commercial real estate loans right now in your
Speaker #6: footprint?
Johnny Lee: Hey, Tim. Actually, still, competition is always there. But again, we want to be very strategic about the kind of relationships that we bring in. Certainly, the rate has a little bit more challenge as far as trying to maintain the yield that we had in, let's say, Q2, prior first half of the year last year. But overall, I think we've been able to, I think, hold our ground pretty well because, again, we're a very relationship-driven bank, and so we look at each one of these prospects or contracts that we are considering lending to.
Speaker #4: Actually, there is still competition; it's always there. But again, we want to be very strategic about the kind of relationships that we bring in. Certainly, the rate has a little bit more challenge as far as trying to maintain the yield that we had in, let's say, Q3 or the first half of the year last year.
Speaker #4: But the overall, I think with the we've been able to, I think, hold our ground pretty well. Because again, we're a very relationship-driven bank, and so we look at each one of these prospects or clients that we look that we're considering lending to.
Speaker #4: We look at the overall potential of the relationship—not just what we might be able to generate from a yield standpoint, but any other additional considered businesses that might come along with it, such as deposits, of course.
Rachel Smith: We look at the overall potential of the relationship, not just what we might be able to generate from a yield standpoint, but any other additional service businesses that might come along with it, such as deposits, of course. So with that, I think from a relationship standpoint, we still are able to be fairly competitive. But again, the reality is certainly we've always faced competition on the rate side. Yeah. Okay. Yeah. Are you seeing competitors undercutting the spreads on these loans relative to where the yield curve is? Well, I think we are from a yield standpoint. We've actually given up quite a bit of businesses for sort of competitor against some of our peers who are offering these 5-year fixed rates below 5.75% on average or 5.5% to 5.75%.
We look at the overall potential of the relationship, not just what we might be able to generate from a yield standpoint, but any other additional service businesses that might come along with it, such as deposits, of course. So with that, I think from a relationship standpoint, we still are able to be fairly competitive. But again, the reality is certainly we've always faced competition on the rate side.
Speaker #4: So with that, I think from a relationship standpoint, we still are able to be fairly competitive. But again, the reality is, certainly we've always faced competition on the rate.
Speaker #4: side. Yeah.
Speaker #6: Okay, yeah. I used to—are you seeing competitors undercutting the spreads on these loans relative to where the yield curve is?
Tim Coffey: Yeah. Okay. Yeah. Are you seeing competitors undercutting the spreads on these loans relative to where the yield curve is?
Speaker #6: Is? Well, I think we are from the—
Johnny Lee: Well, I think we are from a yield standpoint. We've actually given up quite a bit of businesses for sort of competitor against some of our peers who are offering these 5-year fixed rates below 5.75% on average or 5.5% to 5.75%.
Speaker #4: yield standpoint. We've actually given them given up quite a bit of businesses for sort of competitor against some of our peers who are offering these five-year fixed rates below 5 and 3-quarter percent on average or 5 and a half to 5 and 3-quarter percent, but so far, I think we're holding pretty well above that six or higher.
Rachel Smith: But so far, I think we're holding pretty well above that 6 or higher right now with the yield that we're much of the pricing that we've been proposing. Okay. Understood. Those are my questions. Thank you very much. All right. Thank you. Thanks, Tim. Thank you. As we have no further questions on the lines at this time, I would like to hand the call back over to Mr. Lee for any closing remarks. Okay. Thank you. Once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great day, everybody. Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.
But so far, I think we're holding pretty well above that 6 or higher right now with the yield that we're much of the pricing that we've been proposing.
Speaker #4: Right now, with a yield that we're much underpricing, that we've been proposing.
Tim Coffey: Okay. Understood. Those are my questions. Thank you very much.
Speaker #6: Okay. Understood. Those are my questions. Thank you very much.
Speaker #6: much. All right.
Johnny Lee: All right. Thank you.
Speaker #4: Thank
Speaker #4: you. Thanks,
Lynn Hopkins: Thanks, Tim.
Speaker #3: Tim. Thank you.
Operator: Thank you. As we have no further questions on the lines at this time, I would like to hand the call back over to Mr. Lee for any closing remarks.
Speaker #1: As we have no further questions on the lines at this time, I would like to hand the call back over to Mr. Lee for any closing remarks.
Johnny Lee: Okay. Thank you. Once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great day, everybody.
Speaker #4: Okay. Thank you. Once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks.
Speaker #4: Have a great day, everybody.
Operator: Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Speaker #1: Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.
