Simmons First National Q4 2025 Simmons First National Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Simmons First National Corp Earnings Call
Speaker #1: Good day.
Speaker #1: And now, welcome to the Simmons First National Corporation fourth-quarter earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero.
Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two.
Speaker #1: Please note today's event is being recorded. I would not like to turn the conference over to Ed Billy, Director of Investor Relations. Please go
Ed Bilek: Please go ahead. Good morning, and welcome to Simmons First National Q4 2025 earnings call. Joining me today are several members of our executive management team, including President and CEO, Jay Brogdon, CFO, Daniel Hobbs, and Chief Operating Officer, Chris Van Steenburg.
Speaker #1: Go ahead. Good morning and welcome to Simmons First.
Speaker #2: National Corporation's fourth-quarter 2025 earnings call. Joining me today are several members of our executive management team, including President and CEO James Brogdon, CFO Daniel Hobbs, and Chief Operating Officer Chris Van Steenberg.
Speaker #2: Today's call will be in a Q&A format. Before we begin, I would like to remind you that our fourth-quarter earnings materials, including the earnings release and presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab.
Operator: Today's call will be in a Q&A format. Before we begin, I would like to remind you that our Q4 earnings materials, including the earnings release and presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab. During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity, and net interest margin. These statements involve risk and uncertainties, and you should therefore not place undue reliance on any forward-looking statement, as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.
Today's call will be in a Q&A format. Before we begin, I would like to remind you that our Q4 earnings materials, including the earnings release and presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab. During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity, and net interest margin. These statements involve risk and uncertainties, and you should therefore not place undue reliance on any forward-looking statement, as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.
Speaker #2: During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook. Including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity, and net interest margin.
Speaker #2: These statements involve risk and uncertainties, and you should therefore not place undue reliance on any forward-looking statement, as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.
Speaker #2: Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday. As well as our Form 10-K for the year-ended December 31st, 2024, and Form 10-Q for the quarter-ended September 30th, 2025.
Operator: Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday, as well as our Form 10-K for the year ended December 31, 2024, and Form 10-Q for the quarter ended September 30, 2025, including the risk factors contained in those filings. These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information. Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, SimmonsBank.com.
Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday, as well as our Form 10-K for the year ended December 31, 2024, and Form 10-Q for the quarter ended September 30, 2025, including the risk factors contained in those filings. These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information. Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, SimmonsBank.com.
Speaker #2: Including the risk factors contained in those filings, these forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information.
Speaker #2: Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com.
Speaker #2: Operator, we're ready to begin the Q&A.
Operator: Operator, we're ready to begin the Q&A. Thank you. And as a reminder, if you'd like to ask a question, please press star then one. And to remove yourself from queue, please press star then two. Our first question today comes from Matt Olney at Stephens. Please go ahead. Hey, thanks. Good morning, everybody. I want to start on the good morning. On the loan growth front, loan growth took a nice step forward in the fourth quarter. Any more colors on the drivers? And then the second part, I just want to understand the pipeline discussion disclosures. Looks like the approved and rated close pipeline moved up nicely, but the overall pipeline was still flat out. So just trying to appreciate maybe the various components of that pipeline and then what that means for growth in 2026. Thanks. Yeah, thanks, Matt.
Operator, we're ready to begin the Q&A.
Operator: Thank you. And as a reminder, if you'd like to ask a question, please press star then one. And to remove yourself from queue, please press star then two. Our first question today comes from Matt Olney at Stephens. Please go ahead.
Speaker #1: Thank you. And as a reminder, if you'd like to ask a question, please press star, then one. To remove yourself from the queue, please press star, then two.
Speaker #1: Our first question today comes from Matt Olney at Stevens. Please go ahead.
Matt Olney: Hey, thanks. Good morning, everybody. I want to start on the good morning. On the loan growth front, loan growth took a nice step forward in the fourth quarter. Any more colors on the drivers? And then the second part, I just want to understand the pipeline discussion disclosures. Looks like the approved and rated close pipeline moved up nicely, but the overall pipeline was still flat out. So just trying to appreciate maybe the various components of that pipeline and then what that means for growth in 2026. Thanks. Yeah, thanks, Matt.
Speaker #3: Hey, thanks. Good morning, everybody. I want to start on the loan growth front. Loan growth took a nice step forward in the fourth quarter.
Speaker #3: Any more colors on the drivers? And then the second part, I just want to understand the pipeline discussion disclosures looks like the approved and ready to close pipeline moved up nicely, but the overall pipeline was still flat out.
Speaker #3: So just trying to appreciate maybe the various components of that pipeline, and then what that means for growth in 2026.
Speaker #4: Yeah, thanks, Matt. So, I'd say a few things to comment. First, on the quarter, and then we can talk about pipelines in 2026. So we were certainly pleased with the pace of growth for loans in the fourth quarter.
Operator: So I'd say a few things to comment first on the quarter, and then we can talk about pipelines in 2026. So we were certainly pleased with the pace of growth for loans in the fourth quarter. The quarter really had the highest level of production, I think, that we've seen in at least a couple of years. At the same time, we still had elevated paydowns in the quarter, but the level of production was more than enough, obviously, to offset that level of paydowns and drive some meaningful growth. I would also call out for the fourth quarter, in case it's not obvious to you, there are arguably some seasonal adjustments to the fourth quarter. Fourth quarter growth for us tends to be slower on the agri side. Agri loans were down. Mortgage warehouse loans were down.
Jay Brogdon: So I'd say a few things to comment first on the quarter, and then we can talk about pipelines in 2026. So we were certainly pleased with the pace of growth for loans in the fourth quarter. The quarter really had the highest level of production, I think, that we've seen in at least a couple of years. At the same time, we still had elevated paydowns in the quarter, but the level of production was more than enough, obviously, to offset that level of paydowns and drive some meaningful growth. I would also call out for the fourth quarter, in case it's not obvious to you, there are arguably some seasonal adjustments to the fourth quarter. Fourth quarter growth for us tends to be slower on the agri side. Agri loans were down. Mortgage warehouse loans were down.
Speaker #4: The quarter really had the highest level of production I think that we've seen in at least a couple of years. At the same time, we still had elevated paydowns in the quarter, but the level of production was more than enough, obviously, to offset that level of paydowns and drive some meaningful growth.
Speaker #4: I would also call out for the fourth quarter—in case it's not obvious to you—that there are, arguably, some seasonal adjustments to the fourth quarter.
Speaker #4: Fourth quarter growth for us tends to be slower on the agri side, and agri loans were down. Mortgage warehouse loans were down. We obviously divested some loans and had some charge-offs in the quarter.
Operator: We obviously divested some loans and had some charge-offs in the quarter. So really, when you think about fourth quarter underlying growth rate, it was well in excess of the 7% annualized that we disclosed on a total loan basis. So again, I think it demonstrates the ability for us to really move the needle from a loan growth perspective. At the same time, your question on pipeline and kind of 2026 outlook, our guide is not to have sort of sustained that level of growth. We just had some good timing of some things in pipelines coming out of Q3 and early Q4 that pulled through and led to some really nice funded commitments throughout the quarter. Rate ready to close, as you commented on, that's a very, very firm, high, high likelihood area of our pipeline, is also at a multi-quarter high.
We obviously divested some loans and had some charge-offs in the quarter. So really, when you think about fourth quarter underlying growth rate, it was well in excess of the 7% annualized that we disclosed on a total loan basis. So again, I think it demonstrates the ability for us to really move the needle from a loan growth perspective. At the same time, your question on pipeline and kind of 2026 outlook, our guide is not to have sort of sustained that level of growth. We just had some good timing of some things in pipelines coming out of Q3 and early Q4 that pulled through and led to some really nice funded commitments throughout the quarter. Rate ready to close, as you commented on, that's a very, very firm, high, high likelihood area of our pipeline, is also at a multi-quarter high.
Speaker #4: And so, really, when you think about fourth quarter underlying growth rate, it was well in excess of the 7% annualized that we disclosed on a total loan basis.
Speaker #4: So, again, I think it demonstrates the ability for us to really move the needle from a loan growth perspective. At the same time, your question on pipeline and kind of 2026 outlook—our guide is not to have, sort of, sustained that level of growth.
Speaker #4: We just had some good timing of some things, and pipelines coming out of Q3 and early Q4 that pulled through and led to some really nice funded commitments throughout the quarter.
Speaker #4: Rate ready to close, as you commented on, that's a very, very firm, high, high likelihood area of our pipeline. It's also at a multi-quarter high.
Speaker #4: So, I think that points to probably some good production and funded growth as well in the early part of the year. And then, as I think about the rest of the pipeline—our pipeline ranging in that mid, kind of between $1 billion and $2 billion, $1.5 to $2 billion—is a pretty normal pipeline for us.
Operator: So I think that points to probably some good production and funded growth as well in the early part of the year. And then as I think about the rest of the pipeline, our pipeline ranging in that mid kind of between 1 and 2 billion, 1.5 to 2 billion is a pretty normal pipeline for us. We're certainly active and seeing a tremendous amount of opportunities all across our footprint. And so we feel very, very confident when we put all those things together in our outlook for something that's probably a little more optimistic in loan growth than what we've had over the last couple of years. But we're still going to be very, very cautious around the credit and underwriting environment, and then also just from a pricing and profitability perspective, the competitive environment in there.
So I think that points to probably some good production and funded growth as well in the early part of the year. And then as I think about the rest of the pipeline, our pipeline ranging in that mid kind of between 1 and 2 billion, 1.5 to 2 billion is a pretty normal pipeline for us. We're certainly active and seeing a tremendous amount of opportunities all across our footprint. And so we feel very, very confident when we put all those things together in our outlook for something that's probably a little more optimistic in loan growth than what we've had over the last couple of years. But we're still going to be very, very cautious around the credit and underwriting environment, and then also just from a pricing and profitability perspective, the competitive environment in there.
Speaker #4: We're certainly active in seeing a tremendous amount of opportunities all across our footprint, and so we feel very, very confident when we put all those things together in our outlook for something that's probably a little more optimistic in loan growth than what we've had over the last couple of years.
Speaker #4: But we're still going to be very, very cautious around the credit and underwriting environment, and then also just from a pricing and profitability perspective, the competitive environment in there.
Speaker #4: And all that kind of balances out to what we saw as guide for '26 is kind of low to mid-single-digit growth.
Operator: All that kind of balances out to what you saw as guide for 2026 is kind of low to mid single-digit growth. Okay. Perfect. I appreciate the details there, Jay. Then pivoting over, curious about your thoughts on the margin from here. In the fourth quarter, I think it was a 3.81 margin. Just trying to appreciate how clean that number is. Anything you would call out as unusual in the fourth quarter? And then I think the deck mentions the backbook should provide some nice tailwinds to the margin in 2026. Would you expect that to support margin expansion from here? Just trying to appreciate maybe the puts and takes in the margin from here. Yeah. Hey, Matt, this is Daniel. I'll comment on that. So the linked quarter margin growth of 31 basis points, I'll break that down for you, give you an appreciation for that.
All that kind of balances out to what you saw as guide for 2026 is kind of low to mid single-digit growth.
Matt Olney: Okay. Perfect. I appreciate the details there, Jay. Then pivoting over, curious about your thoughts on the margin from here. In the fourth quarter, I think it was a 3.81 margin. Just trying to appreciate how clean that number is. Anything you would call out as unusual in the fourth quarter? And then I think the deck mentions the backbook should provide some nice tailwinds to the margin in 2026. Would you expect that to support margin expansion from here? Just trying to appreciate maybe the puts and takes in the margin from here.
Speaker #3: Okay, perfect. Appreciate the details there, Jay. And then, pivoting over, I'm curious about your thoughts on the margin from here. In the fourth quarter, I think it was a 3.81% margin.
Speaker #3: Just trying to appreciate how clean that number is. Anything you would call out as unusual in the fourth quarter? And then I think the deck mentions the backbook should provide some nice tailwinds to the margin in 2026.
Speaker #3: Would you expect that to support margin expansion from here or just trying to appreciate maybe the puts and takes in the margin from
Speaker #3: Would you expect that to support margin expansion from here or just trying to appreciate maybe the puts and takes in the margin from here?
Daniel Hobbs: Yeah. Hey, Matt, this is Daniel. I'll comment on that. So the linked quarter margin growth of 31 basis points, I'll break that down for you, give you an appreciation for that.
Speaker #4: Yeah. Hey, Matt, this is Daniel. I'll comment on that. So the link quarter margin growth of 31 basis points, I'll break that down for you, give you this appreciation for that.
Speaker #4: So, of that 31 basis points, about 19—call it 19 to 20—of that is from the partial quarter impact of the balance sheet restructure that we did last quarter.
Operator: So of that 31 basis points, about 19, call it 19 to 20 of that is from the partial quarter impact of the balance sheet restructure that we did last quarter. But then the rest of that is really from core NIM expansion from just business practices. So 11 basis points from that. And of that 11 basis points, about three of the three basis points is related to loan growth, and eight basis points is related to rate and mix. So a couple of things to understand from that is we had the three rate cuts in the back half of the year, September, October, and December. Post-balance sheet restructure, we did move from liability-sensitive to asset-sensitive. But a nuance to that is, as you think about our sensitivity along the curve, we're still a little bit liability-sensitive on the short end of that curve.
So of that 31 basis points, about 19, call it 19 to 20 of that is from the partial quarter impact of the balance sheet restructure that we did last quarter. But then the rest of that is really from core NIM expansion from just business practices. So 11 basis points from that. And of that 11 basis points, about three of the three basis points is related to loan growth, and eight basis points is related to rate and mix. So a couple of things to understand from that is we had the three rate cuts in the back half of the year, September, October, and December. Post-balance sheet restructure, we did move from liability-sensitive to asset-sensitive. But a nuance to that is, as you think about our sensitivity along the curve, we're still a little bit liability-sensitive on the short end of that curve.
Speaker #4: But then the rest of that is really from core NIM expansion from just business practices—so, 11 basis points from that. And of that 11 basis points, about 3 of the basis points is related to loan growth, and 8 basis points is related to rate and mix.
Speaker #4: So, a couple of things to understand from that is we had the three rate cuts in the back half of the year—September, October, and December.
Speaker #4: Post-balance sheet restructure, we did move from liability-sensitive to asset-sensitive. But a nuance to that is, as you think about our sensitivity along the curve, we're still a little bit liability-sensitive on the short end of that curve.
Speaker #4: So, call it day one to three months—we're a little bit liability-sensitive. So we got some benefit from those rate cuts. In the fourth quarter, we will shift to asset-sensitive once you get past three months.
Operator: So, call it day one to three months; we're a little bit liability-sensitive. So we got some benefit from those rate cuts in the fourth quarter. We will shift to asset-sensitive once you get past three months and towards the long end of the curve. So as you think about kind of the guide and specifically Q1, we would expect Q1 to be relatively stable to the 381. There might be a basis point or two of benefit there. And then as you think about the full year, we're probably pretty stable. Maybe a couple of basis points get to the mid-380s by fourth quarter. Your comment on the backbook repricing, so yes, that's still a benefit for us, and we expect that to be a benefit for us as we move on. That benefit lessens a little bit as we get rate cuts.
So, call it day one to three months; we're a little bit liability-sensitive. So we got some benefit from those rate cuts in the fourth quarter. We will shift to asset-sensitive once you get past three months and towards the long end of the curve. So as you think about kind of the guide and specifically Q1, we would expect Q1 to be relatively stable to the 381. There might be a basis point or two of benefit there. And then as you think about the full year, we're probably pretty stable. Maybe a couple of basis points get to the mid-380s by fourth quarter. Your comment on the backbook repricing, so yes, that's still a benefit for us, and we expect that to be a benefit for us as we move on. That benefit lessens a little bit as we get rate cuts.
Speaker #4: And towards the long end of the curve. So, as you think about kind of the guide, and specifically Q1, we would expect Q1 to be relatively stable to the 381.
Speaker #4: There might be a basis point or two of benefit there. And then, as you think about the full year, we're probably pretty stable. Maybe a couple of basis points get to the mid-380s by the fourth quarter.
Speaker #4: Your comment on the backbook repricing—so yes, that's still a benefit for us, and we expect that to be a benefit for us as we move on.
Speaker #4: That benefit lessens a little bit as we get rate cuts. We've talked historically about a 200-basis-point pickup before the three rate cuts that we got in the back half of the year.
Operator: We've talked historically about a 200 basis point pickup before the three rate cuts that we got in the back half of the year. So that will come down a little bit. But we still have, Matt, over $2.5 billion of loans that will reprice over the next two years that have a rate less than 4%. So that tailwind will continue to exist. Maybe a couple of points about the guide. Our rate forecast that's embedded in our guide is a rate cut in May and one in August. And so as you think about loan yields repricing, when you look at the Q4, loan yields were down eight basis points. Even if you go back to Q2, we're only down about three basis points. So that backbook repricing is offsetting some of the impact from the rate cuts that we've had.
We've talked historically about a 200 basis point pickup before the three rate cuts that we got in the back half of the year. So that will come down a little bit. But we still have, Matt, over $2.5 billion of loans that will reprice over the next two years that have a rate less than 4%. So that tailwind will continue to exist. Maybe a couple of points about the guide. Our rate forecast that's embedded in our guide is a rate cut in May and one in August. And so as you think about loan yields repricing, when you look at the Q4, loan yields were down eight basis points. Even if you go back to Q2, we're only down about three basis points. So that backbook repricing is offsetting some of the impact from the rate cuts that we've had.
Speaker #4: So that will come down a little bit. But we still have a, Matt, over two and a half billion dollars of loans that will reprice over the next two years that have a rate less than 4%.
Speaker #4: So that tailwind will continue to exist. Maybe a couple of points about the guide. Our rate forecast that's embedded in our guide is a rate cut in May and one in August.
Speaker #4: And so, as you think about loan yields repricing, when you look at the fourth quarter loan yields, we're down eight basis points. Even if you go back to the second quarter, we're only down about three basis points.
Speaker #4: So that backbook repricing is offsetting some of the impact from the rate cuts that we've had. And if you flip the deposit side, you think about the beta there, our beta cumulatively is 64%.
Operator: And if you flip to the deposit side, you think about the beta there. Our beta cumulatively is 64%. We do expect that beta to moderate some into 2025, primarily because a couple of things. Number one is our deposit book is different than it was pre-balance sheet restructure. We got about $1.4 billion less brokered deposits, which have 100% beta. So that's embedded in that 64% cumulative beta today. What we think is the incremental beta for future rate cuts is probably around 50%. And so by the end of 2026, we think the cumulative beta kind of settles in kind of that high 50 range. So still some opportunity there, but we do expect the beta to moderate a little bit.
And if you flip to the deposit side, you think about the beta there. Our beta cumulatively is 64%. We do expect that beta to moderate some into 2025, primarily because a couple of things. Number one is our deposit book is different than it was pre-balance sheet restructure. We got about $1.4 billion less brokered deposits, which have 100% beta. So that's embedded in that 64% cumulative beta today. What we think is the incremental beta for future rate cuts is probably around 50%. And so by the end of 2026, we think the cumulative beta kind of settles in kind of that high 50 range. So still some opportunity there, but we do expect the beta to moderate a little bit.
Speaker #4: We do expect that beta to moderate some in 2025, primarily because of a couple of things. Number one is, our deposit book is different than it was pre-balance sheet restructure.
Speaker #4: We got about $1.4 billion less broker deposits, which have 100% beta. So that's embedded in that 64% cumulative beta today. What we think is the incremental beta for future rate cuts is probably around 50%.
Speaker #4: And so, by the end of ’26, we think the cumulative beta kind of settles in that high-50 range. So, still some opportunity there, but we do expect the beta to moderate a little bit.
Speaker #4: And then, just maybe connecting the NIM discussion with your question on loan growth, we still believe and feel like that we can grow NII without significant growth in the loan portfolio.
Operator: Then just maybe connecting the NIM discussion with your question on loan growth, we still believe and feel like that we can grow NII without significant growth in the loan portfolio just because of the things that I just talked about. So our 9% to 11% guide on NII, we feel pretty good about. Hey, Matt, I'll just chime in. I mean, as I echo everything Daniel said there, bottom line for me is I think my outlook for NIM for 2026 is relatively stable, as Daniel said. I think the backbook reprice on loans, as well as the deposit beta, and our ability to continue to do things we've been doing from administered rates, etc., those are all tailwinds that will offset any additional rate cuts to the extent they come through and allow for that more stable NIM.
Then just maybe connecting the NIM discussion with your question on loan growth, we still believe and feel like that we can grow NII without significant growth in the loan portfolio just because of the things that I just talked about. So our 9% to 11% guide on NII, we feel pretty good about.
Speaker #4: Just because of the things that I just talked about. So our 9% to 11% guide on NII, we feel pretty good.
Speaker #4: about.
Jay Brogdon: Hey, Matt, I'll just chime in. I mean, as I echo everything Daniel said there, bottom line for me is I think my outlook for NIM for 2026 is relatively stable, as Daniel said. I think the backbook reprice on loans, as well as the deposit beta, and our ability to continue to do things we've been doing from administered rates, etc., those are all tailwinds that will offset any additional rate cuts to the extent they come through and allow for that more stable NIM.
Speaker #5: Hey, Matt, I'll just
Speaker #5: Chime in. I mean, as I've echoed everything Daniel said there, bottom line for me is I think my outlook for NIM for '26 is relatively stable, as Daniel said.
Speaker #5: I think the back book reprice on loans, as well as the deposit beta and our ability to continue to do things we've been doing from administered rates, etc.—those are all tailwinds that will offset any additional rate cuts to the extent they come through and allow for that more stable NIM.
Speaker #5: I think the opportunity in excess of what we've got is it, right? Our outlook is what our outlook is. The opportunity, though, and what we're focused on strategically is really on the remix on the deposit side.
Operator: I think the opportunity in excess of what we've got going, right? Our outlook is what our outlook is. The opportunity, though, and what we're focused on strategically is really on the remix on the deposit side. Our biggest opportunity to even further exceed the guide is really built around our ability to organically grow some low-cost deposits. And we're very, very focused on that and think that to the extent we're successful there, we've already got, I think, very strong growth embedded in the guide, but that would be the area that would provide upside to the guide. Okay. That's great commentary. Appreciate all the details there. And maybe just one more follow-up with this discussion. Any commentary about what you're seeing in markets around deposit competition, and loan pricing competition? I think last quarter you flagged the loan side was getting more competitive.
I think the opportunity in excess of what we've got going, right? Our outlook is what our outlook is. The opportunity, though, and what we're focused on strategically is really on the remix on the deposit side. Our biggest opportunity to even further exceed the guide is really built around our ability to organically grow some low-cost deposits. And we're very, very focused on that and think that to the extent we're successful there, we've already got, I think, very strong growth embedded in the guide, but that would be the area that would provide upside to the guide.
Speaker #5: Our biggest opportunity to even further exceed the guide is really built around our ability to organically grow some low-cost deposits. And we're very, very focused on that and think that to the extent we're successful there, we've already got very strong growth embedded in the guide, but that would be the area that would provide upside to the guide.
Matt Olney: Okay. That's great commentary. Appreciate all the details there. And maybe just one more follow-up with this discussion. Any commentary about what you're seeing in markets around deposit competition, and loan pricing competition? I think last quarter you flagged the loan side was getting more competitive.
Speaker #1: Okay. That's great commentary. Appreciate all the details there. And maybe just one more follow-up with this discussion. Any commentary about what you're seeing in markets around deposit competition, loan pricing competition?
Speaker #1: I think last quarter you flagged the loan side was getting more competitive. Just in general, I think the thoughts on both sides there. Thanks.
Operator: Just in general, I've got thoughts on both sides there. Thanks. Yeah, Matt, really continuation of that same theme on the deposit side. Honestly, I would say I think we see there's pretty good behavior around the rate cuts in the industry. Betas are relatively high in my mind, and lags are short around the more recent rate cuts. So that feels good. Where we see irrational competition for the most part today on the deposit side is from smaller banks. The good news is, in a lot of those markets where we're competing with the smaller banks, we have very, very dominant market share, and we can kind of flex around that. So that area is still very competitive, but to me, it's nowhere near as competitive of a pressure as what we're seeing on the loan pricing side. You've heard us talk about that.
Just in general, I've got thoughts on both sides there. Thanks.
Jay Brogdon: Yeah, Matt, really continuation of that same theme on the deposit side. Honestly, I would say I think we see there's pretty good behavior around the rate cuts in the industry. Betas are relatively high in my mind, and lags are short around the more recent rate cuts. So that feels good. Where we see irrational competition for the most part today on the deposit side is from smaller banks. The good news is, in a lot of those markets where we're competing with the smaller banks, we have very, very dominant market share, and we can kind of flex around that. So that area is still very competitive, but to me, it's nowhere near as competitive of a pressure as what we're seeing on the loan pricing side. You've heard us talk about that.
Speaker #5: Yeah, Matt, really a continuation of that same theme on the deposit side. Honestly, I would say I think we feel pretty—there’s pretty good behavior around the rate cuts in the industry.
Speaker #5: Betas are relatively high in my mind, and lags are short around the more recent rate cuts, so that feels good. Where we see irrational competition—for the most part today, on the deposit side—is from smaller banks.
Speaker #5: And the good news is, and a lot of those markets where we're competing with the smaller banks, we have very, very dominant market share.
Speaker #5: And we can kind of flex around that. And so that area is still very competitive, but to me, it's nowhere near as competitive of a pressure as what we're seeing on the loan pricing side.
Speaker #5: You've heard us talk about that. A lot of our loan growth in the fourth quarter was in a CRE bend. We're very focused, as you and others know, on C&I.
Operator: A lot of our loan growth in Q4 was in a CRE bend. We're very focused, as you and others know, on C&I. We have good C&I opportunities in our pipeline. We've had great opportunities. We've had some good production on C&I, but returns on a risk-adjusted basis have been so much stronger in recent months from a CRE perspective because of what we believe is very, very irrational pricing and really pricing away the profitability from even in relationship-based situations where deposits and treasury management are coming with it. The yields on the loans really make no sense, and particularly make no sense on a risk-adjusted basis. So we'd like to see some improvement in that competitive dynamic. It doesn't discourage us as it relates to our overall growth outlook, but that is the biggest competitive factor that we're seeing today. Okay, guys, that's all for me.
A lot of our loan growth in Q4 was in a CRE bend. We're very focused, as you and others know, on C&I. We have good C&I opportunities in our pipeline. We've had great opportunities. We've had some good production on C&I, but returns on a risk-adjusted basis have been so much stronger in recent months from a CRE perspective because of what we believe is very, very irrational pricing and really pricing away the profitability from even in relationship-based situations where deposits and treasury management are coming with it. The yields on the loans really make no sense, and particularly make no sense on a risk-adjusted basis. So we'd like to see some improvement in that competitive dynamic. It doesn't discourage us as it relates to our overall growth outlook, but that is the biggest competitive factor that we're seeing today.
Speaker #5: We have good C&I opportunities in our pipeline. We've had great opportunities. We've had some good production on C&I, but returns on a risk-adjusted basis have been so much stronger in recent months from a CRE perspective because of what we believe is very, very irrational pricing, and really pricing away the profitability from even in relationship-based situations where deposits and treasury management are coming with it.
Speaker #5: The yields on the loans really make no sense, and particularly make no sense on a risk-adjusted basis. So we'd like to see some improvement in that competitive dynamic.
Speaker #5: It doesn't discourage us as it relates to our overall growth outlook, but that is the biggest competitive factor that we're seeing today.
Matt Olney: Okay, guys, that's all for me.
Speaker #1: Okay, guys, that's all for me.
Speaker #1: Thanks for taking the questions.
Speaker #1: Thanks for taking the questions.
Operator: Thanks for taking the questions. Thanks, Matt. Thank you. And our next question today comes from David Feaster at Raymond James. Please go ahead. Hey, good morning, everybody. Good morning, David. I wanted to maybe shift gears to asset quality. Nice to see the resolution of those two problem credits, and with less impact than initially expected. We also saw the sale of the equipment finance business, and you guys did the deep dive into the MPAs. I'm just curious maybe whether there's anything else that you're considering divesting. And as you did that deep dive, whether you found anything else of note that maybe has shifted underwriting at all, or just kind of curious kind of what you're thinking on asset quality and anything that's come out of this whole process. Yeah, David, I'll jump in on this one.
Operator: Thanks for taking the questions. Thanks, Matt. Thank you. And our next question today comes from David Feaster at Raymond James. Please go ahead.
Speaker #5: Thanks,
Speaker #7: Thank you, Matt. And our next question today comes from David Feaster at Raymond James. Please go ahead.
Speaker #7: ahead. Hey, good morning,
David Feaster: Hey, good morning, everybody.
Jay Brogdon: Good morning, David.
Speaker #6: Morning, everybody. David.
David Feaster: I wanted to maybe shift gears to asset quality. Nice to see the resolution of those two problem credits, and with less impact than initially expected. We also saw the sale of the equipment finance business, and you guys did the deep dive into the MPAs. I'm just curious maybe whether there's anything else that you're considering divesting. And as you did that deep dive, whether you found anything else of note that maybe has shifted underwriting at all, or just kind of curious kind of what you're thinking on asset quality and anything that's come out of this whole process.
Speaker #8: I wanted to maybe shift gears to asset quality. Nice to see the resolution of those two problem credits. And with less impact than initially expected, also saw the sale of the equipment finance business.
Speaker #8: And you, the MPAs—I'm wondering, did you guys do the deep dive? I'm just curious, maybe, whether there's anything else that you're considering divesting. And as you did that deep dive, whether you found anything else of note that maybe has shifted underwriting at all, or just kind of curious what you're thinking on asset quality and anything that's come out of this whole—
Speaker #8: process.
Jay Brogdon: Yeah, David, I'll jump in on this one.
Speaker #6: Yeah, David, I'll jump
Speaker #6: In on this one. So, you did a great job summarizing the actions that we took in the quarter, and we feel very, very good that our reserve levels and what we had done, kind of on a specific reserve basis, was more than adequate for the actions that were taken.
Operator: So you did a great job summarizing the actions that we took in the quarter. We feel very, very good that our reserve levels and what we had done kind of on a specific reserve basis was more than adequate for the actions that were taken, particularly on the larger credits and the equipment finance portfolio. Really, as I think kind of read through credit and the results of the deep dive, again feel credit is very stable right now. Those situations were very unique, each of them. They'd been around for a while, particularly with the equipment finance portfolio, had been in runoff for a long period of time. We hadn't originated a loan there in several years. That came from historical acquisition.
So you did a great job summarizing the actions that we took in the quarter. We feel very, very good that our reserve levels and what we had done kind of on a specific reserve basis was more than adequate for the actions that were taken, particularly on the larger credits and the equipment finance portfolio. Really, as I think kind of read through credit and the results of the deep dive, again feel credit is very stable right now. Those situations were very unique, each of them. They'd been around for a while, particularly with the equipment finance portfolio, had been in runoff for a long period of time. We hadn't originated a loan there in several years. That came from historical acquisition.
Speaker #6: Particularly on the larger credits and the equipment finance portfolio. Really, as I think, kind of read through credit and the results of the deep dive—again, I feel credit is very stable right now.
Speaker #6: Those situations were very unique, each of them. They've been around for a while, particularly with the equipment finance portfolio being in runoff for a long period of time.
Speaker #6: We had originated a loan there in several years. That came from historical acquisition. And so the credit read for us as we did the deep dive was really cleaning up some of those legacy-type non-performers that have been in there.
Operator: So the credit review for us as we did the deep dive was really cleaning up some of those legacy-type non-performers that have been in there. We were able to identify the loss content, got the full resolution on several of those credits, and moved on and took the charge-off in other instances, still working toward very rigorous resolution processes in a couple of those instances. However, we had done enough work to know what the loss content was and went ahead and moved on those. So really underlying, I think it's just a continued stable outlook, and all of our kind of early indicators or predictive indicators around credit, I would fall into that characterization of just in the stable category. Okay. Obviously, there's been a lot of disruption across your footprint and in the market broadly.
So the credit review for us as we did the deep dive was really cleaning up some of those legacy-type non-performers that have been in there. We were able to identify the loss content, got the full resolution on several of those credits, and moved on and took the charge-off in other instances, still working toward very rigorous resolution processes in a couple of those instances. However, we had done enough work to know what the loss content was and went ahead and moved on those. So really underlying, I think it's just a continued stable outlook, and all of our kind of early indicators or predictive indicators around credit, I would fall into that characterization of just in the stable category.
Speaker #6: We were able to identify the loss content, got to full resolution on several of those credits, and moved on and took the charge off in other instances.
Speaker #6: Still working toward very rigorous resolution processes in a couple of those instances. However, we had done enough work to know what the loss content was and went ahead and moved on those.
Speaker #6: So really, underlying, I think it's just a continued stable outlook in all of our kind of early indicators or predictive indicators around credit. I would fall into that characterization of just in the stable category.
David Feaster: Okay. Obviously, there's been a lot of disruption across your footprint and in the market broadly.
Speaker #1: Okay, and obviously, there’s been a lot of disruption across your footprint and in the market broadly. Just wanted to get your thoughts on where you see the most opportunity and how you’re positioning to capitalize on that.
Operator: Just wanted to get your thoughts on where you see the most opportunity and how you're positioning to capitalize on that. And then just specifically on the hiring side, it looks like you did add some talent this quarter. Just curious your appetite for hires, where you're hiring, and maybe what segments or markets you're focused on. Yeah. I don't want to be overly generic in the answer, but it is a somewhat generic answer in that we are seeing great opportunities all across the footprint. Southwest part of our footprint, the Midwest, and the Southeast parts, really just footprint-wide, we are very active. Pipelines from a talent perspective are very strong. And I would suspect that you'll see us being successful in continuing to upgrade talent, add talent. And it's across all areas of our business. Again, not trying to be overly generic.
Just wanted to get your thoughts on where you see the most opportunity and how you're positioning to capitalize on that. And then just specifically on the hiring side, it looks like you did add some talent this quarter. Just curious your appetite for hires, where you're hiring, and maybe what segments or markets you're focused on.
Speaker #1: And then just specifically on the hiring side, it looks like you did add some talent this quarter. Just curious—your appetite for hires, where you're hiring, and maybe what segments or markets you're focused on.
Jay Brogdon: Yeah. I don't want to be overly generic in the answer, but it is a somewhat generic answer in that we are seeing great opportunities all across the footprint. Southwest part of our footprint, the Midwest, and the Southeast parts, really just footprint-wide, we are very active. Pipelines from a talent perspective are very strong. And I would suspect that you'll see us being successful in continuing to upgrade talent, add talent. And it's across all areas of our business. Again, not trying to be overly generic.
Speaker #6: Yeah, I don't want to be overly generic in the answer, but it is a somewhat generic answer in that we are seeing great opportunities all across the footprint.
Speaker #6: Southwest, part of our footprint, the Midwest, the Southeast parts, really just footprint-wide, we are very active. Pipelines from a talent perspective are very strong.
Speaker #6: And I would suspect that you'll see us being successful in continuing to upgrade talent, add talent, and it's across all areas of our business.
Speaker #6: Again, not trying to be overly generic. It is somewhat heavily focused in our revenue areas where we are adding talent, but it's not just there.
Operator: It is somewhat heavily focused in our revenue areas where we are adding talent, but it's not just there. A lot of our support areas, where we can bring in strong talent to help us innovate, automate, and drive some of our efficiency and scale initiatives forward, we're seeing some really good talent come out of some of the disruption in those areas as well. So we're very, very excited. That's probably one of the most excited things going on in our business right now: the prospects that we're talking to from a talent perspective and the success that I think we're going to have in that regard. That's great. Maybe just last one, Jay.
It is somewhat heavily focused in our revenue areas where we are adding talent, but it's not just there. A lot of our support areas, where we can bring in strong talent to help us innovate, automate, and drive some of our efficiency and scale initiatives forward, we're seeing some really good talent come out of some of the disruption in those areas as well. So we're very, very excited. That's probably one of the most excited things going on in our business right now: the prospects that we're talking to from a talent perspective and the success that I think we're going to have in that regard.
Speaker #6: A lot of our support areas, where we can bring in strong talent to help us innovate, automate, and drive some of our efficiency and scale initiatives forward.
Speaker #6: We're seeing some really good talent come out of some of the disruption in those areas as well, so we're very, very excited. That's probably one of the most exciting things going on in our business right now—just the prospects that we're talking to from a talent perspective.
Speaker #6: And the success that I think we're going to have in that.
Speaker #6: regard. That's great.
David Feaster: That's great. Maybe just last one, Jay.
Speaker #1: Maybe just last one, Jay. One of the things that we've discussed pretty in depth previously has been, as a part of the Better Bank Initiative, the focus on improving processes and procedures, and there's still kind of in the middle innings of that—maybe a quarter or two ago.
Operator: One of the things that we've discussed pretty in-depth previously has been, as a part of the Better Bank initiative, the focus on improving processes and procedures, and they're still kind of in the middle innings of that, maybe a quarter or two ago. I'm just kind of curious if you could kind of give an update on where we are there on improving, again, the processes and procedures, and some of the business lines, and kind of maybe what you're most focused on near term. Yeah. I think from a non-interest expense, and just overall kind of efficiency and scale point of view, I really think it's still fair to characterize us as in the middle innings of that journey. I also think that the latter innings are much harder to get than those early innings were because we attacked the lower hanging fruit first.
One of the things that we've discussed pretty in-depth previously has been, as a part of the Better Bank initiative, the focus on improving processes and procedures, and they're still kind of in the middle innings of that, maybe a quarter or two ago. I'm just kind of curious if you could kind of give an update on where we are there on improving, again, the processes and procedures, and some of the business lines, and kind of maybe what you're most focused on near term.
Speaker #1: I'm just kind of curious if you could kind of give an update on where we are there on improving again the processes and procedures and some of the business lines and kind of maybe what you're most focused on near term.
Jay Brogdon: Yeah. I think from a non-interest expense, and just overall kind of efficiency and scale point of view, I really think it's still fair to characterize us as in the middle innings of that journey. I also think that the latter innings are much harder to get than those early innings were because we attacked the lower hanging fruit first.
Speaker #6: Yeah, I think from a non-interest expense and just overall kind of efficiency and scale point of view, I really think it's still fair to characterize us as in the middle innings of that journey.
Speaker #6: I also think that the latter innings are much harder to get than those early innings were, because we attacked the lower-hanging fruit first.
Speaker #6: There's a slide on this in the presentation. I want to remind everyone our expenses in 2025 were below our run rate for expenses in the fourth quarter of 2022.
Operator: There's a slide on this in the presentation. I want to remind everyone, our expenses in 2025 were below our run rate for expenses in Q4 2022. So three years of inflation, merit increases, investing in the business, etc. And we've been very, very disciplined in our ability to keep expenses down throughout all of that. And that is a function of, I think, us demonstrating success in executing these efficiency initiatives. We have brought a tremendous amount of automation to processes and continue to do that. We've centralized and standardized around best practices in a lot of areas of the bank. And so you might think of a decade of acquisitions and really taking the time over the last few years to fully, fully integrate and digest all across the footprint. And so I think there's still, David, some very meaningful opportunities for us there.
There's a slide on this in the presentation. I want to remind everyone, our expenses in 2025 were below our run rate for expenses in Q4 2022. So three years of inflation, merit increases, investing in the business, etc. And we've been very, very disciplined in our ability to keep expenses down throughout all of that. And that is a function of, I think, us demonstrating success in executing these efficiency initiatives. We have brought a tremendous amount of automation to processes and continue to do that. We've centralized and standardized around best practices in a lot of areas of the bank. And so you might think of a decade of acquisitions and really taking the time over the last few years to fully, fully integrate and digest all across the footprint. And so I think there's still, David, some very meaningful opportunities for us there.
Speaker #6: So three years of inflation, merit increases, investing in the business, etc., and we've been very, very disciplined in our ability to keep expenses down throughout all of that.
Speaker #6: And that is a function of, I think, us demonstrating success in executing these efficiency initiatives. We have brought a tremendous amount of automation to processes and continue to do that.
Speaker #6: We've centralized and standardized around best practices in a lot of areas of the bank. And so, you might think of a decade of acquisitions, and really taking the time over the last few years to fully, fully integrate and digest all across the footprint.
Speaker #6: And so I think there's still, David, some very meaningful opportunities for us there. As I think about the expense outlook—maybe a little more tactically, not exactly embedded in your question—but if I think about an expense outlook, I'll tie it back to your question around talent opportunities.
Operator: As I think about the expense outlook, maybe a little more tactically, not exactly embedded in your question, but if I think about an expense outlook, I'll tie it back to your question around talent opportunities. We continue just to try to fund our investments. So I think a lot of the work that we're doing in these middle and later innings on the efficiency side are geared around kind of freeing up the investment to bring in talent, to invest and improve in the technology stack, and better innovate around the bank. And so I think you saw our expense guide is up 2% to 3% year over year. That's really reflective, I think, of kind of a balanced view of success in these initiatives paired against the opportunities we see, maybe even on an accelerated basis, to invest in our business.
As I think about the expense outlook, maybe a little more tactically, not exactly embedded in your question, but if I think about an expense outlook, I'll tie it back to your question around talent opportunities. We continue just to try to fund our investments. So I think a lot of the work that we're doing in these middle and later innings on the efficiency side are geared around kind of freeing up the investment to bring in talent, to invest and improve in the technology stack, and better innovate around the bank. And so I think you saw our expense guide is up 2% to 3% year over year. That's really reflective, I think, of kind of a balanced view of success in these initiatives paired against the opportunities we see, maybe even on an accelerated basis, to invest in our business.
Speaker #6: We continue just to try to fund our investments. So, I think a lot of the work that we're doing in these middle and later innings on the efficiency side are geared around kind of freeing up the investment to bring in talent, to invest and improve in the technology stack, and better innovate around the bank.
Speaker #6: And so I think you saw our expense guide is up 2% to 3% year over year. That's really reflective, I think, of kind of a balanced view of success in these initiatives.
Speaker #6: Paired against the opportunities we see, maybe even on an accelerated basis, to invest in our—
Speaker #3: Yeah, David, I'd add a couple of things to what Jay said. I think when you look across our business—from the back office, the middle office, and the front office—we've adopted a continuous improvement mindset in that we're inspecting everything that we do.
Operator: Yeah, David, I'd add a couple of things to what Jay said. I think when you look across our business from the back office, the middle office, and the front office, we've adopted a continuous improvement mindset in that we're inspecting everything that we do. And in many of those processes, we need to tweak some things, and in some of them, we need to completely blow it up and rebuild it. And we recently visited a customer that made a comment to us that says, "If it ain't broke, break it." And we've adopted that in some places. And so there's still a lot of opportunity for us there. Just a couple of points for you. We've talked about our vendor spend and our procurement group that we stood up about two years ago, and we've got some significant success out of that.
Daniel Hobbs: Yeah, David, I'd add a couple of things to what Jay said. I think when you look across our business from the back office, the middle office, and the front office, we've adopted a continuous improvement mindset in that we're inspecting everything that we do. And in many of those processes, we need to tweak some things, and in some of them, we need to completely blow it up and rebuild it. And we recently visited a customer that made a comment to us that says, "If it ain't broke, break it." And we've adopted that in some places. And so there's still a lot of opportunity for us there. Just a couple of points for you. We've talked about our vendor spend and our procurement group that we stood up about two years ago, and we've got some significant success out of that.
Speaker #3: And in many of those processes, we need to tweak some things. And in some of them, we need to completely blow it up and rebuild it.
Speaker #3: And we recently visited a customer that made a comment to us that says, 'If it ain't broke, break it.' And we've adopted that in some places.
Speaker #3: And so there's still a lot of opportunity for us there. Just a couple of points for you. We've talked about our vendor spend and our procurement group that we stood up about two years ago, and we've got some significant success out of that.
Speaker #3: We still see opportunity in that, over the next 12 to 24 months, to gain some ground. And then, when you just look across our footprint, our facilities, the square footage that we have, we've reduced our square footage this year by 6%.
Operator: We still see opportunity in that over the next 12 to 24 months to gain some ground. And then when you just look at across our footprint, our facilities, the square footage that we have, we've reduced our square footage this year by 6%. Some of that is direct savings to the bottom line, and some of that is savings on future spend of maintenance that we might have to do that we are now no longer going to have to do. And that's split about 60% between retail and about 40% from corporate location. So it's not all coming from branches, which is a good thing. So those are examples of just things that we're looking at across our entire business to Jay's comment earlier about how can we self-fund the investments that we're trying to make to grow our businesses. That's helpful. Thanks, everybody. Thanks, David. Thank you.
We still see opportunity in that over the next 12 to 24 months to gain some ground. And then when you just look at across our footprint, our facilities, the square footage that we have, we've reduced our square footage this year by 6%. Some of that is direct savings to the bottom line, and some of that is savings on future spend of maintenance that we might have to do that we are now no longer going to have to do. And that's split about 60% between retail and about 40% from corporate location. So it's not all coming from branches, which is a good thing. So those are examples of just things that we're looking at across our entire business to Jay's comment earlier about how can we self-fund the investments that we're trying to make to grow our businesses.
Speaker #3: Some of that is direct savings to the bottom line, and some of that is savings on future spend for maintenance that we might have to do, that we are now no longer going to have to do.
Speaker #3: And that split about 60% between retail and about 40% from corporate locations. So it's not all coming from branches, which is a good thing.
Speaker #3: So those are examples of just things that we're looking at across our entire business, to Jay's comment earlier about how we can self-fund the investments that we're trying to make to grow our businesses.
David Feaster: That's helpful. Thanks, everybody.
Speaker #1: That's helpful. Thanks, everybody.
Jay Brogdon: Thanks, David. Thank you.
Speaker #4: Thanks, David.
Speaker #5: Thank you. And our next question today comes from Woody Lay at KBW. Please go ahead.
Operator: Our next question today comes from Woody Lay at KBW. Please go ahead. Hey, good morning, guys. Hey, Woody. Good morning, everybody. Good morning. Wanted to start on your comment on the loan production, and you noted it was the highest level over the past couple of years. I wanted to get your opinion. Is that more of a reflection of y'all being more aggressive on growth now that the balance sheet restructure is behind you and you have more flexibility, or is that a reflection of customers being more optimistic, or is it a combo of both? I think it's fair to describe it as a combo, Woody. I think it's probably more the latter than the former. We haven't just sort of lowered rates aggressively or started to sacrifice our standards around profitability.
Operator: Our next question today comes from Woody Lay at KBW. Please go ahead.
Woody Lay: Hey, good morning, guys.
Speaker #1: Hey, good morning, guys.
Speaker #4: Hey, Woody. Good morning, everybody.
Jay Brogdon: Hey, Woody. Good morning, everybody.
Woody Lay: Good morning. Wanted to start on your comment on the loan production, and you noted it was the highest level over the past couple of years. I wanted to get your opinion. Is that more of a reflection of y'all being more aggressive on growth now that the balance sheet restructure is behind you and you have more flexibility, or is that a reflection of customers being more optimistic, or is it a combo of both?
Speaker #1: to start on your comment Good morning. Wanted on the loan production and you noted it was the highest level over the past couple of years.
Speaker #1: And was just wanting to get your opinion. Is that more of a reflection of y'all being more aggressive on growth now that the balance sheet restructure is behind you and you have more flexibility?
Speaker #1: Or is that a reflection of customers being more optimistic? Or is it a combination of both?
Speaker #4: I think it's fair to describe it as a combo, Woody. I think it's probably more the latter than the former. We haven't just sort of lowered rates aggressively or started to sacrifice our standards around profitability.
Jay Brogdon: I think it's fair to describe it as a combo, Woody. I think it's probably more the latter than the former. We haven't just sort of lowered rates aggressively or started to sacrifice our standards around profitability.
Speaker #4: That said, with the significant reduction in wholesale funding as a result of the balance sheet repositioning and just improving—I'll call it the nimbleness, the flexibility—around the balance sheet overall, it has certainly, there's an indirect way that has helped us to accelerate the loan growth.
Operator: That said, with the significant reduction in wholesale funding as a result of the balance sheet repositioning and just improving, I'll call it the nimbleness, the flexibility around the balance sheet overall, it has certainly, in an indirect way, that has helped us to accelerate the loan growth. But the more fundamental answer is we've just seen more robust opportunities. The pipelines were improving all throughout the year last year. The quality of the pipeline, it's not just an aggregate number. You have to really look into the pipeline and think about quality of opportunity. Quality of pipeline was improving all throughout the year. And we just kind of saw a pinnacle in that activity late Q3, early Q4, and we're successful in some pull-throughs there and continue to see success. Again, I mentioned the rate-ready-to-close area of the pipeline.
That said, with the significant reduction in wholesale funding as a result of the balance sheet repositioning and just improving, I'll call it the nimbleness, the flexibility around the balance sheet overall, it has certainly, in an indirect way, that has helped us to accelerate the loan growth. But the more fundamental answer is we've just seen more robust opportunities. The pipelines were improving all throughout the year last year. The quality of the pipeline, it's not just an aggregate number. You have to really look into the pipeline and think about quality of opportunity. Quality of pipeline was improving all throughout the year. And we just kind of saw a pinnacle in that activity late Q3, early Q4, and we're successful in some pull-throughs there and continue to see success. Again, I mentioned the rate-ready-to-close area of the pipeline.
Speaker #4: But the more fundamental answer is we've just seen more robust opportunities. The pipelines were improving all throughout the year last year. The quality of the pipeline—it's not just an aggregate number.
Speaker #4: You have to really look into the pipeline and think about quality of opportunity. Quality of pipeline was improving all throughout the year, and we just kind of saw a pinnacle in that activity.
Speaker #4: Late Q3, early Q4, and we're successful in some pull-throughs there and continue to see success. Again, I mentioned the rate-ready-to-close area, the pipeline. Even as we turn into January, we're seeing some exactly what you would expect with that kind of year-end quality of pipeline.
Operator: Even as we turn into January, we're seeing some exactly what you would expect with that kind of year-end quality of pipeline. So I think it's probably more the latter of your two things, but there's certainly an element of both. Got it. That's helpful. And then maybe circling back on the NIM, I believe last earnings call, y'all gave a sort of a longer-term NIM range of 350 to 375, and you're now above that. And it feels like, as you mentioned, the loan repricing over the next two years is very real. So has that longer-term target, do you think it's shifted upwards a little bit? Yeah. Hey, Woody. The context of that 350 to 375 was that we would like to manage it within that range no matter the interest rate environment. And rates are still relatively high. We've moved to asset-sensitive.
Even as we turn into January, we're seeing some exactly what you would expect with that kind of year-end quality of pipeline. So I think it's probably more the latter of your two things, but there's certainly an element of both.
Speaker #4: So I think it's probably more the latter of your two things, but there's certainly an element of that as well.
Speaker #4: both. Got it.
Woody Lay: Got it. That's helpful. And then maybe circling back on the NIM, I believe last earnings call, y'all gave a sort of a longer-term NIM range of 350 to 375, and you're now above that. And it feels like, as you mentioned, the loan repricing over the next two years is very real. So has that longer-term target, do you think it's shifted upwards a little bit?
Speaker #1: That's helpful. And then maybe circling back on the NIM, I believe last earnings call, you all gave a sort of longer-term NIM range of 3.50% to 3.75%.
Speaker #1: And you're now above that. And it feels like, as you mentioned, the loan repricing over the next two years is very real. So, has that longer-term target—do you think it's shifted upwards a little bit?
Speaker #1: And you're now above that. And it feels like, as you mentioned, the loan repricing over the next two years is very real. So has that longer-term target, do you think it's shifted upwards a little bit?
Daniel Hobbs: Yeah. Hey, Woody. The context of that 350 to 375 was that we would like to manage it within that range no matter the interest rate environment. And rates are still relatively high. We've moved to asset-sensitive.
Speaker #3: Yeah. Hey, Woody. The context of that 350 to 375 was that we would like to manage it within that range, no matter the interest rate environment.
Speaker #3: And rates are still relatively high. We've moved assets sensitive. I would say probably that top end of the range, of the 375, has moved up a little bit.
Operator: I would say probably that top end of the range of the 375 has moved up a little bit. But if rates were to go down to significantly go down, we're trying to stay at that 350 above in that scenario. So I think it's a fair comment to say that the top end of that range has probably shifted up a bit. Yeah. And I think the forward curve has shifted as well. So that range was really embedded on an outlook that had a lot more rate cuts in it than what we're expecting today. So all of that is very fair, Woody. And the good news is rates higher for longer, I think, better for us and better for the industry right now and gives us upward bias in how we think about the NIM range. All right.
I would say probably that top end of the range of the 375 has moved up a little bit. But if rates were to go down to significantly go down, we're trying to stay at that 350 above in that scenario. So I think it's a fair comment to say that the top end of that range has probably shifted up a bit.
Speaker #3: And but if rates were to go down to significantly go down, we're trying to stay at that 350 above in that scenario. So I think it's a fair comment to say that the top end of that range is probably shifted up a
Speaker #3: bit. Yeah.
Jay Brogdon: Yeah. And I think the forward curve has shifted as well. So that range was really embedded on an outlook that had a lot more rate cuts in it than what we're expecting today. So all of that is very fair, Woody. And the good news is rates higher for longer, I think, better for us and better for the industry right now and gives us upward bias in how we think about the NIM range.
Speaker #4: And I think the forward curve has shifted as well. So that range was really embedded on an outlook that had a lot more rate cuts in it than what we're expecting today.
Speaker #4: So, all of that is very fair, Woody, and good news is rates higher for longers—I think better for us and better for the industry right now.
Speaker #4: And gives us upward bias in how we think about the NIM.
Speaker #4: range.
Woody Lay: All right.
Speaker #1: All
Speaker #1: Right. Me, in terms—And then just last, for capital—I mean, you just printed a quarter of a ROTC over almost core 16%.
Operator: And then just last for me, in terms of capital, I mean, you just printed a quarter of a ROTCE over almost core 16%. You're going to be building capital over the next year. How do you think about sort of where excess capital stands and opportunities to deploy it? Yeah. I think our priorities continue to really be around organic growth, investing in the business to grow sustainably and profitably is clear priority one. Priority two would be our very long-standing dividend. And then from there, Woody, I mean, we'll have to think about share buyback, I think, increasingly throughout the year this year. We don't have any share buyback activity embedded in our budgets or forecasts right now. I think we'll keep that tool in the toolkit.
And then just last for me, in terms of capital, I mean, you just printed a quarter of a ROTCE over almost core 16%. You're going to be building capital over the next year. How do you think about sort of where excess capital stands and opportunities to deploy it?
Speaker #1: You're going to be building capital over the next year. How do you think about where excess capital stands and opportunities to
Speaker #1: deploy it? Yeah.
Jay Brogdon: Yeah. I think our priorities continue to really be around organic growth, investing in the business to grow sustainably and profitably is clear priority one. Priority two would be our very long-standing dividend. And then from there, Woody, I mean, we'll have to think about share buyback, I think, increasingly throughout the year this year. We don't have any share buyback activity embedded in our budgets or forecasts right now. I think we'll keep that tool in the toolkit.
Speaker #4: I think our priorities continue to really be around organic growth, investing in the business to grow sustainably and profitably. It's clearly priority one. Priority two would be our very long-standing dividend.
Speaker #4: Then from there, Woody, I mean, we'll have to think about share buyback, I think, increasingly throughout the year this year. We don't have any share buyback activity embedded in our budgets or forecasts right now.
Speaker #4: I think we'll keep that tool in the toolkit. We'll be opportunistic in how we see the growth environment evolving, and, candidly, in how we see the valuation of the stock evolving.
Operator: We'll be opportunistic in how we see the growth environment evolving, and candidly in how we see the valuation of the stock evolving. And where it makes very good sense economically for us to get active, we would do so. But as of now, it's really centers on priorities one and two that I outlined there. All right. That's all for me. Thanks for taking my questions. Thanks, Woody. Thank you. And our next question today comes from Brian Wilczynski with Morgan Stanley. Please go ahead. Hi. Good morning. Hey, Brian. Brian. Maybe going back to the ROTCE for a moment. Clearly, a very strong quarter, 16% ROTCE. If we zoom out a bit, how do you think about the trajectory of ROTCE as we move forward, and how much of it will depend on the environment versus some of the other strategic levers that you talked about earlier? Yeah.
We'll be opportunistic in how we see the growth environment evolving, and candidly in how we see the valuation of the stock evolving. And where it makes very good sense economically for us to get active, we would do so. But as of now, it's really centers on priorities one and two that I outlined there.
Speaker #4: And where it makes very good sense, economically, for us to get active, we would do so. But as of now, it's really centers on priorities one and two that I outlined
Speaker #4: there.
Woody Lay: All right. That's all for me. Thanks for taking my questions.
Speaker #1: All right.
Speaker #1: questions.
Jay Brogdon: Thanks, Woody.
Speaker #4: Thanks, That's all for me.
Speaker #4: Woody.
Operator: Thank you. And our next question today comes from Brian Wilczynski with Morgan Stanley. Please go ahead.
Speaker #5: Thank you. And our next question today comes from Brian Wasinski with Morgan Stanley. Please go ahead.
Brian Wilczynski: Hi. Good morning.
Speaker #6: Hi. Good morning.
Jay Brogdon: Hey, Brian. Brian.
Speaker #6: Brian: Hey, Brian. Maybe going back to the ROTC for a moment. Clearly, a very strong quarter—16% ROTC. If we zoom out a bit, how do you think about the trajectory of ROTC as we move forward?
Ed Bilek: Maybe going back to the ROTCE for a moment. Clearly, a very strong quarter, 16% ROTCE. If we zoom out a bit, how do you think about the trajectory of ROTCE as we move forward, and how much of it will depend on the environment versus some of the other strategic levers that you talked about earlier?
Speaker #6: And how much of it will depend on the environment versus some of the other strategic levers that you talked about earlier?
Jay Brogdon: Yeah.
Speaker #4: Yeah, I'll start on that, Brian. Daniel, I'm sure, is going to want to layer in some comments as well. But I think if you think about whether you think an ROA or ROTC, I think there's probably a couple of things about the fourth quarter to kind of first quarter and outlook that are important to denote.
Operator: I'll start on that, Brian. Daniel, I'm sure is going to want to layer in some comments as well. But I think if you think about whether you're thinking ROA or ROTCE, I think there's probably a couple of things about the fourth quarter to kind of first quarter and outlook that are important to denote. One is there's just always, as we go into the first quarter of any year, there's some seasonality and expenses that we have to chew through from payroll taxes to merit increases, etc. And so the early part of the year has got a seasonal element in it that you don't see in the fourth quarter. In the fee income area, from a non-interest revenue point of view, we've very much exceeded the top end of our range of what we normally see.
I'll start on that, Brian. Daniel, I'm sure is going to want to layer in some comments as well. But I think if you think about whether you're thinking ROA or ROTCE, I think there's probably a couple of things about the fourth quarter to kind of first quarter and outlook that are important to denote. One is there's just always, as we go into the first quarter of any year, there's some seasonality and expenses that we have to chew through from payroll taxes to merit increases, etc. And so the early part of the year has got a seasonal element in it that you don't see in the fourth quarter. In the fee income area, from a non-interest revenue point of view, we've very much exceeded the top end of our range of what we normally see.
Speaker #4: One is there's just always as we go into the first quarter of any year, there's some seasonality and expenses that we have to chew through.
Speaker #4: From payroll taxes to merit increases, etc. And so the early part of the year has got a seasonal element in it that you don't see in the fourth quarter.
Speaker #4: In the fee income area, from a non-interest revenue point of view, we had we've very much exceeded the top end of our range of what we normally see.
Speaker #4: And some of that was just very strong results in some of those fee businesses. A little over $3 million of that was BOLI gains.
Operator: Some of that was just very strong results in some of those fee businesses. A little over $3 million of that was BOLI gains. So we're not going to repeat that every quarter, obviously. I think you've kind of got to run rate that just a little bit. Another big item I would call out is just the effective tax rate. Our balance sheet changed a lot given the repositioning back in Q3. The fourth quarter tax rate is below what our tax rate would be in 2026, which that tax rate's probably, as we called out in the guide, much closer to around 20%. I think of that as I'll do it in ROA, not ROTCE, because it's just that number is more readily available in my mind. We had a 1.29 ROA for the quarter.
Some of that was just very strong results in some of those fee businesses. A little over $3 million of that was BOLI gains. So we're not going to repeat that every quarter, obviously. I think you've kind of got to run rate that just a little bit. Another big item I would call out is just the effective tax rate. Our balance sheet changed a lot given the repositioning back in Q3. The fourth quarter tax rate is below what our tax rate would be in 2026, which that tax rate's probably, as we called out in the guide, much closer to around 20%. I think of that as I'll do it in ROA, not ROTCE, because it's just that number is more readily available in my mind. We had a 1.29 ROA for the quarter.
Speaker #4: And so we're not going to repeat that every quarter, obviously. So I think you've kind of got a run rate that just a little bit.
Speaker #4: And so we're not going to repeat that every quarter, obviously. So I think you've kind of got a run rate that—just a little bit. Big item I would call out is just the— And then another effective tax rate.
Speaker #4: Our balance sheet changed a lot given the repositioning back in Q3. The fourth quarter tax rate is below what our tax rate would be.
Speaker #4: In 2026, which that tax rate probably, as we called out in the guide, much closer to around 20%. And so I think of that as I'll do it in ROA, not ROTC, because it's just that number is more readily available in my mind.
Speaker #4: We had a 129 ROA for the quarter. I think ROA kind of on a more run rate basis is at least kind of mid-1 teens, if you will.
Operator: I think ROA kind of on a more run rate basis is at least kind of mid-1 teens, if you will. That's more of what I think is the sustainable run rate as we turn the quarter into 2026 with all of the tailwinds that we've been describing on this call and opportunities to continue to grow and expand that from there. Yeah. Brian, the only thing I'd add to all that Jay said in terms of the seasonality, when you think about Q1, the additional one there is that there are two fewer days. So the NII raw dollar amount is impacted by that by about $3.5 million. So when you think about the fourth quarter returns relative to first quarter, there will be a downward shift.
I think ROA kind of on a more run rate basis is at least kind of mid-1 teens, if you will. That's more of what I think is the sustainable run rate as we turn the quarter into 2026 with all of the tailwinds that we've been describing on this call and opportunities to continue to grow and expand that from there.
Speaker #4: And that's more of a what I think is the sustainable run rate as we turn the quarter into '26 with all of the tailwinds that we've been describing on this call and opportunities to continue to grow and expand that from
Speaker #4: there. Yeah.
Daniel Hobbs: Yeah. Brian, the only thing I'd add to all that Jay said in terms of the seasonality, when you think about Q1, the additional one there is that there are two fewer days. So the NII raw dollar amount is impacted by that by about $3.5 million. So when you think about the fourth quarter returns relative to first quarter, there will be a downward shift.
Speaker #3: And Brian, the only thing I'd add to all that Jay said in terms of the seasonality, when you think about Q1, the additional one there, is that there are too few or less days.
Speaker #3: So the NII raw dollar amount is impacted by that by about 3.5 million dollars. So when you think about the fourth quarter returns relative to the first quarter, there will be a downward shift.
Speaker #3: But then over the long term, we think about a ROTC as somewhere needs to be kind of mid-teens is where we'd like to be.
Operator: But then over the long term, we think about ROTCE as somewhere that needs to be kind of mid-teens is where we'd like to be. We've talked about an ROA of 1.25% and above. We feel like we've got a really good path to get there. To Jay's point, kind of our maybe normalized rate is in the high teens right now, but we feel like we've got a really good path to get there throughout the year and towards the end of 2026. Yeah. Last comment I'd make on this, Brian, is just when we did the balance sheet repositioning, we thought some of those targets from ROA and ROTCE were probably more achievable in 2027 on a run rate basis. Our jumping-off point at the beginning of 2026 is several basis points higher than where we thought it would be.
But then over the long term, we think about ROTCE as somewhere that needs to be kind of mid-teens is where we'd like to be. We've talked about an ROA of 1.25% and above. We feel like we've got a really good path to get there. To Jay's point, kind of our maybe normalized rate is in the high teens right now, but we feel like we've got a really good path to get there throughout the year and towards the end of 2026.
Speaker #3: And we've talked about an ROA of 1.25% and above. And we feel like we've got a really good path to get there and, to Jay's point, kind of our maybe normalized rate is in the high 1-teens right now.
Speaker #3: But we feel like we've got a really good path to get there throughout the year, and
Speaker #4: Yeah. Last
Jay Brogdon: Yeah. Last comment I'd make on this, Brian, is just when we did the balance sheet repositioning, we thought some of those targets from ROA and ROTCE were probably more achievable in 2027 on a run rate basis. Our jumping-off point at the beginning of 2026 is several basis points higher than where we thought it would be.
Speaker #4: Just when we did the balance sheet repositioning, we thought some of those targets towards the end of ’26 from ROA and ROTC were probably more achievable in 2027 on a run-rate basis.
Speaker #4: And our jumping-off point at the beginning of '26 is several basis points higher than where we thought it would be and all of that indicates kind of similar to Woody's question earlier on NIM, maybe a bit of a parallel shift up.
Operator: And all of that indicates, kind of similar to Woody's question earlier on NIM, maybe a bit of a parallel shift up either in what those run rates should be or in kind of accelerating the achievability of those targets. That's really helpful. Thank you for all the detail. And maybe one follow-up on the funding base that's clearly been a big area of improvement over the past 12 months. As we look forward, can you just elaborate a bit more on the strategy to grow customer deposits over the course of 2026 and beyond? Yeah. I'll jump in there. And others may want to come too, Brian. But I think I'll speak to it maybe in kind of line of business thought process. We've got a lot of activities and efforts going on, some of them in kind of the category of first ever in the bank.
And all of that indicates, kind of similar to Woody's question earlier on NIM, maybe a bit of a parallel shift up either in what those run rates should be or in kind of accelerating the achievability of those targets.
Speaker #4: And either in what those run rates should be or in kind of accelerating the achievability of those targets.
Brian Wilczynski: That's really helpful. Thank you for all the detail. And maybe one follow-up on the funding base that's clearly been a big area of improvement over the past 12 months. As we look forward, can you just elaborate a bit more on the strategy to grow customer deposits over the course of 2026 and beyond?
Speaker #6: detail. And maybe one follow-up That's really helpful. Thank you for all the on the funding base that's clearly been a big area of improvement over the past 12 months.
Speaker #6: As we look forward, can you just elaborate a bit more on the strategy to grow customer deposits over the course of 2026 and beyond?
Jay Brogdon: Yeah. I'll jump in there. And others may want to come too, Brian. But I think I'll speak to it maybe in kind of line of business thought process. We've got a lot of activities and efforts going on, some of them in kind of the category of first ever in the bank.
Speaker #4: Yeah, I'll jump in there. And others may want to comment too, Brian. But I think I'll speak to it, maybe in kind of a line-of-business thought process.
Speaker #4: We've got a lot of activities and efforts going on. Some of them are in kind of the category of first ever in the bank—not first ever in an industry, but just maybe adopting industry best practices for the first time, particularly on the consumer side of our bank.
Operator: Not first ever in an industry, but just maybe adopting industry best practices for the first time, particularly on the consumer side of our bank. And that spans across kind of all demographics, all categories of customer profile. And we're seeing some success, some early success there, experience that success throughout 2025, and are creating better kind of discipline and muscle memory around those activities in the consumer bank. And that's been an area of focus from a talent perspective. And so I think that all of that would fall into something that we're focused on strategically on the deposit side and the consumer category. The other thing I'd mention from a consumer perspective is private banking is a product we really rolled out probably sometime in 2024, if memory serves, but really, really expanded our efforts around private banking in 2025.
Not first ever in an industry, but just maybe adopting industry best practices for the first time, particularly on the consumer side of our bank. And that spans across kind of all demographics, all categories of customer profile. And we're seeing some success, some early success there, experience that success throughout 2025, and are creating better kind of discipline and muscle memory around those activities in the consumer bank. And that's been an area of focus from a talent perspective. And so I think that all of that would fall into something that we're focused on strategically on the deposit side and the consumer category. The other thing I'd mention from a consumer perspective is private banking is a product we really rolled out probably sometime in 2024, if memory serves, but really, really expanded our efforts around private banking in 2025.
Speaker #4: And that spans across kind of all demographics, all categories of customer profile. And we're seeing some success, some early success there, experience that success throughout 2025.
Speaker #4: our creating better kind of discipline and muscle memory around those activities in the And consumer bank. And so that's been an area of focus from a talent perspective.
Speaker #4: And so I think that all of that into something that we're focused is would fall on strategically on the deposit side and the consumer category.
Speaker #4: The other thing I'd mention from a consumer perspective is private banking is a product we really rolled out, probably sometime in '24, if memory serves.
Speaker #4: But really, really expanded our efforts around private banking in 2025. That's another area that we are seeing very good early signs on. And we've got a lot of built-in opportunity that we can synergize across our business.
Operator: That's another area that we are seeing very good early signs on. We've got a lot of built-in opportunity that we can synergize across our business through more competitive products there. So having developed in those products, bringing in private bankers, incentivizing around that, that's another area that we're very, very optimistic in. The last piece that comes to mind for me in another line of business is just on the commercial side of our business. We've been very focused on building out business and middle market C&I capabilities. That is tools, processes, people, and everything. That's been a multi-year investment. We're pretty deep in that journey.
That's another area that we are seeing very good early signs on. We've got a lot of built-in opportunity that we can synergize across our business through more competitive products there. So having developed in those products, bringing in private bankers, incentivizing around that, that's another area that we're very, very optimistic in. The last piece that comes to mind for me in another line of business is just on the commercial side of our business. We've been very focused on building out business and middle market C&I capabilities. That is tools, processes, people, and everything. That's been a multi-year investment. We're pretty deep in that journey.
Speaker #4: Through more competitive products there. And so, having developed in those products, bringing in private bankers and incentivizing around that, that's another area that we're very, very optimistic in.
Speaker #4: And then the last piece that comes to mind for me, in another line of business, is just on the commercial side of our business.
Speaker #4: And so we've been very focused on building out business and middle market C&I capabilities. That is tools, processes, people, everything. And that's been a multi-year investment we're pretty deep in that journey.
Speaker #4: We started in the backside of our business, really re-pooled and reprocessed continue to have some very important initiatives in those areas. And then have brought some very good talent into the bank over the last year or two.
Operator: We started in the backside of our business, really repooled and reprocessed, continue to have some very important initiatives in those areas, and then have brought some very good talent into the bank over the last year or two on the sales side as well. And that continues to be an area where I think you'll see heavy investment from us in terms of building out and expanding on the commercial TM side of the business. And I put all that together and say one simple way I look at this is our non-interest-bearing deposits as a percentage of total deposits is below peer and below where it ought to be. And that kind of circles all the way back to an early comment to a question.
We started in the backside of our business, really repooled and reprocessed, continue to have some very important initiatives in those areas, and then have brought some very good talent into the bank over the last year or two on the sales side as well. And that continues to be an area where I think you'll see heavy investment from us in terms of building out and expanding on the commercial TM side of the business. And I put all that together and say one simple way I look at this is our non-interest-bearing deposits as a percentage of total deposits is below peer and below where it ought to be. And that kind of circles all the way back to an early comment to a question.
Speaker #4: On the sales side as well. And that continues to be an area where I think you'll see heavy investment from us in terms of building out and expanding on the commercial TM side of the business.
Speaker #4: And I put all that together and say, in one simple way, I look at this as our non-interest-bearing deposits as a percentage of total deposits is below peer and below where it ought to be.
Speaker #4: And that kind of circles all the way back to an early comment to a question. I believe that is perhaps the biggest opportunity to accelerate even beyond our guide this year and into the future is our ability to demonstrate some success in growth in those strategies.
Operator: I believe that is perhaps the biggest opportunity to accelerate even beyond our guide this year and into the future is our ability to demonstrate some success and growth in those strategies. Hey, Brian. Chris, I'll add to that. I think Jay referenced some of the things that are not necessarily new to the industry, but new to us. I think as we demonstrate to ourselves that we are effective at those, our focus pivots from the experimentation and piloting to accelerating and scaling. And so as we find those successes or even things we didn't like, we're learning from those quickly, and we're shortening our cycle every time so that we can get from concept to execution and then to results on a much shorter cycle. And we're taking those learnings.
I believe that is perhaps the biggest opportunity to accelerate even beyond our guide this year and into the future is our ability to demonstrate some success and growth in those strategies.
Chris Van Steenberg: Hey, Brian. Chris, I'll add to that. I think Jay referenced some of the things that are not necessarily new to the industry, but new to us. I think as we demonstrate to ourselves that we are effective at those, our focus pivots from the experimentation and piloting to accelerating and scaling. And so as we find those successes or even things we didn't like, we're learning from those quickly, and we're shortening our cycle every time so that we can get from concept to execution and then to results on a much shorter cycle. And we're taking those learnings.
Speaker #4: Hey, Brian, it's Chris. I'll add to that. I think Jay referenced some of the things that are not necessarily new to the industry, but new to us.
Speaker #4: I think as we demonstrate to ourselves that we are effective at those, our focus pivots from the experimentation and piloting to accelerating and scaling.
Speaker #4: And so we're as we find those successes, or even things we didn't like, we're learning from those quickly and we're shortening our cycle every time so that we can get from concept to execution and then to results.
Speaker #4: On a much shorter cycle. And we're taking those learnings and I think one spot that Jay didn't mention is another one is small business where we've got a significant opportunity in our footprint, both embedded in our existing relationships, but also prospect opportunities where we can attract really deposit-rich customers that have got limited credit needs, but they have absolutely have got significant needs needs.
Operator: I think one spot that Jay didn't mention is small business where we've got a significant opportunity in our footprint, both embedded in our existing relationships, but also prospect opportunities where we can attract really deposit-rich customers that have got limited credit needs, but they have absolutely got significant needs around deposits and transaction needs. And so our ability to meet that, we already have demonstrated, and we continue to focus on that area. And that's going to continue to be an area of emphasis for us. Good comments. Yep. I really appreciate all the detail, and thank you for taking my questions. Thanks, Brian. Thank you. And our next question today comes from Gary Tenner at D.A. Davidson. Please go ahead. Thanks. Good morning. I just had one follow-up question.
I think one spot that Jay didn't mention is small business where we've got a significant opportunity in our footprint, both embedded in our existing relationships, but also prospect opportunities where we can attract really deposit-rich customers that have got limited credit needs, but they have absolutely got significant needs around deposits and transaction needs. And so our ability to meet that, we already have demonstrated, and we continue to focus on that area. And that's going to continue to be an area of emphasis for us. Good comments. Yep.
Speaker #4: And so our ability to meet that, we around deposits and transaction already have demonstrated and we continue to focus on that area. And that's going to continue to be an area of emphasis for
Speaker #4: us. Good comments. Yep.
Speaker #6: I really appreciate all the detail and thank you for taking my questions.
Brian Wilczynski: I really appreciate all the detail, and thank you for taking my questions.
Speaker #4: Thanks, Brian.
Jay Brogdon: Thanks, Brian.
Operator: Thank you. And our next question today comes from Gary Tenner at D.A. Davidson. Please go ahead.
Speaker #1: Thank you. And our next question today comes from Gary Tenner at DA Davidson. Please go ahead.
Gary P. Tenner: Thanks. Good morning. I just had one follow-up question.
Speaker #5: Thanks. Good morning. I just had one follow-up question. Just as I'm looking at the interplay between growth on both sides of the balance sheet, based on the guide, I guess two questions come to mind.
Operator: Just as I'm looking at the interplay between growth on both sides of the balance sheet based on the guide, I guess two questions come to mind. One, is there any kind of anchor on the loan deposit ratio to think about now that you're up in the mid-80s there the last couple of quarters? And then the second, just to the degree that loan growth outstrips deposit growth over the course of the year, is that funded with runoff from the securities portfolio, or what are the broad thoughts around that? Yeah. I mean, you nailed it, Gary. I think that our constraining factor in our business from a growth perspective today is certainly not loans. It is on the deposit side, the core customer deposit side, hence all of the commentary that we've had around that being such a key element of our strategic focus going forward.
Just as I'm looking at the interplay between growth on both sides of the balance sheet based on the guide, I guess two questions come to mind. One, is there any kind of anchor on the loan deposit ratio to think about now that you're up in the mid-80s there the last couple of quarters? And then the second, just to the degree that loan growth outstrips deposit growth over the course of the year, is that funded with runoff from the securities portfolio, or what are the broad thoughts around that?
Speaker #5: One, is there any kind of anchor on the loan-to-deposit ratio to think about now that you're up in the mid-80s there? The last couple of quarters.
Speaker #5: And then the second, just to the degree that loan growth outstrips deposit growth over the course of the year, is that funded with runoff from the securities portfolio or what are the broad thoughts around that?
Jay Brogdon: Yeah. I mean, you nailed it, Gary. I think that our constraining factor in our business from a growth perspective today is certainly not loans. It is on the deposit side, the core customer deposit side, hence all of the commentary that we've had around that being such a key element of our strategic focus going forward.
Speaker #4: Yeah, I think—I mean, you nailed it, Gary. I think that our constraining factor in our business from a growth perspective today is certainly not loans.
Speaker #4: It is on the deposit side, the core customer deposit side. Hence, all of the commentary that we've had around that being such a key element of our strategic focus going forward.
Speaker #4: So, I think to the extent you see it outstripping loan growth, outstripping or outpacing deposit growth, we do have cash flows from the balance sheet that would be investment priority one.
Operator: So, I think to the extent you see it outstripping loan growth, outstripping or outpacing deposit growth, we do have cash flows from the balance sheet. That would be investment priority one, investment, the other funding elements that could be in there. We could get more aggressive on the customer side in things like promotional CD rates, etc., to help fund some of that. And then kind of your last stop would be on the wholesale side of any category. Okay. That's all I had. Thank you. Yep. Thank you. Thank you. And that concludes the question and answer session. I'd like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks. Thanks. I'd like to just maybe end today with a few closing remarks. And first of all, it's hard for me not to look back to one year ago.
So, I think to the extent you see it outstripping loan growth, outstripping or outpacing deposit growth, we do have cash flows from the balance sheet. That would be investment priority one, investment, the other funding elements that could be in there. We could get more aggressive on the customer side in things like promotional CD rates, etc., to help fund some of that. And then kind of your last stop would be on the wholesale side of any category.
Speaker #4: Investment, the other funding elements that could be in there. We could get more aggressive on the customer side in things like promotional CD rates, etc., to help fund some of that.
Speaker #4: And then, kind of your last stop would be on the wholesale side of any.
Speaker #4: category. Okay.
Gary P. Tenner: Okay. That's all I had. Thank you.
Speaker #5: That's all I had. Thank you.
Jay Brogdon: Yep. Thank you.
Speaker #4: Yep. Thank
Speaker #4: you. Thank you.
Operator: Thank you. And that concludes the question and answer session. I'd like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks.
Speaker #1: And that concludes the question and answer session. I'd like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks.
Jay Brogdon: Thanks. I'd like to just maybe end today with a few closing remarks. And first of all, it's hard for me not to look back to one year ago.
Speaker #4: Thanks. I’d like to just maybe end today with a few closing remarks. And first of all, it’s hard for me not to look back to one year ago.
Speaker #4: A year ago, we were announcing fourth quarter 2024 results and net interest margin had a two-handle on it. And it was up linked quarter, but was still a two-handle.
Operator: A year ago, we were announcing Q4 2024 results, and net interest margin had a two-handle on it and was up, linked quarter, but was still a two-handle. ROA was barely creeping above 70 basis points, and our efficiency ratio was in the mid-60s. I fast forward to today, and I think about, of course, the results from the balance sheet repositioning, but also just the ongoing commitment to sort of sound and profitable growth, and the decisions we're making, and the discipline that we're demonstrating as we do that. We just find ourselves in a much stronger position. Net interest margin was up 94 basis points compared to a year ago. Our expenses are down, as we talked about on the call, and they're down on a multi-year basis.
A year ago, we were announcing Q4 2024 results, and net interest margin had a two-handle on it and was up, linked quarter, but was still a two-handle. ROA was barely creeping above 70 basis points, and our efficiency ratio was in the mid-60s. I fast forward to today, and I think about, of course, the results from the balance sheet repositioning, but also just the ongoing commitment to sort of sound and profitable growth, and the decisions we're making, and the discipline that we're demonstrating as we do that. We just find ourselves in a much stronger position. Net interest margin was up 94 basis points compared to a year ago. Our expenses are down, as we talked about on the call, and they're down on a multi-year basis.
Speaker #4: ROA was barely creeping above 70 basis points, and our efficiency ratio was in the mid-60s. I flash forward to today, and I think about, of course, the results from the balance sheet repositioning, but also just the ongoing commitment to sound and profitable growth and the decisions we're making, and the discipline that we're demonstrating as we do that.
Speaker #4: And we just find ourselves in a much stronger position. Net interest margin was up 94 basis points compared to a year ago. Our expenses are down, as we talked about on the call.
Speaker #4: And they're down on a multi-year basis. And all of that has led to revenue fourth quarter of this past year compared to a year ago.
Operator: All of that has led to revenue Q4 of this past year compared to a year ago, up almost 20%. Pre-provision net revenue is up 60%, 60%. So I just think about all the things that are now in the rearview mirror for us as we turn the corner into 2026, and we just have a great deal of momentum behind us. The thing I want everybody to hear me say is that we are nowhere near satisfied with where we are right now. In fact, as we've talked about on this call, we continue to design and execute a number of strategic initiatives. We think all of these initiatives are going to bolster that already strong momentum. Our pipelines for adding talent, as we've discussed, are as strong as they've ever been.
All of that has led to revenue Q4 of this past year compared to a year ago, up almost 20%. Pre-provision net revenue is up 60%, 60%. So I just think about all the things that are now in the rearview mirror for us as we turn the corner into 2026, and we just have a great deal of momentum behind us. The thing I want everybody to hear me say is that we are nowhere near satisfied with where we are right now. In fact, as we've talked about on this call, we continue to design and execute a number of strategic initiatives. We think all of these initiatives are going to bolster that already strong momentum. Our pipelines for adding talent, as we've discussed, are as strong as they've ever been.
Speaker #4: Up almost 20%. And pre-provisioned net revenue is up 60%. Six-zero percent. And so I just think about all the things that are now in the rearview mirror for us as we turn the corner into 2026.
Speaker #4: And we just have a great deal of momentum behind us. And the thing I want everybody to hear me say is that we are nowhere near satisfied with where we are right now.
Speaker #4: In fact, as we've talked about on this call, we continue to design and execute a number of strategic initiatives we think all of these initiatives are going to bolster that already strong momentum.
Speaker #4: Our pipelines for adding talent, as we've discussed, are as strong as they've ever been. And so, as we move through 2026 and beyond, we very much look forward to continuing to demonstrate our progress.
Operator: As we move through 2026 and beyond, we very much look forward to continuing to demonstrate our progress, and we remain steadfast in our commitment to delivering value for our customers, for our associates who make all of this happen, and of course, for our shareholders. With that, I'll just thank everyone for the support, and you guys have a great day. Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
As we move through 2026 and beyond, we very much look forward to continuing to demonstrate our progress, and we remain steadfast in our commitment to delivering value for our customers, for our associates who make all of this happen, and of course, for our shareholders. With that, I'll just thank everyone for the support, and you guys have a great day.
Speaker #4: And we remain steadfast in our commitment to delivering value for our customers for our associates who make all of this happen. And of course, for our shareholders.
Speaker #4: So with that, I'll just thank everyone for the support. And you guys have a great day.
Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker #1: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
