Community Financial System Q4 2025 Community Financial System Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Community Financial System Inc Earnings Call
Speaker #1: containers away from the plant. Some more 30-minute
Speaker #2: Right.
Speaker #1: Yeah.
Speaker #3: Good day and welcome to the Community Financial Systems fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal your conference specialist by pressing the star key followed by zero.
Speaker #3: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone.
Speaker #3: To withdraw your question, please press star and then two. Please note that this event is being recorded and discussion may contain forward-looking statements within the provisions of the private securities litigation reform act of 1995 that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the company operates.
Speaker #3: These statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed. Refer to the company's SEC filing. Including the risk factor section for more details.
Operator: Refer to the company's SEC filing, including the Risk Factors section, for more details. Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release. I would now like to turn the conference over to Dimitar Karaivanov, President and CEO. Please go ahead.
Refer to the company's SEC filing, including the Risk Factors section, for more details. Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release. I would now like to turn the conference over to Dimitar Karaivanov, President and CEO. Please go ahead.
Speaker #3: Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release.
Speaker #3: I would now like to turn the conference over to Dimitar Karaivanov, President and CEO. Please go ahead.
Speaker #4: Thank you, Dave. Good morning, everyone. Thank you for joining our Q4 and full year 2025 earnings call. My summary of the quarter is that I'm pleased with the revenue strength across all of our businesses, very pleased with the liquidity and credit equality of our balance sheet, and that we also had more than the usual noise in our expense base.
Q4 2025 Community Financial System Inc Earnings Call
Dimitar Karaivanov: Thank you, Dave. Good morning, everyone. Thank you for joining our Q4 and full year 2025 earnings call. My summary of the quarter is that I'm pleased with the revenue strength across all of our businesses, very pleased with the liquidity and credit quality of our balance sheet, and that we also had more than the usual noise in our expense base. Mariah will provide you the details with some high-level reconciliations to the prior quarter expenses, but overall, I would say that most of the delta is driven by items that are tied to actual earnings performance, plus recent transactions and consolidations. Overall, 16% operating earnings growth in 2025, while making the largest organic growth investments that our company has ever made and actively deploying capital in high return businesses, is something I'm very happy with.
Dimitar Karaivanov: Thank you, Dave. Good morning, everyone. Thank you for joining our Q4 and full year 2025 earnings call. My summary of the quarter is that I'm pleased with the revenue strength across all of our businesses, very pleased with the liquidity and credit quality of our balance sheet, and that we also had more than the usual noise in our expense base. Mariah will provide you the details with some high-level reconciliations to the prior quarter expenses, but overall, I would say that most of the delta is driven by items that are tied to actual earnings performance, plus recent transactions and consolidations. Overall, 16% operating earnings growth in 2025, while making the largest organic growth investments that our company has ever made and actively deploying capital in high return businesses, is something I'm very happy with.
Speaker #4: Marya will provide you the details with some high-level reconciliations of the prior quarter expenses, but overall, I would say that most of the delta is driven by items that are tied to actual earnings performance, plus recent transactions and consolidations.
Speaker #4: Overall, 16% operating earnings growth in 2025, while making the largest organic growth investments that our company has ever made, and actively deploying capital in high-return businesses, is something I'm very happy with.
Speaker #4: I'm most happy about the progress we continue to make in our brand, reputation, talent, capabilities, presence, and the market share gains that are accruing as a result of it.
Dimitar Karaivanov: I'm most happy about the progress we continue to make in our brand, reputation, talent, capabilities, presence, and the market share gains that are accruing as a result of it. One recent data point in our banking business, during Q4, we were selected as the 2025 Company of the Year in Banking by the Buffalo Business First. Looking at a bit more details in the businesses, the largest percentage improvement in pre-tax income compared to Q3 was visible in our employee benefit services business, which grew pre-tax income by 10% quarter-over-quarter. As discussed previously, we spent most of 2025 revamping our growth strategy in the trust fund administration side of the business and expect to start seeing the fruits of that in Q2 of 2026.
I'm most happy about the progress we continue to make in our brand, reputation, talent, capabilities, presence, and the market share gains that are accruing as a result of it. One recent data point in our banking business, during Q4, we were selected as the 2025 Company of the Year in Banking by the Buffalo Business First. Looking at a bit more details in the businesses, the largest percentage improvement in pre-tax income compared to Q3 was visible in our employee benefit services business, which grew pre-tax income by 10% quarter-over-quarter. As discussed previously, we spent most of 2025 revamping our growth strategy in the trust fund administration side of the business and expect to start seeing the fruits of that in Q2 of 2026.
Speaker #4: One recent data point in our banking business, during the fourth quarter, we were selected as the 2025 company of the year in banking by the Buffalo Business First.
Speaker #4: Looking at a bit more details in the businesses, the largest percentage improvement in pre-tax income compared to the third quarter was visible in our employee benefit services business, which grew pre-tax income by 10% quarter over quarter.
Speaker #4: As discussed previously, we spent most of 2025 revamping our growth strategy in the trust fund administration side of the business and expect to start seeing the fruits of that in the second quarter of 2026.
Speaker #4: While full-year performance was in the low single digits, Q4 marked a year-over-year improvement of 8% in revenue, and 13% in pre-tax income, as this momentum is beginning to take shape.
Dimitar Karaivanov: While full, full year performance was in the low single digits, Q4 marked a year-over-year improvement of 8% in revenue and 13% in pre-tax income, as this momentum is beginning to take shape. We expect that 2026 growth will revert back to mid to high single digits. In our banking business, in 2025, we benefited from both mid-single digit asset growth and expanding margin, which drove very meaningful operating income growth of 22% on a full year basis. I would note that our 5% loan growth compares favorably to the industry, and local peers and came in spite of very elevated pay downs of over $300 million in the commercial business. We have continued to add talent and customers from recent disruptions around our footprint, and in our expanded footprint.
While full, full year performance was in the low single digits, Q4 marked a year-over-year improvement of 8% in revenue and 13% in pre-tax income, as this momentum is beginning to take shape. We expect that 2026 growth will revert back to mid to high single digits. In our banking business, in 2025, we benefited from both mid-single digit asset growth and expanding margin, which drove very meaningful operating income growth of 22% on a full year basis. I would note that our 5% loan growth compares favorably to the industry, and local peers and came in spite of very elevated pay downs of over $300 million in the commercial business. We have continued to add talent and customers from recent disruptions around our footprint, and in our expanded footprint.
Speaker #4: We expect that 2026 growth will revert back to mid to high single digits. In our banking business, in 2025, we benefited from both mid-single digit asset growth and expanding margin which rolled very meaningful operating income growth of 22% on a full-year basis.
Speaker #4: I would note that our 5% loan growth compares favorably to the industry and local peers and came in spite of very elevated paydowns of over $300 million in the commercial business.
Speaker #4: We have continued to add talent and customers from recent disruptions around our footprint and in our expanded footprint. Insurance services, at a strong year as well, with top-line growth of 8% and operating income growth of 42%.
Dimitar Karaivanov: Insurance services had a strong year as well, with top line growth of 8% and operating income growth of 42%. We expect mid-single digit growth going into 2026. In wealth management services, revenues, as expected, were impacted by some realignment of producers, which also, as expected, resulted in positive margin and operating pre-tax income with growth of 15%. We expect mid-single digit growth in 2026 as we account for the full run rate of these changes. In aggregate, we had a very strong year in banking, insurance, and wealth. All of those businesses were ahead of industry metrics and peers in their bottom line improvement. Given that banking accounted for the majority of the very significant investments we're making, I'm very pleased with the bottom line result there of 22% growth.
Insurance services had a strong year as well, with top line growth of 8% and operating income growth of 42%. We expect mid-single digit growth going into 2026. In wealth management services, revenues, as expected, were impacted by some realignment of producers, which also, as expected, resulted in positive margin and operating pre-tax income with growth of 15%. We expect mid-single digit growth in 2026 as we account for the full run rate of these changes. In aggregate, we had a very strong year in banking, insurance, and wealth. All of those businesses were ahead of industry metrics and peers in their bottom line improvement. Given that banking accounted for the majority of the very significant investments we're making, I'm very pleased with the bottom line result there of 22% growth.
Speaker #4: We expect mid-single digit growth going into 2026. In wealth management services, revenues as expected were impacted by some realignment of producers, which also is expected to result in positive margin and operating pre-tax income with growth of 15%.
Speaker #4: We expect mid-single digit growth in 2026 as we account for the full run rate of these changes. In aggregate, we had a very strong year in banking, insurance, and wealth.
Speaker #4: All of those businesses were ahead of industry metrics and peers in their bottom line improvement. Given that banking accounted for the majority of the very significant investments we're making, I'm very pleased with the bottom line result there of 22% growth.
Speaker #4: We were less successful in our employee benefit services in 2025 due to both some revenue challenges and planned investment in the fund administration side.
Dimitar Karaivanov: We were less successful in our employee benefit services in 2025, due to both some revenue challenges and planned investment in the fund administration side. With that in mind, the trends there, as mentioned, are positive, and I expect meaningful improvement in 2026. I would also call out the impact of New York State income taxes, as our tax rate is now almost 2% higher than 18 months ago. That is real money, but we will keep working through those headwinds as well. For 2026, one of our main areas of focus is expense management and beginning to harness more fully the investments and focus we have in AI and automation.
We were less successful in our employee benefit services in 2025, due to both some revenue challenges and planned investment in the fund administration side. With that in mind, the trends there, as mentioned, are positive, and I expect meaningful improvement in 2026. I would also call out the impact of New York State income taxes, as our tax rate is now almost 2% higher than 18 months ago. That is real money, but we will keep working through those headwinds as well. For 2026, one of our main areas of focus is expense management and beginning to harness more fully the investments and focus we have in AI and automation.
Speaker #4: With that in mind, the trends there, as mentioned, are positive, and I expect meaningful improvement in 2026. I would also call out the impact of New York State income taxes, as our tax rate is now almost 2% higher than it was 18 months ago.
Speaker #4: That is real money, but we will keep working through those headwinds as well. For 2026, one of our main areas of focus is expense management and beginning to harness more fully the investments and focus we have in AI and automation.
Speaker #4: As a quick statistic on that, due to our focus on automation, we have saved over $200,000 over the past three years, and that has allowed us to keep our headcount roughly flat while growing the overall business meaningfully.
Dimitar Karaivanov: As a quick statistic on that, due to our focus on automation, we have saved over 200,000 hours over the past 3 years, and that has allowed us to keep our headcount roughly flat while growing the overall business meaningfully. We now need to see it fully in the bottom line. Now, let's talk about returns. The pre-tax tangible returns for the quarter were 61% for employee benefit services, 39% for wealth management services, 26% for banking and corporate, and 8% for insurance services. The return in insurance services is impacted by the increase in allocated capital due to our investment in Leap and seasonably, seasonally lower revenues in Q4. Similar to last quarter, we continued to aggressively pursue opportunities to deploy capital at high tangible returns. Durable, growing, subscription-like revenues remain our main focus and point of excitement.
As a quick statistic on that, due to our focus on automation, we have saved over 200,000 hours over the past 3 years, and that has allowed us to keep our headcount roughly flat while growing the overall business meaningfully. We now need to see it fully in the bottom line. Now, let's talk about returns. The pre-tax tangible returns for the quarter were 61% for employee benefit services, 39% for wealth management services, 26% for banking and corporate, and 8% for insurance services. The return in insurance services is impacted by the increase in allocated capital due to our investment in Leap and seasonably, seasonally lower revenues in Q4. Similar to last quarter, we continued to aggressively pursue opportunities to deploy capital at high tangible returns. Durable, growing, subscription-like revenues remain our main focus and point of excitement.
Speaker #4: We now need to see it fully in the bottom line. Now, let's talk about returns. The pre-tax tangible returns for the quarter were 61% for employee benefit services; 39% for wealth management services; 26% for banking and corporate; and 8% for insurance services.
Speaker #4: The return on insurance services is impacted by the increase in allocated capital, due to our investment in LEAP, and seasonally lower revenues in Q4.
Speaker #4: Similarly to last quarter, we continue to aggressively pursue opportunities to deploy capital at high tangible returns. Durable, growing, subscription-like revenues remain our main focus and point of excitement.
Speaker #4: Our recently announced transaction with ClearPoint is a great example of that. We're excited about both the quality and durability of the trust revenue that it will provide, and also the multitude of opportunities for us to deploy both expanded wealth management and banking products to the customer base.
Dimitar Karaivanov: Our recently announced transaction with ClearPoint is a great example of that. We're excited about both the quality and durability of the trust revenue that it will provide, and also the multitude of opportunities for us to deploy both expanded wealth management and banking products to the customer base. Lastly, I would note that in spite of the meaningful inorganic growth, our share count is flat for the year. To reinforce our feelings, as shareholders, we love our company and its prospects and want to own more, not less of it. We're also not too excited about trading shares in our high-quality, diversified income streams for lower quality ones, unless there are significant offsetting benefits. With that, I will pass it on to Mariah for more details.
Our recently announced transaction with ClearPoint is a great example of that. We're excited about both the quality and durability of the trust revenue that it will provide, and also the multitude of opportunities for us to deploy both expanded wealth management and banking products to the customer base. Lastly, I would note that in spite of the meaningful inorganic growth, our share count is flat for the year. To reinforce our feelings, as shareholders, we love our company and its prospects and want to own more, not less of it. We're also not too excited about trading shares in our high-quality, diversified income streams for lower quality ones, unless there are significant offsetting benefits. With that, I will pass it on to Mariah for more details.
Speaker #4: Lastly, I would note that in spite of the meaningful inorganic growth, our share count is flat for the year. To reinforce our feelings, as shareholders, we love our company and its prospects, and want to own more, not less of it.
Speaker #4: We're also not too excited about trading shares in our high-quality, diversified income streams for lower-quality ones unless there are significant offsetting benefits. With that, I will pass it on to Marya for more.
Speaker #4: details. Thank
Speaker #1: You, Dimitar, and good morning all. As Dimitar noted, the company's fourth quarter and full-year performance was robust in all four of our businesses. Including acquisition expenses, GAAP earnings per share of $1.03 increased 9 cents, or 9.6%, from the fourth quarter of the prior year, and decreased 1 cent, or 1%, from linked third quarter results due to 4 cents per share of expenses associated with the Santander branch acquisition.
Marya Wlos: Thank you, Dimitar, and good morning, all. As Dimitar noted, the company's fourth quarter and full-year performance was robust in all four of our businesses. Including acquisition expenses, GAAP earnings per share of $1.03 increased 9 cents, or 9.6% from the fourth quarter of the prior year, and decreased 1 cent, or 1%, from linked third quarter results due to 4 cents per share of expenses associated with the Santander branch acquisition. Operating earnings per share and operating pre-tax, pre-provision net revenue per share were record quarterly and annual results for the company. Operating earnings per share were $1.12 in the fourth quarter, as compared to $1.00 one year prior and $1.09 in the linked third quarter.
Marya Wlos: Thank you, Dimitar, and good morning, all. As Dimitar noted, the company's fourth quarter and full-year performance was robust in all four of our businesses. Including acquisition expenses, GAAP earnings per share of $1.03 increased 9 cents, or 9.6% from the fourth quarter of the prior year, and decreased 1 cent, or 1%, from linked third quarter results due to 4 cents per share of expenses associated with the Santander branch acquisition. Operating earnings per share and operating pre-tax, pre-provision net revenue per share were record quarterly and annual results for the company. Operating earnings per share were $1.12 in the fourth quarter, as compared to $1.00 one year prior and $1.09 in the linked third quarter.
Speaker #1: Operating earnings per share and operating pre-tax, pre-provision net revenue per share were record quarterly and annual results for the company. Operating earnings per share were $1.12 in the fourth quarter, as compared to $1.01 the year prior and $1.09 in the linked third quarter.
Speaker #1: Fourth quarter operating PP&R per share of $1.58 increased $0.18 from one year prior, and increased $0.02 on a linked quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $215.6 million in the fourth quarter.
Marya Wlos: Q4 operating PPNR per share of $1.58 increased 18 cents from one year prior and increased 2 cents on a linked-quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $215.6 million in Q4. Operating revenues increased $8.7 million, or 4.2%, from the linked Q3 and increased $19.5 million, or 10%, from one year prior, driven by record net interest income in our banking business. The company's net interest income was $133.4 million in Q4.
Q4 operating PPNR per share of $1.58 increased 18 cents from one year prior and increased 2 cents on a linked-quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $215.6 million in Q4. Operating revenues increased $8.7 million, or 4.2%, from the linked Q3 and increased $19.5 million, or 10%, from one year prior, driven by record net interest income in our banking business. The company's net interest income was $133.4 million in Q4.
Speaker #1: Operating revenues increased $8.7 million, or 4.2%, from the linked third quarter, and increased $19.5 million, or 10%, from one year prior, driven by record net interest income and our banking business.
Speaker #1: The company's net interest income was $133.4 million in the fourth quarter. This represents a 5.3 million or 4.1% increase over the linked third quarter, and a 13.5 million or 11.2% improvement over the fourth quarter of 2024, and marks the seventh consecutive quarter of net interest income expansion.
Marya Wlos: This represents a $5.3 million, or 4.1%, increase over the linked third quarter, and a $13.5 million, or 11.2%, improvement over the fourth quarter of 2024, and marks the seventh consecutive quarter of net interest income expansion. The company's fully tax-equivalent net interest margin increased six basis points from 3.33% in the linked third quarter to 3.39% in the fourth quarter, driven by lower funding costs. During the quarter, the company's cost of funds was 1.27%, a decrease of six basis points from the prior quarter, driven by lower deposit costs and a lower average overnight borrowing balance, due in part to the funding inflows from the Santander branch acquisition.
This represents a $5.3 million, or 4.1%, increase over the linked third quarter, and a $13.5 million, or 11.2%, improvement over the fourth quarter of 2024, and marks the seventh consecutive quarter of net interest income expansion. The company's fully tax-equivalent net interest margin increased six basis points from 3.33% in the linked third quarter to 3.39% in the fourth quarter, driven by lower funding costs. During the quarter, the company's cost of funds was 1.27%, a decrease of six basis points from the prior quarter, driven by lower deposit costs and a lower average overnight borrowing balance, due in part to the funding inflows from the Santander branch acquisition.
Speaker #1: The company's fully tax-equivalent net interest margin increased six basis points from 3.33% in the linked third quarter to 3.39% in the fourth quarter, driven by lower funding costs.
Speaker #1: During the quarter, the company's cost of funds was 1.27%, a decrease of six basis points from the prior quarter, driven by lower deposit costs and a lower average overnight borrowing balance due in part to the funding inflows from the Santander branch acquisition.
Speaker #1: Operating non-interest revenues increased $6.1 million, or 8%, compared to the prior year's fourth quarter, and increased $3.5 million, or 4.4%, from the linked third quarter, reflective of increases in overall banking and non-banking financial service revenues and included the one-time impact of a $1.6 million income distribution from a limited partnership investment.
Marya Wlos: Operating non-interest revenues increased $6.1 million, or 8% compared to the prior year's fourth quarter, and increased $3.5 million, or 4.4%, from the linked third quarter, reflective of increases in overall banking and non-banking financial service revenues, and included the one-time impact of a $1.6 million income distribution from a limited partnership investment. Operating non-interest revenues represented 38% of total operating revenues during the fourth quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5 million provision for credit losses during the fourth quarter. This compares to $6.2 million in the prior year's fourth quarter, and $5.6 million in the linked third quarter. During the fourth quarter, the company recorded $138.5 million in total non-interest expenses.
Operating non-interest revenues increased $6.1 million, or 8% compared to the prior year's fourth quarter, and increased $3.5 million, or 4.4%, from the linked third quarter, reflective of increases in overall banking and non-banking financial service revenues, and included the one-time impact of a $1.6 million income distribution from a limited partnership investment. Operating non-interest revenues represented 38% of total operating revenues during the fourth quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5 million provision for credit losses during the fourth quarter. This compares to $6.2 million in the prior year's fourth quarter, and $5.6 million in the linked third quarter. During the fourth quarter, the company recorded $138.5 million in total non-interest expenses.
Speaker #1: Operating non-interest revenues represented 38% of total operating revenues during the fourth quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5 million provision for credit losses during the fourth quarter.
Speaker #1: This compares to $6.2 million in the prior year's fourth quarter and $5.6 million in the linked third quarter. During the fourth quarter, the company recorded $138.5 million in total non-interest expenses.
Speaker #1: This represents an increase of $10.2 million, or 8%, from last quarter. Excluding the impact of a $2.1 million quarter-over-quarter increase in acquisition expenses due to the Santander branch acquisition, non-interest expenses increased $8.1 million, or 6.4%, from last quarter.
Marya Wlos: This represents an increase of $10.2 million, or 8%, from last quarter. Excluding the impact of a $2.1 million quarter-over-quarter increase in acquisition expenses due to the Santander branch acquisition, non-interest expenses increased $8.1 million, or 6.4%, from last quarter. $5.4 million of the increase from the linked quarter was from salaries and employee benefits, which was impacted by an increase in performance-tied incentive compensation, including a $1 million true-up of long-term incentive program-related expense, a $0.8 million true-up of annual management incentive plan expense, along with a $0.6 million incentive accrual tied to revenue and bottom-line performance in the CRE finance and advisory business line.
This represents an increase of $10.2 million, or 8%, from last quarter. Excluding the impact of a $2.1 million quarter-over-quarter increase in acquisition expenses due to the Santander branch acquisition, non-interest expenses increased $8.1 million, or 6.4%, from last quarter. $5.4 million of the increase from the linked quarter was from salaries and employee benefits, which was impacted by an increase in performance-tied incentive compensation, including a $1 million true-up of long-term incentive program-related expense, a $0.8 million true-up of annual management incentive plan expense, along with a $0.6 million incentive accrual tied to revenue and bottom-line performance in the CRE finance and advisory business line.
Speaker #1: The $5.4 million of the increase from the linked quarter was from salaries and employee benefits, which was impacted by an increase in performance-tied incentive compensation including a $1.0 million true-up of long-term incentive program-related expense, a 0.8 million true-up of annual management incentive plan expense, along with a 0.6 million incentive accrual tied to revenue and bottom-line performance in the CRE finance and advisory business line.
Speaker #1: Operating expenses associated with the seven branches acquired from Santander totaled $1 million during the fourth quarter, while expenses associated with the banks and Novo branch expansions increased $0.6 million between linked quarters, as additional branches were opened for business.
Marya Wlos: Operating expenses associated with the seven branches acquired from Santander totaled $1 million during the fourth quarter, while expenses associated with the de novo branch expansions increased $0.6 million between linked quarters as additional branches were open for business. The increase in other expenses was impacted by previously announced branch consolidation activities, specifically $0.8 million of net property-related write-downs recognized during the quarter, along with $0.6 million of charitable contribution expenses that were accelerated prior to 2026 tax law changes. Excluding the above-mentioned acquisition expenses, write-downs, charitable contributions, and performance-related incentive accruals, Q4 non-interest expenses were $131.9 million, an increase of $4.3 million, or 3.4 percent, quarter-over-quarter.
Operating expenses associated with the seven branches acquired from Santander totaled $1 million during the fourth quarter, while expenses associated with the de novo branch expansions increased $0.6 million between linked quarters as additional branches were open for business. The increase in other expenses was impacted by previously announced branch consolidation activities, specifically $0.8 million of net property-related write-downs recognized during the quarter, along with $0.6 million of charitable contribution expenses that were accelerated prior to 2026 tax law changes. Excluding the above-mentioned acquisition expenses, write-downs, charitable contributions, and performance-related incentive accruals, Q4 non-interest expenses were $131.9 million, an increase of $4.3 million, or 3.4 percent, quarter-over-quarter.
Speaker #1: The increase in other expenses was impacted by previously announced branch consolidation activities. Specifically, $0.8 million of net property-related write-downs recognized during the quarter, along with $0.6 million of charitable contribution expenses that were accelerated prior to 2026 tax law changes.
Speaker #1: Excluding the above-mentioned acquisition expenses, write-downs, charitable contributions, and performance-related incentive accruals, Q4 non-interest expenses were $131.9 million, an increase of $4.3 million, or 3.4%, quarter-over-quarter.
Speaker #1: Pending loans increased $199.5 million or quarter, an increase of $517.4 million or 5% from one year prior, primarily due to organic growth in the overall business and consumer lending portfolios.
Marya Wlos: Ending loans increased $199.5 million, or 1.9%, during the fourth quarter, and increased $517.4 million, or 5%, from one year prior, primarily due to organic growth in the overall business and consumer lending portfolios. The loan growth also includes approximately $32 million of acquired loans associated with the Santander branch acquisition. The company continues to invest in its, in our, its organic loan growth opportunities and expects continued expansion into the undertapped markets within our Northeast footprint. The company's total ending deposits increased $945.4 million or 7% from one year prior, and increased $330.2 million or 2.3% from the end of the linked third quarter.
Ending loans increased $199.5 million, or 1.9%, during the fourth quarter, and increased $517.4 million, or 5%, from one year prior, primarily due to organic growth in the overall business and consumer lending portfolios. The loan growth also includes approximately $32 million of acquired loans associated with the Santander branch acquisition. The company continues to invest in its, in our, its organic loan growth opportunities and expects continued expansion into the undertapped markets within our Northeast footprint. The company's total ending deposits increased $945.4 million or 7% from one year prior, and increased $330.2 million or 2.3% from the end of the linked third quarter.
Speaker #1: The loan growth also included approximately $32 million of acquired loans associated with the Santander branch acquisition. The company continues to invest in its organic loan growth opportunities and expects continued expansion into the undertapped markets within our Northeast footprint.
Speaker #1: The company's total ending deposits increased $945.4 million, or 7%, from one year prior, an increase of $330.2 million, or 2.3%, from the end of the linked third quarter.
Speaker #1: The growth in total deposits during 2025 was comprised of growth in all of the company's regions. The increase in total deposits between both periods was primarily driven by the $543.7 million of deposits assumed from the Santander branch acquisition.
Marya Wlos: The growth in total deposits during 2025 was comprised of growth in all of the company's regions. The increase in total deposits between both periods was primarily driven by the $543.7 million of deposits assumed from the Santander branch acquisition. Moving on to asset quality. The non-performing loans and net charge-off ratios were consistent with the linked third quarter, while the loans 30 to 89 days delinquent increased 10 basis points from last quarter, aligned with typical seasonal trends. The company's allowance for credit losses was $87.9 million, or 80 basis points of total loans outstanding at the end of the fourth quarter, an increase of $3 million during the quarter. The increases were primarily attributed to reserve building in the business lending portfolio, reflecting the growth in size and volume trends of recently originated commercial loans.
The growth in total deposits during 2025 was comprised of growth in all of the company's regions. The increase in total deposits between both periods was primarily driven by the $543.7 million of deposits assumed from the Santander branch acquisition. Moving on to asset quality. The non-performing loans and net charge-off ratios were consistent with the linked third quarter, while the loans 30 to 89 days delinquent increased 10 basis points from last quarter, aligned with typical seasonal trends. The company's allowance for credit losses was $87.9 million, or 80 basis points of total loans outstanding at the end of the fourth quarter, an increase of $3 million during the quarter. The increases were primarily attributed to reserve building in the business lending portfolio, reflecting the growth in size and volume trends of recently originated commercial loans.
Speaker #1: Moving on to asset quality, the non-performing loans and net charge-off ratios were consistent with the linked third quarter, while the loans 30 to 89 days delinquent increased 10 basis points from last quarter, aligned with typical seasonal trends.
Speaker #1: The company's allowance for credit losses was $87.9 million, or 80 basis points of total loans outstanding at the end of the fourth quarter, an increase of $3 million during the quarter.
Speaker #1: The increases were primarily attributed to reserve building in the business lending portfolio, reflecting the growth in size and volume trends of recently originated commercial loans.
Speaker #1: The allowance for credit losses at the end of 2025 represented over six times the company's net charge-offs during the quarter and full-year results, all of which reinforce our commitment to scale as a diversified financial services company.
Marya Wlos: The allowance for credit losses at the end of 2025 represented over six times the company's net charge-offs during the year. We are pleased with the Q4 and full year results, all of which reinforce our commitment to scale as a diversified financial services company. During 2025, the company made significant progress on our de novo expansion plans, opening 15 new branches across our footprint. Additionally, during the Q4, we successfully integrated 7 former Santander branches in the Lehigh Valley market, which accelerates our retail strategy in a market we anticipate significant growth. Furthermore, we were excited to recently announce an agreement to acquire ClearPoint Federal Bank & Trust, a national leader in a niche trust administration market. This acquisition significantly expands the revenue and offerings of our wealth management business and is expected to close in the Q2 of 2026.
The allowance for credit losses at the end of 2025 represented over six times the company's net charge-offs during the year. We are pleased with the Q4 and full year results, all of which reinforce our commitment to scale as a diversified financial services company. During 2025, the company made significant progress on our de novo expansion plans, opening 15 new branches across our footprint. Additionally, during the Q4, we successfully integrated 7 former Santander branches in the Lehigh Valley market, which accelerates our retail strategy in a market we anticipate significant growth. Furthermore, we were excited to recently announce an agreement to acquire ClearPoint Federal Bank & Trust, a national leader in a niche trust administration market. This acquisition significantly expands the revenue and offerings of our wealth management business and is expected to close in the Q2 of 2026.
Speaker #1: During 2025, the company made significant progress on our Dinovo expansion plans, opening 15 new branches across our footprint. Additionally, during the fourth quarter, we successfully integrated seven former Santander branches in the Lehigh Valley market, which accelerates our retail strategy in a market where we anticipate significant growth.
Speaker #1: Furthermore, we were excited to recently announce an agreement to acquire ClearPoint Federal Bank & Trust, a national leader in the niche trust administration market.
Speaker #1: This acquisition significantly expands our revenue and offerings of our wealth management business and is expected to close in the second quarter of 2026. Looking forward, we believe the company's diversified revenue profile, strong liquidity, and historically good asset quality provide a solid foundation for continued earnings growth.
Marya Wlos: Looking forward, we believe the company's diversified revenue profile, strong liquidity, and historically good asset quality provides a solid foundation for continued earnings growth. More specifically, for 2026, we expect 3.5 to 6% growth in loan balances, 2 to 3% growth in deposit balances, 8 to 12% growth in net interest income, 4 to 8% growth in non-interest revenues, and a provision for credit losses in the range of $20 to 25 million. Core non-interest expenses are expected to be in the range of $535 to 550 million, or an increase of approximately 4 to 7% from 2025, including approximately $8 to 9 million of incremental expenses associated with the branches acquired from Santander, which includes the non-operating amortization on intangibles. These figures do not include the impact of pending or future acquisitions.
Looking forward, we believe the company's diversified revenue profile, strong liquidity, and historically good asset quality provides a solid foundation for continued earnings growth. More specifically, for 2026, we expect 3.5 to 6% growth in loan balances, 2 to 3% growth in deposit balances, 8 to 12% growth in net interest income, 4 to 8% growth in non-interest revenues, and a provision for credit losses in the range of $20 to 25 million. Core non-interest expenses are expected to be in the range of $535 to 550 million, or an increase of approximately 4 to 7% from 2025, including approximately $8 to 9 million of incremental expenses associated with the branches acquired from Santander, which includes the non-operating amortization on intangibles. These figures do not include the impact of pending or future acquisitions.
Speaker #1: More specifically, for 2026, we expect 3.5% to 6% growth in loan balances, 2% to 3% growth in deposit balances, and 8% to 12% growth in net interest income.
Speaker #1: We expect 4% to 8% growth in non-interest revenues and a provision for credit losses in the range of $20 to $25 million. For non-interest expenses, we expect them to be in the range of $535 to $550 million, or an increase of approximately 4% to 7% from 2025, including approximately $8 to $9 million of incremental expenses associated with the branches acquired from Santander, which includes the non-operating amortization of intangibles.
Speaker #1: These figures do not include the impact of pending or future acquisitions. Additionally, we anticipate an effective tax rate between 23 and 24%. Finally, as a reminder for the first quarter, non-interest expenses typically trend higher compared to fourth-quarter levels due to merit increase, higher FICA and payroll taxes, and seasonal snow removal costs.
Marya Wlos: Additionally, we anticipate an effective tax rate between 23% and 24%. Finally, as a reminder for Q1, non-interest expenses typically trend higher compared to Q4 levels due to merit increase, higher FICA and payroll taxes, and seasonal snow removal costs. That concludes my prepared earnings comments, but I do want to say one more thing: It was a catch. Go Bills! And with that, Dimitar and I will now take questions. Dave, I will now turn it back to you to open the line. Thank you.
Additionally, we anticipate an effective tax rate between 23% and 24%. Finally, as a reminder for Q1, non-interest expenses typically trend higher compared to Q4 levels due to merit increase, higher FICA and payroll taxes, and seasonal snow removal costs. That concludes my prepared earnings comments, but I do want to say one more thing: It was a catch. Go Bills! And with that, Dimitar and I will now take questions. Dave, I will now turn it back to you to open the line. Thank you.
Speaker #1: That concludes my prepared earnings comments, but I do want to say one more thing. It was a catch. Go bills. And with that, Dimitar and I will now take questions.
Speaker #1: Dave, I will now turn it back to you to open the line. Thank you.
Speaker #1: you. We will now
Operator: We will now begin the question and answer session. To ask a question, you may press Star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press Star and then two. Our first question comes from Steve Moss with Raymond James. Please go ahead.
Operator: We will now begin the question and answer session. To ask a question, you may press Star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press Star and then two. Our first question comes from Steve Moss with Raymond James. Please go ahead.
Speaker #2: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.
Speaker #2: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question comes from Steve Moss with Raymond James.
Speaker #2: Please go ahead.
Steve Moss: Good morning.
Speaker #3: Good morning.
Steve Moss: Good morning.
Speaker #4: Good morning, Steve. Good morning.
Dimitar Karaivanov: Morning, Steve.
Dimitar Karaivanov: Morning, Steve.
Marya Wlos: Morning.
Marya Wlos: Morning.
Steve Moss: Hey, Dimitar and Marya, maybe just start on with loan pricing here. You know, I hear you guys in terms of the loan growth opportunities. Just curious, you know, I know pricing got a little more competitive here over the last 3 to 4 months. Just kind of curious what you guys are seeing and kind of what you guys think will be the drivers of growth in 2026.
Speaker #4: Hey, Dimitar, Mariah, Steve. Maybe just to start on loan pricing here. Hearing you guys in terms of loan growth opportunities, I'm just curious—I know pricing got a little more competitive here. Curious what you guys are seeing and kind of what you've seen over the last three to four months.
Steve Moss: Hey, Dimitar and Marya, maybe just start on with loan pricing here. You know, I hear you guys in terms of the loan growth opportunities. Just curious, you know, I know pricing got a little more competitive here over the last 3 to 4 months. Just kind of curious what you guys are seeing and kind of what you guys think will be the drivers of growth in 2026.
Speaker #4: What do you guys think will be the drivers of growth in, just kind of, 2026? Yeah. So for the fourth quarter, Steve, originations were in the low sixes.
Dimitar Karaivanov: Yeah. So for Q4, Steve, originations were in the low sixes, and I think the curve hasn't really moved much so far in this quarter, so we're probably kind of in that range. All equal, clearly the trend is lower. So I think at some point this year we will be low six. Could be the end of this quarter, could be next quarter, who knows? But yeah, the trend is clearly lower on that. Fortunately for us, we have a lot of fixed asset repricing to continue. So if you look at kind of that low sixes compared to the current yields that we have on the loan portfolio, there's still a decent amount of gap for us to benefit from.
Dimitar Karaivanov: Yeah. So for Q4, Steve, originations were in the low sixes, and I think the curve hasn't really moved much so far in this quarter, so we're probably kind of in that range. All equal, clearly the trend is lower. So I think at some point this year we will be low six. Could be the end of this quarter, could be next quarter, who knows? But yeah, the trend is clearly lower on that. Fortunately for us, we have a lot of fixed asset repricing to continue. So if you look at kind of that low sixes compared to the current yields that we have on the loan portfolio, there's still a decent amount of gap for us to benefit from.
Speaker #4: And I think the curve hasn't really moved much so far in this quarter, so we're probably kind of in that range. All week long, clearly the trend is lower.
Speaker #4: So, I think at some point this year we will be low six. Could be the end of this quarter, could be the next quarter—who knows?
Speaker #4: But yeah, the trend is clearly lower on that. Fortunately for us, we have a lot of fixed asset repricing to continue. So, if you look at kind of that low sixes compared to the current yields that we have on the loan portfolio, there's still a decent amount of gap for us to benefit from.
Speaker #3: Okay, appreciate that. And then in terms of the non-interest income guide—I think is what it was—Marya, I missed your comment there. Was that 4% to 8% growth for...
Steve Moss: Okay, appreciate that. And then in terms of the non-interest income guide, I think is what it was, Mariah, I missed, I missed your comment there. Was that 4% to 8% growth for 2026?
Steve Moss: Okay, appreciate that. And then in terms of the non-interest income guide, I think is what it was, Mariah, I missed, I missed your comment there. Was that 4% to 8% growth for 2026?
Speaker #3: 2026? 8 to 12%
Marya Wlos: 8 to 12% growth for NII, is that what you asked, Steve?
Marya Wlos: 8 to 12% growth for NII, is that what you asked, Steve?
Speaker #5: Growth for NII—is that what you asked, Steve?
Speaker #3: Non-II, I'm
Steve Moss: Non-NII, I'm sorry.
Steve Moss: Non-NII, I'm sorry.
Speaker #3: sorry. Oh, sorry,
Marya Wlos: Oh, sorry, sorry, sorry.
Marya Wlos: Oh, sorry, sorry, sorry.
Speaker #5: Sorry, sorry. Four to eight. Yes, four to eight percent. Yes, sorry. Yep, I misheard.
Matthew Breese: ... 4 to 8. Yes, 4 to 8%. Yeah, sorry. Yep.
... 4 to 8. Yes, 4 to 8%. Yeah, sorry. Yep.
Speaker #3: Okay. Great.
Steve Moss: Okay, great.
Steve Moss: Okay, great.
Matthew Breese: I didn't hear you. Yep.
Marya Wlos: I didn't hear you. Yep.
Speaker #5: you. Yep.
Speaker #3: Oh, no worries. And then in terms of the employee services employee benefit services business, obviously a healthy step up. And Dimitar, I hear you in your comments in terms of the investment in some accelerating here.
Steve Moss: Oh, no worries. Then in terms of the employee services, employee benefit services business, you know, obviously a healthy step up. Dimitar, I hear you in your comments in terms of the investment and some accelerating here. Just kind of curious. I think you said mid to high single digit growth. Maybe is there just a little bit of like one-time stuff in nature in the fourth quarter or seasonality that we should think of? I realize some of that is asset values, acquisitions and stuff. Just kind of thinking about the cadence of that trajectory a little bit.
Steve Moss: Oh, no worries. Then in terms of the employee services, employee benefit services business, you know, obviously a healthy step up. Dimitar, I hear you in your comments in terms of the investment and some accelerating here. Just kind of curious. I think you said mid to high single digit growth. Maybe is there just a little bit of like one-time stuff in nature in the fourth quarter or seasonality that we should think of? I realize some of that is asset values, acquisitions and stuff. Just kind of thinking about the cadence of that trajectory a little bit.
Speaker #3: Just kind of curious—I think you said mid- to high-single-digit growth. Maybe is there just a little bit of one-time stuff in nature in the fourth quarter, or seasonality, that we should think of?
Speaker #3: I realize some of there's asset values, acquisitions, and stuff. Just kind of thinking about the cadence of that trajectory a little.
Speaker #3: bit. Yeah.
Dimitar Karaivanov: Yeah. So, in the employee benefit services, if you kind of split it up and kind of look at what happened in 2025, in the retirement side of the business, we actually grew high single digits. So that was a very productive outcome on the retirement side. In the institutional trust side, we were basically flat year-over-year, and a little bit down on pre-tax because of the investment on the expense side. So as you think about 2026, if you split up the two businesses, retirement is at higher asset values this year so far than last year. So we will continue to see some pickup there. It's probably going to taper down if asset values don't continue to increase. Just on an average basis, it's gonna taper down over the year.
Dimitar Karaivanov: Yeah. So, in the employee benefit services, if you kind of split it up and kind of look at what happened in 2025, in the retirement side of the business, we actually grew high single digits. So that was a very productive outcome on the retirement side. In the institutional trust side, we were basically flat year-over-year, and a little bit down on pre-tax because of the investment on the expense side. So as you think about 2026, if you split up the two businesses, retirement is at higher asset values this year so far than last year. So we will continue to see some pickup there. It's probably going to taper down if asset values don't continue to increase. Just on an average basis, it's gonna taper down over the year.
Speaker #4: So, in the employee benefit services, if you kind of split it up and kind of look at what happened in 2025, in the retirement side of the business, we actually grew high single digits.
Speaker #4: So, that was a very productive outcome on the retirement side. On the institutional trust side, we were basically flat year over year, and a little bit down on pre-tax because of the investment on the expense side.
Speaker #4: So, as you think about 2026, if you split up the two businesses, retirement is at higher asset values this year so far than last year.
Speaker #4: So we will continue to see some pickup there. It's probably going to taper down if asset values don't continue to increase, just on an average basis.
Speaker #4: It's going to taper down over the year, so that's going to impact that growth trajectory. And on the institutional trust side, we feel like we have really kind of turned the corner there on the revenue side, and we're sitting at the highest assets we have had in that business as well.
Dimitar Karaivanov: So that, that's gonna impact that growth trajectory. And on the institutional trust side, we feel like we have really kind of turned the corner there on the revenue side, and we're sitting at the highest assets we, we have had in that business as well. So between that and the... I think we have more than 20 fund launches coming here in Q1 and Q2, we're going to have an acceleration on that side of the house to get us back to that mid to high single digits. So I think in the aggregate basis, we were sitting here, of course, depending on market conditions, it would be mid to high single digits for the overall line of business. And you're right on the seasonality. There's more in Q4 in that business.
So that, that's gonna impact that growth trajectory. And on the institutional trust side, we feel like we have really kind of turned the corner there on the revenue side, and we're sitting at the highest assets we, we have had in that business as well. So between that and the... I think we have more than 20 fund launches coming here in Q1 and Q2, we're going to have an acceleration on that side of the house to get us back to that mid to high single digits. So I think in the aggregate basis, we were sitting here, of course, depending on market conditions, it would be mid to high single digits for the overall line of business. And you're right on the seasonality. There's more in Q4 in that business.
Speaker #4: So between that and the—I think we have more than 20 fund launches coming here in the first and second quarter. We're going to have an acceleration on that side of the house to get us back to that mid- to high-single digits.
Speaker #4: So, I think on an aggregate basis, we were sitting here—of course, depending on market conditions—it would be mid to high single digits for the overall line of business.
Speaker #4: And you're right on the seasonality. There's more in the fourth quarter in that business. So you're going to see, we expect in 2026, the fourth quarter OLC goal to be the higher mark for 2026.
Dimitar Karaivanov: So you're gonna see, I expect in 2026, Q4, all else equal, to be the higher mark for 2026.
So you're gonna see, I expect in 2026, Q4, all else equal, to be the higher mark for 2026.
Speaker #3: Okay, great. I appreciate all that color and all that—I'll step back in the queue.
Steve Moss: Okay, great. I appreciate all that color, and I'll step back in the queue here.
Steve Moss: Okay, great. I appreciate all that color, and I'll step back in the queue here.
Speaker #3: here. And the
Operator: The next question comes from David Conrad with KBW. Please go ahead.
Speaker #2: Next question comes from David Conrad with KBW. Please go ahead.
Operator: The next question comes from David Conrad with KBW. Please go ahead.
Speaker #6: Yeah, hey, good morning. Just taking a step—big picture here. I mean, you put up, I think, roughly about 38% of your revenues as fee income.
David Conrad: Yeah. Hey, good morning. Just taking a step of, a big picture here. I mean, you put up, I think, roughly about 38% of your revenues as fee income. You know, you have a, you know, peer-leading 22.7 ROTCE. It looks like based on your guide, that ratio might pull back a little bit, but just kind of thinking about, you know, over the next 3 to 5 years, where do you think the fee ratio to revenues could go to? And, you know, the implications of that to your ROTCE.
David Conrad: Yeah. Hey, good morning. Just taking a step of, a big picture here. I mean, you put up, I think, roughly about 38% of your revenues as fee income. You know, you have a, you know, peer-leading 22.7 ROTCE. It looks like based on your guide, that ratio might pull back a little bit, but just kind of thinking about, you know, over the next 3 to 5 years, where do you think the fee ratio to revenues could go to? And, you know, the implications of that to your ROTCE.
Speaker #6: You have a peer-leading 22.7% ROTCE. It looks like, based on your guide, that ratio might pull back a little bit. But just kind of thinking about over the next three to five years, where do you think the fee ratio to revenues could go to?
Speaker #6: And the implications of that to your
Speaker #6: ROTCE? Yeah.
Dimitar Karaivanov: Yeah, great question, David, and one that we certainly hear a lot, and we ask ourselves a lot as well. And I'll start it this way: We love all of our four businesses. And we are experiencing right now in the banking business, which is the largest, we're experiencing tailwinds on the margin side, which we haven't had historically. So even as the other businesses are doing really well themselves, it is hard to overrun the bank, given that you have margin expansion and asset growth at the same time. Now, that's not gonna be forever. You know, the margin expansion party, I think, is going to slow down here this year and beyond. So that's gonna temper down some of that growth rate on the bank side.
Dimitar Karaivanov: Yeah, great question, David, and one that we certainly hear a lot, and we ask ourselves a lot as well. And I'll start it this way: We love all of our four businesses. And we are experiencing right now in the banking business, which is the largest, we're experiencing tailwinds on the margin side, which we haven't had historically. So even as the other businesses are doing really well themselves, it is hard to overrun the bank, given that you have margin expansion and asset growth at the same time. Now, that's not gonna be forever. You know, the margin expansion party, I think, is going to slow down here this year and beyond. So that's gonna temper down some of that growth rate on the bank side.
Speaker #4: Great question, David, and one that we certainly hear a lot and we ask ourselves a lot as well. And I'll start it this way.
Speaker #4: We love all of our four businesses. And we are experiencing right now in the banking business, which is the largest, we're experiencing tailwinds on the margin side, which we haven't had even as the other businesses are doing really historically.
Speaker #4: So, well, themselves, it is hard to overrun the bank given that you have margin expansion and asset growth at the same time. Now, that's not going to be forever.
Speaker #4: The margin expansion party, I think, is going to slow down here this year and beyond. So that's going to temper down some of that growth rate on the bank side.
Dimitar Karaivanov: At the same time, we continue to also invest heavily in inorganic and organic opportunities on the fee income side. So the short of it is, I don't know where it's gonna settle. We want, we wanna have more of all of them, more of all of our core businesses. I think, all else equal, we understand where tangible returns are the highest. So if we have a dollar of capital to invest, it's gonna go to the highest tangible return we can find. And that's why you've seen us, you know, not only invest in the banking business, but in the insurance business, in the benefits business, and in the wealth business now with ClearPoint.
Speaker #4: At the same time, we continue to also invest heavily in inorganic and organic opportunities on the fee income side. So the short of it is, I don't know where it's going to settle.
At the same time, we continue to also invest heavily in inorganic and organic opportunities on the fee income side. So the short of it is, I don't know where it's gonna settle. We want, we wanna have more of all of them, more of all of our core businesses. I think, all else equal, we understand where tangible returns are the highest. So if we have a dollar of capital to invest, it's gonna go to the highest tangible return we can find. And that's why you've seen us, you know, not only invest in the banking business, but in the insurance business, in the benefits business, and in the wealth business now with ClearPoint.
Speaker #4: We want to have more of all of them, more of all of our four businesses. I think OLCQ, we understand where tangible returns are the highest.
Speaker #4: So, if we have a dollar of capital to invest, it's going to go to the highest tangible return we can find. And that's why you've seen us not only invest in the banking business, but in the insurance business, in the benefits business, and in the wealth business now with ClearPoint.
Dimitar Karaivanov: Just as a reference point, we complete probably somewhere between 8 and 12 acquisitions every year, and most of them you don't see because they're in the fee income businesses. So they're kind of small singles and doubles that over time add up, and I think we'll have more opportunities to continue to do that and maybe take some larger swings along the way as well.
Speaker #4: Just as a reference point, we complete probably somewhere between 8 and 12 acquisitions every year. And most of them you don't see because they're in the fee income businesses.
Just as a reference point, we complete probably somewhere between 8 and 12 acquisitions every year, and most of them you don't see because they're in the fee income businesses. So they're kind of small singles and doubles that over time add up, and I think we'll have more opportunities to continue to do that and maybe take some larger swings along the way as well.
Speaker #4: So they're kind of small singles and doubles that over time add up. And I think we'll have more opportunities to continue to do that and maybe take some larger swings along the way as
Speaker #4: well.
Speaker #3: Okay. Thank you. Appreciate
David Conrad: Okay. Thank you. Appreciate it.
David Conrad: Okay. Thank you. Appreciate it.
Speaker #3: it. And the next question
Operator: The next question comes from Matthew Breese with Stephens Inc. Please go ahead.
Operator: The next question comes from Matthew Breese with Stephens Inc. Please go ahead.
Speaker #2: Comes from Matthew Bryce with Stevens Inc. Please go ahead.
Speaker #5: Hey, good morning.
Matthew Breese: Hey, good morning.
Matthew Breese: Hey, good morning.
Speaker #4: Good
Speaker #4: morning. Dimitar,
Dimitar Karaivanov: Morning.
Dimitar Karaivanov: Morning.
Matthew Breese: Dimitar, the ClearPoint transaction, you know, and its market share in and I think you described it as the death care industry. I don't know much about that. I don't know if I know any of the banks that are in that arena. Could you maybe just introduce us to what that industry is and what you expect to do with their book there? It looks to be about $8 million in fee income. You know, maybe set the table for us on that.
Speaker #2: The ClearPoint transaction and its market share in, and I think you described it as, the death care industry. I don't know much about that.
Matthew Breese: Dimitar, the ClearPoint transaction, you know, and its market share in and I think you described it as the death care industry. I don't know much about that. I don't know if I know any of the banks that are in that arena. Could you maybe just introduce us to what that industry is and what you expect to do with their book there? It looks to be about $8 million in fee income. You know, maybe set the table for us on that.
Speaker #2: I don't know if I know any of the banks that are in that arena. Could you maybe just introduce us to what that industry is, and what you expect to do with their book there?
Speaker #2: It looks to be about $8 million. And fee income—maybe set the table for us on that.
Speaker #4: Sure, Matt. Thank you for the question. So what ClearPoint does, and kind of the background of the industry more, kind of at large, is that as the cost of death care—basically people planning for their funerals and their time in the cemeteries, and taking care of the expenses that come with that—the cost for those services has increased over time, pretty meaningfully.
Dimitar Karaivanov: Sure, Matt. Thank you for the question. So ClearPoint does and kind of the background of the industry more kind of at large is that as the cost of death care, you know, basically people planning for their funerals and, you know, their time in the cemeteries and taking care of the expenses that come with that, the cost for those services has increased over time pretty meaningfully. And as a result, there's multiple ways that people save for those events and those life events. Depending on the state, it could be trust, it could be insurance, or it could be deposits, like in New York State. So there's pre-need, you know, deposit accounts, which we already have, and I'm sure other players in New York State have as well.
Dimitar Karaivanov: Sure, Matt. Thank you for the question. So ClearPoint does and kind of the background of the industry more kind of at large is that as the cost of death care, you know, basically people planning for their funerals and, you know, their time in the cemeteries and taking care of the expenses that come with that, the cost for those services has increased over time pretty meaningfully. And as a result, there's multiple ways that people save for those events and those life events. Depending on the state, it could be trust, it could be insurance, or it could be deposits, like in New York State. So there's pre-need, you know, deposit accounts, which we already have, and I'm sure other players in New York State have as well.
Speaker #4: And as a result, there are multiple ways that people save for those events. And those life events, depending on the state, it could be trust, it could be insurance, or it could be deposits.
Speaker #4: Like in New York State, so there's pre-need, deposit accounts, which we already have and I'm sure other players in New York State have as well.
Dimitar Karaivanov: So that business, as you can imagine, you know, if there is one thing that's certain, is that none of us are gonna be around forever. So there's and the population is aging, so that's a you know, tailwind, if you will, in the space. There's a few larger players. ClearPoint is one of the leading ones. There are some other banks, large regional banks that are in the space as well. And then there's a lot of kind of smaller, entities around it. So we like the space, we like the niche. We love businesses where we can compete nationwide with a differentiated offering, in a space that's not easy to penetrate. It's fairly complicated. It's state-by-state rules. It is nationwide.
Speaker #4: So that business, as you can imagine, if there's one thing that's certain, it's that none of us are going to be around forever. So there's a, and the population is aging.
So that business, as you can imagine, you know, if there is one thing that's certain, is that none of us are gonna be around forever. So there's and the population is aging, so that's a you know, tailwind, if you will, in the space. There's a few larger players. ClearPoint is one of the leading ones. There are some other banks, large regional banks that are in the space as well. And then there's a lot of kind of smaller, entities around it. So we like the space, we like the niche. We love businesses where we can compete nationwide with a differentiated offering, in a space that's not easy to penetrate. It's fairly complicated. It's state-by-state rules. It is nationwide.
Speaker #4: So that's a tailwind, if you will, in the space. There are a few larger players—ClearPoint is one of the leading ones. There are some other banks, large regional banks, that are in the space as well.
Speaker #4: And then there's a lot of kind of smaller entities around it. So, one, we like the space, we like the niche, we love businesses where we can compete nationwide with a differentiated offering.
Speaker #4: In a space that's not easy to penetrate, it's fairly complicated. It's state-by-state rules. It is nationwide. So we have a clear right to win here.
Dimitar Karaivanov: So we have a clear right to win here with ClearPoint, so we love that. And then secondly, the customer base here is basically the funeral homes, cemeteries, and larger aggregators in the space. And right now, ClearPoint does predominantly the record-keeping side of those trust relationships. They're increasingly growing into the asset management side of those relationships as well, for the monies in the trust. We think that we bring, on day one, a tremendous platform through our Nottingham Advisors business, with eight CFAs, three CFPs, close to $10 billion of assets, and nationwide reputation. So we think there's exciting opportunities there. We also know that purely on the banking side, we have some products that fit very neatly with the space as well.
So we have a clear right to win here with ClearPoint, so we love that. And then secondly, the customer base here is basically the funeral homes, cemeteries, and larger aggregators in the space. And right now, ClearPoint does predominantly the record-keeping side of those trust relationships. They're increasingly growing into the asset management side of those relationships as well, for the monies in the trust. We think that we bring, on day one, a tremendous platform through our Nottingham Advisors business, with eight CFAs, three CFPs, close to $10 billion of assets, and nationwide reputation. So we think there's exciting opportunities there. We also know that purely on the banking side, we have some products that fit very neatly with the space as well.
Speaker #4: With ClearPoint, so we love that. And then, secondly, the customer base here is basically the funeral homes and cemeteries and larger aggregators in the space.
Speaker #4: And right now, ClearPoint does predominantly the record-keeping side of those trust relationships. They're increasingly growing into the asset management side of those relationships as well for the monies in the trust.
Speaker #4: We think that we bring on day one a tremendous platform through our Nottingham Advisors business, with eight CFAs and three CFPs, and close to $10 billion of assets.
Speaker #4: And nationwide reputation. So we think there's exciting opportunities there. We also know that, purely on the banking side, we have some products that fit very neatly with the space as well.
Speaker #4: So we have a dedicated escrow product, which—one of its actual services and demos to clients is in the funeral space. Nice ability kind of on day—so that's a pretty one to provide additional offerings.
Dimitar Karaivanov: So we have a dedicated escrow product, which one of its actually services and, you know, demos to clients is in the funeral space. So that's, that's a pretty nice ability, kind of on day one, to provide additional offering. We also, through the SBA, can certainly provide a lot of SBA-type financing for some of those funeral homes as well. So there's, there's a lot of multiple ways for us to, to make a lot more money than what they do today on their own.
So we have a dedicated escrow product, which one of its actually services and, you know, demos to clients is in the funeral space. So that's, that's a pretty nice ability, kind of on day one, to provide additional offering. We also, through the SBA, can certainly provide a lot of SBA-type financing for some of those funeral homes as well. So there's, there's a lot of multiple ways for us to, to make a lot more money than what they do today on their own.
Speaker #4: We also, through the SBA, can certainly provide a lot of SBA-type financing for some of those funeral homes as well. So there's a lot of multiple ways for us to make a lot more money than what they do today on their—
Speaker #4: own. Very
Speaker #3: Helpful. Excited to see what you can do with that business, despite the obvious morbidity.
Matthew Breese: Very helpful. Excited to see what you can do with that, with that business, despite, you know, the obvious morbidity. On expenses, you know, there's a lot of moving parts there, but I just wanted to get a sense for where the starting point is in Q1 2026. Is it fair to use kind of the upper end of the $550 range in the first part of the year and maybe moving towards the middle, as the year progresses?
Matthew Breese: Very helpful. Excited to see what you can do with that, with that business, despite, you know, the obvious morbidity. On expenses, you know, there's a lot of moving parts there, but I just wanted to get a sense for where the starting point is in Q1 2026. Is it fair to use kind of the upper end of the $550 range in the first part of the year and maybe moving towards the middle, as the year progresses?
Speaker #2: On expenses, there's a lot of moving parts there, but I just wanted to get a sense for where the starting point is in Q1 '26.
Speaker #2: of the 550 range in Is it fair to use kind of the upper end the first part of the year and maybe moving towards the middle as the year progresses?
Speaker #6: Hi, yes, yes. That is fair. As we mentioned, the prepared remarks Q1 tends to lean a little bit heavier. And as you heard us talk through Q4, primarily comprised of De Novo, Santander, Bonus Accrual, we also had a rebate in Q3 for our medical expenses that didn't carry over to Q4.
Marya Wlos: Hi. Yes, that is fair. As we mentioned in the prepared remarks, Q1 tends to lean a little bit heavier. As you heard us talk through Q4, you know, primarily comprised of de novos and hinder bonus accruals. We also had a rebate in Q3 for our medical expenses that didn't carry over Q4, so you saw a little bit of noise there, too. You know, outside of these items, what we're looking forward to most, I think, in 2026, is seeing that the fruits of our investments, you know, come to light with, you know, people, systems, and other infrastructure that we've talked about, you know, throughout 2025.
Marya Wlos: Hi. Yes, that is fair. As we mentioned in the prepared remarks, Q1 tends to lean a little bit heavier. As you heard us talk through Q4, you know, primarily comprised of de novos and hinder bonus accruals. We also had a rebate in Q3 for our medical expenses that didn't carry over Q4, so you saw a little bit of noise there, too. You know, outside of these items, what we're looking forward to most, I think, in 2026, is seeing that the fruits of our investments, you know, come to light with, you know, people, systems, and other infrastructure that we've talked about, you know, throughout 2025.
Speaker #6: So you saw a little bit of noise there too. Outside of these, items, what we're looking forward to most, I think in 2026, is seeing that the fruits of our investments come to light with people, systems, and other infrastructures that we've talked about throughout '25.
Speaker #6: And we're confident that we'll see the returns, as you can see from '25, but also pulling through even more in '26. So yeah, I'll look.
Marya Wlos: We're confident that we'll see, you know, the returns, as you can see from 25, but also, you know, pulling through even more in 26. I'll see them ahead. We're excited.
We're confident that we'll see, you know, the returns, as you can see from 25, but also, you know, pulling through even more in 26. I'll see them ahead. We're excited.
Speaker #6: I'll seem ahead. We're excited.
Speaker #2: And then the last one is just on the NIM. It feels like there's still some structural upside to the NIM. I was hoping you could comment on that.
Matthew Breese: The last one is just on the NIM.
Matthew Breese: The last one is just on the NIM.
Marya Wlos: Sure.
Marya Wlos: Sure.
Matthew Breese: You know, it feels like there's, there's still some structural upside to the NIM. I was hoping you could comment on that. And then, I, I believe if I have my notes right, you start to see a bit more of the securities book repriced towards the end of the year. So might we see-
Matthew Breese: You know, it feels like there's, there's still some structural upside to the NIM. I was hoping you could comment on that. And then, I, I believe if I have my notes right, you start to see a bit more of the securities book repriced towards the end of the year. So might we see-
Speaker #2: And then I believe if I have my notes right, you start to see a bit more of the securities book repriced towards the end of the year.
Speaker #2: So, might we see some acceleration in NIM expansion as that—
Marya Wlos: Yeah
Marya Wlos: Yeah
Matthew Breese: ... you know, some acceleration in NIM expansion as that occurs?
Matthew Breese: ... you know, some acceleration in NIM expansion as that occurs?
Speaker #2: occurs? Yep.
Marya Wlos: Yep. So first, you know, for Q4, we are happy with that expansion of 6 basis points. That was, you know, primarily attributed to, you know, loan growth, deposit growth, ongoing repricing efforts that we're really diligent with at this company. You know, for Q1, you know, we're guiding 2 to 4 basis points for NIM. Just expecting a little bit of pressure on the loan side, as Dimitar noted earlier. And you know, looking to see that some of the realization of the late cuts in 2025 coming through in Q1 as well. To your point about the securities rebalancing at the end of the year, that we have talked through that, and that is happening. So we do expect expansion.
Marya Wlos: Yep. So first, you know, for Q4, we are happy with that expansion of 6 basis points. That was, you know, primarily attributed to, you know, loan growth, deposit growth, ongoing repricing efforts that we're really diligent with at this company. You know, for Q1, you know, we're guiding 2 to 4 basis points for NIM. Just expecting a little bit of pressure on the loan side, as Dimitar noted earlier. And you know, looking to see that some of the realization of the late cuts in 2025 coming through in Q1 as well. To your point about the securities rebalancing at the end of the year, that we have talked through that, and that is happening. So we do expect expansion.
Speaker #6: So first, for Q4, we are happy with that expansion of six basis points. That was primarily attributed to loan growth, deposit growth, ongoing repricing efforts that were really diligent with, at this company, also lower overnight borrowing balance, which helped there.
Speaker #6: For Q1, we're guiding 2 to 4 bps for NIM. Just expecting a little bit of pressure on the loan side, as Dimitar noted earlier.
Speaker #6: And looking to see that some of the realization of the late cuts is in as well. To your point about the securities rebalancing at the end of the year, we have talked through that, and that is happening.
Speaker #6: So we do expect expansion; we don't necessarily want to guide out too far, but certainly that is a tailwind for us. And it does begin at the end of this year, yes.
Marya Wlos: Don't necessarily want to guide out too far, but certainly that is, you know, a tailwind for us. And it does begin at the end of this year. Yeah.
Don't necessarily want to guide out too far, but certainly that is, you know, a tailwind for us. And it does begin at the end of this year. Yeah.
Speaker #2: And Mariah, did you describe 2 to 4 basis points of NIM expansion in Q1,
Matthew Breese: Marya, did you just- did you describe two to four basis points of NIM expansion in Q1 or, or compression?
Matthew Breese: Marya, did you just- did you describe two to four basis points of NIM expansion in Q1 or, or compression?
Speaker #2: or? Expansion, yes.
Marya Wlos: Expansion, yes, for Q1.
Marya Wlos: Expansion, yes, for Q1.
Speaker #6: For Q1. Yes.
Speaker #2: Got it. All right. I appreciate it. I'll leave it there. Thank you. And the next question comes from Manuel Navis with Piper Sandler. Please go ahead.
Matthew Breese: Got it.
Matthew Breese: Got it.
Marya Wlos: Yes.
Marya Wlos: Yes.
Matthew Breese: ... All right, appreciate it. I'll leave it there. Thank you.
Matthew Breese: ... All right, appreciate it. I'll leave it there. Thank you.
Operator: The next question comes from Manuel Navas with Piper Sandler. Please go ahead.
Operator: The next question comes from Manuel Navas with Piper Sandler. Please go ahead.
Speaker #7: Hey, thanks. Following up on that securities book repricing, what is assumed in the NII guide? Is that the securities are reinvested? Put into loan growth?
Manuel Navas: Hey, thanks. Following up on that, securities book repricing, what is assumed in the NII guide? Is that the securities are reinvested, put into loan growth, pay off something? What is kind of assumed currently with those maturities?
Manuel Navas: Hey, thanks. Following up on that, securities book repricing, what is assumed in the NII guide? Is that the securities are reinvested, put into loan growth, pay off something? What is kind of assumed currently with those maturities?
Speaker #7: Pay off something? What is kind of assumed currently with those
Speaker #7: maturities? Yeah.
Dimitar Karaivanov: Yeah. So, morning, Manuel. Like, because the timing of the securities really is in the fourth quarter and late in the fourth quarter, it doesn't really impact the guide for the year. And I think by then we'll see what the balance sheet looks like. We certainly, our plan number one and foremost is to deploy those into loans, and we believe we've got tremendous momentum in terms of talent and presence and opportunities in the market to do that. And kind of looking forward beyond 2026, we have 2027, where we have another $600 million of securities maturing. Those are kind of spread out a little bit more evenly through 2027. We're going to evaluate those as the time comes. Generally, we want to be lending, not buying securities.
Dimitar Karaivanov: Yeah. So, morning, Manuel. Like, because the timing of the securities really is in the fourth quarter and late in the fourth quarter, it doesn't really impact the guide for the year. And I think by then we'll see what the balance sheet looks like. We certainly, our plan number one and foremost is to deploy those into loans, and we believe we've got tremendous momentum in terms of talent and presence and opportunities in the market to do that. And kind of looking forward beyond 2026, we have 2027, where we have another $600 million of securities maturing. Those are kind of spread out a little bit more evenly through 2027. We're going to evaluate those as the time comes. Generally, we want to be lending, not buying securities.
Speaker #3: So, morning, Manuel. The, because the timing of the securities really is in the fourth quarter and late in the fourth quarter, it doesn't really impact the guide for the year.
Speaker #3: And I think by then we'll see what the balance sheet looks like. Certainly, our plan—number one and foremost—is to deploy those into loans.
Speaker #3: And we believe we've got tremendous momentum in terms of talent and presence and opportunities in the market to do that. And kind of looking forward beyond '26, we have '27 where we have another $600 million of securities maturing.
Speaker #3: Those are kind of spread out a little bit more evenly through 2027. We're going to evaluate those as the time comes. Generally, we want to be lending, not buying securities.
Speaker #3: So, if we're not able to deploy them immediately into loan growth, what's likely to happen is they're going to offset some of our longer-term borrowings, which also mature roughly on a similar timeline in '27.
Dimitar Karaivanov: So if we're not able to deploy them immediately into loan growth, what's likely to happen is, they're going to offset some of our longer term borrowings, which also mature roughly on the similar timeline in 2027. So, but again, it's pretty early to be talking about 2027. For 2026, there's not a lot of impact in the guide from securities.
So if we're not able to deploy them immediately into loan growth, what's likely to happen is, they're going to offset some of our longer term borrowings, which also mature roughly on the similar timeline in 2027. So, but again, it's pretty early to be talking about 2027. For 2026, there's not a lot of impact in the guide from securities.
Speaker #3: So, but again, it's pretty early to be talking about '27 for '26. There's not a lot of impact in the guide from securities.
Manuel Navas: Does the deposit growth guide include some remixing? How much of it is from new branches? Just thinking that it could have been higher if the de novos are working sooner, but maybe if they're not all online yet. Can you just kind of talk about de novo progress and that deposit guide?
Manuel Navas: Does the deposit growth guide include some remixing? How much of it is from new branches? Just thinking that it could have been higher if the de novos are working sooner, but maybe if they're not all online yet. Can you just kind of talk about de novo progress and that deposit guide?
Speaker #7: Does the deposit growth guide include some remixing? How much of it is from new branches? Just thinking that it could have been higher if the de novos are working sooner, but maybe if they're not all online, yes.
Speaker #7: He just kind of talked about De Novo progress and that deposit
Speaker #7: guide. Sure.
Dimitar Karaivanov: Sure, absolutely. So on the de novo side, as we mentioned, we opened 15 this year. The vast majority of the openings occurred in the late Q3, Q4. So those are very young branches, if you want to call it that way. We ended the year with roughly $100 million of footings across the various branches that we've opened. I think the goal for us for this year is to double that, which I think is possible. So again, these are going to become more productive as they mature. Usually takes kind of 18 to 24 months before you can kind of really see some of the momentum. With that said, we're very pleased with where we are. The customer base, not just retail, but commercial, has really stepped up and contributed.
Dimitar Karaivanov: Sure, absolutely. So on the de novo side, as we mentioned, we opened 15 this year. The vast majority of the openings occurred in the late Q3, Q4. So those are very young branches, if you want to call it that way. We ended the year with roughly $100 million of footings across the various branches that we've opened. I think the goal for us for this year is to double that, which I think is possible. So again, these are going to become more productive as they mature. Usually takes kind of 18 to 24 months before you can kind of really see some of the momentum. With that said, we're very pleased with where we are. The customer base, not just retail, but commercial, has really stepped up and contributed.
Speaker #3: Absolutely. So, on the De Novo side, as we mentioned, we opened 15 this year. The vast majority of the openings occurred in the late third quarter and fourth quarter.
Speaker #3: So those are very young branches, if you want to call it that way. We ended the year with roughly $100 million of footings across the various branches that we've opened.
Speaker #3: I think the goal for us for this year is to double that, which I think is possible. So, again, these are going to become more productive as they mature.
Speaker #3: It usually takes about 18 to 24 months before you can really start to see some of the momentum. With that said, we're very pleased with where we are.
Speaker #3: The customer base—not just retail, but commercial—has really stepped up and contributed. And the deposits that we currently have in the de novos, roughly 60%, are commercial deposits.
Dimitar Karaivanov: And the deposits that we currently have in the de novos, roughly 60% are commercial deposits. So we're very pleased with the efforts from our commercial bankers, clients, and all the events and the rest activity. So, to your point, we hope that it accelerates. For us, again, this is a growth strategy on the deposit side, which we expect ultimately brings over $1 billion over a 7- to 10-year period, and I think we're tracking pretty well towards that.
And the deposits that we currently have in the de novos, roughly 60% are commercial deposits. So we're very pleased with the efforts from our commercial bankers, clients, and all the events and the rest activity. So, to your point, we hope that it accelerates. For us, again, this is a growth strategy on the deposit side, which we expect ultimately brings over $1 billion over a 7- to 10-year period, and I think we're tracking pretty well towards that.
Speaker #3: So, we're very pleased with the efforts from our commercial bankers and clients, and all the events and the receptivity, and so to your point, we hope that it accelerates.
Speaker #3: For us, again, this is a growth strategy on the deposit side, which we expect ultimately brings over a billion dollars over a 7- to 10-year period.
Speaker #3: And I think we're tracking pretty well toward that.
Speaker #7: I appreciate the
Manuel Navas: I appreciate the commentary.
Manuel Navas: I appreciate the commentary.
Speaker #7: commentary. This concludes
Operator: This concludes our question and answer session. I would like to turn the conference back over to Dimitar Karaivanov for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Dimitar Karaivanov for any closing remarks.
Speaker #2: Our question and answer session. I would like to turn the conference back over to Dimitar Karaivanov for any closing remarks.
Speaker #2: remarks. Thank
Speaker #3: You, Dave. And thank you all for your interest and, as always, Mariah and I are available for any follow-up. Stay warm.
Dimitar Karaivanov: Thank you, Dave, and thank you all for your interest. And as always, Mariah and I are available for any follow-up. Stay warm.
Dimitar Karaivanov: Thank you, Dave, and thank you all for your interest. And as always, Mariah and I are available for any follow-up. Stay warm.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
