Northwest Bancshares Q4 2025 Northwest Bancshares Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Northwest Bancshares Inc Earnings Call
Speaker #1: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bancshares Q4 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Michael Perry, Managing Director, Corporate Development and Strategy, and Investor Relations. Please go ahead.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bancshares Q4 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Michael Perry, Managing Director, Corporate Development and Strategy, and Investor Relations. Please go ahead.
Speaker #1: Welcome to the Northwest Bancshares fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Speaker #1: If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.
Speaker #1: Thank you. I would now like to turn the call over to Michael Perry. Managing Director, Corporate Development and Strategy, and Investor Relations. Please go
Speaker #1: ahead. Good morning,
Douglas Schosser: Good morning, everyone, and thank you, Operator. Welcome to Northwest Bancshares Q4 2025 Earnings Call. Joining me today are Louis Torchio, President and CEO of Northwest Bancshares; Doug Schosser, our Chief Financial Officer; and T.K. Creal, our Chief Credit Officer. During this call, we will refer to information included in the supplemental Q4 and full year 2025 earnings presentation, which is available on our Investor Relations website. If you'd like to read our forward-looking and other related disclosures, you can find them on slide two. Thank you, and now I'll hand it over to Lou.
Michael Perry: Good morning, everyone, and thank you, Operator. Welcome to Northwest Bancshares Q4 2025 Earnings Call. Joining me today are Louis Torchio, President and CEO of Northwest Bancshares; Doug Schosser, our Chief Financial Officer; and T.K. Creal, our Chief Credit Officer. During this call, we will refer to information included in the supplemental Q4 and full year 2025 earnings presentation, which is available on our Investor Relations website. If you'd like to read our forward-looking and other related disclosures, you can find them on slide two. Thank you, and now I'll hand it over to Lou.
Speaker #2: Everyone, and thank you, Operator. Welcome to Northwest Bancshares' fourth quarter 2025 earnings call. Joining me today are Louis Torchio, President and CEO of Northwest Bancshares, Doug Schosser, our Chief Financial Officer, and T.K.
Speaker #2: Kriel, our Chief Credit Officer. During this call, we will refer to information included in the supplemental fourth quarter and full year 2025 earnings presentation, which is available on our Investor Relations website.
Speaker #2: If you'd like to read our forward-looking and other related disclosures, you can find them on slide two. Thank you. And now I'll hand it over to
Speaker #2: Lou. Good morning,
Louis Torchio: Good morning, everyone. Thank you for joining us today to discuss our Q4 and 2025 full year results. I'll let Doug take you through the specifics of our strong Q4 performance. I would like to take a step back and reflect on a transformational year for Northwest and how our achievements position us for continued growth in 2026. On slide 4, you can see some of the financial highlights of 2025. We closed on a significant acquisition, drove record revenue of $655 million for the full year, and continued to expand the firm's net interest margin. Coupled with our demonstrated expense management discipline through the closing and integration of our sizable acquisition, we drove double-digit EPS growth, all while investing in the talent, technology, and new financial centers and products to support our future growth prospects.
Louis Torchio: Good morning, everyone. Thank you for joining us today to discuss our Q4 and 2025 full year results. I'll let Doug take you through the specifics of our strong Q4 performance. I would like to take a step back and reflect on a transformational year for Northwest and how our achievements position us for continued growth in 2026. On slide 4, you can see some of the financial highlights of 2025. We closed on a significant acquisition, drove record revenue of $655 million for the full year, and continued to expand the firm's net interest margin. Coupled with our demonstrated expense management discipline through the closing and integration of our sizable acquisition, we drove double-digit EPS growth, all while investing in the talent, technology, and new financial centers and products to support our future growth prospects.
Speaker #3: everyone. Thank you for joining us today to discuss our fourth quarter and 2025 full year results. I'll let Doug take you through the specifics of our strong fourth quarter performance.
Speaker #3: I would like to take a step back and reflect on a transformational year for Northwest and how our achievements position us for continued growth in 2026.
Speaker #3: On slide four, you can see some of the financial highlights of 2025. We closed on a significant acquisition, drove record revenue of $655 million for the full year, and continued to expand the firm's net interest margin.
Speaker #3: Coupled with our demonstrated expense management discipline, through the closing and integration of our sizable acquisition, we drove double-digit EPS growth—all while investing in the talent, technology, and new financial centers and products to support our future growth prospects.
Speaker #3: One of the high points of the year was the acquisition and successful integration of Penns Woods, bringing us into the ranks of the top 100 banks in the U.S.
Louis Torchio: One of the high points of the year was the acquisition and successful integration of Penns Woods, bringing us into the ranks of the top 100 banks in the US by assets. As well as adding 20 financial centers to our existing Pennsylvania footprint, we welcomed new team members and thousands of new customers to Northwest. I'm proud of the team for its successful execution of a seamless integration at scale while maintaining our distinct Northwest culture and driving a strong core performance across the bank. We continue to transform our consumer bank, moving from branch consolidation to expansion, opening our first new financial center since 2018 in the Indianapolis, Indiana, MSA, featuring our new design focused on customer hospitality. We're building out our presence in our Columbus headquarters market with new financial centers now under development and due to open later this year in key locations across the city.
One of the high points of the year was the acquisition and successful integration of Penns Woods, bringing us into the ranks of the top 100 banks in the US by assets. As well as adding 20 financial centers to our existing Pennsylvania footprint, we welcomed new team members and thousands of new customers to Northwest. I'm proud of the team for its successful execution of a seamless integration at scale while maintaining our distinct Northwest culture and driving a strong core performance across the bank. We continue to transform our consumer bank, moving from branch consolidation to expansion, opening our first new financial center since 2018 in the Indianapolis, Indiana, MSA, featuring our new design focused on customer hospitality. We're building out our presence in our Columbus headquarters market with new financial centers now under development and due to open later this year in key locations across the city.
Speaker #3: by assets. As well as adding 20 financial centers to our existing Pennsylvania footprint, we welcome new team members and thousands of new customers to Northwest.
Speaker #3: I am proud of the team for its successful execution of a seamless integration at scale, while maintaining our distinct Northwest culture and driving a strong core performance across the bank.
Speaker #3: We continue to transform our consumer bank, moving from branch consolidation to expansion, opening our first new financial center since 2018 in the Indianapolis, Indiana MSA, featuring our new design focused on customer hospitality.
Speaker #3: We're building out our presence in our Columbus headquarters market, with new financial centers now under development and due to open later this year in key locations across the city.
Speaker #3: We've already added several new team members with strong local and business community ties to focus on building momentum in advance of opening our doors.
Louis Torchio: We've already added several new team members with strong local and business community ties to focus on building momentum in advance of opening our doors. We remain focused on excellence as an outstanding full-service neighborhood bank providing a highly personalized service. I'm proud to share that we have just been recognized by Newsweek for the third consecutive year as one of America's best regional banks. We continue to strengthen and diversify our commercial banking business with C&I momentum of 26% year-over-year average loan growth. In 2025, we introduced a new franchise finance vertical, rounding out our nationwide business verticals, each with experienced and well-connected industry leaders, giving us a strong point of distinction in the specialty finance areas. We also materially grew our SBA lending activity in 2025, earning a spot among the top 50 originators in the US.
We've already added several new team members with strong local and business community ties to focus on building momentum in advance of opening our doors. We remain focused on excellence as an outstanding full-service neighborhood bank providing a highly personalized service. I'm proud to share that we have just been recognized by Newsweek for the third consecutive year as one of America's best regional banks. We continue to strengthen and diversify our commercial banking business with C&I momentum of 26% year-over-year average loan growth. In 2025, we introduced a new franchise finance vertical, rounding out our nationwide business verticals, each with experienced and well-connected industry leaders, giving us a strong point of distinction in the specialty finance areas. We also materially grew our SBA lending activity in 2025, earning a spot among the top 50 originators in the US.
Speaker #3: We remain focused on excellence as an outstanding full-service neighborhood bank, providing a highly personalized service. I'm proud to share that we have just been recognized by Newsweek for the third consecutive year as one of America's best regional banks.
Speaker #3: We continue to strengthen and diversify our commercial banking business with CNI Momentum of 26% year over year average loan growth. In 2025, we introduced a new franchise finance vertical, rounding out our nationwide business verticals, each with experienced and well-connected industry leaders, giving us a strong point of distinction in these specialty finance areas.
Speaker #3: We also materially grew our SBA lending activity in 2025, earning a spot among the top 50 originators in the U.S. And at the year-end, we closed on a significant funding for a Columbus-based business as we grow our SBA business both locally and nationally.
Louis Torchio: At the year-end, we closed on a significant funding for a Columbus-based business as we grow our SBA business both locally and nationally. Our bank is reliant on outstanding talent for its success. Over the past 18 months, we've made significant investments in executive and regional leadership, hiring accomplished executives across consumer and commercial banking, wealth management, legal, and finance from numerous other respected financial institutions. We have a highly experienced leadership team in place that's equipped to drive ongoing transformation and growth across our business. In 2025, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of $0.20 per share. This is the 125th consecutive quarter in which the company has paid a cash dividend. Looking ahead, I'm confident in our trajectory. For 2026, we are providing full-year guidance for another record year.
At the year-end, we closed on a significant funding for a Columbus-based business as we grow our SBA business both locally and nationally. Our bank is reliant on outstanding talent for its success. Over the past 18 months, we've made significant investments in executive and regional leadership, hiring accomplished executives across consumer and commercial banking, wealth management, legal, and finance from numerous other respected financial institutions. We have a highly experienced leadership team in place that's equipped to drive ongoing transformation and growth across our business. In 2025, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of $0.20 per share. This is the 125th consecutive quarter in which the company has paid a cash dividend. Looking ahead, I'm confident in our trajectory. For 2026, we are providing full-year guidance for another record year.
Speaker #3: Our bank is reliant on outstanding talent for its success. Over the past 18 months, we've made significant investments in executive and regional leadership. Hiring accomplished executives across consumer and commercial banking, wealth management, legal, and finance, from numerous other respected financial institutions.
Speaker #3: We have a highly experienced leadership team in place that's equipped to drive ongoing transformation and growth across our business. In 2025, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of $20 per share.
Speaker #3: This is the 125th consecutive quarter in which the company has paid a cash dividend. Looking ahead, I'm confident in our trajectory. For 2026, we are providing full-year guidance for another record year.
Speaker #3: Doug will provide all the details on our outlook. Finally, as we have previously discussed, we have also significantly reduced our level of classified assets.
Louis Torchio: Doug will provide all the details on our outlook. Finally, as we have previously discussed, we have also significantly reduced our level of classified assets. 2025 was a fast-paced and productive year. We've laid the foundation for a year of organic growth in 2026 as we maintain our focus on optimizing our operations, expanding our financial center network, and delivering growth across our consumer and commercial lines of business. With that, I'll turn it over to Doug to review Q4 results and provide more detail on our 2026 outlook.
Doug will provide all the details on our outlook. Finally, as we have previously discussed, we have also significantly reduced our level of classified assets. 2025 was a fast-paced and productive year. We've laid the foundation for a year of organic growth in 2026 as we maintain our focus on optimizing our operations, expanding our financial center network, and delivering growth across our consumer and commercial lines of business. With that, I'll turn it over to Doug to review Q4 results and provide more detail on our 2026 outlook.
Speaker #3: 2025 was a fast-paced and productive year. We've laid the foundation for a year of organic growth in 2026 as we maintain our focus on optimizing our operations and expanding our financial center network and delivering growth across our consumer and commercial lines of business.
Speaker #3: With that, I'll turn it over to Doug to review fourth quarter results and provide more detail on our 2026
Speaker #3: outlook. Thank you, Lou.
Douglas Schosser: Thank you, Lou. Good morning, everyone. As Lou indicated, we're pleased with our financial performance. We delivered a strong Q4, and we successfully completed all remaining merger conversion activities on time and on budget. This is the product of all the efforts of our entire team working tirelessly to deliver these results while also ensuring that our merger and conversion activities went smoothly. I am grateful to the team for their efforts. Now, let's continue on page 5 of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the Q4. As a reminder, we closed our merger on 25 July. As such, this is our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion, and opportunities as a combined organization, we don't intend to disaggregate results now or in the future.
Douglas Schosser: Thank you, Lou. Good morning, everyone. As Lou indicated, we're pleased with our financial performance. We delivered a strong Q4, and we successfully completed all remaining merger conversion activities on time and on budget. This is the product of all the efforts of our entire team working tirelessly to deliver these results while also ensuring that our merger and conversion activities went smoothly. I am grateful to the team for their efforts. Now, let's continue on page 5 of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the Q4. As a reminder, we closed our merger on 25 July. As such, this is our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion, and opportunities as a combined organization, we don't intend to disaggregate results now or in the future.
Speaker #2: Good morning, everyone. As Lou indicated, we're pleased with our financial performance. We delivered a strong fourth quarter, and we successfully completed all remaining merger, conversion activities on time and on budget.
Speaker #2: This is the product of all the efforts of our entire team working tirelessly to deliver these results while also ensuring that our merger and conversion activities went smoothly.
Speaker #2: I am grateful to the team for their efforts. Now, let's continue on page five of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the fourth quarter.
Speaker #2: As a reminder, we closed our merger on July 25th. As such, this is our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion, and opportunities as a combined organization, we don't intend to disaggregate results now or in the future.
Speaker #2: Our gap EPS for the quarter was $0.31 per share, and on an adjusted basis, our EPS was $0.33 per share, an improvement on the prior quarter of $0.29 per share and $0.04 per share, respectively, driven by record revenue, net interest margin improvement, and expense management discipline.
Douglas Schosser: Our GAAP EPS for the quarter was $0.31 per share, and on an adjusted basis, our EPS was $0.33 per share, an improvement on the prior quarter of $0.29 per share and $0.04 per share, respectively, driven by record revenue, net interest margin improvement, and expense management discipline. Net interest income grew $6.2 million, or 4.6% quarter-over-quarter, with net interest margin improving to 3.69%, benefiting from higher average loan yields, increased average earning assets from the acquisition, and purchase accounting accretion. Non-interest income increased by $5.5 million, or 17% quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit recorded in the Q4, supporting a total revenue increase of $11.8 million, quarter-over-quarter, or 7%.
Our GAAP EPS for the quarter was $0.31 per share, and on an adjusted basis, our EPS was $0.33 per share, an improvement on the prior quarter of $0.29 per share and $0.04 per share, respectively, driven by record revenue, net interest margin improvement, and expense management discipline. Net interest income grew $6.2 million, or 4.6% quarter-over-quarter, with net interest margin improving to 3.69%, benefiting from higher average loan yields, increased average earning assets from the acquisition, and purchase accounting accretion. Non-interest income increased by $5.5 million, or 17% quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit recorded in the Q4, supporting a total revenue increase of $11.8 million, quarter-over-quarter, or 7%.
Speaker #2: Net interest income grew 6.2 million dollars, or 4.6% quarter over quarter, with net interest margin improving to 3.69%. Benefiting from higher average loan yields, increased average earning assets from the acquisition, and purchase accounting accretion.
Speaker #2: Non-interest income increased by 5.5 million dollars, or 17% quarter over quarter, driven by an increase in bank-owned life insurance income due to higher debt benefit, recorded in the fourth quarter, supporting a total revenue increase of 11.8 million dollars, quarter over quarter, or 7%.
Speaker #2: We also saw improvement in our pre-tax, pre-provision net revenue in the fourth quarter 2025, which increased to $66.4 million, a 92% increase from the third quarter 2025 on a GAAP basis, and was $70.6 million, a 7% improvement from third quarter 2025 on an adjusted basis.
Douglas Schosser: We also saw improvement in our pre-tax, pre-provision net revenue in Q4 2025, which increased to $66.4 million, a 92% increase from Q3 2025 on a GAAP basis, and was $70.6 million, a 7% improvement from Q3 2025 on an adjusted basis. And our adjusted efficiency ratio of 59.5% in the Q4 improved by 10 basis points quarter over quarter and 9 basis points year over year as we continue to exercise tight expense discipline. Turning to page 6, I'll spend a moment covering our loan balances. Average loans grew $414 million quarter over quarter, benefiting from a full quarter impact from the acquired balance sheet and organic loan growth. More importantly, end-of-period loans grew by $66 million in the Q4, ending the year at $13 billion, laying a strong foundation for 2026 continued growth.
We also saw improvement in our pre-tax, pre-provision net revenue in Q4 2025, which increased to $66.4 million, a 92% increase from Q3 2025 on a GAAP basis, and was $70.6 million, a 7% improvement from Q3 2025 on an adjusted basis. And our adjusted efficiency ratio of 59.5% in the Q4 improved by 10 basis points quarter over quarter and 9 basis points year over year as we continue to exercise tight expense discipline. Turning to page 6, I'll spend a moment covering our loan balances. Average loans grew $414 million quarter over quarter, benefiting from a full quarter impact from the acquired balance sheet and organic loan growth. More importantly, end-of-period loans grew by $66 million in the Q4, ending the year at $13 billion, laying a strong foundation for 2026 continued growth.
Speaker #2: In our adjusted efficiency ratio of 59.5% in the fourth quarter, we improved by 10 basis points quarter over quarter, and 9 basis points year over year, as we continue to exercise tight expense discipline.
Speaker #2: Turning to page six, I'll spend a moment covering our loan balances. Average loans grew 414 million dollars quarter over quarter, benefiting from a full quarter impact, from the acquired balance sheet and organic loan growth.
Speaker #2: More importantly, end-of-period loans grew by $66 million in the fourth quarter, ending the year at $13 billion, laying a strong foundation for 2026's continued growth.
Speaker #2: Our loan yield increased to 5.65% in the fourth quarter of 2025, growing by 2 basis points quarter over quarter, and our average commercial loans increased $162 million, or 7.1% quarter over quarter, and $509 million, or 26% year over year.
Douglas Schosser: Our loan yield increased to 5.65% in Q4 2025, growing by 2 basis points quarter-over-quarter, and our average commercial loans increased $162 million, or 7.1% quarter-over-quarter, and $509 million, or 26% year-over-year. Moving to page 7 and our deposit balances, which continue to be a source of strength and stability, average total deposits grew by $475 million quarter-over-quarter, benefiting from the acquired balance sheet and organic growth. Our granular diversified deposit book has an average balance of $19,000, with customer deposits consisting of over 723,000 accounts with an average tenure of 12 years. Customer non-brokered average deposits increased to $507 million quarter-over-quarter, while brokered deposits decreased to $32 million quarter-over-quarter.
Our loan yield increased to 5.65% in Q4 2025, growing by 2 basis points quarter-over-quarter, and our average commercial loans increased $162 million, or 7.1% quarter-over-quarter, and $509 million, or 26% year-over-year. Moving to page 7 and our deposit balances, which continue to be a source of strength and stability, average total deposits grew by $475 million quarter-over-quarter, benefiting from the acquired balance sheet and organic growth. Our granular diversified deposit book has an average balance of $19,000, with customer deposits consisting of over 723,000 accounts with an average tenure of 12 years. Customer non-brokered average deposits increased to $507 million quarter-over-quarter, while brokered deposits decreased to $32 million quarter-over-quarter.
Speaker #2: Moving to page seven, in our deposit balances, which continue to be a source of strength and stability, average total deposits grew by $475 million quarter over quarter, benefiting from the acquired balance sheet and organic growth.
Speaker #2: Our granular, diversified deposit book has an average balance of 19,000 dollars, with customer deposits consisting of over 723,000 accounts with an average tenure of 12 years.
Speaker #2: Customer non-brokered average deposits increased 507 million dollars quarter over quarter, while brokered deposits decreased 32 million dollars quarter over quarter. Our cost of deposits decreased 2 basis points to 1.53%, a product of our proactive management of the overall portfolio and benefit of late-year rate cuts in 2025.
Douglas Schosser: Our cost of deposits decreased 2 basis points to 1.53%, a product of our proactive management of the overall portfolio and benefit of late-year rate cuts in 2025. 43% of our CD portfolio matures within the first quarter of 2026 at a weighted average rate of 3.60%. With new volumes at anticipated lower rates, this should drive an overall decline in CD costs. Although our overall interest rate sensitivity position remains fairly neutral, our balance sheet has become slightly more asset-sensitive with the continued growth in floating-rate commercial loans. Turning to net interest margin on page eight, net interest margin increased 4 basis points to 3.69% in the Q4 2025, with purchase accounting accretion's net impact equating to 4 basis points. Turning to our securities portfolio on page nine, we purchased $363 million of securities during the quarter, consistent with our existing portfolio risk metrics.
Our cost of deposits decreased 2 basis points to 1.53%, a product of our proactive management of the overall portfolio and benefit of late-year rate cuts in 2025. 43% of our CD portfolio matures within the first quarter of 2026 at a weighted average rate of 3.60%. With new volumes at anticipated lower rates, this should drive an overall decline in CD costs. Although our overall interest rate sensitivity position remains fairly neutral, our balance sheet has become slightly more asset-sensitive with the continued growth in floating-rate commercial loans. Turning to net interest margin on page eight, net interest margin increased 4 basis points to 3.69% in the Q4 2025, with purchase accounting accretion's net impact equating to 4 basis points. Turning to our securities portfolio on page nine, we purchased $363 million of securities during the quarter, consistent with our existing portfolio risk metrics.
Speaker #2: 43% of our CD portfolio matures within the first quarter of 2026 at a weighted average rate of 3.60%. With new volumes at anticipated lower rates, this should drive an overall decline in CD costs.
Speaker #2: Although our overall interest rate sensitivity position remains fairly neutral, our balance sheet has become slightly more asset-sensitive, with continued growth in floating-rate commercial loans.
Speaker #2: Turning to net interest margin on page eight, net interest margin increased 4 basis points to 3.69% in the fourth quarter 2025, with purchase accounting accretion's net impact equating to 4 basis points.
Speaker #2: Turning to our securities portfolio on page nine. We purchased 363 million dollars of securities during the quarter, consistent with our existing portfolio risk metrics, this did not meaningfully change the portfolio's weighted average life, which remains at 4.9 years.
Douglas Schosser: This did not meaningfully change the portfolio's weighted average life, which remains at 4.9 years. Our new purchases were consistent with the current composition of the portfolio as we continue to strengthen an already strong source of liquidity. Our portfolio yield continues to increase as new security purchases come on at higher yields than the runoff portfolio. Yields increased to 29 basis points to 3.11% in the quarter. 29% of the portfolio is held to maturity to protect tangible common equity. Turning to page 10, our non-interest income increased $5.6 million quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit income in the quarter. Non-interest income decreased to $2.3 million year-over-year. However, the prior year quarter included a gain on sale of Visa Class B shares, and a gain on low-income housing tax credit investment that did not recur in 2025.
This did not meaningfully change the portfolio's weighted average life, which remains at 4.9 years. Our new purchases were consistent with the current composition of the portfolio as we continue to strengthen an already strong source of liquidity. Our portfolio yield continues to increase as new security purchases come on at higher yields than the runoff portfolio. Yields increased to 29 basis points to 3.11% in the quarter. 29% of the portfolio is held to maturity to protect tangible common equity. Turning to page 10, our non-interest income increased $5.6 million quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit income in the quarter. Non-interest income decreased to $2.3 million year-over-year. However, the prior year quarter included a gain on sale of Visa Class B shares, and a gain on low-income housing tax credit investment that did not recur in 2025.
Speaker #2: Our new purchases were consistent with the current composition of the portfolio, as we continue to strengthen an already strong source of liquidity. Our portfolio yield continues to increase, as new security purchases come on at higher yields than the runoff portfolio, yields increased to 29 basis points to 3.11% in the quarter.
Speaker #2: Twenty-nine percent of the portfolio is held to maturity to protect tangible common equity. Turning to page ten, our non-interest income increased $5.6 million quarter over quarter, driven by an increase in bank-owned life insurance income due to higher death benefit income in the quarter.
Speaker #2: Non-interest income decreased $2.3 million year-over-year; however, the prior year quarter included a gain on sale of Visa B shares and a gain on low-income housing tax credit investment that did not recur in 2025.
Speaker #2: Turning to page eleven, the overall expense excluding merger and restructuring expenses was higher quarter over quarter, and year over year, as the fourth quarter 2025 included a full quarter of the acquired Penns Woods operations.
Douglas Schosser: Turning to page 11, the overall expense, excluding merger and restructuring expenses, was higher quarter over quarter and year over year as Q4 2025 included a full quarter of the acquired Penns Woods operations. Compensation and benefits increased in the Q4 2025, was driven by a full quarter of employees from the Penns Woods acquisition, combined with increased performance-based incentive compensation based on our strong financial performance in 2025. Additionally, adjusted efficiency ratio was 59.5% in the Q4 2025, continuing the improvement in expense management over the last year. On page 12, you'll see overall ACL coverage at 1.15% is down from the Q3 2025, driven by net charge-offs in the current period, which on an annualized basis were 40 basis points, as was guided, and are elevated as a result of one $9.2 million charge-off of a student housing loan.
Turning to page 11, the overall expense, excluding merger and restructuring expenses, was higher quarter over quarter and year over year as Q4 2025 included a full quarter of the acquired Penns Woods operations. Compensation and benefits increased in the Q4 2025, was driven by a full quarter of employees from the Penns Woods acquisition, combined with increased performance-based incentive compensation based on our strong financial performance in 2025. Additionally, adjusted efficiency ratio was 59.5% in the Q4 2025, continuing the improvement in expense management over the last year. On page 12, you'll see overall ACL coverage at 1.15% is down from the Q3 2025, driven by net charge-offs in the current period, which on an annualized basis were 40 basis points, as was guided, and are elevated as a result of one $9.2 million charge-off of a student housing loan.
Speaker #2: Compensation and benefits increased in the fourth quarter of 2025, driven by a full quarter of employees from the Penns Woods acquisition, combined with increased performance-based incentive compensation based on our strong financial performance in 2025.
Speaker #2: Additionally, adjusted efficiency ratio was 59.5% in the fourth quarter 2025, continuing the improvement in expense management over the last year. On page twelve, you'll see overall ACL coverage at 1.15%, which is down from the third quarter 2025, driven by net charge-offs in the current period, which on an annualized basis were 40 basis points, as was guided, and are elevated as a result of one $9.2 million charge-off of a student housing loan.
Speaker #2: This loan was originated more than 10 years ago, has been in workout for several years prior to it being fully resolved this quarter. As a reminder, we have no meaningful concentration in student housing in our portfolio today.
Douglas Schosser: This loan was originated more than 10 years ago, has been in workout for several years prior to it being fully resolved this quarter. As a reminder, we have no meaningful concentration in student housing in our portfolio today. Our 2025 net charge-offs of 25 basis points were at the bottom end of a full-year guidance of 25 to 35 basis points. Turning to credit quality on page 13, our credit risk metrics are within internal expectations given the impact of the loans we acquired from the acquisition. Our total delinquency increased from 1.10% to 1.50% quarter-over-quarter, primarily as a result of mortgage loans and a 31-day month at quarter end. Our 90-day plus delinquencies declined from 0.64% to 0.51% quarter-over-quarter, and NPAs decreased by $21 million quarter-over-quarter.
This loan was originated more than 10 years ago, has been in workout for several years prior to it being fully resolved this quarter. As a reminder, we have no meaningful concentration in student housing in our portfolio today. Our 2025 net charge-offs of 25 basis points were at the bottom end of a full-year guidance of 25 to 35 basis points. Turning to credit quality on page 13, our credit risk metrics are within internal expectations given the impact of the loans we acquired from the acquisition. Our total delinquency increased from 1.10% to 1.50% quarter-over-quarter, primarily as a result of mortgage loans and a 31-day month at quarter end. Our 90-day plus delinquencies declined from 0.64% to 0.51% quarter-over-quarter, and NPAs decreased by $21 million quarter-over-quarter.
Speaker #2: Our 2025 net charge-offs of 25 basis points were at the bottom end of a full-year guidance of 25 to 35 basis points. Turning to credit quality, on page thirteen.
Speaker #2: Our credit risk metrics are within internal expectations, given the impact of the loans we acquired from the acquisition. Our total delinquency increased from 1.10% to 1.50% quarter over quarter, primarily as a result of mortgage loans and a 31-day month at quarter end.
Speaker #2: Our 90-day plus delinquencies declined from 0.64% to 0.51% quarter over quarter, and NPAs decreased by 21 million quarter over quarter. Taking a deeper dive into the breakdown of our credit quality on page fourteen, fourth quarter 2025 continued to see a decline in classified loans as a percentage of total loans and on an absolute basis, which was caused primarily by improvements within the CRE portfolio.
Douglas Schosser: Taking a deeper dive into the breakdown of our credit quality on page 14, Q4 2025 continued to see a decline in classified loans as a percentage of total loans and on an absolute basis, which was caused primarily by improvements within the CRE portfolio. As we discussed on earlier calls, we remain focused on reducing our classified loan balances. Turning to page 15, we are providing our full-year outlook for 2026. We expect to see loan growth in 2026 in the low to mid-single digits and deposit growth in the low single digits. We expect revenues to be in the range of $710 million to $730 million and net interest margin in the low 370s. We anticipate non-interest income in the range of $125 million to $130 million and non-interest expense to be in the $420 million to $430 million range.
Taking a deeper dive into the breakdown of our credit quality on page 14, Q4 2025 continued to see a decline in classified loans as a percentage of total loans and on an absolute basis, which was caused primarily by improvements within the CRE portfolio. As we discussed on earlier calls, we remain focused on reducing our classified loan balances. Turning to page 15, we are providing our full-year outlook for 2026. We expect to see loan growth in 2026 in the low to mid-single digits and deposit growth in the low single digits. We expect revenues to be in the range of $710 million to $730 million and net interest margin in the low 370s. We anticipate non-interest income in the range of $125 million to $130 million and non-interest expense to be in the $420 million to $430 million range.
Speaker #2: As we discussed on earlier calls, we remain focused on reducing our classified loan balances. Turning to page fifteen, we are providing our full-year outlook for 2026.
Speaker #2: We expect to see loan growth in 2026 in the low to mid-single digits, and deposit growth in the low single digits. We expect revenues to be in the range of $710 million to $730 million, and net interest margin in the low 370s.
Speaker #2: We anticipate non-interest income in the range of 125 to 130 million and non-interest expense to be in the 420 to 430 million dollar range.
Speaker #2: We anticipate net charge-offs of between 20 to 27 basis points. We anticipate the tax rate to remain flat to 2025 rate at approximately 23%.
Douglas Schosser: We anticipate net charge-offs of between 20 to 27 basis points, and we anticipate the tax rate to remain flat to 2025 rate at approximately 23%. As we continue to grow in 2026, we will manage the business and drive positive operating leverage. As a reminder, we said last quarter we had not fully recognized all of the cost savings from the merger. We are on track and expected to achieve 100% of the cost savings in Q1 2026, which is ahead of schedule. That is fully reflected in our outlook. Now, I'll turn the call over to the operator who will open up the lines for a live Q&A session.
We anticipate net charge-offs of between 20 to 27 basis points, and we anticipate the tax rate to remain flat to 2025 rate at approximately 23%. As we continue to grow in 2026, we will manage the business and drive positive operating leverage. As a reminder, we said last quarter we had not fully recognized all of the cost savings from the merger. We are on track and expected to achieve 100% of the cost savings in Q1 2026, which is ahead of schedule. That is fully reflected in our outlook. Now, I'll turn the call over to the operator who will open up the lines for a live Q&A session.
Speaker #2: As we continue to grow in 2026, we will manage the business and drive positive operating leverage. As a reminder, we said last quarter we had not fully recognized all of the cost savings from the merger.
Speaker #2: We are on track and expected to achieve 100% of the cost savings in the first quarter of 2026, which is ahead of schedule. That is fully reflected in our outlook.
Speaker #2: Now I'll turn the call over to the operator who will open up the lines for live Q&A session. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.
Louis Torchio: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jeff Rulis with D.A. Davidson.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jeff Rulis with D.A. Davidson.
Speaker #2: We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jeff Rules with DA
Speaker #2: Davidson. Thanks.
Douglas Schosser: Thanks. Good morning. Good morning. Just to follow on, Doug, I appreciate the commentary on the expenses and the cost savings. I guess looking at the full-year guide, call it the midpoint at $425 for expenses, I guess that's $106 a quarter, I guess if you just average. But typical seasonality, and then if Q1 maybe a little, you start off a little heavier on that end, if you could just comment on any trend line with the expenses, that'd be great. Thanks.
Jeff Rulis: Thanks. Good morning. Good morning. Just to follow on, Doug, I appreciate the commentary on the expenses and the cost savings. I guess looking at the full-year guide, call it the midpoint at $425 for expenses, I guess that's $106 a quarter, I guess if you just average. But typical seasonality, and then if Q1 maybe a little, you start off a little heavier on that end, if you could just comment on any trend line with the expenses, that'd be great. Thanks.
Speaker #3: Good
Speaker #3: morning. Good morning. Good morning.
Speaker #4: Thanks for following on. Doug, I appreciate the commentary on the expenses and the cost saves. I guess looking at the full-year guide, call it the midpoint at 425 for expenses, I guess that's 106 a quarter, I guess if you just average.
Speaker #4: But typical seasonality, and then if Q1 may be a little—you start off a little heavier on that end—if you could just comment on any trend line with the expenses, that'd be great.
Speaker #4: Thanks. Yeah, happy to, Jeff, and thanks for the question. So, a couple of things, right? Yes, you're right—seasonally, you will typically see some increases in expenses in the first quarter for things like FICA resets and some other things.
Douglas Schosser: Yeah, happy to, Jeff, and thanks for the question. So a couple of things, right? So yes, you're right. Seasonally, you will typically see some increases in expenses in the first quarter for like FICA resets and some other things. But I still think our overall guide, you're right, in the way you think about it, right? If I've got the low end of the guide at about $105 million a quarter, we also would see increases typically in the second quarter for merit increases. So I think you're right to say that the first quarter might be a little bit elevated, but I would expect overall it not to be at the same level as we were at the fourth quarter.
Douglas Schosser: Yeah, happy to, Jeff, and thanks for the question. So a couple of things, right? So yes, you're right. Seasonally, you will typically see some increases in expenses in the first quarter for like FICA resets and some other things. But I still think our overall guide, you're right, in the way you think about it, right? If I've got the low end of the guide at about $105 million a quarter, we also would see increases typically in the second quarter for merit increases. So I think you're right to say that the first quarter might be a little bit elevated, but I would expect overall it not to be at the same level as we were at the fourth quarter.
Speaker #4: But I still think our overall guide you're right in the way you think about it, right? If I've got the low end of the guide at about 105 million a quarter, we also would see increases typically in the second quarter for merit increases.
Speaker #4: So I think you're right to say that the first quarter might be a little bit elevated, but I would expect overall it not to be at the same level as we were at in the fourth.
Speaker #4: quarter. Gotcha.
Douglas Schosser: Gotcha. And it seemed like some of the performance-based in Q4, a little one-time. I know that you've got the full quarter of Penns Woods, but is there a little bit of non-recurring kind of performance year-end stuff in that figure?
Jeff Rulis: Gotcha. And it seemed like some of the performance-based in Q4, a little one-time. I know that you've got the full quarter of Penns Woods, but is there a little bit of non-recurring kind of performance year-end stuff in that figure?
Speaker #3: And it seemed like is some of the performance-based in Q4 a little one time? I know that you've got the full quarter of Penns Woods, but is there a little bit of non-recurring kind of performance year-end stuff in
Speaker #3: that figure?
Speaker #4: Yeah.
Douglas Schosser: Yeah. Yep. As you true up all your incentive plans, production plans, and other things in the year-end, you've got a little bit of that lift in the fourth quarter as well. Correct.
Douglas Schosser: Yeah. Yep. As you true up all your incentive plans, production plans, and other things in the year-end, you've got a little bit of that lift in the fourth quarter as well. Correct.
Speaker #4: Yeah. As you true up all your incentive plans and production plans and other things in the year-end, you've got a little bit of that lift in the fourth quarter as well.
Speaker #4: Correct.
Speaker #3: Appreciate it. And one last one just on the margin, similar kind of question. The low 30, the 370 range, one, does that include accretion?
Douglas Schosser: Appreciate it. One last one just on the margin, similar kind of question. The low 3.0 to 3.70 range, one, does that include accretion, assuming it does? And then two, kind of the rate assumptions underlying that.
Jeff Rulis: Appreciate it. One last one just on the margin, similar kind of question. The low 3.0 to 3.70 range, one, does that include accretion, assuming it does? And then two, kind of the rate assumptions underlying that.
Speaker #3: Assuming it does, and then two, kind of the rate assumptions underlying that.
Speaker #4: Yeah. So it does include sort of normal contractual purchase accounting accretion. So there would be some slight variation to that when you've got early paydowns or payoffs.
Douglas Schosser: Yeah. So it does include sort of normal contractual purchase accounting accretion. So there would be some slight variation to that when you've got early paydowns or payoffs. So that's one thing to note. The other thing is we do have included in our guidance 3 rate cuts internally. Now, 1 of them was in January. We received a rate cut that we weren't expecting in December, so that effectively offsets it. So we would be thinking there's going to be 2 more rate cuts between here and the end of the year. However, we are pretty neutrally positioned, drifting slightly asset-sensitive, as I said in my remarks, but generally neutral. So our NIM guidance really isn't contingent on those 2 rate cuts. We would stick to that if there were only 1 rate cut or no rate cuts.
Douglas Schosser: Yeah. So it does include sort of normal contractual purchase accounting accretion. So there would be some slight variation to that when you've got early paydowns or payoffs. So that's one thing to note. The other thing is we do have included in our guidance 3 rate cuts internally. Now, 1 of them was in January. We received a rate cut that we weren't expecting in December, so that effectively offsets it. So we would be thinking there's going to be 2 more rate cuts between here and the end of the year. However, we are pretty neutrally positioned, drifting slightly asset-sensitive, as I said in my remarks, but generally neutral. So our NIM guidance really isn't contingent on those 2 rate cuts. We would stick to that if there were only 1 rate cut or no rate cuts.
Speaker #4: So that's one thing to note. The other thing is we do have included in our guidance three rate cuts internally. Now, one of them was in January.
Speaker #4: We received a rate cut that we weren't expecting in December. So that effectively offsets it. So we would be thinking there's going to be two more rate cuts between here and the end of the year.
Speaker #4: However, we are pretty neutrally positioned, drifting slightly assets outside of, as I said in my remarks, but generally neutral. So our NIM guidance really isn't contingent on those two rate cuts.
Speaker #4: We would stick to that if there were only one rate cut or no rate cuts.
Speaker #3: Got it. Thanks. The detail. Appreciate it.
Douglas Schosser: Got it. Thanks for the detail. Appreciate it.
Jeff Rulis: Got it. Thanks for the detail. Appreciate it.
Speaker #4: Yep. Thanks, Jeff, for the
Douglas Schosser: Yep. Thanks, Jeff, for the question.
Douglas Schosser: Yep. Thanks, Jeff, for the question.
Speaker #4: question. Your next question comes
Louis Torchio: Your next question comes from Tim Switzer with KBW.
Operator: Your next question comes from Tim Switzer with KBW.
Speaker #2: from Tim Switzer with KBW.
Speaker #5: Hey, good morning, Tim. My question.
[Analyst] (KBW): Hey, good morning, Tim.
Tim Switzer: Hey, good morning, Tim.
Douglas Schosser: Morning, Tim.
Douglas Schosser: Morning, Tim.
[Analyst] (KBW): Good morning, Tim.
Tim Switzer: Good morning, Tim.
Speaker #3: Good morning, Tim. The
Douglas Schosser: Yeah, morning.
Douglas Schosser: Yeah, morning.
Speaker #3: first one quick follow-up on the NIM and the Yeah, morning. purchase accounting. Can you clarify the overall net purchase accounting impact to NII this quarter?
[Analyst] (KBW): So first one, quick follow-up on the NIM and the purchase accounting. Can you clarify the overall net purchase accounting impact to NII this quarter? Because I think the slide deck referenced 4 basis points, but also $4 million, and my math on those don't quite add up to that. And then I guess just to clarify, is that also a good run rate going forward?
Tim Switzer: So first one, quick follow-up on the NIM and the purchase accounting. Can you clarify the overall net purchase accounting impact to NII this quarter? Because I think the slide deck referenced 4 basis points, but also $4 million, and my math on those don't quite add up to that. And then I guess just to clarify, is that also a good run rate going forward?
Speaker #3: Because I think the slide deck referenced four basis points, but also $4 million, and my math on those doesn't quite add up to that.
Speaker #3: And then, I guess just to clarify, is that also a good run rate going forward?
Speaker #4: Yeah, I'm not sure on the math piece, but yeah, the $4 million and the four basis points was effectively what we were kind of going back and recalculating all of that to.
Douglas Schosser: Yeah, I'm not sure on the math piece, but yeah, the $4 million and the 4 basis points was effectively what we were kind of going back and recalculating all of that to. Again, I would say, generally speaking, we had pretty positive movement across the balance sheet, right? We did have a rate cut in there. So you had improvements in loan yields, small, but they were there in the margin. You had improvement or you had lower deposit costs, and you also had improvements on the securities portfolio. And then you had that 4 basis points impact on purchase accounting. But again, all of those underlying metrics were driving up. Income-wise, of course, having a rate reduction in there sort of changes the income dynamic a little bit on a loan portfolio.
Douglas Schosser: Yeah, I'm not sure on the math piece, but yeah, the $4 million and the 4 basis points was effectively what we were kind of going back and recalculating all of that to. Again, I would say, generally speaking, we had pretty positive movement across the balance sheet, right? We did have a rate cut in there. So you had improvements in loan yields, small, but they were there in the margin. You had improvement or you had lower deposit costs, and you also had improvements on the securities portfolio. And then you had that 4 basis points impact on purchase accounting. But again, all of those underlying metrics were driving up. Income-wise, of course, having a rate reduction in there sort of changes the income dynamic a little bit on a loan portfolio.
Speaker #4: Again, I would say generally speaking, we had pretty positive movements across the balance sheet, right? We did have a rate cut in there. So you had improvements in loan yields, small, but they were there in the margin.
Speaker #4: You had improvement, or you had lower deposit costs, and you also had improvements on the securities portfolio. And then, you had that four basis points impact from purchase accounting.
Speaker #4: But again, all of those underlying metrics were driving up. Income-wise, of course, having a rate reduction in there sort of changes the income dynamic a little bit on the loan portfolio.
Speaker #3: I get you. Okay. But is four basis points a good run rate for purchase accounting? Obviously, depending on prepayments and things like that.
Douglas Schosser: I get you. Okay. But is 4 basis points a good run rate for purchase accounting, obviously dependent on prepayments and things like that?
Tim Switzer: I get you. Okay. But is 4 basis points a good run rate for purchase accounting, obviously dependent on prepayments and things like that?
Speaker #4: Yeah, probably. I mean, we would have had—as we went through the fourth quarter, of course, we closed our merger in July, right? So by the time we got through the end, the first two quarters are a little bit bumpy because you're still kind of catching up on everything.
Douglas Schosser: Yeah, probably. I mean, we would have had, as we went through Q4, of course, we closed our merger in July, right? So by the time we got through the end, Q1 and Q2 are a little bit bumpy because you're still kind of catching up on everything. But the guidance would fully incorporate those contractual purchase accounting. So I think if you kind of go with the low 370s guidance that were provided, that would be inclusive both of normal performance as well as the impact of purchase accounting. Again, it does not assume materially different levels of repayments.
Douglas Schosser: Yeah, probably. I mean, we would have had, as we went through Q4, of course, we closed our merger in July, right? So by the time we got through the end, Q1 and Q2 are a little bit bumpy because you're still kind of catching up on everything. But the guidance would fully incorporate those contractual purchase accounting. So I think if you kind of go with the low 370s guidance that were provided, that would be inclusive both of normal performance as well as the impact of purchase accounting. Again, it does not assume materially different levels of repayments.
Speaker #4: But the guidance would fully incorporate those contractual purchase accounting items. So I think if you kind of go with the low $370s guidance that we’ve provided, that would be inclusive of both normal performance as well as the impact of purchase accounting.
Speaker #4: Again, it does not assume materially different levels of repayments.
Speaker #3: Okay. Got it. And then I was looking for an update. You mentioned on the call, but on your SBA business, you mentioned about recently closing the funding.
Douglas Schosser: Okay. Got it. And then I was looking for an update. You mentioned on the call, but on your SBA business, you mentioned about recently closing funding. Could you maybe provide a little bit more details there? And then what are your growth expectations for this business going forward? And how much of that volume will you be retaining on the balance sheet versus looking to sell?
Tim Switzer: Okay. Got it. And then I was looking for an update. You mentioned on the call, but on your SBA business, you mentioned about recently closing funding. Could you maybe provide a little bit more details there? And then what are your growth expectations for this business going forward? And how much of that volume will you be retaining on the balance sheet versus looking to sell?
Speaker #3: Could you maybe provide a little bit more detail there? And then, what are your growth expectations for this business going forward? And how much of that volume will you be retaining on the balance sheet versus looking to sell?
Speaker #4: Yeah, Lou, I'll answer some of that, and I'll give you some of that. First of all, one of the things that we had the opportunity to do was balance sheet a bit more of that because we had some opportunistic fee income as the fully proceeds come through, and we had the opportunity to not have to take as many SBA gains.
Douglas Schosser: Yeah. Lou will answer some of that, and I'll give you some of that. First of all, one of the things that we had the opportunity to do was balance sheet a bit more of that because we had some opportunistic fee income. As the BOLI proceeds come through and we had the opportunity to not have to take as many SBA gains, we certainly did that within the quarter because obviously those are very nice yielding loans, and we'd like to have them on our balance sheet. And I think as we've talked about before, we do do national originations in the SBA business, but for our in-footprint clients, we tend to want to keep them on the balance sheet.
Douglas Schosser: Yeah. Lou will answer some of that, and I'll give you some of that. First of all, one of the things that we had the opportunity to do was balance sheet a bit more of that because we had some opportunistic fee income. As the BOLI proceeds come through and we had the opportunity to not have to take as many SBA gains, we certainly did that within the quarter because obviously those are very nice yielding loans, and we'd like to have them on our balance sheet. And I think as we've talked about before, we do do national originations in the SBA business, but for our in-footprint clients, we tend to want to keep them on the balance sheet.
Speaker #4: We certainly did that within the quarter. Because, obviously, those are very nice-yielding loans, and we'd like to have them on our balance sheet.
Speaker #4: And I think as we've talked about before, we do do national originations in the SBA business, but for our input print clients, we tend to want to keep them on the balance sheet.
Speaker #4: And the other thing that we'll tend to do is we'll manage a reasonable amount of growth in fee income from the SBA business, as well as balance sheeting a reasonable portion of that business.
Douglas Schosser: And the other thing that we'll tend to do is we'll manage a reasonable amount of growth in fee income from the SBA business as well as balance sheeting a reasonable portion of that business. I don't think we want to get into the cycle where we're booking all the gains and on that constant treadmill. So as we continue to build out the SBA vertical, we're going to do both. We're going to balance sheet, and we're going to sell for gains as we kind of migrate through the process. And then again, we are really excited about the build-out of that team and the fact that we've now reached the top 40 in SBA volume. Top 40 originators by volume.
And the other thing that we'll tend to do is we'll manage a reasonable amount of growth in fee income from the SBA business as well as balance sheeting a reasonable portion of that business. I don't think we want to get into the cycle where we're booking all the gains and on that constant treadmill. So as we continue to build out the SBA vertical, we're going to do both. We're going to balance sheet, and we're going to sell for gains as we kind of migrate through the process. And then again, we are really excited about the build-out of that team and the fact that we've now reached the top 40 in SBA volume. Top 40 originators by volume.
Speaker #4: I don't think we want to get into the cycle where we're booking all the gains and on that constant treadmill. So, as we continue to build out the SBA vertical, we're going to do both.
Speaker #4: We're going to balance sheet, and we're going to sell for gains as we kind of migrate through the process. And then, again, we are really excited about the build-out of that team and the fact that we've now reached the top 40 in SBA volume.
Speaker #4: Top 40 originators by volume.
Speaker #3: Yeah, Tim, this is Lou. Good morning. How are
[Analyst] (KBW): Yeah, Tim, this is Lou. Good morning. How are you?
Louis Torchio: Yeah, Tim, this is Lou. Good morning. How are you?
Speaker #3: you? Just a
Speaker #5: Hey,
Douglas Schosser: Good, Lou.
Tim Switzer: Good, Lou.
Speaker #5: Lou.
[Analyst] (KBW): Just a follow-up on Doug's comments and your question. We really like the flexibility that this provides for us for commercial loan growth, spread income on the balance sheet with the flexibility and the lever to generate fee income. We are just now in the early innings of scaling this business. We've invested a lot in people, a lot in the underwriting, due diligence, and portfolio management around this. And our strategy really is to capitalize on quality business nationally, but also, and maybe more importantly, to focus on driving customers and customer retention in the footprint in the four states we operate in. So we're going to layer this product, and we're looking at some other SBA products into our retail franchise. As we noted, we thought it was important to note in the call that the deal we did right here in Columbus.
Louis Torchio: Just a follow-up on Doug's comments and your question. We really like the flexibility that this provides for us for commercial loan growth, spread income on the balance sheet with the flexibility and the lever to generate fee income. We are just now in the early innings of scaling this business. We've invested a lot in people, a lot in the underwriting, due diligence, and portfolio management around this. And our strategy really is to capitalize on quality business nationally, but also, and maybe more importantly, to focus on driving customers and customer retention in the footprint in the four states we operate in. So we're going to layer this product, and we're looking at some other SBA products into our retail franchise. As we noted, we thought it was important to note in the call that the deal we did right here in Columbus.
Speaker #3: Following up on Doug's comments and your question, we really like the flexibility that this provides for us for commercial loan growth, spread income on the balance sheet, with the flexibility and the lever to generate fee income.
Speaker #3: We are just now in the early innings of scaling this business. We've invested a lot in people, a lot in the underwriting and due diligence and portfolio management around this.
Speaker #3: And our strategy really is to capitalize on quality business nationally, but also, and maybe more importantly, to focus on driving customers and customer retention in the footprint and the four states we operate in.
Speaker #3: So we're going to layer this product and we're looking at some other product SBA products into our retail franchise. As we noted, we thought it was important to note in the call that the deal we did right here in Columbus and so yeah, we're really happy with the business.
[Analyst] (KBW): And so, yeah, we're really, really happy with the business. We'll be like we are with all these businesses. We'll scale them prudently. We're not in a hurry to get to the top 10. So, yeah, really pleased with this. And most importantly, I think I'd like to drive the message that we've built the infrastructure to do this in a prudent manner.
And so, yeah, we're really, really happy with the business. We'll be like we are with all these businesses. We'll scale them prudently. We're not in a hurry to get to the top 10. So, yeah, really pleased with this. And most importantly, I think I'd like to drive the message that we've built the infrastructure to do this in a prudent manner.
Speaker #3: We'll be like we are with all these businesses. We'll scale them prudently. We're not in a hurry to get to the top 10. So yeah, really pleased with this.
Speaker #3: And most importantly, I think I'd like to drive the message that we've built the infrastructure to do this in a prudent manner. Yeah, got it.
Douglas Schosser: Yeah, got it. I mean, the strategy makes a lot of sense to me. You touched on it. If I could have one quick follow-up. There's been some disruption in the SBA space with the rising credit losses over the last few years, and then some of the SOP changes over the summer. Where are you finding the talent you're hiring from? And how are you going forward making sure that you guys are, as you mentioned, prudently running the business?
Tim Switzer: Yeah, got it. I mean, the strategy makes a lot of sense to me. You touched on it. If I could have one quick follow-up. There's been some disruption in the SBA space with the rising credit losses over the last few years, and then some of the SOP changes over the summer. Where are you finding the talent you're hiring from? And how are you going forward making sure that you guys are, as you mentioned, prudently running the business?
Speaker #3: I mean, the strategy makes a lot of sense to me. You touched on it. If I could have one quick follow-up, there's been some disruption in the SBA space with the rising credit losses over the last few years and then some of the SOP changes over the summer.
Speaker #3: Where are you finding the talent you're hiring from? And how are you going forward making sure that you guys are as you mentioned, prudently running the
Speaker #3: business? Yeah.
[Analyst] (KBW): Yeah. No, great question because it's very important, right? So as you know, we've kind of remade the executive suite here over the last couple of years. And Jay DesMarteau, who formerly was GE, TD Bank, and LendingClub, when he came to the firm, he had contacts that he was able to bring. So we know the management we're bringing in. We know the performance level, and we understand what their acumen is, and they have a long history of success. I wouldn't certainly want to name firms, but I would tell you, like all businesses, we've gone to the best and the best of the industry and recruited from those franchise. So we're really comfortable and have experience with the team.
Louis Torchio: Yeah. No, great question because it's very important, right? So as you know, we've kind of remade the executive suite here over the last couple of years. And Jay DesMarteau, who formerly was GE, TD Bank, and LendingClub, when he came to the firm, he had contacts that he was able to bring. So we know the management we're bringing in. We know the performance level, and we understand what their acumen is, and they have a long history of success. I wouldn't certainly want to name firms, but I would tell you, like all businesses, we've gone to the best and the best of the industry and recruited from those franchise. So we're really comfortable and have experience with the team.
Speaker #4: No, great question, because it's very important, right? So, as you know, we've kind of remade the executive suite here over the last couple of years.
Speaker #4: And JD Marto, who we formerly was GE, TD Bank, and Lending Club, when he came to the firm, he had contacts that he was able to bring.
Speaker #4: So we know the management we're bringing in. We know the performance level and we understand what their acumen is and they have a long history of success.
Speaker #4: I wouldn't certainly want to name firms, but I would tell you, like all businesses, we've gone to the best and the best of the industry and recruited from those franchises.
Speaker #4: So, we're really comfortable and have experience with the team.
Speaker #3: Yeah. That sounds great. Thank
Douglas Schosser: Yeah. That sounds great. Thank you, Lou.
Tim Switzer: Yeah. That sounds great. Thank you, Lou.
Speaker #3: you. Thank
[Analyst] (KBW): Thank you.
Louis Torchio: Thank you.
Speaker #1: Your next question comes from you. Daniel Tamayo with Raymond James.
Louis Torchio: Your next question comes from Daniel Tamayo with Raymond James.
Operator: Your next question comes from Daniel Tamayo with Raymond James.
Speaker #5: Hi, Dave. Good morning.
[Analyst] (Stephens Inc): Hi, Daniel.
Douglas Schosser: Hi, Daniel.
[Analyst] (Raymond James): Hey, good morning.
Louis Torchio: Hey, good morning.
Speaker #4: Hey, good morning, guys. This is Tim DeLacian for Danny. Hope
[Analyst] (Stephens Inc): Hey, good morning, guys. This is Tim DeLacy on for Danny. Hope you're doing well.
Tim DeLacey: Hey, good morning, guys. This is Tim DeLacy on for Danny. Hope you're doing well.
Speaker #4: you're doing well. Oh, hey,
Douglas Schosser: Oh, hey, Tim.
Douglas Schosser: Oh, hey, Tim.
Speaker #4: Hey, good Tim. morning.
[Analyst] (Stephens Inc): Hey, good morning. Hey, so just wanted to switch over maybe to the balance sheet. You had mentioned in the release you had targeted the securities portfolio increase in the quarter. Could you maybe share some details on maybe when the timing of when the securities were purchased during the quarter, and then kind of describe maybe your appetite to grow the security book relative to the asset base going forward?
Tim DeLacey: Hey, good morning. Hey, so just wanted to switch over maybe to the balance sheet. You had mentioned in the release you had targeted the securities portfolio increase in the quarter. Could you maybe share some details on maybe when the timing of when the securities were purchased during the quarter, and then kind of describe maybe your appetite to grow the security book relative to the asset base going forward?
Speaker #5: Hey, so just wanted to switch over maybe to the balance sheet. You had mentioned in the release you had targeted the securities portfolio increase in the quarter.
Speaker #5: Could you maybe share some details on maybe when the timing of when the securities were purchased during the quarter and then kind of describe maybe your appetite to grow the security book relative to the asset base going
Speaker #5: forward? Yeah.
Douglas Schosser: Yeah. So we looked at the opportunity. So again, I think we were keep growing our securities book a little bit because we were slightly underweighted if you sort of compared us to sort of peer banks and other things. We did take advantage of that a little bit earlier in the quarter, but not all of it. So basically mid to late October, and then there was a bit more done in November, mid to late November. And we'll continue to look at advantages for how do we sort of support that portfolio going forward. It's a very nice store of liquidity for us.
Douglas Schosser: Yeah. So we looked at the opportunity. So again, I think we were keep growing our securities book a little bit because we were slightly underweighted if you sort of compared us to sort of peer banks and other things. We did take advantage of that a little bit earlier in the quarter, but not all of it. So basically mid to late October, and then there was a bit more done in November, mid to late November. And we'll continue to look at advantages for how do we sort of support that portfolio going forward. It's a very nice store of liquidity for us.
Speaker #4: So we looked at the opportunity. So again, I think we were keeping growing our securities book a little bit because we were slightly underweighted, if you sort of compared us to sort of peer banks and other things.
Speaker #4: We did take advantage of that a little bit earlier in the quarter, but not all of it. So, basically, mid to late October, and then there was a bit more done in November—mid to late November.
Speaker #4: And we'll continue to look at advantages for how do we sort of support that portfolio going forward. It's a very nice store of liquidity for us.
Speaker #4: And also, as we've got an outlook for declining rates, we'll also do things like try to pre-purchase some of the securities that we see maturing within the quarter earlier in the quarter versus late, to try to pick up a little bit of yield benefit there as well.
Douglas Schosser: Also, as we've got an outlook for declining rates, we'll also do things like try to pre-purchase some of the securities that we see maturing within the quarter earlier in the quarter versus late, to try to pick up a little bit of yield benefit there as well. So really, I would just say it's generally prudently managing the investment portfolio and growing it slightly just to keep it sort of in line with peers. So I think we're targeting around 17% of loans or assets into that bucket.
Also, as we've got an outlook for declining rates, we'll also do things like try to pre-purchase some of the securities that we see maturing within the quarter earlier in the quarter versus late, to try to pick up a little bit of yield benefit there as well. So really, I would just say it's generally prudently managing the investment portfolio and growing it slightly just to keep it sort of in line with peers. So I think we're targeting around 17% of loans or assets into that bucket.
Speaker #4: So really, I would just say it's generally prudently managing the investment portfolio and growing it slightly, just to keep it sort of in line with peers.
Speaker #4: So I think we're targeting around 17% of loans or assets into that bucket.
Speaker #3: Okay, great. Thank you for that color, Doug. And then maybe just one follow-up. CRE down this quarter— you guys obviously have the capacity to grow the portfolio going forward here— but in that low to mid-single-digit guidance for loan growth in 2026, how should we be thinking about CRE as a contributor to the loan growth this...
[Analyst] (Stephens Inc): Okay. Great. Thank you for that color, Doug. And then maybe just one follow-up. TRE down this quarter. You guys obviously have the capacity to grow the portfolio going forward here, but in that low to mid-single-digit guidance for loan growth in 2026, how should we be thinking about CRE as a contributor to the loan growth this year?
Tim DeLacey: Okay. Great. Thank you for that color, Doug. And then maybe just one follow-up. TRE down this quarter. You guys obviously have the capacity to grow the portfolio going forward here, but in that low to mid-single-digit guidance for loan growth in 2026, how should we be thinking about CRE as a contributor to the loan growth this year?
Speaker #3: year? Yeah.
Douglas Schosser: Yeah. So you're right. We do have some opportunities there given the percentage of capital that we have related to our CRE book. It takes a while to turn that flow around, but we're definitely in the CRE business, and we continue to look for opportunities to sort of support that particular in our market. So again, it's not one of the businesses that we're aggressively growing nationally, but in our footprint, when there's good developers and operators and we have opportunities to sort of lend to those, we would. Again, we also have some non-performing assets that we or some criticized and classified assets that we talked about that are some real estate developers. So you're also seeing a little bit of that pressure on that overall line item. And again, we hope that that continues to abate as we get through next year.
Douglas Schosser: Yeah. So you're right. We do have some opportunities there given the percentage of capital that we have related to our CRE book. It takes a while to turn that flow around, but we're definitely in the CRE business, and we continue to look for opportunities to sort of support that particular in our market. So again, it's not one of the businesses that we're aggressively growing nationally, but in our footprint, when there's good developers and operators and we have opportunities to sort of lend to those, we would. Again, we also have some non-performing assets that we or some criticized and classified assets that we talked about that are some real estate developers. So you're also seeing a little bit of that pressure on that overall line item. And again, we hope that that continues to abate as we get through next year.
Speaker #4: So you're right. We do have some opportunities there given the percentage of capital that we have related to our CRE book. It takes a while to turn that flow around, but we're definitely in the CRE business.
Speaker #4: And we continue to look for opportunities to sort of support that particular in our market. So again, it's not one of the businesses that we're aggressively growing nationally, but in our footprint, when there's good developers and operators and we have opportunities to sort of lend to those, we would.
Speaker #4: Again, we also have some non-performing assets that we—or some criticized and classified assets that we talked about—that are some real estate developers.
Speaker #4: So, you're also seeing a little bit of that pressure on that overall line item. And again, we hope that that continues to abate as we get through next year.
Speaker #4: So again, we're looking forward to turning that CRE business around to get it to more flat to slight growth. And that's an opportunity that we have coming up in the next year or two.
Douglas Schosser: So again, we're looking forward to turning that CRE business around to get it to more flat to slight growth, and that's an opportunity that we have coming up in the next year or two.
So again, we're looking forward to turning that CRE business around to get it to more flat to slight growth, and that's an opportunity that we have coming up in the next year or two.
Speaker #3: Okay, great. Thank you for the color, guys. I really appreciate it.
[Analyst] (Stephens Inc): Okay. Great. Thank you for the color, guys. I really appreciate it.
Tim DeLacey: Okay. Great. Thank you for the color, guys. I really appreciate it.
Speaker #3: it. Thank
Douglas Schosser: Thank you.
Douglas Schosser: Thank you.
Speaker #1: Your next question comes from Kyle Gearman with Hovde Group.
Louis Torchio: Your next question comes from Kyle Gheorman with Hovde Group.
Operator: Your next question comes from Kyle Gheorman with Hovde Group.
Speaker #5: Hey, good morning. I'm on for Dave Bishop.
[Analyst] (KBW): Hey, good morning. I'm on for David Bishop. Yeah. So loan growth was strong this quarter. I was wondering if you could provide some color on what segments and geographic areas are leading the way and how the pipeline is looking headed to the new year.
[Analyst] (Hovde Group): Hey, good morning. I'm on for David Bishop. Yeah. So loan growth was strong this quarter. I was wondering if you could provide some color on what segments and geographic areas are leading the way and how the pipeline is looking headed to the new year.
Speaker #4: Yeah. So loan growth was strong this quarter. I was wondering if you could provide some color on what segments and geographic areas are leading the way and how the pipeline is looking ahead into the new year.
Speaker #5: Yeah. So the pipeline is looking very good. So we've had a nice improvement in the portfolio actually throughout last year and it continues into the first quarter.
Douglas Schosser: Yeah. So the pipeline is looking very good. So we've had a nice improvement in the portfolio actually throughout last year, and it continues into Q1. And I think I would say it's a broad-based level of growth. So we continue to see kind of growth on our national verticals. Where we're going to focus a little bit more is sort of in our four-state footprint and in some of our businesses that we think we can continue to attract talent and develop some growth opportunities in market. But again, I would say it's generally broad-based. There are some other things that might translate into some good business opportunities into 2026, like some of the tax changes that went through last term, including the expensing of equipment, is good for our equipment finance business, full expensing that you get on the tax benefit.
Douglas Schosser: Yeah. So the pipeline is looking very good. So we've had a nice improvement in the portfolio actually throughout last year, and it continues into Q1. And I think I would say it's a broad-based level of growth. So we continue to see kind of growth on our national verticals. Where we're going to focus a little bit more is sort of in our four-state footprint and in some of our businesses that we think we can continue to attract talent and develop some growth opportunities in market. But again, I would say it's generally broad-based. There are some other things that might translate into some good business opportunities into 2026, like some of the tax changes that went through last term, including the expensing of equipment, is good for our equipment finance business, full expensing that you get on the tax benefit.
Speaker #5: And I think I would say it's a broad-based level of growth. So we continue to see kind of growth in our national verticals. Where we're going to focus a little bit more is sort of in our four-state footprint and in some of our businesses that we think we can continue to attract talent and develop some growth opportunities in market.
Speaker #5: But again, I would say it's generally broad-based. There are some other things that might translate into some good business opportunities into '26, like some of the tax changes that went through last term, including the expensing of equipment is good for our equipment finance business, the full expensing that you get on the tax benefit.
Speaker #5: So again, everywhere that there's some opportunities, and we like the credit profile and we like the returns that we're getting on those loans, we've got people who are out there and ready to do the business.
Douglas Schosser: So again, everywhere that there's some opportunities, and we like the credit profile, and we like the returns that we're getting on those loans, we've got people who are out there and ready to do the business.
So again, everywhere that there's some opportunities, and we like the credit profile, and we like the returns that we're getting on those loans, we've got people who are out there and ready to do the business.
Speaker #4: Awesome, thank you. And maybe a follow-up on that. Could you touch on the payoff and prepayment trends you are seeing in the
[Analyst] (KBW): Awesome. Thank you. Maybe a follow-up on that. Could you touch on the payoff and prepayment trends you are seeing in the quarter?
[Analyst] (Hovde Group): Awesome. Thank you. Maybe a follow-up on that. Could you touch on the payoff and prepayment trends you are seeing in the quarter?
Speaker #4: quarter?
Speaker #5: Yeah. I mean,
Douglas Schosser: Yeah. I mean, again, we've been focusing on the criticized classified assets and continue to manage that down. So that was a pretty significant source of our paydowns. And then again, with interest rates falling, there's going to be other clients that are going to look to refinance existing loans. Obviously, we try to participate in those credits as well, but there's always a bit of a give and take in a rate environment that's changing. So I would just say there was nothing in particular that we'd point out on the paydown side, just sort of normal business flows. I will say.
Douglas Schosser: Yeah. I mean, again, we've been focusing on the criticized classified assets and continue to manage that down. So that was a pretty significant source of our paydowns. And then again, with interest rates falling, there's going to be other clients that are going to look to refinance existing loans. Obviously, we try to participate in those credits as well, but there's always a bit of a give and take in a rate environment that's changing. So I would just say there was nothing in particular that we'd point out on the paydown side, just sort of normal business flows. I will say.
Speaker #5: Again, we've been focusing on the criticized classified assets and continue to manage that down. So that was a pretty significant source of our paydowns.
Speaker #5: And then again, with the interest rates falling, there are going to be other clients that are going to look to refinance existing loans. Obviously, we're trying to participate in those credits as well, but there's always a bit of a give and take in a rate environment that's changing.
Speaker #5: So, I would just say there was nothing in particular that we'd point out on the paydown side—just sort of normal business flows.
Speaker #5: Awesome. I will say.
[Analyst] (KBW): Awesome. Thank you.
[Analyst] (Hovde Group): Awesome. Thank you.
Speaker #5: Thank you. I think, coming off
Douglas Schosser: I think that coming off of the year that we had focusing on the merger, now we're kind of back to business and running the bank more completely without having that distraction. So that'll also be helpful.
Douglas Schosser: I think that coming off of the year that we had focusing on the merger, now we're kind of back to business and running the bank more completely without having that distraction. So that'll also be helpful.
Speaker #4: After the year that we had focusing on the merger, now we're kind of back to business and running the bank more completely without having that distraction.
Speaker #4: So that'll also be helpful. Perfect. Thank you for the color.
[Analyst] (KBW): Perfect. Thank you for the color.
Tim Switzer: Perfect. Thank you for the color.
Speaker #1: Your next question comes from Matthew Brace with Stevens.
Louis Torchio: Your next question comes from Matthew Breese with Stephens Inc.
Operator: Your next question comes from Matthew Breese with Stephens Inc.
Speaker #1: Inc. Good
[Analyst] (Stephens Inc): Good morning.
Matthew Breese: Good morning.
[Analyst] (KBW): Good morning.
Douglas Schosser: Good morning.
Speaker #4: Good morning. morning.
Speaker #3: Just a few from me. The first thing quick, what was the exact amount of the bully death benefit? I was assuming about 6.5 million.
[Analyst] (Stephens Inc): Just a few from me. The first thing, quick, what was the exact amount of the BOLI death benefit? I was assuming about $6.5 million.
Matthew Breese: Just a few from me. The first thing, quick, what was the exact amount of the BOLI death benefit? I was assuming about $6.5 million.
Speaker #4: Yeah, I think that is a pretty good assumption because it was about $6.5 million.
Douglas Schosser: Yeah. I think that is a pretty good assumption because it was about $6.5 million.
Douglas Schosser: Yeah. I think that is a pretty good assumption because it was about $6.5 million.
Speaker #3: Okay. And then, Doug, you had talked a little bit about duty costs and upcoming maturities. I think you had said 43% maturing in the first quarter.
[Analyst] (KBW): Okay. And then, Doug, you had talked a little bit about CD costs and upcoming maturities. I think you said 43% maturing in the first quarter. As you're seeing the CD book kind of repriced mature, what is the blended new cost of CDs, including some of the higher-cost promotional stuff? I'm just trying to get a sense for where CD costs could go near term.
Matthew Breese: Okay. And then, Doug, you had talked a little bit about CD costs and upcoming maturities. I think you said 43% maturing in the first quarter. As you're seeing the CD book kind of repriced mature, what is the blended new cost of CDs, including some of the higher-cost promotional stuff? I'm just trying to get a sense for where CD costs could go near term.
Speaker #3: As you're seeing the CD book kind of reprice mature, what is the blended new cost of CDs, including some of the higher-cost promotional stuff?
Speaker #3: I'm just trying to get a sense for where CD costs could go near term.
Speaker #5: Yeah, I think we're seeing probably about a 10-basis-point opportunity. Again, it's all going to be based on competitive pressures at the time.
Douglas Schosser: Yeah. I think we're seeing probably about a 10 basis point opportunity. Again, it's all going to be based on competitive pressures at the time, but you're seeing that kind of an opportunity that evolves. We also have got, so we've got other savings products as well, and we're attracting new money at times, and we have some of those promotional rates, all of which is helpful. But I would say if you're kind of thinking about that 10 to 15 basis point opportunity on kind of the reprice with the markets coming down, that's probably fair.
Douglas Schosser: Yeah. I think we're seeing probably about a 10 basis point opportunity. Again, it's all going to be based on competitive pressures at the time, but you're seeing that kind of an opportunity that evolves. We also have got, so we've got other savings products as well, and we're attracting new money at times, and we have some of those promotional rates, all of which is helpful. But I would say if you're kind of thinking about that 10 to 15 basis point opportunity on kind of the reprice with the markets coming down, that's probably fair.
Speaker #5: But you're seeing that kind of an opportunity that evolves. We also have got—so we're not—we've got other savings products as well, and we're attracting new money at times.
Speaker #5: And we have some of those promotional rates, all of which is helpful. But I would say if you're kind of thinking about that 10 to 15 basis point opportunity on kind of the reprice, with the markets coming down, that's probably
Speaker #5: fair. Got it.
[Analyst] (KBW): Got it. And then the rest of the book, obviously, you have a lot of lower-cost categories. Just given the environment, we're hearing a lot more about competitive conditions. The core deposit book, how much more room is there to lower costs?
Matthew Breese: Got it. And then the rest of the book, obviously, you have a lot of lower-cost categories. Just given the environment, we're hearing a lot more about competitive conditions. The core deposit book, how much more room is there to lower costs?
Speaker #3: And then the rest of the book, obviously you have a lot lower cost categories. Just given the environment, we're hearing a lot more about competitive conditions.
Speaker #3: The core deposit book, how much more room is there to lower costs?
Speaker #5: Yeah, I mean, again, you're right. I think we're seeing that as well. And we're very focused on sort of managing both the overall size of the deposit book to support growth, as well as the overall cost of the book.
Douglas Schosser: Yeah. I mean, again, you're right. I think we're seeing that as well, and we're very focused on sort of managing kind of both the overall size of the deposit book to support growth as well as the overall cost of the book. And obviously, no one knows kind of where the rate hikes and cycles are going to go. But I would tell you that I think what we're seeing is you're just seeing a little bit of a longer period of time between a change in rates at the Fed and then sort of the reaction sort of of the banks in general. So I think we're kind of following that trend. So I'm not concerned that there's not an opportunity there, but that opportunity might just lag rate reductions by a little bit longer than it had in the past.
Douglas Schosser: Yeah. I mean, again, you're right. I think we're seeing that as well, and we're very focused on sort of managing kind of both the overall size of the deposit book to support growth as well as the overall cost of the book. And obviously, no one knows kind of where the rate hikes and cycles are going to go. But I would tell you that I think what we're seeing is you're just seeing a little bit of a longer period of time between a change in rates at the Fed and then sort of the reaction sort of of the banks in general. So I think we're kind of following that trend. So I'm not concerned that there's not an opportunity there, but that opportunity might just lag rate reductions by a little bit longer than it had in the past.
Speaker #5: The rate counts, rate hikes, and cycles are going to—and obviously, no one knows kind of where they'll go. But I would tell you that I think what we're seeing is you're just seeing a little bit of a longer period of time between a change in rates at the Fed and then sort of the reaction, sort of, of the banks in general.
Speaker #5: So, I think we're kind of following that trend. So, I'm not concerned that there's not an opportunity there, but that opportunity might just lag rate reductions by a little bit longer than it had in the past.
Speaker #5: So call it 30, 45 days before you're going to see sort of those rate.
Douglas Schosser: Call it 30, 45 days before you're going to see sort of those rate reductions.
Call it 30, 45 days before you're going to see sort of those rate reductions.
Speaker #5: reductions. Got it.
[Analyst] (KBW): Got it. Okay. And then this last one is on M&A, following the last deal. Curious your appetite to participate in whole bank M&A and whether or not there's active or ongoing or an increase in conversations? Thank you.
Matthew Breese: Got it. Okay. And then this last one is on M&A, following the last deal. Curious your appetite to participate in whole bank M&A and whether or not there's active or ongoing or an increase in conversations? Thank you.
Speaker #4: Okay, and then just last one is on M&A. Following the last deal, curious about your appetite to participate in whole bank M&A, and whether or not there are active, ongoing, or an increasing number of conversations.
Speaker #4: Thank
Speaker #4: Thank you. Yeah.
[Analyst] (Stephens Inc): Yeah. This is Lou. I'll take that. I think we've signaled in the past, and it remains true that we stay focused now on the successful accretion and driving organic growth in 2026 as a result of our acquisition. Certainly, we're open to conversations. Nothing imminent for us. We're really focused on making sure we execute the 2026 plan and that we get the results that are correlated with the acquisition. We think it's going to be very additive. We like our jump-off point, and we want to string together several quarters of strong results before we would entertain anything like that. Again, notwithstanding, given the regulatory environment and maybe some opportunistic deals as we get further along in this year and look into 2027, we'll keep our options open.
Louis Torchio: Yeah. This is Lou. I'll take that. I think we've signaled in the past, and it remains true that we stay focused now on the successful accretion and driving organic growth in 2026 as a result of our acquisition. Certainly, we're open to conversations. Nothing imminent for us. We're really focused on making sure we execute the 2026 plan and that we get the results that are correlated with the acquisition. We think it's going to be very additive. We like our jump-off point, and we want to string together several quarters of strong results before we would entertain anything like that. Again, notwithstanding, given the regulatory environment and maybe some opportunistic deals as we get further along in this year and look into 2027, we'll keep our options open.
Speaker #5: This is Lou. I'll take that. I think we've signaled in the past, and it remains true, that we stay focused now on the successful accretion and driving organic growth in '26 as a result of our acquisition.
Speaker #5: Certainly, we're open to conversations. Nothing imminent for us. We're really focused on making sure we execute the '26 plan and that we get the results that are correlated with the acquisition.
Speaker #5: We think it's going to be very additive. We like our jump-off point, and we want to string together several quarters of strong results before we would entertain anything like that.
Speaker #5: Again, notwithstanding, given the regulatory environment and maybe some opportunistic deals as we get further along in this year and look into '27, we'll keep our options open.
Speaker #5: However, our goal is to find something that fits culturally, that drives earnings and value for our shareholders. And that fits into our geographic footprint.
[Analyst] (Stephens Inc): However, our goal is to find something that fits culturally, that drives earnings and value for our shareholders, and that fits into our geographic footprint. So we're not interested really in going out of market at this point.
Matthew Breese: However, our goal is to find something that fits culturally, that drives earnings and value for our shareholders, and that fits into our geographic footprint. So we're not interested really in going out of market at this point.
Speaker #5: So we're not interested really in going out of market at this
Speaker #5: point. Great.
[Analyst] (KBW): Great. I appreciate you taking all my questions. I'll leave it there. Thank you.
Matthew Breese: Great. I appreciate you taking all my questions. I'll leave it there. Thank you.
Speaker #3: I appreciate you taking all my questions. I'll leave it there. Thank you.
Speaker #5: Thank
Speaker #5: you.
Douglas Schosser: Thank you.
Douglas Schosser: Thank you.
Speaker #1: Again, if you would like to ask a
Louis Torchio: Again, if you would like to ask a question, press star and the number one on your telephone keypad. Your next question comes from Manuel Navas with Piper Sandler.
Operator: Again, if you would like to ask a question, press star and the number one on your telephone keypad. Your next question comes from Manuel Navas with Piper Sandler.
Speaker #1: question, press star, and the number one on your telephone keypad. Your next question comes from Manuel Navas with Piper Sandler.
Speaker #4: Morning, Manuel. Good
Douglas Schosser: Morning, Manuel.
Douglas Schosser: Morning, Manuel.
Speaker #3: Hey, it's Emet.
[Analyst] (Stephens Inc): Hey, Tim. Good morning. Can we swing back to the NIM for a moment? Could you just talk about the guide? It's pretty strong, and just wondering what are the drivers and progression of the NIM across the year? I hear you on the CD book repricing being a little bit more neutral. Securities yields are benefiting, and loan yields are benefiting. Just kind of where does that kind of set the path across the year?
Manuel Navas: Hey, Tim. Good morning. Can we swing back to the NIM for a moment? Could you just talk about the guide? It's pretty strong, and just wondering what are the drivers and progression of the NIM across the year? I hear you on the CD book repricing being a little bit more neutral. Securities yields are benefiting, and loan yields are benefiting. Just kind of where does that kind of set the path across the year?
Speaker #3: Can we swing back to the morning NIM for a moment? Can we just talk about the guide? It is pretty strong, and I’m just wondering what are the drivers and progression of the NIM across the year?
Speaker #3: I hear you on the CD book repricing. Being a little bit more neutral, securities yields are benefiting and loan yields are benefiting. Just kind of, where does that set the path across the—
Speaker #3: year? Yeah.
Douglas Schosser: Yeah. I mean, we're not giving into kind of all that guide, but I think it's safe to assume that we would have a slightly improving margin as you get some of the benefit of those rate cuts, which I think most people are projecting those to be later in the year, right? So that 370 mid or low 370s is pretty consistent with where we were at 369 for the quarter. And I think we're working to hold on to that. The trade-off, obviously, is we also want to have asset growth. So to the extent that there's competition out there, we're not going to price ourselves out of that competition, but we're not anticipating a significant downward pressure either. So I think we're going to work to maintain that low 370s margin.
Douglas Schosser: Yeah. I mean, we're not giving into kind of all that guide, but I think it's safe to assume that we would have a slightly improving margin as you get some of the benefit of those rate cuts, which I think most people are projecting those to be later in the year, right? So that 370 mid or low 370s is pretty consistent with where we were at 369 for the quarter. And I think we're working to hold on to that. The trade-off, obviously, is we also want to have asset growth. So to the extent that there's competition out there, we're not going to price ourselves out of that competition, but we're not anticipating a significant downward pressure either. So I think we're going to work to maintain that low 370s margin.
Speaker #5: I mean, we're not giving into all of that guide, but I think it's safe to assume that we would have a slightly improving margin as you get some of the benefit of those rate cuts—which I think most people are projecting to be later in the year, right?
Speaker #5: So that 370—mid or low 370s—is pretty consistent with where we were at 369 for the quarter. And I think we're working to hold on to that.
Speaker #5: The trade-off, obviously, is we also want to have asset growth. So, to the extent that there's some competition out there, we're not going to price ourselves out of that competition, but we're not anticipating a significant downward pressure either.
Speaker #5: So, I think we're going to work to maintain that low-370s margin. And again, to the extent that it's going to have any sort of slope to it, it's going to be a little bit later in the year because you would expect to have some slightly lower funding costs that would benefit us.
Douglas Schosser: And again, to the extent that it's going to have any sort of slope to it, it's going to be a little bit later in the year because you would expect to have some slightly lower funding costs that would benefit us.
And again, to the extent that it's going to have any sort of slope to it, it's going to be a little bit later in the year because you would expect to have some slightly lower funding costs that would benefit us.
Speaker #3: I appreciate that. Another progression question. Emet, the charge-off range is pretty solid. What are some assumptions on that progression, or can you not get into that a bit?
[Analyst] (Stephens Inc): I appreciate that. Another progression question. And that charge-off range is pretty solid. Kind of what are some assumptions on that progression, or can you not get into that a bit?
Manuel Navas: I appreciate that. Another progression question. And that charge-off range is pretty solid. Kind of what are some assumptions on that progression, or can you not get into that a bit?
Speaker #5: I mean, yeah, I think that we have. So obviously, in the fourth quarter—and we talked about the guide last quarter, right—that $13 million, that was largely focused on.
Douglas Schosser: I mean, yeah, I think that we have so obviously in Q4, and we talked about the guide last quarter, right? That $13 million that was largely focused on, we had one significant credit that we knew we were working out, and we thought that there was going to be some lost content there. So now I think we're back into a much more normalized flow. So again, there may be a small peak or valley in one quarter given a credit or two that happens, and we're at a relatively overall low level, so you can get little spikes. But we're not anticipating it to be anything super material. So hopefully, we'll have that be a pretty steady charge-off rate throughout the year.
Douglas Schosser: I mean, yeah, I think that we have so obviously in Q4, and we talked about the guide last quarter, right? That $13 million that was largely focused on, we had one significant credit that we knew we were working out, and we thought that there was going to be some lost content there. So now I think we're back into a much more normalized flow. So again, there may be a small peak or valley in one quarter given a credit or two that happens, and we're at a relatively overall low level, so you can get little spikes. But we're not anticipating it to be anything super material. So hopefully, we'll have that be a pretty steady charge-off rate throughout the year.
Speaker #5: We had one significant credit that we knew we were working out, and we thought that there was going to be some loss content there.
Speaker #5: So now I think we're back into a much more normalized flow. So again, there may be a small peak or a valley in one quarter, given a credit or two that happens, and we're at a relatively overall low level.
Speaker #5: So, you can get little spikes, but we're not anticipating it to be anything super material. So, hopefully, we'll have that be a pretty steady charge-off rate throughout the year.
Speaker #5: And again, that guide is a guide for this year. Also, hearken back, we've kind of set our long-term guides always at that 25 to 35.
Douglas Schosser: And again, that guide is that guide for this year. Also, harking back, we've kind of set our long-term guides always at 25 to 35. So we're still anticipating being at the lower end of that kind of overall guide.
And again, that guide is that guide for this year. Also, harking back, we've kind of set our long-term guides always at 25 to 35. So we're still anticipating being at the lower end of that kind of overall guide.
Speaker #5: So we're still anticipating being at the lower end of that kind of overall.
Speaker #5: guide. That's a great
[Analyst] (Stephens Inc): That's great commentary. Switching back to loan growth for a moment. Can you talk about the mix? You spoke a little bit to CRE having some headwinds, but some building potential there. But can you just talk about the different segments and where you see the most growth? I'm guessing C&I has the biggest drivers, but just kind of speak across the loan book for this year with that low single-digit to mid-single-digit guide.
Manuel Navas: That's great commentary. Switching back to loan growth for a moment. Can you talk about the mix? You spoke a little bit to CRE having some headwinds, but some building potential there. But can you just talk about the different segments and where you see the most growth? I'm guessing C&I has the biggest drivers, but just kind of speak across the loan book for this year with that low single-digit to mid-single-digit guide.
Speaker #3: Commentary. Switching back to the loan growth for a moment, can you talk about the mix? You spoke a little bit to CRE having some headwinds, but some building potential there.
Speaker #3: But can you just talk about the different segments and where you see the most growth? I'm guessing C&I has the biggest drivers, but just kind of speak across the loan book for this year, with that low single-digit to mid-single-digit guide.
Speaker #5: Yeah, you'll probably get a little bit of feedback, both from Lou and I, on this topic, right? I think we see some opportunities kind of across the book.
Douglas Schosser: Yeah. You'll probably get a little bit of feedback both from Lou and I on this topic, right? I think we see some opportunities kind of across the book. So whether it be in indirect or even to the extent that we can start to think about the mortgage portfolio, how we slow some of that runoff, when we look at certainly what's going on in CRE, and then when we see our national vertical. So we like the way we're positioned to do business across all of them, and we'll be looking to kind of just support that overall asset growth that we're targeting, that low to mid-single-digit level. So again, I don't know that we would say it's going to continue to be solely focused just on commercial, but certainly we continue to have opportunity to grow commercial. And again, we've kind of talked about our overall mix.
Douglas Schosser: Yeah. You'll probably get a little bit of feedback both from Lou and I on this topic, right? I think we see some opportunities kind of across the book. So whether it be in indirect or even to the extent that we can start to think about the mortgage portfolio, how we slow some of that runoff, when we look at certainly what's going on in CRE, and then when we see our national vertical. So we like the way we're positioned to do business across all of them, and we'll be looking to kind of just support that overall asset growth that we're targeting, that low to mid-single-digit level. So again, I don't know that we would say it's going to continue to be solely focused just on commercial, but certainly we continue to have opportunity to grow commercial. And again, we've kind of talked about our overall mix.
Speaker #5: So whether it be an indirect, or even to the extent that we can start to think about the mortgage portfolio—how we slow some of that runoff—when we look at certainly what's going on in CRE, and then when we see our national vertical.
Speaker #5: So, we like the way we're positioned to do business across all of them, and we'll be looking to kind of just support that overall asset growth that we're targeting at that low- to mid-single-digit level.
Speaker #5: So, again, I don't know that we would say it's going to continue to be solely focused just on commercial, but certainly we continue to have opportunity to grow commercial.
Speaker #5: And again, we've kind of talked about our overall mix. We're not targeting any specific thing. I think we're about 45% commercial, 55% consumer. We like that.
Douglas Schosser: We're not targeting any specific thing. I think we're about 45% commercial, 55% consumer. We like that. We like it anywhere kind of in that 50%, 5% plus or minus on either side. So I think we like the shape of we like the way things are shaping up, and having an inverted yield curve also is nice. So we have the opportunity to kind of blend out a little bit on the longer end of that curve and pick up some yield that way as well. But Lou?
We're not targeting any specific thing. I think we're about 45% commercial, 55% consumer. We like that. We like it anywhere kind of in that 50%, 5% plus or minus on either side. So I think we like the shape of we like the way things are shaping up, and having an inverted yield curve also is nice. So we have the opportunity to kind of blend out a little bit on the longer end of that curve and pick up some yield that way as well. But Lou?
Speaker #5: We like it anywhere kind of in that 50%, 5% plus or minus on either side. So, I think we like the shape of—we like the way things are shaping up, and having an inverted yield curve also is nice.
Speaker #5: So, we have the opportunity to kind of blend out a little bit on the longer end of that curve and pick up some yield that way as well.
Speaker #5: But Lou?
Speaker #3: Yeah.
[Analyst] (Stephens Inc): Yeah. Good morning, Manuel. How are you? I would concur with Doug, right? So we're getting to the point of equilibrium where we're getting a lot of balance in the book. If you remember a couple of years ago, we were heavy consumer with a large focus in mortgage and long on the curve. As we continue to work that down, remix the sheet, we're nearing a 50/50, and we kind of like that both from an interest rate risk and a credit risk standpoint. We are very diversified for a firm our size in that I think that helps with the risk profile. We're not particularly overweighted in any one business. We have a lot of different levers. We think that this year, consumer, both mortgage, home equity, our indirect will be strong. And so driving, I think we're driving growth in our budget across all those sectors.
Louis Torchio: Yeah. Good morning, Manuel. How are you? I would concur with Doug, right? So we're getting to the point of equilibrium where we're getting a lot of balance in the book. If you remember a couple of years ago, we were heavy consumer with a large focus in mortgage and long on the curve. As we continue to work that down, remix the sheet, we're nearing a 50/50, and we kind of like that both from an interest rate risk and a credit risk standpoint. We are very diversified for a firm our size in that I think that helps with the risk profile. We're not particularly overweighted in any one business. We have a lot of different levers. We think that this year, consumer, both mortgage, home equity, our indirect will be strong. And so driving, I think we're driving growth in our budget across all those sectors.
Speaker #3: Good morning, Manuel. How are you? I would concur with Doug, right? So, we're getting to the point of equilibrium where we're getting a lot of balance in the book.
Speaker #3: If you remember, a couple of years ago we were heavy consumer, with a large focus in mortgage and long on the curve. As we continue to work that down, remix the sheet, we're nearing a 50/50, and we kind of like that, both from an interest rate risk and a credit risk standpoint.
Speaker #3: We are very diversified for a firm our size, and I think that helps with the risk profile. We're not particularly overweighted in any one business.
Speaker #3: We have a lot of different levers. We think that this year, consumer—both mortgage, home equity, and indirect—will be strong. And so, I think we're driving growth in our budget across all those sectors.
Speaker #3: We really like the position we're in. We like the flexibility that we have, and I think we're unique in that we do have these commercial national verticals.
[Analyst] (Stephens Inc): We really like the position we're in. We like the flexibility that we have. And I think we're unique in that we do have these commercial national verticals. As Doug pointed out, we have a renewed emphasis on in-market, business banking, lower middle market. We have what's recognized in the four states as a very, very strong consumer franchise. So we like the diversification, and we like the ability to be able to pivot. And we are focused on growth in 2026 organically on the heels of a pretty significant acquisition that would also drive top-line revenue. Thank you for that.
We really like the position we're in. We like the flexibility that we have. And I think we're unique in that we do have these commercial national verticals. As Doug pointed out, we have a renewed emphasis on in-market, business banking, lower middle market. We have what's recognized in the four states as a very, very strong consumer franchise. So we like the diversification, and we like the ability to be able to pivot. And we are focused on growth in 2026 organically on the heels of a pretty significant acquisition that would also drive top-line revenue.
Speaker #3: As Doug pointed out, we have a renewed emphasis on in-market business banking, lower middle market. We have what’s recognized in the four states as a very, very strong consumer franchise.
Speaker #3: So we like the diversification, and we like the ability to be able to pivot and we are focused on growth in 26 organically. On the heels of a pretty significant acquisition that would also drive top-line
Speaker #3: So, we like the diversification, and we like the ability to be able to pivot, and we are focused on growth in '26 organically. On the heels of a pretty significant acquisition, that would also drive top-line revenue.
Manuel Navas: Thank you for that.
Speaker #2: Thank you for that.
Speaker #1: There are no further questions at this time. I'll now turn the call back over to Lou Torchio, President and Chief Executive Officer, for closing remarks.
Speaker #1: There are no further questions at this time. I'll now turn the call back over to Lou Torchio, president and chief executive officer, for closing.
Louis Torchio: There are no further questions at this time. I'll now turn the call back over to Louis Torchio, President and Chief Executive Officer for closing remarks.
Operator: There are no further questions at this time. I'll now turn the call back over to Louis Torchio, President and Chief Executive Officer for closing remarks.
Speaker #3: Thank you. On behalf of the entire leadership team and the board of directors, thank you for joining our call this morning. I'm excited at our prospects in 2026 as we build out our consumer franchise in Columbus, Ohio, deepen relationships in our existing core markets, and continue to build market share in our commercial lines of business.
[Analyst] (Stephens Inc): Thank you. On behalf of the entire leadership team and the board of directors, thank you for joining our call this morning. I'm excited at our prospects in 2026 as we build out our consumer franchise in Columbus, Ohio, deepen relationships in our existing core markets, and continue to build market share in our commercial lines of business. I look forward to speaking to you on our Q1 call in the spring.
Louis Torchio: Thank you. On behalf of the entire leadership team and the board of directors, thank you for joining our call this morning. I'm excited at our prospects in 2026 as we build out our consumer franchise in Columbus, Ohio, deepen relationships in our existing core markets, and continue to build market share in our commercial lines of business. I look forward to speaking to you on our Q1 call in the spring.
Speaker #3: I look forward to speaking to you on our first quarter call in the spring.
Louis Torchio: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
