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Operator: Good morning, and welcome to SouthState Bank Corporation Q4 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Will Matthews. Thank you. Please go ahead. William Matthews: Good morning. This is Will Matthews, and welcome to SouthState's Fourth Quarter 2025 Earnings Call. I'm here with John Corbett, Steve Young and Jeremy Lucas. We'll make some brief prepared remarks and then move into Q&A. I'll also refer you to the earnings release and investor presentation under the Investor Relations tab of our website. Before we begin our remarks, I want to remind you that the comments we make may include forward-looking statements within the meaning of the federal securities laws and regulations. Any such forward-looking statements we may make are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in the press release and presentation for more information about our forward-looking statements and risks and uncertainties which may affect us. Now I'll turn the call over to you, John. John Corbett: Thank you, Will. Good morning, everybody. Thanks for joining us. As we wrap up the year, I'm really proud of what the SouthState team accomplished in 2025. Two years ago, we were deep into the due diligence phase of the independent financial deal. And it was big transformational move for us to do a deal that size and expand Westward into new markets in Texas and Colorado. Now over a several year period, I developed a friendship with David Brooks, Independent CEO, and felt good about the chemistry between our companies. But in a deal of that size, there's always a gut check moment when you weigh all the potential risks, all the things that can potentially go wrong and compare that with the rewards of moving forward. And ultimately, we did move forward and announced the deal in May of 2024. And during this past year of 2025, the SouthState team successfully navigated through that initial period of high risks, the regulatory approvals and the systems conversions, and now we're on the other side, enjoying the rewards of a well-choreographed integration. And in that regard, a special recognition and thanks goes to Mark Thompson. Mark's been working with us for over 20 years and will be retiring soon. But his last assignment was to move to Dallas with his wife and help us build personal friendships with our new partners in Texas and Colorado. And Mark did a great job leading the integration, and we're going to miss his leadership when he hangs up his jersey later this year. In addition to the social success, the deal paid off financially. Excluding merger costs, earnings per share in 2025 are up over 30% and it's not just EPS growth. We also experienced double-digit growth in tangible book value per share, and that's including the day 1 dilution from the deal, raising the dividend by 11% and share repurchases. So double-digit growth in both earnings per share and double-digit growth in tangible book value per share in 2025. And even though organic growth started slow at the beginning of the year, pipelines were building throughout the year, and many of those deals hit the books in the fourth quarter. We ended with 8% loan growth and 8% deposit growth during the quarter. Now as investors, you know that it's typical for bank valuations to lag in the first year of an integration. But with our confidence in how well things were going, we decided to be opportunistic and get more aggressive with our share repurchase plan. We purchased 2 million shares of SouthState stock or roughly 2% of the company in the fourth quarter. And our Board authorized a new share repurchase plan, adding an additional 5 million (sic) [ 5.56 million ] shares to the 560,000 shares remaining in the old plan. We didn't want to miss the opportunity to retire shares when there was such a disconnect between the fundamental performance of the bank and the valuation. When you take a step back, things are playing out right in line with our strategic plan. Our goal for 2025 was to have a clean conversion, achieve our cost save mandate and get the organization growing at historical levels by the fourth quarter. And the team accomplished those goals. The integration is now in the rearview mirror. The risk profile of the company is reduced. The fundamentals of the company are as good as they've ever been, and we're carrying that momentum into 2026. Will, I'll turn it back to you to walk through the moving parts on the balance sheet and the income statement. William Matthews: Thank you, John. I'll hit a few highlights on our operating performance and adjusted metrics, and then we'll move into Q&A. We had a good quarter to close out a very good year with PPNR of $323 million and $2.47 in EPS, resulting in a full year PPNR of $1.27 billion and EPS of $9.50. Our return on tangible common equity for the year was approximately 20%. I'll focus most of my remaining comments on the fourth quarter in comparison with Q3. High level, it was a good quarter for balance sheet growth and noninterest income, offset by higher noninterest expenses, much of which was driven by performance. Our margin and deposit costs were in line with our guidance with a 3.86% tax equivalent NIM and a 1.82% cost of deposits. As expected, accretion income of $50 million was down $33 million from the high we saw in Q3. And I'll note that we have approximately $260 million of remaining loan discount yet to be accreted into income. Our NIM, excluding accretion, was up 2 basis points. That produced net interest income of $581 million, which was down $19 million from Q3 or up $14 million, excluding accretion. Cost of deposits and total cost of funds were down 9 and 14 basis points, respectively. With the reduced accretion and the decline in rates, our loan yields of 6.13% were down 35 basis points, close to our new loan origination coupons of 6.06% for the quarter. As John said, we had good balance sheet growth in the quarter with loans and deposits growing at an 8% annualized rate. We also carried higher cash and Fed funds sold levels in the quarter, up almost $0.5 billion. Steve will give updated margin guidance in our Q&A. Noninterest income of $106 million was up $7 million, largely driven by performance in our correspondent Capital Markets division. This group's $31 million in revenue was one of our better quarters in that business. Although full year NIE was better than guided and modeled, Q4 NIE was higher than expected, partially due to higher performance and commission-based compensation, which were up a combined $6 million from Q3 levels. Fourth quarter performance in noninterest income businesses and the 8% annualized loan growth in the quarter led to higher expense in commissions and incentives. Additionally, marketing and business development spending was up a combined $6 million for the quarter. Even with these higher fourth quarter expenses coming through, our efficiency ratio remained below 50% for the quarter and the year. As we've previously stated, our expectations for 2026 NIE are that we lean into our initiative to expand revenue producers, which likely adds approximately 1% to an inflationary type, 3% NIE increase for an estimated 4% increase over 2025 NIE levels of $1.407 billion. Of course, this is subject to variability, as always, in certain performance compensation and loan origination expense offsets. NPAs declined slightly and credit costs remain low with a $6.6 billion provision expense. Our 9 basis points of Q4 net charge-offs brought the full year number to 11 basis points. We believe our reserve levels are adequate and future provision expense is likely to be primarily a function of loan growth and net charge-offs as we see a slowing of the rotation from PCD to non-PCD and the resultant downward pressure on the ACL. This, of course, assumes no significant changes in expectations for economic and credit conditions. John noted our capital return activity in the quarter with us repurchasing 2 million shares at an average price of [ $90.65 ]. Combined with our dividend, our total payout ratio was just shy of 100% for the quarter. Even with the higher balance sheet growth and higher share repurchase activity, our capital ratios remain very healthy. Our TCE ratio remained at 8.8%, and our CET1 ended the year at 11.4%. Looking back at the year in terms of capital, we closed the sizable acquisition January 1. We increased our dividend 11% in July. We repurchased 2.4% of the company, and yet we still grew TBV per share by 10%. Looking ahead, we believe we have the ability to continue to fund our growth and grow our capital levels while also being active in share repurchases, particularly when we believe there will be an inherent disconnect between our fundamentals and the share price. Operator, we'll now take questions. Operator: [Operator Instructions] Our first question comes from John McDonald from Truist Securities. John McDonald: I thought I would just ask Steve to give the thoughts on the net interest margin for the year and how you're thinking about deposit costs and growing deposits to fund the loan growth you expect? Stephen Young: Sure. Thanks, John. Yes, really not a lot of change from last quarter's guidance. We -- as Will mentioned on the call, our NIM was right at 3.86%, which is right in line with our guidance of 3.80% to 3.90%. Our deposit costs were down 9%. So as we think about the going forward assumptions, it's really 4 things: the interest-earning assets, rate forecast, our loan accretion and our deposit beta. And really, on our interest-earning assets last quarter, we talked that 2026 would average somewhere in the $61 billion to $62 billion range. We still reiterate that guidance. So no change there. We think that it will start off first quarter somewhere in the $60 billion to $60.5 billion range as we had some seasonal municipal deposits in the fourth quarter that sort of roll over in the first quarter. The rate forecast, three rate cuts, so there's really no change there. Loan accretion, we're forecasting $125 million for next year. So that's no change. And then the last is just our deposit beta. And last quarter, we talked about 27% being the number that we think to grow deposits or to fund loans would be the right number, and we still think that's the right number. So as we think about going into next -- into 2026, we see there's always a little bit of a lag, but by the end of the first quarter, we should be in a good shape to hit that for the last three rate cuts and maybe average in the 1.75% range for the first quarter for deposit costs. So based on all those assumptions, we would expect NIM to continue to be between 3.80% to 3.90% in 2026. We might see it start a little bit lower in the year coming out as we get the deposit cost in and then higher in the year as hopefully, we get the deposit costs and growth in the back-half. John McDonald: Okay. And inside of that earning asset outlook, could you talk about your loan growth expectations? You ended the year with good momentum with the 8% you cited. How are you feeling about the loan growth outlook for this year? John Corbett: Yes, it's John here. We communicated throughout the year that we saw the pipeline building and growing. Early in the spring last year, it was about a $3.4 billion pipeline. We ended the year at about a $5 billion pipeline. It's kind of leveled off at that level for the last few months, but that growth in pipeline led to production growth. So in the fourth quarter, production was up 16% versus the third quarter, a record for us at $3.9 billion, and that kind of gave us the mid-single-digit growth in the back half of the year that we guided to. Our guidance previously for 2026 was mid- to upper single-digit loan growth. We still think that, that is appropriate as we see these pipelines build and hold. John McDonald: Okay. And what would get you to the upper end, John, of the loan growth? John Corbett: One of the things that we're seeing in the pipeline, John, is some growth in investor commercial real estate, which really lagged last year. And we're seeing really nice pipeline builds in Texas and Colorado. And if that momentum continues, they had a pipeline of $800 million after the conversion this summer. Now it's up to $1.2 billion. So if they can keep that momentum, that would be the tailwind. Operator: Our next question comes from Stephen Scouten from Piper Sandler. Stephen Scouten: So I'm just curious on the hiring activity. Obviously, you had a pretty significant announcement back in the third quarter and then the announcement this week. Do you guys think about, especially maybe within that expense guidance, a number, a target that you hope to hit in terms of new hires? Or is it really just about being opportunistic across the platform and really just leaning into the opportunity set? John Corbett: Yes. I mean it's a pretty historic time here with the amount of disruption that is going on in our markets. I think I communicated before, we've calculated in our MSAs that we operate in, there's $118 billion of bank deposits that are going to go through a conversion in the next year or so. So that's a lot of creative destruction that's going to go on. We brought in, Stephen, in the neighborhood of 550 to 600 commercial RMs and I've told our team, if we increase that 10% or 15% in the next year or two, that would be perfectly fine to kind of build the base to continue seeing this organic growth -- loan growth. Stephen Scouten: Okay. Great. And that growth of 10% to 15% is kind of contained within that expense guide already, those sort of roundabout expectations? John Corbett: It is. Stephen Scouten: Great. Great. And then I guess my follow-up question would be kind of around correspondent banking and the strength there. Do you think the strength we've seen, especially in the last couple of quarters is sustainable? Or is there anything more episodic that's led to the strength there? Stephen Young: Yes. Thank you, Stephen. Yes, it's been a really great back half of the year for the correspondent Capital Markets and really driven by two things. I mean, we've had a change in rates. We had 75 basis point decrease in rates that was helpful for that business. The interest rate swaps were up $4 million quarter-over-quarter, fixed income is up $1 million, so -- but I would say, as you kind of look at the actual quarter and then kind of look at maybe more of the movie, as we think about those businesses from quarter-to-quarter move up and down, I would look at that business kind of on the average of the year because typically, in the first quarter or two, it's not quite as robust unless there's huge interest rate changes. And then towards the back half of the year, loan production picks up and we get more. So I would say for correspondent, what we're looking for next year is somewhere in the $25 million a quarter, maybe it starts out a little lower, ends up a little higher, somewhere in their $100 million business. That probably makes sense based on what we know right now. And if you kind of just look at noninterest income in total, this quarter, we were at 63 basis points of assets. But if you look at the year, we started out much lower than that. We were -- for the year, we were at 50 basis points -- I think, 56 or 57 basis points of assets. So I would kind of look at that and kind of use that forecast somewhere in that 55 to 60 basis point range for next year on a growing asset base as we talked about. So I think -- let's see how it goes, but I think looking at a full year picture, it's probably a better way to look at it, and let's see if the momentum continues. Stephen Scouten: Yes, that makes a lot of sense. And just when you guys talk about all the hiring activity, are some of those hires contained within that kind of correspondent banking division, any product expansions? Or is it mostly just more like commercial RMs? Stephen Young: The way that I'm talking about it is more the commercial RM space, Stephen. But I would say that, obviously, we're opportunistic everywhere in all business lines. For instance, about a year ago, we hired a team that's really helped us this past year in Houston on the SBA securitization business, and that's been a really great business and has really added to profitability. I think we hired that team in February of 2024, and that's really kind of come through. So there is always opportunistic hiring we're doing. We're trying to build out different products in the capital market space. So we're leaning into foreign exchange more, and we've made some key hires there. So what John is talking about is generally general bank, but we are opportunistic and very [indiscernible]. And from an expense standpoint, in the capital markets area, those are typically commission-based businesses, so it's really not an expense drag initially like there is in the commercial hiring side. Stephen Scouten: Fantastic, it sounds like a lot of good things going on across the bank. Appreciate the color. Operator: Our next question comes from Anthony Elian from JPMorgan. Michael Pietrini: This is Mike on for Tony. So I guess I'll start on expenses. You saw a little bit of an uptick in 4Q sequentially. Anything that we should back out to get a good run rate for 2026? And does expense growth of mid-single digits that you guys guided previously, does that still feel appropriate for 2026? William Matthews: Yes, Mike, it's Will. Yes, Q4 was really, I'd say, impacted by three things: One, performance. We had good performance in noninterest income businesses. We also had a pickup in loan growth, which feeds its way through in some of the incentive-based compensation for relationship managers. Secondly, there's always a bit of Q4 seasonality in an expense base that can sometimes cause the fourth quarter numbers to pick up a little bit. We did experience that this year. And then thirdly, I'd say just the more -- the greater focus and lean into our growth initiative on hiring and some of the expenses you saw, business development, advertising, things like that move up a bit. So really a combination of those factors for Q4. My guidance that I gave in the prepared remarks does incorporate all of those things. And I'd say, too, when you're in the hiring of relationship managers, you don't -- you can't always plan exactly when they become available and because you want quality folks, you grab them when you can. And so you plan out when you hope to hire them and when you think they might come in, but it's a case-by-case basis as to when they're actually brought on board. Michael Pietrini: Great. That makes sense. And then as a follow-up on the buyback, how quickly do you guys anticipate using that new authorization? I think you're at about 5.5 million shares now authorized. And is there price sensitivity at a certain level? I guess any commentary on that would be great. William Matthews: Sure, sure. Yes. I mean I think we would all acknowledge that capital return thoughts should be flexible, and that depend upon a number of factors, where the share price is relative to intrinsic value. Obviously, in the fourth quarter, we thought there was a pretty big disconnect. What's the economic outlook? What's your growth looking like? And then, of course, earnings and capital ratios feed into it as well. So it's really a quarter-by-quarter decision. You look at the fourth quarter, our total payout ratio when you include dividends and share repurchases was in the 97% range. But we did see a big disconnect in our minds between the share price and intrinsic value. But that's higher than is really sustainable long term for a growing company like ours. So it's unlikely we'd be that active going forward with that high of a payout ratio. But I'd say with all of those caveats, growth, share price, economic outlook, other factors that impact your appetite, you could see our total payout ratio of dividends plus repurchases somewhere in that 40% to 60% range. But of course, it could be higher or lower than that depending upon the circumstance. Operator: Our next question comes from Catherine Mealor from KBW. Catherine Mealor: I just wanted to do one follow-up on expenses. And I know you said this in the beginning, Will, but what was the base at which you're growing expenses by a 4% level? That was on operating expenses, right? William Matthews: Yes. Yes. I was using the $1.407 billion for 2025, growing that by 4% was our guidance. Catherine Mealor: Okay. Perfect. I just wanted to confirm that. Awesome. And then maybe one thing back to the margin, can you talk a little bit about -- the deposit beta commentary was great. It was good to see it come down. Just on loan yields, maybe talk a little bit about loan pricing and where you're seeing that. And I feel like you still have a really big back book loan repricing story from your fixed rate book. And Steve, you've given us some commentary in the past about the kind of balance between marked loans repricing lower and then your fixed rate loans repricing higher. And so you just kind of update on that balance and what we should expect to see there would be helpful. Stephen Young: Sure. No, that's -- I'll just update you on the repricing schedule. So we -- in the legacy bank fixed rate loans, we have about $4.3 billion repricing in the next 12 months. And it's right around 5% and I think the coupon is 5.06%, but somewhere in there. Last quarter, our new loan origination rate was 6.06%. So that's, call it, 1% higher, maybe something like that. So you've got a positive there. And then on the independent -- legacy independent book, you have about $2 billion coming due over the next 4 quarters, and it will reprice down from about 7.25%, which is the discount rate to around 6.25% because the inherent loan yields are higher out in Texas and Colorado. So -- yes, there's a positive net. If you look at that, that's roughly $2.3 billion at a 1% positive. We'll have to see where the yield curve ends up because just depending on where the 5-year treasury is, that will determine what that repricing is. If it gets steeper, it will be better. If it gets more flat, it will be worse. But what we saw last quarter was a total loan -- new loan production rate of 6.06% and in Texas and Colorado, the new loan production rate was 6.31%. Catherine Mealor: Great. So I mean, all else equal, if we're in an environment where the curve remains steeper, let's just -- I know you've got three cuts in your numbers, but let's just kind of take that out. If we're in a kind of a stable rate environment, there's enough momentum with the fixed rate repricing being higher than your independent repricing down where loan yields should continue to move higher as we move through the year. Stephen Young: Yes. I would say that yes, the answer is I think we have a sustainable NIM in that 3.80% to 3.90% range. And the way I would kind of characterize it on the NIM versus volume question is if we grow closer to 10%, then probably the margin will come down a little bit because we have to fund it on an incremental dollars, but we'll have higher NII. If we have lower growth, then it will be a little more margin and a little less volume. So I think the range is about right, and then it will be driven by how fast the growth is. Operator: Our next question comes from Jared Shaw from Barclays. Jonathan Rau: This is Jon Rau on for Jared. Maybe just thinking a little bigger picture about investments outside of hiring this year. Are there any projects planned on the tech side in the correspondent banking or anything else across the business that you're looking into? Stephen Young: Sure. Yes. Of course, every year, we go through a very intensive strategic planning process, and we have different investments that we're taking on this year. I think part of the investment relates to some commercial loan servicing platform that we are working on our syndication business, and that's an important piece from a back-office perspective in order to grow on the front office, middle market. We have investments in AI. We have investments in our FX platform. So all of those are included in Will's numbers, but there are -- definitely, we're always investing in the tech platform and the other platforms. But I'd say what's different this year and was part of Will's guidance is that we are very intentional about investing in revenue producers. And that's -- we've got a lot of the platforms already built. This is some finishing off the platforms, but it's really a focus on revenue producers. Jonathan Rau: Okay. Great. And then maybe on the deposit pricing side, starting the year at like 1.75%. Is that [Technical Difficulty] to migrate lower throughout the year? And I guess, does the beta move lower as we get further cuts and you get to a lower and lower deposit rate? Stephen Young: Yes. It's very similar to what we said last quarter. I think our view is the same. We're thinking that we start off around the 27% range, which is what we were in 2018, '19 when we were growing at this pace. If growth -- and let me say that there's always a little bit of a lag with that because of CD pricing, which is true for all your banks. But hopefully, by March, early April, we kind of get all that. If there's no more cuts, we'll get all that in there. And then hopefully, over time, we can move that over towards a 30% beta. But if we grow at the higher -- mid- to higher single digits, we're not sure about that. It could be 27%, it could be 28% but that will be the difference. It will be about how fast we grow will determine how much beta we'll get. Jonathan Rau: Okay. And then if I could just ask one more. It looks like there was some increase in substandard loans this quarter. Just any color on what drove that? Stephen Young: Yes. Overall, credit-wise, John, we had a decline in past dues, a decline in NPAs and a decline in charge-offs. All that stuff trended down. There was an increase in substandard. If you take out the NPAs, 99% of the substandards are current. And the increase was due to a handful of multifamily properties that are in lease-up. The credit team is not concerned about those. In fact, they've got a weighted average loan-to-value of 52%. So really tons of equity. It's just a timing issue in lease-up. Operator: Our next question comes from Gary Tenner from D.A. Davidson. Gary Tenner: Just wanted to ask a little bit about the loan production side. I know the $3.9 billion was a great number. Just curious if you could tell us how much was in Texas or if you want to combine Texas and Colorado and then what the comparative third quarter levels were for the same market? William Matthews: Yes. So in Texas and Colorado, their production was $888 -- Texas and Colorado combined $888 million. So that's 15% higher than the third quarter, which was $775 million. If you take those markets for the entire year of 2025 versus 2024, production is up 10%. So we're continuing to see the pipelines build and our recruiting is Dan Strodel, who's our President out there, has been very successful. Of the 26 commercial RMs that we added in the fourth quarter, 17 of those were in Texas and Colorado. So those guys have kind of weathered through the conversion and they've got a lot of momentum headed into 2026. Gary Tenner: Appreciate that. And just within that same footprint, in terms of the type of production you're getting, is it -- does it remain real estate heavy with a move to shift it towards more traditional C&I? Or what's the kind of the mix that you're seeing there? William Matthews: Yes. Historically, they've been a great CRE lender, and we want them to continue to do exactly what they've been doing historically, but we see an opportunity with some of the tech platform, the treasury management platform, the capital market platform that SouthState is introducing to layer on top of their commercial real estate business with C&I bankers, and that's where a lot of Dan's recruiting activity is occurring. So we'll see that finish [ economy ] in 2026, but we don't want them to stop what they're so good at and have been so good at. Operator: [Operator Instructions] Our next question comes from David Bishop from Hovde Group. David Bishop: Just in terms of the hiring efforts you mentioned there, you mentioned the disruption, I think over -- I think it was close to $120 billion in terms of bank deposits going through the conversions and such. As we look out into the year, you mentioned the '26 here. Are there sort of calling efforts you have like list of bankers, list of clients you're looking to target? Do we see something similar to that maybe in the latter half of the year in terms of lift outs? John Corbett: Yes. Richard Murray, President of our bank, kind of leads that effort with the group presidents, and they've got a very formal pipeline process of on-boarding new bankers just as we do with new clients in the third quarter, there were 200 bankers that were on our list that we were having conversations with. In the fourth quarter, it grew to 237. So it's -- and we're going to hire a small percentage of those, but those conversations are very, very active. Operator: And we have no further questions. I would like to turn the call back over to John Corbett for closing remarks. John Corbett: All right. Well, thank you again for joining us this morning on our call. Thank you for your interest in following our company. And if you have any follow-up questions about your models, don't hesitate to contact Will and Steve. Hope you have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Welcome to the Eastern Bankshares, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded for replay purposes. In connection with today's call, the company posted a presentation on its Investor Relations website, investor.easternbank.com, which will be referenced during the call. Today's call will include forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors These factors are described in the company's earnings press release and most recent 10-K filed with the SEC. Any forward-looking statements made represent management's views and estimates as of today, and the company undertakes no obligation to update these statements because of new information or future events. The company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliations, please refer to the company's earnings press release. I would now like to turn the call over to Bob Rivers, Eastern Executive Chair and Chair of the Board of Directors. Robert Rivers: Thank you, Joelle. Good morning, everyone, and thank you for joining our call. We hope your 2026 is off to a great start. With me today is Eastern's CEO, Denis Sheahan; and our CFO, David Rosato. As we close out the fourth quarter, I want to take a moment to reflect on another successful year and share my thoughts on the future. First, I want to welcome our new colleagues from HarborOne and express my sincere gratitude to all of our employees for their tremendous work throughout the year. It is their efforts that elevate Eastern's brand every day and make us distinctive as Eastern New England's hometown Bank. 2025 was a terrific year for Eastern, highlighted by a 62% increase in operating earnings, strong organic loan growth and a record level of wealth assets under management. We delivered strong financial metrics, continue to return capital to shareholders and our share price outperformed the regional banking index. Our results underscore the strength of our company of our relationship banking model and enhanced earnings power of the company. The merger with HarborOne was another important milestone in 2025. It strengthens our presence in key markets south of Boston and provides an entrance into Rhode Island. At $31 billion in assets and a highly concentrated footprint, we are the largest independent bank headquartered in Massachusetts and have the fourth largest deposit market share in Greater Boston. Our scale allows us to invest in the franchise and better serve our customers while preserving a nimble community-focused approach. Looking ahead, we believe Eastern is well positioned for 2026 and beyond. Our foundation is firmly in place, and we have the size and scale to compete effectively. Now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns. As a result, we will not pursue any acquisitions as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future. We are excited about the organic growth opportunities we see in the market in both our banking and fee-based businesses and expect to continue returning excess capital through share repurchases and prudently growing the dividend. We believe this approach will deliver meaningful value to our shareholders. Now I'll turn it over to Denis. Denis Sheahan: Thank you, Bob. I share Bob's comments in thanking the team for a successful 2025. We are well positioned entering 2026 to capture growth opportunities in our larger market, resulting in steady improvement in our profitability metrics. Our balance sheet is healthy, well capitalized, highly liquid and well reserved. We are frequently asked about M&A, and I want to echo Bob's comments. Simply put, we are not focused on M&A. We have plenty of opportunities to organically grow the company's earnings and enhance profitability, and that is our focus. We will allocate capital towards organic growth efforts and returning excess capital to shareholders while still maintaining appropriate capital levels. What excites me most is the organic growth opportunity ahead of us in both our legacy and newer markets. We see a significant runway to take share with our commercial banking and wealth management businesses and improve deposit growth. Strategic investments in hiring talent have been an important driver of growth. Eastern is a destination of choice for high-caliber talent, particularly those with large bank experience. We offer the size to compete effectively, yet are small enough for individuals to apply their expertise, make decisions and feel a sense of ownership. As a result, our lending teams, both new hires and long-tenured relationship managers remain energized. Our commercial lending platform is a key differentiator driven by the strength of our culture and capabilities. We can deliver the products and services expected for much larger banks while retaining the certainty of execution of local decision-making and deep understanding of our customers and communities. Our banking model continues to resonate with clients, reinforcing trust, building long-term relationships and attracting new business. The positive impact of our renewed growth focus and investments in talent was evident in 2025. Excluding the merger impact, total loans grew $1 billion or 5.6% for the full year on a stand-alone basis, driven primarily by strong commercial lending results. The legacy Eastern commercial portfolio increased 6% from the beginning of the year and pipelines remain solid heading into 2026. We originated $2.5 billion of commercial loans in 2025, with approximately half in commercial and industrial lending and half in commercial real estate. Wealth Management is an important component of our long-term growth strategy and the wealth demographics of our footprint provide significant opportunities. We have been pleased with the integration of the Eastern and Cambridge wealth teams and the progress made strengthening alignment between our wealth and banking businesses. Wealth assets reached a record high of $10.1 billion at year-end, including $9.6 billion in assets under management, driven by market appreciation and positive net flows. Still a lot of work to do, but we are encouraged by the momentum in wealth and optimistic about the growth opportunities in the years ahead. Turning to capital. Our ratios remained strong and well positioned to support our organic growth initiatives. At the same time, we recognize that given our profitability, we expect to generate capital in excess of what can be efficiently deployed through organic growth alone. This dynamic reinforces our commitment to aggressively return excess capital to shareholders primarily through share repurchases. That commitment was evident in the fourth quarter as we repurchased 3.1 million shares for $55.4 million or 26% of the total authorization announced in October. We are committed to rightsizing our capital through organic growth, share repurchases and quarterly dividends. We ended 2025 with a CET1 ratio of 13.2%. Assuming we execute the remainder of our existing share repurchase authorization, we estimate the CET1 ratio will decline to approximately 12.7% by June 30, at which point we anticipate seeking an additional share repurchase authorization subject to regulatory approval. We expect to continue to generate excess capital, but plan to manage our CET1 ratio towards the median of the KRX, which is currently 12%. We are pleased with our performance in 2025 and feel well positioned for 2026 and beyond. We believe that focusing on meaningful growth -- organic growth opportunities we have in front of us and returning excess capital, not M&A, will deliver meaningful value to shareholders for the foreseeable future. David, I'll hand it over to you to provide a review of our fourth quarter financials. R. Rosato: Thanks, Denis, and good morning, everyone. I'll begin on Slides 2 and 3 of the presentation. Q4 marked a strong finish to the year as we reported net income of $99.5 million or $0.46 per diluted share. Included in net income is a GAAP tax benefit related to losses from the investment portfolio repositioning completed in Q1 that accrued over the course of 2025 and nonoperating merger-related costs in the fourth quarter. Operating earnings of $94.7 million increased 28% linked quarter. On a per diluted share basis, operating earnings increased 19% to $0.44. Results benefited from the partial quarter impact of the merger, which closed on November 1 and reflected continued organic loan growth and return of capital to shareholders. Looking at Slide 4. We are pleased by the strength of quarterly trends across several key financial metrics, including operating ROA and operating return on average tangible common equity, reflecting stronger earnings performance and thoughtful balance sheet management. Operating ROA of 130 basis points for the fourth quarter is up 24 basis points from a year ago, while return on average tangible common equity of 13.8% increased from 11.3% over the same period. We continue to generate positive operating leverage as evidenced by an operating efficiency ratio of 50.1%, which improved from over 57% in the prior year quarter. Moving to the margin on Slide 5. Net interest income of $237.4 million or $243.4 million on an FTE basis increased $37.2 million from Q3. The growth was driven by margin improvement due to higher interest-earning asset yields. Included in net interest income was net discount accretion of $22.6 million compared to $10 million in the third quarter, reflecting the HarborOne merger impact. The margin of 3.61% was up 14 basis points from 3.47%. The yield on interest-earning assets increased 21 basis points, while interest-bearing liability costs were up 4 basis points. Net discount accretion contributed 34 basis points to the margin compared to 17 basis points in the prior quarter. Turning to Slide 6. Noninterest income of $46.1 million increased $4.8 million from the third quarter. Q4 results were highlighted by mortgage banking income, which increased $2.9 million to $3 million as we benefited from the addition of HarborOne's mortgage banking operations. Investment advisory fees increased $1.1 million to $18.6 million due to higher asset values as wealth assets reached a record high and interest rate swap income, which increased $500,000 to $1.4 million, the highest level since the third quarter of 2023, which benefited from our hiring last year of an experienced leader to head up foreign exchange and derivative sales. Turning to Slide 7. We highlight Wealth Management, our primary fee business. Wealth assets reached a record high of $10.1 billion, including AUM of $9.6 billion, driven by market appreciation and positive net flows. Wealth fees in Q4 accounted for 40% of total operating noninterest income, which was lower than recent quarters. This was due to the addition of HarborOne, which did not have a wealth management business. Moving to Slide 8. Noninterest expense was $189.4 million, an increase of $49 million linked quarter due to higher operating expenses and merger-related costs. Nonoperating expenses of $33.4 million increased $30.2 million linked quarter due to a $26.7 million increase in merger-related costs and a $3.5 million lease impairment. On an operating basis, expenses of $156.1 million increased $18.9 million due primarily to the addition of HarborOne. Moving to the balance sheet, starting with deposits on Slide 9. Period-end deposits totaled $25.5 billion, an increase of $4.4 billion or 21% from Q3, mostly due to the addition of $4.3 billion of HarborOne deposits. $163 million of HarborOne brokered deposits matured in the quarter, and we anticipate the remaining $85 million to run off in Q1. Excluding the merger impact, deposits increased $20 million. Importantly, while still early, we have not experienced any material drawdowns of HarborOne deposits. Total deposit costs of 159 basis points increased modestly from the third quarter, primarily due to a mix shift from the addition of the HarborOne deposit base, partially offset by pricing actions undertaken in the quarter. We are focused on growing deposits to support our funding strategy and remain disciplined in balancing the needs of our very strong deposit base with that of the margin. Looking ahead, as we thoughtfully integrate the HarborOne deposit base, we anticipate deposit costs to remain slightly elevated. However, we will work deposit costs down and target deposit betas like our experience during the most recent tightening cycle or about 45% to 50% with lags relative to Fed actions. Turning to Slide 10. Period-end loans increased $4.7 billion or 25% linked quarter, primarily due to the addition of $4.5 billion of HarborOne loans. Excluding the merger impact, loans increased $255 million or 1.4%, primarily due to continued strong commercial lending. On a full year basis, organic loan growth was $1 billion or 5.6%, driven by commercial and steady growth in consumer home equity lines. Heading into 2026, commercial pipelines remain solid. Slide 11 is an overview of our high-quality investment portfolio. The portfolio yield was up 1 basis point to 3.04% from Q3. In addition, the AFS unrealized loss position ended the quarter at $259 million after tax compared to $280 million at September 30. In addition, securities acquired from HarborOne totaling $298 million were sold following the completion of the merger and the proceeds used to reduce HarborOne's wholesale funding. Turning to Slide 12. Our capital position remains strong as indicated by CET1 and TCE ratios of 13.2% and 10.4%, respectively. As Denis stated earlier, we are committed to rightsizing capital through organic growth, share repurchases and quarterly dividends. This commitment was evident in Q4 with the repurchase of 3.1 million shares for $55.4 million or 26% of the authorization announced in October at an average price of $17.79, which was $0.44 below the VWAP for the quarter. Our diluted common shares outstanding were 224.4 million as of year-end. To start 2026, we have repurchased an additional 635,000 shares through yesterday for a total cost of $12.3 million and now have 8.1 million shares remaining in our authorization that runs through the end of October. However, we currently anticipate completing the authorization around midyear. Additionally, our Board approved a $0.13 dividend for the first quarter. As displayed on Slide 13, asset quality remains excellent as evidenced by net charge-offs to average total loans of 18 basis points and reflects the quality of our underwriting and proactive risk management approach, addressing issues prudently and quickly. Nonperforming loans increased as expected by $103 million linked quarter, mostly due to $94 million of loans acquired from HarborOne that were thoroughly assessed and adequately reserved. We have very strong reserve coverage of 35% on these loans. The HarborOne NPLs are largely driven by a handful of larger CRE loans across a mix of property types and one C&I loan. We expect to see resolution of several credits in the first half of 2026. Others may take longer, but we have action plans for each loan and our managed asset group has strong experience in working through acquired nonaccruing loans. Reserve levels remain strong as demonstrated by an allowance for loan losses of $332 million or 144 basis points of total loans. These metrics are up from $233 million or 126 basis points at the end of Q3 due to the initial allowance established for acquired HarborOne loans. Criticized and classified loans of $793 million or 5% of total loans increased from $495 million or 3.8% of total loans at the end of Q3. The increase is entirely from HarborOne loans as Eastern legacy criticized and classified loans decreased $23 million. Finally, we booked a provision of $4.9 million, down from $7.1 million in the prior quarter. On Slides 14 and 15, we provide details on total CRE and CRE investor office exposures. Total commercial real estate loans are $9.5 billion. Our exposure is largely within local markets that we know well and is diversified by sector. The largest concentration is the multifamily at $3.1 billion, which is a strong asset class in Greater Boston due to ongoing housing shortages. Within our Eastern legacy portfolio, we have had no multifamily nonperforming loans and have had no charge-offs in this portfolio for well over the past decade. We remain focused on investor office loans. The portfolio is now $1.1 billion or 5% of our total loan book with the addition of HarborOne. Criticized and classified loans of $178 million or about 16% of total investor office loans compared to $138 million or 17% of total investor loans at the end of Q3. In addition, our reserve level of 5% remains conservative. Before discussing our 2026 outlook, I want to briefly review the HarborOne merger financials starting on Slide 16. We are on track to achieve the merger-related financial targets set forth at the time of our announcement last year. Notably, as indicated on our third quarter call, we early adopted the CECL accounting standard ASU 2025-08, which marginally reduced accretion and marginally helped tangible book value due to the elimination of the day 2 credit reserve. Slide 17 outlines the final purchase accounting adjustments relative to estimates at time of announcement. These came in as expected. The interest rate fair value mark on loans of $246 million was modestly higher than estimated at announcement. The credit mark of $104 million at closing was spot on [indiscernible] consistent with expectations and the result of a very thorough review of the HarborOne loan portfolio. On Slide 18, we provide an estimated schedule of accretion and amortization for the fair value marks that will impact earnings going forward from the HarborOne merger. Most notable is the accretion of the discount on acquired loans. We expect this will create net interest income of approximately $12 million to $13 million each quarter for the next year. For acquisitions prior to HarborOne, we anticipate accretion will provide net interest income of approximately $9 million to $10 million per quarter in 2026. We have modeled the loan accretion schedule based on the best information we have available, but actual accretion recognized is subject to loan prepayments over time. We provided a similar schedule following the close of the Cambridge transaction, and the actual results have been generally consistent with our projections, which reinforces our confidence in these estimates. Also provided on Slide 18 is the expected amortization of the core deposit intangible for HarborOne, which will be reported in noninterest expense. We anticipate this noncash expense to be approximately $8 million to $9 million per quarter over the next year. We are focused on merger integration and ensuring a smooth transition for customers and employees while capturing the projected cost savings and other long-term benefits of the transaction. As a reminder, the core system conversion is scheduled for February. On Slide 19, we provide our full year outlook for 2026. Loan growth for 2026 is anticipated to be 3% to 5% and deposit growth of 1% to 2%. Based on market forwards as of year-end, we anticipate net interest income to be in the range of $1.20 billion to $1.50 billion with a full year FTE margin of 3.65% to 3.75%. While provision will be based on the evolution of credit trends in 2026, we currently expect $30 million to $40 million of provision expense. Operating noninterest income is expected to be between $190 million and $200 million, this assumes no market appreciation impacting our wealth management business. Also, fee income is seasonally weaker in the first quarter and grows in subsequent quarters. Operating noninterest expense should be in the range of $655 million to $675 million. As a reminder, Q1 expenses are impacted by seasonally higher payroll and benefit costs of approximately $2 million to $3 million. We expect a full year tax rate on an operating basis of approximately 23%. We will maintain a strong capital position as we manage our CET1 ratio towards 12%. Continuing our 2026 outlook on Slide 20, we have significant capital return opportunities. We believe focusing on organic growth within our existing footprint, returning capital through share repurchases and prudently growing the dividend and not pursuing acquisitions will deliver meaningful value to shareholders for the foreseeable future. This concludes our comments, and we will now open up the line for questions. Operator: [Operator Instructions]. And your first question comes from Feddie Strickland from Hovde. Feddie Strickland: Just wanted to drill down on the margin. I appreciate the guide, but is the idea that we maybe see the core margin relatively flat near term as you focus on growing deposits and holding on to the HarborOne deposits and then maybe we see more expansion later in the year? R. Rosato: Feddie, it's David. Yes, that is accurate. Our margin forecast does ramp up each -- marginally each quarter, accelerates a little bit in the back half of the year. Just as a reminder, we -- that forecast is based on market forwards of 2 rate cuts in June and September. So the impact as if those 2 cuts come to be, steeper yield curve and margin expansion. Feddie Strickland: Great. And just one more, if you could talk about the pipeline mix today and what percentage of maybe C&I versus owner-occupied CRE, nonowner-occupied CRE and HELOCs we might see in terms of loan growth over the next couple of quarters? Denis Sheahan: Yes. Feddie, it's Dennis here. We -- the pipeline remains strong across our different commercial businesses, whether it's commercial real estate, community development lending and C&I. It's down somewhat from our peak, which was during the fourth quarter, but we have a good mix. It's about a little bit more than 50% CRE, between CRE and community development lending and the other, say, 45% is C&I. But we had a lot of closings here to end the year. So it's good. We'll expect it to continue to grow certainly in first and second quarter. Operator: Your next question comes from Damon DelMonte from KBW. Damon Del Monte: So just curious on the outlook for the provision of $30 million to $40 million. Just wondering if that's higher than we saw this year for realized provision. Just kind of curious on your thoughts of the credit landscape. And are you sensing there's some softness, which is leading you to kind of step that up on a year-over-year basis? R. Rosato: The guidance is similar to what we gave last year. And then in '25, we outperformed the guidance. Our thoughts are generally the same. We tend to leave lean, a little conservative and hope to outperform what we have there. But I wouldn't read too much into concerns that we have on the credit front. Denis Sheahan: Yes. We're not seeing -- Damon, it's Denis here. We're not seeing any material shift in our credit metrics, credit trends in the marketplace. I think as David said, he outlined sort of the rationale for the provision, but there's nothing underneath it that has us concerned. Damon Del Monte: Okay. Great. And then just given the timing of the deal closing during the quarter, David, can you give us a little guidance on what a pro forma average earning asset base would be in the first quarter, also considering that you paid off some brokered CDs and wholesale stuff from the HarborOne side? R. Rosato: Sure, Damon. There was very modest deleveraging, as you know, in the securities portfolio, it was $298 million. So I would take the period-end balance sheet and -- 12/31 and then the growth numbers that we've laid out for loans and deposits. The only thing I'd add to that would be a slight uptick, maybe 1% of total assets in the securities portfolio, but that will be throughout the year. We haven't been reinvesting in bonds for a while. So we're going to -- we're targeting about 15% of total assets and securities. So little growth there. And Damon, just one other thought is similar to this year, residential mortgage balances will be basically flat. So the growth will come, as Denis said, in commercial and then HELOCs, consistent with 2025. Operator: Your next question comes from Gregory Zingone from Piper Sandler. Gregory Zingone: First question, nice quarter on the AUM growth. Would you be able to break out the growth between market appreciation and the net flows? Denis Sheahan: Yes. We had about $200 million of net flows in the fourth quarter, really strong, good momentum building in terms of the integration of the business here at Eastern. Referrals from our colleagues across the bank, whether it be from the Commercial Banking division or the retail division into Wealth Management are building nicely. So we're very pleased with the progress there. And hopefully, that will continue into 2026. Gregory Zingone: Awesome. And then pivoting back to credit for a second. Would you be able to give us a little more color on those nonperforming credits, maybe including whether or not these loans were located in downtown Boston? R. Rosato: Sure. They -- first of all, they are not located in downtown Boston. The NPLs were completely driven by HarborOne. And what I would point you to, it's -- they're mostly CRE. There's one C&I loan in there. There's no surprises in there whatsoever to us. We followed these loans from the beginning of due diligence all the way through to today. We have plans, resolution plans for each one of those. Some will actually be resolved this quarter. And I'd point you to the originally telegraphed credit mark and the final credit mark, which is exactly the same. So there was no surprise whatsoever in that book. Gregory Zingone: Okay. And at what point in your workout phase would you guys entertain a larger sized loan sale for any of these portfolios, whether they're nonperforming or criticized? Denis Sheahan: We don't see that as necessary here. We certainly -- in terms of resolving the loans, you might look at individual loan sales, but we don't think that this is significant enough to entertain sort of a blanket portfolio sale. Again, as David said, we have these well identified through the merger process, the merger evaluation. These loans are being closely monitored by HarborOne. They may not have been nonaccruing, but there's some deterioration that we expected, and that's why we had a significant credit mark in those, and that was part of our overall evaluation of the firm and of the merger. So we're confident in our ability to resolve these here relatively quickly. And we don't think we need to do any kind of a bulk portfolio sale. Operator: [Operator Instructions]. Your next question comes from Laura Hunsicker from Seaport Research. Laura Havener Hunsicker: So David, if I could just come back to you on margin. Just a couple of things here. When in the quarter did you guys do the whole investment portfolio repositioning on HONE? R. Rosato: Right out of the chute. So the first couple of days of November. Laura Havener Hunsicker: Perfect. Okay. Cool. And then do you have a spot margin for December? R. Rosato: I do -- similar to, I think, 2 quarters ago, let me give you an adjusted spot margin because there was a bunch of accretion that came through in December. I think the most representative number would be 3.64% from December. So yes -- no, so what I was going to say is just a basis point below the lower end of our margin guidance. And together with the comments I said that the margin will incrementally creep up over the course of the year. Laura Havener Hunsicker: Got you. Got you. Okay. And then just looking at Slide 18, I love this slide. I really appreciate you including it. So your actual accretion impact, the 11.4%, that's 17 basis points on margin, and I look to first quarter, so it looks like that's going to be about 20 basis points or so, kind of that's the run rate, 19 to 20 basis points of accretion income on margin. Is that correct? So just thinking about your guide of 3.65% to 3.75%, that's obviously inclusive of that, just making double share here. R. Rosato: Yes. The guide includes the numbers you see on Slide 18. Again, I just want to caution everyone, there's variability quarter-to-quarter. If you go back to third quarter -- second quarter and third quarter of last year, we had a $6.5 million swing linked quarter. So this is our best estimate based on a lot of analytical work and what happened. Though there's variability quarter-to-quarter in Cambridge Trust. Life of the deal, we're basically spot on. That's the good news. But it will bounce around each quarter. Denis Sheahan: And to be clear, Laurie, this is -- what you see in the schedule is the accretion for HarborOne. As David indicated in his comments, there's an additional $9 million to $10 million of accretion from former mergers that being mostly Cambridge, but also Century. R. Rosato: Yes. Thank you, Denis. And Laurie, just make sure you read the footnotes. Everyone read the footnotes because we've laid out the remaining accretion and amortization expense for each deal. Laura Havener Hunsicker: Okay. Sorry, where is that? R. Rosato: It's just the footnotes, the bottom of Page 18. Laura Havener Hunsicker: Right. Okay. Got you. Got you. Got you. Okay. And then just going back over to credit. I just want to make sure I got right. So looking at the increase in the commercial nonperformers from $51 million to $147 million, $96 million, $94 million came from HONE and that's 35% reserved? Denis Sheahan: Yes. Yes. Laura Havener Hunsicker: Okay. And then as we look throughout the year, you said you'd reduce it. Can you just help us think about when is that $94 million gone? R. Rosato: That's difficult to answer. I know it's a handful of loans. I know there will be some resolutions in the first and second quarter. I can't be more specific than that. We -- I would point you back to our experience with Cambridge Trust. We had an initial jump up in NPLs, and we worked those down quite quickly. It took a couple of quarters, but a year after that deal, all that stuff had been worked through. And I would expect similar experience here, maybe even a little faster. Laura Havener Hunsicker: Perfect. Perfect. And then MBFI exposure, do you have an update there? Denis Sheahan: Yes. I mean it's -- Laurie, it's still -- it's in the same ballpark, a little over $500 million. And again, for us, a big chunk of this is affordable housing. It's lending to organizations that provide affordable housing in the state. That's about $120 million of that $0.5 billion. There's another $250 million is to REITs that lend in our market. These are direct loans that we look at and we underwrite right alongside the REIT. It's in the multifamily space largely. And then there's about $100 million of asset-based lending that are fully followed asset-based credits. So it's not a particularly large segment for us, and that constitutes the composition of the portfolio. Laura Havener Hunsicker: Right. Okay. Okay. And then just shifting over here, the $3.5 million lease impairment, where is that showing up exactly? Is that a credit against your other noninterest income? Or is that sort of separate sale of other assets category? Where do you -- where is that line? R. Rosato: It runs through the nonoperating expense line. So it was a building... Unknown Executive: But on the income statement... R. Rosato: Through the... Unknown Executive: Nonoperating... R. Rosato: Nonoperating expense, yes. Laura Havener Hunsicker: Okay. Okay. It's in the other. Okay. And then can you just talk a little bit about -- you had a drop in that sort of the -- within sort of other -- it's broken out at the end, the sale of other assets, the loss of $700,000, what's that relative to -- it was $1.5 million last quarter. R. Rosato: Yes. That was just the associated leasehold improvements in that building that had the -- that had the lease. So there's 2 components. Laura Havener Hunsicker: Okay. And how should we think about that running? R. Rosato: One time event. Laura Havener Hunsicker: Okay. Okay. Okay. So that line should run 0-ish. Unknown Executive: Yes. Laura Havener Hunsicker: Okay. Okay. Okay. And then last question, Denis, to you. Can you just share a little bit about -- and this maybe kind of circles back to HoldCo. I realize you're not probably going to comment. But again, your outlook, Page 20, last bullet, not pursuing acquisitions, all in bold. I mean, I think that's great. It's certainly more definitive than we were last quarter. So directionally, you've gotten stronger on that. Can you just share a little bit about your thinking around that and how you come to be? And certainly, we love that you're leaning more into buybacks. But just can you share a little bit about how you came to this position? Denis Sheahan: Well, we've outlined, Laurie, just look, we're not pursuing acquisitions. We're entirely focused on the growth of this company, the organic growth. We're excited about the potential in each of our businesses. That's what we're leaning into. We recognize returning capital to our shareholders is the best use in terms of that excess capital. And so we're leaning heavily into buybacks. As I said in my comments, we think we'll manage our CET ratio down over time towards 12%, which is a pretty significant decline from where it is today. And we still think it leaves us with very comfortable and safe capital levels. So we're going to lean into buybacks. We're going to do all the blocking and tackling of growing this business one customer at a time. And that's what we're looking forward to. And we're just -- we're not pursuing acquisitions. Operator: Your next question comes from Janet Lee from TD Cowen. Sun Young Lee: For -- I don't know if this is talked about yet. For your fee income, could there be -- where do you see better upside? And then did you also talk about what you would do with HarborOne's mortgage banking business? Would you be beneficiary if mortgage comes back more fully if the rates were to go down a little more? And what's sort of your outlook for other fee income line for the investment advisory business fees or others that could be -- that could potentially surprise to the upside versus where you have on your guide? R. Rosato: Sure, Janet. So I called out in my comments that the guide was assuming no market appreciation in the Wealth Management business. So you can make a judgment of expected returns of the S&P 500. And if it's up, there's additional fee income that will be derived there. So I want to make sure we're clear about that. The -- I think over, over time, fee income from HarborOne's mortgage business will probably be 8% to 10% of total fee income. We will -- you're right, we would be a large beneficiary if there's a drop in rates, there's an increase in refi activity or even purchase activity. We're not counting on that. We're not -- we're -- time will tell if that's true. It's a highly efficient well-oiled business that they run. We're still in the process of integrating that into legacy Eastern. That business will be part of the system conversion next month. But it gives us an option on fee income, and it also gives us an option on the ability to feed our balance sheet with residential mortgage if we ever choose to do so. That's not -- as I said, to Damon, our expectation is we're going to keep our residential mortgage portfolio flat in 2026, just as we did in 2025 and favor HELOC and commercial loan growth. Sun Young Lee: Got it. And just one follow-up. really appreciate the comment around how you're staying focused on organic and probably there's more opportunities for buyback. You talked about 12 -- getting that CET1 down to 12.7% by the June quarter. When you say managing towards that 12%, is there sort of a time line around when you want to get down to that peer level beyond that June guidance that you gave? Denis Sheahan: Well, Janet, it's Denis. I think assuming there's a lot of assumptions in there. The first one being that we finish and we believe we will, let's see the existing buyback authorization by about midyear. And at that point, we would look to request approval for another buyback. And thinking about the profitability of the company, the amount of excess capital we believe we will generate because organic growth will not absorb that excess capital. So it will give us room to continue to execute and do buybacks. We will continue to manage down that pro forma, say, 12.7% to a lower level and towards 12% as we execute that additional buyback. So we don't have a precise point in time, but our intent is to continue to manage it. It's, of course, subject to where stock price, et cetera. We want to be disciplined and responsible as we execute the buyback. But nonetheless, that is our intent. Operator: And your next question comes from Feddie Strickland from Hovde. Feddie Strickland: Just had a quick follow-up on loan growth. Is there any seasonality or particular slower or faster quarter in terms of loan growth just as we think about the guide within the course of the year? Denis Sheahan: Yes. It's a little bit like a frozen thunder here in the first quarter. So it would build more throughout the year, Feddie. Pipelines build into the first quarter. But certainly, as you get late Q1 into Q2 and Q3, that's typically when most of our production happens and round off the end of the year nicely as we did this year. But typically, Q1 is a little slower. Do you agree, David? R. Rosato: Yes, 100%. Operator: And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks. Robert Rivers: Well, thanks again, folks for joining our call this morning. We hope you fare well during the winter and look forward to talking with you again in the spring. Operator: This concludes today's conference call. You may now disconnect. Thank you.
Operator: Hello, and welcome, everyone joining today's Kimberly-Clark de México Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the meeting over to CEO, Pablo Gonzalez. Pablo Roberto González Guajardo: Thanks so much. Hello, everyone. Thanks for participating on the call. We wish you and your families a terrific 2026. We'll go straight to results and then make some brief comments about the quarter and our expectations going forward. So I'll pass it on to Xavier. Xavier Cortés Lascurain: Thank you, Pablo. Good morning, everyone. Our sales reached MXN 14.1 billion in the fourth quarter, an increase of 2.1% versus the same period of 2024. Total volume was flat and price/mix improved 2%. Growth was driven by consumer products, which expanded 5.5%, supported by healthy year-over-year growth of 1.4% and price/mix of 4.1%. Export hard rolled sales continued to decline as we converted more tissue towards higher-value domestic products. Sequentially, results continued to improve from Q3 to Q4 as sales increased 4.8%, with Consumer Products up 8.5% primarily volume less, reflecting strong commercial execution, the planned innovations to products and improved market dynamics. Cost of goods sold was flat and as a percentage of sales improved by 130 basis points. Compared to last year, virgin fibers, recycled fibers, SAM and resins were favorable, partly offset by higher fluff costs. The peso remained supportive with an average appreciation of roughly 8%. Our cost reduction program once again delivered solid results, generating approximately MXN 500 million in savings during the quarter, mostly within cost of goods sold. These efficiencies came from sourcing, materials optimization and ongoing process improvements across our operations. As a result, gross profit increased 5.4% and our margin reached 40.4%, reflecting both disciplined revenue management and cost tailwinds. SG&A expenses increased 0.8% year-over-year and as a percentage of sales decreased 22 basis points as we continue to carefully prioritize brand investment and overhead efficiency. Operating profit grew 9.2%, and our operating margin expanded to 22.9%. We generated MXN 3.7 billion of EBITDA, an increase of 6% with an EBITDA margin of 26.4%, a 140 basis point sequential improvement and 100 basis point expansion versus the fourth quarter of 2024. Financing cost was MXN 398 million compared to MXN 350 million last year, driven mainly by lower returns on cash balances. Net income reached MXN 2.2 billion with EPS of MXN 0.73, a 23% increase year-over-year. For the full year, sorry, sales reached an all-time record of MXN 55.4 billion, up 1.1%. EBITDA was MXN 14.1 billion, representing 25.5% of sales, while margins declined 170 basis points due to the cost pressures we faced, particularly during the first half of the year. Net income was MXN 7.6 billion or 13.7% of sales. Throughout 2025, our cost reduction initiatives delivered MXN 1.95 billion in savings, driven by sourcing, operating efficiencies and product design optimization. We invested MXN 1.8 billion in CapEx, consistent with our plan and focused on technology upgrades, cost reductions, efficiencies and strategic capacity additions. We also repaid MXN 3.7 billion of debt, paid MXN 6.2 billion in dividends and repurchased nearly 43 million shares, equivalent to 1.4% of shares outstanding. We closed the year with a strong and healthy balance sheet. Total cash stood at MXN 9.7 billion. Net debt-to-EBITDA was 1.0x, and EBITDA to net interest coverage remained very solid at 10x. Thank you very much. I return it to Pablo. Pablo Roberto González Guajardo: Thanks. So we continue to operate against a soft consumer backdrop. However, we've delivered year-over-year growth, strong margins and a meaningful sequential improvement. Consumer Products performance was notably stronger, supported by innovations and commercial initiatives. Overall, consumer confidence remains subdued and private consumption growth has moderated. Within retail, value formats and private label continue to gain share as shoppers seek savings, while e-commerce growth remains robust. Against this backdrop, our categories continue to show resilience, and our brands have benefited from our strong innovations, price and mix discipline and market execution. As we get into 2026, we have solid plans to strengthen our core businesses, accelerate growth in our diamond categories, expand into adjacencies and new categories, most notably in pet food as well as participate in markets we have traditionally not emphasized in the past, such as private label. On costs, we're seeing the benefits of lower pulp, recycled fibers, resins and superabsorbent materials, which together with a stronger peso, will provide important tailwinds as we move into 2026. Cost reduction program remains a key structural lever, and we will stay aggressive in sourcing, product design and process efficiencies. A few additional comments before we open it up for Q&A. First, Kimberly-Clark Corporation, our strategic partner, announced in November its agreement to acquire Kenvue. This combination will create a leading global health and wellness company with a complementary consumer portfolio and expanded capabilities. As the transaction progresses towards closing expected in the second half of 2026, we will evaluate potential strategic implications for Kimberly-Clark de México, including the possibility of integrating Kenvue's operations in Mexico. Our focus will remain on achieving operational excellence and capturing value-accretive growth opportunities for the business. Additionally, we will hold our Annual Shareholders Meeting on February 26, where the Board will propose a dividend increase in the high single digits, reflecting our solid cash generation and confidence in future performance. We will also propose a share repurchase program, which will remain significant and aligned with our commitment to disciplined capital allocation. One final note. Starting with the first quarter results, we will be releasing them to the public on the third Tuesday of the month after the end of the quarter as soon as the Board approves them at the regularly scheduled meeting later on the same day, and we will hold our call early on Wednesday morning. In summary, looking ahead to 2023, we face 2026, we face external risks, including ongoing tariff uncertainty and a slower domestic demand backdrop tied to softer formal employment and slower remittances. However, we are optimistic. We are entering 2026 with better momentum than 2025, and we have mitigating factors to those risks, including our leading positions in essential categories, portfolio initiatives focused on value and affordability, continued excellent execution with customers and, of course, a robust balance sheet. With that, let me turn it over to questions. Operator: [Operator Instructions] Our first question comes from Alejandro Fuchs with Itaú. Alejandro Fuchs: Congratulations on the results. I have 2 very quick ones. First for Pablo. I was wondering, Pablo, if you could comment on the expectations for this year, maybe on competitive environment, what you're expecting? And maybe if you can elaborate a little bit more into going into private label, how relevant do you think this will be for the business in the medium to longer term? And then the second one, very quickly to Xavier. I was wondering, Xavier, if you could give us some color on the tax rate during the quarter. I think it was quite low. So maybe you could explain a little bit more what was the case, that would be very helpful. Pablo Roberto González Guajardo: Thanks, Alejandro. Thanks for being on the call. Yes, first, on the competitive environment, I mean, we faced a pretty competitive environment during 2025, again, given that the economy is not growing much and consumption is subdued. I don't think it was more aggressive than in some years past, but it certainly was, I would say, maybe a tidy more aggressive. And we expect that to continue this year. I mean we expect the economy to grow at a higher rate not what it should be growing, but certainly at a higher rate. So we expect categories to expand a little bit, but competitors to be aggressive to try and gain share and grow at a faster clip than categories. So nothing that we haven't seen in the past. This is the nature of our categories. And against that backdrop, I guess, we performed very, very well, particularly in consumer products during the second half of the year and we're entering with that momentum and with stronger shares into 2026. And we've got plans on innovation, price mix, et cetera, that I think will carry us forward. So we're pretty optimistic with the year as a whole. It might start a little bit slow, but I think for the year as a whole, we're pretty optimistic. On private label, as I mentioned in my opening remarks, and you guys know this, I mean, given the consumer is so stretched, private label has been gaining ground in many categories, not only ours. We've been able to fend off on our part the private label, given our -- the strength of our shares, but it is no doubt increasing. It's important and both hard discounters and overall retailers are pushing it forward. So what we decided to do is to participate more aggressively in private label, and we put together a dedicated team with dedicated assets to look into this and with some early successes. And we will be going forward, competing on private label and of course, competing overall in the market for this business. So we expect this can be a benefit for us going forward. And together with, again, strengthening our core, accelerating diamond categories, being more aggressive on the supply chain front with Kimberly-Clark Corporation, Private label, I think, can add an additional opportunity for growth in KCD Mexico's case. Javier, on the tax rate? Xavier Cortés Lascurain: Sure. Alejandro. You are correct in pointing out that the tax rate -- the effective tax rate shown in the fourth quarter was lower than what we traditionally have. And that, of course, also had an impact for the full year. This comes from an accounting adjustment that primarily reflects improvements in our estimation processes and those yielded a more accurate estimate, and that allowed us to reverse some provisions. This adjustment does not result from any change in our tax strategy nor from the adoption of new tax positions or any aggressive tax assumptions. And it will also not impact how much taxes we pay. This is -- these are mostly accounting and noncash adjustments. And let me underline that we continue to apply a consistent, conservative and very responsible approach to tax accounting. So I hope that helps. Operator: Our next question comes from Ben Theurer with Barclays. Benjamin Theurer: Congrats on the results. Two very quick ones. So one, obviously, 2025, you've done a relatively good job on continued cost savings initiatives. And I mean, the run rate was really good. So if you could share maybe how you think about that into 2026, also in the backdrop of the better environment that you're expecting? And then as it relates to raw materials, I mean, I would say it was mixed, but obviously, FX supportive. So how do you feel about the raw material price environment and then obviously, as FX as a tailwind and how that then ultimately comes down to profit margins into 2026? Pablo Roberto González Guajardo: Thanks, Ben. Thanks for the questions. First, on the cost reduction program, as we've said before, I mean, this is really an essential part of our culture. And that's why year-over-year and every year we deliver very strong results. And we are confident 2026 will not be the exception. We have identified already upwards of MXN 1 billion in savings for this year and most likely will be close to what we achieved in 2025. And again, this is just part of our culture of continuously looking for opportunities in product design and sourcing and materials on efficiencies to continue to improve our execution operationally. So we expect another strong year on our cost reduction program, and we are off to a very, very good start. When it comes to raw material price environment, I mean, we're entering 2026 in a very different position as most of our raw materials are -- have come down, and we don't necessarily expect them to continue to go down throughout the year. But certainly, they will compare very, very favorably at least through the first half of the year and maybe through the whole year. I mean it's hard to tell these things can -- they're very volatile and they can change. But the scenario we're looking at right now is pretty favorable to start the year together with the exchange rate. So we do expect, as you could see in the fourth quarter, that to trickle down to our margins on the bottom line. Operator: We will move next with Antonio Hernandez with Actinver. Antonio Hernandez: Congrats on your results. I wanted to check what's the current standpoint on the Nutec partnership? At what stage are you currently in terms of operations, distribution and sales? Pablo Roberto González Guajardo: Sure. Thanks, Antonio. We -- as you know, we entered the pet food business in the second quarter of last year and really have been working on ramping that up over the last half of last year, and that will continue to be our priority this year. We continue to gain space at shelf as consumers have reacted very, very positively to the products, I would say, particularly to the premium offering, so Prime Care. And as that has happened, of course, retailers have become more and more interested in giving us more space, putting the brand out there, and that is allowing us to increase our penetration. And that will be our main focus still on 2026. As we said from the very beginning, this is a category that will contribute to our results in the medium term. It won't be immediate. But I think we continue to make very good strides, and we believe 2026 will be a breakout year for us in that sense. And in the coming years, it should be a category that delivers more in terms of both top line and bottom line for Kimberly-Clark de México. Operator: We will move next with Renata Cabral with Citibank. Renata Fonseca Cabral Sturani: I have one that is a follow-up about the consumer segment that you just commented. Just would like to ask if you can provide some color in terms of price mix for this quarter. And since last quarter, I think it's performing really well, and you already commented something about why this is going well. And my second question is if you can comment something about dividends and buybacks for 2026. Pablo Roberto González Guajardo: Sure. First, on the price/mix, Renata, I mean, as we mentioned, Consumer Products overall grew 5% for the quarter. Volume was a little bit over 1% and price/mix was a different 4%. And when you look at price and mix, if you break it down, it was pretty much even, 2.1% price was up and mix was up 2%. And again, this is not only a testament to the discipline on our pricing, but also on our good commercial execution and the effort we've placed on improving our mix in all of our categories and driving consumers up to the higher tiers. And we've been very successful, for example, in doing that in bathroom tissue as we move users up to Cottonelle. So even in a very, I would say, subdued consumer environment, we've shown that we can bring mix and price to the table. So those 2 components together with gaining a little bit of volume, that's what really has delivered a very strong showing for Consumer Products in fourth quarter and also third quarter. So we'll continue to work on that to think about where we see pricing opportunities, continue to push for a stronger and better mix and of course, continue to look for ways to grow the categories and volume. So it's really the combination of the 3 that allowed us to post these results, and that will that's the objective for 2026 is to continue to move on all those 3 fronts. When it comes to dividends, as we mentioned, we will have our shareholder meeting late in February, and we will be discussing with the Board on February 10, the dividend that we want to propose and the repurchase program that we want to go forward with. But we are -- we will -- we know we'll be proposing a dividend increase in the high single digits. And again, this reflects our solid cash generation and confidence in future performance. So it will be another year where we provide this high single-digit dividend increase into 2026. Xavier Cortés Lascurain: And we will also be proposing a share buyback, which will continue to be significant. Operator: We will move next with Guilherme Mendes with JPMorgan. Guilherme Mendes: I have 2. First, on your short-term and long-term thoughts about the degree of cannibalization between private label and your own branded portfolio. Where do you see it now? And long term, is there some, let's say, mindset around what degree of cannibalization this can make to your long-term volumes in your core branded brands? And secondly, if you could share more thoughts around what the Kenvue potential acquisition in Mexico could mean in terms of incremental revenue, CapEx, returns? That's it. Pablo Roberto González Guajardo: Thank you. Thanks for the questions. First on cannibalization. Look, with our strategy of multi-tier, multichannel, multi-brand in our categories, our brands have held up steady very, very nicely. I mean our shares are very strong in many categories growing, even though private label in the category is growing. So in many, many instances, we're the #1 player with very strong shares and then private label is now the second player in those categories. So we will continue to focus on our brands, and I want to be very, very clear about that. Our brands are our priority. We're a branded consumer products company. But given the opportunity for growth in private label and the fact that we believe we could be good partners with some of our clients in strategic areas, we want to participate -- and -- but our, again, multi-tier innovation program, multichannel, multi-brand continue to be the priority. And as it's held up very strongly until this point, we expect it to continue to hold on very strongly going forward. We just see an added opportunity for growth if we can participate in private labels. And as we've started to do this, we've seen some early success. So we'll see what it means going forward. But I can't stress enough that our main priority is our brands, innovation behind our brands and bringing to consumers the best products at the best cost in every single tier, in every single channel with the best brands, which -- and preferred brands, which are ours. On the Kenvue issue, and thanks for asking that question. As I mentioned, we've just started conversations with our partners -- with our strategic partner. And these conversations will evolve here through end of January, February, March. By -- I'm going to say by April, we should have a much clearer understanding of where we stand, what the Kenvue business in Mexico would mean for Kimberly-Clark de México and whether we can come to an agreement with our strategic partner as to how to move forward. So we'll have more information certainly in our conference call when we report first quarter results in April. But let me just say this. Our understanding is that on the top line, Kenvue, Mexico is about roughly $200 million in sales company. So it's about 1/10 of where we stand. So not huge, but also not insignificant. It's a nice size, and it would be a transaction that would add quite a few categories that we're interested in, in the health and wellness. And as we've always said, categories that have great growth potential, categories where we see we can add value given the way we operate innovations, brands, channels, tiers, et cetera, categories where we think we can add value not only to consumers but also to clients and that in the medium term would be accretive to our, of course, top line, but also bottom line results and margins. So early. Again, we've just started the conversations, but it's a good opportunity for us. Again, not a huge one, but an opportunity that opens very nice windows of growth going forward that would add to our core diamond categories, new categories where we've entered like pet supply chain integration with Kimberly-Clark Corporation. And if this happens, then Kenvue categories. So the whole scenario, I think, paints a very good picture of the possibilities of growth for Kimberly-Clark de México going forward. Operator: Our next question comes from Bob Ford with Bank of America. Robert Ford: Congrats on the results. Pablo, given the concerns around private label, could you maybe provide some examples of innovations across major categories and price tiers? And maybe touch on like some of the materials innovations, right? We're going through this pretty big technology cycle. And I'm just curious if you -- if there are any things that have been patented or maybe a product cycle that you feel really comfortable that you can maintain leadership in for an extended period of time? Pablo Roberto González Guajardo: Yes. Thanks, Bob. Thanks for the question. These are all very, very dynamic categories. And I can talk about a few of the things we did this past year. I wouldn't want to get ahead of myself and talk about 2026. But I'll give you some color on where we stand. But in 2025, for example, we -- in bathroom tissue, we introduced new products in a whole range of products. And particularly, we were very aggressive in bringing new technologies into the premium category with Cottonelle with great, great results. I mean our sales in Cottonelle are growing double digits and continue to do so very strongly. When you look at diapers, we also brought even a Tier 7 diaper to continue to premiumize the category with softness that is unparalleled in the market and of course, the absorbency that consumers come to expect from Huggies. And we've also improved even our economy tiers with now stretchable ears in diapers, which is a first really for the economy tiers. So again, across all of the tiers, -- we've improved our products in feminine care. We brought a new nocturnal pad that it's considered by consumers the best product in the market by an important margin, and it's just a new platform that we're bringing to that category. And incontinence, we brought new products, again, in pads and panty liners that have also preferred by consumers that also offer a new platform. So very, very excited about what we've done and even more so with what we see going forward because I think we're going to be bringing to market some new technologies, first-in-market technologies and in some cases, first to the world technologies that I think will continue to strengthen our platform, strengthen our brands and strengthen our position in the market. So this is never ending, and I'm very excited about our plans for 2026 and innovation, but already looking at '27, '28 and making sure we bring very relevant innovations to market and try and step ahead -- and keep stay a step ahead of competition in every tier in every channel going forward. So sorry, I can't say more about '26, Bob. I'll share more as we go through the year and bring those innovations to market. But as you can see, I'm very, very excited with what I see we can bring to the table in this year. Robert Ford: No, that's definitely well communicated. It's a great teaser. With respect to maybe playing a greater role in the supply chain, can you touch on what you think your competitive advantages are, right? I mean you're clearly doing a much more sophisticated kind of tiering of products. You're doing more shorter production runs. I'm familiar with some of the productivity rates that Kimberly-Clark de México versus the rest of the system. Beyond that, what should we think about when it comes to maybe selecting Mexico to play a much bigger role in the North American supply chain? Pablo Roberto González Guajardo: That's a great question, Bob. Look, we are at a great point on that issue because after working with Kimberly-Clark on specific projects over the past years, we really have -- it's come to the point where we're sitting down, we're taking a look at the whole supply chain. We are being completely transparent in putting the numbers out there, costs, efficiencies, logistics, et cetera, and identifying the biggest opportunities going forward. And as you mentioned, in many respects and particularly when it comes to certain of the tiers in the market, we have advantages because of the way we operate, because of our costs and because of how we know to manage different tiers, which, again, it's much easier said than done. So we're finding very interesting opportunities. But the key thing is where I started that it's not now just hey, we found this project, how do we move forth together with it. It's really a holistic look at the supply chain, figuring out where we can add value, figuring out where they can add value and putting all of that together so that when we think of a project now, it's really for the medium and long term. It's not just a one-timer. We will still have some one-timers, but it is becoming more of a, hey, can we think of certain area of the U.S. where Mexico would be better positioned to supply products and put us in a better competitive position overall in such a market. So we're delighted that that's where the conversations stand. And we just had our Kimberly-Clark Board members attend our Board meeting, and they expressed the same confidence that we're finding very interesting opportunities and that we're very confident going forward our supply chains can come together and deliver very positive improvements for both Kimberly-Clark Corporation and Kimberly-Clark de México. So again, another area where we're very excited and where we think that '26, '27 could be breakout years when it comes to really determining how to play together. Operator: [Operator Instructions] We will move next with Jeronimo de Guzman with INCA Investments. Jeronimo de Guzman: I had 2 questions. The first one was just a follow-up on what you talked about with the shift. You talked a little bit more about the shift or increasing the emphasis on private label and value. And I was just -- you kind of touched upon it, but I just wanted to see if we should expect any kind of impact on pricing/mix or margins as a result of this. Pablo Roberto González Guajardo: No, we don't think so, Jeronimo, certainly not in the short term. And in the medium to long term, we'll see how successful we are and how many -- how strongly we can participate. But of course, and you know our culture, we're already working into, okay, if we are very successful and can participate meaningfully, how do we change our cost structure so that we continue to deliver the margins that we've targeted and that continue to be our target. So no, don't expect a change anytime soon on that target. And we will find ways to, over the medium to long term, be there within that target range. Jeronimo de Guzman: Okay. Makes sense. And then a question on just how are you thinking about pricing because you're mentioning the raw material environment being very supportive, but you're also talking about competition continue to be aggressive, trying to gain share. So yes, kind of how are you thinking about pricing going forward? Pablo Roberto González Guajardo: Thanks for the question. We are looking at all of the opportunities on pricing because notwithstanding, as you say, that raw materials are a tailwind right now and so is the exchange rate. These are very volatile, particularly -- well, both of them. And we've seen in past years that things can change relatively quickly. We don't expect that to happen, but it could. So we're ready. We're ready to move on pricing. And with our revenue growth management initiative, we're always looking for opportunities, both on pricing and mix. So we -- I would venture to say that we will -- you will see some pricing coming to the market this year and aiding our results. And again, we'll continue to work on the mix, and you will see some mix also come into the equation and also help our results during the year. No specific plans at this point, but pretty confident that both factors will be relevant and help us with the results in 2026. Operator: Our next question comes from Juan Guzmán with Scotiabank. Juan José Guzmán Calderón: Congrats on the strong performance. Just one quick question here as most of my questions have already been answered. Regarding Away from Home, given this 10% contraction that you mentioned due to channel inventory adjustments, what's your outlook for this business going forward? And even when it's early in the year, what trends have you been observing recently? And what strategies are you implementing to recover sales growth here? And that will be it. Pablo Roberto González Guajardo: Thanks, Juan. Thanks for the question. Yes, not happy with the results on the professional side. Again, a combination of a softer economy and our wholesalers reducing their inventories given their concerns on the market. Having said that, again, we believe the economy will pick up a little bit this year. And particularly on that side, when it comes to hotels, restaurants, et cetera, we will definitely see the benefit of at least some of the games of the World Cup being played in Mexico. And not just because of some of the games, I think tourism overall will be a positive for the country this year. So we expect really this to turn around in the coming -- I don't know by the first quarter, I think we'll do quite better, and we're already seeing much better performance in the first quarter, early, but we're seeing much better performance in the first quarter. But certainly, by the second quarter, I think we'll see better performance. And our strategies, same as in consumer products, we're very clear of the different areas we want to go after, and we're bringing also innovation and interesting -- very interesting innovation to the different categories, and we're working very, very closely with our wholesalers to go after specific accounts and to try and premiumize in different categories. So not very different in terms of the strategies that we're pursuing in Consumer Products. And again, we expect this to turnaround certainly by second quarter, and we expect the business as a whole to grow nicely throughout the rest of the year. And again, we're already starting to see early signs of that turnaround, but I think it will take a little bit more so maybe by second quarter. Operator: And at this time, there are no further questions in queue. I will now turn the meeting back to Pablo Gonzalez for closing remarks. Pablo Roberto González Guajardo: Well, thanks again, everyone, for participating. As you can see, very exciting things going on at Kimberly-Clark de México, and we -- we will have more to share when we have our call on April, certainly on many of the initiatives that I just mentioned on innovation, on Kenvue, et cetera. So looking forward to it and looking forward to have a very good year at Kimberly-Clark de México. And with that, again, thanks so much, and I hope that you also have a terrific 2026. Thank you all. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Hello, everyone, and welcome to the OceanFirst Financial Corp. Q4 '25 Earnings Release. My name is James, and I will be your operator for today. [Operator Instructions] The conference call will now start, and I'll hand it over to our host, Alfred Goon. Please go ahead. Alfred Goon: Thank you, James. Good morning, and welcome. I am Alfred Goon, SVP of Corporate Development and Investor Relations. Before we kick off the call, we'd like to remind everyone that our quarterly earnings release and related earnings supplement can be found on the company website, oceanfirst.com. Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and any factors that could cause actual results to differ from those statements. Thank you. And now I will turn the call over to Christopher Maher, Chairman and CEO. Christopher Maher: Thank you, Alfred. Good morning, and thank you to all who been able to join our fourth quarter 2025 earnings conference call. This morning, I'm joined by our President, Joe Lebel; and our Chief Financial Officer, Pat Barrett. We appreciate your interest in our performance and this opportunity to discuss our results with you. This morning, we will provide brief remarks about the financial and operating performance for the quarter and some color regarding the outlook for our business. We may refer to the slides filed in connection with the earnings release throughout the call. After our discussion, we look forward to taking your questions. We reported our financial results for the fourth quarter which included earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis. In terms of performance indicators, we're pleased to report a fifth consecutive quarter of net interest income growth, which increased by $5 million or 5% as compared to the prior quarter and up 14% as compared to the prior-year quarter. The current quarter results were fueled by an increase in average net loans of $446 million. Our net interest margin of 2.87% declined modestly compared to the third quarter. Total loans for the quarter increased $474 million, representing an 18% annualized growth rate, driven by $1 billion in originations. Joe will have more to add regarding our growth strategy in a few minutes, but we're very pleased to see the organic growth momentum that is a direct result of the investments we made in the first half of 2025. Asset quality remained exceptional as total loans classified as special mention and substandard decreased 10% to $112 million or just 1% of total loans. This continues to place us among the top decile of our peer group. The quarterly provision was primarily driven by improvements in asset quality and a decrease in unfunded commitments, offset by loan growth. GAAP operating expenses for the quarter were $84 million and included $13 million of expenses related to our residential outsourcing initiative, merger costs and execution costs for our credit risk transfer. On a core basis, operating expenses of $71 million were down $1 million or 2% from the linked quarter primarily driven by the impact of our strategic initiative to outsource our residential lending platform. Pat will provide additional commentary on the credit risk transfer and a detailed update on our financial outlook in a moment. Capital levels remain robust with an estimated Common Equity Tier 1 capital ratio of 10.7% and tangible book value per share increased to $19.79. We did not repurchase any shares this quarter under the existing plan as our capital was utilized to support loan growth. This week, our Board also approved a quarterly cash dividend of $0.20 per common share. This is the company's 116th consecutive quarterly cash dividend. Finally, on December 29, we announced a merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. The acquisition of Flushing will directly support our organic growth initiatives in New York, positioning OceanFirst as a scaled competitor in the deepest banking markets in the country. The resulting company is expected to demonstrate improved profitability and increased operating scale, which should deliver meaningful upside to our shareholders. We continue to work towards an expected close in the second quarter of 2026, and we'll provide more updates as regulatory approval progresses. In the meantime, we remain focused on OceanFirst's continued organic growth efforts, which are proving successful as shown in the results of this quarter. At this point, I'll turn the call over to Joe for additional color on the businesses. Joseph Lebel: Thanks, Chris. I'll start with loan originations for the quarter, which totaled just north of $1 billion for the second consecutive quarter and resulted in record quarterly loan growth of $474 million. Our C&I business grew 42% for the year as we have reaped the benefit of our continued recruitment of talent, coupled with favorable conditions for many of our borrowers. Much of that was in the second half of the year, which bodes well for interest income growth early in 2026. As discussed in the previous quarter, we made the decision to outsource the residential and title businesses, and we have worked through the remainder of the existing pipeline and expect to see measured runoff in the portfolio going forward. The loan pipeline of $474 million, while lower quarter-over-quarter, is due to the outsourcing of residential and is still markedly higher than this time last year, reflecting the robust growth in the commercial bank. Total deposits in the fourth quarter increased $528 million, with $323 million driven by organic growth across varied business lines. Among those lines, the Premier Bank team grew deposits $90 million or 37% from the linked quarter with the weighted average cost of their deposit portfolio declining 36 basis points to 2.28% as of December 31. To date, the Premier Banking teams have brought in a $332 million in deposits across more than 1,300 accounts and representing more than 350 new customer relationships. Approximately 21% of those balances are in noninterest-bearing DDA. Lastly, noninterest income decreased by $3.3 million to $9 million during the quarter primarily driven by lower title fees and a reduction in the gain on sale of loans related to the outsourcing of our residential and title platforms. We continue to see strong swap demand linked to our commercial growth and look for that to continue in the coming quarters. Overall, noninterest income levels were in line with our expectations as guided in the previous quarter. With that, I'll turn the call over to Pat to review the remaining areas for the quarter. Patrick Barrett: Thanks, Joe. As Chris noted, net interest income grew while margin declined modestly, as we had previously guided. Pretax pre-provision core earnings grew 9% or $3 million from the prior quarter, driven by earning asset growth over the second half of the year. Loan yields decreased modestly, reflecting the impact of floating rate resets and a continued mix shift in our portfolio. Total deposit costs increased modestly, reflecting very isolated upward repricing for certain interest-bearing accounts combined with continued competitive deposit pricing. Borrowing costs also contributed a modest 1 basis point of pressure on our margin, reflecting the net impact of our subordinated debt issuance and retirement during the fourth quarter. Average interest-earning assets increased meaningfully compared to the prior quarter, reflecting increases in both the securities and loan portfolios. Growth in securities was from our late third quarter opportunistic purchases, which also had a modestly compressing impact on our margin. Looking ahead, we expect positive expansion in both NII and margin. As Chris mentioned, asset quality remained very strong with nonperforming loans to total loans at 0.2% and nonperforming assets to total assets at 0.22%. Asset quality continues to remain at the low end of historical levels for criticized and classified loans as risk ratings across our commercial portfolio remained stable. Net charge-offs ticked up slightly, but full year net charge-offs as a percentage of total loans remained extremely low at 5 basis points. Turning to expenses. Core noninterest expenses decreased from $72.4 million to $71.2 million, driven by the sale of our title business, noncore items include restructuring charges of $7 million related to our residential outsourcing initiative, $4 million of merger-related costs and $1 million of professional fees related to the credit risk transfer transaction we executed during the quarter. Looking ahead, we expect our first quarter core operating expense run rate to remain in the range of $70 million to $71 million, with seasonal compensation increases offset by a full quarter's benefit of our residential outsourcing initiatives. Capital levels remained strong, with our CET1 ratio increasing to 10.7%, reflecting strong loan growth during the quarter combined with the benefits of the credit risk transfer transaction. This trade provided approximately 50 basis points of CET1 ratio benefit at an annual pretax cost of less than $4 million. A word on taxes, we expect our effective tax rate, which was 22% in Q4, to remain in the 23% to 25% range quarterly, absent any changes in tax policy. There are no changes to our full year guidance, as stated in the third quarter's earnings release, mid- to high single-digit loan and deposit growth. NII and NIM growing with NIM growing past 3% during the year and NII ramping in the second half of the year. Other income, $7 million to $9 million per quarter and expenses relatively flat to current run rates. Note that these are stand-alone expectations that do not reflect the impact of the Flushing acquisition. We've also added our first quarter outlook for convenience. But again, remember that the first quarter always reflects the impact of 2% fewer days and the impact that has on a lot of our P&L items and NII. At this point, we'll begin the question-and-answer portion of the call. Operator: [Operator Instructions] And moving on to our questions, we have one from Daniel Tamayo from Raymond James. Daniel Tamayo: Maybe just a clarity on your net interest income guidance, Pat. The growth in dollars matching the growth in loans, that's to be read as -- the back of the envelope math is just under $90 million, I guess, in loan growth. So that's the way to think of that. That number is the net interest income growth? Or how should we be thinking about... Patrick Barrett: No, it will -- it actually will probably grow at a bit higher clip than whatever our loan balances grow just because of the compounding effect of how big the balance sheet is today. So I was just reminding that Q1, it always looks disappointing because you have to shave 2% off for fewer days in the quarter with the drop from fourth quarter to first quarter, and then it will begin to ramp back up. I think you'll see high single-digit growth in NII for the year. Daniel Tamayo: Great. Okay. That's perfect. And then let's see here, the -- I guess as it relates to the deal, any kind of updated commentary around what loan sales might end up looking like after the close? Christopher Maher: It's a little bit too early to give you any precise figures on that. We're undergoing a process right now to review the portfolios. A lot of the work we could not really kind of get deep into when we were still in the confidential mode of negotiating with Flushing. So now we've got a little better ability to do that. So we'll update you as our thoughts evolve, but we do expect to be able to do some work on the balance sheet in a way that improves our margins and ROA outlook over time while also reducing credit risk. Daniel Tamayo: Understood. And then maybe just a clarification question for you, Pat, on the expense line. Where is the recurring CRT premium expense? In what line? Patrick Barrett: It comes through other. It's just like insurance premium expense essentially. Christopher Maher: So an expense, it's not in the yield. It won't be in the NIM or in the -- will look like OpEx... Operator: Moving on, we have Tim Switzer from KBW. Timothy Switzer: I got a few on balance sheet growth here. So first up on commercial balances, C&I on a dollar basis, it looks like it's accelerated for 4 straight quarters, basically every quarter this year with a pretty meaningful pickup in Q4. What kind of pace should we expect for 2026? Joseph Lebel: Tim, it's Joe. Look, I think we probably snuck in a couple of Q1 stuff into Q4, but that's what the borrower wants and that's what we're going to do. But the seasonality aside, which tends to be a little slower in Q1 as everybody is waiting for year-end financial statements, I would tend to think that you're going to see very similar growth rates. I think we've got it in the 7% to 9% range, which I think is fair. Look, we put a ton of dollars into talent in that space, and I think that space is now just starting to deliver what we expected. So more to come. Timothy Switzer: Okay. Okay. That's helpful. And I think you guys disclosed this last quarter, wondering if you could talk about how much of the growth this quarter in C&I was driven from the Premier Bank in cross sales? Joseph Lebel: Yes. So I don't have the quarterly number in front of me, but I do have the half year numbers. So they generated just shy of $200 million in gross closed loans and the outstandings at the end of the year were about $64 million, which is pretty much what we figured, right? They're going to be more deposit-heavy, loan-to-deposit number is going to be really good. But they do have a solid C&I clientele, which is a benefit. And I think we'll see more of that to come in '26 as well. Christopher Maher: Tim, it's Chris. One other thing I'd mention is that we're really pleased that the level of self-funding in the C&I customers was pretty strong this year. So we're seeing pretty strong deposits come in. The C&I teams have done a nice job with that. So we had just shy of like a 40% coverage of outstanding self-funding. So as that book rotates, we do more C&I and on a relative basis, less CRE, the deposit portfolio is going to strengthen as well. Timothy Switzer: Got you. Yes, that's great. And then on the Premier Bank specifically, it looks like the deposit growth maybe slowed down a little bit. I know it's just one quarter, there's probably some volatility, maybe some seasonality in there. But can you add some color on that? And then reconfirm if you still feel good about the target for $2 billion to $3 billion of deposits by the end of '27? Joseph Lebel: Yes. So Tim, I think you hit on the head. We had higher balances up until really the last week of the year. We had some seasonality, some distribution, some bonus payments. I think that's part for us to learn about the clientele as well. You onboard 350 new clients, you're trying to solve for what works. So we saw nothing but a ramp up until the last week. So I think you're going to see recoveries as the year goes on, you're going to see continued growth. I don't see any reason why we would back off the 2027 targets. Operator: Moving on, we now have Christopher Marinac from Janney Montgomery Scott. Christopher Marinac: Chris and Pat and Joe, I wanted to ask about the Premier banking new money rate that came in. You may have mentioned it, I just missed it. Then I had a follow-up. Christopher Maher: Yes. I don't know that we have the new money rate, handy. We did -- the overall portfolio was down nicely to just like a [ 2.25% ] cost. We're seeing noninterest-bearing is coming in faster now. And although the balances were seasonally weak, as Joe mentioned, we continue to open new accounts and establish new relationships at a good clip. So I think you're going to see that trend with more noninterest over time, better -- lower yields on those deposits and a faster pace of growth in Q1. Christopher Marinac: Okay. So [ 2.25% ] is the overall rate, and that works with what I was asking. Chris, as you move forward with Flushing, can you just go back through the opportunity to kind of reset deposit rates? And is there anything instructive from what you're doing now with Premier banking and those new customers with what you can do with Flushing. And I guess part of my question is also how much of that is sort of additional potential earnings beyond what you underwrote going in? Christopher Maher: Yes. So I think there's a tremendous opportunity there, Chris. So let me just kind of walk through mechanically what we think it is. And I hope you understand also kind to shy away from any numbers around that opportunity. But the premise is -- well, first, I should say, if you look at Flushing's numbers, they've done a nice job of building noninterest-bearing accounts at a pretty good clip. They've built nicely over the course of the year and have had some momentum on their side. I think our Premier folks who operate in the markets where the Flushing branches are today, will find a higher rate of success because they have the opportunity to offer that kind of branch distribution network over time. And then I think the real important part of this is that for both us and for Flushing, being a stronger, larger regional bank is going to help us in recruiting top-tier talent. So I think we are a more attractive destination for career commercial bankers who are looking for a platform to continue to build their brand and build their teams and build their legacy. So I kind of see it in a few ways. Flushing was doing a great job on its own. We can probably do a little better with our Premier teams giving them a branch distribution network. And then we're going to be a much more competitive place to land. I think as we go through the first few quarters as a combined company, hopefully later this year, we'll be able to put a finer point on what we think that growth rate will look like. But those deposit markets are absolutely massive. So although you do -- in the Northeast, you're always picking up share from someone else. That's kind of the name of the game. There's a lot of share out there in the markets. We're picking. And we really like the branch distribution network where it is, the neighborhoods they're in, the streets they're on. And I think that's going to help both of us grow faster than either one of us would have grown stand-alone. Christopher Marinac: Great. That's helpful, Chris. And I guess, without getting too deep in the weeds, I mean, in general, it doesn't seem like what you had told us in late December really is dependent on adjusting these rates that, as you can have success later on that, then that creates future opportunities for earnings. Christopher Maher: Yes. So with the one caveat, we are thinking through the balance sheet and in every bank, you have a variety of different funding sources and a variety of different assets. And this is an opportunity for us to be very thoughtful about thinking through the higher cost deposits and the lower-yielding loans and securities, and kind of saying -- looking at that mix and say the marginally highest-cost funding and the lowest-yielding assets present an opportunity to be much more efficient together. And that's really what the balance sheet process is about. And that's something that we may not be able to solve exactly at closing, but we would hope that within 30 days of closing, we would be able to provide some really good data on that. Operator: We now have David Bishop from Hovde Group. David Bishop: A quick question on the -- back to the C&I growth here and maybe for Joe. Just curious geographically, maybe where you're seeing the best strength there? And is any of this growth also driven by maybe expiration of noncompetes or handcuffs that were maybe placed against some of these lenders you had hired over the past year? Joseph Lebel: So the good news is it's pretty geographically dispersed, David, which I appreciate because we've hired lenders in all markets. Yes, we are -- some of the handcuff stuff that comes off, even if it's really like what I consider to be not really true handcuffs, people do feel that obligation, and that's a fair assessment. So I anticipate that we'll see more and more out of those folks as they get a little deeper into their OceanFirst tenure. But I don't -- I wouldn't say that there's anywhere where we're not performing up to standard. And then I think I've mentioned earlier that we've even got some of that activity from the Premier Bank, which is really valuable in terms of some of their clientele in -- New York City-centric. Christopher Maher: And there's like a positive flywheel as these new bankers come on. Their first few clients take a little bit of time. And then those clients have a good experience. They tell not just their friends but the accountants, the attorneys and get better known and then it becomes incrementally better to pick up kind of the second round of clients and the third rounds of the -- we see a lot of opportunity going forward. David Bishop: Got it. And I saw the earnings narrative on the deposit funding side, sounds like one large deposit client reset in terms of deposit rates from 0 upwards. I don't know, Pat or Joe, if you have that number in terms of maybe what the NIM headwind? And is that sort of just a onetime, a [ femoral ] impact? Patrick Barrett: Yes, it's onetime. It happens all the time where customers don't know where they want their money and they keep it out of higher-earning promotional type of things if they think they need it. So it was just -- it was noteworthy because of its size, and it's very infrequent and we would expect not recurring. Christopher Maher: And it was fully reflected in Q4. It -- actually, it was kind of like a late Q3 thing. So you're not going to see that drag or provide a headwind going into Q1. So... Patrick Barrett: I could have just said that NIM hardly moved at all just due to a lot of little things and noise, but that didn't feel like it was a good enough explanation for 3 basis points of contraction. So it was that kind of quarter... David Bishop: And I know this number bumps around, especially at the end of the year, but did see a noticeable pickup in the early-stage delinquencies in the 30- to 89-day bucket. Any commentary there that could be driving that? Christopher Maher: Yes. It was just one loan, Dave, that has a federal government lease where the lease payment is a little bit late. So we don't have any concern in the long term, but it was already a loan that we had in the substandard bucket. We've been watching it because of that tenancy. So we'll give you an update as time goes on, but they have a good lease in place. It looks like it was just a payment issue, meaning their collection of their rent was just delayed administratively. David Bishop: Got it. And then maybe a holistic question for you, Chris. It looks like the Netflix studio is entering into sort of the final stages, they're building the studios, sound stages and such. Any thoughts about maybe is there a potential to sort of set up branches within that footprint or any sort of branding within that community or within that development to sort of take advantages of branding the company there and backing the caterers, the builders, et cetera. Do you see any sort of longer-term opportunities as that builds out? Christopher Maher: That's going to be a tremendous thing for the Monmouth County, which is our second strongest county after Ocean County. So I think we've got a few branches that provide some good coverage for that market already. I don't know that we'll need to open other branches. But I'll make a broader comment. That's a great kind of boom to the Monmouth County market. But we continue to see over the course of our core, call it, the Jersey Shore market, that the post-pandemic period has been a seismic shift, more people were down at the shore more parts of the year. There's been a significant demand for the infrastructure you need, everything from hospital systems having to expand to hospitality and office and all sorts of stuff. So our core, our strongest market in kind of the Central New Jersey Shore is doing pretty well. And I think that's going to be a pretty sticky thing. We see that happening probably for several more quarters. Operator: Next up, we have Matthew Breese from Stephens Inc. Matthew Breese: On Premier Banking, I guess I was a little bit surprised by the loan and deposit growth guide and outlook maintaining 100% loan-to-deposit ratio. I was thinking once the Premier banking effort got up and running, there would be a reduction to that ratio. I was hoping you could maybe talk a little bit to that. And then the other one is, I know it's still early days with these teams, but on the DDA side, is 30% DDAs from Premier banking, that's still the right long-term number? Christopher Maher: I'll take the first side and then Joe can take the question about the noninterest bearing. In terms of the loan-to-deposit ratio, we'd like to see that down under 100%. On any particular quarter, it's a little bit of wait until the last few days as you see deposits come in or go out. I don't expect us to be a bank that's going to wind up at a 90% loan-to-deposit ratio, but I'd like to be substantially lower than 100%. I think we're going to see how things play out. We're opportunistic too, about earnings and making sure that we've got the right earnings power. And I would note that we've got a very robust set of deposit verticals. So we have our consumer deposit vertical. We have a government banking vertical, we have our corporate cash management and C&I vertical, and we have the Premier vertical, which overlaps a lot with the C&I vertical. So we have a lot of different sources of deposits and feel comfortable running at the higher end, which is not unusual for banks in the Northeast. But to your point, we'd like to be further under 100%. I think you may see that over the next several quarters, but not dramatically under 100%. Joseph Lebel: I think on the second half, Matt, I'd tell you that between 25% and 30% is actually, in my mind, still the right number. What we're hearing a lot from clients and clients that I've met personally is that their anticipation in midyear '25 or late-year '25 was a transition into full operating businesses coming across to OceanFirst in '26. So we still have a significant number of unfunded operating accounts that we've opened, getting ready for people to migrate. So I anticipate you're going to see a higher percentage of DDA as time goes on during the 2026 fiscal year. Matthew Breese: Got it. Okay. And then, Chris, going back to Flushing, you had mentioned that there was some higher-cost components. Of the $7.3 billion of Flushing deposits, could you just describe some of the business lines tied to the higher-cost components? And then oppositely, what are the highest-quality parts that you're more likely to kind of keep and grow? What's on the whiteboard there? Christopher Maher: So if you think about -- everyone has kind of pockets of deposits and everyone has more kind of promotionally-priced deposits. You think about their national deposit vertical, the iGObanking, for example, or BankPurely, which is not a lot of dollars. It's a good capability for us to have and preserve going forward but those are higher-cost deposits. Not surprising, some of the government deposits are higher cost because they wind up being excess fund accounts and you've got to be competitive on that. And then there are some money market accounts across the base that have been kind of priced more to acquire deposits. But there's still a pretty big slug of long-term high-quality deposits that either historically have been at Flushing for a long time, I remember the bank was chartered in 1929, so they've got a really long history. Very strong in Queens, very strong in the Asian communities, significant number of the branches they've opened in the last several years have been to serve the Asian communities around the city, which are not just in Flushing but places like Bay Ridge, and Lower Manhattan, Sunset Park, kind of those areas. So I think the real opportunity here is those long-term consumer accounts that go back in a lot of the franchise, the Asian markets and a lot of their commercial clients keep operating accounts with them. So that's all high-quality stuff. Around the edges, we might decrease the amount of dollars that are out in iGObanking, maybe some of the higher-yield money market, maybe some of the higher-cost government. That's kind of the high quality, lower quality. And I think every bank has some of that. We're looking at our own stuff, too, in the way we price it. Matthew Breese: Understood. Very helpful. And Pat, just looking at deposit costs up this quarter, and I know you mentioned there was an isolated incident. Obviously, Premier banking as a blend is higher than the average cost, could you help us out with the deposit cost outlook for the year? Where do we peak and without any rate cuts or using your rate cuts to kind of forecast, where do you expect deposit cost to be at the end of the year? Patrick Barrett: Yes. I am not going to give you a guess of where deposit costs are going to be at the end of the year, but I do think that they're going to keep coming down. They are coming down. They're lagging a little bit from a speed of repricing relative to rate cuts, which is exactly what happened when we were in an uprate environment, we lagged before they started going up. So I think we're seeing the same kind of things. So starting off slowly, repricing and then picking up. I'm encouraged by the fact that all of our spot rates across all of our deposit types are noticeably lower than the averages for the quarter. So they are steadily coming down already. Rate cuts help because there's a lot of promotionally-priced stuff. It's not contractually indexed, but a lot of the larger promotional balances definitely are linked there. And frankly, the pace of loan growth and the opportunity for loan growth is going to drive a lot of how that ends up occurring, similar to the loan-to-deposit ratio. It's less something that we drive the business towards rather than an outcome. And if there's high-quality loan growth that is a little bit higher than our deposit growth outlook, then we'll probably fill the buckets with some higher-cost deposits just to secure the longer-term lending relationships. So I think you'll probably see deposit costs and loan yields roughly moving in line with each other with a slight edge on the loan yields due to growth, and that's going to drive our margin, I think, steadily improving as we move through the year, a handful of basis points every quarter. That's a backhanded way of not answering your question exactly. So... Matthew Breese: All very helpful. And maybe just to drill in on one category that looks like it has the most room, your time deposit costs, the spot cost at the end of the quarter was 3.64%. What is kind of the blended all-in cost of CDs as they -- I know there's going to be some promotional stuff in there, but the all-in blend of [ stuff ] resets. Christopher Maher: Yes. Well, one thing, Matt, I'd note that when we think about the balance sheet restructure, to your prior question, that's the first dollars we're going to give up. We don't have a lot of brokered, but we do have some, and we've kept those durations really short. So as we kind of zero-in on the combined balance sheet with Flushing, the very first thing we will do is let those brokered runoff, and those are in the high 3s, but coming down. So even if we kept them, they would be coming down. So I think there's a strong opportunity there. And all of that is probably -- the weighted average duration on that is under 6 months, Pat? Patrick Barrett: Yes. It's about 4 months. So we can pretty rapidly change prices, and we actually do. We don't wait for a rate cut and mess around with kind of daily changes and we see are we able to keep rollover balances or not? Are we attracting any new balances or not? With, again, that being just one of the components of funding base that we need to maintain to support whatever the loan growth rate is. Operator: And that is it for all the questions. Thank you, everyone, for participating on that. And the Q&A is now clear, and I'll hand it back to Chris Maher for some final remarks. Christopher Maher: All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in April about our first quarter results. Thanks very much. Bye. Operator: And this concludes today's call. Thank you all for joining. You may now disconnect your lines. Have a great one.
Operator: Thank you for standing by. This is the conference operator. Welcome to NOVAGOLD's 2025 Year-end report conference call and webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions]. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie Hennessey: Thank you, [ Aisha ]. Good morning, everyone. We are pleased that you've joined us for NOVAGOLD 2025 year-end webcast and conference call and also for an update on the Donlin Gold project. On today's call, we have NOVAGOLD's Chairman, Dr. Thomas Kaplan; President and CEO, Greg Lang; and Peter Adamek, NOVAGOLD Vice President and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by e-mail. I would like to remind you, as stated on Slide 3, any statements made today may contain forward-looking information, such as projections and goals, which are likely to involve risks to tail in our various EDGAR and SEDAR filings and forward-looking disclaimers that are included in this presentation. With that, I will now turn the presentation over to Dr. Thomas Kaplan. Thomas Kaplan: Thank you very much, Melanie. We start on Slide 4. I'd just like to point out something which in this era of volatility and resource nationalism. It's important to understand that NOVAGOLD and our partners at Paulson are building the path to what will be America's largest single gold mine. That's an extraordinary statement. And candidly, one that would have seemed to many people a year ago, something that would be very hard to imagine. And yet, here we are at a perfect time to be building America's gold mine. If we go to Slide 5, I'd like to speak to the most important event that took place last year. And that was the transaction that has already shown itself to be catalytic. And yet on the other hand, for reasons which I will state, I believe that we are really in just the first inning of the revaluation of NOVAGOLD. And the reason is simple, for the first time, NOVAGOLD is perfectly aligned with its partner. People used to ask me, Tom, you own gold assets, silver assets and you never joined the public boards. And why this one? And my answer to that is because I enjoy it. I love working with the people. And by temperament, if I'm interested in something, I tend to go all in. My interest in NOVAGOLD has been metaphysical from the time that I first saw it in the public markets to the time when on December 31, 2008, Egor Levental negotiated an agreement that effectively had us come in as the safer of NOVAGOLD, which was going to go out of business. It had a lot of problems. We turned them around. But along the way, our first shareholder has become something of an angel, and that's John Paulson. He was the first investor in NOVAGOLD after the Electrum Group took it over. And it was a fantastic journey as some of you will read Greg Lang's own story of how he came to NOVAGOLD. When John sent his analysts to see whether I could possibly be right when I posited that we think it's possible that NOVAGOLD just on the 5% of the land package that's been explored is a pure play on the next Carlin, we felt that we could see 80 million to 100 million ounces. And of course, he found that, that was highly improbable. He sent his analysts to visit they came back, he called me and he said, "What do you want to do?" and I said, "Like $100 million." He said, "Done." And I said, "What changed?" and he said, "Our analysts came back. We can see what you see. Congratulations." Up until about 2020, I think I can say that it really was a lot of fun. And then unfortunately, we had some glitches. I'll get to that in a moment. But suffice to say that since John Paulson took the extraordinary step of investing $800 million personally to take a 40% stake in Donlin, the market has understood that this may well have been the best single buy in the gold mining space since Barrick itself, Goldstrike, which was the company maker, for that company and certainly, one of them as well for Franco-Nevada. The market reception that we've had from a low of $2.5 early last year to, well, where we are today, certainly shows that people understand not just the quality of the asset, but that we argue for a major, major revaluation, which as far as we're concerned, hasn't really even taken place yet. Next slide, please. On Slide 6, what you can see is a very interesting story. We were partners for a very, very long time. The Barrick partnership preexisted my coming into the story in 2008 to 2009. But from the time that we applied our team approach, NOVAGOLD was one of the premier rated assets in the GDXJ. And we believe that it has the potential to be that once again, maybe the premier asset in the play. And what you see is a very, very nice progression up until about 2020 when there was a change in management at Barrick. Well, the next several years were not as fun as the previous ones. However, by the time that last year or the year before, rolled around, it was very clear that our partners agenda was not going to work. And fortunately, Mark Bristow and I were able to reach an agreement to buy Barrick's half of Donlin with John Paulson buying 80% of that stake and NOVAGOLD increasing its stake from 50% to 60%. We went from having years of nonalignment with our partner, whose I had wondered very much to copper and in some very interesting jurisdictions to being in a position where we could once again reboot and take us back to where we were. Well, if you look at this chart, we were a $12 stock in 2020. So many things have happened since then. And I would argue, and I think John Paulson would partly agree that based on where we should be, where we would have been without the delay, we would be multiples higher than where we are today. One thing I can tell you is that I will be working with management and also with the Paulson Group for us to remain that lost ground and multiply where we should be because to my mind, that lost ground took place in sub-$2,000 gold, and we are in a completely different place and one of the reasons why I am so confident about that is that we are literally in the right place. People talk about world-class, but as somebody who really made his fortune in countries like Bolivia, Zimbabwe, South Africa, I sold Kibali to Mark Bristow. I really do believe that in order to be able to get the premium rating, you have to be in a place where people can sleep well at night where when they go to sleep, they know that when they wake up in the morning, what they thought they owned, they still own. In other words, you want all the leverage to an underlying thesis, but in a jurisdiction that will allow you to keep the fruits of that leverage. It really doesn't get any better than Alaska. So for all of those reasons, I believe that we are really just in the first inning. We haven't really even taken ourselves back to where we should be at $2,000 gold. Next slide. Now let me talk a bit about the advantage that we have from being partners with John Paulson and his team. They are proven talents in the mining industry at a time when very few generalists have the kind of expertise that they have shown, not just in picking the right assets, but also we're necessary becoming activists. John Paulson, of course, is very famous for having been perhaps the greatest beneficiary of identifying the macro trade that coincided with the financial crisis. And as George Soros put it at the time, he not only identified the trade, he identified the very, very best vehicles to be able to make from 10 to 100x on the investments for his clients. I am very proud to say that John, who has been an investor in NOVAGOLD since 2010. It's our longest-standing and most active shareholder. But the fact that John, who is, as I've been a very, very well-known public advocate for gold ownership has decided to make such an investment. He's basically said the macros, I know. I'm bullish on gold. I want more exposure to it. And as far as I'm concerned, Donlin is the single best way for me to play it. In other words, the same thesis that accompanied his views on how to be able to deal with subprime and the housing prices are embodied in the stake that he has taken in Donlin. He didn't have to do it. He saw an opportunity. And again, I really do believe and all credit to him that this will be the single savviest investment having been made in the gold space in many, many decades. One other factor that I'd like to add is not only does Paulson bring acumen and strategic depth to the project. But also, they have extraordinary access to financing that is not necessarily my frame of reference. So in Electrum, we have several sovereign wealth funds, which are the only outside owners in what is essentially a family an employee-owned business. And my strong suit is in the sovereign wealth funds. John is in the United States. And as we've seen with the success of perpetual, he knows how to be able to bring capital to an equation to be able to lower the cost of capital. And there are many, many upsides in the financing opportunities which we can look towards. There are a number of countries, including Japan, Korea, the Emirates, Saudi Arabia, which really have pledged to invest well over $1 trillion in the United States. I would venture to say that the largest gold mine in the United States on the Pacific Coast might very well be attractive to countries like Japan, where you have very, very strong gold demand or a country like Korea, where the central banks the Central Bank has said that they're going to resume gold purchases. Well, Japan has pledged $550 billion, and last I saw Korea $350 billion. And then, of course, you have the Emirates, who are partners with me, Saudis who are partners with me. It's a whole different world to be able to finance the largest gold mine in the United States. Paulson brings advantages to us in that respect. And there are many, many upsides that could take place. Possible we could merge and on a 100% basis. be, a 1.5 million ounce gold producer. Whatever is in the interest of NOVAGOLD, we will always consider and most importantly, take into consideration our shareholders who have been fantastic guides. But the point is there are upside cases on financing stories that really didn't exist until a year ago. So again, watch this space. Now I'd like to go to something which on Slide 8, may look like a little bit of sulfur [indiscernible]. There are suit been bullish on gold, not as many who have basically put all of their wealth into gold and silver mining assets. We are called Electrum because it is a naturally occurring alloy of gold and silver. And we have been all in. And obviously, what's transpired over the last year or 2 has been wonderful. But when I go out on the road, because I have been told evangelist or one of them for a number of years, I'm very often asked where I see gold going. So if I can take a step back so that it gives me the opportunity without selective disclosure or selective hypothesizing for years. I expressed that I thought the first equilibrium level for gold would be between $3,000 to $5,000. I expressed this publicly as early as when gold was at $550 and that, of course, took a lot of people by surprise. I expressed I was going to sell. What I then had is the fastest-growing privately held natural gas producer in the United States. We sold that in 2007 to pivot entirely into the one money that I believe in. And still the believe in. Gold 1.0 has been great, candidly, crypto and calling it Gold 2.0 has expanded Gold 1.0's reach to so many places that I normally don't even have to speak to most people about why they should earn gold. I just tell them where I think it's going. In May 2019, I did a Bloomberg peer-to-peer interview with David Rubenstein. That night, gold was at about $1,900. actually, that's not true. It was $1,280. And David asked me, so you see it going past $1,900, which was the previous high and I told I believe that when it goes past $1,900, we're talking about $3,000 to $5,000. But I also added this, which was, if not a lot higher, depending on macro circumstances that today seem in but which I can't really quantify. Now at that time, I was already formulating a different thesis on where I saw gold going. A lot has changed since the early 2000s. And my thesis has changed. But I really didn't think it was prudent for me to say that publicly. It was already enough when gold was at $1,280 to say I see it going from $3,000 to $5,000. But now I want to walk you through my thesis which is borne out of the fact that I'm no more a gold bug than I was a silver bug, a hydrocarbon bug, the platinum bug or any other insect. It's just that this is my belief and you can take it for whatever it's worth. On Slide 9, I think it's very clear now that gold is here to stay. It has been revitalized as an asset class. I'm not going to spend too much time on the things that make it attractive. Gold has been thriving whether you have inflation fears, deflation fears, whether you require a safe haven or you don't. The gold industry itself has dwindling discovery rates or grades are now plunging to below a gram central buyers have been buying. I've said for years, the central banks are not dumb money. They actually know better the lack of credibility of so much of the assets that they own on their balance sheet that by buying gold as an act of choice and active volition, they are doing as much as anyone to be able to show you that you should own it. And clearly, everyone who's been buying gold as a central banker, and they're not paid [ 2 in '20 ] to take bold decisions is obviously looking like a genius. That also goes with the other aspect that I've always said since gold was at $500, which is whenever the Indians and the Chinese are competing over a scarce asset you must want to own it. So you have Chinese and Indian demand, you have central bank demand, and you now have new investors who are coming in to compete with the official sector. This environment is perfect. I should add that I never used to resort to talking about the fear factors in pushing for why people should own gold. I spoke about economics 101, supply and demand, why one wants to have a money that can't be debased by fiat. A lot of good logical factors, but I didn't go into the 4 horsemen of the apocalypse, or any of the things that sometimes people bear into when they talk about both. However, after 2022 and the combination both of the real displacement in the world order with the Russian invasion of Ukraine, and the displacement of the financial order with the freezing of Russian assets outside of Russia. That really was a game changer. It was a game changer for a lot of central banks. It was a game changer for a lot of investors who want to preserve their capital, both as a safe haven and also because gold is something that when you own it, it doesn't represent someone, it doesn't represent someone else's liability to repay you. So all of these things, we've seen a little bit esoteric, all of a sudden came into sharp relief. And you see gold taking off. Well, I do believe this is the early stage of a complete revaluation. On Slide 10, this is where I believe we're going to see gold going. Now that chart is a chart of the Dow Jones Industrial average since 1975. Here's what happened in the Dow. Up until about 1980, essentially for 30 years, the Dow was in a trading range. And if it came to 1,000 or peaked above it, smart people said, well, sell it. It's at the top of the trading range. And that worked for a while. The problem is that reversals essentially mean that at some point, you can actually say this time it's different. Otherwise, it's not a reversal. So normally, when people hear this time it's different, they think, "Oh, well, that's a bubble about the burst." Very often it is, but sometimes it's just representing new facts and this is what happened with the Dow. Now I happen to remember I was working for someone in London in 1987, while I was doing my PhD. And I remember the crash of '87. I'd like you to try to see if you can see it on this chart, a crash, which took the Dow down from the 2000s to, I think, 16 -- 1,700. It seems like the sky was falling in. You cannot see it. It was a downdraft essentially in the passage of time meant to wipe out weak hands as it started to make its climb to 45,000. I don't know where the gold needs an '87 moment. If it happens, you just have to buy it and buy it and buy it. It could be brief, it could be short and it may not even happen at all because the reality is that the fundamentals for gold are so strong and literally get reinforced almost with every tweet. It is reinforced on a weekly, if not daily basis why everyone should have gold in their portfolio. The problem is there really isn't enough gold to go around, except at much, much higher equilibrium prices. So with the 3,000 to 5,000 area having been met. And by the way, people sometimes say, why 3 to 5. I said, be it could go to 5 and then correct down to 3 before going past 5 to 20. In any event, I'd like to cite Ray Dalio, who is someone that I deeply, deeply respect rate is extraordinary. And if there's a public service announcement, reads books is the best what I would say, market-related applied historian in the world today. So at a certain point, not long ago, Ray said, gold is now the second largest reserve currency behind the U.S. dollar. To understand why you need to look at the history of fed currencies like the dollar in hard currencies like gold. The way I see it, we're currently facing a plastic currency devaluation similar to what we saw in the 1970s or in the 1930s. In both of those cases, fiat currencies around the world all went down together and also went down in relationship to hard currencies like gold. Up until about a year or 2 ago, for decades, when people ask me, which currencies should I own, I said on the U.S. dollar because although I do believe that all paper currencies are toilet tissue, the U.S. dollar is double-ply. It has factors that make it better than its other paper currency comparables. Not that I believe in it, but if you need a paper currency, the dollar, of course, there's always room for the Swiss franc and a couple of other esoteric things, but you get the idea. The dollar and gold and I said, for me, it's all about gold, not the dollar. But for most investors, you know they can't be as all in as a private investor like myself. Suffice to say that the U.S. is doing everything it can to debate the cornerstones of its being not just first among equals, but the superpower. Those chickens will come home to roost, and I'm sorry to see it. The United States obviously has factors that make it unique. It has the ability to project power all over the world in a way that until the Chinese catch up is unique to itself. It -- well, it had a multilateral alliance system that the Chinese could not compete with, and therefore, was the boss. And in return, for this leadership people were willing to buy the dollar despite America's bipartisan commitment to spending so much more money than it has, and they were willing to go along with the convenient picture, which is to say if you defend us, you are the economic superpower and that's a trade we're willing to make. It was a trade-off. Well, we are starting to witness shifts in that, which I'm not saying are going to immediately displace the dollar. But for a variety of reasons, you will see not only adverse series now, but friends look to be able to have more financial autonomy. One thing, however, I do have to say for those who are buying gold depos, they think that the dollar will weaken. That's not necessarily true. I remember when I sold my energy company, we got a lot of money. And I remember saying, George Soros once said that the existential decision for any investors is in which currency to denominate themselves. I chose gold. But also, I had other paper currencies. The dollar euro at that time in November of 2007, was about $147 million. The dollar has strengthened to 115, let's say, and gold has gone from 600 to nearly 5,000. In other words, you do not need a weaker dollar to buy gold. Does it help? Yes. But those who shut off that mythology will do a lot better. I knew that the gold and the dollar could go up in tandem. So really, when you're looking at that analysis, don't make that the central pivot in my opinion. If it helps the analysis, no problem. But there are a lot of myths about gold, which have been dispelled that now people really do understand. You didn't need strong oil. When I sold my energy company oil was at $120 a barrel. It's half of that, gold was at $600. There are a lot of miss. The point is, this is a bull market. And you're going to play it if you're not in it and you're going to be increasing your allocation as other people come into it for the first time. The mining equities are tremendously undervalued. And the reason for that is after so many years of dismissing gold as a harbors relic people almost can't believe what they're seeing. They can't believe it's really going to be 3,000, 4,000, 5,000. Well, if it is, the gold miners are truly, truly value plays, something to consider. If I move to Slide 11, very simply put, if you look back over 25 years, which is not unreasonable since the turn of the century, gold has done a brilliant job as an asset class. As we know that people do like to look back, I think people, our investors are going to be encouraged more and more to have gold in their portfolio as portfolio diversifiers. Not to mention the other myriad factors for owning gold in today's world. Slide 12. So this for me has been one of the great reasons why I love Donlin. The leverage to gold, the leverage to what we see is 45 million ounces now in all resources with the potential for that to multiply along strike. The 45 million ounces is only 3 kilometers of an 8-kilometer mineralized belt, which itself is only 5% of the land package, 95% of Donlin is unexplored. That's going to turn around. We are now, for the first time, systematically going through our land package, we believe that it is possible, although this is a wildly forward-looking statement at the next [ Donlin ] could be at Donlin. The chance is that there's nothing else big there are very small. Having said that, even if nothing else was there, we do believe that we can see the existing resource multiply. But assuming never none of that happens, this is the leverage that we have to go -- and it shows NPV 5, which are perfectly fine. And it also shows NPV 0. And the reason why I say that is because up until the early 1990s, U.S. assets were valued at a 0% discount rate. I believe we're going to get back to that. If you have the right jurisdiction and you have exploration potential and you have so many of the other attributes that Greg will be describing in just a couple of minutes. I really do believe that we will be closer to the right of the right-hand side. But be that as it may, you can clearly see that the beauty of Donlin is that it gives you all the leverage, you could possibly want to gold, but in a jurisdiction that will allow you to keep it. At Donlin, you can sleep well at night and be exposed to tremendous good news while being short jurisdiction risk. And so with that, I'm going to hand the baton over to Peter Adamek to talk about our financial results. Thank you. Peter Adamek: Thank you, Tom. Turning to our operating performance on Slide 14. NOVAGOLD reported a fiscal 2025 4th quarter net loss of $15.6 million. This represents an increase of $4.7 million from the comparable prior year primarily due to higher site activity at Donlin Gold and higher general and administrative expenses. NOVAGOLD Fourth quarter results also reflect the company's second consecutive quarter with a 60% interest in Donlin Gold. For the full year, NOVAGOLD reported a net loss of $94.7 million during fiscal 2025, which included a $39.6 million noncash, nonrecurring charge for warrants issued as consideration for a backstop commitment in support of the Donlin Gold transaction. Excluding this onetime charge, general and administrative expenses during the fiscal 2025 were largely unchanged from prior year while Donlin Gold expenditures were $9 million higher due to the 2025 field program. On Slide 15, our treasury during fiscal 2025 increased by $13.9 million, which left us with $115.1 million at the end of the year. During the year, we closed a public offering and a private placement, generating net proceeds of $259.6 million, we also acquired an additional 10% of Donlin Gold for consideration and transaction costs totaling $210.1 million at the start of the third quarter of 2025. Corporate G&A cash spend during the year increased by $1 million versus prior year, and our share of Donlin Gold funding increased by $10.1 million due to increased site activity in 2025 and the company's 10% increased Donlin Gold funding obligation. Moving to Slide 16. As discussed on the previous slide, our treasury sits at a robust $115.1 million at the end of the fourth quarter of fiscal 2025. Our 2025 cash expenditures of $41.2 million were below our overall 2025 guidance by $0.8 million due to slightly lower-than-anticipated spending at Donlin Gold and marginally higher G&A costs at NOVAGOLD as a result of higher professional fees following the closing of the Donlin Gold transaction. Looking ahead to 2026, our anticipated expenditures for 2026 are approximately $98.5 million, which include $78.8 million for NOVAGOLD 60% of Donlin Gold expenditures and $19.7 million for corporate G&A. With that, I will now turn the presentation over to Greg. Greg Lang: 2025 was a very active year at the Donlin site. We completed an 18,000 meter drill program. Throughout this program, the safety record was impeccable, and we hired over 80% of our employees from villages in and around the Donlin mine site. The results from this program will be used to enhance our geologic modeling, resource conversion and geotechnical drilling to support the designs of the project facilities. We recently updated our technical report for regulatory compliance, pending the completion of the feasibility study. This report more than anything else really demonstrates the robust nature of the mineralization at Donlin. We're also very active in the communities this year. With the renewed progress at the site, it garnered a lot of interest. We hosted many community visits, regulatory visits as well as additional analyst tours. So a very active year at the site. Our team in Alaska also finalized shared value statements with additional villages, bringing the total to 20. We completed a restoration program at Snow Gulch. And Enrique Fernandes, one of the Donlin employees was recognized by his peers for his contributions to misundertaking. Turning to the next slide. What I really want to highlight here is just to remind everybody, we have completed the federal permitting process. and we have substantially completed the state permitting. We're one of the few projects that is not relying on permitting and the decisions impacting the timing are solely in the hands of the owners. As shown on Slide 20, we continue to support the state and federal agencies in defending the permits they have issued. The court rulings to date have validated that the agencies did a thorough job preparing the environmental impact statements and the associated permits. We're continuing to advance the design of our tailings dam and other water retention structures. This work has been submitted to the regulatory agents in Alaska, and we expect them to be responding in the near future. Our federal permit, turning to the next slide was remanded for a small additional study by the courts. This requires a supplemental EIS. During the permitting, we evaluated a tailings release and the court asked that we study additional releases. This work is well advanced, and this supplemental EIS has been incorporated into the FAST-41 program. This is a program that creates schedules and deadlines for the agencies to follow in processing a permit. It doesn't change anything in our designs, but it just focuses the agencies on getting this work done in a timely fashion. My next few slides will talk about why one might consider investing in NOVAGOLD. Donlin is -- it is just simply a unique asset in terms of its production profile, it will average over 1 million ounces a year in a mine life of almost 3 decades. There are many mines in the industry of this size anymore. At 40 million ounces, we've got a huge endowment at 2.25 grams, great grade for an open-pit deposit the exploration potential at Donlin is tremendous. We know the ore body is open ended at strike at depth and along with 3 kilometers of the 8-kilometer gold-bearing system has only likely been explored. When the time is right, we will resume exploration on the project. We also know that there's tremendous potential on our landholdings at Donlin. The area of the known mineralization represents about 5% of our land holdings are. Alaska is a great place to do business. They've got a well-established, traditional and responsible mining and are the second largest gold producing state in the U.S. Another great factor about Donlin, it is located on private land owned by 2 native corporations. As I mentioned earlier, our permits are in hand, and we're wrapping up the state permitting. We've maintained a great environmental and safety record at our site, and we're committed to responsible mining. The team at NOVAGOLD has the expertise it takes to bring a project like Donlin into fruition. Moving to the next slide. When you look at the other development projects that are being advanced in the industry, the output of them is less than 0.5 million ounces a year. Clearly, Donlin would be far and away the largest new gold mine to be built. Its first 10 years will produce about 1.3 million ounces a year, truly in a class of its own. Grade is also a very key attribute at Donlin. The industry grades are approaching a gram per tonne. At 2.25 grams, Donlin is twice that. And it's that grade that gives Donlin very competitive cash costs. And this slide just highlights the potential along trend. The ACMA, Lewis deposits are less than half of the 8-kilometer belt. We've got gold bearing drill holes all up and down the trend, and we will resume exploration when the time is right. This year's drill program included results of over 26 grams per ton demonstrating the quality of the resource and the potential for significant grades when we continue exploring. Moving to the next slide. We're up in Alaska. We've been there for many years. We're very comfortable operating in the state. It's got a great regulatory environment. There is a responsible active mining industry in Alaska, and we're really privileged to be there. When you look at the jurisdictional risks of other mining jurisdictions, Alaska is third globally on the Fraser Institute Index. As I mentioned earlier, we are on private land. Calista Corporation owns the mineral rights and TKC owns the surface rights. Both of these entities have been stance, allies and advocates for the project as we navigated the permitting process. We have life of mine agreements in place with both of these entities. Donlin will provide a meaningful impact to these businesses, and they look forward to the economic opportunities that the mine will bring. Another development in Alaska that we're following very closely is the planning to bring gas down from the north slope into the Cook Inlet. This is being championed by Glenfarne, and they are working to secure funding to advance this. Gas resources up in the North Slope have been known for many years, but it was the difficulty getting them to market was the challenge with the Administration's new focus on U.S. energy independence. I think the time is getting close to bring this gas into the Cook inlet, produce in Alaska as well as the export markets. This is very important to us, and I think you might have noticed we have signed a nonbinding letter of intent with Glenfarne, the champion of this pipeline project. The parties will advance discussions on a supply agreement with Glenfarne as their plans materialize to build the gas pipeline from the North Slope. NOVAGOLD enjoys strong institutional support. We've been very fortunate to have a shareholder base that's been with us many, many years. The top 10 shareholders represent almost 2/3 of our outstanding stock. It's great to have such blue-chip investors behind us. We value their support and the long-term relationships that have guided us for many, many years. Turning to the next steps at the project and some of the catalysts that will be coming up. Within the next few weeks, we anticipate that we will announce an engineering firm to complete the bankable feasibility study. This work is expected to take about 18 months and the firm will be certainly well known to many of you that follow the construction activities in the mining industry. We've also hired Frank Arcese. He is the project manager. He brings extensive experience to the project, and we're very fortunate to have a man with his background. We will also be exploring future sources of financing as we advance the feasibility study. Looking ahead, we look forward to updating all of our shareholders and stakeholders on the progress we're making. We'll now open the line for questions. Operator: [Operator Instructions]. The first question comes from Raj Ray with BMO Capital Markets. Raj Ray: I have 3 questions, if I may. The first one is, well, congratulations on getting the nonbinding LOI signed with the Glenfarne. I know it's early days of negotiations, but is there anything you can share with us with respect to what's the structure of that agreement that NOVAGOLD would like to have? That's the first. The same question is on your RFP for the BFS that you have sent out of various engineering funds Look, I know it's -- there's a lot of good engineering firms. But given the fact that commodity prices across the board are running, it's also important to have the best teams within those engineering firms. So as you are starting to talk to them what's the feeling you're getting about the capacity they have and your ability to have not only the top form but also the best team within the firm? And my last question is on the technical report update. It's great to have that very informative. I did see that there's a slight pickup in the strip ratio. I just wanted to get a sense whether some of the geotech drilling you have done, if that's informing that increase in [indiscernible] or if you can share any additional details? Greg Lang: All right. Raj, Well, thank you for joining the call this morning. I think I could cover all your questions. Beginning with the pipeline and our discussions with Glenfarne, it's a clean slate. Glenfarne is quite interested in all aspects of what we're doing. They've expressed interest in building and operating the pipeline for us. And we think that's really a logical piece of the project to carve out. So we're really just, like I said, an open slate where discussions will continue. And I would watch Alaska for the next month or so and look for announcements on their success in financing the pipeline. And it's important to note that this is not a new project, and it's already permanent, and it will follow the existing Trans Alaska oil pipeline. So very exciting developments there, and it's great that Donlin has a seat at the table as their plans advance. On the RFP for the feasibility study, we were very select in the firms that we brought into the bidding process. We only wanted to consider firms that have one experience to take on a project of this scale and the capacity of people to do it. And so we've kept the field very narrow, and we anticipate releasing that news in the next few weeks. But I think part of the selection process addressed the buried issue you talked about, and that was we went with the firm that did have the capacity to take on a big project. And finally, on the technical report, the strip ratio has ticked up a bit, and that's driven by 2 factors. I think, one, we've taken some areas of the pit, we flattened the slopes a little bit. And we've also taken a little different view of dilution. And these are areas that we will revisit when we are advancing the model that will support the feasibility study. Operator: The next question comes from Soundarya Iyer with B. Riley Securities. Soundarya Iyer: Congratulations on the quarter. I just have 2 questions. One is on the bankable feasibility study. So I'm trying to understand like how the current budget, the $78 million that has been budgeted for the upcoming Donlin activities. How is that allocated between like feasibility work and the ongoing exploration. My actual question is how do we look at it as -- do we look at it as a single year budget? Or is it like through the feasibility study that's going to take 12 to 18 months. Greg Lang: Well, the work program at Donlin in 2026 will be very active. The bankable feasibility study will obviously be a large component of that. In addition to the bankable feasibility study, we're also in final discussions on firms on several unique parts of the project. For example, these would be the autoclaves. There's some companies out there with deep experience in this processing technology. So we'll have a separate contract for that as well as the gas pipeline and other components of the infrastructure. Those are also included in the Donlin budget for next year. We continue to be very active in the communities, and we've increased our budget in the communities to reflect the increased activity as the project is moving forward. Of course, it's getting more and more interest. So we're going to really be out in the villages and throughout the state and in our nation's capital, actively talking up the project and keeping everybody informed of our plans. So that's the main components of the Donlin budget. The feasibility study, we've guided will take about 18 months to complete, and we'll be -- once we announced the firm that we've selected, we'll update everybody on the schedule. Soundarya Iyer: Just one more from me. I mean, there's a lot of potential in the Donlin land package with just like 5% explode so far. So as we move into feasibility and then eventual construction , how are you guys thinking about advancing that exploration optionality in the near term. Will that be a confident event along with the feasibility study? Greg Lang: We will -- last year, we did a pretty extensive soil sampling program along the known mineralized trend. As I noted earlier, and that's just a very small part of our landholdings at Donlin. So we will be working with our partner developing plans for future exploration. But right now, really, it's all hands on deck getting the feasibility study kicked off. And once we get that work well underway, we'll turn our attention to the exploration and other matters. But certainly, the potential is vast at Donlin, and we look forward to updating everybody on that work. But I think the immediate potential exists in and around the new ore bodies. So it'll be an exciting time to be exploring it up in Alaska. Melanie Hennessey: Thank you. We have a few questions coming in from the webcast, and I'll start with a question coming in from [ Eric Schein]. Is the tailings design now effectively locked or still at risk of material change? Greg Lang: That's it. That's a good question. Let me -- first off, remind everybody that the tailings dam at Donlin is a downstream rock construction anchored into the bedrock. It's also a fully aligned structure. And that's really -- that's state-of-the-art. That's the most stable dam being built and the liner is just added protection. So the design of the tailings dam is really not impacted at all. It's finalized and we've submitted the design packages to the state. I don't anticipate any changes at all. Melanie Hennessey: Great. The second question, what are the project economics, [ NPV and IRR ] that you're targeting as part of the DFS? Greg Lang: I think that's -- that will be addressed in the feasibility study sensitivities. Looking at our recent technical report, and I encourage everybody when they have time to give it a review. The economics on the gold price of about $2,100 were double-digit rate of return. And it's -- you don't have to stretch your imagination from 2,100 to where we sit today, that's almost -- it's better than a twofold increase in price. So I think the economics at much lower gold prices are robust. And as you've noted in all of our presentations, we have tremendous leverage to upside and the current projects have close to an amazing cash flow generator. Melanie Hennessey: The next question is for Tom. It's actually more of a statement from Matt Kovacs, Dr. Kaplan. I have been listening to you at NOVAGOLD for many years. How does it feel to be right and see your predictions and the price of gold coming to fruition? Thomas Kaplan: It's not really a function of satisfaction of being right. Obviously, being right is essential for the way that we do business. We always start with a macro view on an underlying commodity or as I would put it in the case of precious metals currencies, and the reason why we start with macro is for the good reason that I'm not a mining guy. I've been in the business for 33 years. And I've surrounded myself with the best of the best geologists, people who've been there and done that, like Dr. [ Larry Buchanan], you know who's still our Chief Geologist since 1994, or Greg Lang and Richard Williams, who both brought in [ Cortez ] and whether be on time, on budget when they were at Barrick. If you surround yourself with great people and you have assets that have superlatives attached to them, you're going to be right. The question is how long does it take? If I have that kind of conviction, which some was metaphysical certitude about a thesis like I have had with gold and silver. And I have the right vehicle with which to be able to get the greatest leverage to that, especially today, in a jurisdiction that allows you to keep the fruits of the leverage. I can hold forever. I don't get frustrated. So by the time people come around to my point of view, it's not like I feel of indication. It's -- well, I'm glad that they came around and that offers me the opportunity to reward the people who've been with us with outsized gains. To me, business is personal. I mean I have multiple passions in life. But over the last 33 years, we've only really focused on maybe half a dozen, 6, 7 assets. But if you look at our track record from first investment to exits, the annual track record is into the 80s of percents. And that was actually over 100% around the time of the financial crisis. But the last 10 years or so have been almost like watching paint dry in the mining industry. But fortunately, the fundamentals always well out. I've never had a doubt about gold. And if I don't have a doubt. And by the way, I'm always questioning myself, I'm always saying, have the circumstances changed. In fact, in 2007, when I made that statement that a private equity conference that I was selling my energy company, fastest-growing natural gas producer in North America to go into gold and silver. And remember, I mean, the [ Petro ] state, and they said, what is your target? And I said my first equilibrium level is between 3,000 and 5,000 and then the next question was a very, very intelligent one, which was what can go wrong with your thesis? You obviously have so much conviction. And I said for the first time in my life in my career, I can't find how I'm wrong, and that scares me. And for years, I was looking around for people to challenge me, like an ancient Greek with a light, [indiscernible] with a lamp looking for an honest man. And I was never persuaded out of my position and God only knows -- or excuse me, heaven knows. There is nothing that has happened either within the realm of gold specifically or the macro circumstances in which we find ourselves, that has done anything to dissuade me from my firm beliefs which are, as you've seen, that gold will do as the Dow has done in terms of the breadth and long waves and sweep of the bull market. And it may happen much faster than the Dow for reasons that are almost self-evident at this point. So it's not really so much about being right. It's about doing the right thing. And candidly, gold because I felt it was the best way to protect my family's wealth. And the fact that we express that through mining companies means that other people can join in if they like what we're doing. But first and foremost, it was out of personal interest. And so being right is not about -- growing about it. It's about knowing that we allocated capital properly for our kids. I hope that answered -- well, you made a statement, but I hope that, that just gave a little bit more context to it. It's not so much about being right. It's about doing the right thing. And that can sometimes seem different. Melanie Hennessey: The final commentary is worth sharing, and I'll just read it. It comes from the line of [ Jim Jamieson ]. Mr. Lang, Dr. Kaplan and Mr. Paulson, my wife and I have been NOVAGOLD shareholders and related Trilogy shareholders since 2011. I have been a true believer from the get go. My wife, not so much. Thank you all for saving my marriage, just kidding. Thank you for your blood, sweat and tears, your extraordinary efforts, patients, resilience and foresight have brought us this far. We can't wait for the next 8 innings. Best wishes [ Jim ]. Thomas Kaplan: Thank you, Jim. You certainly made our week. Greg Lang: I'm glad it worked out for you. Melanie Hennessey: That ends our Q&A. So back to you, Aisha. Thomas Kaplan: All right. We thank you for joining our call. Operator: Go ahead. Thomas Kaplan: Thank you, everyone. Greg Lang: Thank you. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, everyone, and welcome to the Q4 2025 USCB Financial Holdings, Inc. Earnings Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I would like to turn the conference over to Luis de la Aguilera, Chairman and CEO. Sir, please go ahead. Luis de la Aguilera: Thank you, Jamie, and good morning, and thank you for joining us for USCB Financial Holdings Q4 2025 Earnings Call. I am Luis de la Aguilera, Chairman, President and CEO of USCB Financial Holdings. With me today reviewing our Q4 highlights is CFO, Rob Anderson; and Chief Credit Officer, Bill Turner, who will provide an overview of the bank's performance, the highlights of which commence on Slide 3. 2025 was another successful year in which team USCB closely focused on our business plan, executed efficiently and delivered strong results. In reviewing overall performance, we note that total assets reached $2.8 billion, up 8.1% year-over-year. Loans grew by $216 million or 11%, reflecting strong commercial activity and disciplined underwriting. Deposits increased $171 million or 7.9%, demonstrating continued franchise growth and deep client relationships. Net interest income expanded to 3.27%, improving from 3.16% in the prior year. Credit quality remains excellent with nonperforming loans at 0.14% of total loans. Tangible book value per share increased 10.8% year-over-year to 11.97% (sic) [ $11.97 ]. These metrics affirm that our business model remains sound and that the bank continues to execute consistently across all major areas: profitability, balance sheet strength, credit quality and capital. Still, as we executed our 2025 plans, management kept its eye on the future, taking strategic actions to enhance our earnings power in 2026 and beyond. In the third quarter of 2025, we completed a successful $40 million subordinated debt issuance, providing efficient capital at attractive terms. Most of the proceeds were used to repurchase approximately 2 million shares at a weighted average of 17.19% (sic) [ $17.19 ] per share, underscoring our confidence in the intrinsic value of our stock and our commitment to returning capital to shareholders. In the fourth quarter of 2025, we reported GAAP diluted EPS of $0.07, which included 2 known nonoperating impacts. First, the execution of select restructuring of our securities portfolio that resulted in the sale of $44.6 million of lower-yielding available-for-sale securities producing an after-tax loss of $5.6 million or $0.31 per diluted share. Second, a $0.06 per share income tax liability expense related to prior periods for income generated in states outside of Florida. When you exclude these strategic nonroutine items, operational diluted EPS was $0.44, consistent with last quarter and reflecting strong stable performance. The balance sheet repositioning was thoughtfully planned as we reinvested the proceeds into higher-yielding loans at year-end. As a matter of fact, Q4 2025 was our strongest loan production quarter for the year, and this past December, posted a record monthly closing high for 2025. This action is expected to lift NIM, accelerate earnings and deliver long-term value for our shareholders. On expenses, while GAAP noninterest income and expense reflect the restructuring and onetime items, our operation efficiency ratio remained 55.92%, demonstrating stable operating leverage. Our capital remains strong, and we announced this week that the Board's approval of a 25% increase quarterly cash dividend of $0.125 per share. Risk-based capital ratios continue to exceed regulatory requirements by a comfortable margin, and the bank's underlying business remains solid, disciplined and resilient across all metrics. CFO, Anderson will guide us in detail through these strategic actions and their expected positive impacts. The following Page 4 is self-explanatory, directionally showing 9 select historical trends since recapitalization. Profitable performance based on sound and conservative risk management is what our team is focused on consistently delivering. I'll now turn the call over to Rob for a deeper review of our performance. Robert Anderson: Thank you, Lou, and good morning, everyone. Q4 was an interesting quarter for us, and there are several items that require some detailed explanations. Prior to addressing each item individually, I would note that the bank's core performance remains strong. The measures implemented in the fourth quarter will further strengthen USCB's position for continued improvement in 2026. First, as we previously disclosed, we executed a securities loss sale in December, which negatively impacted our earnings per share by $0.31. We also incurred tax liabilities to other states where we generate income from loans. State tax liability expenses for all 2024 and for the first 3 quarters of '25 were recognized during the fourth quarter of this year. This was $1.1 million and negatively impacted earnings by $0.06 per share. Going forward, our tax expense should be modeled at 26.4%. Adjusting our GAAP figures for these 2 items only, you will find the operating or adjusted numbers on Page 6. This includes operating return on average assets of 1.14%, operating return on average equity of 15.05%, operating efficiency of 55.92% and operating diluted earnings per share of $0.44. I would note that our expenses were not adjusted, and this line item does include costs that although semi-routine in nature, do not occur consistently or have a full year impact recognized in Q4 and subsequently will be amortized over 12 months in future periods. I'll provide further details once we get to the expense slide. Also, the 18.3 million shares represent a complete 3-month period following the repurchase of shares in September. And last, tangible book value per share was $11.97. So with that overview, let's discuss deposits on the next page. Average deposits were essentially stable this quarter, down $3.9 million compared to the prior quarter, but up $314.6 million year-over-year, reflecting continued strength in core relationship growth. Within the mix, a positive development was a $26.4 million quarter-over-quarter increase in DDA balances, which represented 24.3% total average deposit. This shift toward lower cost funding supports our NIM resilience, particularly in an uncertain rate environment. On pricing, interest-bearing deposit rates decreased 27 basis points to 3.02%, down from 3.29% in the third quarter. Total deposit costs improved 25 basis points from the quarter-to-quarter and 20 basis points compared to the same quarter last year. These results reflect the benefit of the September, October and December rate cuts and the disciplined repricing actions we have implemented. So with that, let's move on to the loan book. Average loans increased $31.9 million or 6.02% annualized compared to the prior quarter and $172.3 million or 8.8% compared to the fourth quarter of 2024. On an end-of-period basis, our loan book grew just under 11%. As Lou mentioned, December was a record month for the new loan production. Also, since these loans were booked at the end of December, we did not get the full benefit of interest income in the period. This will be realized in Q1 of 2026. Additionally, we must provision on day 1 for these loans, so the financial impact in the quarter was negative. Portfolio yield declined modestly to 6.16%, reflecting the Federal Reserve's Q3 and Q4 rate cuts, which impacted our variable rate loans tied to SOFR and Prime. Additionally, a higher proportion of new loan production were short-tenured 180-day correspondent banking loans tied to SOFR. Gross loan production totaled $196 million in the fourth quarter with $83.5 million or 43% coming from correspondent banking. These loans carried a 5.26% new loan yield due to their short-term 180-day SOFR-linked structure, which helps explain the sequential yield decline. Excluding correspondent banking new loan production, new loan yields remained healthy at 6.43% for the quarter. And as we look ahead to 2026, we expect loan yields to remain above 6%. On Page 10 is a snapshot of our business verticals, and all these business verticals are led by very seasoned experienced bankers and are pivotal to our branch-light model. These business verticals are highly scalable. And in the past year, we have added production personnel to support further growth. Now moving on to Page 11. Net interest income increased $933,000 on a linked quarter basis, representing 17.4% annualized growth and improved by $2.8 million compared to the same period last year. NIM expanded 13 basis points quarter-over-quarter and 11 basis points year-over-year to 3.27%. A key driver of this improvement, consistent with what we discussed on the deposit side is our ability to reprice the deposit book more quickly than the loan portfolio. Our disciplined deposit pricing strategy supported a steady NIM recovery throughout 2025. As we head into 2026, we expect further NIM improvement to be supported by continued impact of rate cuts and the ongoing execution of our deposit strategy, which emphasizes core relationship funding. Additionally, we anticipate NIM improvement from the securities restructuring performed late in Q4. Moving on to Page 12. Our balance sheet remains well positioned to benefit from an easing cycle. According to our ALM model, the balance sheet is liability sensitive, and we continue to maintain a healthy mix between fixed rate and variable rate loans. With additional rate cuts expected in the near term, we anticipate meaningful relief in funding costs and a supportive backdrop for overall margin expansion. While we believe we can continue to outperform our model deposit betas, it's important to consider the dynamics on the asset side as well. We currently have $2.18 billion in the loan portfolio and 61% or roughly $1.33 billion is variable rate or hybrid in nature. Of that, 52% or approximately $692 million is scheduled to reprice or mature over the next year. This will naturally influence the pace at which asset yields adjust in the lower rate environment. In short, our liability sensitivity will depend on our ability to reprice our deposit book faster than the loan portfolio reprices, something we have historically executed well. With that, let's turn to our securities portfolio. We ended the quarter with $461.4 million in securities, split 67% AFS and 33% HTM with a quarterly portfolio yield of 3.01%. At current rates, we expect to receive $68.2 million of cash flows in 2026 and approximately $87.7 million in a 100 basis point down rate scenario. These cash flows provide meaningful optionality, allowing us to support loan growth or retire higher cost funding as conditions evolve. At this point, we are not anticipating any additional portfolio restructuring. We do expect the yield on the investment portfolio to improve from current levels driven by natural cash flow reinvestment at higher yields when available. As noted, the loss rate executed in the fourth quarter of 2025 was deliberately aimed at increase our NIM and the resulting cash flows were redeployed into higher-yielding loans. So with that, let me pass it over to Bill to discuss asset quality. William Turner: Thank you, Rob, and good morning, everyone. As you can see on Page 14, the first graph shows the allowance for credit losses increased to $25.5 million at the end of the fourth quarter at an adequate 1.16% of the portfolio. We made a $480,000 provision to the allowance that was driven mostly by the $59 million in net loan growth. There were no loan losses during the quarter. The remaining graphs on Page 14 show the nonperforming loans at quarter end grew by 8 basis points or almost $2 million. The nonperforming ratio stands at 0.14% of the portfolio, and these loans are well covered by allowance. This increase is related to 2 past due residential real estate loans that are in the process of collection. These loans are well collateralized by real estate and no loss is expected. Classified loans also increased during the quarter to $6.4 million or 0.29% of the portfolio and represents 2.1% of capital. The increase is related to the 2 nonperforming residential loans previously mentioned. No losses are expected from the classified loan pool. The bank continues to have no other real estate. On Page 15, the first graph shows the diversified loan portfolio mix at year-end. The loan portfolio increased $59 million on a net basis in the fourth quarter to just under $2.2 billion. Commercial real estate represents 57% of the loan portfolio or $1.2 billion centered in retail, multifamily and owner-occupied loans. The second graph is a breakout of the commercial real estate portfolios for the nonowner-occupied and owner-occupied loans, which also demonstrates our collateral diversification with no major changes from the third quarter. The table to the right of the graph shows the weighted average loan to values of the commercial real estate portfolio at less than 60%, and the debt service coverage ratios are adequate for each portfolio segment. The quality and payment performances are good for all segments of the loan portfolio with the overall past due ratio at 0.14% and nonperforming loans also at 0.14% with both ratios below peer banks. There were no loan losses in the quarter. Overall, the quality of the loan portfolio is good. Now let me turn it back over to Rob. Robert Anderson: Okay. Thank you, Bill. The headline for noninterest income was the securities loss restructuring we executed in December. The AFS securities sold represented approximately 12.6% of the AFS portfolio as of November 30, 2025, and had a weighted average yield of 1.70% and the sales resulted in a onetime after-tax loss of $5.6 million or $0.31 per diluted share. The proceeds were reinvested into loans with a 6.15% yield. Excluding the security loss, noninterest income was $3.3 million for the fourth quarter of 2025, consistent with prior quarters. So let's move on to expenses. Our total expense base was $14.3 million, while up from the prior quarter contained $759,000 for a new bonus plan for nonmanagement personnel and enhancements of sales incentives and retention programs. It's important to note that the $759,000 represents an annual expense and will be accrued monthly based on performance in the future periods. The new bonus and retention programs aim to attract and retain top talent and position USCB as a leading bank employer. Consulting and legal fees rose by $315,000 compared to the previous quarter with $275,000 of this increase attributed to the nonroutine expenses related to the universal shelf offering and the share repurchase transaction that took place earlier in 2025. Other operating expenses increased $137,000 primarily due to force-placed insurance for specific borrowers, which the company fully expects to receive reimbursement for in the coming quarters. The operating efficiency ratio was $55.92, which encompasses the full $14.3 million expense base. Adjusting for the $759,000 and the $275,000, the fourth quarter expense base would have been $13.2 million, resulting in an adjusted efficiency ratio of 51.87%. When planning for 2026, we consider the $13.2 million to be an appropriate baseline for our expenses in Q4 of '25. So with that, let's turn it to -- turn over to capital ratios. Earlier this week, the Board approved a 25% increase to the dividend or $0.125 per share based on strong operating earnings. As a reminder, in August of 2025, the company issued $40 million in subordinated notes and used most of the proceeds to buy back 2 million shares or approximately 10% of the company at a weighted average price of $17.19 per share. The bank maintains regulatory capital levels that significantly exceed the thresholds necessary for classification as well capitalized, and we look for ways to deploy capital where the return on average equity is between 15% to 17%, which equates to top quartile performance relative to peers of similar size. Last, I will note the ending share count for the quarter was 18.1 million. And with that, let me turn it back to Lou for some closing comments. Luis de la Aguilera: Thank you, Rob. 2025 ended another strong year for U.S. Century, and we continue to proactively make ongoing strategic decisions that support profitability and shareholder value. As we look ahead into 2026, expanding and strengthening our deposit base remains one of our highest priorities. Our approach is multi-vertical and intentionally relationship-driven, not rate-driven. While all our production units are ready to deliver results, we are leaning on 4 of our strongest business lines: Business Banking, Private Client Group, Association Banking and Correspondent Banking. Each vertical has a clear plan, clear targets and experienced leadership accountable for execution. Business banking delivered strong results in 2025, closing the year-end at nearly $400 million in deposits, and we are building on that momentum. In 2026, we're expanding production capacity by launching a new lending and deposit gathering team focused on Doral, Medley and Hialeah, 3 of the densest small business markets in Miami-Dade. This team will emphasize SBA and C&I lending, operating accounts and treasury services, all designed to bring in sticky relationship anchored deposits. It's a very targeted expansion, and this positions business banking to be one of our biggest contributors to organic deposit growth this year. Our Private Client Group had an excellent year-round growing deposits, 18% to $300 million. This franchise continues to win because of its deep specialization in professional markets, legal, medical and affluent professional clients. For 2026, we're adding more dedicated relationship talent, beginning with additional production hires expected between Q1 and Q2. The strategy here is share of wallet, more operating accounts, more treasury services and deepening our footprint in the professional services sector. Association Banking remains one of the most scalable opportunities, and it carries our largest deposit growth target for 2026 of $100 million. The team now manages over 480 homeowner associations relationships today and continues to grow both deposits and lending in this vertical. Our 2026 strategy focus on property management company. Roughly half of the HOAs in South Florida are professionally managed. And now with 25 firms onboarded, we are working hard to capture these operating and reserve balances. Keep in mind that approximately 40% of the state's population of 23 million live in either a condominium, homeowner association or a planned urban development, underscoring the importance potential of this business vertical. This granular, stable, low beta deposit growth is exactly the kind of funding we want more of. Correspondent Banking grew to $235 million by year-end. The team also delivered a strong lending year and meaningful fee income through wire activity. In 2026, the focus is on expanding the corresponding banking relationships onboarding 3 to 5 new correspondent banks and maintaining an active travel schedule. We're also evaluating additional production talent to support growth. Our goal is to continue growing low-cost deposits as well as expand on trade finance and income -- and fee income opportunities. Our specialty business lines, namely private client, correspondent and association banking have grown to $686 million or 29.3% of total deposits. We have a clear and attainable plan to continue this important growth trajectory. With that said, I would like to open the floor to Q&A. Operator: [Operator Instructions] And our first question today comes from Will Jones from KBW. William Jones: So I just wanted to start on deposit trends. I know the story with average balances is a little bit different than what you saw in the period, but I just wanted to dig into kind of the shrinkage you saw there at the end of the year, essentially given back some of that growth you saw last quarter. Rob, just any notable trends to point out there? And any kind of seasonality to be aware of or strategic shrinkage you guys kind of saw there at the end of the quarter? Luis de la Aguilera: Well, there's 2 things that happened literally on the last 2 weeks of the last month. We have a relationship with a client that is over 10 years, phenomenal relationship, and there was a significant move in deposits of well over $100 million. This is something that they had communicated to us as early as February, it was a business move that they were going to make. It could have happened in January, but it happened in the last 2 weeks of the year. The client still maintains with us over $112 million in deposits, 31% is DDA [indiscernible] accounts, and that is something that's going to rebuild over time. There was also on the correspondent banking side, about a $50 million swing also in the last 2 weeks of the year, but that has pretty much been recovered already in January. Our Correspondent Bank clients are flush with cash and periodically, especially at year-end, they tend to pay down their loans, and that's exactly what happened here. So those were isolated to very identified situations, and we're not really concerned about them. We expected them. William Jones: Yes. Okay. Got it. I guess that kind of bares my next question. You guys are kind of operating at the higher bound of your loan-to-deposit ratio that we've seen over the past handful of years. So I guess just based on your commentary that that's probably going to trend maybe back down a little bit in the first half of '26. But maybe just any thoughts about where you could -- what range you would like to see that ratio operate in and how you think about the current levels? Robert Anderson: Yes. I think optimally, I mean, I like kind of the 90% to 95% on the loan-to-deposit ratio. I think you get a little bit above that. That seems a little too tight for me, when you get a little lower than that, I think you have a little bit more liquidity. So I generally like anywhere between 90% and 95%, and I think we're operating at that level. As Lou mentioned, you do have some companies that do some window dressing at year-end. We anticipate to build back those deposits. I think Lou mentioned in his closing comments, we have a lot of resources decked up against deposit building for 2026, and we feel that is the #1 priority for the bank as we go into 2026. William Jones: Yes. Okay. That's helpful. And Lou, I thought your comments were interesting about this new kind of SBA vertical that you guys are launching there in some of your specific Florida markets. Maybe if you could just unpack that a little bit deeper for us. Just frame what you see the -- that opportunity looking like over the next, call it, 1 to 3 years? And maybe whether or not you already have the personnel in place to kind of kickstart that initiative? Luis de la Aguilera: Sure. Well, the initiative actually launched about 4 years ago, and we have been growing it prudently. It delivered over $1 million in fee income last year. We tend -- we do a lot of SBA 504, always have, always will. But we got into the 7a space just to diversify our product offering on the SBA side. And also, we like the gain on sale opportunity there. We're -- our average ticket is about $1.2 million. I think most of them are real estate secured. So we tend to be conservative in nature. We're not a shop that is trying to do millions of dollars in $50,000 loans that are unsecured. That's not what we're going to be doing. We'd like to grow this probably in the next 3 years to about $40 million or $50 million in annual volume, and that would deliver very handsomely on the fee income side. So we believe that the markets that we're going to be targeting down here, Hialeah, Medley and Doral, they're contiguous markets on the North and Northwest side of the county. Our analysis show that there's over 43,000 small businesses in these markets, and that's the type of business we're going to go after pretty much with the same focus that we started. It's not the tiny little, small SBA loan. These are established businesses. They have revenues probably between $3 million to $5 million. And again, this is the type of business that we're going to be selling treasury to and developing. William Jones: Got it. Okay. So this is just an extension of what you guys are already doing on the SBA side then? Okay. Luis de la Aguilera: Correct. We're just going to be -- we're going to be ramping it up. William Jones: Got you. Okay. That's helpful. And then the last thing for me, maybe just broad strokes over capital. You guys have been just fairly active over the past 3 months or so. Just strategically, as you think about some of the repurchase you did, the dividend increase, bond structure and of course, organic growth. Maybe it's just a good time to reset and just ask whether there's anything else you guys are thinking about strategically on the capital front and maybe just what your top priorities are in 2026. Robert Anderson: Yes. Besides building capital and returning it to shareholders, that's the #1 priority. I mean we just increased the dividend 25%. I think that demonstrates some conviction and strength by the management team and the Board. We did a lot last year with the buyback and the sub debt, I think 2026, we're looking to earn and return capital, and we don't have any significant plans, I would say, at this time to do anything other than produce good earnings and build it. Operator: Our next question comes from Feddie Strickland with Hovde Group. Feddie Strickland: I wanted to drill down on the margin a little bit. It sounds like in your opening comments, you talked about thinking there's going to be some expansion over the course of the year. But is it fair to expect a little bit more of a spike maybe in the first quarter from the impact of the balance sheet restructure and then kind of see a more steady growth over the rest of the year, particularly if we get some rate cuts? Robert Anderson: You broke up a little bit on the first part. Are you referencing the NIM, Feddie? Feddie Strickland: Yes. Sorry about that. I want to talk about the margin and just whether we might see a little bit more of a spike in the first quarter versus [indiscernible]. Robert Anderson: Yes. I think we're going to be probably, I would say, conservatively, probably a little flat. What we had is some runoff in deposits that were moderately priced. We backfilled a little bit of that with some FHLB advances, which were a little bit priced here. We ended the quarter at 3.27%. I think you should model flat to slightly up, not significant, and we look to build it. If we do get any rate cuts, certainly, that would be on the front end of the curve, and we look to our $1.2 billion money market book to reprice plus our CDs. And I think that would give us the margin expansion as well. But right now, the challenge for us is to backfill the deposits we lost with either DDA or moderately priced money market and either pay off the advances or redeploy that into higher-yielding loans. So I would say, conservatively, flat to slightly up on the NIM in the first quarter. Feddie Strickland: Appreciate that. And just on the loan growth, I mean, is kind of high single digits, low teens still on the cards? It sounds like it is, particularly given the strong growth at quarter end. Robert Anderson: Yes, I would say that, I mean, on average, we were kind of 6% for the quarter, but we just put up our largest quarterly new loan production in a while. It was $196 million, and a lot of that was done at year-end. So we didn't get the benefit of it in the quarter in terms of interest income, but we provisioned for it, and we'll get the benefit in the second quarter. But I would still say conservatively, certainly high single digits and maybe a little bit more to the low double digits would be kind of a secondary guide for you. Feddie Strickland: Perfect. And just one last question on the tax rate guidance. I think I heard you say that's going to go up to 26.4%. Is that a consequence of some of the securities you sold? Or just curious what the driver was there? Robert Anderson: No. The main driver is that we self-identified with our tax professionals kind of -- we do have some loans that are out of state, and we want to make sure we're complying with everything. So we went ahead and paid those. It was for prior periods. But I would say, from a modeling standpoint, going forward is 26.4% is a good modeling number in terms of the tax expense you'll see in 2026. Operator: [Operator Instructions] Our next question comes from Evan Yee from Raymond James. Evan Yee: I was just kind of curious on your expense outlook. If you have any updates there and maybe what the puts and takes would be given just the new bonus plan enhancements to sales incentives and retention programs in addition to what kind of sounds like more anticipated hires here? Robert Anderson: Yes. So the fourth quarter, I would characterize as first is we have our GAAP numbers. And this quarter, we're referencing some non-GAAP numbers, which I historically really don't prefer, and I think we've done it one other time with a portfolio of restructuring maybe in 2023. But since we've been public, we have been reporting GAAP numbers, and that's what I prefer. I think it's just a cleaner quarter for you guys. But we backed out the 2 known items. And then on the expense side, we did some new programs that were annual type expenses that booked in the quarter, and those will be based on performance on a run rate going forward. But I think if you were to back those things out, our expense base was around $13.2 million for the quarter. And I think you'll see that gradually increase in the first quarter with new hires and through the year. But we anticipate to have low 50% on an efficiency ratio. And -- but I think $13.2 million would be a good jump-off point for the fourth quarter as you model out 2026, if that's helpful. Evan Yee: Okay. Great. No, that is super helpful. And then I guess another one for me. I know we've had -- we touched on SBA, but just curious if you have any updates on your fee outlook as a whole? And could you maybe go into the puts and takes there? Robert Anderson: Yes. So on noninterest income, we've been running this quarter would have been $3.3 million if you backed out the securities loss that we executed. The quarter before was around $3.7 million, $3.3 million, $3.7 million. So I would anticipate us to continue to build that around, I think, the $3.5 million to $3.8 million range for 2026 initially and as we move forward -- but that's kind of what we're targeting. I think that's a good number, and it should gradually build from there. We have a lot of -- on the wire fees, new correspondent banks, we're increasing volume there. We've done that successfully. Swap fees remain attractive to our clients in the marketplace. And then certainly, our treasury management business as well is bringing in a lot of fees as well. So I think there's opportunity there for us as a company. And I would say anywhere from $3.5 million to $3.8 million in the coming quarters is a good number. Operator: And ladies and gentlemen, at this time, in showing no additional questions, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Lou for any closing remarks. Luis de la Aguilera: Thank you, Jamie. Before I conclude, I want to express my appreciation to our shareholders, clients and the entire USCB team for their continued confidence and partnership. As you've heard today, 2025 was a year marked by strong execution, disciplined decision-making and strategic actions designed to evaluate our earnings power for years to come. As we move into 2026, our focus remains unchanged, deliver consistent performance, grow high-quality loans, strengthen core funding, manage risk with discipline, invest in our people and create long-term value for our shareholders. I thank you all for your interest and support, and I look forward in meeting again at our next earnings call. Operator: Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Daniel Morris: Hello, everyone, and welcome to the presentation of Ericsson's Fourth Quarter 2025 results. With me here in the studio today are Börje Ekholm, our President and CEO; and Lars Sandstrom, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A. [Operator Instructions] Details can be found in today's earnings release and on the Investor Relations website. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call. We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll now hand the call over to Börje and to Lars for their introductory comments. Borje Ekholm: Thanks, Daniel. So good morning, everyone, and thanks for joining us today. It was a strong end of the year, as we executed with discipline and made solid progress against our strategic priorities. We are building a more resilient Ericsson. We expanded EBITA margins year-on-year for the ninth consecutive quarter, and we're getting closer to our long-term target of 15% to 18% EBITA margin and we ended the year with a net cash position of over SEK 61 billion. Our cost initiatives are just one component of our actions to structurally improve margins and cash flow. And you have seen that we have reduced the headcount, for example, by 5,000 over the past year. And we expect to continue reducing headcount going forward. And last week, we announced some initiatives we're taking in Sweden as part of a global effort we do to keep cost efficiency in our business. With the operational improvements we've implemented over the past few years, they are now getting increasingly visible in the P&L, and we had another 48% gross margin quarter now in Q4. The EBITA margin was 18%, both for the quarter and the full year, and that means that we are tracking very close to our long-term financial targets after normalizing for the about 3 percentage point benefit from the iconectiv gain. And now going forward, we expect to see improving operating leverage as our top line accelerates that we could see in Q4. Now that the underlying demand environment for mobile networks remain actually flattish. But it is encouraging that we had an organic growth of 6% during Q4. And the reason for this is that over the past few years, we have invested in a number of growth opportunities and growth initiatives like 5G core, mission-critical networks and enterprises, and I'll expand a bit more on this. In my view, we're actually entering a very exciting era of what we can call hyper-connectivity. So now we're starting to see everything being connected. I would say Ericsson is really well placed for this paradigm shift, and I believe we have the right strategy to win. To date, AI investments have been focused on models, semiconductors, data centers, et cetera. For sure, these are really critical, but the real economic value will actually come in AI applications and devices. So think about drones, humanoids, could be connected glasses, XR glasses, could be instantaneous or simultaneous translation services. You have a number of these things. All these new type of use cases, AI use cases, will really changed the nature of traffic with much more demand for uplink and low latency, and it has to be resilient and trusted. So when you think about this new world with AI is going into the physical world, if you call it a kind of a physical AI, those applications and use cases will be distributed, but more importantly, they will also typically be mobile. So they will require advanced wireless connectivity. So best effort connectivity, Wi-Fi, 4G, and I would even say 5G non-standalone, will simply not be enough. Instead, we will require 5G standalone today and then later on will require 6G. But this new world will also require better mid-band coverage to get the right performance of the network. And I'll take just 1 example, and you see China having a 10x denser grid than the rest of the world. And I would say that's one of the reasons why many are saying China is a formidable competitor in AI today as they are moving into AI applications. So at this point in time, it's a very exciting time. Our strategy is to lead in mobile networks with high performance, autonomous and programmable networks that are 5G native and at the same time, scale this mobile platform to new areas, like mission-critical enterprise solutions, but also providing tools to developers. So now let me go briefly through some of the progress we made against our strategic initiatives during the last year. Through our high-performing programmable and autonomous network, we're enabling our CSP customers to deliver differentiated performance and create new applications and use cases to monetize. And when you think about differentiated performance, it's actually creating dedicated performance for the application you have at hand. And during the year, we actually signed several key agreements with front-runner customers like Telstra, Vodafone, but we also made critical inroads in the important Japanese market with all leading operators. These advanced networks that we're building together with front-runner customers will be key to monetize and scale the AI opportunity. In parallel, we focused on scaling the mobile platform to new use cases and sectors, the most mature new use case is fixed wireless access, that during 2025, actually reached 150 million global subscribers. And typically, and most often, they have better customer satisfaction than other access technologies like fiber, for example. And now as you've heard me say earlier, we're also starting to see traction within mission-critical applications. And this, we think, is a key growth opportunity for us going forward. During 2025, we executed many new agreements in the public safety sector, and we're also targeting national security and defense operations. On the enterprise side, we're continuing to strengthen our position. The market for network API is actually starting to develop. In 2025, Vonage was first to offer aggregated access to network APIs across all 3 major U.S. carriers. And these advanced APIs included advanced fraud detection, and we have significant customer interest today. Our joint venture, Aduna, onboarded and achieved full coverage in 5 countries, including the U.S., Spain, Germany, Canada and the Netherlands. In enterprise wireless solution, we're seeing the market for private 5G starting to industrialize. It's still, though, early days. So we -- but we continue to see growth in our Wireless WAN solutions, but that was partly offset by lower sales in private 5G. So it's still a developing market here. So -- but before passing on to Lars to go through a bit more on the numbers, I'd like to take a moment to just go through our capital allocation strategy. Our top priority is to invest for technology leadership, and we expect this to be largely organic. We don't really see any need for large acquisitions going forward, as we believe we have the assets needed to execute on our strategy. However, we expect to see some smaller, potential tuck-ins, but that will be smaller in nature. So our current, very strong financial position offers scope for increased shareholder distributions. And as you have seen in this report, the Board is proposing an increased dividend to SEK 3 per share and the buyback program of up to SEK 15 billion. So that would be a total of SEK 25 billion to shareholders. This represents the largest shareholder distribution in our history and reflect our strong position and the Board's confidence in our strategy. So Lars will now go through this as well as our financials. So over to you, Lars. Lars Sandstrom: All right. Thank you, Börje. I will begin with some additional comments on the group before moving on to the segments. Net sales in Q4 totaled SEK 69.3 billion, with organic sales growing 6% year-on-year and with growth in all segments. Sales grew in the market area, Europe, Middle East and Africa; and in market areas Southeast Asia, Oceania and India. Market area, Americas, was broadly stable impacted by intense competition in Latin America, offset by slight growth in North America, driven by higher software growth; and Northeast Asia declined. Reported sales decreased by 5%, impacted by a negative currency effect of SEK 6.8 billion. In Q4, adjusted gross income was SEK 33.2 billion, including a currency headwind of SEK 3.6 billion. Adjusted gross margin reached 48% as a result of our cost reduction measures and operational excellence in both networks and cloud and software and services. On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped to SEK 21.4 billion, around SEK 2 billion lower year-over-year. Of this, about half is currency and the rest is cost initiatives. Excluding FX, R&D remained broadly stable. Adjusted EBITA was SEK 12.7 billion, up by SEK 2.4 billion, including a negative currency impact of SEK 2.5 billion and the EBITA margin was up around 4 percentage points to 18.3. Behind this improvement is the good progress we've seen in terms of optimizing our operations and lowering our operating expenses. Cash flow before M&A was SEK 14.9 billion, driven by earnings and reduced net operating assets. As Börje has already highlighted, the Board will propose higher shareholder distributions following the good 2025 cash generation. Let's move on to the results for the full year. Net sales amounted to SEK 236.7 billion and organic sales grew by 2%. Growth in Americas and in Europe, Middle East and Africa was partly offset by declines in the other market areas. At the same time, reported sales decreased by 5%, impacted by a negative currency effect of SEK 13.9 billion. The sales decline, which gives a significant volume impact on gross income, was more than offset by higher gross margins. Adjusted gross margin was 48.1% with support from cost reduction initiatives and operational efficiency. The result on adjusted gross income was an increase of SEK 2.5 billion to SEK 113.9 billion, despite a negative currency impact of SEK 7.2 billion. Turning to operating costs, excluding restructuring charges and impairments. Operating expenses dropped to SEK 81.2 billion, which is SEK 7.4 billion lower than the prior year. Of these, about 2/3 come from our cost initiatives, mainly from SG&A and the rest is currency. Adjusted EBITA increased to SEK 42.9 billion, and the margin was 18.1% or 14.9% excluding the capital gain from iconectiv. Net income for the full year was SEK 28.7 billion, including the benefit from iconectiv -- the gain from iconectiv. Cash flow before M&A was SEK 26.8 billion, a reduction of around SEK 13 billion compared to the prior year. In 2024, a strong working capital reduction contributed to higher operating cash flow. I'll cover cash flow more in details here later. So let's move to the segments. In Networks, sales decreased by 6% year-over-year to SEK 44.2 billion, with a negative currency impact of SEK 4.4 billion, so organic sales increased by 4%. We saw organic growth in market area, Europe, Middle East and Africa, driven by Middle East and Africa. Sales also grew in Southeast Asia, driven by Vietnam. Sales declined slightly in Americas due to continued price competition in Latin America. Sales were broadly stable in North America with continued healthy investment levels. Sales also declined in Northeast Asia due to timing of network investments. And Networks adjusted gross margin increased to 49.6% despite the higher share of service sales. The margin benefited from cost reduction actions and operational efficiencies. Adjusted EBITA in Networks was stable at SEK 10.1 billion despite a currency headwind of SEK 1.8 billion. And adjusted EBITA margin was 22.8%, an increase of 1.2 percentage points compared to last year. And looking at the right-hand graph, the full year adjusted gross margin reached 50% and stabilized at the new level, and adjusted EBITA margin reached 20.7%. Moving on to segment Cloud Software and Services. Sales increased by 3% year-over-year to SEK 20 billion despite a negative currency impact of SEK 1.8 billion. Organically, sales grew by 12%, mostly driven by higher core sales across all market areas and timing of project deliveries. Adjusted gross margin came in at 44.3%, an improvement of around 5 percentage points compared to last year, driven by a high share of software sales and continued delivery efficiency. Adjusted EBITA increased to SEK 3.7 billion with a margin of 18.6%, supported by the effective implementation of our strategic initiatives. Looking at the right-hand graph, the full year adjusted gross margin was 43% and adjusted EBITA margin 11.4%. These are both new high levels. Enterprise sales stabilized on an organic basis in Q4, growing 2%. Reported sales decreased by 25%, and that's an impact of the sale of iconectiv and currency. Global Communications platform organically grew by 3%, driven by an expansion in CPaaS. And adjusted gross margin declined to 52.1%, driven by the iconectiv divestment. Adjusted EBITA landed at minus SEK 1.1 billion, improving by SEK 0.1 billion compared to last year despite the iconectiv impact. Turning to free cash flow, which was SEK 14.9 billion before M&A in the quarter and SEK 26.8 billion for the year. We delivered cash flow to net sales of 11% for the year within our 9% to 12% target. The decrease in cash flow year-on-year is due to very strong working capital reductions in 2024. Working capital in 2025 was broadly stable at historical low levels. And net cash increased sequentially by SEK 9.4 billion to SEK 61.2 billion. Return on capital employed in 2025 was 24.1%, including the iconectiv gain, while excluding it, it was around 19%. Then turning to capital allocation. During 2025, the Board has undertaken a review of the balance sheet and the capital allocation principles. On the balance sheet, we remain committed to an investment-grade credit rating and maintaining a solid net cash position. Turning next to the 4 capital allocation priorities. First, the top priority is to maintain a technology leadership through continued R&D investment to ensure customer confidence at all times. Second, we are committed to a stable, to progressive ordinary dividends. And third, as already -- as Börje mentioned, we remain selective with inorganic investments. And finally, any excess cash will be distributed to shareholders. So for 2025, the Board will propose an increased dividend of SEK 3 per share and a share buyback program of up to SEK 15 billion at the AGM. After adjusting for the total shareholder distribution of approximately SEK 25 billion, the 2025 net cash position is at a solid level, considering future investment needs and the business outlook. Next, I will cover the outlook. Global uncertainty remains with potential for further changes in tariffs and broader macroeconomic factors. The outlook assumes stable exchange rates and no tariff changes here. So for Networks, we expect Q1 sales growth to be broadly similar to the 3-year average quarter-on-quarter seasonality. For Cloud Software and Services, we expect Q1 sales growth to be below the 3-year average quarter-on-quarter seasonality. And we expect Networks adjusted gross margin to be in the range of 49% to 51% for Q1. And restructuring charges for the full year '26 are expected to be at an elevated level with proposed headcount reductions recently announced in Sweden and continued actions across other markets. With that, I hand back to you, Börje. Borje Ekholm: Thanks, Lars. So today, we have a very strong position and a very competitive portfolio. In many markets, there will be a need to invest to keep network performance at a competitive level. And as you've seen, we made critical inroads in many key markets during the year, for instance, in Japan. In 2026, we're planning for a flattish RAN market, but expect growth to come from new areas. This means we will need to continue our efforts on operational efficiency. And by doing so, we can strengthening our company for varying market conditions. This will enable us to continue with critical investments in technology leadership including increased R&D investments in defense and mission-critical, while at the same time supporting our margins and cash flow generation. Overall, as I mentioned before, we're entering a very exciting time where AI will move from a focus on data centers and large models to devices and applications. This will require advanced wireless connectivity, putting Ericsson in the middle of the next phase in the AI era. Our strategy is focused on making sure we capture this opportunity. We're doing it by providing the industry's best network for AI that enable differentiated services and new monetization opportunities. This includes both new use cases including by exposing networking capabilities through network APIs, but also new sectors, such as mission-critical networks. This will allow us to capture significant share of the value from connectivity and help drive growth for us as Ericsson. So if I draw this out a bit longer term, I believe we can have a model with a flattish mobile networks market, but with our investments in growth areas that we -- basically, we can see a modestly growing top line. So if you combine the operating leverage, actually improving profitability in the Enterprise segments as well as share buybacks, we should see a healthy growth in profit per share. So to wrap up, in 2025, we were laser focused on strategy execution and continue to take critical steps to position Ericsson for the future. We're unlikely to see growth in the RAN market this coming year, but our investments in mission critical 5G core and the enterprise will drive growth for the company. I would say it's exciting if you ask me. On that note, I also want to thank all my colleagues at Ericsson for a lot of great work. Thank you, team. With that, I think it's time for you, Daniel, to lead us through some Q&A. Daniel Morris: Thanks, Börje. We'll now move to the Q&A. [Operator Instructions] Thanks. Okay. Operator, we're ready to open the line for the first question. The first question today is going to come from the line of Simon Granath at ABG. Simon Granath: Congrats team Ericsson for the solid results here. On OpEx, I'd like to push a bit on the medium-term trajectory and the R&D balance. With the RAN demand looking broadly flattish into 2026. OpEx growth largely reflecting salary inflation rather than volumes. If we assume a similar demand environment into 2027 with [indiscernible] still later in this decade, how do you think about the risk of managing R&D and were capabilities changes too early? So simply on the mid-term OpEx trajectory? Lars Sandstrom: Mid-term. When you look at the OpEx levels that we have today, and the structure we have, it's a question about working and investing, and we are already in 2025 and back -- and going into this year, there are key strategic areas where we are investing and some other areas where we are taking other decisions. So I think that -- and that will also be how we will work going into 2027. Then of course, there is a continuous cost inflation that we need to drive through productivity to ensure that we keep the right level here going forward as well. So there will -- and when these big investment comes, we will see. I think you will have to comment as well from your perspective. Borje Ekholm: Yes. I think the -- given the flattish market we're in, we will have to work continuously on the, I call it, R&D efficiency. But there is also a question of making sure we allocate to the right areas. This is why new areas like mission-critical is actually critical to be part of as well as defense applications. So we believe that we can -- even in a flattish market, we can actually have the right R&D level with the program and with the efforts we have in place. But it's, as you know, it requires us to really be at the forefront of R&D efficiency as well. But you should not expect us to -- put it this way, we are not going to trade off technology leadership, and we believe we can have technology leadership at the spend level even into '27 and beyond. Daniel Morris: Moving to the next question, please. The next question is going to come from the line of Erik Rojestal at SEB. Erik Lindholm-Rojestal: Congratulations on the results here. So just Börje, you mentioned increasing investment in defense in '26 and mission-critical was a key driver here in the quarter. I understand this is a good market for you right now, but can you please shed some light on how large the exposure is that you have currently in this area? And what the size of the opportunities that you see out there? How large are they? Borje Ekholm: We -- if we start in the end of discussing -- first of all, what we want to say here is, in reality, the investments we make in defense today is captured in the total R&D spend. And as we go forward where we see that, we probably need to increase that a bit. And the reason for that is we actually see the potential for a very sizable market in defense given what the spending in the U.S., of course, but it's also the increased European spending on defense will make this into a fairly sizable market. And we see that market moving from, what I would call, dedicated solutions, kind of proprietary technology solutions into much more 3GPP-enabled solutions. And the reason for that is simply that is more cost effective and it's going to be much better performance. So we see actually the communication market in defense to be a sizable opportunity that we want to make sure we're early on in. But there are also other applications. So think about defense from a broader perspective, the sensing capabilities of the solutions we have actually allows you to, for example, do drone detection. Think about where the usefulness of that and it can do detection of objects that are not connected. So it's basically maybe popular wording will be called the radar. These are major opportunities that we would say are really large that we want to position ourselves to go after. So when you see us increasing spending, it's not -- I think part of it will be offset with other efficiency gains, but we want to say that we actually go after an opportunity here that we think is rather sizable. Daniel Morris: Thanks, Erik. Moving to the next question, please. The next question is going to come from the line of Jakob Bluestone at BNP. Jakob Bluestone: I had a question around supply chain shortages. I'm wondering sort of broadly, are you seeing any issues that might hold back your ability to grow? And specifically, can you comment on the impact of memory price increases? So what share of your bill of materials relates to memory chips? Do you hedge these? Can you pass on any price increases to customers? Lars Sandstrom: When it comes to the supply chain, I think we have worked for quite some time on resiliency. And when it comes -- that is including then supply chain, so to say, deliveries. So that is continuous work that we do. So -- but of course, when it comes to the memory side, it has been quite a bit of noise around that. But I think we are in a good position of handling that as it looks for this year here. And on the pricing side, it is a mix. Of course, there is some impact, but also here, it's really working close with our suppliers also together with our customers to make sure that we are not squeezed in the middle here. So it's both ends here to work with. Jakob Bluestone: Can you maybe just expand how have you avoided shortages? Is this just by building inventories, just given the sort of... Lars Sandstrom: It's part of the -- how we work, but also to have a good relation and long-term relationship with the different suppliers that we work with. Daniel Morris: Thanks, Jakob. Moving to the next question, please. The next question is going to come from the line of Andreas Joelsson at DNB. Andreas Joelsson: Moving from the splendid operations to the buybacks perhaps. And if we assume that you make SEK 25 billion in free cash flow on a sustainable level, that is equal to the total remuneration to shareholders. So should we say that around SEK 45 billion is a net cash that you feel -- that you and the board feel is needed for the -- to run the operations? Lars Sandstrom: I think as we mentioned there, the view is that it's important to have a solid net cash position. And we're coming out here with SEK 61.2 billion in net cash and the total distribution of around SEK 25 billion. And adjusted for that, we have given the business outlook that we see now, we see that it is a solid net cash position coming out of 2025. Then when we come to next year, then we will have a look again, of course. But the capital allocation principles are there and that is guiding us also going forward. Borje Ekholm: And when you think about the business outlook, of course, you need to think about geopolitics, you think about whether it's the question before, tight supply chain, for example. And all of these factors reaches the conclusion that, that was the right level now. Andreas Joelsson: And just as a follow-up, is there any thinking from the Board and from the management, given what you said before about growing EPS that you could -- that you would like to have a more long-term buyback program and making sure that you can achieve that? Lars Sandstrom: I think this is the first time, Ericsson now announces buyback program. So it is clearly a part of the toolbox for the Board and the AGM and for the shareholders to decide upon. Borje Ekholm: Yes. I think you would also say, Andreas, that it's intentional that is launched as a buyback program and you also know the mandate for those are reviewed annually by the AGM. So this will be our hope and ambition and what is that this will be a recurring thing. Then the size will vary, of course, depending on how the outlook looks like. Daniel Morris: Thanks, Andreas. Moving to the next question, please. The next question is going to come from the line of Sandeep Deshpande at JPMorgan. Sandeep Deshpande: My question is on the market in mobile networks, overall. Has the market changed at all? I mean, we've heard about the EU restricting some of the high-risk vendors, but at the same time, you are seeing a greater price competition in Latin America. Maybe Börje, you can make some comments on how this market overall is playing out in the world given the geopolitical situation? Borje Ekholm: Yes. If you -- a way to think about it, Sandeep, is we look at this market for the last 2 decades, right, and it's been flattish. So we like to think or plan for that type of market outlook. If it gets better, then we have a strong cost competitiveness, we get operating leverage. If it gets worse, we need to review that assumption, right? But that's kind of the way we think about the business. Then, of course, it varies what happens. So over the last few years, and I think we spoke about this a couple of quarters ago that we saw increased competition in Latin America, we see it from time to others in other parts of the world, Southeast Asia, Africa, et cetera. So that kind of comes and goes a bit. The thing that could be a positive is, of course, the high-risk vendor discussion in the EU. That's a sizable opportunity. If you think about the -- it's -- I mean we don't know exactly, but call the high-risk vendor market presence in Europe to be 1/3 to maybe up to 40%, but around that as a guideline, that would be a sizable revenue opportunity for trusted vendors. So that could change. At the same time, it's -- now it's a proposal. It has to go through the process. So this is something that's probably going to take 12, 18 months before we really know the impact. So we're not factoring that in. But of course, it is an upside opportunity. And of course, it is, I would say, the toolbox, the EU discussed or implemented quite some time ago, which is 5, 6 years ago, has been not been widely adopted. So it is a change in stance with the current proposal. Daniel Morris: Thanks for the question, Sandeep. Moving to the next question, please. The next question is coming from the line of Sébastien Sztabowicz at Kepler Cheuvreux. Sébastien Sztabowicz: On Networks, how do you see the mix trending in the coming quarters? We are now seeing some stronger growth in Africa, Southeast Asia and lower deployments in the U.S. and maybe also in Japan and Korea. So just curious about the mix trend in Networks. And also at a broad level what would be the puts and takes to your gross margin in the coming quarters? Where do you see some upside or downward pressure? Lars Sandstrom: I think single quarters will vary. But if you look a little bit on the underlying for '26, North America on healthy investment levels in the market. So -- and that we expect to continue during the year. And then when it comes to growth opportunities, there is an investment need in India and also in Japan, where we have also in both these markets, ensure that we have a good, solid market position. So when the customers decide to invest, we should be able to capture on that. Europe, rather stable. And then there are -- we will see what happens in Latin America. There is opportunities there, but still quite tough competition for sure, parts of Southeast Asia as well. So I think that's a little bit the balance act. In Africa, we have had a couple of good quarters now with 4G and 5G rollouts and modernization activities. And hopefully, we can see that continue also going into this year. So that's a little bit the balance act on the market mix. And then the puts and takes, there is a cost pressure in the group, in the flat RAN market and continuous cost pressure on us both in the people part, but also in material cost so that we need to continuously work with. That's why we talk about then somewhat higher elevated levels on restructuring, both -- that will impact both, so to say, OpEx, but also in the cost of goods sold. So that is necessary to offset this upward pressure on costs. So that is some of the puts and takes. Then you have the normal product mix, but that will vary between quarters as always. Daniel Morris: Thanks, Sébastien. Moving to the next question, please. Next question is going to come from the line of Felix Henriksson at Nordea. Felix Henriksson: It's relating to IPR. I think in the report, you called out that you had a contract expiring with the Chinese smartphone vendor at the end of 2025. So I just wanted to ensure whether or not there are other significant contract cliffs in 2026 that we should be aware of? And as a quick follow-up to that, what is your level of conviction in being able to grow the SEK 13 billion annual run rate in IPR going forward? Lars Sandstrom: Yes. Normally, we try to give you that guiding point around the run rate coming out of the year, around SEK 13 billion. When it comes to the contract, this is not a major impact. And we always -- when we negotiate, renew contracts, we are targeting the best economic outcome and that we will do as well this time. So that could be some impact here, but that is then normally coming back with a renewal. So it should not impact the full year, so to say. And then potential upsides are there. We are in settlement negotiations with one of our licensees. So that is hopefully coming into place this year. And then there is the underlying opportunities around the pure smartphones when it comes to IoT, automotive, et cetera, that should support growth coming into this year as well. So that's a little bit the balance -- the pieces that will drive some opportunities. Daniel Morris: Thanks, Felix. Moving to the next question, please. Next question is going to come from the line of Ulrich Rathe at Bernstein. Ulrich Rathe: My question is on the bigger picture of the revenue outlook. So you're guiding for a flattish market and highlight the growth opportunities in mission-critical and other areas. And now in the fourth quarter, you delivered mid-single-digit organic growth, which is taken with some excitement in the market today. Would you go as far as saying that something like mid-single-digit revenue growth is possible in a flattish run market with the growth opportunities in these new opportunity areas that you're highlighting? Or is this maybe a bit of a phasing effect here? I think you highlighted in particular in CSS, the delivery phasing. Just wondering what your bigger picture here is? Borje Ekholm: I think to -- if you think about it from a little bit longer-term perspective, and it's going to fluctuate, right? But the size of the mission-critical market and the enterprise opportunity as well as 5G core that contributes here, 5G core, by the way, you should remember, it's only about 1/4 of all networks that are upgraded to stand-alone today, so there is a rather sizable opportunity there. So when you look at those outlooks, those individual pieces, they are large enough to a drive pretty nice long-term growth. It's not going to be double digits, as you say. So that -- take that out, but it may be low- to mid-single digits. And I think the -- that's what makes me a bit excited is actually to think about it from that kind of at least some basic growth and you add on operating leverage on that, you add on what we're seeing on the enterprise that we're going to get that to profitability and you combine that with share buyback, you actually get a very healthy growth profile. So I think there is something here that I think from a little bit longer-term perspective is rather exciting. Daniel Morris: Thanks, Ulrich. Moving to the next question, please. Next question is coming from the line of Sami Sarkamies at Danske Bank. Sami Sarkamies: I have a question on your silicon strategy. Your competitor recently announced that they will start building products based on NVIDIA chips. We have also done some R&D work related to the use of chip use. What is your take on the situation? And do you see a role for NVIDIA in future RAN products? Borje Ekholm: We selected a strategy several years ago to basically disaggregate the software and hardware and actually allow our software to run on pretty much any architecture. And of course, here, we can run on, of course, the x86, but it can run on GPUs. It can run on our proprietary Silicon as well. And by the way, you could well see the TPU from Google. You could see what Qualcomm is coming with AMD, et cetera. So we wanted to be a bit independent of the selection of the hardware layer. The reason for doing that was that we felt it was the right strategy to give the customers the opportunity to choose what hardware layer they want to run on. And you know today, there are operators rolling out cloud RAN. That's on x86. In the future, it may be different. So I think the -- I cannot comment on Nokia's decision, that's for them to comment on. But from my point of view, I -- we wanted a very different strategy, not to select the infrastructure layer today, but rather do that as we come closer towards AI RAN realization and 6G, then we can make an intelligent choice together with our customers. And we feel good about that strategy, but that also means that we're going to continue to work with the x86 ecosystem and the GPU ecosystem. Daniel Morris: Thanks for the question, Sami. Moving on to the next question, please. The next question is going to come from the line of Didier Scemama at Bank of America. Didier Scemama: Sorry to come back to the point on memory and cost inflation. So I'm looking at your inventories, which are seasonally lower in Q4. You seem to suggest that you are -- you have adequate supply from new suppliers. So just can you elaborate a little bit? Have you signed like a 12-month supply agreement that makes sure that the pricing is not going to be a headwind to your gross margins? And -- or put it in a different way, what have you assumed in your gross margin in terms of cost inflation from memory over the course of '26? Lars Sandstrom: I think margin -- inventory levels are coming down in the fourth quarter following the seasonality that we have, and that includes all inventories. So when it comes to that part, I think we are well positioned coming into the year when it comes to inventory levels on this kind of areas. Then of course, there is cost increases coming that we need to work with. But we don't share exactly how much that is, of course. But it will have some impact, but we will work together with our customers to ensure that we are, so to say, not stuck in the middle here, but there is an understanding that there is some sharing to be done here. Didier Scemama: And sorry, again, to go back to the defense point, I think you sort of said, look, with the opportunities. Can you give us a sense of the size of your business today in defense? What sort of costs you're thinking about? Does that require any CapEx? Just elaborate a little bit so we've got something to work with. Borje Ekholm: Yes. I think you can assume -- we're not going into details exactly what our business is because we're working with a number of defense organizations. As you know, Ericsson exited all defense several years ago. So we haven't really had a presence. So today, we're working in partnerships as well as with defense organization. So we're not going into details there. But -- and I think when you look at the overall sizing, the revenue opportunity, there are a number of consultants out there talking about the size of that opportunity. We -- and some are very big numbers. I'm not sure it's going to be that. But we think it's compared to the rest of the opportunity we have is sizable. When we talk about it from an investment point of view, this is more saying that we will ramp up our presence in here and actually increase our investments. It's not going to be material compared to our overall SEK 50 billion we spent on R&D. So that's why we also say that it's part -- it can be -- well be offset, maybe not fully, but by the efficiency gains that we're going to do. So when you look at it from a total point of view, think about it as there is a big opportunity we will try to invest to get that. We're not going to materially impact our outlook with that. That's not the case. But we want to single it out as a growth opportunity. Lars Sandstrom: And I think on your question there on CapEx, it's very, very limited. Borje Ekholm: Yes, that's fair. That will be -- you will not see that as a CapEx need. Daniel Morris: Thanks, Didier. Moving to the next question, please. The next question is going to come from the line of Daniel Djurberg at Handelsbanken. Daniel Djurberg: I have a question. If you could give any more color on the visibility in the North American RAN market in '26? Is it fair to assume a more back-end loaded year given some of your larger customers' spectrum asset holdings, for example, that could I expect to build upon in the latter part of the year? Lars Sandstrom: I think it -- we don't -- I think we say that when it comes to the full year, we are coming out with healthy investment levels, and we expect that to continue. Then how it will pan out between quarters, it's actually rather, I think, difficult to say. It depends on what the capital investment needs that they have in different rollout phases, et cetera. So it's -- I don't think it's today, easy to say what will be the difference between the first and the second half. Borje Ekholm: No I think that -- we don't guide that way, we've elected to do it quarterly and I think that's why we do it quarterly. What I -- I do think it's fair to say that when we look at the North American market -- and by the way, this is actually a global phenomenon. But when you will hear, I think our customers talk a bit about being cautious on CapEx, the interesting thing is we also see a change in mix in our customers. So we believe we're -- the active components are going to be needed because that's driven by the traffic growth and the need to go 5G stand-alone as well as new use cases like fixed wireless access. So when you see that, you actually see, call it a healthy investment level, even though our customers most likely will guide for a bit lower CapEx without knowing they need to guide on their own, but it's given signals that you can hear and it's pretty clear, they will be cautious on CapEx. Daniel Morris: Thanks for the question. Moving on to the next question, please. The next question is going to come from the line of Andrew Gardiner at Citi. Andrew Gardiner: Just coming back to a point you made earlier in your presentation regarding the performance that you've had over the course of 2025. Your profitability has improved noticeably last year. You've had 2 good years of operational cash generation. And so that is putting Ericsson, as you point out, in touching distance of the long-term financial targets. That being said, these targets are some years old at this point. Are they still relevant and accurate targets for us to use in the market? Or given the changing state of your end markets and your strong execution, is there the possibility to do better, right? Do you have the ambition to perhaps outperform those somewhat old targets at this point? Borje Ekholm: I think it's right that they're old. We have not succeeded at reaching them, so that's a fair comment. But I think the -- we should remember, we also set the targets in a different environment geopolitically as well as business mix, to be honest. So we set them when iconectiv was part of our portfolio, we set them in a very different political environment. I think we -- I'm not too fan of changing targets easily. So we want to make sure that we reach that 15% to 18% first. Once we're solidly there, then I think we can start to talk about is that the right target after that. But right now, I think it's a good measure of what we should achieve with the current type of business we have. Daniel Morris: Thanks for the question, Andrew. We just have time for a brief follow-up question from one of the analysts before we close. So if we can bring Daniel back in, Daniel Djurberg, Handelsbanken. Daniel Djurberg: I would like to ask a little bit on the Cloud Software and Services. Sorry, if I missed the answer before. But could you help us to understand a little bit more on this impact of this large contract being in most -- in the quarter i.e., with the outlook comments on Q1 seasonality have changed to more of a similar view if the contract has been excluded in Q4? Lars Sandstrom: It's a good question. Now as we said, we are coming out strong in Q4 here with -- and as you know, we have lumpiness when it comes to project deliveries, which are -- if you look at the full year, we are up around some 6% organically in Cloud Software and Services. And I think that has been a good underlying growth that we have seen, supported by the core business, and that is what we see as a healthy level coming into '26. Then, of course, if that single comment would bring us back to normal, I think that's a little bit -- it would, of course, bring us closer for sure. That is true. And then we should remember, I think you have all seen that, that we have a significant currency headwind coming in, in Q1 year-over-year as a comparison that you will see currency rates peaked somewhat in Q1 '25. So that headwind we also are facing here. Daniel Djurberg: Look forward to see you in Barcelona. Borje Ekholm: Thank you. Lars Sandstrom: Thanks. Daniel Morris: Thanks, everyone, for joining. That concludes the call. Borje Ekholm: Thank you.
Operator: Greetings, and welcome to the Amerant Bancorp Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Laura Rossi, Executive Vice President and Head of Investor Relations. Please go ahead, Laura. Laura Rossi: Thank you, Kevin. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's Fourth Quarter and Full Year 2025 results. On today's call are Carlos Iafigliola, our Senior Executive Vice President and Interim CEO; and Sharymar Calderon, our Senior Executive Vice President and CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition, references will also be made to the non-GAAP financial measures. Please refer to the company's earnings release for a statement regarding forward-looking statements as well as for information and reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our Interim CEO, Carlos Iafigliola. Carlos Iafigliola: Thank you, Laura, and good morning, everyone, and thank you for joining us today to discuss Amerant's fourth quarter and full year 2025 results. As we begin today's call, I would like to turn to Slide 3 and frame our discussion around the clarity of our direction and the disciplined execution underway across the organization. Our strategic direction remains clear. In December, the Board approved our 3-year strategic plan. Our plan is built on a disciplined and sequenced road map in order to stabilize, optimize and a disciplined and sequence road map and grow the organization. This strategy reflects our confidence in Amerant's future and our ability to significantly enhance shareholder value in the coming years. We believe human capital is a key enabler of our strategic plan. We intentionally focus on our strategy on leveraging Amerant intrinsic values, which encourages teamwork, support talent development and retention and promotes effective challenge at all levels of the organization. We're investing in the development of our teams, promoting via talent recognition and ensuring that our workforce remains stable, supported, aligned and empowered to contribute to our long-term success. As part of the stabilization phase, our immediate priorities are focused on strengthening the foundation through the following highly-impact areas. Credit transformation, we concentrated on restoring predictability to our loan portfolio's credit performance. We have taken a decisive approach to review our loan portfolio and work diligently on the resolution of our credit issues to improve asset quality. We're focused on aligning our credit portfolio with our strategic objectives, such as targeting exits from non-core markets and large exposures as well as avoiding migration into criticized buckets. At the same time, we made significant progress to improve our risk selection practices by making disciplined decisions aligned with our risk appetite. Our second point is balance sheet optimization or growing wiser. We identified components that expanded Amerant's assets above the $10 billion watermark and reduced non-core funding by quarter end to rightsize our balance sheet and improve key metrics. Our third initiative is operational efficiency, assessing processes and leveraging our technology tools to improve productivity, reduce cost and enhance client experience. We have initiated several actions resulting from our cost review process, and we'll continue to provide updates in the following quarters. Notably, we have launched an AI project aimed at discovering use cases that will assist in optimizing our processes. We remain confident in the results of our ongoing efforts to strategically reposition Amerant. Accordingly, we have approved a share repurchase program, recognizing the intrinsic value of our shares. Our continued momentum will allow us to advance with clear direction and stability, position the organization for sustained growth and long-term value creation. To our investors, clients and team members, thank you for the continued partnership and confidence in our future. We believe we have the right people, the right plan and the right focus. We are aligned, we are committed, and we are executing with discipline. I'm confident in where we are headed and proud of what we are building together. Before I turn it to Shary, I want to briefly address recent events in Venezuela, considering our historical customer base and upcoming opportunities there. Our view on these events may impact Amerant is positive. We almost have $2 billion in deposits, significant AUM and close to 50,000 customers in this country. We see meaningful opportunities for growth in a market we know exceptionally well across both individual, wealth and deposit flows as well as commercial banking relationships. We expect commercial activity to pick up again after the administration recently announced plans to restore U.S. oil extraction licenses and return them to American companies, which suggests that a key sector of Venezuela's economy could reopen soon. We believe Amerant is well positioned to support international oil industry participants through account onboarding, payment processing and transactional services tied to activity between operators and subcontractors. We have also seen an incremental value and trading flow of Venezuelan bonds through our broker-dealers since early January. We are closely monitoring the situation in the country, connecting with current and potential customers and assessing opportunities. We will continue to provide updates as appropriate. With that, I will turn it to Shary to review our financial results for the quarter. Sharymar Yepez: Thank you, Carlos, and good morning, everyone. Let's turn to Slide 4, where you will see the highlights of our balance sheet. Total assets were $9.8 billion as of the end of the fourth quarter, a decrease from $10.4 billion as of the end of the third quarter. The decrease was primarily driven by the reduction of wholesale funding through the use of our excess liquidity and sale of investments as well as reduction of higher cost deposits. Cash and cash equivalents decreased $160.7 million to $470.2 million compared to $630.9 million in the third quarter. Total investments were $2.1 billion, down from $2.3 billion in the third quarter. Total gross loans decreased by $244.6 million to $6.7 billion from $6.9 billion in the third quarter as a result of higher prepayments and repayments compared to the loan production in the quarter as we focused on credit quality improvement efforts. On the deposit side, total deposits decreased by $514 million to $7.8 billion compared to $8.3 billion in the third quarter, although as a result of our efforts to reduce higher cost deposits and broker deposits. Broker deposits continued to decrease from $550.2 million in the third quarter to $435.7 million as of the fourth quarter. As Jeff mentioned, we decreased FHLB advances by repaying $119.7 million in long-term advances as we continue to execute on prudent asset liability management and use excess liquidity at hand to optimize our balance sheet. Our assets under management increased $87.2 million to $3.3 billion, primarily driven by higher market valuations and net new assets. As we've shared in past calls, we continue to see this as an area of opportunity for us to grow fee income going forward. Let's turn to Slide 5. Looking at the income statement, you will see that diluted income per share for the fourth quarter was $0.07 compared to $0.35 in the third quarter. Net interest income was $90.2 million, down $4 million from $94.2 million in 3Q '25, primarily driven by a smaller balance sheet size, the timing of repricing of assets versus liabilities after the interest rate cuts and lower impact versus prior quarter due to collection efforts over previously classified loans. The net interest margin decreased to 3.78% from 3.92% in the third quarter. Provision for credit losses was $3.5 million, down $11.1 million from $14.6 million in the third quarter. Noninterest income was $22 million, up from $17.3 million in the third quarter, driven by the gain on sale and leaseback of 2 of our banking centers, higher gains from available-for-sale securities sold and lower derivative losses. Core noninterest income, excluding non-core items, was $16.7 million. Noninterest expense was $106.8 million, up $28.9 million from the third quarter, primarily due to valuation expenses on loans held for sale, contract termination costs, staff separation costs, impairment charges on an investment carried at cost and intangible assets related to the mortgage company's wind down. Excluding non-core items, core noninterest expense was $77.6 million. You can also see that ROA and ROE this quarter were 0.10% and 1.12% compared to 0.57% and 6.21%, respectively, and our efficiency ratio was 95.19% compared to 69.84%. These ratios were primarily impacted by the decrease in net income and the increase in expenses this quarter. Turning on to Slide 6, you can see our non-GAAP metrics. Pre-provision net revenue was $5.4 million compared to $33.6 million in 3Q '25. Excluding non-core items in noninterest income and expense, core PPNR was $29.3 million compared to $35.8 million in 3Q '25. The decrease in core PPNR was primarily driven by higher non-core expenses in the fourth quarter, which were partially offset by higher non-core income items in the same period. A reconciliation of core PPNR and the impact on key ratios is shown in Appendix 1 included in this presentation. We had the following non-core items during the fourth quarter. Noninterest income of $5.3 million, which included a $3.3 million gain on the sale and leaseback of the 2 banking centers located in South Florida, non-core noninterest expenses of $29.2 million, which included $14.9 million in losses on loans held for sale, which includes $13.8 million related to a year-end valuation allowance on loans classified for sale carried at the lower of cost or fair value, $7.5 million in contract termination costs as part of our restructuring costs aimed at improving the company's cost structure. These initiatives include terminating certain rights and benefits associated with existing advertising contracts and a third-party loan origination agreement under a white label program, $3.8 million in separation costs, primarily in connection with the leadership transition in the fourth quarter; $2.5 million in impairment charge on an investment carried at cost and $500,000 in an intangible asset impairment related to the downsizing of Amerant Mortgage. Adjusting for these non-core items, our core efficiency ratio was 72.58%, core ROA was 0.84% and core ROE was 8.98%. Turning to Slide 7, which shows the quarter-over-quarter comparison of some of our capital ratios. Our CET1 was 11.8% compared to 11.54% last quarter, mainly driven by lower risk-weighted assets and from net income during the quarter, while partially offset by $13 million in share repurchases and $3.7 million in shareholder dividends. We paid our quarterly cash dividend of $0.09 per share of common stock on November 28, 2025, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on February 27 of this year. During the fourth quarter, we also repurchased 737,334 shares at a weighted average price of $17.63 per share compared to tangible book value of $22.56 as of December 31, 2025. This represented 78% of tangible book value. Turning now to Slide 8, where we show our well-diversified deposit mix along with the composition of our loan portfolio. Total deposits for the quarter were $7.8 billion, down $514 million or 6.2% compared to $8.3 billion in the previous quarter. We had decreases in every category as we reduced higher cost deposits, but had a slight increase in customer CDs. Total loans, on the other hand, were $6.7 billion, a decrease of $244.6 million or 3.5%, compared to $6.9 billion, primarily due to decreases in CRE and owner-occupied loans. Next, on Slide 9, you will see additional information related to net interest income and net interest margin. This quarter, we continued to reprice our interest-bearing deposits to maintain a healthy NIM and saw the cumulative beta at 0.4% since the rates down period started. Moving on to asset quality. As you can see on Slide 11, nonperforming assets increased to $187 million or 1.9% of total assets compared to $140 million or 1.3% of total assets in the prior quarter. The increase in nonperforming assets is the result of rigorous efforts by portfolio management, credit administration and credit review, complemented by an independent third-party firm brought in to ensure timely reviews of updated financial information and risk rating, including the identification of any possible deteriorated conditions to allow us to be more proactive in expediting resolution. As disclosed before year-end, these reviews covered approximately $5.3 billion or 85% of the commercial loan portfolio through covenant testing, annual reviews or limited financial reviews. The remaining portfolio not covered by the reviews consists primarily of small balance loans that are evaluated through payment performance, recent originations in 2025 and loans secured with cash or investments as collateral. We will continue our scheduled review process throughout 2026, and we prioritize efforts on proactive credit quality and portfolio management measures. Now moving into criticized loans. On the next 3 slides, we provide details for nonperforming classified and special mention loan movements during the quarter. In the first slide, we show the composition of our nonperforming loans at the end of the fourth quarter. We have included details of the sufficiency of collateral coverage and the type of individual evaluation performed over them. During 4Q '25, downgrades into nonperforming loans were primarily in the commercial Florida portfolio and certain other loans that have tangible collateral. You will also see the results of efforts to exit these credits via paydowns, payoffs and loan sales with balances declining now in January to $155 million as a result of this work. In the next slide, we have included similar information as it relates to the classified portfolio. During 4Q '25, downgrades into classified loans were primarily driven by CRE loans in Florida and Texas, commercial Florida loans and certain other loans that have tangible collateral. In this slide, you will also see the results of the efforts to reduce the loan balances in this bucket by now in January 2026 when 4 loan sales closed totaling $66 million. We continue to work on the exit of the remaining $15 million credit, which is expected to occur during the first quarter of 2026. Classified loans net of held-for-sale loans closed at $274 million. In the next slide, we cover special mention loans and the characteristics as it relates to collateral coverage. During 4Q 2025, downgrades to special mention were driven by one CRE Texas loan and one CRE relationship with collateral diversified in different geographies. Overall, this composition reflects a disciplined approach to credit monitoring, valuation and resolution as we continue to proactively manage risk across the portfolio. Now moving on to Slide 15. Here, we show the drivers of the provision recorded this quarter and impact to the allowance for credit losses. The provision for credit losses was $3.5 million in the fourth quarter and was comprised of $7.9 million in additional reserves for charge-offs, $800,000 in net change in specific reserve allocations, offset by releases of $3.6 million due to credit quality and macroeconomic factors, $2.3 million due to the reduction in loan balances. In addition, we recorded $700,000 for unfunded loan commitments. During the fourth quarter of 2025, gross charge-offs totaled $29.5 million related to 5 commercial loans totaling $22.3 million, indirect consumer loans totaling $1.5 million, 1 CRE loan totaling $900,000 and multiple commercial loans totaling $4.8 million. These charge-offs were offset by $11.1 million due to recoveries, mainly the recovery of $8 million that we had previously disclosed in the 3Q '25 10-Q. Lastly, the allowance for credit losses coverage ratio was down to 1.20% from 1.37% last quarter, primarily due to charge-offs of specific reserves. Excluding specific reserves, the coverage ratio decreased slightly from 1.23% to 1.20%. In Slide 16, we provide the following regarding financial expectations. In the short term for 1Q '26, we are projecting loan balances at similar levels as of 4Q '25 as exits of credits would offset loan production. However, growth for the year is estimated between 7% to 9% with the higher end driven by funding of existing lines. Our projected deposit growth is expected to match loan growth. We continue to focus on improving the ratio of noninterest bearing to total deposits and the overall cost of funds. Net interest margin is projected to be in the 3.65% to 3.70% range. We are projecting expenses of approximately $70 million to $71 million in the first half of 2026, progressively reducing to $67 million to $68 million at the end of the year. We intend to continue executing on prudent capital management, balancing between retaining capital for growth and buybacks and dividends to enhance returns. And with that, I pass it back to Carlos for additional comments and closing remarks. Carlos Iafigliola: Thank you, Shary. As we close today's call, let me point out Slide 17, where I would like to reaffirm the priorities shaping our strategic execution and the fundamental advantages that continue to differentiate Amerant. Our capital levels remain strong. Our net interest margin continues to stand out, and we see meaningful potential to expand fee income as asset management and treasury management continue to grow. We're also driving greater efficiencies across the organization with disciplined expense management. Central to all this is an elevated focus on improving predictability of credit quality and enhancing asset quality to support sustainable performance. During the quarter, we took focused, deliberate action to reinforce risk management and strengthen our credit processes. These enhancements demonstrate our commitment to resolution, allocating resources where they matter the most and ensuring the portfolio remains resilient. Although these measures influence results this period, they position us well and remain confident in both the durability of our franchise and the opportunities ahead. Looking ahead, our operating focus is firmly aligned with priorities we have shared, advancing a high-quality loan pipeline supported by disciplined underwriting, strengthening asset quality through a disciplined relationship-driven credit culture and strong monitoring process, executing cost efficiency initiatives designed to deliver ongoing and recurrent savings, deepening core deposit relationships to increase share of wallet, maintaining strong capital and shareholder returns, including our dividend and authorized share repurchases. Thank you for your continued support as we execute on these commitments. So with that, I will stop. Shary and I will take questions. And Kevin, please open the line for Q&A. Operator: [Operator Instructions] Our first question is coming from Michael Rose from Raymond James. Michael Rose: I guess the main question here is -- and I am really appreciate all the color that you guys just gave here on the call, but you have this 3-year program. From the outside looking in, what can we use to kind of measure the progress? Again, I know there's a lot of moving pieces here, a lot of heavy lifting. But again, as analysts and shareholders from the outside looking in, whether it's at the end of year 1, year 2 or the full 3 years, what kind of metrics can we look at and things can we look at to get a better handle on if your strategy is now successful after the prior efforts over the past couple of years? Carlos Iafigliola: Thank you, Michael, for the question. I believe one of the critical items that we're trying to address this quarter is its credit quality. And I believe the improvements of those metrics related to either migration and key credit metrics would be the most important items to define success after regaining confidence on the migration and the risk rating accuracy is critical for us, and that's been -- most of the work being placed during the third quarter and the fourth quarter were precisely to accomplish that objective. So going forward, a critical measure for success for Amerant after several quarters missing the guidance and estimates related to credit quality is precisely regaining that confidence. So whenever we discuss specific line items on the credit quality buckets, we really want to accomplish the objectives that were given. So I believe in my mind, that's one of the critical objectives. Secondly is a disciplined approach towards loan origination. Those 2 items, in my mind, are critical at this point. And one is -- the second one will help us with the first as we improve a disciplined approach towards loan origination and you see that there is consistency in the approval process, underwriting, we'll get better predictability on the credit bucket. So Shary, do you want to complement. Sharymar Yepez: No, yes. Carlos, I think that's right on point. To complement what Carlos was saying, and Michael, to your point, at the strategic plan, we have long-term initiatives. But as we think about the immediate-term initiatives, I think we can summarize them into 2 buckets. Number one, credit; number two, operational efficiencies. In terms of credit, we have to do 4 steps: continue the path to reduce the size of the criticized bucket or flows are greater than inflows, if any. Third, continue to strengthen portfolio management and credit administration to make sure that we have a very healthy risk rating process. And fourth, that Carlos mentioned as well, we have to be selective with onboarding into our balance sheet. We have to stay disciplined and within our risk appetite. And then as it relates to operational efficiencies, I think it goes back to ROI and being selective on the items that really move the needle. But at the same time, we have to balance with investments that are foundational for us as we continue our growth plan. So we have ways to measure that on the credit side, for sure, looking at the criticized buckets. And then as it relates to operational efficiencies, it would be efficiency ratio and ROA. Michael Rose: I guess the follow-up would be when do you -- it sounds like maybe this -- at least these next couple of quarters are going to be just kind of working towards stabilization, getting the asset quality down, starting to regrow the balance sheet. But as we get into maybe year 2 and year 3, have you guys outlined any financial targets, whether it be ROA, efficiency ratio, just to help us from a glide path perspective. And given that it has been several years of these turnaround efforts, I think providing some of those targets and making progress towards them is kind of what I was referring to in the first question. Is that something you'd be willing to share today? I know it's early days since the whole transition has started, but I think that would certainly help investors get a little bit more confident, particularly after the move that we've seen in the stock here in the past 60 to 90 days. Carlos Iafigliola: Yes. No, definitely. So when it comes to key financial metrics, our strategic plan, which has, I guess, 4 key topics and then each of one has different type of KPIs. Return on asset is definitely one that we really want to accomplish by year-end, getting as close as possible to the 1%. That's something that we constantly are discussing internally and how to move the different levers to get into that specific number. And when it comes to efficiency ratio, our goal and with all the actions that you have seen on Q4, we're precisely geared towards the accomplishment of the 60% or getting as closer as possible to the 60% at year-end. I believe this has been 2 topics that we have been discussing for a while. I believe there has been several earnings calls that we have been flying around the airport of these 2 numbers, but very difficult to land the plane. But we really are looking at everything that we can in terms of what will take us there. And that is, in my mind, those will be the critical measures, at least for 2026 to accomplish. Evidently, as we navigate into the strategic plan, our 3-year get us to compare Amerant to other peers that have a significant price to book and that will get us into a lower 60% in the long term and a higher of 1% or 2027 and 2028. So those are ultimately goals. I believe on a way to think on this is immediately for 2026 aspirational goals is getting to the 1% and 60% for 2027 is even better than 1% and improving the 60% and reaching, that I believe, aspirationally, what everyone wants is to break the 60% and get into the 55% to 58% in the long term. Those are our aspirational goals, and those are the key metrics that we'll be focusing really, really closely. Operator: Next question is coming from Russell Gunther from Stephens. Russell Elliott Gunther: I wanted to follow up on the expense conversation. I appreciate the glide path that you guys provided for '26. Can you give some color on the specific drivers that are going to get us from point A to point B. And then as we think about 2027, how should we think about sort of an annualized 4Q '26 number and a good growth rate off of that, if any? Sharymar Yepez: Sure. Russell, I think as I was mentioning a little bit earlier, it goes back to ROI and the contributions that they provide to the company. If we want to look at buckets of where we're seeing all of these opportunities or where we have been executing on these opportunities, I would say, first, we're reducing higher cost deposits that not only impact the NIM, but that could also have higher earnings credit. So this is an impact to noninterest expenses, and we see definitely room for opportunities to improve that. But I also think that when we looked at the marketing and advertising spend, we definitely saw opportunities to optimize our cost structure for 2026 and going forward. So what this will allow us is while some of these expenses will still be noticed in the first half of 2026, we will see an improvement in the second half of the year, which is why we're identifying a progressive reduction of expenses going forward. The other thing is from a hiring perspective, we certainly continue to hire. But what we're doing is we're being very strategic and making sure we're disciplined as to the hiring to make sure that everything is aligned to our strategic plan. And I think you had a second question related to where -- what the normalized expense would be. I think we gave some guidance as to the $67 million to $68 million for 4Q. That's, I guess, what I would call a little bit of a normalized expense level. And the other way to see it is, as Carlos was mentioning, we're targeting to hit the 60% efficiency ratio and cope that -- improve that metric. So I guess that's doing the math backwards, that's what we're seeing from a normalized expense standpoint. Carlos Iafigliola: Thank you, Shary. And I believe it's important to also make the point that once we reach the $67 million, $68 million, the expectation is that those expenses for 2027, 2028 on our strategic plan, they will grow, but they wouldn't -- they will preserve the rule that we're stipulating on the efficiency ratio. So 2028, if we accomplish the 55% to 60% efficiency ratio for those years, you will expect to see around $70 million per quarter, but that would be once we cross the 2026 and going into 2027 and 2028. So those are the type of things that we have been discussing. When it goes to expenses specifically, you see the actions that we took in end of the quarter 2025. And those contract terminations and all those actions will set the plate for a leaner cost structure, especially in the marketing space. We believe we needed to rationalize certain partnerships and reduce the activation component. I believe the brand awareness that we needed to accomplish was already done, and we see already the impact of that. So I believe there is no need to overlap certain partnerships. I believe we have to stick to core partnerships and monetize on them as opposed of creating an overlap or diminishing the impact of additional partnerships. So only doing that going forward, just for 2026, that will imply savings of more than $6 million in marketing expenses. So just to giving you a sense of -- from where the cost reductions are coming from. Russell Elliott Gunther: Switching gears to the asset quality discussion. I appreciate what you've already shared with us. As we look at NPL and classified levels intra-quarter, they are above where they were at the end of third quarter. How do you see that progressing over the course of how we end the first quarter, how we end the year? Would you expect it to be linear? And then kind of what level of provisioning do you think will be necessary to address related losses and provide for that high level -- excuse me, high single-digit loan growth guide? Sharymar Yepez: Sure, Russell. So as it relates to migration during the fourth quarter, this was the result of the significant coverage that we had over the portfolio as it relates to credit reviews, whether it was done through the first line or whether it was done through credit reviews, the penetration over the portfolio as it relates to risk rating was very significant. And after that, the result of that is now we have a full understanding of the characteristics of these loans. It allows us to get to a resolution and expedite resolution and address the buckets both of criticized and I think importantly, being proactive in avoiding loans getting into those criticized buckets. So as we think about it now shift into 2026, what we're seeing is outflows outweighing any type of inflow or any type of migration that we can see into those buckets. So we do project an improvement in the criticized portfolio. You had a question as it relates to provision. Provision has multiple components that we're thinking about in the full year. There's a portion related to growth. And I know that in the first quarter, we're projecting to be overall flat, but we do have annualized growth. We have to build the reserves for that loan growth. And also -- we also have some weight as to the composition of that growth. To the extent we have a higher composition of C&I, typically, those loans require a higher coverage level. So we're expecting that to be seen in provision. And then we have some loss content that is embedded within the provision as well. Within all of that, we could be seeing something in the 40 to 45 basis points from a P&L... Carlos Iafigliola: And I have to complement, Shary, I think most of the effort that if you think of the progression of the efforts that we have been doing is risk identification, trying to be upfront with the different credit buckets and thereafter trying to exit things that could potentially migrate into this bucket. So our idea is that we're trying to prevent that further items will fall into this bucket, we have to become more proactive with the credit risk management process, and we are working towards that. Russell Elliott Gunther: If I could sneak one more in. I appreciate your prepared remarks around events in Venezuela. So it looks like international deposit levels were flat this quarter. Wondering if you could share how that has trended so far year-to-date. Also, if you could touch upon how recent current events are likely to impact your international deposit gathering efforts specifically. And then big picture, it sounded like you view for events as a potential tailwind to Amerant. Is there anything that would be caused for concern? Carlos Iafigliola: Yes. No, good question. I believe, historically, we have been very well positioned to leverage on our international capacities. The bank, as you know, is vertically integrated, especially on the personal side to onboard customers to have their banking needs and the investment needs all under the same umbrella. I believe that's a great thing that we have. And traditionally, our international customers have been using these platforms throughout the year. So I believe it's still too soon, but we see very good signs and very fast progression. We have engaged with economists and with different advisers to understand the situation down there. And I believe it's very promising. The events are moving really, really fast. We believe there is a great opportunity that we cannot size as of now, but we see that the production -- the oil production in the country will definitely surge and will create the opportunity for regaining wealth in the country that will, in turn, create opportunity for Amerant to increase deposits on the international side. So we're assessing very closely. It's still too soon to understand the impact. But we believe once it starts, it may create a positive impact for the international depository base. Sharymar Yepez: And Carlos, to complement that, too, in the fourth quarter, we did see an increase in the personal account balances on the international side, offset with some commercial reductions. The commercial reductions are typically occurring, and that's part of the business as usual for the companies. So nothing extraordinary that we're seeing there. But I think the important piece, as Carlos was highlighting is we see a lot of opportunities, although it's early to tell, we see opportunities on the deposit and AUM side, but we continue our plan of focusing on the deposit and AUMs and not looking into the lending strategy at all. Operator: Our next question is coming from Wood Lay from KBW. Wood Lay: I wanted to start with deposits and core deposits were down about $4 million. And I was just wondering how much of that was intentional runoff. And now that assets came below $10 billion at the end of the year, do you expect bringing those deposits back on balance sheet? Carlos Iafigliola: Right. No, good question. I believe those -- and we made comments along the presentation regarding to optimize the balance sheet composition. We analyzed the balance sheet in quarter end or actually in Q4, and we started to discuss once I took over the components and trying to understand if we really were a $10 billion institution or not. So understanding the excess liquidity that we carry and understanding the inorganic source of deposits, we decided there is no need to carry the burden of being a $10 billion financial institution for quarter end if the sources that are taking us there are not organic or they are not part of our core business. So we decided to exit this specific deposits at quarter end and accomplish the goal of being under the $10 billion. So now we're going to declare Amerant to be over the $10 billion, we really want to make it because they are the right fundamentals behind that, not just because of the sake of being over the $10 billion. So I believe it was a process of rationalizing and understanding what are the true drivers behind the growth not just because of the sake of being $10 billion. Wood Lay: And then you still have an elevated brokered deposits and healthy borrowing. Is the intention to continue to remix that in '26 and likely stay $10 billion? Carlos Iafigliola: Yes. We definitely -- remember, we will use brokered deposits as an ALM tool. So if there is an opportunistic approach on that side to lock in long interest rate at an advantageous level for the bank, we'll reuse that line item to hedge, but the intention is not to use it as a source of increasing the balance sheet. So you can expect low levels going forward. Wood Lay: And then just last quick follow-up on expenses. Do you expect any elevated restructuring charges in 2026? Or do you feel like you have all of that behind you now in the fourth quarter? Carlos Iafigliola: So great question. Our internal discussions have been centered about diverting or stop using non-GAAP metrics as much as we can. I believe there was an excessive usage of non-GAAP metrics to track the performance of the company that creates a lot of noise and a lot of add-backs and a lot of distraction. So we are actually transferring to the scorecards to the -- either the executive committee and the bank in general, metrics that are GAAP that we can actually trace through our financials and with no need of additional explanation. So all the efforts that we did in Q4 were precisely related to trying to have a clean 2026. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good morning all and welcome to the Byline Bancorp 4Q 2025 Earnings Call. My name is Carli, and I'll be coordinating the call today. [Operator Instructions] Please note that this conference call is being recorded. At this time, I'd like to introduce Brooks Rennie, Head of Investor Relations of Byline Bancorp. Please go ahead. Brooks Rennie: Thank you, Carli. Good morning, everyone, and thank you for joining us today for the Byline Bancorp Fourth Quarter and Full Year 2025 Earnings Call. In accordance with Regulation FD, this call is being recorded and is available via webcast on our Investor Relations website along with our earnings release and the corresponding presentation slides. As part of today's call, management may make certain statements that constitute projections, beliefs or other forward-looking statements regarding future events or their future financial performance of the company. We caution that such statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. The company's risk factors are disclosed and discussed in its SEC filings. In addition, our remarks and slides may reference or contain certain non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward-looking statement and non-GAAP financial measures disclosure in the earnings release. As a reminder for investors, this quarter, we plan on attending the KBW Winter Financial Services Conference in Boca Raton, Florida. With that, I would now like to turn the conference call over to Alberto Paracchini, President of Byline Bancorp. Alberto Paracchini: Thank you, Brooks. Good morning, everyone, and Happy New Year to all of you. We appreciate you joining the call this morning to review our fourth quarter and full year 2025 results. With me today are Chairman and CEO, Roberto Herencia; our CFO, Tom Bell; and our Chief Credit Officer, Mark Fucinato. Before we get started, I'd like to pass the call over to our Chairman, Roberto Herencia for his remarks. Roberto? Roberto Herencia: Thank you, Alberto, and a Happy New Year to all. we extend our best wishes for a successful and healthy year ahead. We are delighted and proud to finish the year on a strong note and excited to announce a 20% increase in our quarterly dividend. No doubt a reflection of our strong financial performance and confidence in our ability to continue to deliver top quartile results in key profitability metrics as Alberto and the team will cover shortly. What our Board and team have accomplished over the last few years is remarkable and provides a great platform for the future. Our North Star, the preeminent local commercial bank. The Chicago banking market, including verticals we run out of Chicago, offers significant opportunities for growth and development with Byline well positioned to lead. Every day, it feels we're reminded that we live in an era of radical uncertainty where rules-based order is fading. And of course, we care about the impact and outcomes on our customers. The majority of which live in a world that is very distant from billionaires, Davos and geopolitics. In this environment, we, as the local community and commercial bank become even more relevant to our customers and the people who work with us. As you know, we believe in people first banking where engaged employees delight our customers, enabling Byline to produce top quartile returns for our shareholders. In December, we were named to America's Best Workplaces for 2026 overall. We wrapped up the year with continued low turnover and an engaged workforce of just over 1,000 employees who work together to deliver value for our customers and community. And that's inspiring to me and the rest of the Byline team. We have at Byline identified our common purpose, becoming the preeminent local bank. We strive to execute consistently with that at all levels all the time. And that defines our future. So others don't have to do it for us. The position of the franchise is enviable as the largest local community bank, the second largest local commercial bank and the largest, most stable platform for quality lenders to bring their books and grow their businesses. We have the balance sheet plus a strategically stable ownership group with all the tools and structure in place that a lender needs to just focus on serving clients and finding new ones. This gives us an edge over what most banks dream of and the #1 that you show most banks try to solve with deals, organic growth. We are driving everything toward compounding returns and that means reliable, sustainable, prudent growth over the long run. And you can see that in all our actions with capital and recruiting and in our track record for achieving top-tier financial results. To summarize why we are excited. First, the people we have in place from those that have been here for over 40 years, to those who joined us over the last 5 years as a result of merger activity in the market. Second, the results out of that execution have been exquisite, 130 million reasons in the last year to back up this excitement. Third, the quality and simplicity of our strategic plans have kept us focused. We don't strive to be everything to everyone. We are a commercial bank, striving for preeminence in that segment. Fourth, our position in the marketplace, as I've described, and finally, our unique shareholder base and their representation in our boardroom. This is an incredibly optimistic time for Byline, company populated by exceptionally kind competent people who care about what we do and how we do our work. Differentiate and separate is what we plan to do. I truly believe that among the thousands of community banks, we are unique in our approach and prospects. And with that, I'm happy to return the call to Alberto. Alberto Paracchini: Great. Thank you, Roberto. This morning, I'll walk you through the highlights for the full year as well as the quarter. Tom will follow the detail -- with the details on the financials, and I'll come back and wrap up before we open it up for questions. As always, you can find the deck for this morning's call on the IR section of our website. Please refer to the disclaimer at the front. So turning to our full year results on Slide 4. Byline delivered strong results for both the fourth quarter and full year of 2025. Before I get into the numbers, I want to thank our team. The results we're sharing today are a direct reflection of their dedication to customers and the effort they put in throughout the course of the year. A year ago, I said we had excellent momentum and felt confident in our ability to profitably grow the business and deliver value for shareholders. I'm pleased to report we did exactly that. The operating environment evolved differently than we anticipated. Interest rates remained elevated longer-than-expected, macroeconomic uncertainty increase and regulatory and policy changes came faster than in the past. Against that backdrop, we stayed focused on what matters, serving customers, executing our strategy and achieving several important milestones. First, we closed our transaction with First Security, converted systems and completed the integration all within a single quarter. Second, we upgraded important customer-facing technology platforms. And third, we continued our preparation to cross the $10 billion asset threshold in 2026. We also grew relationships, sustained profitability, build capital returned $42 million back to stockholders and grew tangible book value per share by approximately 17%. Overall, 2025 was a productive year in which we continued advancing our strategy to become the preeminent commercial bank in Chicago. For the year, net income was $130.1 million or $2.89 per diluted share on revenue of $446 million, up 9.7% year-on-year. Profitability was strong with pretax preparation ROA of 219 basis points ROA of 136 basis points and ROTCE of 13.5%. Year-on-year loan growth came in at 8.9% and deposits grew 2.5%. Capital ratios increased throughout the year and ended strong with TCE at 11.3%, demonstrating strength and financial stability. Lastly, we maintained positive operating leverage, notwithstanding the rate environment towards the end of the year and our continued investment in the business. Turning to the fourth quarter on Slide 5. Results for the fourth quarter were also strong. Net income was $34.5 million or $0.76 per diluted share on revenue of $117 million. Profitability and returns remain solid. Pretax preparation income was $56.6 million, pretax preparation ROA was 232 basis points. ROA was 141 basis points. And again, ROTCE notwithstanding a higher capital base was 13%. Revenue was up 1.1% from the prior quarter and 12% year-on-year, driven by higher net interest income. From a balance sheet standpoint, loans grew 3% linked quarter, deposits declined to $7.65 billion due largely to balance sheet management at the end of the year. Origination activity was consistent with prior quarters at $323 million, with growth coming primarily from our commercial and leasing businesses. On the liability side, noninterest-bearing deposits were essentially flat at 24% of total deposits and deposit costs came down 19 basis points to below 2% for the quarter. Tom will provide you with additional detail on deposit costs, the margin as well as our rate outlook. Expenses remained well managed and came in at $60.4 million. Our efficiency ratio was 50.3% and our cost-to-asset ratio was 2.47% as of quarter end. Asset quality remained stable. Credit costs for the quarter were $9.7 million, driven by net charge-offs of $6.7 million, down on a quarter-over-quarter basis and a reserve build of $3 million. Our allowance now stands at 1.45% of total loans, up 3 basis points from last quarter and NPLs increased to 95 basis points. Turning to capital. Our capital levels remain strong across the board, and that strength gives us real flexibility in how we allocate resources. We put that flexibility to work this quarter by repurchasing approximately 346,000 shares. Looking ahead, our Board authorized a new repurchase program that allows us to buy back up to 5% of outstanding shares. And the Board also approved a 20% increase in our quarterly dividend, which will be paid this quarter. I'll now turn it over to Tom to walk you through the financials in more detail. Thomas J. Bell: Thank you, Alberto, and good morning, everyone. Starting with our loans on Slide 6. Total loans increased [ 3.3 million ] annually and stood at $7.5 billion at year-end. Origination activity was solid, which was up 22% compared to the prior quarter. Payoff activity increased $156 million from Q3 and stood at $361 million. And line utilization ends up to 60% for the quarter. Our loan pipelines remain strong, and we expect loan growth to continue in the mid-single digits to 2026. Turning to Slide 7. Total deposits were $7.6 billion for the quarter, down 2.3% from the prior quarter primarily due to managing the balance sheet to stay below the $10 billion year-end and Q4 seasonality outflows. We saw a nice decline in deposit costs for the quarter and continue to see the benefit from disciplined deposit pricing which drove deposit costs lower by 19 basis points. Turning to Slide 8. We had record high net interest income of $101 million in Q4, up 1.4% from the prior quarter, primarily due to loan growth, lower rates paid on deposits and lower interest expense related to the sub debt payoff, partially offset by lower yields on loans and securities. This was the third consecutive quarter of NII growth and reflects a 10.7% increase for the full year. The net interest margin grew to 4.35%, up 8 basis points linked quarter and on a year-over-year basis, NIM expanded 25 basis points. The improvement in the margin was driven by a decrease in the cost of interest-bearing liabilities, which declined by 29 basis points. Our outlook for net interest income is based on the forward curve, which currently assumes 50 basis point decline in the Fed funds rate for 2026. This implies a net interest income range of $99 million to $100 million for the first quarter. We continue to remain focused on growing and sustaining our net interest income by growing the balance sheet and reducing our asset sensitivity. Turning to Slide 9. Noninterest income was $15.7 million, essentially flat from the prior quarter. Gain on sale of loans was $5.4 million, down $1.6 million linked quarter, reflecting lower premiums and mix of loans sold. Swap income was up nicely for the quarter as we continue to focus on growing other fee income categories. Our gain on sale forecast for 2026 is on average, $5.5 million per quarter. with lower Q1 expectations due to typical seasonality. Turning to Slide 10. Expenses came in at $60 million, essentially flat from the prior quarter. The modest decrease reflected lower loan-related and data processing expenses, partially offset by higher incentive compensation. For 2026, we expect our quarterly noninterest expense to trend between $58 million and $60 million. Turning to Slide 11. Our allowance for credit losses increased 3% to $109 million, representing 1.45% of total loans, up 3 basis points from the prior quarter. We recorded $9.7 million in provision for credit losses in Q4 compared to $5.3 million in Q3. Net charge-offs decreased $6.7 million compared to $7.1 million in the previous quarter. NPAs to total assets increased to 77 basis points in Q4 from 69 basis points in Q3. The increase was partially driven by a lower balance sheet at year-end. Moving on to capital on Slide 12. This quarter capped a year of meaningful progress in growing our capital position. For the quarter, CET1 came in at a strong 12.33%, up 18 basis points linked quarter and up 63 basis points year-over-year. Additionally, the TCE to TA ratio stood at 11.29%, up 168 basis points from last quarter. In closing, we remain focused on long-term stockholder value by growing tangible book value per share, EPS and increasing our return on tangible common equity. With that, Alberto, back to you. Alberto Paracchini: Thank you, Tom. Before we open the call for questions, let me touch on our priorities heading into 2026. First, we remain on track and expect to cross the $10 billion asset threshold this year, and we're well prepared for that milestone. We're monitoring the regulatory environment closely, particularly potential changes to asset thresholds, but we're not slowing down in anticipation of what might happen. We will continue to move forward. Second, our focus remains on organic growth. Last April, we launched a commercial payments business and the progress so far has been excellent. We've onboarded 6 customers and have several more in the pipeline for this year. We've also added approximately $70 million in liability balances and have seen a corresponding increase in ACH volumes, both transactions as well as dollars. We entered 2026 with good pipelines and remain well positioned to continue gaining share across all our commercial businesses. Third, credit discipline remains a priority. The way we maintain that discipline is by staying close to our portfolio, monitoring it and identifying and addressing issues quickly as they emerge. As we move into 2026, we're excited about where we stand. We've built a strong team. We're generating real operating leverage. Our competitive position is solid and we're able to capitalize on opportunities when they come. In short, we like where we're positioned. Before we turn to questions, I want to thank our employees for everything they do for our company and our customers on a daily basis. And with that, Carli, we can open the call up for questions. Operator: [Operator Instructions] Our first question is from Nathan Race from Piper Sandler. Nathan Race: Maybe just to zoom out for a second, Alberto. You guys posted a really strong year in 2025. Pre-tax pre-provision income was up 13% year-over-year. So just curious, as you look at the company broadly, which areas or which verticals are you most excited about to just continue to scale up and where you see an opportunity to become more efficient, whether it's in the technology front where you guys have been proactively investing or in any other areas? Alberto Paracchini: Yes. Thanks for the question, Nate. So I touched on it a little bit in the remarks there. So certainly, we continue to be excited with our commercial payments team. It's a team that we launched last April. We're being very deliberate in how we approach that market. But we have a great team. We've added people there and we're starting to see the benefit of not only having a pipeline but onboarding customers, growing deposits, growing transaction volumes and correspondingly ultimately, fees that come along with that. So we're -- we're certainly excited about that, but we're also excited given our position in Chicago and the current competitive dynamics about our ability to continue to gain share in the commercial banking space here. As you know, we are today the largest community bank in the market. Tomorrow, when we go over $10 billion, we will be between $10 billion and probably $70 billion or $75 billion, we will be the largest local commercial bank in the market. So we like where we are, and we like the opportunities that we have across really all of our businesses, Nate. Nathan Race: Got it. That's really helpful color. Changing gears to capital. You guys have continued to build at pretty strong clips, just given the profitability profile. And I noticed in the last couple earnings decks, the 8% to 9% TCE target has been absent. So curious if there's anything to read into that just in terms of how you think about capital returns to shareholders and what that implies in terms of the M&A environment these days. Or if you're just looking to maybe operate with higher capital levels going forward versus the previous targets? Alberto Paracchini: Yes. I think from if you think about it in terms of -- we always talk a bit about always wanting to have some degree of flexibility. So that comes with it. So we do carry a bit more capital to allow for that. I think our experience has been that, that has served us well. It has allowed us to move very, very quickly and really without any hesitation or delay when opportunities come up in the market, and we like that. That being said, I think this past quarter, I think you also saw the comments related to the increase in dividends to the degree that we have excess capital, we will -- and we have no immediate use for it. We will find ways to return that capital back to shareholders. As you know, this past quarter, we were active, we were repurchasing shares. We thought we repurchased shares at attractive prices. And also over time, and I think you've heard the comments, we want to have a sustainable and growing dividend over time. And I think our Board took action in that regard with the dividend increase that we just announced. So hopefully, that's indications of the capital priorities. We obviously want to have capital to take advantage of; to grow the balance sheet, grow organically, support the growth of the business; two, have a sustainable dividend; three, have enough flexibility to pursue M&A when and if those opportunities surface. And then lastly, we have the buyback program in place. As you know, we also announced an authorization to buy back up to 5% of shares outstanding. So we think the combination of that gives us enough flexibility to do what we need to do in terms of growing the business, but also at the same time, return capital back to shareholders if we have no use for that capital. Nathan Race: Okay. That's very helpful. If I could just sneak 1 more in for Tom. I think you mentioned in your comments that you're looking to reduce the asset sensitivity of the balance sheet going forward. Just curious if you could shed some more light on that and kind of how you think that positions the margin going forward in light of potentially additional Fed cuts this year? Thomas J. Bell: Sure, Nate. The margin has been growing. We're happy with that. We like the idea that NII is growing. We continue to kind of try to -- we are issuing some CDs, but also we have some flexibility to do some more interest-bearing accounts. So just because of the mix of our bank, we really want to have some more floating rate liabilities, and I think we're set up well for that. It will take time to get there. But again, the disciplined pricing we've had going on over the last year here related to deposits has really helped to kind of lift the margin. And the goal is to kind of try and keep it stable. But again, year-end was -- we had a lot of activity in the fourth quarter, and we had some securities that we sold just to keep the bank under $10 billion. That was a really important effort for us. And so we'll -- it's likely we'll be buying those securities back here in the first quarter. So obviously, those transactions are a little bit tighter margin trades. We just think about -- that's why we focus on NII. So stable, I would say, stable and growing net interest income. Alberto Paracchini: Yes. And it also to add to what Tom said, Nate. It also -- again, just the common theme today seems to be flexibility. But with our margin, it gives us ample flexibility from a competitive standpoint. I mean we're not in a situation like other institutions are where they're trying to get their margin back up to a level that they need to get it to from a base profitability standpoint. I think with our margin today, it certainly gives us a lot of flexibility competitively that we can use when appropriate. Operator: Our next question comes from Damon DelMonte from KBW. Damon Del Monte: Just looking for a little color on the loan growth outlook. I know you mentioned mid-single-digit growth, but -- can you just kind of remind us what areas of your lending platform offer the best opportunities kind of across which segments can drive that? Alberto Paracchini: Really, I mean, commercial, I would still say that, Damon. Real estate I think it's going to be a function of transaction activity. It's not to say that there are not transactions happening, but certainly since rates started going up in 2022. I think transaction activity relative to what it was before has been somewhat muted. With rates coming down, is that going to change? Are we going to see some of that. Obviously, if that picks up, then probably what we would tell you at some point is that we probably move that guidance up. But at this point, I think that kind of mid-single-digit range is solid. Damon Del Monte: Got it. Okay. And then, Tom, with regards to your commentary on NII for next quarter, is typically first quarter like a seasonally low quarter for you guys and then you'll see like a steady build as we go through the rest of the year. Or do you think that... Thomas J. Bell: No. Damon Del Monte: There's not really much seasonality in the first quarter. Thomas J. Bell: Damon, you're right. It's -- obviously, there's fewer days in the quarter. So that's one drag. Loan fees, et cetera, that go through the margin are a little bit lower during that -- during the first quarter. But generally speaking, again, stable to growing throughout the year. Damon Del Monte: Got it. Okay. Alberto Paracchini: Yes. I would also to add to that, Damon. I think always we've gotten some rate cuts here towards the end of the year last year, naturally we're asset sensitive. So notwithstanding the fact that our margin expanded, but just putting that aside for a second. If we're asset sensitive, we see rate cuts there's a transition period, right? We have to catch up probably on a gradual kind of declining rate scenario. We have to catch up. It usually takes us about a quarter to catch up and be able to kind of reprice and reset. So just keep that in mind as you think about the rate environment going forward. Thomas J. Bell: Damon, one more thing, Damon, just to point out is, remember, with the Fed cuts in the fourth quarter, the SBA loans reset January 1. So when you see guidance a little bit lower than what we actually reported for the fourth quarter, some of that is driven by the fact that we have loans resetting here January 1. Damon Del Monte: Got it. Okay. Great. And then with regards to credit and kind of your outlook for net charge-offs for the upcoming year as you kind of think about provisioning. I think last year, you had around close to 40 basis points of net charge-offs, which was down a little bit from '24. Based on what you're seeing in your portfolio, do you feel like you're kind of going to be in that near 40 basis point range again? Alberto Paracchini: I think in the -- I think, Damon, our guidance has been pretty consistent on that like 30 to 40 basis points, somewhere in there. It might be towards the high end of that range. It might be towards the low end of that range, but somewhere in that kind of 30 to 40 basis points range at this point. Operator: [Operator Instructions] Our next question comes from Brendan Nosal from Hovde Group. Brendan Nosal: Yes. Maybe just to start off here on kind of the underlying pieces of the loan growth outlook. Just thinking between origination activity and payoffs. I think originations dropped 17% for this year to $1.3 billion or so. So like how do you think about the underlying pace of originations that are getting you to that mid-single-digit net growth outlook for 2026? Alberto Paracchini: I think I would point you to that page in the deck that shows the kind of the trend of originations and payoffs. It's slide -- it's Page 6 of the deck where it talks about portfolio trends. I know throughout the year, we get questions sometimes in terms of, well, your loan growth is exceeding kind of the target and probably the answer that you hear us give is we have a pretty good handle in terms of what we're seeing from an origination standpoint. We think we know the activity that's going to pay off. But obviously, that's at times, the timing of it, and it also can be a little bit harder to predict. And I think the past quarter -- the fourth quarter, certainly, you saw payoffs catch up a bit. So I would point you to that chart and kind of that mid-single-digit range in the categories that I highlighted, which is primarily our kind of commercial banking categories is really where we're going to expect to see growth. And just the nuance quarter-on-quarter is going to be really that payoff number and our ability to actually be as accurate as we can be with that. So hopefully, that answers your question. Brendan Nosal: Yes, yes. That's helpful. Switching gears here to net interest income, but a bit more of a conceptual question. Like you folks have been outperforming your quarterly NII guide pretty consistently for the past I would say, 2 years or so, despite the short-term part of the curve coming down and your asset sensitivity. Is there a point at which you just gain a little more comfort with how your balance sheet is responding to this environment? Do you get a little more bullish with the NII outlook that you're giving. Thomas J. Bell: That's a good question. I mean I think Alberto touched on it with the loan payoffs. I mean I think loan payoffs were probably lower overall for the year than expected. So we benefited from some NII related to that. We continue to hear that payoffs will probably be a little bit higher. So I think that's where we probably provide some caution. But generally speaking, I think we've done a really good job on deposit pricing. We still are growing, so we need to grow more deposits. I mean we just had some, call the fourth quarter noise because of the $10 billion, but we continue to focus on deposit, growing core deposits first and foremost and then sprinkling in some other deposits to help support the balance sheet. But look, we're continuing to grow NII. I think it's grown meaningfully. I think we've done well on the rates down scenarios that have happened that we've been able to have stable and growing NII. I think at some point, you run out of room there to continue to drop deposit costs in a meaningful way. And I think you still have to be mindful of the competition and the other banks that are growing. So I think our numbers are really strong still. And I think we're really proud of the results we've had. But it really is a function of loan growth and low-cost deposits, and we have seasonality that happens and a lot of our deposits that we saw leave in the fourth quarter, we've already seen a recovery on some of that. So we will benefit from that as well. And I think then, furthermore, we'll just see how the payment scheme does and then the benefits we get from that will probably give us a chance to say guidance could be better. Roberto Herencia: Yes. I would add... Thomas J. Bell: Those are couple of thoughts. Alberto Paracchini: Just to add just another -- a bit more on the deposit pricing thing. We've been outperforming our own internal models as it pertains to it. So you're probably a question that you have in your mind is, well, what are you guys doing? Why is that? And I think I touched on that a quarter or a couple of quarters ago that look, I think analytically, we're getting a little bit better and being able to segment our portfolio more granularly and therefore, be able to make more precise pricing decisions in different pockets or segments of the portfolio. So I think we're getting better at that operationally, and that's resulted in some of the, call it, the -- even against internally what we expect some of the outperformance. But -- so there's some of that, that you're seeing come into play, and I think you saw it in terms of how quickly we've been able to reprice liabilities here with -- in the fourth quarter with a changing environment. But that said, ultimately, we will exhaust that. And that has -- ultimately will have limits, meaning it will catch up, but that's just something to keep in mind in that we've -- it hasn't been just -- how confident are you to provide higher guidance? It's been -- we've actually been kind of performing better than what we thought internally we could do. And that's been obviously a positive overall. So just keep that in the back of your mind. Brendan Nosal: Yes. That's super helpful. I'm going to sneak 1 more in here. Just on the SBA business. I mean, the gains on sale have been compressing for a couple of years now. Is there a point at which like the risk-adjusted return that you're getting for the overall business, including lending plus gains isn't up to where you want it to be? And like how far are we from that point today? Thomas J. Bell: I still think, Brendan, we're pretty far from that. And I would also point you when you look at the compression and the gain on sale margin, a lot of that has to do with the mix. I mean, as you can see on the chart on Page 9, where any time that you have a higher proportion of loans that are longer tenor loans, so like 25-year term versus 10. That mix between 10 and 25 drives that. And certainly, to a degree that you have other types of government guaranteed loans like a USDA loan here or there, that also impacts the gain on sale margin. But to answer your question on the big picture side of it, I think you would have to see materially much more compression for it to get to a point where you start to rethink whether on a risk-adjusted basis, this is still attractive. Operator: [Operator Instructions] Our next question comes from Terry McEvoy from Stephens. Terence McEvoy: Maybe just circling back to the commercial payments team. Are these clients or customers, are they fintech companies? And if so, could you talk about the due diligence you're doing there? Are they more traditional payments to your commercial customers? And Alberto, what maybe some medium-term goals and objectives that we can kind of track over the next couple of years to track the progress? Alberto Paracchini: Yes, good question, Terry. So I think on that commercial payments business, I would say so far, think of like -- so I'll give you an example. So payroll processing companies. So not necessarily kind of like a small commercial customer, but a payroll processor that provides payroll services and as part of those services is the ability to originate and process payroll payments for their client base. And we would be, for example, the banking institution behind that providing the infrastructure to allow that to happen. So that's an example. I would tell you some of the clients that we've onboarded have been in that particular vertical. But we also want to look for opportunities beyond that in terms of -- you mentioned fintech companies that would need to have a payment element to their business. In other words, it could be something along the lines of embedded finance or a company that's trying to embed payments into their product offering to their end clients. So that's certainly something that we could entertain. We could entertain that with just traditional access to the payment rails, but also we could do it through access to supporting their issuing of cards or their acquiring of card transactions. So that's just a flavor of the capabilities of the team that we have and the business that they're going after. And as far as metrics going forward, I think we'll keep you up to date. Certainly, we're off to a good start. I would tell you it's been deliberate. We hired that team -- we launched the business in April of last year. The team came on board fully a year earlier. So this has not been a quick build. Let's make sure that we have processes, procedures, policies and the infrastructure to properly be in the business and support the clients that we want to do business with. The last thing I would say is also think about it as not really a shotgun approach. We're not trying to onboard 10 or 15 customers a year. We're trying to onboard 3 or 4 and the onboarding process for the reasons that you are thinking of is 6 to 9 months. And that's just to make sure that from a compliance process, procedures, policies, we are comfortable supporting the banking needs of those customers. So hopefully, that gives you some color on that business. Terence McEvoy: Yes. That's great. And then maybe just 1 quick last one. Did the government shutdown impact the SBA business in Q4, and it didn't look like it from a revenue standpoint. And did anything get pushed out into the first quarter? I know Tom said Q1 is going to be down a bit, but just wondering there. Alberto Paracchini: It always has a little bit of an impact, Terry, but I think we would just tell you it was -- it's immaterial. Operator: Our next question comes from Brian Martin from Janney Montgomery Scott. Brian Martin: Say, just 1 on -- I think I'm not sure who mentioned it, but maybe whoever was talking about the swap income, just talked about maybe a bit more focus on fee income this year. You've already touched on the SBA. I guess just kind of wondering the run rate we're at today, around $16 million and kind of is that a good sustainable level and then it grows from there given kind of focus there and maybe where the focus is to maybe improve that run rate as you look into '26? Alberto Paracchini: I think it's a good level. We want to see that absolute number go up. The answer is yes. I think a couple of areas. Tom mentioned swaps and derivatives and things of that sort. So we want to continue to do as much as we can there. Obviously, that's a bit of a rate-sensitive dynamic, but we certainly want to continue to offer those products and services and take advantage of situations where we can do that. Second would be I touched on the commercial payments business, while the side effect of that is fee income, treasury management fees and the like. So certainly, that's one area that we want to see grow. Our wealth management business, which is a small part of our business today, but we grew nicely this year. We're getting closer and closer to be able to eclipse the $1 billion in assets under management, which is a milestone given the size of that business today. So hopefully, over time, that business gets to contribute a bit more. And then you obviously have the gain on sale business from our SBA government-guaranteed lending business. Brian Martin: Got you. Okay. That's helpful. And I guess maybe 1 for Tom. Just given some of the noise, I think you talked about Tom at year-end with kind of managing the balance sheet to the $10 billion level. Can you help us just maybe a guidepost on the average earning assets in 1Q, just given end of period, fourth quarter was a bit lower than the average for the quarter, but knowing your commentary about kind of buying back some here in the first quarter, kind of a landing spot or just kind of a range and I think about the earning asset base for 1Q? Thomas J. Bell: I think kind of in that $150 million to $200 million Brian. I mean we had -- in the fourth quarter, we had a number of payoffs. The payoffs kind of came early in the quarter and the loan growth came towards the end of the quarter. So I think that plus the fact that we had about $100 million of securities that we had cleaned up for the portfolio a little bit. So I would call it $150 million to $200 million and more earning assets, but still below $10 billion in total assets for the first quarter. Brian Martin: Yes. So the average in the fourth quarter was $9.2 billion, but the period end was closer to, call it, $9 billion maybe. So maybe it's a $9.2 billion level is kind of a decent way to think about 1Q as a landing spot broadly. Thomas J. Bell: I think so. It sounds right. Brian Martin: Yes. Okay. I appreciate that. Alberto Paracchini: No, I was going to say, Brian, just I commented on it, and Tom commented on it as well. And just to be clear, towards the end of the year, we just wanted to make sure, and we had levers to pull. We just wanted to simply make sure that we were not going to be over $10 billion. So that is the comments related to really balance sheet management were really attributed to that. We just wanted to make sure that as of that snapshot of 12/31, we were not going to be over $10 billion. So we achieved that. We don't have that constraint going forward. So to Tom's point, I think you will not really see any type of management activity to try to keep us below a certain level in terms of assets. Brian Martin: Yes. No, I appreciate that, Alberto. That's kind of what I figured. I just want to make sure I have the right starting point given all the noise in there that, like you said, was just the management function. So thank you for that commentary. Maybe just 1 or 2 others. Just on the credit quality front, any changes in the -- any material changes, I'm assuming no in the criticized or classified levels from third to fourth quarter when we see the filings come out? Alberto Paracchini: No material changes just ebbs and flows. We're going to be -- I mean, you certainly know us, we're going to be quick to -- if we see something, we're going to be very, very quick to downgrade, even if it means to downgrade something to criticize. And we certainly have a view anytime we do that. We have a plan. Where is the credit? Where is the trajectory of the credit, like we had it in a short period of time. Is this temporary? Do we expect this to be ultimately to correct itself? Are they -- is the borrower taking the right corrective actions in which case, you will see us -- we'll see that credit migrate back. If not -- if we don't have confidence in that, then we look to move the credit quickly out of the bank. So -- but no, I would tell you, it's just ebbs and flows. Brian Martin: Okay. Okay. And the last 1 for me is just -- I know Tom has talked about the NII dollars. But just in terms of the margin percentage, I guess, would it make sense that there's -- given the outlook for rates this year with maybe potentially 2 cuts out there, but really less noise than last year from a rate perspective that maybe the core margin, when you think it ex the accretion, there's a little bit more stability in that margin this year. I'm not sure what's baked into the guidance in terms of NII, but just thinking about it intuitively that we don't see much rate movement, maybe that core margins a bit more stable or steady as you move throughout the year? Or is that not -- how to think about it? Alberto Paracchini: Yes. It's going to be stable, Brian, I hate to talk about margins. But it's going to be stable. I mean it has grown. I don't know that you can expect it to continue to grow -- but I think we'll take the margin we have. And if we can maintain it throughout the year, I think we'd be pretty satisfied with that. Brian Martin: Yes. I apologize for asking the question, Tom. I know it's a bigger financial picture question with the rate environment. So I appreciate the color. And thank you for the questions and congrats on a great year. Alberto Paracchini: Yes. Thank you, Brian. We appreciate it. Operator: Thank you very much. We currently have no further questions. So I'd just like to hand back to Alberto to Paracchini for any further remarks. Alberto Paracchini: Great, Carli. So to everyone on the call, thank you for joining us today. We appreciate your interest in Byline, and we look forward to talking to you again next quarter. Thank you very much. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
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