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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Freeport-McMoRan Fourth Quarter Conference Call. Later, we will conduct a question and answer session. If you wish to ask a question during the Q&A session, press 1 on your touch-tone phone. If you require assistance during the conference, please press 0. I would now like to turn the conference over to Mr. David Joint, Vice President, Investor Relations. Please go ahead, sir. David Joint: Thank you, Regina, and good morning, everyone. Welcome to the Freeport-McMoRan conference call. Earlier this morning, Freeport-McMoRan reported its fourth quarter and full year 2025 operating and financial results. A copy of today's press release with supplemental schedules and slides are available on our website fcx.com. Today's conference call is being broadcast live on the Internet. Anyone may listen to the conference call by accessing the webcast link on our homepage. In addition to analysts and investors, the financial press has been invited to listen to today's call. A replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include non-GAAP measures and forward-looking statements, and actual results may differ materially. Please refer to the cautionary language included in our press release and slides to the risk factors described in our SEC filings, all of which are available on our website. Also on the call with me today are Richard Adkerson, Chairman of the Board, Kathleen Quirk, President and Chief Executive Officer, Maree Robertson, Executive Vice President and CFO, and other members of our management team. Richard will make some opening remarks, Kathleen will review our slide materials, and then we'll open up the call for questions. Richard? Richard Adkerson: Thanks, David. Thank each of you for joining our call today. We're pleased to report positive results for our fourth quarter. 2025 was a truly eventful year. Recent copper prices have been strong in the face of uncertainties from global trade, tariffs, and geopolitical conflicts. The future for copper remains bright. Kathleen will report on the notable progress we have achieved during the fourth quarter following the September mudflow event at PTFI. It is impressive and provides our organization confidence about our future. PTFI has a well-designed plan to recover. Now we must execute, and we will. Our long-term strategy commitment for Freeport-McMoRan to be foremost in copper remains intact. With our high-quality assets, our strong financial position, and our highly motivated, confident global team, I'm personally enthusiastic and confident about Freeport-McMoRan's ability to create significant value for our shareholders and all of our stakeholders. Kathleen? Kathleen Quirk: Thank you, Richard. And I'm gonna be referring to our slide materials. We're very pleased to be here today to report on our fourth quarter results, review our 2025 performance, and update you on our initiatives, projects, and outlook for the future. Starting with Slide three and looking back on our performance in 2025, our team demonstrated resilience in overcoming challenges and achieved meaningful progress on several initiatives to support a strong foundation and position the company for a positive long-term future centered on value creation. As we look ahead, we're strongly positioned as an experienced global leader with compelling opportunities to enhance values through our ongoing operational initiatives and future prospects for substantial cash flow generation, which support investments in profitable growth and returns to shareholders. We show our annual information on Slide three, on copper sales, unit costs, and financial metrics. For the year 2025, we finished the year strong with copper sales and net unit cash costs slightly better than our adjusted guidance for the year. Despite the Grasberg incident, which impacted annual copper volumes by approximately 10% compared to our plan going into 2025, our consolidated unit net cash cost for the year of $1.65 per pound were within 3% of our guidance going into the year, and adjusted EBITDA of nearly $10 billion for 2025 was similar to 2024 levels. From a big picture standpoint, the results demonstrate the benefits of our diverse portfolio of copper assets. It's clearly evident in our strong fourth quarter financial results. Strength of our Americas business in this environment. I'm returning to our focus areas for 2026 where we summarize on Slide four our priorities. The first is execution. This is a hallmark of the Freeport-McMoRan culture. We're committed to maintaining Freeport-McMoRan's long track record for successful execution, carefully planning our work, and bringing relentless focus and energy on achieving our plans. The Grasberg incident was humbling, but our team has risen to the challenge and is dedicated to safely and sustainably restoring our operations as we go through 2026. Across the business, we're sharply focused on delivering our planned volumes, meeting our cost targets, executing capital projects safely and efficiently, and on maintaining discipline each day on the underlying metrics which drive our results. Managing risk, overcoming unforeseen challenges, and staying on top of what matters, for the short term and the long term. A second key focus area is crystallizing value in our Leach opportunity. This is a meaningful value driver for our business given the opportunity for near-term low-cost growth. The work we have done in recent years positions us to scale production in the coming years, and we're targeting a 40% increase in 2026 from this initiative on our path to achieving 800 million pounds per annum. Third, we're adopting innovation, automation, and new technologies to drive enhancements to reliability, efficiencies, and overall operational performance. These initiatives show promise for significant value as we work to reduce cost, enhance growth, and profitability of our US business. We have a robust profile of organic growth options and we'll continue to advance these initiatives during the year. We've got three projects, major projects in The Americas that provide optionality for future growth. And as we go forward, our team is focused on opportunities to increase margins and cash flows through greater efficiencies and disciplined investments in long-term growth. Turning to the markets on Slide five, prices on the LME during 2025 traded in a broad range between $3.87 per pound and $5.68 per pound, averaging $4.51 per pound for the year. On the US COMEX exchange, average prices for the year were slightly higher, although the differential is not significant. Year to date in 2026, prices have risen significantly in recent months with current LME prices approximately 30% higher than the 2025 average. During 2025, copper prices largely tracked macro sentiment. Market weighed US dollar weakness, expected US rate cuts, accelerating AI and technology-driven demand, and Chinese stimulus against mixed economic data, uncertainty around tariff and trade policy, economic pressures in China, and elevated geopolitical risk. At a micro level, demand benefited from secular demand trends associated with electrification and AI data centers and offset the impact of weakness in private construction and more cyclical sectors. Supply disruptions in copper and regional trade distortions which drove significant material to The U.S. also impacted copper markets during 2025. In The U.S., our customers are reporting that data center demand represents the most significant source of growth for power cable and building wire. This growing sector is offsetting weakness in traditional demand sectors, residential construction, and autos. Demand from China continues to be supported by significant investments in the electrical grid and continued growth in China's production of electric vehicles. China's demand for copper continued to grow during 2025. As you'll see in this chart, global inventories of copper on exchanges have risen in recent months during a period of sharp increases in copper prices. Most analysts are projecting that the market will be tightly balanced during 2026 with some projecting deficits and others small surpluses. Copper's superior conductivity makes it the metal when it comes to electrification. Massive investment in the power grid, renewable generation, technology infrastructure, and transportation are driving increased demand for copper and forecasts call for above-trend growth and demand for the foreseeable future. As we review the fundamentals, we continue to expect the market will require additional copper supplies to meet growing demand. And at Freeport-McMoRan, we're well-positioned to supply copper reliably and responsibly to a growing market. You've probably seen by now the recent report from S&P Global, which was released earlier this month. On Slide six and seven, we published some highlights of the report. It was a new study which evaluated the role of copper in the age of artificial intelligence. And we've summarized key findings which indicate that massive growth in demand for electricity will translate into above-trend growth in copper demand, pointing to a doubling of copper demand through 2040. The study projects a long-term annual growth rate in demand of 2.9% over this period, including significant growth in new secular demand drivers. The report is available from S&P Global, and we encourage everyone to take a look at it. Moving to our fourth quarter results on Slide eight. We've got a summary of the quarter. Our operating performance during the fourth quarter was favorable to our estimates going into the period. Production was in line with expectations, and sales were better than expected principally because of the timing of shipments in Indonesia. As indicated in our November update, we completed investigations on the Grasberg incident and restarted the Deep MLZ and Big Gossen mines during the fourth quarter. Since our November report, we've continued to make steady progress to prepare the Grasberg Block Cave to resume operations, and we're on track for a second quarter 2026 start-up. With strength in copper prices during the quarter, the performance of our U.S. business was quite strong with operating income 3.5x the level of the 2024 fourth quarter. This demonstrates a positive leverage of pricing at these operations with strong conversion to the bottom line. Moving to the operating statistics, on Slide nine, we summarize the highlights by geographic region. Starting in The U.S., production was up 5% versus both the year-ago fourth quarter and for the year 2025 versus 2024. This is notable given the declines that we faced in the prior two years, and despite the low grades, we've been working to increase volumes in The U.S. through efficiency gains through our leach recovery initiatives. We're targeting an 8% increase in volumes in The U.S. for 2026, in part related to adding scale in our innovative leach project. We're making excellent progress with our initiatives to improve efficiencies and cost performance. We're continuing to integrate new technologies to realize better performance in our basic mining functions, and we're successful in 2025 in converting our haul truck fleet at our Baghdad mine to autonomous. We're continuing to refine the autonomous process. We are optimistic that the value proposition of this technology can be applied on a broader scale. In South America, performance was in line with expectations. The Cerro Verde team will highlight finished strong to deliver another solid year. Our copper sales for South America for the year 2025 totaled 1.1 billion pounds. And the expectation is that we'll have a similar amount of sales from South America during 2026. Our unit net cash cost in South America for the fourth quarter averaged $2.57 per pound, and we expect a similar level in 2026. We're expecting stable production levels at Cerro Verde and some growth at El Abra, a project in Chile in partnership with Codelco. Over the next couple of years, there's a lot of activity at El Abra currently with a leach pad extension, and plans to conduct testing during 2026 of heated stockpile injections to enhance leach recoveries. We're also finalizing the preparation of an environmental impact statement for a major expansion at El Abra, which we plan to submit in the first half of this year. With our progress, you'll see we added reserves for the El Abra expansion of over 17 billion pounds of copper, and we're excited about this project as we progress through the regulatory process. In Indonesia, in line with our plans, we operated on a limited basis from the Deep MLZ and Bigas mines during the fourth quarter and continued our preparation for the planned restart of the Grasberg Block Cave. Sales for the fourth quarter exceeded production by about 60 million pounds of copper, which was a timing variance. Operations at one of two smelters resumed late in the year, and the new smelter remains in standby status with an expected restart later this year. We've made great progress to restore operations at the Grasberg Block Cave, which we'll cover in more detail on the next two slides. On Slide 10, we provide a refresher from our November call on the various work streams required to safely restart operations at the Grasberg Block Cave. As a reminder, the Grasberg Block Cave represents the most significant contributor in the district. We provided a schematic on the right showing the various production blocks within the Grasberg Block Cave. And as a reminder, the incident occurred in Flux Production Block 1C. Our plan incorporates a phased restart and ramp-up of the Grasberg Block Cave beginning in the second quarter, initially in Production Blocks 2 and 3, followed by Production Block 1S in 2027, and finally, Production Block 1C in 2027. With the successful ramp-up of production blocks two and three beginning in the second quarter, we expect to have 85% of production restored in the district in the second half of this year. The milestones for restarting production blocks 2 and 3 include cleanup of the mud in the tunnels, principally in the service area, the installation of cement plugs to isolate the panels in Production Block 1C, and to ensure there's no connection to the surface and replacement of the electrical and communication systems damaged in the incident. For Production Block 11S, the repairs are expected to extend beyond the restart of PB2 and PB3, principally to install additional productive barriers and replace the number of damaged shoes used to transport ore to the haulage level. We continue to target a restart of PB1, both PB1S and PB1C, during 2027. And we're gonna continue to progress the reopening plan as we monitor progress with various mitigation initiatives for the production block one. We're incorporating recommendations from the investigation to enhance our risk management and mitigation. The incident highlighted the need for more dynamic cave management plans tailored for various conditions and for more robust controls and operational procedures to address areas subject to risk from an external mud rush. In addition, we're continuing to adopt new innovative approaches to mud drainage solutions for the pit bottom. We've got those described on Slide 31. And to adopt emerging technology for imaging to improve cave shape monitoring, and those are all being advanced. We've got a scorecard on Slide 11. Very pleased with the progress that we've made to date. We're tracking the plan. Mud removals in the areas required to commence the start-up of PB2 and PB3 are substantially complete, and the barrier is being installed to isolate Production Block 1 are advanced and expected to be completed in the first quarter. With the installation of the protective plugs, infrastructure repairs are expected to move to completion by quarter-end, positioning the restart to commence in the second quarter. We remain confident in reestablishing large-scale production and in our ability to safely operate this great ore body over the long term. The progress to date continues to de-risk the plan, and in executing the restart, our team will be vigilant in prioritizing safety above all else. We're pleased to report on our reserve at year-end 2025. Those are reported on Slide 12. As you know, at Freeport-McMoRan, we benefit from a significant reserve and resource position where we have established operations and successful track records. A summary of the reserves is indicated here, where we continue to maintain long reserve lives and substantial resources to support long-term production and our growth opportunities. The reserve additions that we're reporting in 2025 are substantially in excess of our production, and those principally relate to the addition of over 17 billion pounds of copper for the El Abra project, which was previously considered a mineral resource. The reserves in Indonesia are included, and they're reported through 2041. And we note that an extension is in progress, and that would enable the report portion of the reported resource to be included in our longer-term reserve plans. In addition to the reserves, we have significant incremental mineral resources, with over half located in the United States. We'll point out the large resource in the Safford Lone Star District as we continue to advance studies to evaluate a major opportunity there. Slide 13, we wanted to update you on our growth plans. It's clear additional copper supplies will be required to support energy infrastructure, new technologies, and more advanced societies. Our projects at Freeport-McMoRan would provide significant copper which can be developed from our known resources in jurisdictions where we have an established history and experience. Our projects in Indonesia also benefit from the high gold content that goes along with the copper. Because these projects are brownfield in nature, we benefit from leveraging existing infrastructure and experienced workforce and relationships with key stakeholders to move more quickly with less risk than greenfield projects. We're now entering a period of growth in our Americas business with near and medium-term opportunities to scale our Leach initiative and double our production at our Baghdad mine. We have longer-term growth in the Saffron Lone Star District and an exciting project, as we mentioned, at El Abra in Chile. In approaching these projects, we're using innovative approaches to improve efficiencies, reduce costs, and capital intensity. And work to shorten lead times for our projects. Our high potential, low-cost innovative Leach initiative is a great example of doing this. We've talked about what we've done to date. We've produced over 200 million pounds from this initiative in 2025. We're targeting 300 million pounds in 2026. Some of the progress and milestones that we reached in 2025 was the initiation of deployment in the field of our first internally generated additive at Morenci. We've got encouraging results there. And we're planning to adopt it on a broader scale during 2026. We're continuing to be very encouraged by lab tests of additional additives, and those show even greater promise. We have projects in 2026 in our pipeline for the leach project to test injection of heated solutions in our stockpiles, which together with the additives have potential for significant recovery gains. 2026, we're looking at as a pivotal year for us in this initiative. As we work to scale to 400 million pounds in 2027 and to 800 million pounds by 2030. Our expansion opportunity at Baghdad is advancing toward an investment decision during the first half of the year. We're planning to advance engineering, retest the economics, and work with our vendors to secure fixed pricing on major components. We're also continuing to advance our work on tailings infrastructure to further enhance the optionality on timing. We're continuing our studies on Safford Lone Star District, as we mentioned, to evaluate optimal development options. And at El Abra, we have a great opportunity with our partner at Codelco to develop a large-scale expansion. Our total reserves at El Abra are getting close to the large position we have at Cerro Verde. This is a terrific opportunity for us. And we're looking forward to working with regulators as we commence the permitting process this year. Progress at Kuchin Liyar is also continuing in Indonesia, and this will allow us to sustain a low-cost long-term production profile in the Grasberg District. Before we get into our forecast for sales guidance and cost and cash flow, we want to highlight Freeport-McMoRan on Slide 14 as America's copper champion. Freeport-McMoRan is an important American copper producer and is by far the largest contributor to The U.S. copper market with an established and successful franchise dating back to the late 1800s. Our operations in The U.S. are fully integrated with smelting and refining facilities and leach processing that efficiently produce refined cathode. Freeport-McMoRan supplies 70% of the refined copper produced in The U.S. And as we pointed out, a large portion of our reserves, resources, and future growth are in The U.S. We're driving a series of initiatives to enhance our U.S. business through innovation, automation, and investment in expanded facilities. These initiatives are designed to add production at a low incremental cost and improve profitability and resiliency of our U.S. business. In an industry where development lead times can span more than a decade, our business in The U.S. is strongly positioned with the potential for an over 50% increase in copper production as we go through the next four to five years. We're very excited about these opportunities. And they most of all, they represent a significant value driver for Freeport-McMoRan. Maree is gonna cover our outlook, and then we'll circle back and open up the call for questions. Maree? Maree Robertson: Thanks, Kathleen. If you turn to Slide 15, we show our three-year outlook for sales volumes of copper, gold, and molybdenum. The plans are very similar to our last update in November. Our 2026 copper sales have been adjusted slightly to address the timing of sales between 2025 and 2026. As indicated, we expect growing volumes in 2027 and 2028 as we reach full recovery at Grasberg. We provide quarterly estimates on page 27 of the reference materials. We expect to be at a quarterly run rate of approximately 1 billion pounds per quarter in 2026. Unit net cash costs are expected to average $1.75 per pound for 2026, assuming by-product credits priced at $4,000 per ounce of gold, and $20 per pound molybdenum. With growing volumes, our first-half costs are expected to be above the average for the year, with second-half costs approximating $1.25 per pound. Putting together our projected volumes and cost estimates, we show modeled results on Slide 16. The EBITDA and cash flow at various copper prices, ranging from $4 to $6 per pound of copper. These are modeled results using the average of 2027 and 2028 with current volume and cost estimates, and holding gold flat at $4,000 per ounce, moly flat at $20 per pound. Annual EBITDA would range from approximately $11 billion per annum at $4 per pound copper to over $19 billion per annum at $6 copper, with operating cash flows ranging from approximately $8 billion per year at $4 to over $14 billion per year at $6 copper. The dotted line shows the 2026 estimates, which reflect the phased ramp-up at Grasberg. These amounts exclude potential recovery under our property and business interruption insurance coverage. The policy provides coverage for up to $700 million for underground losses. We show sensitivities to various commodities on the right. You will note we are highly leveraged to copper prices, with each 10¢ per pound change equating to approximately $400 million in annual EBITDA in the 2027-2028 periods. We'll also benefit from improving gold prices, with each $100 per ounce change in price approximating $120 million in annual EBITDA. With our long-lived reserves and large-scale production, we are well-positioned to generate substantial cash flow to fund future organic growth and cash returns under our performance-based payout framework. Slide 17 shows our current forecast for capital expenditures in 2026 and 2027. Capital expenditures for 2025 totaled $3.9 billion, half a billion dollars below our plan going into 2025, and are expected to approximate $4.3 to $4.5 billion in 2026 and 2027. We have added $150 million in capital in 2026 to advance engineering and early works at Baghdad to enhance optionality as we work towards an investment decision targeted in the second half of the year. The discretionary projects approximated $1.4 billion in 2025, and are expected to approximate $1.6 to $1.7 billion per year in 2026 and 2027, with roughly 50% related to the Piching Liard Development and the LNG Project at Grasberg. The balance includes acceleration of tailings and other infrastructure to support the Baghdad expansion, the Atlantic Copper Circular Project, which is expected to be completed during 2026, and capitalized interest. The discretionary category reflects the capital investments we are making in new projects, under our financial policy, are funded with the 50% of available cash that is not distributed. These projects are value-enhancing initiatives detailed on Slide 37 in our reference material. We continue to carefully manage capital expenditure and we'll continue to deploy capital strategically to projects with the best return and risk-reward profiles. And finally, on Slide 18, we reiterate the financial policy priorities, focusing on a strong balance sheet, cash returns to shareholders, and investments in value-enhancing growth projects. Our balance sheet is solid with investment-grade ratings, solid credit metrics, and flexibility within our debt targets to execute on our projects. We have no significant debt maturities during 2026, and have substantial flexibility for funding the 2027 maturities. We have distributed $5.7 billion to shareholders through dividends and share purchases. We have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders. Our global team is focused on driving value in our business, committed to strong execution of our plans, providing cash to invest in profitable growth, and returning cash to shareholders. Thank you for your attention. We'll now take your questions. Operator: Ladies and gentlemen, we will now begin the question and answer session. If your question has been answered or you wish to remove yourself from the queue, please press 1 again. If you are using a speakerphone, please pick up your handset before pressing the numbers. We ask that you limit your questions to one. If you have additional questions, please return to the queue. Our first question will come from the line of Carlos De Alba with Morgan Stanley. Please go ahead. Carlos De Alba: Great to see progress in Indonesia. Just wanted to understand maybe a little bit the guidance for the outer years. Considering the opportunity in leaching that you have in North America, does the numbers, your guidance include the leaching reaching around 800 million pounds in 2028? Or is it not included in that official guidance? Kathleen Quirk: Good morning, Carlos. We've included in our outlook between 250 million and 300 million in 2026 and have not included anything beyond that for expansion. So it's around the long term. We've got around 250 million pounds in these numbers and have the opportunity. We expect to be at 300 this year, with an opportunity to scale to 427. So there's some upside in our numbers, obviously. The slide where we're showing what the potential is getting to 2 billion pounds in The U.S. includes the Baghdad expansion and getting the incremental volumes out of the leach program. So we have the potential to get to roughly 2 billion pounds in The U.S., but those aren't included in the 2027-2028 guidance at this point. Carlos De Alba: Alright. Great. Thank you. Operator: Our next question comes from the line of Katja Jancic with BMO Capital Markets. Please go ahead. Katja Jancic: The unit cash costs in South America are moving higher. Can you maybe elaborate on what's going on there and how we should think about costs there over the next few years? Kathleen Quirk: Yes. Patrick, in South America, we're forecasting net cash costs in the $2.58 range on average for 2026. Those are very similar to what we experienced during the fourth quarter of $2.57 per pound. When you look at the comparison to 2025, the increase relates mostly to labor and energy, power costs, as well as labor. You've got also a weaker dollar as well. So that's reflective, but it's very similar to what we've experienced in the fourth quarter, and we'll carry that run rate forward. Katja Jancic: Thank you. Operator: Our next question comes from the line of Alexander Hacking with Citi. Please go ahead. Alexander Hacking: Yeah. Thanks, Kathleen and team. The 2027 target to get costs in The U.S. down to $2.50 a pound. Could you maybe elaborate on how you plan to get there? Because costs last year were around $3.10, you're guiding to around $3 this year. Sorry, $3 this year, even with a nice increase in U.S. production. Like, how are you getting another 50¢ out by 2027? Thank you. Kathleen Quirk: It's really a target. And it assumes that we're successful with scaling our leach opportunity as well as continuing to drive efficiencies within The U.S. business. So it's really coming from adding volumes at a low incremental cost. We have a number of initiatives not only in the leach initiative, but we have a number of initiatives. Really, as we look at our U.S. operations, focused on minimizing downtime, improving, and just improving all of the efficiencies. And so we have really an opportunity to increase our volumes basically with the same operating rates that we have today. So that's the target that we have, and bringing in lower-cost volumes will bring down the average. Alexander Hacking: Thank you. Operator: Our next question comes from the line of Bob Brackett with Bernstein Research. Please go ahead. Bob Brackett: Good morning. I'd like to talk about Slide 14 where you highlight America's copper champion. We think rough numbers, The U.S. consumes 4 billion pounds of copper, 2 billion of which is imported. In that context, if you look at your targets, you'd be adding, you know, rounding up to 0.8 billion of that 2 billion of imports, which is a significant amount of those imports. And I'll highlight that the leaching initiative delivers refined copper, not concentrate. So I guess the question would be, can you do more? But also, the question is, how do you focus on this target in light of what copper tariffs could be going forward? Is that driving this production or just the unit economics in any world driving this production target? Kathleen Quirk: Thanks for those comments. And to highlight the leach initiatives, the exciting thing about these opportunities for us is that we're able to, with success, and we've got to have success on our additive work and with the heat injections that we're trialing this year, with success, the incremental cost of these pounds of copper that we're bringing on are very low cost, relative to the cost of what you'd have to do to actually mine the material and take it all the way through a smelter. So these are very low incremental cost pounds. They do not require significant capital. We already have the material that's been mined, and it's really the processing piece. And spending some incremental dollars to improve recoveries is what we're targeting. So that is really a very exciting value creation opportunity for us when you're talking about adding these kinds of volumes in a relatively short period of time. When you think about copper projects taking ten years or more, if we're successful here, we can be adding a new mine with very, very low operating costs and very insignificant capital expenditures. So that's a real opportunity for us. The Baghdad project is more of a conventional opportunity. As we've talked about, we've got a very significant reserve there. And what we have been talking about for a number of years now is the opportunity to build new processing facilities and bring that value forward. And we've been doing work on enhancing the optionality of that project. And as we look at that project today, it requires roughly a $4 average copper price to justify the investment. And, of course, copper prices are much higher than that today and support the project. You know, we look at a broad range of projects for copper prices when we qualify a project, but this is one we want to put our infrastructure where we have big reserve positions, and this is one where we believe it should be developed and can be developed within a short time frame. And so we're working to make sure that we have our arms around the capital and that we can execute the project efficiently. But that'll be a nice addition also to domestic production in The U.S. Bob Brackett: We're not really looking at tariffs to support this investment. It's hard to predict what those are. We're really looking at a broad range of absolute prices and how we can deliver a low operating cost mine and improve resiliency in The U.S. Bob Brackett: Great. Thanks for that color. A quick follow-up would be, in the past, you've talked about the next phase of leaching as being a phase three. In today's presentation, you're starting to take that phase three and tell us specifically how you're going to achieve it. Should I interpret that to mean that your level of conviction in the 600 million pounds target has increased over the last year or so? Kathleen Quirk: Certainly, with the additive work that we've done, prior to this past year, we were doing mostly lab testing. Now we're doing more work in the field where we're actually deploying additives on stockpiles in the field, gonna be doing that on a broader basis during 2026. And we've advanced these heat projects where essentially, we're taking the solutions that we apply on the stockpiles and heating those solutions as injecting heat into the stockpiles. And so what I say is 2026 is a pivotal year for us because we should have results on how heat and additives combine, and that really will set us up for scaling the opportunity. But you're right. We've made really good progress on the additives. We're excited to test this heat opportunity both at Morenci and El Abra this year, and that's gonna be very informative to us on our path. But we've made a lot of progress in converting some of the R&D work to early positive results. So the additive we end up with will likely be a little different than the additive we're using today. The additive we're using today is performing well. It is giving us incremental production. But we do believe based on what we've been seeing in the lab, that we'll use a variety of additives depending on the stockpiles to drive the best recoveries that we can get. And really think we're on to something. We've got more work to do, but this is a huge value creator for Freeport-McMoRan, particularly in our U.S. business. Operator: Our next question comes from the line of Lawson Winder with BofA Securities. Please go ahead. Lawson Winder: Thank you very much, operator. And, Kathleen, thank you for today's update. If I could just pick up on the comments you made on Baghdad 2X. Can you maybe give us a sense of a more precise timing this year for the update? That would be one. And then thinking about the CapEx, the slides highlight that the CapEx is still under review. What we've been seeing in the industry over the past several years is typical CapEx inflates at about 5% per year. Versus the 2023 dollars 3.5 billion. Is that a reasonable way to think about the level of CapEx inflation? And then are there any changes to the plan being contemplated with this latest updated study that could potentially change the approach or the overall mine plan or the CapEx? And then just finally, you highlight the attractiveness of this project at the current copper price. Given that it works at $4, what other factors will you consider when thinking about approving this project potentially later this year? So I know that's sort of four questions, but really it's just about Baghdad 2X and a few more details on that project. Kathleen Quirk: So as you pointed out, the 3.5 billion for the project was based on work that we had done at the end of 2023. And what we're doing in the first half of this year is continuing our engineering work and actually getting to a point where we can have enough of the engineering done to go out to our vendors to actually get fixed pricing. So that's really where we want to put ourselves as we go through the next six months. So that we have more concrete bids on what the project will cost. And so we're looking to make a decision on the project when we have this information, at midyear. And so we don't know the answer to your question yet about this 5% per annum. We know there is cost inflation. We've been trying to assess whether the tariffs will have any impact on some of the components that are involved here. And we'll continue to do value engineering to try to keep the capital intensity of the project as low as possible. But we want to do enough front-end work so that when we qualify the project for investment, we can deliver and execute on that plan. And that's what we're working on in the first part of this year. We're also doing some work on the power and making some deposits there. So we've added $150 million in capital associated with this project that will put us in a position to make a decision. In terms of the factors that we are looking at, in addition to the copper price, we want to look at the long term and the range of prices and how this project would perform. We also want to make sure that we have the right workforce set up, and we've been investing in infrastructure. Labor has been a challenge in The U.S. And that's what partially drove us to going to autonomous during 2025 to set up better optionality for Baghdad for expansion in the future. We want to optimize the performance of the autonomous fleet. We're not getting exactly what we expected to get from the performance of the autonomous fleet, but we've got progress ongoing to get us to a point where we're comfortable that the autonomous fleet is capable of running at these higher rates. So we've got some other things going on to de-risk the plan as we go through the first half, but those are the major factors: confidence in our ability to execute the capital plan, confidence in our ability to operate efficiently. Part of the goal here, in addition to bringing on additional volumes, is to bring on those volumes at a lower incremental cost than our current cost and take advantage of efficiency. So that work we're gonna be doing as well over the next several months as we get to an investment decision. But this is a project that is pretty straightforward. It's a relatively short lead time. And we just want to make sure that we can deliver on the economics that we set up at the start. Corey Stevens is on the call, and Corey, anything that you want to add there either on the Baghdad expansion, the Leach initiative, or our focus on bringing down our unit cost in The U.S.? We'd be happy to see if you have any insights that you want to add to that. Corey Stevens: No. I appreciate that, Kathleen, and yeah, just the comment on the Baghdad work. You know, the team is super energized. You know, we're through a lot of the incoming infrastructure requirements and designs and long lead items from, like, power upgrades and so forth. So and then in parallel, like we talked about, the autonomous work, very inspiring. You know, it's still early days there. You know, we really only went full autonomous in the late in the summer. So there's a bit of a learning curve there, but we're on a good track. And the team's gonna figure that out as we go forward. On the leach side, the ramp-up is really based on a lot of the initiatives that are coming to pass this year. So heat, you know, we talked about at Morenci, at El Abra. Those are big demonstration activities going on there. And then yesterday, as a matter of fact, we started another leach stockpile at our New Mexico operation at Chino. And there, we were using chemical heat. So we termed that one the perfect pile. It's an engineered piece that, you know, we build confidence around our lab work there that's really giving us a lot of excitement there that really can facilitate not only a benefit to Chino, but could change the way that we design future stockpiles going forward to enhance the ultimate activity that's coming out of those. So lots of moving parts, lots of activities, more to come this year. Lawson Winder: Excellent. Thank you both. Operator: Our next question will come from the line of Bill Peterson with JPMorgan. Please go ahead. Bill Peterson: Yes. Hi, good morning team, and thanks for taking the sounds like Indonesia is on track with the timing guidance from last year. I was wondering if you can add any incremental lessons learned at Grasberg since the November update. You know, you called PB2 and 3 on schedule for 2Q 2026. Any further granularity you could provide on timing where it could land in the quarter? Where you know, what would make it come in faster versus extended? Thanks. Kathleen Quirk: Thank you. And Mark Johnson's on the line, and he can add to these comments. But you know, we did an update in mid-November on the investigation, and we have learned a lot. And as I mentioned, we are adopting the recommendations from the investigation. The plan in terms of what we laid out in that time frame in November is very much the same. We've been executing on that plan. We've been achieving the results. As we mentioned, the mud removal within the mine workings has gone well. And we're 97% of what we need to be to start up production blocks two and three. We've just completed a cement pour at one of these protective barriers that we talked about that's needed to restart production block two and three. And so the work that we're doing between now and start-up really is related mostly to infrastructure. Now that we have these plugs in, we'll be able to advance that more. But we haven't given a specific date within the second quarter. But we would expect it would be in the first half of the second quarter at this point, and we're on track to do that. Mark, don't know if you want to add anything about that and also add maybe any comments about the overall risk management we're doing on mud removal from the surface. Mark Johnson: Yeah. The plan, as you stated, that we came up with in November, the team's done a great job of executing that. You know, it's primarily driven at first with the cleanup of the mud. That is essentially complete for the PB2, PB3 startup. Obviously, there were some challenges there that a lot of you know, it's not it's kind of a unique work environment. We dealt with some localized drainage issues. You know, it required pumping, and the team was quick to respond. Very happy also with the response from some of our key suppliers. A lot of this infrastructure that we're building is the communication systems that allow us to do the remote mining. So our suppliers on that end have risen to the challenge. So we don't see any problem with the supply chain side of things. We've continued to work with our consultants and verify our plan, make it more robust. We're looking at some new tools for our cave management that'll also play into how we look and mitigate risks, and all of that's progressing quite well. Really, I don't see any real hurdles at this point to be able to start up as we've planned. You know, any variation, I think, will be relatively minor. Plus and minuses. I think it's a very solid plan to start up. The ramp-up, you know, is something that we've spent time looking at as well. We have good history on that as to how we'll reopen some of these draw points, do it in a very cautious and safe manner, step by step, and observe and adjust as we go. Anyway, I'm very happy with the overall progress and where we are today. So PB2 and PB3, you know, is the lion's share of our production. And then, obviously, we're also working towards the PB1 area restart. Bill Peterson: Thanks for all the color. Operator: Our next question will come from the line of Liam Fitzpatrick with Deutsche Bank. Please go ahead. Liam Fitzpatrick: Good morning, Kathleen and team. Just a couple of follow-up questions on the GBC profile. It sounds like the initial start-ups of 2026 are going to plan. But in terms of 2027, is it possible that PB1S could be brought forward ahead of the mid-2027 start-up that you have? And then for PB1C, if you conclude that you can't restart production from that block, do you have the flexibility to open up other areas and bring those into production also by late 2027? Thank you. Kathleen Quirk: We haven't, with respect to our plans for PB1, the work that we've done to lay out this plan, we're continuing to expect that Production Block 1 South will be a mid-'27 start-up, and then we're gonna continue to evaluate the PB1C. Our focus really is getting the 85% up and running that we're talking about during 2026. And as we go through and in parallel, we're working on PB1. But our focus for the current period is to get the substantial amount of production restored, and then we'll look to see how to optimize and enhance it. But we're not, at this point, not looking at advancing PB1 South. But we'll be in a position to continue to evaluate that as we go. Liam Fitzpatrick: Okay. Thank you. Kathleen Quirk: With the question about the PB1C, do you want to comment on that? If we decide not to go back into PB1C? Mark Johnson: Yeah. We have some other, you know, we haven't had to face this yet, but some of the other opportunities there would be to change our sequence and go to PB1 North. We also have some options to incrementally add production from Deep MLZ. It would be at a lower grade if we did that. And, you know, the potential would be to continue to develop and ramp up PB2, PB3 beyond what we have in our plans. But all of those are, you know, forward-looking. We don't have any, our plan is still to proceed as we've shown. On Slide 31, a lot of those initiatives there on the mud removal are focused on PB1. So the execution of those and the results of those will very much drive how we look at what our options or what our future plans may look like. Liam Fitzpatrick: Just a quick follow-up. If you wanted to do PB1N, you could bring that in around a similar time, late 2027, early 2028. Mark Johnson: Yeah. We'd have to do some different development. It's a change in the sequence. It would be something that we'd have to work through. We've talked about it at a high level, but we don't have anything firm. And, you know, I'd hate to until I have that, I'd hate to respond on the timing, but we've got a lot of development capability. It's not, you know, it's adjacent to what we're already doing. We were in the process of developing all of the infrastructure around that. So that would be an option, but we don't have any firm plans. Liam Fitzpatrick: Okay. Thank you. Operator: Our next question comes from the line of Timna Tanners with Wells Fargo. Please go ahead. Timna Tanners: Wanted to ask in light of the sharp move in copper lately if you have any fresh thoughts about the recycling opportunity. I know that you have a plan and program at Atlantic Copper. Are there other potential initiatives that could leverage secondary material? And then along those same lines, any thoughts on substitution, copper for silver in solar, but also aluminum for copper in other applications? It'd be great to get your thoughts. Thanks. Kathleen Quirk: You pointed out the circular that we're doing in Spain at our facility, and Atlantic Copper, where we're completing a project to process scrap from electronics. So it's got a lot of precious metals associated with it. And so that project, we're completing the middle of this year. We do some scrap processing in The U.S. at our existing facilities. It's not, you know, we follow that business, but it's not the core of what we do. You know, our core really is around producing mining and processing what we mine. But we'll look on the margin if there's an opportunity, but it's not our, obviously not our business. In terms of substitution, that is a topic that people have long talked about. You know, we believe that the properties of copper because of its superior conductivity are compelling. You know, when you talk about data centers and that sort of thing, you know, copper still is a very, very important component of data centers. There will be substitution and thrifting as prices rise. But when you look at the big picture, you still need a lot more copper to be able to support the demand, the secular demand trends that are ongoing. So we're very confident that copper will still be viewed as a superior metal really from a conductivity standpoint, recognizing that there will be thrifting. There will be substitution that takes place as that relative value changes. Richard Adkerson: Yeah. I'd appreciate it. But that's inevitable, but it will be in the context of a higher copper price. Timna Tanners: Sure. Thanks. Operator: Our next question will come from the line of Brian MacArthur with Raymond James. Please go ahead. Brian MacArthur: Two questions on Indonesia. First, in the fourth quarter, I see there's no export duties when I look at your guidance going forward, TCs are up to $0.43 versus historical levels. Can you just tell me how you're accounting for that, whether there are export duties in that guidance going forward or what's going on, or whether that's just inter-transfer of costs as you go to the new smelter as things ramp up? And my second question has to do with KL. Obviously, it's getting bigger. Is that all additive post-2030, i.e., the higher production at KL, you still have the mill capacity, you have to do anything? And I see capital has gone up. Is that just inflation? Or is that given the KLR is a little more complicated and you have to do something else? Thank you. Kathleen Quirk: In terms of the question around export duties, we're no longer exporting concentrates. And so we don't have any export duties in our numbers. The TC number is really just the internal smelter cost. The operation of the existing smelter as well as the tolling fees that we pay or the operating cost of the new smelter and the tolling fees we pay at PT smelting. So they're really kind of internal costs. Of course, it doesn't include, you know, when you're comparing selling concentrate to a third party, that rate reflects all of the byproducts in the free metal. So going forward at CTFI, you're gonna have the cost to the smelter in that processing line, that TCRC line, but all the benefits that you get from the free metal, the byproducts, etcetera, will be in the revenue line. So it's a little different than historically when we've been just, you know, selling most of our concentrates. And Brian, we can follow up more with you on that if that's, I didn't fully answer it. But on the Kuchin Liyar, this is actually a positive here. We've been looking for some time at what's optimal between Grasberg Block Cave and Kuchin Liyar operating rates to look at what is optimal from an NPV standpoint. And as you know, the footprint of KL is very big, and a lot of it was carrying forward after 2041. But in looking at the Grasberg Block Cave and Kuchin Liyar, and the need potentially to invest in pyrite handling and processing facilities for certain types of ore, we developed a plan that allowed us to defer a significant amount of pyrite processing that would have been associated with Grasberg Block Cave and actually defer that out. And so you see KL rates going from where we were projecting 90,000 tons a day to 130. So we've added production from KL. Grasberg Block Cave is slightly smaller. All of this is just timing because with an extension, we'll get those reserves over time. But this plan allows us to defer processing for pyrite. Brian MacArthur: Got it. So you wouldn't have to make, I mean, the mill will be, what, 240 or whatever at its max like it used to be before. You're just substituting A for B in this process. Kathleen Quirk: Right. Exactly. And what it allows us to do is defer the time frame when we need to spend capital on the pyrite handling. Brian MacArthur: Great. And just back, we can take the rest of this offline. But just that 43¢ for Indonesia this year for treatment charges, is that inflated this year because we have a lower production rate and it's a ramp-up, i.e., on an ongoing basis, would it be better than that? Kathleen Quirk: Yes. Brian MacArthur: Okay. Thank you very much. Operator: And I will now turn the call back over to management for any closing comments. Kathleen Quirk: Thanks, everyone, for participating, for your questions. And if you have any follow-ups, David Joint is available, and our management team is available. And we look forward to reporting our progress as we go through the year. Operator: Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Independent Bank Corporation Fourth Quarter 2025 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Brad Kessel, President and Chief Executive Officer. Please go ahead. Brad Kessel: Good morning, and welcome to today's call. Thank you for joining us for Independent Bank Corporation's conference call and webcast to discuss the company's fourth quarter and full year 2025 results. I am Brad Kessel, President and Chief Executive Officer. And joining me is Gavin Mohr, Executive Vice President and Chief Financial Officer, and Joel Rahn, EVP, Head of Commercial Banking. Before we begin today's call, I would like to direct you to the important information on Page two of our presentation, specifically the cautionary note regarding forward-looking statements. If anyone does not already have a copy of the press release issued by us today, you can access it at the company's website, independentbank.com. The agenda for today's call will include prepared remarks followed by a question and answer session, and then closing remarks. I am pleased to report on our fourth quarter and full year 2025 results as we advance our mission of inspiring financial independence today with tomorrow in mind. Our vision is a future where people approach their finances with confidence, clarity, and the determination to succeed. Our core values of courage, drive, integrity, people focus, and teamwork are the blueprint our employees live by. We strive to be Michigan's most people-focused bank. Independent Bank Corporation reported fourth quarter 2025 net income of $18.6 million or $0.89 per diluted share, versus net income of $18.5 million or $0.87 per diluted share in the prior year period. For the year ended 12/31/2025, the company reported net income of $68.5 million or $3.27 per diluted share compared to net income of $66.8 million or $3.16 per diluted share in 2024. Highlights for the year include an increase in net interest income of $1 million, that's 2.2% over 2025, a net interest margin of 3.62%, that's eight basis points up on a linked quarter basis. A return on average assets and a return on average equity of 1.35% and 14.75% respectively. Net growth in loans of $78 million or 7.4% annualized, that's from 09/30/2025. Net growth in total deposits less brokered deposits of $57.5 million or 4.8% annualized. An increase in tangible common equity ratio to 8.65% and the payment of a $0.26 per share dividend in common stock on 11/14/2025. Our fourth quarter performance marked the culmination of another remarkable year with our organization excelling on all fundamentals. Over the past year, we increased tangible book value by 13.3% and delivered near-record earnings. Meanwhile, our dividend payout ratio was 32% for the year as we continue to recognize the value of returns for our shareholders. During the fourth quarter, we realized continued net interest margin expansion, strong loan growth, and increased non-interest income. In addition, our credit quality metrics remain positive with watch credits and nonperforming assets below historic averages. In anticipation of continued strong earnings, we repurchased shares and executed a tax credit transfer agreement during the fourth quarter which is expected to reduce tax obligations and enhance earnings per share. Looking ahead to 2026, our confidence is bolstered by a robust commercial loan pipeline and our ongoing strategic initiative to attract and integrate talented bankers into our organization. Moving to Page five of our presentation, deposits totaled $4.8 billion at 12/31/2025. An increase of $107.6 million from December 31, 2024. This increase is primarily due to growth in savings and interest-bearing checking reciprocal and time balances that were partially offset by decreases in noninterest-bearing and brokered time deposits. On a linked quarter basis, business deposits increased by $20.4 million, retail deposits increased by $64.1 million, offset by a $28.6 million decrease in municipal deposits. The deposit base is comprised of 47% retail, 37% commercial, and 16% municipal. All three portfolios are up on a year-over-year basis. On Page six, we have included in our presentation a historical view of our cost funds as compared to the Fed fund spot rate and the Fed effective rate. For the quarter, our total cost of funds decreased by 15 basis points to 1.67%. At this time, I would like to turn the presentation over to Joel Rahn to share a few comments on the success we are having in growing our loan portfolios and provide an update on our credit metrics. Joel Rahn: Thank you, Brad, and good morning, everyone. On page seven, we share an update of loan activity for the quarter. We continue to experience solid loan growth in the fourth quarter with total loans growing by $78 million or 7.4% annualized, as Brad just referenced. For the year, we increased our loan portfolio by $237 million or 5.9%. Our commercial portfolio led the way with $276 million or 14.2% growth. Commercial loan generation continued its strong trend in Q4 with $88 million in quarterly growth or 16% annualized. Our residential mortgage portfolio grew by $7.2 million, and our installment loan portfolio decreased by $17 million for the quarter. Our strategic investment in commercial banking talent continues to supplement our loan growth. During the fourth quarter, we added an experienced banker in Metro Detroit, and in total, we have 49 bankers comprising eight commercial loan teams across our statewide footprint. During the year, we added a net of five experienced bankers to the team. Looking ahead, we believe we will continue low double-digit growth of our commercial loan portfolio in 2026. Our pipeline remains solid, comparable to January 2025. We continue to see market opportunities from regional banks in both talent and customer acquisition, and we are seeing steady organic growth from existing customers. Looking at the commercial loan production activity on a year-to-date basis, the mix of C&I lending versus investment real estate was 57% and 43%, respectively. And for our commercial portfolio, our mix is 67% C&I and 33% investment real estate. Page eight provides detail on our commercial loan portfolio concentrations. There has not been any significant shift in our portfolio over the past year, with the portfolio remaining very well diversified. Our largest segment of the C&I category is manufacturing, $183 million or 8.3% of the portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at $202 million or 8.8%. We outlined key credit quality metrics and trends on page nine. We continue to demonstrate strong credit quality. Total nonperforming loans were $23.1 million or 54 basis points of total loans at quarter-end, up slightly from 48 basis points at September 30. It is worth noting that $16.5 million of this total is one commercial development exposure that we discussed last quarter. We continue to work through the challenges of this particular project and are appropriately reserved for any loss exposure. Past due loans totaled $7.8 million or 18 basis points, up slightly from 12 basis points at September 30. It is not reflected on the slide, but worth noting that we realized net charge-offs of $1.6 million or four basis points of average loans for the year. This compares to $900,000 or two basis points in 2024. At this time, I would like to turn the presentation over to Gavin Mohr for his comments, including the outlook for 2026. Gavin Mohr: Thank you, Joel, and good morning, everyone. I am going to start on Page 10 of our presentation. Page 10 highlights our strong regulatory capital position. I would like to note our tangible common equity ratio has moved back into our targeted range of 8.5% to 9.5%. Additionally, 407,113 shares of common stock were repurchased at an aggregate purchase price of $12.4 million in 2025. Turning to page 11. Net interest income increased by $3.5 million from the year-ago period. Our tax-equivalent net interest margin was 3.62% during 2025 compared to 3.45% in 2024 and up eight basis points from 2025. Average interest-earning assets were $5.16 billion in 2025 compared to $5.01 billion in the year-ago quarter and $5.16 billion in 2025. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin. On a linked quarter basis, our fourth quarter 2025 net interest margin was positively impacted by two factors. Change in interest-bearing liability mix added nine basis points and a decrease in funding cost added 13 basis points. These were offset by a change in earning asset yield and mix of 13 basis points as well as interest charged off on a commercial loan that was negative one point. On page 13, we provide details on the institution's interest rate risk position. The comparative simulation for 2025 calculates change in net interest income over the next twelve months under five rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies to the spot yield curve from the valuation date. Shock scenarios consider immediate, permanent, and parallel rate changes. The base case modeled NII is slightly higher. During the quarter due to nine basis points of model margin expansion. The NIM benefited from mix shifts in both assets and liabilities. On the asset side, solid commercial loan growth was funded by runoff in overnight liquidity, investments in lower-yielding retail loans. Funding costs benefited from growth in non-maturity deposits and a decline in wholesale funding. The NIM further benefited from a reversal of excess liquidity in the fourth quarter 2025. The NII sensitivity position is largely unchanged for rate changes of plus and minus 200 basis points. The bank has slightly more exposure to larger rate declines minus three and four hundred and larger benefit from larger rate increases plus 300 or 400. The shift in sensitivity for larger rate moves is due to shifts in non-maturity deposit modeling. Primarily caused by 50 basis points of Fed cuts during the quarter. Currently, 38.3% of assets repriced in one month and 49.2% repriced in the next twelve months. Moving on to page 14. Noninterest income totaled $12 million in 2025 compared to $19.1 million in the year-ago quarter and $11.9 million in the third quarter 2025. Fourth quarter 2025 net gains on mortgage loans totaled $1.4 million compared to $1.7 million in the fourth quarter 2024. The decrease is due to lower profit margins and lower volume of loan sales. Mortgage loan servicing net was $900,000 in the fourth quarter 2025 compared to $7.8 million in the prior year quarter. The change due to price was a gain of $200,000 or $0.01 per diluted share after tax in 2025 compared to a gain of $6.5 million or $0.24 per diluted share after tax in the year-ago quarter. The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $931 million of mortgage servicing rights on 01/31/2025. As detailed on page 15, noninterest expense totaled $36.1 million in 2025 as compared to $37 million in the year-ago quarter and $34.1 million in 2025. Compensation expense decreased by $300,000, primarily due to lower performance-based compensation expense, lower medical-related costs, and lower payroll tax expense, and higher deferred loan origination costs due to higher commercial loan production. That was partially offset by higher salary expense. Data processing costs decreased by $300,000 from the prior year period, primarily due in part to a reimbursement from the core provider for billing overages and other credits received. That was partially offset by smaller increases in several other solutions and one-time charges relating to special projects. Income tax expense included a $1.8 million benefit or $0.09 per share resulting from the execution of a tax credit transfer agreement related to the purchase of $22.9 million of energy tax credits during the three-month and full year ended 12/31/2025. Compared to no such benefit in the prior year. I am going to move on to page 18. This will summarize our initial outlook for 2026. The first column is loan growth. We anticipate loan growth in the mid-single-digit range and are targeting a full-year growth rate of 4.5% to 5.5%. We expect to see growth in commercial with mortgage loans remaining flat and installment loans declining. This outlook assumes a stable Michigan economy. Next is net interest income. We are forecasting growth of seven to 8% over 2025. We expect the net interest margin expansion of five to seven basis points in the first quarter 2026 with successive quarterly increases of three to five basis points, primarily due to decreasing yields on interest-bearing liabilities that's partially offset by a decrease in earning asset yields. This forecast assumes a 0.25% cut in March 2026 and August 2026 while long-term interest rates increased slightly from year-end 2025 levels. A full-year 2026 provision expense for allowance for credit losses of approximately 20 to 25 basis points of average portfolio loans would not be unreasonable. Moving to page 19. Related noninterest income, we estimate a range of $11.3 million to $12.3 million quarterly. We estimate the total for the year to increase three to 4% as compared to 2025. We expect mortgage loan origination volumes to decrease six to 7% and net gain on sale to be down 14% to 16% compared to the full year 2025 results. Our outlook for noninterest expense is a quarterly range of $36 million to $37 million with the total for the year five to 6% higher than 2025 actuals. The primary driver is an increase in compensation and employee benefits, data processing, loan and collections, and occupancy. Our outlook for income taxes is an effective rate of approximately 17% assuming the statutory federal corporate income tax rate does not change during 2026. Lastly, the board of directors authorized share repurchases of approximately 5% in 2026. Currently, we are not modeling any share repurchases in 2026. That concludes my prepared remarks, and I would now like to turn the call back over to Brad. Brad Kessel: Thanks, Gavin. We have built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments and continue delivering strong and consistent results for our shareholders. As we move through 2026, our focus will be continuing to invest in our team, investing in and leveraging our technology while striving to be Michigan's most people-focused bank. At this point, we would now like to open up the call for questions. Operator: As a reminder, to ask a question, you will need to press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Brendan Nosal of Hodde Group. Your line is now open. Brendan Nosal: Hey, good morning, everybody. Hope you are doing well. Good morning. Let me just start off here kind of on your market outlook here in Michigan. Can you just kick it off by offering your latest thoughts on the opportunity set you are seeing, particularly in Southeast Michigan given the M&A dislocation? And I guess, if you added five commercial bankers in 2025, like, what would the ambition set look like for banker ads in '26? Joel Rahn: Well, I will take it. And Brendan, this is Joel. Good question. I would think in terms of our talent acquisition expectation, it is similar. We will have some departures with retirements, etcetera, that we have to cover. But I think a net add of four to five bankers this year would be reasonable to expect. And in terms of opportunity in Southeast Michigan, we do think there will be opportunity there. It is just beginning. And so typically, the account side window opens first and can be some time before the customer feels the impact. But we are watching it closely and feel that it will be accretive for us. Brendan Nosal: Okay. Thanks, Joel. Maybe one more from you before I step back. Just on the loan growth outlook for, I guess, 5% at the midpoint. I guess, like, typically, I think of your bank as a high single-digit organic grower. So I guess just given the market opportunities you see, what is pushing that range down to the mid-single-digit area? And is there upside if payoffs behave a little more rationally in '26? Brad Kessel: Brendan, this is Brad. I will jump in there, and I would just say that over the last few years, we have actually reshaped the balance sheet. And particularly with the loan portfolios and our strategic emphasis. So of course, we have got the rundown in the investment portfolio, which has been funding our loan growth. But within the loan portfolios, the largest emphasis and where we have been investing in talent has been in Joel's group, that is the commercial banking team. And that has driven what I would call the outsized growth rate for our company for that line of business. At the same time, we still have a very strong and robust lending talent and teams in the consumer and mortgage banking groups. Yet we are just putting less on in those categories on our balance sheet. And in fact, we forecast in '26 some shrinkage in the consumer portfolio. And that is not so much coming out of the branch channel. The shrinkage is really coming off of less originations from our indirect lending group. Which is, as we have shared in the past, has always two focuses. One is marine, and the second is an RV. And we really have just not seen the same volume that we saw several years ago coming through the RV channel. The marine is still pretty good, but so when you add that all up, what ends up happening is you have double-digit growth in commercial, but the lower level of net growth in mortgage consumer gets us to that somewhere mid-single-digit overall loan growth projected for 2026. Does that make sense? Brendan Nosal: Yeah. No. That is a helpful framework to view it through. I guess just I will sneak in one more on a related topic then. Just given how much of the loan growth has been funded by securities, cash flows in the recent past, what is the outlook for that dynamic this year? Gavin Mohr: Thanks. Yes. So we have got about $120 million of forecasted runoff in securities for 2026. And that will fund loan growth. So we again, continue to intend to continue to remix that asset mix into next year. Through next year. Brendan Nosal: Fantastic. Thank you for taking my questions. Gavin Mohr: Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Damon DelMonte of KBW. Your line is now open. Damon DelMonte: Hey. Good morning, Hope everybody is doing well today, and thanks for taking my questions here. First one, just on the margin and the guidance provided around that. Gavin, just wondering if you could kind of walk through the cadence again for kind of what you expect here in the first quarter and then the forthcoming quarters after that? And then what were some of the drivers behind that, for a rising margin? Gavin Mohr: Yeah. So, we are looking at five to seven basis points of expansion in Q1, and then Q2, '3, and four, we are forecasting three to five basis points of expansion each quarter. And that gets you to the overall forecast of, you know, 18 to 23 basis points on a year-over-year, full-year basis. What is going on there is a couple of things. One, just the benefit of we have two rate cuts in the forecast of March and August. We feel really good about our ability to see that 40% plus beta on the repricing down of deposits. The yield curve shape right now in terms of the forward yield curve is beneficial. The mid the five to seven point of the curve is actually drifting a little bit higher. So we are getting some more slope in that respect. And then also, it is the continued repricing of below-market assets as we go into 2026. Does that make sense, Damon? Damon DelMonte: It does. Yep. I appreciate that color. And then kind of just broader on capital management, just kind of given where capital levels are and you do have a buyback in place, just kind of wondering. I know it is not in your guidance and your forecast, but just kind of wondering what your appetite is for buybacks. And then also, you know, how do you view the M&A landscape right now? Are there any interest in trying to pursue a merger with another company? So just kind of curious on your thoughts around that. Thanks. Gavin Mohr: I will start with capital and then hand it over to Brad. I would just say that we are really excited about the capital build and outlook for the organization. And you know, that provides us with a tremendous amount of flexibility, and that is really what we are focused on. Obviously, the dividend is very important. We just announced a significant increase over seven and a half percent. The board approved. And we want to continue to have a stable and growing dividend. But with that capital build, it is going to allow us the flexibility to do share repurchase when we think the price makes sense. So I am really excited about the capital position today. For Brad? Yeah. Very good. Brad Kessel: Gavin. And in regards to the M&A in the Michigan market, of course, you have got the Fifth Third Comerica, which while that is not directly impacting us, indirectly, as it goes back to Joel's remarks, we think there is an opportunity for talent and customer acquisition. Across the state, today, we have 80 plus or minus independent Michigan-based community banks. I think we will see consolidation at a similar pace to what we have seen historically in Michigan. And that is probably somewhere between 4-6%. Who they are, I am not sure. Our appetite, we would be very interested, depending on the specifics. And so that would include sort of strategically or geographically, how does it fit the footprint, the overall size, you know, and not wanting to maybe well, want to be cognizant of all the other good work we have got going on organically. So I think the culture would be very important. The metrics need to work, and it needs to materially add to EPS and at the same time, we are very respectful of not wanting to dilute our existing shareholders. So I would just step back and just say M&A for Independent, it could very well happen but is not a requirement for us to continue the success that we have experienced historically over the years. Damon DelMonte: Great. That is excellent color. I appreciate that. That is all that I had. Thank you very much. Brad Kessel: Thanks, Damon. Operator: One moment for the next question. And our next question comes from the line of Nathan Race of Piper Sandler. Your line is now open. Nathan Race: Hey, guys. Good morning. Thanks for taking the questions. Gavin, just going back to the margin discussion, could you update us just in terms of how much cash flow you have come off the bond portfolio each quarter and what the magnitude of or the amount of loans that you have that are repricing higher and what that amount looks like in terms of that yield pickup? Gavin Mohr: Yeah. Give me one sec. So the bonds, the run for the run rate for 2026 is $120 million. And I think it is fair. You could model that as pro forma to the or split it up equally per quarter. On the loan side, let me get through my notes here. Maybe to ask another question while you dig that up, Gavin. Do Great. Nathan Race: Maybe Brad, just thinking, you know, more holistically about the balance sheet composition. Just curious what the appetite is to maybe trade some of your excess capital. Obviously, you guys are going to be building capital at pretty strong clips just given the profitability profile this year. But just what the appetite is, maybe trade some regulatory capital to maybe reposition the securities book, whether it is on the AFS or HTM side of things. Brad Kessel: You know, so that is a good question, Nathan. And revisit that strategy regularly. Historically, we have sort of nibbled at selective investment sales and, generally where we can earn it back within a reasonable time frame. But we have had a book. It is running off. And I am not sure you are really going to see Independent needing to accelerate that taking losses and I just that is not really in the strategy at this point. Nathan Race: Okay. That is helpful. I appreciate that. Maybe one more from me. Just in terms of what you are seeing or expecting from a charge-off perspective, I appreciate the provision guide, and, you know, charge-offs have been really well behaved over the last several quarters now. But just any thoughts maybe, Joel, in terms of, you know, any normalized expectations around charge-off range going forward? Joel Rahn: Yeah. We do not see we see it being very similar to the past few years. We really do not see any big change in that profile. And cannot recall, Gavin, if in your guidance, if you had any specific range there. We did not. Well, we said provision would be Yeah. 20 to 25 basis points. Yeah. And that provision is going to be a function of more loan growth than anything. But I think the charge-off history, you know, recent history has been really, really well. And I think probably is unrealistic to expect that indefinitely. The charge-offs really to date have been in the consumer loan portfolio. And the biggest driver has been quite frankly, due to a customer passing away and then getting the collateral back in and then disposing of it. But I think somewhere in our recent history, maybe a little bit higher, could be modeled on a go-forward basis. Nathan Race: Agree with that. Nathan, I have your the details for your question on cash flow repricing. Nathan Race: Mhmm. Gavin Mohr: Average for the quarterly for 2026 is going to be about $105 million. At an exit rate of on average of $5.50. So at current speeds, CPRs. Nathan Race: Okay. And that is on the commercial book or just overall, Gavin? Gavin Mohr: That is fully I mean, that is the entirety of our fixed-rate portfolio. So that includes mortgage, commercial, is going to run about let us see, for the year, it is about $80 million. I am sorry. Excuse me there. It is $228 million. My totals were off. Let me Nathan Race: Do not worry about it, Gavin. Yeah. So yeah. Yeah. We are good. We are good. Appreciate it. Yeah. Can Gavin Mohr: It is yeah. You are good. It is 200 and total commercial is around $220 million for the year to May. So it is yeah, Nathan Race: Okay. Quite substantial then. Yeah. That is all I had. I appreciate all the color, guys. Thank you. Gavin Mohr: Thanks, Nathan. Operator: Thank you. One moment for our next question. And our next question comes from the line of John Rodis of Janney. Your line is now open. John Rodis: Hey, morning, guys. Gavin, just following up on the securities portfolio. You said runoff of roughly $120 million. Does that all I mean, are you looking to reinvest any into the securities portfolio at this time? Or I think looking at my prior notes, I think you said sort of targeting securities portfolio, you know, 12 to 15% of assets. Is that still sort of the thought process? Gavin Mohr: That is, John. And we I do not think we will get through 2026, without doing any securities purchases. John Rodis: Okay. Okay. But if you look I know 2027 is a long way away, but could you maybe hit a bottom then, I guess? Or Gavin Mohr: Yeah. Yeah. I anticipate in 2027. Do not make me give you a month in 2027, but within 2027, we will have four out and we will start to reinvest. Yeah. So I you know, we have not met 12 to 14% of total assets is still a target for us in terms of triggering investment purchases. So that is still the strategy. They are John. John Rodis: Yeah. Okay. Thanks, Brad. Brad, maybe just a follow-up on the M&A question. And you guys talked about through the normal course of business sort of adding a handful of bankers each year. I mean, you be open to you know, picking up a team of lenders or anything like that? I know it gets a little bit tougher when you add teams as far as culture and stuff like that, but what are your thoughts? Brad Kessel: Yeah. I mean, that has not been the pattern historically. But I would say we would be open to that. Joel, what are your thoughts on that? Joel Rahn: Yeah. I am certainly open to it. That does not happen very often. It is fairly rare. And we have just we have had really good success in, in just, you know, going after one banker at a time. And so I think would expect that is where the majority of our ads will continue to come. Sort of one bank credit and then building a team. John Rodis: Correct. Yeah. Yeah. Yep. Okay. Thanks, guys. You are sort of breaking up a little bit, but I think I get the picture. Thank you. Brad Kessel: Thanks, John. Operator: Thank you. I am showing no further questions at this time. I will now turn it back to Brad Kessel for closing remarks. Brad Kessel: In closing, I would like to thank our Board of Directors and our senior management for their support and leadership. I also want to thank all our associates. I continue to be so proud of the job being done by each member of our team. Each team member in his or her own way continues to do their part toward our common goal of guiding customers to be independent. Finally, I would like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call. Have a great day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Greetings, and welcome to the LSI Industries Inc. Fiscal 2026 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jim Galeese, Chief Financial Officer. Please go ahead. James Galeese: Welcome, everyone, and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 2026 second quarter results. In addition to this release, we also posted a conference call presentation in the Investor Relations section of our corporate website. Information contained in this presentation will be referenced throughout today's conference call. Included are certain non-GAAP measures for improved transparency of our operating results. A complete reconciliation of GAAP and non-GAAP results is contained in our press release and 10-Q. Please note that management's commentary and responses to questions on today's conference call may include forward-looking statements about our business outlook. Such statements involve risks and opportunities, and actual results could differ materially. I refer you to our safe harbor statement which appears in this morning's press release for more details. Today's call will begin with remarks summarizing our fiscal second quarter results. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to LSI President and Chief Executive Officer, Jim Clark. James Clark: Thank you, Jim, and good morning, everyone. I appreciate you joining us today. This morning, we'll be reviewing our second quarter results for fiscal 2026. As you likely saw in our earnings release, we delivered solid second-quarter results that were in line with our expectations. Revenue was essentially flat year over year at $147 million while profitability and free cash flow improved. Given the strength of the prior year comparisons, particularly within Display Solutions, I'm pleased how this quarter performed and how our teams executed throughout the quarter. Jim Galeese will walk through the financial details in a few minutes, but I want to spend some time on a few areas that I think were important as we move into the second half of the year. As we've discussed previously, the second quarter of last year benefited from unusually strong event-driven demand, most notably in the grocery vertical, following the resolution of a failed merger between two large grocery chains. The release of pent-up demand drove exceptional growth of 100% in our Display Solutions segments, with 50% of that being organic growth in Q2 of last year. This demand pattern in groceries has returned to a more normalized level. And against that backdrop, flat consolidated sales and improved margin represents solid execution. More importantly, we continue to see healthy customer engagement, active planning discussions, and increasing order trends as we exit the quarter. Lighting delivered another strong quarter with sales growth of 15% year over year and meaningful margin expansion. This follows 18% growth in the first quarter, and we're encouraged by the consistency of performance across multiple end markets. Several factors have contributed to the strength in lighting, including the addition of aluminum poles to our steel pole product line, an increase in large project shipments, continued momentum in our national account strategy, and solid traction from recent product introductions as we remain focused on product vitality. As we exit the second quarter, lighting orders were up approximately 10% year over year, resulting in a book to bill above one. This gives us continued confidence as we look ahead. In Display Solutions, we maintained a high level of execution across several large multiyear customer programs. Particularly in the refueling area, convenience store, quick-serve retail, and casual dining restaurant verticals. While revenues declined slightly year over year due to the prior year comparisons, orders improved sequentially and were up year over year supporting an improved backlog entering into the third quarter. What's particularly encouraging is how the opportunity set within display solutions continues to evolve. Historically, much of our growth in food services has come from quick-serve restaurant customers. These programs often involve large numbers of sites, sometimes hundreds at a time, with individual product values ranging from $20,000 to $40,000 per location. This work remains an important and durable part of our business, and we continue to win and execute well in that space. While at the same time, we are now seeing meaningful traction beyond traditional QSR into the casual dining space and premium food services. With these programs, they typically involve fewer locations and the value per site is significantly higher, often ranging from $250,000 to $1 million per location. These opportunities align well with our capabilities in custom fabrication, integrated design, and program execution, and they represent a natural extension of the platform we've built over the past several years. We're also encouraged by improving activity in the international market, particularly in Mexico and the islands. Conditions strengthened during the quarter after several softer periods. Based on what we're seeing today, we expect activity to remain elevated into fiscal and calendar year 2027. Over the last two quarters, I've emphasized that our focus for 2026 and what will continue into 2027 will be our people. That commitment remains unwavering. Talent management through thoughtful role design, succession planning, and deeper cross-team integration are not just priorities, they're essential to creating a single unified organization we continue to bring JSI and EMI together under the LSI umbrella. While there will be opportunities for operational consolidation in the future, the greatest return on our investment will continue to come from empowering our people. Aligning them around shared goals, and enabling them to collaborate more seamlessly. The core objective of this integration is to unlock meaningful cross-selling opportunities by breaking down silos, improving transparency, and ensuring our teams are working as one cohesive commercial engine. A few months ago, we brought on a senior sales leader within our display solutions group specifically targeted to enhance visibility into our current sales activities, pipeline development, and near-term conversion opportunities. Just as importantly, this role is helping us to strengthen alignment between sales, operations, and execution, ensuring that we are not only identifying opportunities across brands, but we act on them quickly, consistently, and with a unified customer experience. Next week, we will take another important step forward as we host our sales meeting here in Cincinnati. Bringing together nearly 120 sales employees and marketing professionals from across the organization, we will be spending several days together, including time over the weekend, focused on collaboration, alignment, and building the relationship that makes true cross-selling and coordinated execution possible. This time together is not just about strategy and planning. It's about reinforcing our shared purpose, our culture, and continuing to work on becoming one integrated team moving forward as one organization. From a customer perspective, we continue to see increasing engagement from large, sophisticated organizations that place a premium on supplier scale, geographic coverage, and manufacturing depth. In several cases, customers have specifically cited our ability to design, fabricate, and deliver across multiple regions as a key differentiator. This capability continues to elevate the types of programs we're invited to pursue. Profitability and cash generation were highlights of the quarter. Adjusted EBITDA increased year over year to $13.4 million, and margin performance benefited from disciplined project pricing, productivity improvements, and effective cost management, which together helped offset ongoing cost inflations. Free cash flow was strong at $23 million, driven by profitability and continued working capital discipline. We used that cash flow to reduce our total debt by $22.7 million during the quarter, ending with a net leverage ratio of 0.4. The balance sheet strength supports our fast-forward strategy, allowing us to invest in our organic growth, pursue operational improvements, and maintain optionality around future acquisition opportunities, all while continuing to return capital to our shareholders through our dividends and other programs. Execution across the organization continues to reflect LSI's high SAGE ratio and culture. Our team stayed focused during a quarter that required careful management of mix, margin, and timing. I'm proud of how they delivered. The collaboration between sales, operation, design, and supply chain continues to be strong, and that alignment is showing up both in execution and in customer confidence. Looking ahead to the '6, we expect continued progress on our goals supported by improving order trends and backlog. We remain confident in the secular growth outlook across our key vertical markets and in our ability to grow above the market through a differentiated solutions-based approach. In closing, I want to thank you for your continued support in LSI. We're executing well, we're financially strong, and we remain focused on building long-term value through disciplined growth and operational excellence. With that, I'll turn the call back over to Jim Galeese for a more detailed review of our financial results. James Galeese: Good morning, all. LSI Industries Inc. generated sales of $147 million in Q2, consistent with the prior year, successfully offsetting challenging prior-year comps. Adjusted net income and adjusted EBITDA were modestly above the prior year and all were double-digit above the same quarter fiscal 2024. Adjusted earnings per share were $0.26 for the quarter. Cash flow in the quarter was higher than expected at $23 million following a timing-related softer first quarter. The strong cash flow lowered our debt to EBITDA leverage ratio to 0.4 times, providing significant capital allocation flexibility. With our amended financing facility, LSI has cash and availability of approximately $100 million. Next, a few comments on our two reportable segments. As mentioned, Lighting had an outstanding quarter, realizing sales growth of 15%. This represents the third consecutive quarter of double-digit growth as compared to the prior year quarter. Referencing various reports on non-resi construction, our double-digit growth rate continues to outperform the market. As a result of volume and effective margin management, adjusted operating income increased 29%, with the adjusted gross margin rate improving 190 basis points versus last year. One of the growth opportunities identified for Lighting was increasing our business with national accounts. We felt our operating model capabilities aligned closely with satisfying strict customer requirements, so investments were made to support this initiative. Results reflect significant progress in gaining new customers and sales. This, along with the health of our key vertical markets, is driving our strong growth rate. We expect favorable momentum to continue into the '26 as lighting orders for Q2 were 10% above the prior year, a book-to-bill ratio above one on strong shipment quarter and an improved backlog. Shifting to Display Solutions. Jim did an excellent job providing context to the current quarter's performance for Display, and how to interpret comparisons to the prior year. I'll just add a few additional comments. For the grocery vertical, second-quarter sales reflect a return to normal seasonal demand. Implications were lower sales this quarter versus the pull-forward of last year, but also a return to more predictable demand flows, allowing us to plan and fulfill customer programs more efficiently. For example, Q2 adjusted gross margin improved 30 basis points despite lower production volume, reflecting improved productivity enabled by more stable production scheduling. Orders also followed a return to seasonal demand patterns, Q2 grocery orders increased double digits year over year, generating a strong book-to-bill ratio of 1.2 versus under one last year in building backlog. We expect sales growth in grocery in the '26. Activity remains high in the refueling c-store vertical, as we continue to execute against several large customer programs. In addition to our established foundation of large customers, we recently added multiple mid-sized projects, representing a combination of new and existing customers and brands. Building relationships with new customers provides the opportunity to expand our sustainable, repeat business model successfully built and executed. Over time, growing growth in our service business is also providing cross-selling opportunities. For one refueling c-store customer, where we are currently active with service at over 140 sites, the opportunity to present our broader solution set resulted in a significant number of sites specifying our Archer perimeter lighting system, generating an expansion of revenue per site. The QSR vertical has been sluggish as large chains manage multiple priorities, inflation, leadership changes, and shifting consumer habits. Our teams, however, are very busy working with customers on numerous programs in the concept and development phases. So future investments are planned, the timing of release remains unclear. In summary, LSI delivered a solid Q2 in 2026, and we remain encouraged by the level of activity in the majority of key vertical markets. Work to market the value of our LSI solution set is ongoing, and we expect to generate growth in Q3 and the second half of the fiscal year. I'll now turn the call back to the moderator for the question and answer session. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. One moment while we poll for questions. Our first question is from Aaron Spychalla with Craig Hallum. Aaron Michael Spychalla: Yes. Good morning, Jim and Jim. Thanks for taking the questions. Maybe first on refueling in C store. You talked about onboarding multiple projects given some more targeted sales initiatives. So it sounds like a little bit more consistent growth is expected there. Can you just maybe help frame that opportunity a little bit for us more on what that looks like and just, you know, some of those initiatives? James Clark: Yes. Aaron, it's Jim Clark. Thanks for the question. I think that the word I'd use is steady. I can think about this call last year, this time, and we were looking at a project that we knew in the refueling sector was gonna run out into fiscal year 2026, and that has proven true. Right now, I would say we have a number of those projects, smaller in scale, but the same kind of makeup where we have received the order, we're looking for the releases, and we've got a nice path in front of us gonna bring us through the remainder of '26 and into '27. So I can't give specific color on any one particular project. They're all a little bit different, but I would say they're geographically spread, both internationally and domestically. The business is healthy in both its content and its pace. James Galeese: Yes, Aaron. Jim G. here. I'll just add on to Jim's comments that we have this very strong foundation with our large core, repeatable customers that we've done business with multiple cycles for years. Some of these mid-sized customers indicate two things. Number one, the health of the vertical, the level of activity going on there, and secondly, it's a combination of having done business with some of these customers before, but several of them are new, and some of those are actually non-domestic entities. It is an opportunity for us to further develop relationships and build on this foundation that we have. It sends a positive signal about the health of the vertical. Aaron Michael Spychalla: Yeah, that's helpful. Thanks. And then maybe on Mexico, good commentary on activity levels there. Can you just talk about some of the market drivers you noted elevated demand into FY '27? Maybe just at what level has that business been for you, and where can it get to if we look out into FY '27? James Clark: You know, I think that, in general, relatively conservative. We look the best we can when we start to forecast out six, nine, twelve, or eighteen months. It gets difficult for us, but I'll comment on this: if you look at that market in general, and it's just one of the markets, right? I don't want to get overly focused on c-store because we've got grocery in there, we've got QSR, we've got casual dining that I just talked about today. We've got auto, we've got a number of other segments. We talk a lot about grocery and C store, but they are not our only verticals, and I feel good about the momentum in all of them right now, to tell you the truth. What we're seeing is a competitive environment that's accelerating. If you look at companies like Wawa's, Sheetz, Casey's, and conversations around Circle K and 7-Eleven, it says a lot in that particular vertical about the pace of that industry, the competitive forces that have come to play, and new construction is driving remodel. Remodel is driving remodel. And this pace to continue to refresh their location, refresh the aesthetics of the location, the capabilities both in food services and other services, it bodes really well for us. We see this going on for many years, and that's just within that vertical. We think the things that returned to normal have a nice upward curve to them. We believe that the competitive forces in grocery also have the same dynamics we talk about in c-store, which are competitors raising the game, and the foundation in those industries raising their game along with it. That bodes very well for us. Someone asked me just the other day to recap new construction versus remodel. We love new construction, but it's a smaller component, 20, 80, 20. It's 80% remodel. That remodel is on a nice curve where it's trending kind of five year remodels right now. People are investing in those stores and putting money in them to be competitive with all these new starts and the changing environment. Aaron Michael Spychalla: Okay, that's helpful. And maybe on the non-U.S. or the Mexico component, just how does that potentially look as we move out, like, pipeline and just maybe what that business can become for you? James Clark: Yeah. I think that basically, Mexico, all the chaos, the global chaos of trade and duties and immigration caused a lot of question marks over heads in Mexico. I think a lot of that has normalized now, and folks are ready to get back to their original plans. I would argue that we're far behind based on their plans, and now it's just a matter of how much effort they start and try to go on their plan from day one or start and try to catch up with some of the things that were in arrears. That will materialize over the summer, and we'll have a better vision on that. James Galeese: And Aaron, I would just add that the deregulation of the external retail or environment's been a nice win for LSI. It's had its ebbs and flows and probably will continue to have some ebbs and flows, but one thing is certain. Our partners, oil company partners who entered Mexico, it truly reflects that we are partners with them. So it's not a supplier relationship. We bring some experiences to them as they enter and grow in that market, and vice versa. Right now, that activity is on an upswing, and in the intermediate term, we see that upswing as positive to continue. James Clark: And we're in the second inning on that, by the way. To even say we've scratched the surface would be an overstatement. Aaron Michael Spychalla: Okay. Yeah. Understood. And then maybe just one on EMI, the integration. Can you just talk about where margins stand today as we get closer to that two-year mark? Talk about some of the operational initiatives there and maybe more broadly across the business as well. James Clark: Well, first of all, we love EMI, we love the whole team, and it fit in well. I think we've talked about this before, but when we look at M&A, we don't just look at the financials. We look at culture and everything else associated with the business as much as we look at any element. I want to underline the culture part. What I usually say is we look at the operational efficiency, the sales synergies, the balance sheet with as much weight as we look at culture. Our thinking behind that from an M&A perspective is if we're a square and they're a triangle, that takes a lot of work to kind of get them into our company and get them operating in the same rhythm. They demonstrated, the people there and their culture, are very close to LSI's culture. So it was a real win-win together, just like JSI was, just like Canada's Best is. We've talked about it before. They've had better than 200 bps of improvement in their margin, and we're continuing on that. I think that for us to reach, to get them up to that 10.5 and better, we probably still got a full year left in that journey, but I'm very pleased with the progress. Aaron Michael Spychalla: Understood. Thanks for the color. I'll turn it over. Operator: Okay. Our next question is from Christopher Glynn with Oppenheimer and Company. James Galeese: Thanks. Good morning, Jim. You know, wanted to go into your comment about the premium food services, get a better picture of what that entails. And I had a couple of other opportunities in mind. I don't know if they fit into premium food services or other, but how do you look at, like, the campus meal plan infrastructures and maybe hotel buffets? James Clark: Yes. So Chris, thanks for the question. I wanted to kind of highlight what we're going to just kind of moniker as premium food services, and it was really to delineate and differentiate between QSR. We've always had a very strong position in QSR. We remain in that. We see a lot of growth opportunities, particularly on our display solutions side, and across the gamut—our digital menu board, our refrigerated products, our food-grade countertops, all of that. We love QSR. But we've always had a spot in this premium food services, and I want to break it up into two pieces. One, we'll call casual dining. Those are restaurants that are, you know, think about waiter-waitress service, a restaurant that you're gonna come in, typically a chain, and some of them are larger, some of them are smaller. But the numbers tend to be smaller than QSR, but the investment inside the store is measurably bigger. Right? So we were just looking at a project last week that's gonna tip over a million dollars just for this restaurant interior. We have steady business in that, and there are indications that it's improving. On the campus side and on the food services side, particularly related to refrigeration, we have been making inroads there. We sat down just over two years ago to double our effort there. We have a steady business, but we don't have the volume that I think we deserve. And they've been working across EMI and across JS. They've been working very hard to put themselves in those spots. The difference between our core business, where we have multiple projects that span across multiple years, when we get into this premium food services side, a campus for a college, cafeteria plans, these casual dining restaurants, hospitality, the number of locations tends to be smaller. If we get a project, a lot of times it's a project of one, or maybe a regional project of five or twelve or something like that. But the scale of the project is much bigger—10, 20 times the size of our smaller projects. Same kind of development time, but we think that our spot is unique to their demands because we're able to come in and truly be a one-stop-shop, from refrigeration to countertops to steel, to lighting, to graphics, to millwork. It's a nice fit, and I think that the work we're doing in these other sectors has created more visibility for us and more credibility. So we come in much more credible, much more recognized, and I think we're starting to see the beginning of that as a viable market for us, one that we can continue to grow exponentially. Christopher Glynn: Yeah. Thanks. Seems like campus could be a nice-sized vertical at some point. And then you've talked about the three acquisitions today and the one-point integrated team. Appreciate that explanation. Messaging is really well packaged, and obviously suggests the opportunity to continue to do the appropriate consolidation. So I was just curious about how you think about what might be an appropriate leverage ratio range for the right kind of deal? James Clark: When we're talking M&A, what do we look at for multiples? Is that what you were saying? Or you were talking about leverage? Christopher Glynn: No. I was talking about your balance sheet. James Clark: Yeah. We've talked about this before. I mean, certainly anything below three, we're comfortable with, and we sleep even better when it's below two. Right now, we're at 0.4. We've had a demonstrated history of using our debt revolver, using debt inside the company to go and make acquisitions and then quickly put ourselves into a leverage ratio where we're comfortable. But generally, we want to be, certainly below three. If we had something extraordinary, we always talk about it in terms of incremental or exponential. Right? So incremental is something we do within our debt revolver, and it's, you know, 50, 80, 100, 125 million maybe. We're very much there. And then we look at exponential, which might be something that pushes us into the threes. I can't see a scenario where the first number wouldn't start any greater than a three. But, yeah, that would be exponential, and we're always on the look for that. We just haven't found the right fit for us at this point. James Galeese: Yeah. Chris, you know, we feel very strong about our cash flow generation. As you saw, we had an excellent cash flow quarter. We're on pace now for our fourth consecutive year of cash flow exceeding free cash flow exceeding $30 million. So we're comfortable at looking at M&A transactions of sizes and then the ability to bring that leverage ratio down pretty quickly given our cash flow generation capabilities. Operator: Thank you, guys. Our next question is from Alex Rygiel with Texas Capital. Alex Rygiel: Thank you. Good morning, everyone. Very nice quarter. First question here, could you give us an update on the Canada Best acquisition integration activities and the traction, in particular, on entering the banking vertical in the U.S.? James Clark: So Alex, thanks for the question. Canada's Best has worked out very well for us. Again, I just talked about it a minute ago about culture, and they were just another good fit. I couldn't underline that enough, that we look at the balance sheet, but we look at culture with as much diligence and as much focus as we look at anything else in the business. These guys have been great. They hustle, they are proud and energized to be part of LSI and part of a bigger team. But I gotta tell you, they're true entrepreneurs. The whole team up there, they look for opportunities. They are more emboldened with the financial strength of LSI and the capabilities. I didn't talk about this specifically, but JSI has a facility up there in Collingwood. Our Canada's Best facility is just outside of Toronto. We're in the process right now of integrating those two, making them a stronger Canadian operation under one umbrella. So it has worked out very well for us. We have begun to talk to retail bank environments here in the U.S. These projects typically, when we're talking about hundreds or thousands of sites, it's not unusual for the gestation period to be twelve, eighteen, or twenty-four months for us to get involved in a large project. I can't say we've had any meaningful wins yet, but we're investing time. They will have a spot at our sales meeting next week to talk about the markets they're in, the diversity, and how they're addressing those markets. We have teams collaborating on that. We're hopeful we're able to talk about retail banking as another top five, top 10 market for us, within the next twelve months. So, in summary, activity started. We've had some small wins, and we're looking to push that forward. Alex Rygiel: And then secondly, more broadly on price increases. I believe your last price increase might have been around March. Can you talk to us if there have been any recent price increases or if there's a need for price increases given tariff implications or other raw material cost inflation? James Clark: Yes. When you look at the two segments, Display Solutions is minimally impacted by tariffs. I'm not giving specific numbers, but I would broadly say no more than 10% or 15% of any material or any product we use in display solutions has been impacted by tariffs. Lighting is a little bit more because of the sourcing locations on some key components and things like that. But in terms of pricing, we make price adjustments now as opposed to price changes. Some categories and products are more susceptible, and others are more stable. We're always looking for the opportunity. We're disciplined in pricing, and we respect fairness. We are market competitive and make it difficult for others to breach. Pricing is one of them, but we're disciplined. We don't want to overstep our bounds and bring different competitive forces into our customer environment. We are price disciplined and focused on it. Most of what we're doing now is price adjustments as opposed to blanket price changes. James Galeese: Yeah, just to reinforce Jim's comments. We are principally a project-based business. Given that, it gives us the opportunity, on a regular basis, to examine pricing and make sure we are aligned with what's going on with our cost structure, particularly our material input costs. Our team does an excellent job of maintaining current cost. When making project quotes, we are accurate and make pricing decisions that optimize our margin management. James Clark: And I will just add on the closing comment. We always reserve the right for price review. Even when we win an award, have a three-year project, we are not locking ourselves in on pricing for three years. We have good relationships with our customers. We're upfront about negotiations and project costs. That discipline around price goes both ways. We want to ensure we're good stewards for LSI and we want to ensure we're good partners for our customers. Alex Rygiel: And then lastly, you talked a little bit about some operational improvement opportunities. Are there any notable CapEx needs associated with that over the next twelve months? James Clark: Nothing notable. Our CapEx is relatively small. We don't see anything material impacting that, at least in the foreseeable future. But I will say, not related to that question but not specific to spending, we are looking for these opportunities. We always talked a few years back about building a better company before we built a bigger company. We've built that better company, we've built a bigger company. Now we're going back and making those improvements and doing it in respectful ways for the people within our company, for our customers, to ensure we're not doing anything disruptive. We are after all of those improvements and consolidation and rationalization, and all of the opportunities are hidden in it. James Galeese: You know, Alex, I would just broaden your comment that it's not just about capital spend but also about investment. We invest in multiple ways, not just CapEx, like looking at our facilities footprints, our talent structure, new product introductions, development costs, etcetera. We are aggressive in having our team put forth proposals to us in all those categories. We invest accordingly, and I think those investments are showing up in some performance areas across our two reportable segments. Operator: Very helpful. Thank you. Our next question is from George Gianarikos with Canaccord Genuity. George Gianarikos: Hi. Thank you for taking my questions. Maybe to focus first on your statement here in the press release that you expect above-market growth for the year. Can you sort of talk a little bit about the competitive environment and what you're seeing there that gives you the conviction you can grow faster than the competition? Thank you. James Clark: Yes, good morning, George, and thanks for the call. I think we hit on it a little bit earlier, and I appreciate bringing it up again. We think there's a lot of dynamics going on in the spaces we're playing in. You know, we purposely, if you remember the whole story of how we constructed our first plan and then the fast-forward plan, it was about narrowing the aperture and looking for markets where we thought we could make an impact and differentiate ourselves. But the other component, the other leg of the stool, was identifying those markets with some type of disruption for long-term growth, which we define as five or ten years. I underline that new entrants in the convenience store space are very aggressive, they're committed to the customer environment in those stores, aligning well with what we're delivering. The grocery market, the work and investment they're putting in for shopper experience, branding, and customer experience, it's key. Lighting plays a big role in this. But our entry has been Display Solutions, which gets us in the door. The combination of products, the uniformity of it, our ability to deliver, our services component, I think it puts us in a category of one. I feel like we have the opportunity to not only win those projects but accelerate our win rate with those projects. George Gianarikos: Thank you. And maybe just one last question for me. Focusing on the M&A opportunities, that you've been focusing on and have executed on, I'm curious as to what the return dynamics look like with the bump up in rates here that we've seen and your willingness and desire to use debt as a way to finance them. What has that done to the pipeline and the available pool of acquisitions in the marketplace? Thank you. James Clark: Yes, I don't want to poke the bear here, but obviously, I don't like that the rates are higher. But I do feel like there's been a leveling effect, particularly regarding private equity. The multiples are more realistic, and the conversations are more business-oriented. I don't feel there's as much of the fever pace as there was a couple of years ago. Deals were just getting done sometimes, one, two, three turns higher multiple than we would even consider. So even with higher rates, the environment’s better for strategic acquirers like us. It just comes down to the selection process. We're picky buyers, right? I talked about it a couple times on the call today. It can't just be the company performance or the products. The culture has to be there. We don't want to go in and try to rework anyone or fight an opposing or different culture. It doesn't mean theirs isn't good, but ours is better. We want to have similar thoughts, goals, and tools. It makes it trickier because we are so selective. But, to be completely honest, the rates aren't that bad as we look at them. And I do think they have helped turn conversations more realistic and more business-oriented. I wouldn't mind lower rates, don't get me wrong, but I feel better in this environment than I did when it was free money. George Gianarikos: Thank you so much. James Clark: Thank you, George. Operator: Our next question is from Sameer Joshi with H.C. Wainwright. Sameer Joshi: Hey, good morning, Jim and Jim. Thanks for taking my question. Congratulations on a better than expected quarter. Really good performance in the Display segment here. Most of the questions were answered already, but just digging a little deeper into the implications of meaningful traction in the casual dining and the premium fast food services, where there are large projects. I think you mentioned the timing is similar, so that is good. But in terms of visibility and profitability, how does it compare with QSR? James Clark: First of all, Sameer, thank you for the question. Very good to hear your voice. I was hesitant to even bring up casual dining because when you look at QSR, typically, the projects we're involved in are multi-site, hundreds and hundreds of sites. And when we talk about them, we talk about a project award, and a project deployment or release schedule tends to go on for six months or a year. It's much easier for us to get the visibility and talk about it. But at the same token, I felt like we were underselling the work we were doing, particularly because we see the real cross-selling happening more in this casual dining space more quickly, I should say. And I wanted to draw attention to it. The casual dining space is going to be counted in the dozens, as opposed to the hundreds. The project sizes are going to be much larger, and they tend to be larger. The combination of goods and services we offer tends to be much bigger. I would just say it's a work in progress, developing and picking up speed. If you give us two or three more quarters to talk about it, I'll have more visibility and maybe a stronger story to tell. But we've always been in this space. I don't want anybody to think it's new or that it represents a significant turn. But I did want to bring it up because I just feel momentum building in it. The project sizes are much bigger, which I think reflects on our cross-selling opportunity. And just in general, I think we see some more accelerated market activity right now, which could end tomorrow with one bad quarter of sales in that casual dining spot. But right now, looking ahead for the rest of 2026 even though it's just January, I feel pretty good about it. Sameer Joshi: Thanks for that color. Bringing this out gives us better insight into the inner workings of the company. Thanks for that. And then just one immediate question. I know Q3, the fiscal Q3, is historically a low quarter, especially in the Display segment. Are things any different for the current year fiscal third quarter? James Clark: Well, I'm not going to hide the fact that I said it in my comments. I’m enthusiastic about what Q3 could be, but I'm moderate in the sense that I think it's going to track similar to our other Q3s. On a comparative to any other quarter, Q3 is always our toughest. But on a comparable basis to prior year, I have very little doubt we will outperform prior year. How much we'll do that? I’d like to say that we have opportunities. I feel good about Q3. But if it’s Q3 and bleeds into Q4 or is more moderated over Q3 or Q4, I can't tell right now. But I feel good. Sameer Joshi: That's fine. And that's good to hear. Thanks a lot for taking my questions. James Clark: You're welcome. Thank you. Operator: There are no further questions at this time. I'd like to hand the floor back over to Jim Clark, President and CEO, for any closing remarks. James Clark: I'd just like to say that we're proud of the accomplishment of the team in Q2. Myself and Jim are two people out of 2,000 that are here. We're very happy with the work they're doing, we're very happy with the confidence our customers have in us, and we're encouraged by what we see in front of us. That's a good quarter, and we're looking for even better ones in the future. Thank you for your time and attention and your interest in LSI Industries Inc. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by. Welcome to NovaGold Resources Inc.'s 2025 Year-End Report Conference Call and Webcast. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. Webcast viewers may submit questions through the text box in the lower right corner of the webcast frame. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie Hennessey: Thank you, Ayesha. Good morning, everyone. We are pleased that you have joined us for NovaGold Resources Inc.'s 2025 Year-End Webcast and conference call and also for an update on the Donlin Gold project. On today's call, we have NovaGold Resources Inc.'s chairman, Doctor Thomas Kaplan, president and CEO, Greg Lang, and Peter Adamek, NovaGold Resources Inc.'s vice president and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by email. I would like to remind you, as stated on slide three, any statements made today may contain forward-looking information, such as projections and goals, which are likely to involve risks detailed 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 Doctor Kaplan. Thomas Kaplan: Thank you very much, Melanie. When we start on slide four, I would just like to point out something which in this era of volatility and resource nationalism, it is important to understand that NovaGold Resources Inc. 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 five, I would 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 Resources Inc. And the reason is simple. For the first time, NovaGold Resources Inc. 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, why this one? And my answer to that is because I enjoy it. I love working with the people, and by temperament, I'm interested in something, I tend to go all in. My interest in NovaGold Resources Inc. has been metaphysical. From the time that I first saw it in the public markets to the time when on 12/31/2008, Igor Levantal negotiated an agreement that effectively had us come in as the savior of NovaGold Resources Inc., 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 Resources Inc. 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 Resources Inc., when John sent his analysts to see whether I could possibly be right, when I posited that we think it's possible that NovaGold Resources Inc. just on the 5% of the land package that's been explored, is a pure play on the next 80 to 100 million ounces of course, he found that that was highly improbable. He sent his analysts to visit. They came back. He called me. And he said, do you wanna do? And I said, I'd like a $100 million. He said, done. And I said, what changed? And he said, our analyst 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 bought 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 $2.50 early last year to well, where we are today, certainly shows that people understand not just the quality of the asset, but that we are due for a major, major revaluation which, as far as we're concerned, hasn't really even taken place yet. Next slide, please. On slide six, 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 Resources Inc. 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 partner's 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 Resources Inc. increasing its stake from 50 to 60%, we went from having years of nonalignment with our partner whose eyes had wandered 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 heartily 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 regain 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 fortunes 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 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 where necessary becoming activists. John Paulson, of course, is very famous for having been perhaps the greatest benefit 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, identified the very, very best vehicles, be able to make from 10 to 100 times on the investments for his clients. I am very proud to say that John who has been an investor in NovaGold Resources Inc. 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 crisis 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, 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 and employee owned business. And my strong suit is in the sovereign wealth funds. John's is in The United States, and as we've seen with the success of Perpetua, 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 a trillion dollars 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 for 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 Emiratis, 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. Possibly, we could merge. And on a 100% basis, be a one and a half million ounce gold producer. Whatever is in the interest of NovaGold Resources Inc., we will always consider and most important 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 into something which on slide eight may look like a little bit of self aggrandizement, there are others who've been bullish on gold, not as many who have basically, you know, put all of their wealth into gold and silver mining assets. You know, we are called Electrum. Because it is a naturally occurring ally of alloy of gold and silver. And we have been all in. And, obviously, what's transpired over the last year or two has been wonderful. But when I go out on the road, because I have been, gold's 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 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 $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 believed in. And still believe in. Gold one point o, has been great. Candidly. Crypto and calling it gold two point o has expanded gold one point o's reach. To so many places that I normally don't even have to speak to most people about why they should own 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? Would was a previous high? And I told him, 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 dim. 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 changed. Since the early two thousands, and my thesis had changed, but I really didn't think it was prudent for me to say that. Publicly, you know, 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 wanna walk you through my thesis which is born out of the fact that I'm no more a gold bug than I was a silver bug. A hydrocarbon bug, a 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 nine, 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 you know, are now plunging to below a gram. Central buyers have been have been buying upset 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, an act of 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 two and twenty 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 one zero one. Supply and demand, why one wants to have a money that can't be debased by fiat, you know, a lot of good logical factors. But I didn't go into the four horsemen of the apocalypse or any of the things that sometimes people veer into. When they talk about gold. However, after 2022, and the combination both of the real displacement in the world order the Russian invasion of Ukraine and the displacement of 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 which seemed 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, thirty years, the Dow was in a trading range. And if it came to a thousand or peaked above it, you know, smart people said, well, you know, 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, uh-huh. 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 '87 while I was doing my PhD. And I remember the crash of eighty seven. 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 2 thousands to think, $161,700. It seemed 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 goal 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. 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, by the way, people sometimes say, why 3 to 5? I say, because it could go to 5, and then correct down to 3, before going past 5, to 2 or 20. In any event, I'd like to cite Ray Dalio, who is someone that I deeply, deeply respect. Ray is extraordinary, and if there's a public service announcement, read his books. He's 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 fiat currencies like the dollar and hard currencies like gold. The way I see it, we're currently facing a classic currency devaluation to what we saw in the nineteen seventies or in the nineteen thirties. 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 two ago, for decades, when people asked me which currencies should I own, I said, on the US dollar, because although I do believe that all paper currencies are toilet tissue, the US 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 US is doing everything it can to debase 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, quote, the boss. 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 fiction, 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 adversaries 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 because 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. I remember saying, George Soros, said that the existential decision for any investors in which currency to denominate themselves. I chose gold, but also I had other paper currencies. The dollar euro at that time in November 2007, was about $1.47. The dollar has strengthened to $1.15, 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 shuck off that mythology will do a lot better. I knew that the gold in 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 a $120 a barrel. It's half of that gold was at $600. Are a lot of myths. 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 barbarous relic, people almost can't believe what they're seeing. They can't believe it's it's gold 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 twenty five 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 are 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 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 as 45 million ounces now in all resources. With the potential for that to multiply along strike. You know, the 45 million ounces is only three kilometers of an eight 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, that the next Donlin could be a Donlin. The chances 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 gold. And it shows NPV fives, which are perfectly fine, and it also shows NPV zeros. And the reason why I say that is because up until the early nineteen nineties, US 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 Resources Inc. reported a fiscal 2025 fourth 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 Resources Inc.'s fourth quarter results also reflect the company's second consecutive quarter with a 60% interest in Donlin Gold. For the full year, NovaGold Resources Inc. 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, one time 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 2025. Corporate G and A cash spent 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% increase 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 2025. Our 2025 cash expenditures of $41.2 million were below our overall 2025 guidance by $800,000 due to slightly lower than anticipated spending on debt spending at Donlin Gold and marginally higher G and A costs at NovaGold Resources Inc. 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 Resources Inc.'s 60% of Donlin Gold expenditures and $19.7 million for corporate G and 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, 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. 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 Henrique Fernandez, one of the Donlin employees, was recognized by his peers for his contributions to this undertaking. Turning to the next slide. What I really wanna 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 the regulatory agents in Alaska, and we expect them to be responding 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 the 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. 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 Resources Inc. Yeah. Donlin is you know, it is just simply a unique asset. In terms of its production profile. It will average over a million ounces a year in a mine life of almost three decades. There aren't many mines in the industry of this size anymore. At 40 million ounces, we've got a huge endowment at two and a quarter grams. Know, great grade for an open pit deposit. You know, the exploration potential at Donlin is tremendous. We know the ore body is open ended at strike, at depth, and along the three kilometers of the eight kilometer gold bearing system has only lightly been explored. When the time is right, we will resume exploration on the project. We also know that there's tremendous potential on our land holdings at Donlin. The area of the known mineralization represents about 5% of our land holdings there. You know, Alaska is a great place to do business. They've got a well established tradition of responsible mining and are the second largest gold producer state in The US. Another great factor about Donlin, it is located on private land. Owned by two days 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. You know, the team at NovaGold Resources Inc. 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 a half million ounces a year. You know, clearly Donlin would be far and away the largest new gold mine to be built. Its first ten years will produce about 1.3 million ounces a year. Truly in a class of its own. Greatness also a very key attribute at Donlin. The industry grades are approaching a gram per ton. At two and a quarter grams, Donlin is twice that. And it's that grade that gives Donlin very competitive cash costs. And this slide just highlights the potential of long trend. The ACMA and Lewis deposits are less than half of the eight 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. You know, 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. Were 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 their jurisdictional risks, of other mining jurisdictions, Alaska is third globally on the Fraser Institute index. As I mentioned earlier, we are on private land. Chelista Corporation owns the mineral rights. And TKC owns the surface rights. Both of these entities have been staunch 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. Is being championed by Glenfarm. And they are working to secure funding to advance this. Know, 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 US energy independence, I think the time is getting close. To bring this gas into the Cook Inlet. For use 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 Glenfarm, the champion of this pipeline project. The parties will advance discussions on the supply agreement with Glenfarin. As their plans materialize to build the gas pipeline from the North Slope. You know, NovaGold Resources Inc. enjoys strong institutional support. We've been very fortunate have a shareholder base. It's been with us many, many years. The top 10 shareholders represent almost two thirds of our outstanding stock. It's great to have such blue chip investors behind us. We value their support and 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'll be coming up. Yeah. 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 eighteen 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 Arquise. 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: Thank you. To join the question queue, you may press Webcast viewers may submit questions to the text box in the lower right corner of the webcast frame. The first question comes from Raj Ray with BMO Capital Markets. Please go ahead. Raj Ray: Thank you, operator, and good morning, Doctor Kaplan, Greg, and the NovaGold Resources Inc. team. Have three questions, if I may. The first one is, well, congratulations on getting the non binding LOI signed with the Glenfarm. I know it's early days of negotiations, but is there anything you can share with us with respect to what's the ideal structure of that agreement that NovaGold Resources Inc. would like to have. That's the first. The same question is on your RF for the VFS. That you have sent out to 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, you also important to have the best teams within those engineering firms. So as we 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 firm, but also the best team within the firm? And my last question is on the technical report. 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 the ratio or if you can share any additional details. Thank you. Greg Lang: Alright, Raj. Well, thank you for joining the call this morning. You know, I think I've could cover all your questions. You know, beginning with the pipeline and our discussions with Glenfarm. You know, it's a clean slate. You know, Glenfarm is quite interested in all aspects of what we're doing. You know, 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. We're 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, you know, this is not a new project, and it's already permanent. And it will follow the existing Trans Alaska oil pipeline. Very exciting developments there, and it's great that Donlin has a seat at the table. As their plans advance. You know, on the RFP for the feasibility study, you know, we were very select in the firms that we brought into the bidding process. You know, we only wanted to consider firms that had one experience to take on a project of this scale. And the capacity of people to do it. So we kept the field very narrow and you know, we anticipate releasing that news in the next few weeks. But I think part of the selection process addressed the very 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, you know, the strip ratio has ticked up a bit, and that's driven, you know, by two factors. I think one, we've taken a put some areas of the pit. We've flattened the slopes a little bit. And we've also taken a little different view of dilution. And, you know, these are areas that we will revisit when we are advancing the model that will support the feasibility study. Raj, did that cover great. Raj Ray: Yes. Yes. That covers all my questions. Thank you very much. And all the best. Pleasure. Operator: The next question comes from Saundaria Iyer with B. Riley Securities. Please go ahead. Saundaria Iyer: Hi, team. Congratulations on the quarter. I just have two questions. One is on the bankable feasibility study. So I'm trying to understand, like, how the current budget that the $78 million that has been you know, budgeted for the upcoming Donlin activities. How that allocated between, like, feasibility work and the ongoing exploration? It's been my my actual question is how do we look at it as a do we look at it as a single year budget, or is it, like, through the feasibility study that's gonna take twelve to eighteen months? Greg Lang: Well, the work the work program at Donlin 2026 will be very active. You know, the bankable feasibility study will obviously be a large component of that. You know, 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. You know, 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 gonna, you know, really be out in the 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. It'll take about eighteen months to complete. And we'll be you know, once we announce the firm that we've selected, we'll update everybody on the schedule. Saundaria Iyer: Thank you. Just one more from me. I mean, there's a lot of potential in the Donlin land package with just like 5% explored so far. So as we move into feasibility and then eventual construction, Nick, how are you guys thinking about advancing that exploration optionality in the near term. Will that be a concurrent event along with the feasibility study? Greg Lang: Well, we will you know, last year, we did a pretty extensive soil sampling program along the known mineralized trend. As I noted earlier, that's just a very small part of our land holdings at Donlin. So we will be, you know, working with our partner developing plans for future exploration. Yeah. But right now, you know, 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 yeah, we look forward to updating everybody on that work. But I think the immediate potential exists in and around the known ore bodies. So it'll be an exciting time to be exploring it up in Alaska. Saundaria Iyer: Thank you. Thank you, and congratulations. I'll turn it over. Greg Lang: Thank you. 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 Shinseng. Is the tailings design now effectively locked or still at risk of material change? Greg Lang: That's a good question. Let me you know, first off, remind everybody that the tailings dam at Donlin is a downstream rock construction anchored into the bedrock. It's also a fully lined structure and that's really that 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. We've not 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 BFS? Greg Lang: I think, you know, that's you know, that will be addressed in, you know, the feasibility study sensitivities. You know, looking at our recent technical report, and I encourage everybody when they have time to to give it a review. You know, the economics at gold price of about $2,100 were, you know, double digit rate of return. And it's you don't have to stretch your imagination, you know, that you know, from 2100 to where we sit today, that's almost better than a twofold increase in price. So I think you know, the economics at much lower gold prices are robust, as you've noted in all of our presentations, we have tremendous leverage to upside. And at the current projects, of course, it's amazing. Cash flow generator. Melanie Hennessey: The next question is for Tom. It's actually more of a statement from Matt Kovacs. Doctor Kaplan, I have been listening to you and NovaGold Resources Inc. 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 macros for the good reason that I'm not a mining guy, I've been in the business for thirty three years. And I've surrounded myself with the best of the best geologists, people who've been there and done that, like doctor Larry Buchanan. You know, who's still our chief geologist since 1994. You know, or a Greg Lang and a Richard Williams, who both brought in Cortez and Pueblo Viejo, 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 is some part to his metaphysical certitude, about a thesis like I'd 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 vindication. It's, well, I'm glad that they came around, and that, you know, 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, you know, over the last thirty three years, we've only really focused on maybe half a dozen, six, seven, assets. But if you look at our track record, from first investment to exits, the annual track record is into the eighties of percents, that was actually over a 100%, you know, around the time of the financial crisis. But, you know, the last ten years or so have been almost like watching paint dry in the mining industry. But fortunately, you know, the fundamentals always will 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 at 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'm in a petro state. And they said, what is your target? And I said, my first equilibrium level is between three and five thousand. 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, you know, for people to challenge me, like, you know, an ancient Greek with a light, you know, Diogenes 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, golden 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 crowing 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, Jamison. Mister Lang, Doctor Kaplan, and Mister Paulson, my wife and I have been NovaGold Resources Inc. 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. Seriously, thank you for your blood, sweat, and tears, your extraordinary efforts, patience, resilience, and foresight have brought us this far. We can't wait for the next eight innings. Best wishes, Jim. Thomas Kaplan: Thank you, Jim. You made you made you certainly made our week. Greg Lang: Thank you. Yeah. I'm glad it worked out for you. Melanie Hennessey: That ends our Q&A. So back to you, Ayesha. Operator: All right. Well, everybody, thank you. Thomas Kaplan: Thank you, everyone. 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: Greetings, and welcome to the Huntington Bancshares Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Eric Wasserstrom, Director of Investor Relations. Eric, please go ahead. Eric Wasserstrom: Thank you. Good morning, and welcome, everyone, to our fourth quarter call. Our presenters today are Stephen Steinour, Chairman, President, and CEO; Brantley Standridge, our President of Consumer and Regional Banking; and Zachary Wasserman, Chief Financial Officer. Brendan Lawlor, Chief Credit Officer, will join us for the Q&A. Earnings documents, which include our forward-looking statements disclaimer and non-GAAP information, and copies of the slides we'll be reviewing today are available on the Investor Relations section of our website, which is www.ir.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour after the close of the call. With that, let me now turn it over to Steve. Stephen Steinour: Thanks, Eric. Good morning, and thank you for joining us. Beginning on slide three, as we enter 2026, the year of Huntington's 160th anniversary, it's a moment of pride, but even more a moment of anticipation. Our heritage and deeply rooted values continue to guide us, yet it's the opportunity ahead that energizes us. We're focused on becoming the country's leading people-first, customer-centered bank, and that ambition is taking shape across the franchise. Nearly every part of Huntington is performing at a high level, creating powerful momentum as we look to the future. We've developed a differentiated operating model. Beginning next month, our consumer and regional bank franchise will have a presence in 21 states, many of the fastest-growing in the country. Our local delivery of national capabilities is a franchise-defining competitive advantage. We also have a leading national commercial bank, which includes the fifth-largest equipment finance lender in the nation, 15 unique specialty finance verticals, as well as an expanding set of capital markets capabilities. These functions make us a premier provider to companies ranging from small and middle-market businesses to large corporate entities. Our approach is entirely customer-centric. Our business lines lead with advice and guidance, deliver award-winning customer service, and are supported by top-tier digital capabilities. And we adhere to our aggregate moderate to low-risk profile. In summary, our vision and values guide how our colleagues support our customers. These attributes, combined with our scalable business model and recent positioning in the most attractive states, will enable growth far into the future. Slide four illustrates the core components of our model and how they drove excellent full-year results for 2025. We have activated a flywheel of value creation in which our operating model drives sustainable high growth, enabling us to accelerate reinvestment and strengthen our competitive advantage. In '25, this model delivered truly outstanding results: 11% revenue growth, 16% adjusted EPS growth, 290 basis points of positive operating leverage, and strong credit performance. All of this drove powerful capital generation. Slide five summarizes our key messages. First, our focused execution is generating significant organic growth. Second, we have proven expertise in integrating new partner banks. And third, we're delivering exceptional profitability and value creation to our shareholders. We are driving outstanding revenue, earnings, tangible book value growth, and returns while investing for growth in the years ahead. As shown on slide six, our organic growth engine remains exceptionally strong. We delivered another year of significant above-peer cumulative organic loan and deposit growth. And as Zach will talk to in a moment, our value-added fee services are showing a similar trend. These outcomes reflect how our teams are executing with discipline across all of our customer segments. This quarter, we delivered strong growth in primary bank relationships, up 4% year over year in consumer banking and 7% in business banking. We are focused on deepening customer relationships and expanding wallet share while maintaining diversified portfolios. Slide seven highlights some of the strategic investments we made in 2025 that accelerate our flywheel and enhance our long-term growth trajectory. We continued our branch build-out in North and South Carolina and expanded our middle-market banking in Texas. We added new commercial verticals, and the Veritex and Cadence partnerships augment our scale and density in states that are projected to grow roughly 30% faster than the national average. We also added to our platform and capabilities. With the addition of TM Capital and Janney Capital Markets, we expanded the breadth of our financial advisory, as well as increased our categories of fixed income trading. Additionally, we added functionalities and services within our commercial payments platform. We executed several integrated partnerships to deliver new fintech solutions for our consumer and small business customers, and we continued our investment in industry-leading digital capabilities. These initiatives expand the breadth of customers we serve, deepen our relationships, and help accelerate our fee revenue growth. In summary, 2025 was an extraordinary year for Huntington. Our outstanding financial results reflect the substantial investments we've made in our capabilities over the past several years, and we intend to continue investing across all elements of our franchise going forward. These investments and our recent partnerships position us to sustain strong growth well into the future. With that, let me turn it over to Brant to share some updates on the partnership integrations. Brantley Standridge: Alright. Thank you, Steve. Starting on slide eight, I want to share our differentiated and proven approach to partnerships. Our approach is collaborative and transparent, designed to align around our common objectives, creating a strong foundation for long-term value creation. We're able to quickly identify and engage the leaders and make thoughtful decisions around the talent of the combined organization. Our objective is to create a welcoming environment for our new colleagues. We work with rigor and speed, mobilizing dedicated teams to migrate our partners' entire organization to Huntington platforms. We thoughtfully sequence the activities to minimize disruption and operational risk. We've found that this approach creates an experience that is as frictionless as possible for both colleagues and customers. We are also intentional about approaching key customer product migrations with a people-first, white-glove process. We actually like to call it the green glove process. We quickly deploy the full suite of Huntington capabilities, including products, balance sheet capacity, value-added services, and digital capabilities. This approach for our new customer-facing colleagues enables them to stay engaged with their customers throughout the entire process, expanding their existing relationships and growing new ones. For their customers, it ensures continuity of service while gaining exposure to the expanded set of capabilities we can offer. This approach drives economic value by empowering and engaging our partners, being thoughtful and focused in our talent management and retention efforts, deploying the full breadth of our capabilities, developing deeper lending relationships and value-added services, and moving quickly to migrate systems. We're able to realize substantial cost and revenue synergies. Turning to Slide nine, let me give you an update on how we've applied this approach to our partnerships with Veritex and Cadence. We've spent extensive time in the market with our new colleagues, aligning the local leadership structure and demonstrating our culture. For example, with Cadence, we undertook a 22-city tour right after the announcement to get to know our new colleagues and learn about their customers and the markets they serve. We undertook similar meetings with Veritex and have frequent senior leader connectivity and end-market engagement. We could not be more excited to welcome these new colleagues to Huntington. Engagement with the leadership and colleagues of our partners is fundamental to our ability to execute integration activities quickly, effectively, and get to the critical focus of value creation. We have undertaken a thoughtful approach to our combined organization's talent decisioning with a lot of input from the Cadence management team and completed this work well in advance of closing. This creates certainty for our new colleagues and provides immediate line of sight to a large percentage of our cost synergies. We've made significant progress on systems integration. With Veritex, we substantially completed this process last weekend. This concludes what has been an extremely efficient and well-executed conversion. It's only taken 187 days since the announcement. We can say with confidence that Veritex is now integrated into Huntington. For Cadence, we're already advanced in our product and data mapping and expect systems migration to occur midyear. This would also represent a highly expedited time frame. Because of these actions, we are already realizing our targeted cost synergies from Veritex, which we expect to be fully included in our run rate by the second quarter. For Cadence, we expect to begin realizing the identified cost benefits immediately upon closing and reach the full run rate in the fourth quarter of this year. As we deploy the full Huntington franchise in our new markets, we expect to begin benefiting from revenue synergies. This is already the case at Veritex, and we expect this to accelerate now that we are operating on the Huntington platform and our new colleagues have access to the full array of our product platform and capabilities. We would expect a similar pattern in Cadence. Some revenue synergies achieved early after close and acceleration in the second half of the year and in 2027 following the systems migration. We are excited about how these two partnerships will springboard our growth in Texas across a number of new markets for us. We see extensive opportunities in these areas and across the breadth of our expanded footprint. And we intend to invest to drive market growth, density, and share of customers' wallet. With that, let me turn it over to Zach to discuss the quarter's financial results in detail. Zachary Wasserman: Thank you, Brant, and good morning, everyone. Beginning on slide 11, I'll cover our financial performance. We delivered exceptional profitability in the fourth quarter and for the full year of 2025, supported by strong organic loan and deposit growth, expanding fee revenues, improving margins, positive operating leverage, and excellent credit. For the quarter, earnings per common share was $0.30. On an adjusted basis, excluding acquisition-related expenses and other notable items, EPS was $0.37, up 9% year over year. I'll review the drivers of this performance in detail on the next several pages. Turning to Slide 11, average loans grew 14.4% year over year, excluding the addition of the Veritex portfolio. Average loans grew $10.9 billion or 8.6% year over year. This growth was well balanced between core and new initiatives. New initiatives account for $1.8 billion in the period and contributed nearly half of the total organic loan growth for the year. Key contributors included our organic expansion into Texas and North and South Carolina, as well as strong performance in our funds finance and financial institutions group commercial verticals. Of the remaining $1.4 billion in loan growth in the fourth quarter, from the core we delivered $500 million from corporate and specialty banking, $400 million from regional banking, $400 million from auto, $400 million from floor plan businesses, and $200 million from commercial real estate. These gains were partially offset by a $200 million decline in equipment leasing, a $200 million decline in residential real estate balances, and a seasonal decline of $100 million in RV marine loans. All told, in 2025, we generated organic loan growth of $10.1 billion, which exceeded the $9.5 billion of loans added through our Veritex partnership. This performance underscores the exceptional execution by our colleagues across the company. The businesses are firing on all cylinders, and our teams continue to deliver outstanding organic growth. Turning to deposits on slide 12, average deposits increased 5.1% quarter over quarter and 8.6% year over year. On an end-of-period basis, excluding Veritex, core deposits grew $5.5 billion year over year or 3.4%. We continue to drive strong volume growth while maintaining disciplined pricing throughout the rate cycle, resulting in a 35% cycle-to-date down beta. This performance is enabled by our sustained focus on growing primary banking relationships across both the consumer and commercial segments. Veritex deposits contributed meaningfully to this quarter's growth while we optimized select acquired funding categories as planned. Together, these dynamics underscore the depth and quality of our relationship-oriented deposit-gathering capabilities and the effectiveness of our funding strategy. We continue to execute well on our down beta plan. Similar to the third quarter, we quickly implemented actions after the Fed rate reduction in December to achieve a 40% down beta in the last two weeks of the fourth quarter. The deposit environment remains competitive. However, our approach to optimizing volume growth and pricing is working. Our goal remains to maximize revenue growth and ensure robust core funding for our continued strong organic loan growth. We will continue to manage our asset yields and funding costs to optimize this outcome. On to slide 13, our NII dollar growth and margin expansion continue to demonstrate powerful momentum. During the quarter, we drove $86 million or 5.6% sequential growth in net interest income. This represents over 14% growth on a year-over-year basis. Net interest margin was 3.15% for the fourth quarter, up two basis points from the prior quarter and aligned to our outlook. This is largely driven by contributions from Veritex core NIM. Expanding on that for a moment, as we've noted, Veritex closed in October, and the final rate marks and detailed loan level accretion schedule was updated at that time. This update resulted in a modest reduction in expected PAA and modest accretion to tangible book value excluding one-time costs. The updated schedule is noted in the appendix of the presentation for your reference. Moving to fee income on slide 14, our fee businesses were strong across virtually every area. Year over year, payments grew 5%. Commercial payment revenues continue to be the primary engine of this growth, up 8% year over year. Wealth management grew 10%. Adjusted for the sale of a portion of our corporate institutional custody and trust business last quarter, it grew 16%. This was powered by continued household acquisition and assets under management net inflows. Capital markets performed well, delivering its second strongest revenue quarter of all time, trailing only 2024. Some advisory deals did push from the fourth quarter to close early in 2026, and so our first quarter is off to a very good start. Loan and deposit fees are up over 20%, driven by strong loan commitment fees. Based on our solid commercial lending pipelines, we expect this trend to continue over the next several quarters. Clearly, momentum in the fee businesses remains strong, and we anticipate broad-based growth going forward. On the next slide, I'll step back for just a moment to reflect on the multiyear of these businesses. Turning to slide 15, on a full-year basis, our fee income businesses have been growing at a steady high single-digit CAGR since 2023. And we see this CAGR as sustainable over our long-term planning horizon. As we've highlighted many times, we view three businesses, payments, wealth management, and capital markets, as having long-term strategic growth opportunities. The financial performance of these businesses validates our strategy, which has focused on expanding where we believe we can offer these value-added services to our customers in a manner that enhances our relationship and meets their needs. Moving to expenses on slide 16, on a core basis, excluding one-time costs and the impact of absorbing Veritex's expense base, Huntington's operating expenses were up just $7 million sequentially, or just about one-half of 1%. This reflects our cost discipline and focus on continuous expense reengineering, essential elements of our value creation flywheel. We set out in early 2025 to deliver positive operating leverage for the year, and we delivered results well above that budget. Coming into the year, our plan assumed approximately 100 basis points of positive operating leverage. It was a solid, achievable planning target given our growth agenda and the level of strategic investment we intended to sustain. As we drove significant outperformance on revenues over the course of the year, we delivered a much wider 290 basis points of adjusted operating leverage while accelerating investments across our enterprise. This outcome is an expression of the model we've been building toward and will drive substantial value creation. Slide 17 recaps our capital position. Over the last year, we drove adjusted CET1 higher. Our capital management strategy remains focused on our top priority of funding high-return loan growth, then supporting our strong dividend yield, and finally, capital return and all other uses. As we have noted, we intend to continue driving adjusted CET1 toward the midpoint of our 9% to 10% operating range. Given our projections for strong capital generation, we expect to have the capacity to add approximately $50 million per quarter of repurchases to the mix of distribution in 2026 following the close of our partnership with Cadence. Slide 18 gives an overview of how the flywheel of our operating and economic model is generating powerful return and driving shareholder value. In 2025, we grew adjusted ROTCE by 40 basis points through robust PPNR expansion while simultaneously increasing our capital base. We have grown tangible book value 19% year over year while returning 40% of earnings through dividends. And as noted, we intend to initiate programmatic share repurchases in the near term. Turning to slide 19, credit quality continues to perform very well, with net charge-offs of 24 basis points. Forward-looking credit metrics remain stable. The criticized asset ratio rose to 4.2%, primarily due to Veritex commercial real estate loans that we identified during diligence, and remains within our historical range. The nonperforming asset ratio was 63 basis points and has trended within our expected range for several quarters. Let's turn to slide 20 for our outlook for 2026. We're providing guidance for Huntington on a stand-alone basis, but given that we're only a few days away from closing our partnership with Cadence, we thought it would be helpful to give an initial view of how this might contribute to our 2026 results. Naturally, we will refine this outlook after the close. Starting with net interest income, we expect growth on a stand-alone basis between 10% to 13%, supported by 11% to 12% growth in loans and 8% to 9% growth in deposits. We anticipate further net interest margin expansion this year, driven primarily by lower hedge drag and fixed asset repricing. We expect the NII contribution from Cadence this year to be approximately between $1.85 to $1 billion, including PAA. We will update this outlook inclusive of PAA later in the first quarter after we've had the opportunity to do the analysis post-closing. In terms of earning assets, our cash plus securities portfolio is currently about 25% of total assets, and we expect to remain approximately at this level post-closing. On the topic of quarterly expectations for deposit and loan growth, we're expecting to see loans grow faster than deposits in the first quarter as we continue to optimize the funding we have received from Veritex and begin the integration of Cadence. After that, in Q2, Q3, and Q4, we expect to see deposits growing at a level consistent with loan growth as our normal organic process of core funding loans continues. We expect to exit 2026 with our deposit growth in dollar terms equaling our asset growth, giving us strong funding momentum heading into 2027. Moving to noninterest income, we expect fee revenues to grow between 13% to 16%. This represents the continued strong contributions from our three core value-added services, further growth in our loan commitment fees, and the contribution from the new capital markets teams at TM Capital and Janney we added at the year-end 2025. We expect Cadence to add approximately $300 million in fee revenue. We plan to provide an update on our expected revenue synergies later in the first quarter. We anticipate core expenses will grow 10% to 11%, and we expect to deliver a baseline of 150 to 200 basis points of operating leverage. This outlook includes the expected cost synergies we've targeted from Veritex, which we expect to be fully in the run rate of our cost base by the second quarter. We estimate Cadence will increase our expense base by $1.1 billion. Similar to Veritex, we expect to begin realizing cost synergies almost immediately after closing, with the full benefits run rating into expenses in the fourth quarter. We expect net charge-offs for the year to be 25 to 35 basis points. Given our current starting point, we think losses will likely be at the lower end and normalize closer to the midpoint of that range over time. The combination with Cadence doesn't change this view. The effective tax rate for the year is expected to be between 19% to 20%. The fully diluted average share count for the year, inclusive of Cadence-related issuance, is expected to be approximately 2.02 billion shares. For the first quarter, we expect the weighted average share count to be approximately 1.9 billion. Cadence's anticipated February 1 close will result in a partial quarter impact to several income statement and balance sheet items. Also, with the addition of Cadence, we have a new class of preferred shares, which we have addressed in the footnote in the updated appendix slide. Pulling back, let me conclude our guidance discussion with a few observations. First, our current 2026 forecast for Huntington's stand-alone growth in NII, in assets, deposits, and fees generally exceeds the growth we've experienced in these categories in 2025, while our expected operating leverage is at the top end of our typical range. This underscores our focus on delivering strong organic growth even as we move through our integration with Cadence. Second, we are executing against our integration plans. As noted, we expect to realize the cost synergies from Veritex in the second quarter and from Cadence in the fourth quarter. In terms of the revenue synergies, we have already begun to benefit from incremental lending and capital markets activity with former Veritex customers. And Cadence bankers are already actively engaged with their customers to educate them about the broader product platform and capabilities that we will be able to offer. We believe this will contribute to incremental revenue growth in 2026 and into 2027. Turning to Slide 21, we remain confident in our long-term trajectory. Our operating model and the momentum across the franchise give us conviction in the sustainability of our targets for the medium and longer term. The investments we're making position Huntington for continued outperformance. Concluding on slide 23, our flywheel of value creation is working and poised to accelerate. Our differentiated business model drives strong growth and profitability. As our profitability expands and we generate efficiency through cost reengineering, we increase our capacity to invest. As we drive robust investment back into our business, we grow our competitive advantage. That competitive advantage drives further market differentiation and customer expansion, driving revenue growth and sustainable share gains in a virtuous cycle. Looking ahead to 2026, we believe the benefits of our strong organic growth and recent partnerships will enable further expansion of our investment capacity over the next several years. This will increasingly distinguish us from our peer set and drive substantial shareholder value. With that, we'll conclude our prepared remarks and move to Q&A. Eric Wasserstrom: Thank you, Zach. We will now take questions. We ask that as a courtesy to your peers, each person ask only one question and one related follow-up question. If you have additional questions, please return to the queue. Thank you. Operator: We will now be conducting a question and answer session. Our first question today is coming from Erika Najarian from UBS. Your line is now live. Erika Najarian: Hi, good morning. Thank you for taking my questions. First question is just a clarifying question on the expense trajectory, both the baseline and the Cadence addition and how we layer on the cost savings. So given that you gave the guidance on standalone, I'm guessing the baseline for core expenses would be $4.82 billion, which excludes two months of Veritex. And then we layer on the standalone growth. I guess the other part of the question is that $1.1 billion is equal to eleven months of Cadence based on consensus 26. And so I'm wondering, as I think about Brant's comments, if we then layer on the cost saves, and then I just have a follow-up. Zachary Wasserman: Sure. I'm not sure exactly what your question was there, Erika, but I'll take it and sort of just unpack where the expense guidance is. Fundamentally, what we see at this point is underlying Huntington expense growth in mid-single digits, aligned to generate one and a half to two points of operating leverage. And then with Veritex, bringing in the entirety of the Veritex cost base, and also, I would note the two small capital markets businesses that we added on January 1. Those add about one point of total Huntington expense growth, obviously, more revenues as well. But that piece comes in. And so the totality of all of that together is the 10% to 11% year-on-year growth, which generates really positive operating leverage, 150 basis points to 200 basis points, you know, clearly on top of the 300 basis points of operating leverage we generated in '25. And then Cadence is the $1.1 billion added on, as you noted, eleven months of expenses. It represents the full complete of the cost synergy program for both Veritex and Cadence, by Q2 and Q4 respectively. And aligned to the previous guidance we've given about 75% of three-quarters of the Cadence cost synergies accruing in 2026. You know, I think what is also in there clearly, I tried to highlight this in some of my prepared remarks, is continued investment back into the business. And we think that that is a terrific model not only to drive the kind of revenue performance we're achieving in '26, but even more importantly, over the longer term and continue to drive the competitive and share gains that we've got. So all of that is embedded in that, and we think it's the right model and right posture at this point. Erika Najarian: Got it. That's clear. So that addition includes both cost saves and investments back into the business. And the second follow-up question I had, maybe at the is more for Steve and Brant. I thought it was notable that when you talk about Veritex and Cadence, you say the word partnership very intentionally. You know, maybe talk about how your approach has been generating more goodwill in order to perhaps create revenue synergies and cost synergies. And perhaps a better timeline than other traditional acquisitions that are perhaps not treated as partnerships. Stephen Steinour: Erika, great question. And I'm going to let Brant answer this for the most part because he's been on point driving this. Literally from the outset. But the format of the partnership has been incredibly beneficial to us. And we have great partners in both Malcolm Holland and Dan Rollins and their teams. And because we've been able to work together very tightly, and Brant will expand on this significantly, we are in a much better position with confidence on both the expense and the revenue synergy side. So, Brant, over to you. Brantley Standridge: Well, Erika, thank you for the question. One of the things that partnership has allowed us to do is to really move with greater speed and rigor on some of the key decisions. And as it relates to board decisions, management decisions, all of our colleague decisions, organizational structure decisions, all of those have been decided and communicated. And that creates a high level of certainty for the colleagues of both Veritex and Cadence. It creates a lot of familiarity for them and, frankly, gives us a lot of confidence in our ability to deliver on the value creation given that we've created so much certainty for them so quickly. The other component, as you know, a large percentage of the cost synergies revolve around people. And so moving quickly to decide on our make all that key people decisions in the case of Cadence gives us a line of sight to the majority of our cost synergies there. So that partnership approach clearly gives us some advantage or a lot of advantages when we think about both cost and revenue synergies. Stephen Steinour: And the teams have just been outstanding. The collaboration here, phenomenal. We are very impressed with the quality of the teams. And both these banks are well run. So these are not sort of fixer-up turnarounds. This is bringing our capabilities, products, etcetera, to terrific teams, which, as Zach pointed out, we will be further investing in to drive the revenue growth in the years ahead. Operator: Thank you. Our next question today is coming from Jon Arfstrom from RBC Capital Markets. Your line is now live. Jon Arfstrom: Thanks. Good morning, guys. Zach, I think you're gonna get a workout this morning, but on expenses. But anything you can do to give us a little tighter range on expected first-quarter expenses or early '26 expenses just to help set this up? Zachary Wasserman: I'll Demir, I'll give you a quarterly guidance. I do appreciate it. Look, if I take a step back, for us, what's important is driving for positive operating leverage. And as we've noted sort of a number of times, even in the prepared remarks highlighted this for 2025, we come into the year thinking somewhere between one hundred and two hundred basis points of operating leverage as a really good level supports the long-term earnings growth rate that we want to achieve. It also is the right balance for us as we execute that flywheel model. Driving reengineering into baseline costs, reinvesting deeply back into the business. To really power continued long-term revenue growth. And so I think that's the approach that we're taking in it, and we think it's the right one, as I noted before. You know, I will also highlight if you look at that guidance slide, just stare at that plus cadence column, the marginal profitability that we're as we bring cadence into the business is really significant. It's a 50% marginal efficiency ratio, and that's even before the full cost synergy. So all of this for us adds up to an earnings growth trajectory that continues to meet our objectives. And generate ultimately the long-term financial commitments that we've set, importantly, including that 18% to 19% return on capital. Jon Arfstrom: Okay. Alright. Just another question here just for clarification. On Slide 20, you talk about the revenue-producing initiatives that are embedded in the expense guide. How material are those? And then what revenue synergies, if any, from Veritex and Cadence is included in the guide? Thanks. Zachary Wasserman: Yes. Good question again. And the answer is very little of the revenue synergies are baked into the guidance at this point. This continues to be aligned to the longer-term objectives that we've said and we discussed at the Cadence partnership announcement call. I guess Brant highlighted in his prepared remarks, our expectation is to share a deep dive around where we expect the revenue synergies to be later this quarter in a further conference and then to layer that on and provide the right guidance around that. So a lot more to come there. Very excited about it. You know, the thing about the investments up into the business, you know, we've been growing investments back into the company at about a 20% clip for five years in a row. Our expectation is to continue the same. And the focus areas for those investments really continue to be digital technology development and capabilities across all areas of our business. Marketing to acquire new customers. There's gonna be a terrific opportunity to deploy digital acquisition across the new partner acquired footprints. And then, you know, people to build out the businesses that we've been growing, and we'll continue to do that. Operator: Thank you. Next question is coming from Ken Usdin from Autonomous Research. Your line is now live. Ken Usdin: Thanks. Hey, Zach. Can you just back to Slide 20, do you have the starting point FY 'twenty-five baseline for core expenses that the 10%, 11% is built on? Zachary Wasserman: Sure. It's $4.871 billion. Yes. Exactly. Ken Usdin: Okay, great. Thanks. And then the second question is I guess there's a little back and forth today about the cost base still being a little bit higher. But I wanted to ask if I look back at the October deck when you talked about $2 of pro forma EPS in seven. I just want to make sure that there might be some timing differences in terms of how much you're reinvesting and how much things all come together. So we're still tracking towards that $2 pro forma EPS that you guys had suggested back in October in the merger deck? Zachary Wasserman: Yes. It's a terrific question, Ken. It's a I love that question because it kinda comes back to ultimately the value creation model that we're trying to drive here is what is where our focus is and the answer is yes. We continue to be on track for the fundamental drivers of that earnings power. If you think about it, the way I think about it is first of all, three major drivers of value creation from the partnership: seamless integration, and retention of talent and kind of continuing with the momentum of the underlying businesses. I will note that both Veritex in the period after close before conversion performing exceptionally well, driving above expectations loan and deposit and revenue growth. And Cadence, likewise, we haven't even closed. We're expecting that just a week from now. They just reported their results this morning and those likewise. Expectations continue to show very strong underlying growth in SAAR. Partnership model would just enable that to continue. Secondly, it's the cost synergies. We have full line of sight to achieve or beat them. And then lastly, it's these revenue synergies, which are not in this guidance yet, but really will be powerful as we add those on. We continue to finalize the plans to go and achieve them. And so those are kind of the fundamental building blocks. As I think about the EPS, you know, look, we've generated 16% earnings per share growth in twenty-five. The guidance I've given here on page 20 applies somewhere in the kind of mid to high teens for underlying organic EPS in '26. You should expect the same kind of growth in earnings power as we go into 'twenty-seven. And on top of that, you'll get the full run rate of the cost synergies that's probably something on the order of a dime. And then revenue synergies and of course the PAA will be what it is. Ultimately, and we'll give guidance on that once it's finalized. Operator: Thank you. Our next question today is coming from Matthew O'Connor from Deutsche Bank. Your line is now live. Matthew O'Connor: Good morning. You gave the expense impact from the capital market deals? You said it added about 1% to the expense base. How about on the fee side? What's your rough estimate on the fee contribution from the corporate market deals? Zachary Wasserman: Yeah. It's coming in sort of $80 million and $90 million of expense above revenues. Matthew O'Connor: Okay. Then I guess maybe talk about some of the other drivers of the fees because obviously, my model could have been wrong, but the fee guide seemed better than I had even adjusting for like, $80 to $90 million. So maybe some details in terms of what are the key drivers of that growth? Zachary Wasserman: Totally. Fundamentally, if you think about fees, this year in 2020 well, last year, twenty twenty-five, we generated 7% growth in core fees and it was 8% in those three major fee-driving categories we talk a lot about payments, cap markets, and wealth management. As we go into 2026, our expectation was to see acceleration of all of that all of those categories, something on the order of one to 2% acceleration, and we've got strong line of sight to delivering that. As we've noted, it's been a locus of a lot of investment over time. So we're seeing that come through now in terms of acceleration of revenue growth. And then on top of that, you will add the $80 to $90 of revenues from the two new small capital markets divisions that are joining us plus Veritex. And so that's really the kind of the ingredients that could get us to this guide. And have strong line of sight and confidence to deliver. Operator: Thank you. Our next question today is coming from Ebrahim Poonawala from Bank of America. Your line is now live. Eric: Hey, good morning. This is Eric on for Ebrahim. Just maybe another one on the expense side. I was curious if you can talk about the level of investments that you guys have embedded into that underlying Huntington expense growth that you've mentioned at the mid-single digit. Anything new there, any new investments or acceleration in spend that's kind of embedded? Zachary Wasserman: Yeah. Good question, Eric. Thanks for the follow-up. I'll highlight that we expect to grow investments at around 20% back into the business as we go into this upcoming year. And again, as noted before, the kind of the focus of that is always threefold. Digital and technology capabilities across the business, secondly, marketing and last, people to build out their business. So I think about the kind of the initiatives that will power, you know, we're still early days in a lot of the major new growth initiatives we've been talking about the last couple of years. New commercial specialty verticals, both lending and deposit-oriented new geographies that we've been growing into organically, North and South Carolina, Texas, all of those will be focused for continued investment. We've talked about in the Carolina, for example, the expectation in 2026 is to open a new branch there almost every two weeks. And so, of course, that'll be an area that we're investing in. And then, you know, I think Brant highlighted earlier, one of the biggest areas that we see opportunity to really capture revenue synergies in the combined franchise is in digital acquisition and customer acquisition across the footprint. And so there's funding in the investment plan to go after that. Eric: Got it. That's helpful. And then I think just to quick follow-up to clarify. I know you said you'll provide more details post the close, but was curious what level of PAA is embedded into the NII guide? Thanks. Zachary Wasserman: Yep. Because it's somewhere between seven and ten basis points of NIM of, you know, aligned to the prior expectations we had. Again, think we've highlighted that in the Cadence earnings call or Cadence deal announcement call, and we'll update that as we get through the close here in the next month. Operator: Thank you. Next question is coming from Manan Gosalia from Morgan Stanley. Your line is now live. Manan Gosalia: Hey. Good morning. Hi, Manan. Hey. Good morning. Zach, in your comments on the investment spend, just now, you didn't mention AI. Is there any AI-related investment spend in there? And I guess the broader question there is, given that there's a lot going on this year with the acquisitions, that's probably driving a lot of your investment spend. Would you say that 2026 is a high point for investment spend that you plan to make? Zachary Wasserman: Thanks, Manan. Great questions both. And to answer the second one first, the answer is no. Investments are not a high point here. In fact, investing into the business is the flywheel of value creation that we just talked about. We will always want to grow investments at a fast clip and just think about the model going on for a second. Look back at the last six years. Revenue growth CAGR 10%, investment growth CAGR just about 20%, earnings growth in the teens. And so that model is a sustainable long-term model and we will keep driving it. And it's powered by, you know, not only earnings growth, but also disciplined reengineering of our cost base, something on the order of 1% per year. And so that's the model we expect to sustain perpetuity, and that's what's driving our competitive success. You know, if you just move to AI, absolutely there's significant investment happening in AI. I wouldn't characterize the nature of the driver of our investment growth as because of AI certainly, is growing along with those other investments as well. And we're seeing use cases across the organization really exponentially increase at this point. Driving cost savings, driving productivity, driving a better customer experience in lots of different ways, and of course more efficient technology engineering. Stephen Steinour: And then on what Zach referenced, digital and technology, the AI was included in that. Operator: Thank you. Our next question is coming from Steven Truback from Wolfe Research. Your line is now live. Eric: Hey, this is actually Eric. Hey. Derek: Derek, this is Derek. Thanks for taking the question. Our first question we had was on credit guidance. And it looks like, like, the year-on-year increase, like, our assumption is a lot of that is, like, kind of the seasoning of the loans you've put on the last year. But just curious if that's right. Just sort of what would cause you to fall on like one end of the guidance range or the other. Eric: Derek, you're yeah. I think you're talking a little light too. You have you repeat it? I think you referenced seasoning as the reason for the guide. Derek: Yes, I'm sorry. Yes, that's right. Just Eric: Yeah. That's that was the case, let me just say that yes, there's a little bit of that in there. But I mean, the reality is the performance this year was just exceptional. And as you look back over the history, we've been trending between that 25 to 35 basis points range for some time. And that's really the basis of our guide. And as Zach said in his prepared remarks that we would be really in the lower end of that range. And so that's really the expectation for 26. Derek: Sure. That's Eric: And then just a follow-up question on the deposit beta. You mentioned the 40% beta in the last two of the quarter. Just curious as we're thinking about two more rate cuts, if that's also the right level to be thinking about with incremental cuts on the way down? Thank you. Zachary Wasserman: Yeah. Yeah. That's also a terrific question. It's an area of a lot of focus as you know. And, you know, our expectation is to continue to get a solid down beta, something in the high 30s to 40%, aligned with the guidance we've given. You know, I'll tell you that, you know, beta in and of itself is not our objective function. Our objective function is core funding loan growth really powering the ability to continue to drive peer-leading both loan growth and revenue growth with a great marginal return on capital. And that model is working exceptionally well, and you see no. It's, of course, a competitive environment, but you know, the ability of the teams to execute on both volume growth and disciplined pricing continues to be very strong. Operator: Thank you. Our next question is coming from Chris McGratty from KBW. Your line is now live. Chris McGratty: Great. Good morning. Hey, Zach. Going back to the tech conversation for a second, this quarter, a lot of focus you know, tech wallet, growth rate, percent of revenues. Any I heard you on the, you know, of the three things that you're really investing in. But do you have dollars around what you're putting into tech and the rate of growth? Zachary Wasserman: Yes. Great question, Ken. We're smiling here because Chris, I'm sorry. Because we're our expectation is in some of the conferences later this year later this quarter, truly double click into the investments just to share with you more guys on it. So I won't steal that thunder and give you a number today, but certainly, it's a powerful growth, and we've seen you know, in our view, we're investing in technology in exactly the right places. It's all about customer-facing capabilities, driving both our value-added services, but also acquisition, digital marketing, you know, the question that we just got a second ago in terms of beta, you know, the amount of MarTech capability that we've built over the last several years is really what's enabling us to achieve these dual results of great deposit volume and pricing. So, you know, those are the kind of things that we put our in the technology investments against. I'll come back to you with more details here in short order as we go to these conferences. Chris McGratty: Understood. Yep. We'll wait for that. And then on kind of the balance sheet, a lot of times, you do acquisitions companies. Have certain portfolios that know, maybe don't fit strategically. As you kind of evaluate both portfolios, is there any tweaking that you presume, might happen in the next, you know, quarters as you get to another company a little bit better? Stephen Steinour: Chris, as we looked at both partnerships and combined with the that would do for the portfolios, like it on the whole. And there's not, say, an exit portfolio. There's a little more commercial real estate construction than we would prefer, and we'll manage that in due course. Nothing special. With that. And we've got some great growth areas that we're looking for that will offset anything we end up doing on the construction side. Operator: Our next question is coming from Brian Foran from Truist. Brian Foran: Hey, I'm going to apologize in advance. I'm still on the struggle bus with the guidance. So on expenses, I guess the way I'm trying to think about it is, if I understand the math right, you plan on reporting something like $6.5 billion of expenses this year, maybe $6.46 billion to $6.5 if I take the guide literally. And then as I think about the exit from the year, pushing that up would be the twelfth month of cadence. Pushing that down would be the cost saves. But then maybe pushing that back up is how much of the cost saves are reinvested over the course of the year? So is there any way to relate because people have really different takeaways. Some people are like, gonna exit the year with, $6.6 billion. Some people are we're gonna exit the year at $6.2 billion. Like, is there any way to talk to exit run rate of dollars of annualized expenses for the whole thing pro forma? Zachary Wasserman: I don't have that right in front of me to be honest with you, Brian. My guide that you would see like, I think we're gonna on a full year, see an efficiency ratio of around 55%. And we'll continue to see that improve as we go into '27. The growth rate of expenses relative to revenue should be very attractive as we get through Q4. And also kind of goes back to that question we talked before. Are we on track for earnings power in 2027? And the answer is yes. Brian Foran: Okay. Maybe I have to try the same question on loan growth because I'm tying myself in the same set of knots. Like, we get to the back half of the year, you know, everything's integrated. We're not talking about the year over year. We're talking about quarter over quarter annualized. So Veritex and Cadence aren't in there. Like I don't know if the Cadence number for loans is just where they are today or some assumption in it. But, like, you kinda put this all together. Would you expect to be like, still at 9% annualized loan growth exiting the year like where you are today before the acquisitions? Would you expect it to be slower as you do the integrations, faster as you recognize revenue synergies like any any kind of you know, again, I understand the difficulty of doing a guide on what you're gonna report when things are partial year impacts. But once we get through that, any way to talk to like what you expect the core loan growth rate to look like in the back half of 'twenty-six? Again, linked quarter annualized, not year over year. Zachary Wasserman: Yeah. Yeah. Good question for sure. Look, the way I think about it is our underlying loan momentum has been in the 8% to 9% range in 2025. As we thought about Huntington standalone in 2026, our expectation was around the same amount. And in our long-range plan when I say long-range plan, I typically mean so the next few years after that three years, was of a similar growth rate. You know, one of the strategic themes and rationales for us entering the partnership with Cadence and also with Veritex was that they would expose Huntington to even faster organic growth opportunities over the course of time and create new to invest and build the business from there as well. And so that 8% to 9% to me is a minimum. We would expect to see revenue synergies, growth synergies lift that particularly in the near term. Of course, not giving 27 guidance this morning, but I think that kind of fundamental growth power is at or better as we get into the latter part of '26 and beyond. Operator: Thank you. Our next question is a follow-up from the line of Ebrahim Poonawala from Bank of America. Your line is now live. Vikram: Hello? Stephen Steinour: Hello? Hello? Vikram: Hey. Hey, Graham. This is Vikram. Hey, Steve. Just a big picture question. Beyond all the guidance-related questions. It feels like there's a lot going on at the bank. In terms of banker hiring, a couple of deal integrations. As we look forward, just talk to us in terms of how you feel about just the integration of all this over the next six to twelve months. And I think there's an expectation that Huntington could still be on the lookout for additional deals, how should shareholders think about the potential for more M&A over the next maybe six months? Stephen Steinour: Ebrahim, thank you for the question. We sort of thought that one would come even a little earlier. Initially. But we let's start with we've got two partners. And they are performing exceptionally well with us. The teams are doing great work together. Brant, Dan Rollins, Malcolm Holland, and their teams and our team have come together in a very fundamentally sound and strong fashion. We're off to a great start. We've just completed we are completing the Veritex conversion as we speak. Started over the weekend. We will close with Cadence in two weeks. As you heard from Brant, the org management and personnel decisions are made and communicated. We're moving very quickly. With that. At the same time, the core of the company is performing well, and that's our primary focus, drive the core results. So we're completing these integrations. They don't end at a conversion, but we're completing these conversions over the course of this year, maybe this year a little bit more in terms of culture. But rapidly so we can get at the revenue opportunities that we've talked about. And we've used this term springboard on purpose. We think we have great growth potential in these markets. They're much better on average than the markets we've been operating in. And Texas is very unique, and we come together with a number five share. So we've never been in these markets or markets like these before. So very optimistic, we're very focused on driving organic growth and executing these integrations extraordinarily well. And the partnerships are facilitating that and we're aligned at creating shareholder value. As to other M&A, maybe someday, we've been clear. I think it was the Goldman conference. We're not gonna do an MOE. We're not gonna go to auctions. They have to be strategic in nature where they're adding value and revenue growth. For us. And they have to meet financial and risk metrics. And, you know, if someone approaches us with something of that nature, then we would take a look at it. But we're very focused on driving the organic growth of the business. And that's priority one, two, and three for us. We like the position we're coming into '26 with. And the momentum we have, and we're ecstatic about the quality of the partners. These are two really good banks, great people, coming into Huntington. I think we've got a terrific back half of this decade. Just with these combinations. Vikram: Got it. And while I have you, maybe, Zach, just clarifying the 55% efficiency ratio you believe for full year 2020? Zachary Wasserman: Your voice cut out a little bit there, maybe at the end. I think you said am I confident we'll hit 55% efficiency ratio? Is that right? Vikram: Yep. Yep. 55 for '26. Yeah. Zachary Wasserman: Yep. Very, very confident. Operator: Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Stephen Steinour: Thank you all for joining us today. We didn't mean to confuse you and I hope we've sorted some of that out in the discussion. We're performing very well. We're coming off an extraordinary year. We've got a lot of momentum. And very clear objectives as we move into '26. We've never been better positioned for the future and we're excited about that. And our 20,000 colleagues and soon to be 25,000 are gonna do everything we can to create shareholder value and build the franchise for years and years to come. We look forward to welcoming these 5,000 new colleagues coming to us from Cadence in the next couple of weeks. Thanks for your interest. We'll be back to you mid-quarter for more details on the models, and appreciate again your support. Have a great day. Operator: Thank you. That does conclude today's teleconference and webcast. You may now disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good morning, and thank you for standing by. Welcome to Abbott Laboratories' Fourth Quarter 2025 Earnings Conference Call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star one one keys on your touch tone phone. This call is being recorded by Abbott Laboratories. With the exception of any participants' questions asked during the question and answer session, the entire call including the question and answer session, is material copyrighted by Abbott Laboratories. It cannot be recorded or rebroadcast without Abbott Laboratories' express written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations. Good morning, and thank you for joining us. Mike Comilla: With me today are Robert Ford, Chairman and Chief Executive Officer, and Philip Boudreau, Executive Vice President, Finance and Chief Financial Officer. Robert and Philip will provide opening remarks. Following their comments, we will take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected results for 2026. Abbott Laboratories cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott Laboratories' operations are discussed in item one a Risk Factors, to our annual report on Form 10-Ks for the year ended 12/31/2024. Abbott Laboratories undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott Laboratories' ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com. Note that Abbott Laboratories has not provided the related GAAP financial measures on a forward-looking basis for the non-GAAP financial measures for which it is providing guidance because the company is unable to predict with reasonable certainty and without unreasonable effort the timing and impact of certain items, which could significantly impact Abbott Laboratories' results in accordance with GAAP. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the press release issued earlier today. With that, I will now turn the call over to Robert. Robert Ford: Thanks, Mike. Good morning, everyone, and thank you for joining us. Before discussing our fourth quarter results, I want to take a moment to reflect on 2025, a year that demonstrated Abbott Laboratories' leadership and innovation, disciplined execution, and strategic actions taken to position the company for sustainable long-term growth. Innovation continues to be the foundation of our success. In 2025, we achieved several important milestones that strengthen our position for the future, including regulatory approvals for our Volt and Tactiflex Duo PFA products, a new indication for Navitor TAVR valve, CMS national coverage for Triclip and CardioMEMS, completing enrollment in our pivotal trial to bring a new LAA device to market, filing for FDA approval for our dual glucose ketone sensor, initiating the pivotal trial of our coronary IVL device, starting the launch sequence in EPD to bring biosimilars to emerging markets, and recently starting the launch sequence in nutrition to bring new products to market that meet evolving consumer preferences. 2025 was also a year of disciplined execution. We delivered top-tier margin expansion and achieved our original target of double-digit earnings growth in earnings per share despite the implementation of new tariffs and heightened market challenges in China. Finally, in 2025, we made important strategic moves to shape Abbott Laboratories' future. Our announced acquisition of Exact Sciences will allow Abbott Laboratories to enter and lead in the fast-growing cancer diagnostics market and add a new high-growth business with an attractive pipeline to the Abbott Laboratories portfolio. We expect 2026 to be another year powered by innovation, operational excellence, and strategic execution. As we announced this morning, we forecast the midpoint of our 2026 organic sales growth range to be 7% and the midpoint of our adjusted earnings per share range to reflect 10% growth. I'll now summarize the fourth quarter results in more detail. I'll start with nutrition, where sales declined in the quarter. Abbott Laboratories has been in the nutrition business for more than sixty years. With that history comes experience, not just in times of growth, but in times that require navigating challenges. As I mentioned last quarter, the US pediatric business is seeing an impact from market share loss partly due to the loss of a large WIC contract last year. But our results this quarter underscore a broader challenge, which is the need to reignite volume growth, a challenge many consumer goods businesses face today. Over the last several years, we've seen manufacturing costs in nutrition rise, in part due to a post-pandemic driven surge in commodity costs that remains in our cost base today. We've increased prices to help mitigate the impact of higher manufacturing costs, but those price increases in the current economic environment have become a factor in constraining volume growth. Many consumer goods businesses are facing this dynamic. Higher manufacturing costs led to higher prices, which in turn are suppressing demand as consumers become increasingly more price-sensitive. This path is not sustainable long-term, so we began to make changes in the fourth quarter. Our goal is to transition our business back to one with a more balanced growth profile, with volume growth playing a greater role going forward. In the fourth quarter, we began implementing price and promotion initiatives to help start the process of reigniting volume growth. To further drive volume growth, we are increasing our focus on innovation, which is an area that was deprioritized the last few years given the necessary heavy focus on production and supply chain management in this business. Following the launch of two new versions of Ensure late last year, we expect to launch at least eight new products over the course of the next twelve months. We expect performance in nutrition to remain challenged in the first half of the year with a return to growth in the second half. While this transition back to a more sustainable volume-driven business has consequences on our near-term results, these are the right steps to take to better position the business for longer-term success. Moving to diagnostics, sales increased 3.5% due to the anticipated year-over-year decline in COVID testing sales. Core Lab Diagnostics grew 3.5%, achieving a third consecutive quarter of accelerating growth and building steady momentum as we enter 2026. For the full year, excluding China, growth in Core Lab Diagnostics was 7%, reflecting durable demand in markets around the world. In point-of-care diagnostics, sales grew 7% in the quarter driven by adoption of our high-sensitivity troponin test, which allows for earlier and more accurate detection of heart attacks. Turning to EPD, where sales increased 7% in the quarter. Growth was well-balanced across the markets and therapeutic areas that we participate in, including double-digit growth in India and several countries across Latin America and The Middle East. By focusing on high-demand therapies and faster-growing markets, EPD delivered its fifth consecutive year of sales growth exceeding 7%. And I'll wrap up with medical devices. Sales grew 10.5%. Philip Boudreau: In diabetes care, sales of continuous glucose monitors grew 12% in the fourth quarter and 17% for the year. With sales in 2025 exceeding $7.5 billion, this marks the third consecutive year that our CGM sales have grown by more than a billion dollars. Our success in CGM continues to be driven by strong underlying market fundamentals, a leading position in cost and scale, and an unwavering commitment to market-leading innovation. These factors have led to a continued increase in adoption across all of the various use groups. Robert Ford: In electrophysiology, sales grew double digits in The US and internationally. In December, we announced FDA approval of our BOLT PFA catheter, which represents our first PFA product offering in The United States. And earlier this week, we announced that we obtained CE Mark for our new Tactiflex Duo ablation catheter, which offers both RF and PFA energy to treat patients battling AFib. In structural heart, growth was driven by double-digit growth in Navitor, double-digit growth in Triclip, and double-digit growth in MitraClip. In the coming weeks, we'll achieve an important milestone completing enrollment in our CATALYST trial. This trial is evaluating the performance of the amulet left atrial appendage device compared to oral anticoagulants in patients with AFib. This trial is designed to generate the evidence to demonstrate the clinical benefits of the amulet, which could lead to broader adoption and expansion of the addressable market. In heart failure, growth of 12% was driven by growth across our market-leading portfolio of ventricular assist devices, which offer treatment for chronic and temporary conditions, and growth in CardioMEMS, our implantable sensor used for the early detection of heart failure. Our investment strategy in medical devices is based upon a true two-pronged approach. Invest to sustain strong performance in high-growth segments like diabetes, structural heart, electrophysiology, and heart failure. And we invest to increase the growth outlook in more foundational segments like rhythm management and vascular. While the investments in traditionally high-growth segments tend to get more attention, the investments we've made in our foundational businesses are generating very impressive returns. In Rhythm Management, growth of 12% was led by continued strong uptake of our leadless pacemaker, Aveir. For the full year, growth of 10% in Rhythm Management represents the third consecutive year of significantly outperforming the market. With Aveir and the investments we're making in conduction system pacing and other novel technologies, we see the $10 billion rhythm management market as a great opportunity to capture market share and drive sustainable growth for years to come. In vascular, growth of 6.5% was led by double-digit growth in vessel closure products and growth from ESPRIT, our below-the-knee resorbable stent. For the full year, vascular sales grew 5%, making this the second consecutive year vascular has delivered mid-single-digit growth. With the expected approval of our coronary IVL device next year, we expect growth in vascular to follow a similar pattern of acceleration that we've seen in rhythm management. And lastly, in neuromodulation, growth of 5.5% was led by strong international growth. We turned our rechargeable spinal cord stimulation device. So in summary, despite facing some challenges in '25, we achieved our original target of double-digit earnings per share growth. Our new product pipeline continues to be highly productive. And combined with the strategic steps we took to shape the company for the future, we're well-positioned for accelerating growth in 2026. I'll turn over the call to Philip. Thanks, Robert. Philip Boudreau: As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our fourth quarter results, sales increased 3.8% when excluding COVID testing sales. Adjusted earnings per share of $1.50 reflects growth of 12% compared to the prior year. Foreign exchange had a favorable year-over-year impact of 1.4% on fourth quarter sales, which was in line with our expectations at the time of our earnings call in October. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.1% of sales, which despite the impact of tariffs, increased 20 basis points compared to the prior year. Adjusted R&D was 6.2% of sales and adjusted SG&A was 25.1% of sales. Adjusted operating margin was 25.8% of sales, which reflects an increase of 150 basis points compared to the prior year. Turning to our outlook for 2026, today, we issued guidance for full-year adjusted earnings per share of $5.55 to $5.80. This reflects 10% growth at the midpoint of the range and contemplates an adjusted earnings per share forecast of $1.12 to $1.18 for the first quarter. For the year, we forecast organic sales growth to be in the range of 6.5% to 7.5%. Based on current rates, we expect exchange to have a favorable impact of around 1% on full-year reported sales, which includes an expected favorable impact of around 3% on first-quarter reported sales. And we forecast our adjusted tax rate to be in the range of 15 to 16%. With that, we'll now open the call for questions. Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone. You will then hear an automated advising you that your hand is raised. To withdraw your question, please press 11 again. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. Our first question will come from Larry Biegelsen from Wells Fargo. Your line is open. Larry Biegelsen: Good morning. Thanks for taking the question. So, Robert, on the last call, you seemed comfortable with consensus revenue growth, but you're guiding a little bit lower today. I assume that's related to nutrition. Can you talk about what's changed since the last call? And how you're thinking about the year playing out from a cadence standpoint? I assume, you know, you would expect growth to accelerate through the year given your comments on nutrition and some of the launches. I'll leave it at that. Thanks for taking the question. Robert Ford: Thanks, Larry. I think if I remember, you're the one who asked that question back in October. And you know, when I answered that question, I think consensus was 7.5% top line. EPS was 10%. So today, we guided the midpoint at 7% on the top line, 10% on the bottom. So the midpoint here is half a percent lower than what was consensus. But other than that, nothing's really changed. The EPS is in line with consensus, expecting healthy margin expansions. I'm sure we're going to talk a lot about the pipeline, which is either on target or ahead of schedule in certain products. The balance sheet's in great shape. I feel good about us closing Exact Sciences. So the half-point change on the top line is, as you pointed out, really the change in the near-term outlook, I'd say, of our nutrition business. You saw in our quarter, in our Q4, we had a negative quarter. And as I said in my comments, you know, there's a component of this business. It's a healthcare-driven product portfolio, but there's a component of it, a dynamic of it that is very much aligned with consumer packaged goods. And I'd say the challenges that CPG businesses have been facing are pretty well known following the pandemic. Pretty significant surge in costs between 2022 and '24 to offset that. I think we all went ahead and tried to mitigate it with price increases that obviously drove the top line, but more importantly, I would say, improved or didn't allow the economics and the profitability of the businesses to deteriorate. If you look at our profitability in that business, 2024, 2025, where it was back in 2022, it had that impact. But the higher prices have resulted now in what I see as kind of suppressing demand and lowering the volume growth. And the pressure in the volume growth accelerated, I'd say, as we moved throughout Q4 and consumers became increasingly more price-sensitive. So as I said in my comment, it's not a sustainable path. You'll get down into the spiral if you keep increasing prices. You'll keep on driving volume down. So you know, we could have gone a couple more quarters, maybe nine more months doing this, but it would not be sustainable. And at some point, something fundamentally has to change here. And I just felt that the longer we took to make this change, the more painful it would be. If I look at the strength of the portfolio right now and the growth, all the growth prospects we have, the ability to add a whole new growth vertical, I just thought that the timing was right to do this and do this as quickly as possible to get through it. So we began implementing price promotion initiatives that are going to help invigorate growth. I think early signs right now, Larry, are encouraging. Obviously, we're going to have to keep monitoring that. And then we're also launching a lot of new products to be able to kind of support that volume growth. We haven't had to reallocate R&D resources to be able to do that. You know, this is a business that operates around 2, 2.2% of R&D, so we just reallocated within that budget to focus on new product development. So we'll have a couple of quarters here where growth in nutrition is going to be challenged. And then in the second half, we'll return to positive growth. And I got confidence in the team that's in place today that we can transition back to more of a volume-driven growth business. If you look at what we did back in 2022 when we had supply disruption, it took us about nine to twelve months to get our share back. I don't think it's going to take that long, so I think it's about a six-month process here of reshifting that. And that's really what's creating, I would say, or part of it, what's creating a little bit of this first half, second half dynamic in our growth forecast. But outside of that, Larry, where we were in October, nothing has really changed. In fact, I'd say a significant majority of the company here is either maintaining high single-digit top-line growth or low teens growth or they're accelerating their growth versus 2025, whether it's our cardiovascular franchise or diabetes products, EPD, our pharma business, we're going to be lapping the core diagnostic headwinds that we faced last year. If you remember, we had about a billion dollars of headwind that we faced last year in our diagnostic business, whether it was COVID and the China challenges. That's mostly going to be behind us. We're going to be adding another high-growth vertical with Exact Sciences. So I think there's a lot to like here. I think there's a lot of growth here. And while we know we've got some work to do in nutrition, I can guarantee you that we're not distracted by that from all the great opportunities that we have here. So like I said, I think we've got a good setup for 2026. A lot of accelerating growth as we progress through the year. Larry Biegelsen: Alright. Thank you very much. Robert Ford: Thank you. Operator: Our next question will come from David Roman from Goldman Sachs. Your line is open. David Roman: Thank you. Good morning, everyone. I did want to start, Robert, on the pipeline and then maybe just ask a follow-up question, if we have time, on the guidance and the outlook. You did talk about some of the approvals in the EP business. And most specifically, can you help us sort of frame the Abbott Laboratories portfolio in EP maybe looking back six months, where we are today, where you are then six to twelve months from now, and contextualize kind of the portfolio relative to competition and where you see the biggest opportunities to accelerate growth there with Volt, Tactiflex Duo, Tactiflex VT, I think even NextGen Agilis, InsightX, etcetera. Robert Ford: Sure. I mean, I think that I do have to put that into context. I mean, if you go back three years, David, there was a lot of concern about our franchise, you know, that was growing double digits that was going to, you know, be flat or even negative because we didn't have a PFA catheter. You know, we developed a strategy. The team put together a strategy. We presented it to our board three years ago in terms of what we were going to do. And over the last couple of years, even without PFA products, we've been able to actually sustain our double-digit growth rates, you know, twenty-four and twenty-twenty-five without a PFA catheter. So, the strategy that you're now referencing about our PFA products, that's just part of our strategy that we presented, you know, three years ago. And laid out here. So we began launching the PFA product line in a much larger installed base of capital and mapping systems. The launch of Volt in Europe has gone very well. I'd say when we talked about developing Volt, we said let's look at where the shortcomings of our first-generation products are and can we build those into Volt. And, you know, the feedback that I can see from the European market and, quite frankly, through the last couple of weeks as we've begun our limited market release here in The US is two things keep jumping out pretty continuously. One, the elegance, the ease, and the smoothness and the predictability of the mapping integrated with the catheter, the visualization, all of that that we spent a lot of time putting together, I continue to hear very positive feedback on that. And then, you know, the ability to potentially do these procedures with sedation versus general anesthesia, that is a recurring theme that I keep on hearing here. So, I'd say the Volt launch has gone very much aligned to what we expected as we were putting the program together. This year, we'll have the launch of Volt here in The US and Tactiflex Duo internationally. I think it comes down to we always wanted to make sure that we had a toolbox approach here for the physicians so they can have choice and they can have greater flexibility about how they use these products. I'm sure that there'll be cases and types of patients and patient profiles that will lend itself more to a balloon and bask type design, and there are going to be types of patients in situations where Tactiflex Duo with its dual energy source will be preferred. And, ultimately, it's going to be up to the physician to make those decisions. But I like the fact that, you know, the team, as they put the strategy together, that we would have both these products. I think you raised this point very well, which is I don't think that there is a company right now that's better positioned in terms of completeness of the portfolio than what we have. You know, whether it's technology or the scale and the infrastructure, starting with, you know, the capital placements that we've got. The incredibly competent clinical specialists that we have out in the field that have shown their value to our customers right now. We've got both RF and PFA products. We've got all the elements, whether it's catheters, patches, etcetera. Introducer sheets, all of that you reference. And on top of that, we've got an LAA device, which is I would say is becoming pretty clear that if you want to be a leader in this space, you can't just look at having a PFA catheter. You've got to have the full portfolio including this device. Right now, it seems like 25% of LAA procedures are done concomitantly. So I think if you put all of that together, the portfolio that we've assembled combined with the resilience of what this team has done and how they've executed, I've got high expectations for this business this year. The team knows that. I expect that we should grow at least in line with the market, David, which I expect I think it seems like the forecast here is mid to high teens. So I think we're in a really good position and I'm excited to see the second part of the strategy that we put together three years ago. And we're really excited to kind of, you know, put that second part of that phase into action now. David Roman: Very helpful. Maybe just a follow-up on the guidance. I think we all know that you don't solve your guidance to meet short-term consensus. And you are committed to achieving your commitments. But as you've thought about putting together the outlook for 2026, considering some of the different variables that you faced over the past couple of quarters, like how did you think about risk adjusting the outlook? And maybe just help us think about the considerations in the guidance and maybe just your philosophy as you kind of put the outlook together here. Robert Ford: Well, I mean, listen. I think if you look at our growth for 2026, I mean, we've always targeted high single digits and double-digit, high single-digit top line, double-digit bottom line. That's our investment identity, and we've kind of followed through with that. If you look at our 2026, I think the way you need to kind of look at it is you've got a very big portion of the company that is going to, you know, that we're sustaining that growth. In some cases, it'll be accelerating, but you know, a large portion of the company sustaining the high single-digit growth, whether it's in cardiovascular, whether in diabetes. We've got a bunch of new products launching to be able to support, you know, those kind of growth profiles in the business. EPD, supporting, you know, with the biosimilar launch, you know, that high single-digit kind of growth rate. So you've got a lot of large portions and even some geographies that, you know, we can sustain that growth and we feel that we're supporting it with product launches and investment to sustain what I consider a pretty differentiated growth rate. Then you've got the second bucket, which is, I'd say, an acceleration in our diagnostics. And all that really is is we've been doing very well taking share in our Core Lab business across the world. And what we had a challenge with last year is with, you know, COVID coming down, 2024, I think it was, like, $750 million coming down to $250 million. So you had half a billion dollars headwind there, and then you had another, you know, $400 million, $500 million headwind in China VBP. Right? Our forecast for COVID is, you know, around that same number, around $200 million. So I'm not expecting, you know, any significant growth or decline. And, you know, a lot of the VBP, you know, they come in waves. The vast majority of our sales in China have gone through the VBP in 2025. So we really felt that impact in 2025. There's going to be more VBPs in China, but the shares that we have in those waves are very, very small compared to what we have. So you've got this whole lapping of our diagnostic business. And as long as we keep on doing what we're doing in the United States, Europe, in Latin America, and other parts in Asia, which we have been doing, you're going to see a nice acceleration in our diagnostic business. And you started to see that throughout the year as the VBP impact started to dissipate a little bit as the year progressed. You've got then, obviously, you know, as I spoke quite at length here about, you know, this transition with nutrition, you've got, you know, probably one or two quarters here where growth is going to be challenged. But I am confident that what we're going to be able to do here is reignite volume growth, and you'll see that business get back to growth. So those elements there, Dave, really look at it and say, okay, you've got continued momentum in a large portion of the business. You've got some lapping that's going to be happening. And then we've got this transition, which I consider to be pretty short-term here, but a couple of quarters, to be able to get to this guide on the nutrition side. And then I'm sure we'll talk about Exact Sciences, but that's another factor here to be able to add on, you know, $3 billion plus business growing 15% a lot of growth opportunities for us. So that's kind of how we looked at it, at least from a top line. And then having that flow through down to the bottom line, making investments in the areas that we need to, and nice gross margin and op margin profile expansion too. David Roman: Great. Thanks so much. Appreciate all the perspective. Robert Ford: Thank you. Operator: Our next question will come from Robbie Marcus from JPMorgan. Your line is open. Robbie Marcus: Great. Thanks for taking the questions. Two for me. Robert, last week, when we were talking, you said you expect CGM to continue to track higher at about $1 billion a year. That would put 2026 somewhere in the low to mid-teens. Is that the right way to think about CGM growth next year? And maybe if you just want to give your updated thoughts on market growth and Abbott Laboratories' position there. Then I have a follow-up. Thanks a lot. Robert Ford: Sure. But you said next year, you mean 2026. Right? Robbie Marcus: Yes. Thank you. Robert Ford: Got it. Yeah. Yeah. I mean, I think yeah. There's all this debate that I read about that the market's slowing, and I get if you're just looking at percentages and that's how you base yourself off it, then I guess if it's that myopic, then I think okay. I understand the conclusion. But I don't consider growing a billion dollars every single year and doing it four years in a row to be slowing down here, Robbie. I think the math will work out to what you just kind of highlighted there. In the kind of low teens. But I think there's still a lot of opportunity for penetration in this both from a market perspective, but then also from our opportunity, you know, our ability to drive market share in and market expansion. I think that if you look at across all three, all three patient groups, whether it's the intensive insulin user, you know, the basal insulin user, and the non-insulin user, all of those areas still there's so much penetration to be able to have here. And you can see across the world, not just in The United States but across the world, you know, a lot of movement whether it's patient groups, healthcare systems that are, you know, looking to expand the use and the adoption of the technology into all these patient segments. You know, The US gets a lot of attention and it's an important market and, you know, there's a lot of great opportunities for us there in terms of the non-insulin user reimbursement opportunity. I continue to see nice progress in this process. Seems to be a lot of support to do this. And the data that we've shown, like we've published three studies already that show that this patient segment also benefits with lower A1c, greater time and range, all the things that have driven kind of reimbursement in the other segments. I think that this is a very strong opportunity for us here in The US. And we'll see how it plays out. I think we'll see some language in the first half and then how it all plays out with comment periods. You know this Robbie, comment periods. There's all of this. So I'm not baking that into my guidance. But, you know, I can tell you we will be 150% ready to execute whether it's having manufacturing capacity and having scale and the position in the primary care side, which is where that'll probably play out more. We'll be ready. So that provides an opportunity to, you know, to outperform, you know, that consensus forecast. I think on the intensive insulin user side, still think there's penetration to be had and adoption to be had, especially in international markets. I think it's only about 50% penetrated. So I think there's still a lot of opportunity to do the work that we're doing there. Obviously, scale and cost matter in the international markets, and I think we've got that position set. And then, you know, as you look at what I think is more specific to us, the opportunity to bring in a very product to look at market share, shift in a segment that I'd say we're probably a little bit underrepresented from a market share perspective, which is on the pumper side with the launch of our GKS sensor. I think that's going to provide us a great opportunity. I'm not going to try and pinpoint the exact quarter here, Robbie. When we get approval, we'll issue the press release, and we'll be out. But we've been working hard already concomitantly with the regulatory process, you know, with KOLs, with, you know, with physician groups, with payers, and I think there was an article that came out in The Lancet in January talking about the beginning of this year talking about, you know, the importance of measuring continuously ketones as DKA is still a major care gap here for people with diabetes. I think you've got a big opportunity here with this product for market share conversion. I think one of the surprising things for me in this as we started to really double click on these patient segments is, you know, we talked about the SGLT2 population. We did some analysis in The US. You got about 6 million SGLT2 users in The US. And if you cross-reference their usage of CGM through, you know, through all the databases, only about a million of those six are on CGMs. So I think there's going to be an opportunity here also to kind of create market expansion with this product. So not just share capture, but also market expansion. So this market is still very robust. It's becoming larger, so I get the large law of big numbers kind of lowers those percentages, but you just look at it from a penetration perspective, Robbie, there's still so much to do in all these segments and different geographies that, you know, we're still very excited and making big investments whether it's in sales and marketing, clinical, R&D, and manufacturing, because we still think that we're this is still I'm not going to say it's the first or second inning, but we're far away from being from the seventh inning on this one. So I think there's still a lot of opportunity here. We're in a good position. Robbie Marcus: Great. Maybe just a quick follow-up. It's great to see you're still able to do double-digit EPS growth in 2026. I would imagine that's coming through the top line and margin expansion. Should we think about the magnitude of margin expansion and the drivers of it? Philip Boudreau: Thank you. Yes. I'll let Bill take that. Philip Boudreau: Yeah. Thanks, Robbie. You know, I couldn't be more proud of what the team accomplished in 2025 as Robert outlined. You know, overcoming uncertainties, volatilities, and whatnot still drive margin expansion. And that commitment to the execution and excellence there maintains in 2026. Expect to do more of the same, focus on the things that are strategically aligned and adhere to where we continue to look at a 50 to 70 basis point improvement in operating margins every year, and that's kind of what we've got built into this and fully expect we'll do that through both gross margin expansion as we've done, but continue to gain leverage in the P&L where appropriate. So that's kind of how we've constructed that double-digit earnings. Appreciate it. Thank you very much. Thank you. Operator: Next question will come from Vijay Kumar from Evercore ISI. Vijay Kumar: Hi, Robert. Good morning, and thanks for taking my question. My first one on maybe on the product side. Aveir, like you mentioned, another double-digit quarter. Just curious on where are we from a penetration standpoint, what innings are we in? And you know, how durable is this double-digit growth in a category that's, you know, a pacemaker, low single-digit growth category, and you guys are doing double digits? Robert Ford: Sure. Well, I made some comments about, you know, we look at this rhythm management $10 billion market as actually an opportunity to grow. So we have been making our investments. Aveir, obviously, is a big driver of that, but we're making investments in other areas of the portfolio to kind of be able to support our ability to take market share and grow at a differentiated rate here. To your question on penetration, listen, the global low voltage or pacing segment market is around $5 billion. Whatever, $4.8 to $5.2, depending on what you're looking at, but let's just call it $5 billion. I'd say Aveir is about 10% of that right now. So, you know, early innings here for us for sure. And as I said previously, when we began this process, I wasn't interested in just getting a flash in the pan sales growth for, like, a year or six quarters. So we really worked hard, and the team did an incredible job to really establish a new standard of care, and get physicians trained. It's a different type of implant. So what we're seeing here is really nice growth in places that, you know, a year, year and a half ago we began the training process and really seeing really strong penetration there. If you look at just single chamber, I think right now The U.S., single chamber pacing, which is about 15% of the total market, that's about 50% penetrated. So there's still a long opportunity here in The U.S. and quite frankly, globally too. So I think the team has done an incredible job here where we've launched new products. We'll continue to launch new products in this space, and we think that this is the next standard CRM is these devices that are communicating with each other, that can be implanted transfemorally and don't use leads. The clinical evidence in terms of what they're able to deliver is pretty impressive right now. So I think we've got a lot of investment here that will support this type of differentiated growth rate. Vijay Kumar: Yeah, that's helpful, Robert. And my follow-up on, or I guess the second question is on cap allocation. Any updated thoughts on Exact Sciences deal close timing, you know, dilution? I think you mentioned 20¢. You know? And when you think about that, your leverage levels, it's still, you know, post-deal, it'll still be pretty modest. You still have capacity. I'm curious when you think about M&A versus divestitures or spin-offs, you know, MedTech right now seems to be spin-off seems to be the flavor of the season. I'm curious how you're thinking about those decisions. Robert Ford: Well, you put a lot into that one there, Vijay. Let me see if I can unpack that. I think from a capital allocation perspective, you know, I've always been pretty consistent with our approach. I don't have a formula that x percent goes here, y percent goes there. We are committed to a growing dividend, and we did that again for 2026 when we announced our dividend back in December. So we're growing our dividend. But outside of that, you know, we'll allocate our capital in terms of what we believe is the best balance between short-term and long-term for our shareholders where we can create value. Regarding M&A, listen, my focus right now is integration, closing Exact Sciences integration. That's going to be my primary focus. I think post-close, our gross debt to EBITDA ratio will be around 2.7 times. So to your point, we still have plenty of capacity. But I think in the near term, I'd say focus on integrating Exact Sciences. And if there's opportunities for us to add, there'll probably be more tuck-in type size deals to take advantage of. Regarding the status right now of Exact Sciences, I think we're making great progress towards closing. They've submitted, we've submitted all of our required clearances over here. There's a shareholder vote on February 20. So right now, I'm not changing any assumption regarding timing of close or kind of EPS impact. And, you know, as we integrate and as we put the, you know, as we integrate the business, then we'll go updating it as we go along. But right now, there's no change in terms of timing and in terms of dilution. So I read your note last night, Vijay. I thought that you would have been asking a question about multicancer early detection and the opportunity that exists. I largely agree with your report. I think this is going to be another great opportunity for us. And it's one that as we looked at the deal, says, okay, greater reimbursement of this type of test will really make this a very, very large segment. I think the way I see this is, you know, the same way that we have our lipid panel test every year, the same way that we do a cardiometabolic panel or a white and red blood count panel every year. You know, after a certain age, I believe that if the product is right, performs right, and it's priced the right way, I just envision this being that type of test. So I think that if that becomes the case, I think your forecast is way under cold even on the upper side. Vijay Kumar: That's helpful comments, Robert. Thank you. Robert Ford: Thank you. Operator: Our next question will come from Danielle Antalffy from UBS. Your line is open. Danielle Antalffy: Hey, good morning, everyone. Thanks so much for taking the question. And Robert, just two questions for you on nutrition. Appreciate all that you're saying about the strategy there going forward. But I guess the first part of the question is, what gives you confidence that these are the right prices that you're landing at today to drive that volume increase? Like, did you guys do I appreciate it's global. So imagine it differs by market. And then the second question is now and tell me if I'm wrong here, but presumably nutrition has a different profitability profile and maybe talk about whether, how it changes your view about how this fits into the entire Abbott Laboratories portfolio. Thank you so much. Robert Ford: Sure. Regarding the pricing, so we did some pricing work just before Thanksgiving in time for, you know, what usually is a pretty busy kind of retail activity. And so we did different testing here in The United States. We did different testing internationally also. We got the results back on The US side pretty quickly. You get to see the impact pretty quickly. And like I said in the comments, I think the early signs are encouraging. But I also said, hey. We gotta keep monitoring this. You gotta keep monitoring it for the consumer. You gotta keep monitoring it for competitive activities. But I think right now, based on what we have, I think we've kind of called it right. And, you know, regarding, you know, kind of allocating expenses, listen. We don't have a cookie-cutter approach across all the businesses. You know, it always depends on, you know, momentum, opportunity, the balance of the short and the long term, and so we take a very kind of detailed view in terms of how we're allocating. Yeah. The profitability has improved in this business. I'd say it's probably from a profile perspective going to be in line with what it was in 2025. We've obviously got some adjustments in our spend level and learned how to spend a little bit better, and we did that also in Q4, shifting some of the focus from kind of, you know, marketing and brand to a little bit more kind of price and promotion. At least for these next six months. And that way, we're able to at least kind of maintain a kind of steady profile over here. Danielle Antalffy: Thank you. Robert Ford: Thank you. Operator: Our next question will come from Matt Taylor from Jefferies. Your line is open. Matt Taylor: Sorry. Good morning. Thanks for taking the question. I wanted to start with diagnostics and see if you could unpack the dynamics there a little bit more. You touched on the China headwinds, in VBP and mentioned some smaller programs or categories there. What's the outlook like for diagnostics in China? It does seem like the rest of the world's doing fairly well. But what do you foresee for China growth this year and next in diagnostics? Robert Ford: Well, specifically in diagnostics, like I said, I think we've gone through what I would consider the bulk of our VBP based on the different, you know, the strength and the market share we have and the different aspects. The way they're going about this is they're just looking at categories of assays and then kind of implementing it in the first two were the ones that we had, you know, over 40, 45 market share in those markets. So we kind of felt that pretty significantly. I think the next big area of VBP is going to be on your regular kind of core lab oncology testing, and, you know, we have very little market share over there. So listen. We put a new management team in place there. Put our most experienced commercial person that is driving that business. We've done a lot of work there between working with our distributors, segmenting the market, looking at our product portfolio, looking at different types of product offerings, you know, new product offering versus, you know, legacy product offering. So I think the teams have done a really good job there. And my expectation with that business going forward is, listen, I'm not expecting, you know, I'm not expecting big growth out of it. All I need for it is to be pretty stable. And it being stable, I get to have the other parts of the portfolio that are accelerating. Our US business is actually done better than what it's done in the past, so we're capturing market share over there. Our Latin America business is doing better than what it's done in the past, capturing share there. Our European business is continuing to grow and got a good position over there. So I'd say the outlook of that business is we will be, I'd say, single-digit growth this year versus kind of where we were in 2025. And if you remove China, again, this is a full-year view. If you remove China, then you're in those you're in that kind of 7 to 8% kind of range. So I don't like doing that, Matt, because, you know, China is part of our business. But you'll see an acceleration even with China just because it's a little bit more stable versus where it was last year. Matt Taylor: Great. Thanks. And maybe I could just ask a follow-up on diabetes. You talked about some optimism for the outlook for the market and specifically around the non-insulin type two coverage. We've seen the guidelines change, and so I definitely see a potential for that coverage to expand significantly. You mentioned you've seen some progress in the process. And I guess I was wondering how you think that could play out in the first half of the year, what forms the new coverage could take, or any other thoughts that you had on that? Robert Ford: I don't want to get ahead of myself. What I can tell you is, listen, there's definitely support. There's support from the ADA. There's support from other physician groups. Okay? And their support because the clinical data is backing that support up. Right? I mentioned that we've got three studies that we did with that patient segment and it shows this improved A1c and this better time and range. So I think the support is backed up by clinical evidence and you've got a US HHS and CMS that sees the value of this type of technology, sees the value of being proactive in managing your health even if you're not taking medications or you're not taking insulin, bringing this type of technology improves outcomes. So you have a receptive CMS. Let's call it like that. Like I said, I think you're going to see some sort of language, Matt, in the first half. Okay? But I know how these things go. We've gone through them so many different times at different parts of the product. Language will come out, then there'll be a ninety-day comment period. Then there'll be a sixty-day period to be able to evaluate it. And right now, could that be a different process? There could be a different process. It could be a much shorter comment period. It could be a much shorter implementation timeline. Because there is this support and desire to bring this to more people. But like I said, I'm not going to bake that in. I'm not going to bake that in just yet, but I am being prepared. That means the team is prepared. I mean, if it happened next week, I'd tell you they'd be prepared. So we're doing a lot of work there. I think the key aspect as you think about that expansion is that it's going to happen predominantly in primary care. So how well are you set up? How well is your sales force deployed? How well is your integration into the healthcare systems with Epic and other another. So that's going to be an important part. And outside of that, I think we should just be, think, very enthused I mean, very enthusiastic that this will happen. Whether it happens in the second quarter, the third quarter, for me, like, I'm thinking about this. This is going to be a huge opportunity for this market, not just in The US, but globally for years and years to come. So let's just get it right. Matt Taylor: Great. Thanks so much. Thank you. Operator: Thank you. Our next question will come from Travis Steed from BofA Securities. Your line is open. Travis Steed: Hey, thanks for taking the question. Maybe to spend some time talking about in MedTech kind of the macro procedure environment given some of the worries on APA subsidies. And then I'll just go ahead and my second question out. When you think about for total Abbott Laboratories and growth over 2026, we think about more Q1 first half being more in line with kind of the Q4 growth and then improve from there over the second half? Robert Ford: Yeah. So, yeah, I think that's probably I think that's probably good. I mean, think you know, sometimes these puts and takes, you know, it kind of just masks, you know, sometimes it feels like you're better than what you are because you're lapping something, you know, So I tend to look at it also on a two-year stack basis. So if you look at it at a two-year stack basis, it looks pretty, you know, there's some acceleration. In Q3 and Q4, but not to the extent, you know, without, you know, just on a one-year, one-year basis. But I think that's the right way to look at it. You know, obviously, we're always striving to do better, but I think that's a good it's a good starting point. What was your other question on med tech volumes? Yeah. Listen. I think I read some report that there were some concerns about med tech volumes in Q4. You know, we just reported our Q4. You're going to have a bunch of med tech companies that will report over the next couple of weeks. I would be extremely surprised if you hear that volumes were short in Q4. Our volumes were really good in Q4 across all of our categories. Even what is considered what we call, you know, more foundational or traditionally more slower growth kind of segment. So I think the evidence on our print and our guide is not suggesting that the med tech volumes are slowing, and I think there continues to be given the innovation that's happening in the space, given the clinical evidence that's being generated with that innovation, I still see this as a very attractive segment, not just for, you know, this year or next quarter, but for many, many years to come. Travis Steed: Great. Thanks a lot. Robert Ford: Yep. Operator: Thank you. Our next question will come from Joanne Wuensch from Citi. Your line is open. Good morning and thank you for taking the question. And I think I'm allowed to still say happy New Year. Two questions. I'll put them right Thank you. I'll put them right up front. EPD is sort of held up there in high single digits pretty consistently, but the macro landscape getting a little bit more complicated as we sit still here. I'd be curious if you see anything that we need to sort of be aware of over the next twelve, maybe twelve to eighteen months. And then my second question has to do with structural heart. Looks like you've multiple products, we'll call them multiple shots, and goal is keeping that growth rate going nicely. Anything you want to call out in particular or anything we should be looking at for the upcoming medical meetings? Thanks. Robert Ford: Sure. Regarding EPD, I mean, I think this team is incredibly resilient and I get that there's some concern about geopolitics going forward, but let's face it, Joanne. I mean, there's been macro challenges at least since I've been in this role for the last five years. And so yes. We gotta pay attention to them. Yes. We gotta navigate. But I'm going to rely heavily on a team that has shown that they can actually do that and do that in pretty difficult circumstances already. And continue to be able to drive the business in that, you know, seven, eight, 9% range here. So yeah, it's we gotta be mindful of it, but this is a team that on at least in these markets, have proved to be very resilient, have deep connections in the market, deep relationships, you know, clinical, distribution wise. So, and now that we're bringing our biosimilar portfolio into these markets, biosimilars are now the fastest growing generic kind segment. I feel good about this business. I think, you know, the idea of bringing this differentiated portfolio in a team that has done extremely well in navigating all of this. I think we've got, you know, also strong aspirations for this business. So, yeah, we'll keep an eye on out, but I don't think that, you know, it's something completely new for us or this business. We operate in 160 countries. We're truly a global company. So we will have to figure it out. So and then I think your question on structural heart, yeah, I mean, this is an area that we've invested heavily over the last couple of years. We've developed what I would consider best-in-class portfolio across all three valves. And I think we've got a lot of upcoming, you know, upcoming growth catalysts that will move its way through. I think we've got great new products with Navitor, Triclip, Amulet. Most of these on the early are, I believe, still in their early cycle. Yep. You guys always ask would ask me about, like, when will MitraClip grow or get back to growth. I just clearly say we did double-digit growth in MitraClip. I think that's a result of some of the guideline changes that we're seeing and kind of reigniting some of the growth here in The US. But you got a lot of we got a lot of things going on in this business. We had label expansion in Navitor and MitraClip. Got a next-generation repair technology coming out with both MitraClip and TriClip, fifth generation. I mentioned guideline changes to MitraClip and Triclip. That's having an impact. We just got approval or got approval for Triclip in Japan. That's a whole new market for us that we see a huge opportunity, a big opportunity for us, and we're launching that as we speak in Q1. We've done some bolt-on M&A in this business. I think I mentioned this last time. We acquired a company called Lara Lab, which is an AI-powered imaging interventional cardiology company that's we're integrating that into our product offerings now for pre-procedure planning. So I think that's going to help also since imaging is such an important part in these procedures. And then the pipeline looks really good too. We've got our next-generation amulet. Expect to be launching that beginning of next year. We're going to go into trial, into our IDE trial with our balloon TAVR in the second half of this year. So, again, as I'm thinking about I know what's going to launch in 2027, and I know the impact that those launches are going to have in terms of our growth rate, and we're building our pipeline to be able to ensure that we can sustain that growth in 2028. And I look at this Balloon TAVR program as really being important to do that. And then we're also going to start our IDE trial for our trans-mitral valve replacement program too, which I think is going to be best-in-class. So I think this team has got not only an incredible pipeline to work with, but we've also been making the investments on the clinical side, clinical teams, sales reps, across the world. So I think we're well-positioned in our structural heart business. Crystal, we'll take one more question, please. Operator: Thank you. And our last question will come from Josh Jennings from TD Cowen. Your line is open. Josh Jennings: Just keep it to one on capital allocation, starting to circle back. But I think the focus for your team, Robert, has been to kind of look at inorganic ads for the devices and diagnostics franchise that played out with the Exact Sciences acquisition. I mean, should we be thinking that that remains the focus? Or is the nutrition recovery can you can that business get back to mid-single-digit growth without any business of external business development initiatives? Thanks for taking the questions. Robert Ford: Sure. Yeah. Listen, I'd say the capital allocation regarding M&A and kind of our focus is, you know, it's going to be in those two areas. Right? Med tech and diagnostics is where we see an opportunity. I don't consider a need for inorganic in, you know, in our nutrition business to execute the strategy that I just described, which is to more emphasis on volume growth. I think we've got the right products, the right brands, and the right teams in place to be able to kind of do that. We know, I think the biggest investment that we're making is, you know, we're seeing the impact of that now. Which is, you know, addressing kind of, you know, price points and doing it comprehensively across the world so that we, you know, we can get everything kind of reignited back to volume growth. So I'd say that's the focus is med tech and diagnostics. So I don't think anything changes there. So I'll close here with a few comments. Listen, we've got I think we delivered a pretty strong year in 2025. Obviously, there were challenges. There'll always be challenges. We delivered on our original EPS target of double-digit, healthy margin expansion. I think I've spent some time on this call talking about our high and how we think about our pipeline and ensuring that we have a nice cadence of pipeline going forward. Not just what we're launching this year, but what we're investing in this year so that we can be ready to launch in '27 and '28. So I think the pipeline has been very productive and we took a very important strategic step to shape Abbott Laboratories for the future, with the announcement of the Exact Sciences acquisition. I think that's going to add a whole new growth vertical for Abbott Laboratories. And I think that cancer diagnostics is going to be a very important clinical and medical need for society, for global society. So I think we're going to be well-positioned there and I feel good about the timing and everything that we put in place there. So as we transition to 2026, yeah, I think I highlighted here, we've got a lot of businesses that are going to sustain what I would consider pretty differentiated growth rates high single digits, teens, and we can support those with the investments we made and the product launches that we've got. And then we've got some large businesses that are going to have some inflection points and acceleration, whether it's Core Lab or even our electrophysiology business here. So I feel good about what we've got put in what we've laid out here in terms of our plan. Obviously, we strive to do better than that, and there's opportunities to do better than that. But I think as I sit here in January, this is a good starting point. And, with that, I'll wrap up, and thank you for joining us. Thank you all for your questions. This now concludes Abbott Laboratories' conference call. Mike Comilla: Webcast replay of this call will be available after eleven a.m. Central Time today on our website abbott.com. Thank you for joining us today. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.
Operator: Good morning, ladies and gentlemen. And welcome to Live Oak Bancshares Fourth Quarter 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference call over to Gregory Seward, Live Oak's General Counsel. Please go ahead. Gregory Seward: Thank you, and good morning, everyone. Welcome to Live Oak's Fourth Quarter 2025 Earnings Conference Call. We are webcasting live over the Internet, and this call is being recorded. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investorliveoakbank. You can go to the events and presentations tab for supporting materials. Our earnings release is also available on our website. Before we get started, I'd like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from our expectations are detailed in the materials accompanying this call, our SEC filings. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliation of those measures to GAAP measures, can also be found in our SEC filings and in the presentation materials. I will now turn the call over to our President, Vijay Moesch. Vijay Moesch: Great. Thanks, Greg. Good morning, everybody. Thanks for joining us. Let's get started on slide four. 2025 was quite an interesting year. And here at Live Oak, I'm really, really proud of the way we navigated through those interesting times. Macro uncertainty persisted throughout the year. Whether it was Doge or tariffs or uncertain economy and ultimately three rate decreases from the Fed late in the year. We continue to navigate through a small business credit cycle and our loan portfolio showed continued credit stabilization over the course of the year. We significantly improved our operating processes and controls. We successfully executed on our first preferred offering. And we finished the year nicely with some outside venture gains from our ventures portfolio. And yet even with that busy and potentially distracting backdrop, we produced some excellent results as you can see on slide five. A few of the biggest highlights were record loan production, 17% loan growth, 27% core PPNR growth, 17% revenue growth, and 13% tangible book value growth, in addition to accelerating our momentum in our key growth initiatives of Live Oak Express and checking. I'm particularly proud of this two-year view of our production on slide six. 57% growth in loan production across both our small business and commercial groups and importantly, strong pipelines heading into 2026. And as proud as I am of those production results, what matters most is how you translate that into profitable operating leverage. And you can see on slide seven that those results are simply outstanding. With adjusted PPNR of 27% over 2024 and adjusted EPS up 49%. New customer acquisition and growth like this doesn't just happen by accident. Our people and how we deliver excellent customer service make the difference. Our goal is to continue this momentum and deliver earnings outcomes that are more consistent and sustainable over time. While credit has been top of mind for us and for investors over the past year, perspective is always important. And on slide eight, you can see our credit trends over ten years relative to all other SBA lenders. And while default rates had moved higher over the last two years, as PPP and stimulus tailwinds have burned off, and rates rose rapidly, Live Oak's performance has consistently been well ahead of peers. Thankfully, we know small businesses and are great credit managers. We're hopeful that these trends start to moderate back towards the long-term trend lines sooner rather than later. Finally, we continue extending our customer product offerings with checking and small dollar SBA loan capabilities. Both of these efforts launched in early 2024. And in just 24 months, our teams have made significant gains in winning customer checking relationships and serving more small business borrowers. At the end of 2024, only roughly 6% of our customers had both a loan and deposit relationship with us. Today, that percentage is 22%. And we've got a lot more runway to travel. On the small dollar 7(a) front, what we call Live Oak Express, production is ramping up meaningfully and will continue to do so. These loans are also very desirable on the secondary market. That are leading to nice gain on sale increases. There's a lot more upside to this business as well. We're just starting. I couldn't be prouder of how our people are taking care of customers making our operations better and profitably growing our company. Thank you to all Live Oakers for the momentum that they have built heading into 2026. And with that, Walt, how about running through some of the financial highlights for the quarter? Walt Phifer: Thanks, Vijay. Good morning, everyone. As outlined on Page 11, we had an outstanding end to our 2025 campaign. With Q4 producing $44 million of net income and $0.95 of earnings per share, both of which were approximately three times 2024. Our strong performance was aided by excellent growth in core profitability trends, as seen in both our reported and adjusted PPNR improvement year over year. Generally improving credit trends and our fourth consecutive quarter of lower to stable provision expense and $28 million of net gains in our ventures investment portfolio primarily driven by the $24 million gain from the Aperture sale. Growth remains excellent. As Q4's loan production of $1.6 billion capped off our highest year of loan production in company history with $6.2 billion driving the 17% annual loan balance growth. Outstanding loan origination that you just won't see replicated broadly across the industry. And we love to see the progress across our two initiatives of growing business checking and originating Live Oak Express loan. Business checking balances of $377 million doubled year over year, materially benefiting our interest expense line, while Live Oak Express contributed $12 million towards our gain on sale totals in 2025. Let's get into the details on the following pages. Page 12 provides a financial snapshot of our Q4 earnings results. With quarter over quarter demonstrated improvement across all major profitability and growth metrics. On the bottom right of the page, you will see several notable items, included within our reported results. Headlined by the $28 million net investment gains from our Live Oak Ventures investment portfolio, In addition, we had approximately $11 million of offsets from warrant losses, capitalized software accelerated depreciation, severance, and allocation of funding to our donor advised fund. Continue to be very excited about our operating leverage trends highlighted on slide 13 as was BJ's. Q4's adjusted PPNR of $64 million as detailed in Slide 28 is 21% higher than 2024. While our adjusted EPS has doubled over the same time period. That doesn't tell the full story. It includes approximately $5 million of accelerated depreciation of capitalized software and severance expenses. As well as an intentional decision to delay some loan sales until 2026 which we'll touch on more shortly. Due to the large aforementioned investment gains. Slide 14 breaks down the $1.6 billion of loan originations by vertical and business unit. A few quick things that hit on here. Approximately 70% of our verticals originate more production in 2025 than they did in 2024. And both small business and commercial lending teams delivered double-digit year over year balance sheet growth rates. Slide 15 illustrates our loan and deposit balance growth. Highlighting the strong, consistent trends on both fronts. Our total loan portfolio grew approximately 4% linked quarter with year over year loan balances increasing approximately 17%. That's just outstanding durable growth. Q4 customer deposit growth was slightly down linked quarter, as was expected due to typical Q4 seasonality. Yet our year over year customer deposit growth rate was 18%. Which is fantastic growth in a very, very competitive market. As I mentioned earlier, we continue to be very excited about the momentum we are seeing in business checking, as highlighted on page 16. We saw our fourth consecutive quarter of growth with checking balances increasing 4% linked quarter to $377 million and are highly encouraged by our progress in deepening customer relationships. As BJ noted, 22% of our customers now have both a loan and a deposit account with us. Our total low-cost deposits and 37% of new loan customers also open a checking account in Q4. including noninterest bearing checking balances, low-cost collateral construction, and loan reserve accounts, now totals approximately 4% of our total deposit base. A two x increase year over year. And tremendously accretive to our earnings profile. Our net interest income and margin trends are detailed on slide 17. In 2025, we saw our quarterly net interest income increase $8 million or 7% linked quarter. And $26 million or 26% compared to 2024. Driving the Q4 increase in net interest income were both our continued outstanding growth as well as our net interest margin expansion of five basis points quarter over quarter, aided by our deposit portfolio repricing downwards in response to the 50 basis points of Fed cuts in Q4. While our variable quarterly adjusted loan portfolio did not reprice until January. As in the past, when we have seen large Fed moves downward of 50 basis points in the quarter, will see near-term compression as our deposit pricing and strong volume catch up. And we continue our upward trajectory on net interest income. Historically, our model operates well in a lower interest rate environment. Once we navigate the journey down as our deposit pricing adjusts. Currently, our base outlook for the Fed consists of three Fed cuts in March, June, and September 2026. Any less cuts or cuts later in the year will provide an earnings opportunity for the bank. Moving to guaranteed loan sale trends on Slide 18. Gain on sale was intentionally down this quarter as our large investment gains provided loan sale flexibility. Essentially allowing us to delay sales into a future quarter while increasing our loans held for sale by approximately $60 million quarter over quarter to maximize net interest income for a few additional months. This is a similar tactic that we have deployed in the past when we have large investment gains. Looking back to 2025, we are more than pleased the momentum that we are seeing in our Live Oak Express product. And the immediate impact it has had on our providing for a meaningful 20% of our gain on sale for $12 million a two x what it contributed in 2024. We remain very focused on ramping our Live Oak Express originations. As that will continue to be the primary driver of our gain on sale growth going forward. Expense and efficiency trends are detailed on slide 19. Q3 reported noninterest expense of $89 million included approximately $6.6 million of one-time expenses detailed within a notable item section back on slide 12. We remain heavily focused on improving both our customer and our employee experiences. And implementing technology and operational improvements across our entire business. All with the goal of creating raving fans moderating expense growth and thus improving efficiency, and providing a solid, mature foundation to support our growth. Taking a look at credit on slide 20, Over thirty days past due remained low for the fifth consecutive quarter with $10 million or nine basis points of our held for investment loan portfolio past due as of December 31. The amount of nonaccrual loans increased to $110 million or 91 basis points of our unguaranteed held for investment loan portfolio in Q4, The linked quarter increase in here was primarily driven by SBA credit, and it's consistent with the broader SBA industry trends. Which LIBOR continues to outperform. Our reserve levels declined modestly in line with the improving trends in past dues, classified assets and net charge offs. Altogether, improvements across these metrics show that the uptick in nonaccruals is manageable. Capital levels remain healthy and robust as shown on page 21. Q4 strong results matched our asset growth. Keeping our capital levels relatively flat linked quarter. A few thoughts on the forward outlook. We are very optimistic about the opportunity in front of us in 2026 and beyond. On the revenue front, we generally see a stable or low rate environment coupled with continued strong loan growth as a favorable backdrop for our bank's growth, margin, and credit outlook. Our two strategic initiatives in business checking and Live Oak Express are nicely with plenty of runway to continue to drive deeper relationships. Increased fee revenue, and lower funding cost. We have refocused our expense base. And investments on the best opportunities. Which will moderate the growth rate while better supporting strong revenue growth. The possibilities that AI and tech innovation provides across the bank are enticing. And will enhance our customer service and efficiency with active efforts ongoing. And above all else, we have an amazing culture, team, and brand here at Live Oak Bank that is irrevocable. With that being said, thank you again for joining this morning. Vijay, back to you for closing comments before we hit the queue for Q&A. Vijay Moesch: Excellent. Thanks, Walt. Let's just take some questions. Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any case. Once again, it is star one should you wish to ask a question. Your first question is from Crispin Love from Piper Sandler. Your line is now open. Crispin Love: Thank you. Good morning, everyone. Just first, NII and the NIM, very strong in the quarter. Nice expansion there. But can you just talk about some of the dynamics into the first quarter, the impact of the last two cuts, the impact of loan yields that there's likely some lag, also deposit costs, then just consequently, NII and the NIM in the first quarter relative to the fourth. Well, I believe you mentioned some compression in the NIM, but higher NI, but if you just flesh that out a little bit, that'd be great. Walt Phifer: Yeah. Hey, Chris. It's Paul. Thanks for the question. I think you hit the nail on the head and kinda go back to some of the comments I made. In the prepared remarks. Typically, anytime you see 50 basis points of Fed cuts in the quarter or the following quarter, As you know, we have a large variable quarterly adjust loan portfolio that reprices on the first business day. So that'll drive both NIM and net interest income compression in the near term. The good news, which essentially, the beauty of Live Oak and our growth engine, is that as the deposit pricing, deposit price continues to adjust, growth really pushes us back to that up into the right migration and both the interest in coming in fairly quickly. Really, and and the seedness of that flow on the up and to the right migration is largely gonna depend on know, what your your whatever fed outlook or forward curve you're thinking or or taking a look at. But I think, you know, a good proxy if you kinda, you know, kinda looking for a guide for what Q1 could look like in terms of NIM Back in '24, we had 50 base points of Fed compression or of Fed rate cuts right at the end of right at September. And you you can see kind of the quarter over quarter change, Q4 twenty twenty four as a result of that. Crispin Love: Okay. Great. Helpful color there. And then just on gain on sale income, down materially in the fourth, not a major surprise. At least directionally, because of the shutdown. And then you also mentioned the aperture gain. Drove some of that decision to hold more. I think you typically sell more in the back half of quarters. But, is that changing in the first quarter because of the shutdown? Have you been active selling in early twenty twenty six? And then just when you look at the first quarter, how would you think gain on sale income should trend just as you look at more normalized quarters like the 2025, my I would expect that it would be kind of higher than that just when you look at the fourth, but I just wanna kinda check to see what you're thinking there. Walt Phifer: Yeah. Thanks, Chris. It's Walt again. You know, I think the government shutdown really did impact us much in Q4. I think we saw a little bit of a timing delay in certain loans, but you saw that, you know, strong s b, SBA production in the quarter You know, so we're able to get, you know, kind of all our loans as we talked about in the last 30 earnings call, you know, kind of position to close once the government opened up, and that's, like, exactly what we did You know, as you think about gain on sale trajectories, I don't think anything will change between when we sell loans versus, you know, January versus February or or March. I think it'll still be much you know, more to the mid to the back end of the quarter. That's our typical approach. I think Q1 historically, for us is our lowest quarter of the year. I know 2020, '5 was a little bit different because of the fintech gains, but I would expect our Q1 to be much more in line with you know, the 2025. And then that's when we start our our up into the right stair step. Momentum within the gate on field line. Crispin Love: Alright. So if I'm looking at one q twenty five, so even if even though that there was a little bit of lag there, it could be below that kinda two Q3 q level. Walt Phifer: I think it'll be closer to what you're seeing in 2025. Yeah. So our 2026 will be closer to what you see in 01/2025, so it'll be a step up versus what you saw in Q4. And then that gets us back into you know, that's I think Q1 twenty twenty five was in the $15 million reach of total gain on sale. That feels you know, that feels appropriate. Crispin Love: Alright. Thank you. Appreciate it, Walt. Walt Phifer: Sure. Operator: Thank you. Your next question is from David Feaster from Raymond James. Your line is now open. David Feaster: Good morning, everybody. Walt Phifer: Hey, David. David Feaster: I wanted to to not to beat a dead horse on the margin outlook, but I just wanted to maybe get some thoughts on the trajectory. I appreciate the commentary on the first quarter. You've got three cuts embedded in your guidance. Obviously, there's some you you there's just gonna be a lot of moving parts. Right? You got the tailwinds from the reprep deposit repricing in the prior cuts. The headwinds on on the the assets repricing lower on on the rate sensitive stuff. I just was curious if you could help us think through with the three cuts that you've got embedded, how do you think about the margin trajectory over the course of the year? Do you think we can given the tailwind from the prior cuts, we can actually see some expansion and kinda just us think through that trajectory over the course of the year. Walt Phifer: Yeah. I think, you know, David this is Walt again. You know, really you know, thing that we think about is not only what the Fed cuts gonna do, it's the it's it's the timing and severity of those cuts. You know, stable environments work really well for us. So if you saw, you know, 2024, we saw compression And then with a stable environment, we saw a nice NIM expansion throughout the year. With 25 basis points of, you know, of Fed cut assumptions, that allows our deposit pricing to catch up relatively quickly. Ultimately, we're you know, we'll expect that step down here in Q1, and then you know, our expectation is to go back on that, you know, start seeing the up and right trajectory or NIM expansion, you know, as we move through the year. It's gonna be driven by growth Now, obviously, you know, positive market is very competitive and what kind of you know we have to do what we need to do to continue to fund our outstanding growth. And, you know, David, like we talked about in the past, we we at Live Oak, I mean, even with a you know, a three you call it anywhere from a three fifteen to a three fifty NIM. You know, we think that's really attractive. We focus a lot on net interest income. That's the beauty of kind of the Live Oak model, right, where you can have double digit net interest income growth year over year. Even with some variations, you know, from your margin trajectory? Absolutely. David Feaster: Terrific. That's helpful. And then, you know, obviously, there was a lot of noise on the expense side this quarter. You alluded to to some of the things. Just was hoping you could give us some puts and takes on expenses. You know, you've got a lot of investments on the horizon. We talked about, you know, the Live Oak Express ramping up. We talked about embedded finance. Could you just help us think through a good core expense run rate from here? What's your investing in and how you think about funding those investments just as I know you've really been focused on expense management. Walt Phifer: David. This is Walter again. Thanks. Great question. You know, we're we're really trying to do our best to make sure that we're balancing both revenue and expense growth. You know, we've as BJ mentioned and I mentioned, kind of looking at the operating leverage slide, we've done a really good job of that, especially over the last few years. They even have extended past, you know, five years with our PPNR or p p PPNR trajectory. You know, I think from, you know, where we're investing, you know, the two strategic priorities for us of both business checking and lab express and Live Oak Express are, you know, heavy focal points. You know, the the the areas with AI and application and kind of across our operational areas of of the bank, it's and our loan, loan origination platform is really exciting. Know, I think from you know, expense growth rate, You know, we typically you we mentioned that in our prepared remarks, we expect that to moderate quite a bit. You know, that that's something probably likely in the in the single digits year over year as we think through, you know, it's just making sure that we're, you know, reporting our money strategically in the right places. David Feaster: Okay. That's helpful. And then just quickly touching on credit. You know, there's there's mixed trends there. Just wanted to get your color on what are you hearing from your clients? Where are some of the pressure points that you're seeing as you as you look into the portfolio? Are there any segments that there's more pressure? And and what drove that increase in nonaccruals? And just how do you think about credit how do you think credit trends near term, and any color on the classified assets trends specifically would be helpful as well. Michael Cairns: Yeah. Good morning. Michael Cairns here. I'm happy to talk about credit a little bit here. And my view on this quarter was it was a fairly uneventful and stable quarter when you compare it to where we were last last quarter. The past dues are low, And to your point or your question, classified loans are flat to slightly improving over the quarter. And when you think about nonaccrual, loans, those live within our classified loan portfolio. And so when we determine that they're a classified loan, at that point, we're assessing the reserve of potential losses against that those loans. And natural progression of a classified loan or the the reason we identify as a potential problem loan is because payment defaults could happen. So you're seeing that in the nonaccrual balances, but you're not seeing a spike in reserve or provision expense because we've already assessed the the potential losses within that pool. And then when you look at and I and I know Walt touched on this already, but when you look at the SBA data, you know, 2025, we still saw higher industry defaults. Live Oak wasn't immune. To that, but we also fared significantly better than the industry. And when I think about that, I think about the fact that we we have always maintained our credit culture don't stress on underwriting standards. And a lot of credit really to our lending staff who are out there historically and today finding loan growth without sacrificing credit quality. And I think that's what has set us up to be a favorable favorable position to the industry and also what will pay dividends for us in the future. And then to when you also think about the interest rate cuts that happened in the 2025, Our borrowers haven't felt the benefit of that quite yet, but they should in 2026. So I expect some relief there, especially if we see some additional cuts And, again, I don't know if I touched on this or not, but the SBA the SBA portfolios that makes up the chunk of the nonaccrual balances and the classifieds. So with all that, I felt like it was a pretty stable quarter. David Feaster: That's great color. Thanks. Operator: Thank you. Your next question is from David from Cantor. Line is now open. David: Hey. Good morning, guys. Walt Phifer: Good morning, Dave. David: Hey, Walter. I just wanna go back to your comments on the margin. You mentioned down similar to that trend in 4Q 'twenty four, I believe. And so it looked like that was down about 18 basis points that quarter. So just wanted to make sure that, that was sort of the magnitude that you were thinking about. And then on slide 17, you guys included a newer line in that some income from a it was other loan income. It was about six basis points on the margin. For the quarter. I was just wondering what that was exactly, and is that something that's going to reverse as that rolls, you know, off of one queue? Or does that stay in the margin trying to figure out if that's incremental to what you guys saw in terms of the trend in 04/2024. Thanks. Walt Phifer: Sure. Hey, Dave. This is Walt. Thanks for that, you know, for the question. On the other loan income, I'll start there. So that line, it was was inflated more than we typically see in any given quarter. This really, relates to few large solar and senior housing loans that paid off that had pretty high prepayment penalty. So that's something that, you know, we don't expect to see the run rate you know, you know, moving forward and especially not to that degree. And then, you know, as you think about the trajectory you know, back in Q4, you know, after the 50 basis points of cuts, Yeah. I think that's, you know, that's in a reasonable range think the one thing that's helping us this year is that we were able to get out front of of the the variable loan portfolio, repricing on January 1. With some deposit, rate reductions there at the end of, of Q4. And, also, we're able to already to reduce the pricing again here in Q1. So we're doing what we can to mitigate it. You know, but I think the the other factor there is, you know, our pipeline has been really slowed down at all. So, you know, we're expecting a pretty strong Q1 in terms of growth. That's gonna, you know, hopefully help you know, you know, manage that that that NIM compression that they're taking a look at. David: Great. Appreciate that. And then just, on expenses, just wanna make sure I heard you right. Were you saying mid single digit growth for expenses next year? Walt Phifer: Slower than what we saw this year? David: Okay. Yeah. Great. And then just on Live Oak Express, it was good detail you had in here on the 12,000,000 of gain on sale. For 25. Are you thinking I guess, bigger picture, what are thinking for the trajectory there? Is that something that I could double in '26? Could it could it go even higher than that? What what are your thoughts there? Walt Phifer: Yeah, Dave. This is Walt again. I'll start and then Peter, you wanna add into you know, from the Live Oak Express efforts. Know, I think we're doing what we can to really make sure we're we're building top of the funnel in that space. We saw you know, we we did see a slowdown in our Live Oak Express origination back 2024 the SBA SOP changes in June. You know, that you know, we had to essentially reset kind of know, our expectations to make sure that we're to build rebuild that pipeline with borrowers or rebuild the pipeline with with borrowers after know, just essentially updating them, educating them on what those SOP changes were. Know, look, I think doubling is very aspirational. I think it'll be something less than that. I'll let Vijay talk and add in if he has any comments. Vijay Moesch: Yeah. I think at cruise altitude, I think, you know, we're our aspirational goals are a billion dollars a year of production. At cruise altitude. That's not next year. That's over time. When we started down the road of building out a Live Oak Express product, it was really by brute force. I think we've talked about it before that, you know, we just never really focused on the small dollar loans, you know, that we our average loans size was more in the 1.2 or $1,300,000 average loan size range. And so know, we started just kind of trying to see how we could do it What we're doing now is intentionally building capabilities so that we can fill you know, the top of funnel, so to speak, and get a lot more leads that we can then work in a much more efficient manner. So for instance, we are, you know, building and co developing a next generation loan origination platform, which will make it simpler, easier, faster, and more efficient for our people to serve our customers much more quickly and get to decisions and funding a lot faster. We have engaged outside expertise in our marketing group. That are expert in performance marketing to find ways to better target customers. That are out there searching for loans that we can that we can do through our Live Oak Express product. And we are making sure that our lenders, have been carrying the bulk of the water, up to now in terms of referrals, can even find more avenues for those referrals and we're encouraging them to do that both through how we how we provide them resources, but then also making it part of the you know, incentive plans that we have for them to grow the business. So we've kinda got a multifaceted way of going after this. Intentionally. So we think that we'll continue to see growth over the next several years towards that aspirational target of 1,000,000,000 a year. David: Alright. Great. Thanks, guys. Operator: Your next question is from Tim from KBW. Your line is now open. Tim: Hey. Good morning. Thanks taking my questions. My my first one is kind of a follow-up on this discussion on Live Oak Express, and you know, we're more than six months now into these SOP changes regarding the smaller dollar loans. Which I think we're now starting to see how that has pressured volume on maybe some of your competitors. So is there any way you're able to maybe not quantify, but you know, characterize the impact that has had on your competitors. And, you know, is that made it a little bit easier for you to win some market share in the smaller dollar space? And, also, like, has that impacted pricing, yields, anything like that? Vijay Moesch: On the latter, I don't think that we've seen an impact on pricing or yields quite yet. On the former, I think we started to see that. You know, we've started to see some lenders back away first the nonbank lenders, because they were were seeing a lot of the the biggest credit pressures And, you know, we're we're starting to see bank lenders be a little more choosy on what they do, which makes a lot of sense. We want a healthy SBA seven a industry. And we have always been very intentional from the outset on our small dollar lending products. We don't play at the highest, highest end of the pricing game. We don't chase you know, spotty credit. We want businesses, small businesses to succeed. And so you know, our total addressable market, so to speak, on the smaller side, is going to be reduced somewhat because we're gonna be cheesier about who we do business with. But on the flip side, we're gonna make it so easy for customers to do business with us. And we're going to target people that have a propensity to do business with us, like they want to, and they are going to get the full power of our brand and our people and our tech over time such that we think that that's going to be a huge differentiator between what they currently get today, particularly on the small dollar side, and what Live Oak is gonna deliver. So really excited about how we're actually thoughtfully building out this business, and I think it'll be quite substantial and a huge part of what we do on the SBA side. For years to come. Tim: Interesting. That that was a great color. Thank you. I was also wondering, like, on the on the flip side of this, if since everyone is not required to do basically full underwriting and you know, the upfront guarantee fees and everything, is essentially equal for the larger loans. Are you seeing some of your competitors kind of move back to Live Oak's more traditional loan size at all. Vijay Moesch: Not necessarily. Not that not that we can discern. You know, we haven't seen much much change from that perspective, Tim. Tim: Okay. And then I was also looking for maybe an update on the opportunities and internal development you guys are doing with regards to AI has brought this up a few times on conference calls. I was looking for an update there. What are kind of the tangible use cases you're exploring and you know, what are the benefits it can provide you whether that's you know, internal efficiency efforts or you know, creating a better experience for customers. Vijay Moesch: Sure. I'll just give a quick update on that. I think starting with our technology and our labs teams, all of our developers are using cursor next generation AI based developing software. And I'm not sure that that's going on across the rest of the industry, but having all of our people well versed in that, we made that pivot very quickly. So that's that's number one, and that's helpful. We are intentionally and introducing our people to AI first with things like Copilot, but then also things like you know, putting our information into proprietary large language models that they can then query and use for analytics specifically related to our customer information, our portfolios, our business. So that's that's kinda fundamental, and maybe a lot of people are doing that. But then what we're looking at is a multi pronged approach on how we how we go after this. I think if you just look at modernizing what you do in technology or in operations or revenue generating parts of an organization? Just simply say, we wanna put in AI. AI is gonna solve everything. It's not. What we're looking at is a way to say how do we go to major parts of the organization understand what the pain points are that don't make it easy or simple or fast or efficient for our people and our customers. And to fix those, sometimes with just better process, sometimes with eliminating manual process. And then more and more with AI. And it's a combination of being intelligent around that. So we're going to major departments and groups like loan operations and you know, secondary markets and deposit operations and those areas to modernize those using AI and other tactics. We're also asking everybody in our organization to be knowledgeable about just doing things better and more efficient whether it's using AI or you know, not using AI. And then thirdly, you know, we're going to create a dedicated team that is thinking about how over the next three to five years we create an AI native bank. What does that mean? What does that look like? We have the innovative history here. And technology that that was born out of our founders. And we're constantly thinking about how to do that better. And so you'll see more and more use cases, tangible use cases from us over time as we start to build out what that means to be an AI native bank. Tim: Got it. That that was great. Thank you. If if I get one more question, kind of a follow-up on the credit discussion. I I think Michael mentioned you know, we're not seeing any kind of spikes in the provision expense Is that you know, what what should we expect going forward in terms of provision if credit continues to gradually improve over the course of the year like it has over the last few months? Should provision be stable? Can it moderate a little bit further, or is this kind of where it's gonna stay? Walt Phifer: I'll start. Hey. Hey, Tim. It's Walt. I'll jump in too, and then you might can add on. I think if you think about stabilizing credit trends, I think one thing you have to remember with us was being a high growth bank. You know, that growth and CECL typically don't get along real well. So, you know, growth will continue to drive our provision expense along with our portfolio trends as well. But I think, you know, kind of what you've seen over the last three quarters is a really good view of kind of, like, stabilizing, you know or kind of stabilizing portfolio with stabilizing credit trends, and that should give you kind of a broad view of what you could expect kinda going forward, you know, assuming the same level of growth. Tim: Yeah. That that's fair fair point of provision. So I guess we should think about maybe the reserve percentage staying about level. Walt Phifer: Yeah. That's that's that's about right. Tim: Got it. Alright. Well, thank you. Operator: Your next question is from Billy Young from TD Cowen. Line is now open. Billy Young: Good morning, guys. How are you? Walt Phifer: Morning, Billy. Billy Young: Just a question on your business checking initiatives. Given the strong momentum in your comments and the strong performance you had over the past year. Do you have any updated thoughts about how we should think about the funding mix looking out over the next year or two given, you know, the the increased growth in NIB? Walt Phifer: Yes. I'll start there, Billy. I think the you know, we've been able to get to about 4% of our noninterest bearing deposits as as I mentioned earlier. You know, ultimately, our aspirational goal over just like kind of, you know, BJ mentioned with Live Oak Express is over time to get up towards in that 15% of our deposit base, like, again, that's not gonna happen next year. I think we saw 2% of non interest bearing a year ago, 4% this year. I think that trajectory makes sense. You know, as we kinda move into, into 2026. If you just think about know, leveraging that, you know, that growth rate? Billy Young: Got it. Thank you. That's helpful. And then just a couple of housekeeping items on the decision to hold on to more of your gain on sale loans. Just did you size up how much the benefit was to the margin or NII from holding on to the higher held for sale loans this quarter? And then also, did you use this opportunity to maybe portfolio some more in production? In 4Q? Walt Phifer: Yeah. I'll jump in on that, Billy. The benefit for NII of about $60 million of HFS given our our spreads and our margins is you know, likely in the call it, 1.8 to $2.5 million range. A year. Sorry. Yeah. That that's correct. Divide that by four, that kinda gives you so not overly material for Q4 itself. You know, as far as portfolioing, I don't think that's what what we'll likely do. I mean, I've always you know, kind of aspire to get to the point where we're building any kind of we used to call a treasure chest, but essentially, it's a it's a portfolio of held for sale. We are loans that we can sell at any given point, gives us some good momentum going into into Q1. So we'll likely monetize you know, that additional $60 million here in In Q1, and then that gives us some flexibility for reloads that we originate in Q1. To then kinda get a give us a headstart into Q2 and so forth. Billy Young: Got it. Thank you for taking my questions. Operator: Sure. Thanks, Billy. Operator: Thank you. There are no further questions at this time. I will now hand the callback over to Chip Mahan. Chairman and CEO. The closing remarks. Chip Mahan: See you next quarter. Thanks. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.
Operator: Good morning, everyone, and welcome to the FB Financial Fourth Quarter 2025 Earnings Call. Please note, today's event is being recorded. At this time, I'd like to turn the conference call over to Mike Orcutt, with FB Financial. Please go ahead. Good morning, welcome to FB Financial Corporation's Fourth Quarter 2025 Earnings Conference Call. Mike Orcutt: Hosting the call today from FB Financial are Christopher T. Holmes, President and Chief Executive Officer, and Michael M. Mettee, Chief Operating and Financial Officer. Please note, FB Financial's earnings release and supplemental financial information, and this morning's presentation are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of the call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation. During this presentation, FB Financial may make comments which constitute forward-looking statements under the federal securities laws. Forward-looking statements are based on management's current expectations and assumptions and are subject to risks, uncertainties, and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K. Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC rules. A presentation of the most directly comparable GAAP financial measure and a reconciliation of non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information, and this morning's presentation, which are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov. I would like to now turn the presentation over to Mr. Christopher T. Holmes, FB Financial's President and CEO. Christopher T. Holmes: Alright. Thank you very much, Mike. Thank you to everyone for joining us on the call this morning and for your interest in FB Financial. For the quarter, we reported EPS of $1.07 and adjusted EPS of $1.16. We've grown our tangible book value excluding the impact of AOCI at a compound annual growth rate of 11.6% since we became a public company with our IPO. This quarter, our pretax, pre-provision net revenue was $71.1 million, or $77.1 million on an adjusted basis. Earnings were led by net interest income of $150.6 million, a net interest margin of 3.98%, and low credit costs in the quarter. Adjusted returns were solid, reporting a return on average assets of 1.4% or 1.51% on an adjusted basis, and a return on average tangible common equity of 14.4% or 15.9% on an adjusted basis. For the year, we reported EPS of $2.45 and an adjusted EPS of $3.99. Our balance sheet grew through the acquisition of Southern States Bank and was complemented by organic growth in our key businesses and geographies. All in, loans held for investment grew 29% and deposits were up 25% year over year. As I reflect back on 2025, and think forward into 2026, there are two key themes that stand out to me. The first of those is growth, both in our financial assets, but also in our capabilities. This comes in the form of talented new teammates. During the past year, we executed on an acquisition in record time. We grew our talent base by adding new associates across the company, and we reorganized leadership responsibilities in various areas to optimize our organization. We expect to see these actions pay off in 2026 and beyond through enhanced customer experience, contributions to our strong and inviting company culture, and ultimately continuing our history of outstanding growth. The second area is we're generating earnings and financial returns that meet my expectations as the CEO of the company and as a shareholder with high expectations. This year and particularly this quarter, our bottom line results were where they need to be with adjusted returns of about 1.5% on assets and approximately 16% on tangible common equity, and that's with a TCE ratio of almost 10%. These profitability results are within the range of expectations we set for ourselves. Our results for organic growth in loans and deposits were the only real notable area of underperformance in 2025, which comes from a combination of economic conditions, some distractions from the acquisition, and some related organizational changes. As we look into 2026, we're very excited about the prospect for strong growth opportunities, both organically and otherwise. We did accomplish a lot during the year, which reinforces the strength and determination of our team and franchise. I'm pleased with our results, proud of the team, and I'm very bullish on the year ahead. So while I could use some additional time today to give you my perspective on a multitude of other topics like the regulatory environment, views on M&A, and our myriad of metrics and goals that we set for ourselves in 2026, I'm simply going to reiterate our top priority for the year ahead, which is to cement our focus on the customer. Through this simple action, we'll deepen relationships, we'll provide better products and service, and we'll acquire more new associates and customers. It's that focus that's going to allow us to grow the business. Very simply, that's going to be our winning formula in 2026. So with that, I'd like to turn the call over to our Chief Financial and Operating Officer, Michael M. Mettee. Michael? Michael M. Mettee: Thank you, Chris, and good morning, everyone. I'll pick up right where Chris left off. Over the past year, we've laid a solid foundation that positions us to accelerate into a period of significant opportunity. We've acquired and converted Southern States, which added approximately 20% to our size. We've seen market disruption in our geographies, which has created opportunity in our markets. And we've added talent in key areas of our company. So as we move into 2026, we really couldn't be more excited about the year ahead. Turning to our results for the quarter and for the full year, net income on a reported basis for the quarter was $57 million or $61.5 million on an adjusted basis. For the year, we delivered net income of $122.6 million and adjusted net income of just over $200 million. Our net interest margin for the quarter came in at 3.98%, which is a three basis point expansion over the third quarter. Even with the Fed rate cuts and lower loan yields, we were able to manage our liability side of the balance sheet to expand margin, namely through deposit repricing and benefits realized on our third quarter sub-debt and trust preferred payoff. Non-interest income improved in the quarter as we saw stronger swap fees in investment services revenue along with benefits from non-recurring items which we've detailed in our supplement. On the expense side, fourth quarter non-interest expense came in at $107.6 million or $100.4 million on an adjusted basis. Included in the reported results is roughly $4.6 million in merger and integration expenses which should largely conclude by the end of the first quarter of 2026. In our adjusted non-interest expense, we had an additional $3 million in performance-based incentive expense, and roughly $1.2 million in higher franchise tax expense. We also had higher than expected year-end increases related to the share repurchase transaction, which I'll detail in a bit, technology costs, and other professional services totaling about $1.5 million that are not run-rate expenses. All in, our banking core non-interest expense totaled $88 million for the quarter, and $298 million for the full year. Looking at credit, our reported provision expense was lighter this quarter at $1.2 million due to low charge-offs and minimal changes in modeled reserves. Non-performing assets ticked up slightly this quarter with higher past dues in some of our consumer portfolios and our optional Ginnie Mae repurchase portfolio, but loss content remains low as annualized net charge-offs totaled only five basis points in the quarter. Overall, our credit outlook remains stable for our portfolios and geographies. All in, our allowance for loan losses settled at $186 million or 1.5% of our loans held for investment. Looking at the balance sheet, you'll see loan growth of $86 million for the quarter and total deposit growth of $97 million, both roughly 3% on an annualized basis. In the fourth quarter, we experienced a pickup in late quarter payoff activity, which reduced our loan growth by about half. This activity was spread across several loan categories, but was mostly pronounced in our C&I and CRE buckets. As Chris mentioned earlier, these organic growth levels for the quarter are below what we expect and what we've historically delivered. However, when I look at average balances for the quarter, we show annualized 6% loan growth and 7% deposit growth. And for the year, we're pleased to have grown the company 29% on loans and approximately 25% on deposits. New production trends remain competitive, both on rate and structure with new loan yields priced around 6.75% for the quarter and new deposit costs around 3% for the quarter. Even with softer organic growth during the fourth quarter, we believe the wind is at our backs and our sails are up. The company has significant opportunity to grow market share organically as we continue to bring new relationships to the bank. With that, you should expect us to return to our normal high single-digit growth rate in 2026. As it pertains to capital, I want to highlight the large stock repurchase transaction that we executed in the quarter. In total, we repurchased just over 1.7 million shares, representing about 3% of the company. The transaction was with our largest shareholder, the estate of the late Mr. Jim Ayers, which allowed the estate to diversify its holdings and gain some liquidity while also allowing the company to deploy excess capital in a beneficial way. We are proud to participate in this transaction with other large institutional investors, and this investment in ourselves demonstrates our belief in our franchise and our growing business. As we move into 2026, we expect our net interest margin exclusive of loan accretion to land between 3.78% and 3.83% in the first quarter and on a full-year basis consistent with where we are today, and that assumes a rate cut baked into our forecast for 2026. We would then expect the benefit from loan accretion to add an additional 15 basis points or so, and that's exclusive of any accelerated accretion that might pull through. In banking, we're expecting to see fee income grow in the upper single-digit range as we continue to grow our customer base, add product offerings, and deepen relationships with our current customers. On expenses, I'll reiterate the full-year guide that we gave last quarter as we expect banking expense to land between $325 million and $335 million, which puts our efficiency ratio in the low 50s for the full year and at 50% by year-end 2026. This guide is run-rate only and would not include any investments made in revenue producers or market expansion. From a balance sheet standpoint, we're sticking with a mid to high single-digit loan growth in core customer deposit growth in that same mid to high single digits that we've spoken about for the full year 2026. So as I conclude, I want to thank the team for their work this year and I look forward to a prosperous 2026. With that, I'll turn the call back over to Chris. Christopher T. Holmes: Alright. Thanks for the color, Michael, and thanks again to everybody for joining us on the call this morning and your interest in FB Financial. And operator, at this time, we'll open the line for questions. Operator: Once again, that is star and then one. Our first question today comes from Brett Rabatin from Hobby Group. Please go ahead with your question. Anya Palsh: This is Anya Palsh. I'm asking questions on behalf of Brett. So he was wondering if management anticipates any additional share repurchases from the Ayers estate. Christopher T. Holmes: Yeah. That is a good question. And we do not actually anticipate that. And so, the conversation we've had is that we do not anticipate that. That does not mean just like any of us that folks will change their mind, but all the conversations we've had, we do not anticipate that. Anya Palsh: Okay. Thank you. And another question that I have is, do you guys think mortgage banking is on the right path, or does the platform need any additional tweaking? Michael M. Mettee: Hey, Anya. Good morning. This is Michael. Yeah. Actually, mortgage had a really good year. And if you think about where we were two years ago in the mortgage environment, versus today, '26 versus 2025 versus '23, we originated the same amount of volume, but the contribution went from a negative to a nice positive number. So they're definitely on the right track. You know, tweaks to the platform, I would say, just like on the banking side, we are open for business, looking for revenue producers that can continue to expand our relationships and bring core customers to the bank. So, we're pleased with mortgage and expect big things from them. Christopher T. Holmes: Yeah. And I would just add in terms of tweaks, let's say we're always tweaking. Whether that's more as Michael said, we're tweaking things every day. But in terms of the basic structure and the elements of what we have in that business, we're actually quite pleased with it. And when we look at '26, that is a potential for it's a very positive potential for overperformance, I would say. As Mike said, this year it actually went from a negative to a positive. And depending on what happens in the world and what happens in the market, that's an area that could be a bright spot for us based on what we have put in our expectations for this year. Anya Palsh: Okay. Thank you. And, you know, what do you guys, what does management think about the current M&A climate? And is there any optimism on additional deals? Christopher T. Holmes: So climate-wise, I would say, climate-wise, a lot of conversations going on out there. I think at every level, that's just an industry comment, it's not specific to us, but I'd say there's a lot of things happening out there. People evaluating strategically what the future holds for them. When we think about us, specifically, we'll continue to evaluate our opportunities. In prepared remarks, one of the things I talked about is really our customer focus. We have to maintain that and we have to make sure that that's at the top of our priority list and for our objectives for the year. But as we get opportunities, which we do, we have conversations and we get opportunities, we'll continue to evaluate those. And if the right one comes along, certainly, we would be in a position to act on it. The Southern States combination that we did in 2025 was very positive. We feel like all the way around, they always do cause some distraction from your normal operating environment. And so we weigh that anytime we're considering a transaction. And so when it's worth it, then we're going to be in a place to take advantage of it. Anya Palsh: Sounds good. Thank you. Appreciate the answers. Christopher T. Holmes: Sure. Thank you. Give Brett our best. Operator: Our next question comes from Russell Gunther from Stephens. Please go ahead with your question. Russell Gunther: Hey, good morning, guys. Christopher T. Holmes: Hey, Russell. Russell Gunther: Morning, Chris. Morning, Michael. On the loan growth front, so you called out the elevated pay downs and how they impacted this quarter. Would be helpful just to quick level set where those levels compared to last quarter. And then as a follow-up, you guys tend to position yourselves as a high single-digit to low double-digit grower. It sounds like you're guiding to high single digits for this year. Maybe if you could just kind of walk us through the asset class and geographic loan leaders and just whether or not that assumes that level of growth can happen with the players on the field today versus incremental hires. Michael M. Mettee: Yeah. So I would say, Russell, in the fourth quarter, payoffs were a bit elevated, especially at the latter part of the quarter. Chris would let us all go home on December 24. We probably would be having a different point-to-point conversation. But you work full year, so that last week of the year is where we saw a lot of the payoffs come. You know, every company has ebbs and flows. Right? Every company faces payoffs. So that's just part of business. That's just something you have to do. But on a percentage basis, it was elevated in the fourth quarter. That being said, we're going to pay off in the first quarter this year and second quarter this year. And so expect to grow through it as a company. Our growth forecast is not predicated on hiring new people. It's the team we have in place with the relationship managers and bankers that we have. We would expect those to grow that high single-digit range without adding another person. And where can I come from? Yeah. We came into Asheville, North Carolina last year. They're off to a good start. You know, Tuscaloosa, Alabama, smaller market, but had a really strong year. But every market, especially in our metro areas, have a lot of in-migration and growth opportunities. And then in our more community markets, expect to continue to grow market share on both sides of the balance sheet. And we're focused on growing deposits and loans, not just the loan side. Then asset class, look, we pride ourselves on being a community bank. So that means we serve all asset classes. And so we're not saying, hey. You can only grow one or the other. But we want to be full service to our clients. So I'd expect that to be broad-based. Christopher T. Holmes: Yeah. So Russell, okay. If I can just make a couple of comments and I want to reiterate two things. Two or three things Michael said or amplify them. He is right. If we were to stop the world in motion there and not have the last week of the quarter, we'd have been north of 5% in terms of loan growth, actually six-ish, and if you compare average to average, you would see that in our numbers. Point to point was one thing, but we don't get obsessive over that because we feel pretty good about the run rate right where it is. You asked about can it happen with current players? I think that's an important part of kind of how we project ourselves for the future and how we budget. We budget current players, and we budget very normal activity. We don't budget things like, we certainly don't budget acquisitions. We do not budget bringing over big teams. And so it's current player activity. And Michael, he also made a statement in his prepared remarks, our expense side is the same. Our expense side is also current players with a very, I'll say, normal measured growth rate versus having the big moves in there on either the revenue or expense side. So I think that's important. And then on geographies, there's one other thing I would say is Nashville approaches half of our loans in deposit base. And so that becomes an important part of that picture for 2026 and beyond. That's either, you know, so that becomes probably the biggest part of that. And as you know, we've had some changes there. We continue to be actually really bullish headed into '26 on that part of our geography. Russell Gunther: That's really helpful. Thank you both. And then, my last question would be on the expense front. So, it would be helpful to get a sense for how the 4Q run rate shapes up. Michael, I think you called out 1.5 million of non-run-rate expenses. But please, correct me if I misheard that. And then as a follow-up, last quarter, you mentioned the willingness to kind of toss that expense guide out the window if you think you can hire commercial lenders the way you'd like. So I was just curious if any of that, you know, materialized in this fourth quarter result. And have any changes been made to the comp structure in order to be able to kind of help attract the type of talent you'd like to get or that might shake loose? Michael M. Mettee: Yes. Thanks, Russell. Just to clarify on the expense base, there was $3 million that was performance-based related to long-term and incentive, which is equity, which is really a peer comp analysis. So that resulted in, you know, Chris mentioned our returns. It's a return-based compensation model, and as we saw our returns continue to perform at a higher level, that's what drove that. So that's not necessarily reoccurring because we should be in line with where we expect our performance shares to pay out on a go-forward. And then franchise tax, which was another thing I called out, $1.2 million, we should that shouldn't be reoccurring as well. And then the other piece, we did the share repurchase transaction and had some professional services fees in there, which I said was non-run-rate. So if I looked at $88 million on the banking side outside of merger and integration costs, and I'd say, you know, $5 or $6 million of that was not what I would call run-rate, but it was expense. It hit in the fourth quarter, and that's really why we reiterated our guide for '26 is that we gave last quarter. We don't see those as continuous. Although, would love to have yes, it was we outperform on a return basis if our performance shares go up, then actually a good problem for everybody, I think. So the other piece you mentioned throwing out the expense guide out the window. I like how you put that. I don't know that that's how I said it. But, you know, I think about it in two buckets, really. We have our normal course of business, as Chris mentioned, or you said, players and seats. And that goes for the entire company. Yeah. We've got to maintain discipline and create operating leverage. And so we'll continue to do that. We do recognize that as opportunities come, there's an expense outlay that occurs, and so, yeah, we're certainly willing to do that for the right people, the right teams. We don't hire just to hire. Also recognize that it's a very fluid environment, and all of our people get recruited as well. And so we play offense and defense. I'm a college football guy, so it's a little bit like, you know, the transfer portal. You gotta make sure you got your team recruiting all the time, internal and external. And so we actively do that. And then ads, yeah, we added a couple of key people during the quarter. We're really excited about those. And we expect that to continue for the long term. But really, all that's just heating up, and it's, yeah, it's a full-time responsibility to make sure that we're recruiting the right people for FB Financial. Christopher T. Holmes: Yep. I think excellently put all the way around, Michael. I want to add two things. There's a lot of disruption in a lot of places, not just our markets, all around the country. And I think what that creates, you know, even if you look at comments made on earnings calls so far this cycle, you've seen banks get pretty bold and say, hey. I'm coming after you. To some of the regional banks. You've seen others talk about their hiring goals and that kind of thing. So I would, and so you have to realize we have a lot of people coming into our markets in Middle Tennessee, East Tennessee, Georgia, Alabama, and so that what that does is, you know, they're just recruiting anybody and everybody. And so your people are getting calls, and our people are getting calls. And we say this internally, and I'm certainly saying it on this call. We don't want any of our people underpaid, and so we will make sure that they're all fairly compensated. And if they're not, we want to correct that. And so, as Mike said, that's part of us just making sure we're taking care of our folks. And then when it comes to those A players that may be available out in the market, we will not miss the opportunity because of comp. Okay? We can compete with anybody from the largest bank on the planet to the smallest community bank that we can compete with. And so, we feel very strong about our position there. So if you and if that's the case and you take that off the table, it really comes down to culture, where the company is headed, and how they feel that they can take care of their customers and compete. And that's where we think we, over the long term, we're gonna win. So that's how we do it. Russell Gunther: That's great, guys. Thank you for all the help and for taking my question. Operator: Our next question comes from Will Jones from KBW. Please go ahead with your question. Will Jones: Yes. Hey, great. Good morning, guys. Punching for Catherine here. Maybe I just wanted to stick along the same lines. Like a lot has been made about some of the M&A that is out there and what that could mean for the talent acquisition front as well as the client acquisition front. But I wanted to ask you guys, you know, we're talking about how big this opportunity is, but you guys are seeing it and living it every day on the ground. Is that opportunity, you know, is it out there, you know, right now? Is it, you know, is the, are you actively seeing, you know, this big opportunity we're talking about in hiring in terms of just your boots on the ground there? Christopher T. Holmes: Yeah. Good morning, Will. It's Chris. You know, I think these things, and I don't want to point to anything specific, so I'll point I'll look in the mirror. Okay. Remember, we did a transaction in 2025, and again, it just creates a lot of disruption for your own company, but also for others, and it creates a lot of activity. And I think all that depends on a lot of things. You know, how quickly the transaction closes, what the communication is during all that period, when conversion actually takes place, conversions become a big deal. But actually, the most important part of a transaction is integration. Because that's, and sometimes folks confuse conversion and integration. Integration starts from the second, actually, it starts before you make the announcement. Because, you know, teams are working together and you see how that goes. You then make an announcement, and you then go through all this period of, frankly, changes to how people do business. And, you know, all of us approach that a little differently, I would tell you. Some folks, especially if they're the lead acquirer, they say, yeah. Let me tell you how you do business now. And some folks don't like that and they'll go somewhere else. Our approach tends to be a best approach. We evaluate how both companies do business and we end up adopting some of both. And we also end up adopting, we take an approach of what we call a best athlete approach, and we take folks from both companies depending on what works best for the whole. And so again, I'm telling you all that to tell you, it is not, there is, it's so much more art than science. All of that's going on in a lot of places right now. And so it evolves over time. Sometimes there's an immediate exodus of people because they just go, this is not gonna work. Okay? Or it's not gonna work for me. Other times, there's never an exodus of people, and I'd say most commonly, there's a slow drip. And so all of those are going on with multiple transactions. And we're out there playing in that sandbox. But again, our approach is, hey. Make sure we have the right culture, make sure that people know our long-term plan and that this is a great place to be. And make sure that they can take care of their clients. That's, that is the most, I'd say, important thing. And so I wish I could give you a little something a little more formulaic that could work its way into an EPS model, but all of that's going on, and depending on who you're talking about, you know, I would say there's a couple of big transactions going on in our market. And I think that the two different bigger transactions are taking different approaches. Michael M. Mettee: Yeah. And, Will, this is Michael. You know, to your point on disruption, and Chris mentioned some other calls. You know, one of the markets that's been called out, and some of it's Huntsville, Alabama. And if you look at Huntsville, bankers, there hasn't been necessarily M&A that's driven, but banker disruption has been on fire for six months. And, you know, we look up in the fourth quarter and we're really excited about the team we have in Huntsville right now. Yeah. And so, but there's, and amongst banks, I mean, I don't, you know, write this in stone, but there's, we have 50 or 60 bankers that moved between banks in the past six months. And we look at our team and we see the opportunity there. We're super excited about them. Relatively new, but very experienced market bankers. So not even M&A related. It's just opportunity related. And so that's, it's happening in and all around us. And we think we're poised to, are well-positioned to be successful with that. Will Jones: That's great. Thank you both. That's all very helpful content. I think we're all just trying to contextualize what we're talking euphorically about this hiring opportunity that exists and just wanted to see if maybe there's an immediacy to it or from your lens that it might take a little time to get there. So I appreciate that context. Michael M. Mettee: And, Michael, maybe for you, I will just, sorry. Not to interrupt you, but I think the answer to that is both. There is immediacy, but we're not just thinking about the next two weeks. Right? Yeah. This is a three, five, seven-year kind of opportunity with all this going on. And so, you know, these things take a little bit of time. So to answer both, it's probably not what you're looking for. Christopher T. Holmes: But Michael, I was gonna say exactly the same thing. They enter both, and I would say this, is what folks, what tends to be what helps FBK is folks view us as having a very long runway. And they view us as being able to, they view us as having a really bright path forward. And so that helps us and we play the long game there. So we're much more interested in, hey, we're gonna be here. We're gonna play the long game, and we think that's gonna be a winning formula. So it is both. Will Jones: Okay. That's very helpful. I appreciate you guys contextualizing that for us. Michael, maybe one for you on the margin. It's great to see the higher NIM this quarter. You guys seem to consistently outperform where you guys expect the margin to be. And then we have a little bit of higher guide and it's really just been a large function of you guys, you know, good managers of deposit costs. But as we enter kind of a '26 period where we expect growth to pick up even from where we are today, what do you think just incremental deposit betas will look like? And what kind of leverage do you feel like you still have to manage deposit costs over the course of next year? Michael M. Mettee: Yeah. Well, that's a really good question. Yeah. We feel good about the margin guide and the growth opportunity. I will say that mid to high single-digit growth at a 3.80 kind of core margin. However, as you mentioned, you know, as people come in entrance, you know, sometimes, when you hire people or not sometimes, a lot of times, to bring over relationships, you gotta start with bringing over a customer and it's probably paying above market for deposit costs and then you earn their business every time and we fully expect that our bankers can do that and will do it. So, and of course, I'm sure our competitors do as well. So, more people coming into our markets, you know, paying higher costs. I personally get flyers from a lot of large banks, you know, twice a week or mail offering things that are pretty exorbitant. So we do realize it's out there. Really comes down to the customer experience and relationship long term. And earning that business, and that's what we're focused on. So you could see both on the loan and deposit side, some margin compression if things get really, really, kind of dicey or competitive out there. But I think so far, everybody's pretty focused on everybody meeting competitive wise as well. You know, kind of lowering cost as rates go down. I will say this too, though, Will, because this is counterintuitive to maybe a lot of other institutions. Yeah. We want to be a fair value proposition to our customers. We want to earn, Chris mentioned the long game. We're thinking, yeah, years and decades. And so we're not trying to get everybody to zero cost deposit. We want to be fair. We want them to have their money here. We want it to be their entire family, their business, everybody. And so, we expect that on both sides of the balance sheet. We have fair loan yield. We won't be the lowest loan pricing either. But we want to take care of our customers. And so, you know, our deposit cost does run a little bit higher than some others. And our loan yields run a little bit higher. And so, we think that's the fair thing for the customer and for the company and for the shareholders. So that's kind of a different approach probably. Will Jones: Yes. Just maybe expectations on what incremental deposit betas will look like in this kind of competitive market you're describing? Michael M. Mettee: Yes. I mean, think if you're still looking at that 55%, 60% range, which is where it's been. I think on interest-bearing, but we'll see how, you know, treasuries are up. Right? A lot of external noise to the banking system that could put pressure on money moving back into some of those US treasury money market funds, which could impact that. But we've been pretty consistently able to move down deposit cost with rate cuts. That being said, we only think there's gonna be one or so where we sit today. Will Jones: Yeah. Okay. Good stuff. Maybe just lastly for me, Chris, we talked a little bit about just the appetite for what incremental M&A will look like and you mentioned for the right opportunity. You guys would keep your eyes and ears open. What could you just frame what that opportunity would look like maybe as you think about the right size, the right geography, just what you would look for in an M&A transaction today? Christopher T. Holmes: Yeah. So geographically, we're gonna be looking around the Southeast and the Carolinas even into Virginia, which is a contiguous state for us from where we are today. And not far at all geographically. So Carolinas, Virginia, Georgia, Alabama, some things that could even get down into the northern part of Florida would all be the types of places we would be looking. We would prefer, okay, not necessarily have to be contiguous to some of our existing geography. And here's an example of what I mean by that. I mentioned Virginia. Hampton Roads, Virginia is actually quite a long way from us and so that would be less interesting for us than, let's say, Western Virginia, they are the places like, I don't know, I'm hesitant to name the towns. So I'm a little hesitant to get too specific. But you can understand what I mean by, you know, jumping over big parts of geography is generally not what we're looking for. We like for it to be a little closer to our existing but in all of those locations. So I would think of more kind of Western Virginia, but, you know, the Carolinas certainly of interest. Georgia, Alabama, all of our existing Southeastern, let's say, geography. And then, you know, we like banks that we generally aren't looking for things that we have to fix in a significant way. We like companies that perform well. Asset-wise or size of the institution. We love things that are, call it anywhere from a couple of billion in assets all the way up to, you know, 6 or 7 even billion in assets. So we would, we love, that's a description of what we target. There are some cases where we may go smaller than that on the asset side. If it's a market that we're particularly interested in and we like what they do in that market, so there are cases where we go small in that. Asset-wise. Will Jones: Okay. That's great color, Chris. I appreciate it, guys. Thanks for the questions and congrats on a great year. Christopher T. Holmes: Thanks, Will. Thank you so much, Will. Operator: Our next question comes from Steve Moss from Raymond James. Please go ahead with your question. Thomas: Hey, guys. This is Thomas on for Steve. Could you just talk maybe about the loan pipeline and client sentiment broadly? How is client confidence these days? And what is their appetite for investment? Michael M. Mettee: Yeah, Tom. Good morning. It's Michael. Yes. Actually, the pipeline is pretty strong. I think we've been saying that we've been seeing strong pipelines. There's some deals that pushed into '26 from '25. And so I'd reiterate that they've been strong. Clients, I think a lot of the noise that happened maybe early last year that limited some of that early growth is past all the noise is still out there. I think that they're just operating in a way that, hey. It's kind of new norm, and we're excited about the future and investments occurring. We're seeing a lot of existing clients start new projects or deals, and a lot of times, they're able to take their older stuff to the permanent market if it's multifamily or real estate-based. And C&I activities picking up. So, really actually pretty positive operating environment business-wise. Thomas: Okay, great. Appreciate that color. And just one more for me. Last quarter, I know you guys indicated that loan growth would largely be governed by core deposit growth. And it looks like maybe core deposit growth was a little challenged in the fourth quarter. I saw you took on some brokered. Can you maybe talk about your core deposit growth outlook for 2026 and maybe the strategy that's gonna get you there? Michael M. Mettee: Yeah. With core deposit growth always a focus for us, you know, we've got a lot of funding capabilities that you, that we would exercise in kind of the shorter term if need be. I'd say actually when I think about core, it goes back to a comment I made a little bit earlier that sometimes you bring over customers and the intent is to turn them into relationships, is another word for core. And a lot of times, you know, if that didn't materialize ever, you know, some period of time, you know, and they're higher cost, we'll just go ahead and say, hey, maybe we're not the place for you. And so, that's where you can see deposit movement in and out of the balance sheet and that's a continuous process. Brokered small number for us, you know, 4% or so, balances. We do make sure that we have funding in place if need be. And I think from a perspective of how we're gonna do it in '26, I do think it gets back to what Chris said in his comments is, you know, the focus on the customer, customer experience, making sure we have the right treasury management, platform and products, as we go, I'll call more upstream a little bit opportunities, you know, that kind of middle market commercial client, a lot of opportunity there. But even, you know, half our business is consumer as well. And so, retail network, we've got to reignite the focus on our client there. And we're in the process of that and just really adding and activating relationships. So it's broad-based. You can't point to just a single thing. Because we're in a lot of these different businesses and so a lot of opportunity in our geographies. Thomas: Okay. Got it. Thanks for taking my questions and congrats on a good year. Michael M. Mettee: Thanks, Tom. I appreciate it, Tom. Bye. Operator: And at this time, we'll be ending today's question and answer session. I'd like to turn the floor back over to Christopher T. Holmes for any closing remarks. Christopher T. Holmes: Alright. Thank you so much again. We appreciate everybody joining us on the call. And we're glad to have had a good year. We're looking forward to 2026. And so thank you all and reach out directly if we need to give you more information. Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.