Northwest Bancshares - Q4 2025

Transcript

Operator (participant)

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bancshares Q4 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Michael Perry, Managing Director, Corporate Development and Strategy and Investor Relations. Please go ahead.

Michael Perry (Managing Director of Corporate Development and Strategy and Investor Relations)

Good morning, everyone, and thank you, operator. Welcome to Northwest Bancshares Q4 2025 earnings call. Joining me today are Lou Torchio, President and CEO of Northwest Bancshares, Doug Schosser, our Chief Financial Officer, and T.K. Creal, our Chief Credit Officer. During this call, we will refer to information included in the supplemental Q4 and full year 2025 earnings presentation, which is available on our investor relations website. If you'd like to read our forward-looking and other related disclosures, you can find them on slide 2. Thank you, and now I'll hand it over to Lou.

Lou Torchio (CEO)

Good morning, everyone. Thank you for joining us today to discuss our Q4 and 2025 full year results. I'll let Doug take you through the specifics of our strong Q4 performance. I would like to take a step back and reflect on a transformational year for Northwest and how our achievements position us for continued growth in 2026. On slide four, you can see some of the financial highlights of 2025. We closed on a significant acquisition, drove record revenue of $655 million for the full year, and continued to expand the firm's net interest margin. Coupled with our demonstrated expense management discipline through the closing and integration of our sizable acquisition, we drove double-digit EPS growth, all while investing in the talent, technology, and new financial centers and products to support our future growth prospects.

One of the high points of the year was the acquisition and successful integration of Penns Woods, bringing us into the ranks of the top 100 banks in the U.S. by assets. As well as adding 20 financial centers to our existing Pennsylvania footprint, we welcome new team members and thousands of new customers to Northwest. I'm proud of the team for its successful execution of a seamless integration at scale while maintaining our distinct Northwest culture and driving a strong core performance across the bank. We continue to transform our consumer bank, moving from branch consolidation to expansion, opening our first new financial center since 2018 in the Indianapolis, Indiana, MSA, featuring our new design focused on customer hospitality.

We're building out our presence in our Columbus headquarters market, with new financial centers now under development and due to open later this year in key locations across the city. We've already added several new team members with strong local and business community ties to focus on building momentum in advance of opening our doors. We remain focused on excellence as an outstanding full-service neighborhood bank, providing a highly personalized service. I'm proud to share that we have just been recognized by Newsweek for the third consecutive year as one of America's best regional banks. We continue to strengthen and diversify our commercial banking business with C&I momentum of 26% year-over-year average loan growth.

In 2025, we introduced a new franchise finance vertical, rounding out our nationwide business verticals, each with experienced and well-connected industry leaders, giving us a strong point of distinction in the specialty finance area. We also materially grew our SBA lending activity in 2025, earning a spot among the top 50 originators in the U.S. At the year-end, we closed on a significant funding for a Columbus-based business as we grow our SBA business both locally and nationally. Our bank is relying on outstanding talent for its success. Over the past 18 months, we've made significant investments in executive and regional leadership, hiring accomplished executives across consumer and commercial banking, wealth management, legal, and finance from numerous other respected financial institutions. We have a highly experienced leadership team in place that's equipped to drive ongoing transformation and growth across our business.

In 2025, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of $0.20 per share. This is the 125th consecutive quarter in which the company has paid a cash dividend. Looking ahead, I'm confident in our trajectory. For 2026, we are providing full-year guidance for another record year. Doug will provide all the details on our outlook. Finally, as we have previously discussed, we have also significantly reduced our level of classified assets. 2025 was a fast-paced and productive year. We've laid the foundation for a year of organic growth in 2026 as we maintain our focus on optimizing our operations, expanding our financial center network, and delivering growth across our consumer and commercial lines of business.

With that, I'll turn it over to Doug to review Q4 results and provide more detail on our 2026 outlook.

Doug Schosser (CFO)

Thank you, Lou, and good morning, everyone. As Lou indicated, we are pleased with our financial performance. We delivered a strong Q4, and we successfully completed all remaining merger conversion activities on time and on budget.

... This is the product of all the efforts of our entire team working tirelessly to deliver these results, while also ensuring that our merger and conversion activities went smoothly. I am grateful to the team for their efforts. Now, let's continue on page 5 of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the Q4. As a reminder, we closed our merger on July 25. As such, this is our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion and opportunities as a combined organization, we don't intend to disaggregate results now or in the future.

Our GAAP EPS for the quarter was $0.31 per share, and on an adjusted basis, our EPS was $0.33 per share, an improvement on the prior quarter of $0.29 per share and $0.04 per share, respectively, driven by record revenue, net interest margin improvement, and expense management discipline. Net interest income grew $6.2 million or 4.6% quarter-over-quarter, with net interest margin improving to 3.69%, benefiting from higher average loan yields, increased average earning assets from the acquisition, and purchase accounting accretion. Non-interest income increased by $5.5 million, or 17% quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit recorded in the Q4, supporting a total revenue increase of $11.8 million quarter-over-quarter or 7%.

We also saw improvement in our pre-tax, pre-provision net revenue in the Q4 of 2025, which increased to $66.4 million, a 92% increase from the Q3 2025 on a GAAP basis, and was $70.6 million, a 7% improvement from Q3 2025 on an adjusted basis. Our adjusted efficiency ratio of 59.5% in the Q4 improved by 10 basis points quarter-over-quarter and 9 basis points year-over-year as we continue to exercise tight expense discipline. Turning to page six, I'll spend a moment covering our loan balances. Average loans grew $414 million quarter-over-quarter, benefiting from a full quarter impact from the acquired balance sheet and organic loan growth.

More importantly, end-of-period loans grew by $66 million in the Q4, ending the year at $13 billion, laying a strong foundation for 2026 continued growth. Our loan yield increased to 5.65% in the Q4 of 2025, growing by 2 basis points quarter-over-quarter, and our average commercial loans increased $162 million or 7.1% quarter-over-quarter, and $509 million or 26% year-over-year. Moving to page 7 and our deposit balances, which continue to be a source of strength and stability. Average total deposits grew by $475 million quarter-over-quarter, benefiting from the acquired balance sheet and organic growth.

Our granular, diversified deposit book has an average balance of $19,000, with customer deposits consisting of over 723,000 accounts with an average tenure of 12 years. Customer non-brokered average deposits increased $507 million quarter-over-quarter, while brokered deposits decreased $32 million quarter-over-quarter. Our cost of deposits decreased 2 basis points to 1.53%, a product of our proactive management of the overall portfolio and benefit of late year rate cuts in 2025. 43% of our CD portfolio matures within the Q1 of 2026 at a weighted average rate of 3.6%. With new volumes at anticipated lower rates, this should drive an overall decline in CD costs.

Although our overall interest rate sensitivity position remains fairly neutral, our balance sheet has become slightly more asset sensitive with the continued growth in floating rate commercial loans. Turning to net interest margin on page 8. Net interest margin increased 4 basis points to 3.69% in the Q4 of 2025, with purchase accounting accretions net impact equating to 4 basis points. Turning to our securities portfolio on page 9, we purchased $363 million of securities during the quarter. Consistent with our existing portfolio risk metrics, this did not meaningfully change the portfolio's weighted average life, which remains at 4.9 years. Our new purchases were consistent with the current composition of the portfolio as we continue to strengthen an already strong source of liquidity.

Our portfolio yield continues to increase as new security purchases come on at higher yields than the run-off portfolio. Yields increased to 29 basis points to 3.11% in the quarter. 29% of the portfolio is held to maturity to protect tangible common equity. Turning to page ten, our non-interest income increased $5.6 million quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit income in the quarter. Non-interest income decreased to $0.3 million year-over-year. However, the prior year quarter included a gain on sale of Visa Class B shares and a gain on low-income housing tax credit investment that did not recur in 2025. Turning to page eleven.

The overall expense, excluding merger and restructuring expenses, was higher quarter-over-quarter and year-over-year, as Q4 2025 included a full quarter of the acquired Penns Woods operations. Compensation and benefits increase in the Q4 of 2025 was driven by a full quarter of employees from the Penns Woods acquisition, combined with increased performance-based incentive compensation based on our strong financial performance in 2025. Additionally, adjusted efficiency ratio was 59.5% in the Q4 of 2025, continuing the improvement in expense management over the last year.

On page twelve, you'll see overall ACL coverage at 1.15% is down from the Q3 of 2025, driven by net charge-offs in the current period, which on an annualized basis, were 40 basis points, as was guided, and are elevated as a result of a $19.2 million charge-off of a student housing loan. This loan was originated more than 10 years ago, has been in workout for several years prior to it being fully resolved this quarter. As a reminder, we have no meaningful concentration in student housing in our portfolio today. Our 2025 net charge-offs of 25 basis points were at the bottom end of a full year guidance of 25-35 basis points. Turning to credit quality on page thirteen.

Our credit risk metrics are within internal expectations, given the impact of the loans we acquired from the acquisition. Our total delinquency increased from 1.10% -1.50% quarter-over-quarter, primarily as a result of mortgage loans and a 31-day month at quarter-end. Our 90-day-plus delinquencies declined from 0.64% - 0.51% quarter-over-quarter, and NPAs decreased by $21 million quarter-over-quarter. Taking a deeper dive into the breakdown of our credit quality on page 14, Q4 2025 continued to see a decline in classified loans as a percentage of total loans and on an absolute basis, which was caused primarily by improvements within the CRE portfolio. As we discussed on earlier calls, we remain focused on reducing our classified loan balances.

Turning to page 15, we are providing our full year outlook for 2026. We expect to see loan growth in 2026 in the low-to-mid single digits and deposit growth in the low single digits. We expect revenues to be in the range of $710 million-$730 million, and net interest margin in the low 3.70s. We anticipate non-interest income in the range of $125 million-$130 million, and non-interest expense to be in the $420 million-$430 million range. We anticipate net charge-offs of between 20 to 27 basis points, and we anticipate the tax rate to remain flat to 2025 rate at approximately 23%. As we continue to grow in 2026, we will manage the business and drive positive operating leverage.

As a reminder, we said last quarter we had not fully recognized all of the cost savings from the merger. We are on track and expected to achieve 100% of the cost savings in the Q1 of 2026, which is ahead of schedule. That is fully reflected in our outlook. I will turn the call over to the operator, who will open up the lines for a live Q&A session.

Operator (participant)

At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jeff Rulis with D.A. Davidson.

Jeff Rulis (Managing Director, Senior Research Analyst)

Thanks. Good morning.

Doug Schosser (CFO)

Good morning.

Jeff Rulis (Managing Director, Senior Research Analyst)

Just to follow on, Doug, I appreciate the commentary on the expenses and the cost saves. I guess, looking at the full year guide, call it the midpoint at $425 for expenses, I guess that's, you know, $106 a quarter, I guess, if you just average. But it, typical seasonality, and then if Q1 maybe a little-- you start off a little heavier on that end. If you could just comment on any trend line with the expenses, that'd be great. Thanks.

Doug Schosser (CFO)

Yeah, happy to, Jeff, and thanks for the question. So a couple of things, right? So yes, you're right. Seasonally, you will typically see some increases in expenses in the Q1 for, like, FICA resets and some other things. But I still think our overall guide, you're right in the way you think about it, right? If I've got the low end of the guide at about $105 million a quarter, you know, we also would see increases typically in the Q2 for merit increases. So I think you're right to say that the Q1 might be a little bit elevated, but I would expect overall it not to be at the same level as we were at the Q4.

Jeff Rulis (Managing Director, Senior Research Analyst)

Got you. And it seemed like some of the performance based in Q4 is a little one time? I know that you've got the full quarter of Penns Woods, but is there a little bit of non-recurring kind of performance year-end stuff in that figure?

Doug Schosser (CFO)

Yeah. Yep. As you true up all your incentive plans and production plans and other things in the year-end, you've got a little bit of that lift in the Q4 as well. Correct.

Jeff Rulis (Managing Director, Senior Research Analyst)

Appreciate it. And one last one, just on the margin, similar kind of question. If the low 30s, the 370 range, one, does that include accretion? Assuming it does, and then two, kind of the rate assumptions underlying that.

Doug Schosser (CFO)

Yeah. So it does include sort of normal contractual purchase accounting accretion. So there would be some slight variation to that when you've got early pay downs or payoffs. So that's one thing to note. The other thing is we do have included in our guidance 3 rate cuts internally. Now, one of them was in January. We received a rate cut that we weren't expecting in December, so that effectively offsets it. So we would be thinking there's going to be two more rate cuts between here and the end of the year. However, we are pretty neutrally positioned, drifting slightly asset sensitive, as I said in my remarks, but generally neutral. So our NIM guidance really isn't contingent on those two rate cuts. We would stick to that if there were only, you know, one rate cut or no rate cut.

Jeff Rulis (Managing Director, Senior Research Analyst)

... Got it. Thanks for the detail. Appreciate it.

Doug Schosser (CFO)

Yep. Thanks, Jeff, for the question.

Operator (participant)

Your next question comes from Tim Switzer with KBW.

Tim Switzer (VP Equity Research)

Hey, good morning.

Doug Schosser (CFO)

Good morning, Tim.

Tim Switzer (VP Equity Research)

Thanks for taking my question.

Doug Schosser (CFO)

Morning, Tim.

Tim Switzer (VP Equity Research)

Yeah, morning. Well, first one, quick follow-up on the NIM and the purchase accounting. Can you clarify, the overall net purchase accounting impact to NII this quarter? Because I think the, the slide deck referenced 4 basis points, but also $4 million, and my math on those don't quite add up to that. And then, I guess just to clarify, is that also a good run rate going forward?

Doug Schosser (CFO)

Yeah, I'm not sure on the math piece, but yeah, the $4 million and the 4 basis points was effectively what we were, what we were kind of going back and recalculating all of that to. Again, I would say, generally speaking, we had pretty positive movement across the balance sheet, right? We did have a rate cut in there. So you had improvements in loan yields, small, but they were there in the margin. You had lower deposit costs, and you also had improvements on the securities portfolio. And then you had that 4 basis points impact from purchase accounting. But again, all of those underlying metrics were driving up income-wise. Of course, having a rate reduction in there sort of changes the income dynamic a little bit on the loan portfolio.

Tim Switzer (VP Equity Research)

I get you. Okay. But is 4 basis points a good run rate for purchase accounting? Obviously, dependent on prepayments and things like that.

Doug Schosser (CFO)

Yeah, probably. I mean, we would have had as we went through the Q4... Of course, we closed our merger in July, right? So by the time we got through the end, the first two quarters are a little bit bumpy because you're still kind of catching up on everything. But, the guidance would fully incorporate those contractual purchase accounting. So I think if you kind of go with the low 370s guidance that were provided, that would be inclusive both of, normal performance as well as the impact of purchase accounting. Again, it does not assume materially different levels of prepayments.

Tim Switzer (VP Equity Research)

Okay, got it. And then I was looking for an update. You, you mentioned on the call, but on your SBA business, you mentioned about recently closing the funding. Could you maybe provide a little bit more details there? And then what, what are your growth expectations for this business going forward? And, you know, how much of that volume will you be retaining on the balance sheet versus looking to sell?

Doug Schosser (CFO)

Yeah, I'll, Lou will answer some of that, and I'll give you some of that. First of all, one of the things that we had the opportunity to do was balance sheet a bit more of that because we had some opportunistic fee income. As the full proceeds come through, and we had the opportunity to not have to take as many SBA gains, we certainly did that within the quarter, because obviously those are very nice yielding loans, and we'd like to have them on our balance sheet. And I think as we've talked about before, we do do national originations in the SBA business, but for our in-footprint clients, we tend to want to keep them on the balance sheet.

The other thing that we'll tend to do is we'll manage a reasonable amount of growth in fee income from the SBA business, as well as balance sheeting a reasonable portion of that business. I don't think we want to get into the cycle where we're booking all the gains and on that constant treadmill. So as we continue to build out the SBA vertical, we're going to do both. We're going to balance sheet, and we're going to sell, sell for gains as we kind of migrate through the process. And then again, we are really excited about the build-out of that team and the fact that we've now reached the top 40 in SBA volume. Top 40 originators by volume.

Lou Torchio (CEO)

Yeah, Tim, this is Lou. Good morning. How are you?

Tim Switzer (VP Equity Research)

Hey, Lou.

Lou Torchio (CEO)

Just a follow-up on Doug's comments and your question. We really like the flexibility that this provides for us, you know, commercial loan growth, spread income on the balance sheet with the flexibility and the lever to generate fee income. We are just now in the early innings of scaling this business. We've invested a lot in people, a lot in the underwriting and due diligence and portfolio management around this. And our strategy really is to capitalize on quality business nationally, but also, and maybe more importantly, to focus on driving customers and customer retention in the footprint in the four states we operate in. So we're going to layer this product, and we're looking at some other product, SBA products into our retail franchise.

As we noted, we thought it was important to note in the call that the deal we did right here in Columbus. And so, yeah, we're really, really happy with the business. We'll be, like we are with all these businesses, we'll scale them prudently. We're not in a hurry to get to the top 10. So, yeah, really pleased with this. And, most importantly, I think I'd like to drive the message that we've built the infrastructure to do this in a prudent manner.

Tim Switzer (VP Equity Research)

Yeah, got it. That—I mean, the strategy makes a lot of sense to me. You touched on it. If I could have one quick follow-up. You know, there's been some disruption in the SBA space with, you know, the rising credit losses over the last few years and then some of the SOP changes over the summer. Where are you finding the talent you're hiring from? And, you know, how are you, you know, going forward, making sure that you guys are, as you mentioned, you know, prudently running the business?

Lou Torchio (CEO)

Yeah. No, great, great question because it's very important, right? So, as you know, we've kind of remade the executive suite here over the last couple of years, and Jay DesMarteau, who formerly was GE, TD Bank, and LendingClub-

... when he came to the firm, he had contacts that he was able to bring. So we know the management we're bringing in, we know the performance level, and we understand what their acumen is, and they have a long history of success. You know, I wouldn't certainly want to name firms, but I would tell you, like all businesses, we've gone to the best and the best of the industry and recruited from those franchise. So we're really comfortable and have experience with the team.

Tim Switzer (VP Equity Research)

Yeah, that, that sounds great. Thank you.

Lou Torchio (CEO)

Thank you.

Operator (participant)

Your next question comes from Daniel Tamayo with Raymond James.

Lou Torchio (CEO)

Hi, Daniel.

Doug Schosser (CFO)

Good morning.

Tim DeLacey (Analyst)

Hey, good morning, guys. This is Tim DeLacy on for Danny. Hope you're doing well.

Doug Schosser (CFO)

Oh, hey, Tim.

Tim DeLacey (Analyst)

Hey, good morning. Hey, so just wanted to switch over maybe to the balance sheet. You had mentioned in the release, you know, you had targeted the securities portfolio increase in the quarter. Could you maybe share some details on maybe when the timing of when the securities were purchased during the quarter, and then kind of describe maybe your appetite to grow the security book relative to the asset base going forward?

Doug Schosser (CFO)

Yeah. So we looked at the opportunity. So again, I think we were keep growing our securities book a little bit 'cause we were slightly underweighted if you sort of compared us to sort of peer banks and other things. We did take advantage of that a little bit earlier in the quarter, but not all of it. So basically, mid to late October, and then there was a bit more done in November, mid to late November. And we'll continue to look at advantages for how do we sort of support that portfolio going forward. It's a very nice store of liquidity for us.

And also, you know, as we've got an outlook for declining rates, we'll also do things like try to pre-purchase some of the securities that we see maturing within the quarter, earlier in the quarter versus late, to try to pick up a little bit of yield benefit there as well. So really, I would just say it's generally prudently managing the investment portfolio and growing it slightly, just to keep it sort of in line with peers. I think we're targeting around 17% of loans or assets into that, into that bucket.

Tim DeLacey (Analyst)

Okay, great. Thank you for that color, Doug. And then maybe just one follow-up. You know, CRE down this quarter, you guys obviously have the capacity to grow the portfolio going forward here, but, you know, in that low to mid-single digit guidance for loan growth in 2026, how should we be thinking about CRE as a contributor to the loan growth this year?

Doug Schosser (CFO)

Yeah. So you're right. We do have some opportunities there, given the percentage of capital that we have related to our CRE book. You know, it takes a while to turn that flow around, but we're definitely in the CRE business. And we continue to look for opportunities to sort of support that particular in our market. So again, it's not one of the businesses that we're aggressively growing nationally, but in our footprint, when there's good developers and operators and we have opportunities to sort of lend to those, we would. Again, we also have some non-performing assets that we or some criticized and classified assets that we talked about that are some real estate developers. So you're also seeing a little bit of that pressure on that overall line item.

Again, we hope that that continues to abate as we get through next year. So again, we're looking forward to turning that CRE business around to get it to more flat, to slight growth, and that's an opportunity that we have coming up in the next year or two.

Tim DeLacey (Analyst)

Okay, great. Thank you for the color, guys. I really appreciate it.

Doug Schosser (CFO)

Thank you.

Operator (participant)

Your next question comes from Kyle Gierman with Hovde Group.

Kyle Gierman (Equity Research Associate)

Hey, good morning. I'm on for Dave Bishop. Yeah, so, loan growth was strong this quarter. Was wondering if you could provide some color on what segments and geographic areas are leading the way, and how the pipeline is looking headed into the new year?

Doug Schosser (CFO)

Yeah. So the pipeline is looking very good. So we've had, we've had a nice improvement in the portfolio actually throughout last year, and it continues into the Q1. And I think I would say it's a broad-based level of growth. So we continue to see kind of growth in our national verticals. Where we're going to focus a little bit more is sort of in our four-state footprint and in some of our businesses that we think we can continue to attract talent and develop some growth opportunities in market. But again, I would say it's generally broad-based.

There are some other things that might translate into some good business opportunities into 2026, like some of the tax changes that went through last term, including the expensing of equipment is good for our equipment finance business, the full expensing that you get on the tax benefit. So again, everywhere that there's some opportunities and we like the credit profile, and we like the returns that we're getting on those loans, we've got people who are out there and ready to do the business.

Kyle Gierman (Equity Research Associate)

Awesome. Thank you. Maybe a follow-up on that. Could you touch on the payoff and prepayment trends you are seeing in the quarter?

Doug Schosser (CFO)

Yeah. I mean, again, we've been focusing on the criticized classified assets and continuing to manage that down. So that was a pretty significant source of our paydowns. And then again, with interest rates falling, there's going to be other clients that are going to look to refinance existing loans. Obviously, we try to participate in those credits as well, but there's always a bit of a give and take in a rate environment that's changing. So I would just say there was nothing in particular that we'd point out on the paydown side, just sort of normal business flows....

I will say, I think that coming off of, coming off of the year that we had focusing on the merger, now we're kind of back to business and running the bank, you know, more completely without having that distraction. So that'll also be helpful.

Kyle Gierman (Equity Research Associate)

Perfect. Thank you for the color.

Operator (participant)

Your next question comes from Matthew Breese with Stephens Inc.

Matthew Breese (Managing Director)

Good morning.

Doug Schosser (CFO)

Morning.

Matthew Breese (Managing Director)

Just a few from me. The first thing, quick: what was the exact amount of the BOLI death benefit? I was assuming about $6.5 million.

Doug Schosser (CFO)

Yeah, I think that is a pretty good assumption, 'cause it was about $6.5 million.

Matthew Breese (Managing Director)

Okay. And then, Doug, you had talked a little bit about CD costs and upcoming maturities. I think you said 43% maturing in the Q1. As you're seeing the CD book kind of reprice, mature, what is the blended all, you know, new cost of CDs, including some of the higher cost promotional stuff? I'm just trying to get a sense for where CD costs could go near term.

Doug Schosser (CFO)

Yeah. I think we're seeing probably about a 10 basis point opportunity. Again, it's all going to be based on competitive pressures at the time, but, you know, you're seeing that kind of an opportunity that evolves. We also have, you know, we've got other savings products as well, and we're attracting new money at times, and we have some of those promotional rates, all of which is helpful. But I would say if you're kind of thinking about that 10- to 15 basis point opportunity on kind of the reprice with the markets coming down, that's probably fair.

Matthew Breese (Managing Director)

Got it. And then the rest of the book, obviously, you have a lot of lower cost categories. Just given the environment-

Doug Schosser (CFO)

Right.

Matthew Breese (Managing Director)

We're hearing a lot more about competitive conditions, you know, the core, the core deposit book. How much more room is there to, to lower costs?

Doug Schosser (CFO)

Yeah. I mean, again, you're right. I think we're seeing that as well, and we're very focused on sort of managing kind of both the overall size of the deposit book to support growth as well as the overall cost of the book. And, you know, obviously, no one knows kind of where the rate counts, rate hikes and cycles are going to go. But I would tell you that I think what we're seeing is, you're just seeing a little bit of a longer period of time between change in rates at the Fed and then sort of the reaction sort of of the banks in general. So I think we're kind of following that trend.

So I'm not concerned that there's not an opportunity there, but that opportunity might just lag rate reductions by a little bit longer than it had in the past. So call it 30-45 days before you're going to see sort of those rate reductions.

Matthew Breese (Managing Director)

Got it. Okay. And then this last one is on M&A. You know, following the last deal, curious your appetite to participate in whole bank M&A and whether or not there's active or ongoing or an increase in conversations? Thank you.

Lou Torchio (CEO)

Yeah, this is Lou. I'll take that. You know, I think we've signaled in the past, and it remains true, that we stay focused now on the successful accretion, and driving organic growth in 2026 as a result of our acquisition. Certainly, you know, we're open to conversations, nothing imminent for us. We're really focused on making sure we execute the 2026 plan, and that we get the results that are correlated with the acquisition. We think it's going to be very additive. We like our jump-off point, and we want to string together several quarters of strong results before we would entertain anything like that.

Again, notwithstanding, given the regulatory environment, and and maybe some opportunistic deals, as we get further along in this year and look into 2027, you know, we'll keep our options open. However, you know, our goal is to find something that fits culturally, that drives earnings and value for our shareholders, and that fits into our geographic footprint. So, we're not interested really in going out of market at this point.

Matthew Breese (Managing Director)

Great. I appreciate you taking all my questions. I'll leave it there. Thank you.

Doug Schosser (CFO)

Thank you.

Operator (participant)

Again, if you would like to ask a question, press star and the number one on your telephone keypad. Your next question comes from Manuel Navas with Piper Sandler.

Doug Schosser (CFO)

Morning, Manuel.

Lou Torchio (CEO)

Hey, Manuel.

Manuel Navas (Senior research Analayst and Managing Director)

Good morning. Can we swing back to the NIM for a moment? Could you just talk about the guide is pretty strong and just wondering what are the drivers and progression of the NIM across a year? I hear you on the CD book repricing being a little bit more neutral. Securities yields are benefiting and loan yields are benefiting. Just kind of where does that kind of set the path across the year?

Doug Schosser (CFO)

Yeah, I mean, we're not giving into kind of all that guide, but, you know, I think it's safe to assume that we would have a slightly improving margin as you get some of the benefit of those rate cuts, which I think most people are projecting those to be later in the year, right? So that 3.70 mid or low 3.70s is pretty consistent with where we were at 3.69 for the quarter. And I think we're, you know, working to hold on to that. The trade-off, obviously, is we also want to have, you know, asset growth. So to the extent that there's competition out there, we're not going to price ourselves out of that competition, but we're not anticipating a significant downward pressure either. So I think we're gonna, we're gonna work to maintain that low 3.70s margin.

And again, to the extent that it's gonna have any sort of slope to it, it's going to be a little bit later in the year because you would expect to have some slightly lower funding costs that would benefit us.

Manuel Navas (Senior research Analayst and Managing Director)

I appreciate that. Another progression question. That charge-off range is pretty solid? Kind of what are some assumptions on that progression, or can you not get into that a bit?

Doug Schosser (CFO)

I mean, yeah, I think that we have. So obviously, in the Q4, and we talked about the guide last quarter, right? That $13 million, that was largely focused on... We had one significant credit that we knew we were working out, and we thought that there was going to be some lost content there. So now I think we're back into a much more normalized flow. So again, there may be a small peak or a valley in one quarter, given, you know, a credit or two that happens, and we're at a relatively overall low level, so you can get little spikes. But we're not, you know, we're not anticipating it to be anything, you know, super material. So hopefully we'll have that be a pretty steady charge-off rate throughout the year.

Manuel Navas (Senior research Analayst and Managing Director)

And again, that's the last one.

Doug Schosser (CFO)

That guide is for this year. Also hearken back, we've kind of set our long-term guides always at 25-35, so we're still anticipating being at the lower end of that kind of overall guide.

Manuel Navas (Senior research Analayst and Managing Director)

That's great commentary. Switching back to loan growth for a moment, can you talk about the mix? You spoke a little bit to CRE having some headwinds, but some building potential there. But can you just talk about the different segments and where you see the most growth? I'm guessing C&I has the biggest drivers, but just kind of speak across the loan book for this year with that low single digit to mid-single digit guide.

Doug Schosser (CFO)

Yeah, you'll probably get a little bit of feedback, both from Lou and I on this topic, right? I think we see some opportunities kind of across the book. So whether it be in indirect or even, you know, to the extent that we can start to think about the mortgage portfolio, how we slow some of that runoff, when we look at certainly what's going on in CRE, and then when we see our national vertical. So, you know, we like the way we're positioned to do business across all of them, and we'll be looking to kind of just support that overall asset growth that we're targeting, that low to mid single digit level. So again, I don't know that we would say it's going to continue to be solely focused just on commercial, but certainly we continue to have opportunity to grow commercial.

And again, we've kind of talked about our overall mix. We're not targeting any specific thing. I think we're about 45% commercial, 55% consumer. We like that. We like it anywhere kind of in that 50%, 5% plus or minus on either side. So I think we like the way things are shaping up, and having an inverted yield curve also is nice, so we have the opportunity to kind of blend out a little bit on the longer end of that curve and pick up some yield that way as well. But, Lou?

Lou Torchio (CEO)

Yeah. Good morning, Manuel. How are you? I would concur with— I would concur with Doug, right? So we're getting to the point of equilibrium where we're getting a lot of balance in the book. If you remember, a couple of years ago, we were heavy consumer with a large focus in mortgage and long on the curve. As we continue to work that down, remix the sheet, you know, we're nearing a 50/50, and we kind of like that, both from an interest rate risk and a credit risk standpoint. We are very diversified for a firm our size, in that, I think that helps with the risk profile. We're not particularly overweighted in any one business. We have a lot of different levers.

We think that this year, consumer, both mortgage, home equity, our indirect, will, will be strong. And so, you know, driving, I think we're driving growth in the, in our budget across all those sectors. We really like the position we're in. We like the flexibility that we have. And, you know, I think it's, we're unique in that we do have these commercial national verticals. As Doug pointed out, we have a renewed, emphasis on in-market business banking, lower middle market. We have, what's recognized in the four states as a very, very strong consumer franchise.

We like the diversification, and we like the ability to be able to pivot, and we are focused on growth in 2026 organically, on the heels of a pretty significant acquisition that would also drive top-line revenue.

Manuel Navas (Senior research Analayst and Managing Director)

Thank you for that.

Operator (participant)

There are no further questions at this time. I'll now turn the call back over to Lou Torchio, President and Chief Executive Officer, for closing remarks.

Lou Torchio (CEO)

Thank you. On behalf of the entire leadership team and the board of directors, thank you for joining our call this morning. I'm excited at our prospects in 2026 as we build out our consumer franchise in Columbus, Ohio, deepen relationships in our existing core markets, and continue to build market share in our commercial lines of business. I look forward to speaking to you on our Q1 call in the spring.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.