Simmons First National - Q4 2025

Transcript

Operator (participant)

Good day, and welcome to the Simmons First National Corporation Q4 Earnings Conference Call and Webcast. All participants will be in listen-only mode. To get assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Ed Bilek, Director of Investor Relations. Please go ahead.

Ed Bilek (EVP and Director of Investor and Media Relations)

Good morning, and welcome to Simmons First National Corporation's Q4 2025 Earnings Call. Joining me today are several members of our Executive Management team, including President and CEO Jay Brogdon, CFO Daniel Hobbs, and COO Chris Van Steenberg. Today's call will be in a Q&A format. Before we begin, I would like to remind you that our Q4 Earnings materials, including the earnings release and presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab. During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity, and net interest margin.

These statements involve risk and uncertainties, and you should therefore not place undue reliance on any forward-looking statement, as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday, as well as our Form 10-K for the year ended December 31st, 2024, and Form 10-Q for the quarter ended September 30th, 2025, including the risk factors contained in those filings. These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information. Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors.

Additional disclosures regarding non-GAAP metrics, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com. Operator, we're ready to begin the Q&A.

Operator (participant)

Thank you, and as a reminder, if you'd like to ask a question, please press star then one. To remove yourself from queue, please press star then two. Our first question today comes from Matt Olney at Stephens. Please go ahead.

Matt Olney (Managing Director)

Hey, thanks. Good morning, everybody. Want to start on the loan growth front, loan growth took a nice step forward in the Q4. Any more colors on the drivers? And then the second part, I just want to understand the pipeline discussion, disclosures. Looks like the approved and ready to close pipeline moved up nicely, but the overall pipeline was still flat out. So just trying to appreciate maybe the various components of that pipeline and then what that means for growth in 2026. Thanks.

James Brogdon (President and CEO)

Yeah, thanks, Matt. I'd say a few things to comment first on the quarter, and then we can talk about pipelines in 2026. We were certainly pleased with the pace of growth for loans in the Q4. That quarter really had the highest level of production, I think, that we've seen in at least a couple of years. At the same time, we still had elevated paydowns in the quarter, but the level of production was more than enough, obviously, to offset that level of paydowns and drive some meaningful growth. I would also call out for the Q4, in case it's not obvious to you. There are some, you know, arguably some seasonal adjustments to the Q4. Q4 growth for us tends to be slower on the Agri side, and Agri loans were down.

Mortgage Warehouse loans were down. We obviously divested some loans and had some charge-offs in the quarter. So really, when you think about Q4 underlying growth rate, it was well in excess of the 7% annualized that we disclosed on a total loan basis. So again, I think it demonstrates the ability for us to really move the needle from a loan growth perspective. At the same time, your question on pipeline and kind of 2026 outlook, our guide is not to have sort of sustained that level of growth. We just had some good timing of some things, and pipelines coming out of Q3 and early Q4 that pulled through and led to some really nice funded commitments throughout the quarter.

Rates ready to close, as you commented on, that's a very, very firm, high, high likelihood area of our pipeline is also at a multi, multi-quarter high. So I think that points to probably some good production and funded growth as well in the early part of the year. Then as I think about the rest of the pipeline, you know, our pipeline ranging in that mid kind of between $1 billion-$2 billion, $1.5 billion-$2 billion is a pretty normal pipeline for us. We're certainly active and seeing a tremendous amount of opportunities, all across our footprint. So, we feel very, very confident when we put all those things together, in our outlook for something that's probably a little more optimistic in loan growth than what we've had over the last couple of years.

But we're still going to be very, very cautious around, you know, the credit and underwriting environment, and then also just from a pricing and profitability perspective, the competitive environment in there. All that kind of balances out to what we, what you saw as guide for 2026 is kind of low-to-mid single-digit growth.

Matt Olney (Managing Director)

Okay. Perfect. Appreciate the details there, Jay, and then pivoting over, curious about your thoughts on the margin from here and the Q4. I think it was a 381 margin. Just trying to appreciate how clean that number is. Anything you would call out as unusual in the Q4, and then I think the deck mentions the backbook should provide some nice tailwinds to the margin in 2026. Would you expect that to support margin expansion from here? Just trying to appreciate maybe the puts and takes on the margin from here.

Daniel Hobbs (CFO)

Yeah. Hey, Matt, this is Daniel. I'll comment on that. So, the linked quarter margin growth of 31 basis points, I'll break that down for you, give you appreciation for that. So of that 31 basis points, about 19 basis points, call it 19-20 basis points of that is from the partial quarter impact of the balance sheet restructure that we did last quarter. But then the rest of that is really from core NIM expansion from just business practices. So 11 basis points from that and of that 11 basis points, about 3 basis points is related to loan growth, and 8 basis points is related to rate and mix. So, you know, a couple of things to understand from that is, you know, we had the three rate cuts in the back half of the year, September, October, and December.

Post-balance sheet restructure, we did move from liability sensitive to asset sensitive. But a nuance to that is, as you think about our sensitivity along the curve, we're still a little bit liability sensitive on the short end of that curve. So call it day one to three months, we're a little bit liability sensitive. So we got some benefit from those rate cuts in the Q4. We will shift to asset sensitive once you get past three months and towards the long end of the curve. So, as you think about kind of the guide and specifically Q1, we would expect Q1 to be relatively stable to the 381. There might be a basis point or two of benefit there and then as you think about the full year, we're probably pretty stable.

Maybe a couple of basis points get to the mid-380s by Q4. Your comment on the backbook repricing, so yes, that's still a benefit for us, and we expect that to be a benefit for us as we move on. That benefit lessens a little bit as we get rate cuts. You know, we've talked historically about 200 basis point pickup before the three rate cuts that we got, you know, in the back half of the year. So that will come down a little bit, but we still have, Matt, you know, over $2 billion-$2.5 billion of loans that will reprice over the next two years that have a rate less than 4%. So that tailwind will continue to exist. Maybe a couple points about the guide.

Our rate forecast, that's embedded in our guide, is a rate cut in May and one in August, and so as you think about loan yields repricing, you know, when you look at the Q4, loan yields were down eight basis points. Even if you go back to Q2, we're only down about 3 basis points, so that backbook repricing is offsetting some of the impact from the rate cuts that we've had, and if you flip to the deposit side, you know, you think about the beta there, our beta cumulatively is 64%. We do expect that beta to moderate some in 2025, primarily because a couple of things. Number one is, our deposit book is different than it was pre-balance sheet restructure.

We got about $1.4 billion less brokered deposits, which have 100% beta. So that's embedded in that 64% cumulative beta today. What we think is the incremental beta for future rate cuts is probably around 50%. And so by the end of 2026, we think the cumulative beta kind of settles in that, kind of that high 50 range. So still some opportunity there, but we do expect the beta to moderate a little bit. Then just maybe connecting the NIM discussion with your question on loan growth, we still, we still believe and feel like that we can grow NII, without significant growth in the loan portfolio just because of the things that I just talked about. Our 9%-11% guide on NII, we feel pretty, pretty good about.

James Brogdon (President and CEO)

Hey, Matt, I'll just chime in. I mean, as I, I'd echo everything Daniel said there. Bottom line for me is I think, you know, my outlook for NIM for 2026 is relatively stable, as Daniel said. I think the backbook reprice on loans, as well as the deposit beta and our ability to continue to do things we've been doing from administered rates, et cetera, those are all tailwinds that'll offset any additional rate cuts to the extent they come through and allow for that more stable NIM. I think the opportunity in excess of what we've got it, right? Our outlook is what our outlook is. The opportunity though, and what we're focused on strategically is really on the remix on the deposit side.

Our biggest opportunity to even further exceed the guide is really built around our ability to organically grow some low-cost deposits, and we're very, very focused on that and think that, you know, to the extent we're successful there, we've already got, I think, very strong growth embedded in the guide, but that would be the area that would provide upside to the guide.

Matt Olney (Managing Director)

Okay. That's great commentary. Appreciate all the details there. And maybe just one more follow-up with this discussion. Any commentary about what you're seeing in markets around deposit competition, loan pricing competition? I think last quarter you flagged loan the loan side was getting more competitive. Just in general, I'll take the thoughts on both sides there. Thanks.

James Brogdon (President and CEO)

Yeah, Matt, really continuation of that same theme on the deposit side. You know, I honestly, I would say I think we feel pretty, see there's pretty good behavior around the rate cuts in the industry. Betas are relatively high in my mind, and lags are short around the more recent rate cuts. So that feels good. Where we see irrational competition for the most part, today on the deposit side is from smaller banks. The good news is, in a lot of those markets where we're competing with the smaller banks, we have very, very dominant market share, and we can kind of flex around that. So that area is still very competitive, but to me, it's nowhere near as competitive of a pressure as what we're seeing on the loan pricing side. You've heard us talk about that.

We, a lot of our loan growth in the Q4 was in a CRE blend. We're very focused, as you and others know, on C&I. We have good C&I opportunities in our pipeline. We've had great opportunities. We've had some good production on C&I, but returns on a risk-adjusted basis have been so much stronger in recent months from a CRE perspective because of what we believe is very, very irrational pricing and really pricing away the profitability from even, even in relationship-based situations where deposits and, you know, treasury management are coming with it, the yields on the loans really make no sense and particularly make no sense on a risk-adjusted basis. So we'd like to see some, you know, improvement in that competitive dynamic. It doesn't discourage us as it relates to our overall growth outlook, but that is the biggest competitive factor that we're seeing today.

Matt Olney (Managing Director)

Okay, guys, that's all for me. Thanks for taking the questions.

James Brogdon (President and CEO)

Thanks, Matt.

Operator (participant)

Thank you. Our next question today comes from David Feaster at Raymond James. Please go ahead.

David Feaster (Managing Director of Banking)

Hey, good morning, everybody.

James Brogdon (President and CEO)

Good morning, David.

David Feaster (Managing Director of Banking)

I wanted to maybe shift gears to asset quality. Nice to see the resolution of those two problem credits, and with less impact than initially expected. You know, also saw the sale of the Equipment Finance business, and you guys did the deep dive into the NPAs. I'm just curious, you know, maybe whether there's anything else that you're considering divesting and as you did that deep dive, whether you found anything else of note that maybe has shifted underwriting at all, or just kind of curious kind of what you're thinking on asset quality and, you know, anything that's come out of this whole process.

James Brogdon (President and CEO)

Yeah, David, I'll jump in on this one. So, you did a great job summarizing the actions that we took in the quarter, and we feel very, very good that our reserve levels, and what we had done kind of on a specific reserve basis was more than adequate for the actions that were taken, particularly on the larger credits and the Equipment Finance portfolio. Really, as I think, kind of read through credit and the results of the deep dive, again, feel credit is, you know, very stable right now. Those situations were very unique, each of them. They'd been around for a while, particularly with the Equipment Finance portfolio had been in runoff for a long period of time. We hadn't originated a loan there in several years. That came from historical acquisition.

And so the credit read for us, as we did the deep dive, was really cleaning up some of those legacy-type, you know, non-performers that have been in there. We were able to identify the loss content, got the full resolution on several of those credits and moved on and took the charge off in other instances, still working toward very, very rigorous resolution processes in a couple of those instances. However, we had done enough work to know what the loss content was and went ahead and moved on those. So really underlying, I think it's just a continued stable outlook and all of our kind of early indicators or predictive indicators around credit. I would fall into that characterization of just in the stable category.

David Feaster (Managing Director of Banking)

Okay and obviously there's been a lot of disruption across your footprint and in the market broadly. Just wanted to get your thoughts on where you see the most opportunity and how you're positioning to capitalize on that? And then just specifically on the hiring side, it looks like you did add some talent this quarter. Just curious your appetite for hires, where you're hiring, and maybe what segments or markets you're focused on.

James Brogdon (President and CEO)

Yeah, I don't want to be overly generic in the answer, but it is a somewhat generic answer in that we are seeing great opportunities all across the footprint. You know, southwest part of our footprint, the midwest, the southeast parts, really just footprint wide, we are very active. Pipelines from a talent perspective are very strong and I would suspect that you'll see us being successful in continuing to, you know, upgrade talent, add talent. Tt's across all areas of our business. Again, not trying to be overly generic. It is somewhat heavily focused in our revenue areas where we are adding talent, but it's not just there. A lot of our support areas where we can bring in strong talent to help us innovate, automate, and drive some of our efficiency and scale initiatives forward.

We're seeing some really good talent come out of some of the disruption in those areas as well. So, we're, we're very, very excited. That's probably one of the most excited things, going on in our business right now is the prospects that we're talking to from a talent perspective, and the success that I think we're going to have in that regard.

David Feaster (Managing Director of Banking)

That's great. Maybe just last one, Jay, you know, one of the things that we've discussed, you know, pretty in depth previously has been as a part of the Better Bank initiative, you know, the focus on improving processes and procedures. There's still, you know, kind of in the middle innings of that, you know, maybe a quarter or two ago. I'm just kind of curious if you could kind of give an update on where we are there on improving, you know, again, the processes and procedures and some of the business lines and kind of maybe what you're most focused on near term?

James Brogdon (President and CEO)

Yeah, I think from a non-interest expense and just overall kind of efficiency and scale point of view, I really think it's still fair to characterize us as in the middle innings of that journey. I also think that the latter innings are much harder to get than those early innings were because we attacked the lower hanging fruit first. There's a slide on this in the presentation. I want to remind everyone, you know, our expenses in 2025 were below our run rate for expenses in the Q4 of 2022. So three years of inflation, merit increases, investing in the business, et cetera. And that is a function of, I think us demonstrating success in executing these efficiency initiatives.

We have brought a tremendous amount of automation to processes, and continue to do that. We've centralized and standardized around best practices in a lot of areas of the bank. And so you might think of, you know, a decade of acquisitions and really taking the time over the last few years to fully integrate, and digest all across the footprint. So, I think there's still, David, some very meaningful opportunities for us there as I think about the expense outlook, maybe a little more tactically, not exactly embedded in your question. But if I think about an expense outlook, you, you know, I'll tie it back to your question around talent opportunities. We continue just to try to fund our investments.

So I think a lot of the work that we're doing in these middle and later innings on the efficiency side are geared around kind of freeing up the investment to bring in talent, to invest and improve in the technology stack and better innovate around the bank. So, you know, I think you saw our expense guide is up 2%-3% year-over-year. That's really reflective, I think, of, kind of a balanced view of success in these initiatives, paired against the opportunities we see, maybe even on an accelerated basis, to invest in our business.

Daniel Hobbs (CFO)

Yeah, David, I'd add a couple of things to what Jay said. You know, I think when you look across our business from the back office, the middle office, and the front office, we've adopted a continuous improvement mindset in that, we're inspecting everything that we do. In many of those processes, we need to tweak some things, and in some of them, we need to completely blow it up and rebuild it. You know, we recently visited a customer that made a comment to us that says, "If it ain't broke, break it." We've adopted that in some places. So there's still a lot of opportunity for us there. Just a couple of points for you. We've talked about our vendor spend and our procurement group that we stood up about two years ago, and we've got some significant success out of that.

We still see opportunity in that over the next 12-24 months to gain some ground. Then, you know, when you just look across our footprint, our facilities, the square footage that we have, we've reduced our square footage this year by 6%. Some of that is direct savings to the bottom line, and some of that is savings on future spend of maintenance that we might have to do that we are now no longer going to have to do. That's split about 60% between Retail and about 40% from Corporate location. It's not all coming from branches, which is a good thing. You know, those are examples of just things that we're looking at across our entire business, to Jay's comment earlier about how can we self-fund the investments that we're trying to make, to grow our businesses.

David Feaster (Managing Director of Banking)

That's helpful. Thanks, everybody.

James Brogdon (President and CEO)

Thanks, David.

Operator (participant)

Thank you. And our next question today comes from Woody Lay at KBW. Please go ahead.

Woody Lay (VP)

Hey, good morning, guys.

James Brogdon (President and CEO)

Hey, Woody. Good morning, everybody.

Woody Lay (VP)

Good morning. I wanted to start on your comment on the loan production, and you noted it was the highest level over the past couple of years. I just wanted to get your opinion. Is that more of a reflection of y'all being more aggressive on growth now that the balance sheet restructure is behind you and you have more flexibility, or is that a reflection of customers being more optimistic, or is it a combo of both?

James Brogdon (President and CEO)

I think it's fair to describe it as a combo, Woody. I think it's probably more the latter than the former. We haven't just sort of like lowered rates aggressively or you know, started to sacrifice our standards around profitability. That said, with the significant reduction in wholesale funding as a result of the balance sheet repositioning and just you know, improving, I'll call it the nimbleness, the flexibility around the balance sheet overall, it has certainly. There's in an indirect way that has helped us to accelerate the loan growth. But the more fundamental answer is, we've just seen more robust opportunities. The pipelines were improving all throughout the year last year. The quality of the pipeline, it's not just an aggregate number. You have to really look into the pipeline and think about quality of opportunity.

Quality of pipeline was improving all throughout the year, and we just, we just kind of saw a pinnacle in that activity, late Q3, early Q4, and we're successful in some pull-throughs there, and continue to see success. Again, I mentioned the rate-ready to close area of the pipeline. Even as we turn into January, we're seeing, you know, some exactly what you would expect with that kind of year-end, you know, quality of pipeline. So, so I think it's probably more the latter of your two things, but there's, there's certainly an element of both.

Woody Lay (VP)

Got it. That's helpful, and then maybe circling back on the NIM, I believe last earnings call, y'all gave a sort of a longer-term NIM range of 350-375, and you're now above that and it feels like, as you mentioned, the loan repricing over the next two years is very real. So has that longer-term target, do you think it's shifted upwards a little bit?

Daniel Hobbs (CFO)

Yeah. Hey, Woody, you know, in the context of that 350-375 was that, you know, we would like to manage it within that range no matter the interest rate environment and, you know, rates are still relatively high. We've moved to asset-sensitive. I would say probably that top end of the range of the 375 has moved up a little bit and, but, you know, if rates were to, you know, go down significantly, we're trying to stay at that 350 or above in that scenario. So I think it's a fair comment to say that the top end of that range has probably shifted up a bit.

James Brogdon (President and CEO)

Yeah and I think the forward curve has shifted as well. That range was really embedded in an outlook that had a lot more rate cuts in it than what we're expecting today. So all of that is very fair, Woody. And the good news is rates higher for longer. I think [it's] better for us and better for the industry right now, and gives us upward bias in how we think about the NIM range.

Woody Lay (VP)

All right. Then just last for me, in terms of capital, I mean, you just printed a quarter of a ROTC over, you know, almost core 16%. You're going to be building capital over the next year. How do you think about, sort of where excess capital stands and opportunities to deploy it?

James Brogdon (President and CEO)

Yeah. I think, you know, our priorities continue to really be around organic growth, investing in the business, you know, to grow sustainably and profitably. It is our clear priority one. Priority two would be our, you know, very long-standing dividend. Then from there, Woody, I mean, you know, we'll have to think about share buyback, I think, increasingly throughout the year this year. We're not. We don't have any share buyback activity embedded in our budgets or forecasts right now. I think we'll be. We'll keep that tool in the toolkit.

We'll be opportunistic in how we see the growth environment evolving and candidly in how we see the, you know, the valuation of the stock evolving. Where it makes very good sense economically for us to get active, we would do so. But as of now, it's really centers on priorities one and two that I outlined there.

Woody Lay (VP)

All right. That's all for me. Thanks for taking my questions.

James Brogdon (President and CEO)

Thanks, Woody.

Operator (participant)

Thank you and our next question today comes from Brian Wilczynski with Morgan Stanley. Please go ahead.

Brian Wilczynski (VP of Equity Research)

Hi, good morning.

James Brogdon (President and CEO)

Hey, Brian. Brian.

Brian Wilczynski (VP of Equity Research)

Maybe going back to the ROTC for a moment. Clearly a very strong quarter, 16% ROTC. If we zoom out a bit, how do you think about the trajectory of ROTC as we move forward and how much of it will depend on the environment versus some of the other strategic levers that you talked about earlier?

James Brogdon (President and CEO)

Yeah. I'll start on that, Brian. Daniel, I'm sure is going to want to layer in some comments as well. But I think if you think about whether you think in ROA or ROTC, I think there's probably a, you know, a couple of things about the Q4, to kind of Q1 and outlook that are important to denote. One is there's just always, you know, as we go into the Q1 of any year, there's some seasonality and expenses that we have to chew through, you know, from payroll taxes to merit increases, et cetera. And so the early part of the year has got a seasonal element in it that you don't see in the Q4.

In the fee income area from a non-interest revenue point of view, we had, you know, we've very much exceeded the top end of our range of what we normally see, and some of that was just very strong results in some of those fee businesses. You know, a little over $3 million of that was BOLI gains, and so we're not going to repeat that every quarter, obviously, so I think you've kind of got to run rate that just a little bit, and then another big item I want to, I would call out is just the effective tax rate. You know, our balance sheet changed a lot given the repositioning back in Q3.

The Q4 tax rate is below what our tax rate would be in 2026, which are, you know, that, that tax rate's probably, as we called out in the guide, much closer to around 20%. And so I, you know, I think of that as, I'll, I'll do it in ROA, not ROTC, because it's just that number's more readily available in my mind. You know, we had a 129 ROA for the quarter. I think ROA kind of on a more run rate basis is at least kind of mid one teens, if you will. And that's, that's more of a, of what I think is the sustainable run rate as we turn the quarter into 2026 with all of the tailwinds that we've been describing on this call and opportunities to continue to grow and expand that from there.

Daniel Hobbs (CFO)

Yeah. Brian, the only thing I'd add to all that Jay said in terms of the seasonality, when you think about Q1, the additional one there is that there are two fewer days. So the NII raw dollar amount is impacted by that by about $3.5 million. So, you know, when you think about the Q4 returns relative to the Q1, there will be a downward shift. But then over the long term, we think about ROTC as somewhere it needs to be kind of mid teens is where we'd like to be. We've talked about an ROA of 125 and above. We feel like we've got really good path to get there. And to Jay's point, kind of our maybe normalized rate is in the high teens right now. But we feel like we've got a really good path to get there, throughout the year and towards the end of 2026.

James Brogdon (President and CEO)

Yeah. Last comment I'd make on this, Brian, is just, you know, when we did the balance sheet repositioning, we thought some of those targets from ROA and ROTC were probably more achievable in 2027 on a run rate basis. You know, our jumping off point at the beginning of 2026 is several basis points higher than where we thought it would be and all of that indicates kind of similar to Woody's question earlier on NIM, maybe a bit of a parallel shift up in either in what those run rates should be, or in kind of accelerating the achievability of those targets.

Brian Wilczynski (VP of Equity Research)

That's really helpful. Thank you for all the detail and maybe one follow-up on the funding base that's clearly been a big area of improvement over the past 12 months. As we look forward, can you just elaborate a bit more on the strategy to grow customer deposits over the course of 2026 and beyond?

James Brogdon (President and CEO)

Yeah. I'll jump in there, and others may want to come to Brian, but I think I'll speak to it maybe in kind of like line of business thought process, you know. We've got a lot of activities and efforts going on, some of them in kind of the category of first ever in the bank, not first ever in an industry, but just maybe adopting industry best practices for the first time, particularly on the consumer side of our bank, and that spans across kind of all demographics, all categories of customer profile, and we're seeing some success, some early success there, experience that success throughout 2025, and are creating better kind of discipline and muscle memory around those activities in the Consumer Bank, so that's been an area of focus from a talent perspective.

And so I think that, all of that is, you know, would fall into, something that we're focused on strategically, on the deposit side and the consumer category. The other thing I'd mentioned from a consumer perspective is private banking is a product we really rolled out, probably sometime in 2024, if memory serves. But really, really expanded our efforts around private banking in 2025. That's another area that we are seeing, very good early signs on and we've got a lot of built-in opportunity that we can, you know, synergize across our business, through more competitive products there. So having developed in those products, bringing in private bankers, incentivizing around that, that's another area that we're very, very optimistic in.

And then the last piece that comes to mind for me, you know, in another line of business is just on the commercial side of our business. We've been very focused on building out business and middle market C&I capabilities. That is, you know, tools, processes, people, everything. That's been a multi-year investment. We're pretty deep in that journey. We started in the backside of our business, really repooled and reprocessed, continue to have some very important initiatives in those areas, and then have brought some very good talent into the bank over the last year or two, on the sales side as well. That continues to be an area where I think we'll see, you'll see heavy investment from us, in terms of building out and expanding, on the commercial TM side of the business.

And I put all that together and say, you know, one simple way I look at this is our non-interest-bearing deposits as a percentage of total deposits is below peer and below where it ought to be, and that kind of circles all the way back to an early comment, to a question. I believe that is perhaps the biggest opportunity to accelerate even beyond our guide, this year and into the future is our ability to demonstrate some success and growth in those strategies.

Chris Steenberg (COO)

Hey, Brian, it's Chris. I'll add to that. I think, you know, Jay referenced some of the things that are not necessarily new to the industry, but new to us. I think as we demonstrate to ourselves that we are effective at those, our focus pivots from the experimentation and piloting to accelerating and scaling. And so we're, as we find those successes, or even things we didn't like, we're learning from those quickly and we're shortening our cycle every time so that we can get from concept to execution and then to results, on a much shorter cycle. And we're taking those learnings.

And I think one spot that Jay didn't mention is another one, small business where we've got significant opportunity in our footprint, both embedded in our existing relationships, but also prospect opportunities where we can attract really deposit-rich customers, that have got limited credit needs, but they have absolutely got significant needs around deposits and transaction needs. So our ability to meet that, we already have demonstrated and we continue to focus on that area and that's going to continue to be an area of emphasis for us.

James Brogdon (President and CEO)

Good comments.

Brian Wilczynski (VP of Equity Research)

Yep. I really appreciate all the detail and thank you for taking my questions.

James Brogdon (President and CEO)

Thanks, Brian.

Operator (participant)

Thank you and our next question today comes from Gary Tenner at DA Davidson. Please go ahead.

Gary Tenner (Managing Director and Senior Research Analyst)

Thanks. Good morning. I just had one follow-up question. Just as, you know, I'm looking at the interplay between growth on both sides of the balance sheet, you know, based on the guide. I guess two questions come to mind. One, is there any kind of anchor on the loan deposit ratio to think about now that you're up in the mid 80s there the last couple of quarters? And then, the second, just, you know, to the degree that loan growth outstrips deposit growth over the course of the year, is that funded with runoff from the securities portfolio or what are the broad thoughts around that?

James Brogdon (President and CEO)

Yeah. I think, I mean, you, you nailed it, Gary. I, I think that our constraining factor in our business from a growth perspective today is certainly not loans, It is, it is on the deposit side, the core customer deposit side. Hence all of the commentary that we've had around that being such a key element of our strategic focus going forward, so I think to the extent you see it outstripping loan growth, outstripping, or outpacing deposit growth, we do have cash flows from the balance sheet.

That would be, you know, investment priority one, investment, you know, the other funding, elements that could be in there is, you know, we could, we could get more aggressive on the customer side in things like promotional CD rates, et cetera to help fund some of that. Then kind of your last stop would be on the wholesale side of any category.

Gary Tenner (Managing Director and Senior Research Analyst)

Okay. That's all I had. Thank you.

James Brogdon (President and CEO)

Yep. Thank you.

Operator (participant)

Thank you. And that concludes the question and answer session. I'd like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks.

James Brogdon (President and CEO)

Thanks. I'd like to just maybe end today with a few closing remarks. First of all, it's just hard for me not to look back to one year ago. A year ago, we were announcing Q4 2024 results and net interest margin had a two handle on it and was up, linked quarter, but was still a two handle. ROA was barely creeping above 70 basis points. Our efficiency ratio was in the mid-60s. You know, I flash forward to today and I think about, of course, the results from the balance sheet repositioning, but also just the ongoing commitment to sort of sound and profitable growth and the decisions we're making, and the discipline that we're demonstrating as we do that. We just find ourselves in a much stronger position.

Net interest margin was up 94 basis points, compared to a year ago. Our expenses are down, as we talked about on the call, and they're down on a multi-year basis and all of that has led to revenue Q4 of, of this past year compared to a year ago, up almost 20%. Pre-Provision Net Revenue is up 60%, 60% and so I just think about all the things that are now in the rearview mirror for us, as we turn the corner into 2026, and we just have a great deal of momentum behind us. The thing I want everybody to hear me say is that we are nowhere near satisfied with where we are right now. In fact, as we've talked about on this call, we continue to design and execute a number of strategic initiatives.

We think all of these initiatives are going to bolster that already strong momentum. Our pipelines for adding talent, as we've discussed, are as strong as they've ever been. So as we move through 2026 and beyond, we very much look forward to continuing to demonstrate our progress and we remain steadfast in our commitment to delivering value for our customers, for our associates who make all of this happen, and of course, for our shareholders. So with that, I'll just thank everyone for the support, and you guys have a great day.

Operator (participant)

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.