CBC

Good day, and thank you for standing by. Welcome to the Central Bancompany First Quarter 2026 Earnings Conference Call. At this time, all participants are in a 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, John Ross, President and CEO. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us for Central Bancompany's first quarter 2026 earnings call. With me in the room today are our Chief Financial Officer, James Ciroli, Chief Customer Officer, Dan Westhues, and Chief Credit Officer, Eric Hallgren. As a reminder, I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined on page three of our press release. Today, we plan to briefly discuss first quarter highlights before opening the line for questions. Before I turn to the numbers, please allow me to share some non-financial highlights. In the first quarter, we were humbled to again be named one of America's Best Banks by Forbes, as well as the best performing U.S. public bank with more than $10 billion in assets by S&P Global Market Intelligence.

Recognition from such organizations is a testament to the efforts of our nearly 3,000 full-time employees, who I'd like to thank for their continued legendary service. With that, let's cover the financial results. For the quarter, Central Bank posted net income of $111.1 million, or $0.46 per fully diluted share. Return on average assets of 2.2%, NIM on an FTE basis of 4.36%, and an efficiency ratio on an FTE basis of 45.7%. Relative to the first quarter of 2025, net income increased $16.3 million, or 17%. Our asset quality remained consistent with 10 basis points of net charge-offs again this quarter, and allowance covered 130 basis points of total loans.

We remain encouraged by the continued resumption of growth in our balance sheet, with ending loans excluding other consumer of nearly 6% annualized quarter-over-quarter and average deposits of 5% year-over-year. Lastly, capital levels at the holding company remain well above target, with approximately $1.9 billion of excess or $7.80 per share. We leaned into capital deployment this quarter by announcing a meaningful increase to our quarterly dividend and repurchasing $32 million worth of our shares, taking advantage of attractive prices and expanded liquidity. We are pleased with these results and appreciate those on the line for joining us for this call.

With that, I'd like to open the line for questions. Operator?

As a reminder, if you have a question, please press star one one on your telephone. You'll hear that automated message advising your hand is raised. To remove yourself, please press star one one again. One moment while we compile the Q&A roster. Our first question is coming from the line of Manan Gosalia of Morgan Stanley. Your line is open.

Hi. Good morning, all.

Good morning.

It looks like loan yields held up nicely despite rate cuts at the end of last year. I was hoping you can help us with what's going on under the surface in terms of, you know, yields, spreads, fixed rate loan repricing, et cetera. You know, anything that can help us think through the forward look under different rate scenarios, given that rate expectations have been moving around quite significantly over the past several weeks.

Yeah. Happy to, Manan. This is Jim. You know, looking at it on a linked quarter basis, if you look at the loan yields, yeah, sure, they came down 3 basis points. Almost all of that was loan fees just coming off of higher prepayment fees in the prior quarter, which being that we had fewer prepayments this quarter. I would also note that our loans kind of ended the quarter higher than their average. We're showing kind of growth momentum coming out of the quarter and into the second quarter. With fewer prepayments, we kind of like that scenario. What I would say additionally is that we repriced about $400 million in the quarter, we anticipate about $1.8 billion more for the rest of the year repricing.

When those loans are repricing, they're coming out at like a 580-ish type yield. And we continue to see loan opportunities at 300 basis points over similar maturity treasuries. So as that $1.8 billion reprices in the rest of the year, I think that that could provide, you know, some upside to where we were in NIM. One of the things I would just point out, as you look at our NIM coming down, I wouldn't necessarily focus on the loan yields coming down. Sure, they came down 3 basis points. But if you look at the deposit side, our deposit costs came down 5 basis points. If you factor out the shifts higher in public funds that we kind of signaled on the last call.

Public funds ended the fourth quarter higher, and we talked about the seasonality there. Seasonality would kind of go sideways during the quarter, i.e. the averages for the first quarter were going to be higher than the averages for the fourth quarter, the length quarter in public funds. That's exactly what we saw. We anticipate that the public funds, you saw those. Guys, I'd point out slide nine that we added to the deck. You saw our public fund deposits at the end of the quarter start to come down. The ending balance was lower than the average balance, and that's exactly what we said on the call last time.

Did I cover everything that you wanted me to cover there, Manan? That was a lot.

Yeah, yeah. No, that was great detail. I really appreciate that. Then maybe to just pivot over to the credit side. You know, I see the credit remained broadly solid in the quarter. I guess if I really had to nitpick, you know, one question is on the delinquencies. You know, we've had a couple of quarters where they've edged up a little bit, and it looks like it was driven by commercial. Any thoughts you can give there on what you're seeing and your views on credit overall?

I'll turn to Eric Hallgren, our Chief Credit Officer, in a second. What I'd tell you, what I'm seeing right now is that we still continue to have a lot of small numbers in our asset quality statistics. When you have small numbers, small changes can seem like they're bigger than they actually are. I think that, you know, really what we're looking at in our asset quality numbers continues to be pristine. Just like I said, small changes in that pristineness can lead to big percentage changes, but that doesn't necessarily mean anything. Eric, what color can you add?

Yeah. Thanks, Jim. The increase, Manan, as you noted, was primarily driven in the first quarter by commercial. That was really concentrated to a small number of markets and largely attributable to a handful of commercial clients. From what we see, we don't anticipate those delinquencies degrading any further and expect resolution here. Overall, we view it as isolated pockets of stress and not indication of systemic weakness kind of emerging as we look ahead for the rest of the year.

Got it. That's great. Thanks so much for the color.

Thank you. One moment for the next question, please. Our next question will be coming from the line of Nathan Race, Piper Sandler, your line is open.

Hey, guys. Good morning. Hope you're all doing well and thanks for taking the questions. Jim, just going back to your earlier comments around some of the deposit flows in the quarter. You know, I'm just curious how you think about, you know, working down some of the excess liquidity that kind of weighed on the margin. In 1Q, and just generally how we should think about the size of the balance sheet, specifically, kind of, bringing assets as a better jump-off point for the second quarter.

That's a great question, Nate. I appreciate it because, you know, we really worked hard in the first quarter. If you recall the path of rates, it wasn't terribly looking good in earlier parts of the quarter. At the end of the quarter, where we like to extend duration to is about the four-year mark with our security portfolio. Near the end of the quarter, you know, we saw rates come up in that part of the curve, so we stepped up the pace of our buying activity in March. That continued into April as well. In fact, in April, we're seeing we're reinvesting that the cash into about a 4.30% yield right now. We've continued to work hard to try to find great opportunities.

You know, like we want to find things that are U.S. government guaranteed or at least sponsored by agencies of the U.S. government. We don't like taking on a lot of convexity risk. Trying to deploy that money is a lot of work by our treasury team. When the market comes back in where we want it to be, like it did in March and April, we were able to move even more and faster in that environment than we did.

Got it. That's helpful. Maybe changing gears a little bit. You know, you guys are obviously continuing to build, you know, excess capital at least on touch going forward, as evidenced here in 1Q as well. Jim, I'm sorry, J.R., would love to get your kind of thoughts on just kind of your optimism level for an acquisition announcement this year and just generally how conversations are trending. Seems like you guys have the competitive currency to, you know, share with potential partners, but would just love some updated thoughts on that front.

Yeah. It's a very understandable question. More than half our capital is excess, and it is a major focus of ours on a daily basis. Having said all of that, we have no real updates for you at this stage. You can kind of push replay on the comments we made last quarter. Just summarizing those briefly, we do think we're well positioned. We are in active discussions. Nothing is imminent. We see everything that's out there, and we'll update you when we have a deal, but until then, we're just going to work really hard on it. No real updates this quarter for you.

Okay. Fair enough. Helpful. Maybe one last one from me. You know, the payments revenue, you know, tends to show kind of a seasonally decline in the first quarter. You know, just curious if you guys still feel like some of the initiatives you put in place, particularly with Dan and his team, you know, are bearing fruit. Do you still think, you know, some of the payments revenue projections that we've talked about in the past, you know, kind of hold true in terms of kind of a nice ramp over the balance of this year?

We do. I mean, yeah, I appreciate, Nate, you noticed the seasonality between Q4 and Q1. It really comes off of a really good quarter in Q4, and it comes down pretty sharply. You know, when you, when you look at this on a year-over-year basis, what we're seeing is still the consumer's still spending. There's no concern from a consumer spending perspective. We're seeing nice growth on the on the commercial side with some of the programs we're putting into place. I would say, yeah, we continue to feel pretty sanguine about that business as we move forward.

Okay, great. I appreciate all the color. Thanks, guys.

Thank you.

Thank you. One moment for the next question, please. Our next question will be coming from the line of Matt Olney of Stephens. Your line is open.

Hey, thanks. Good morning, everybody. Just want to go back to the deposit discussion. Jim, you already addressed the moving parts around the public funds and slide nine is helpful for that. Any general observations you can share as far as just the competitive dynamics for deposits in your marketplace and kind of what you're seeing more recently?

That's a fair question, Matt. Welcome to coverage on our stock. Looking forward to spending more time with you as well. What you're going to find as you look at us is we're out there generally growing deposits at around, you know, adjusting for seasonality, which we had a lot this quarter. Adjusting for seasonality, we're growing deposits kind of mid-single digits across our markets. We're doing that through our acquisition campaigns where we're focused on growing checking accounts. We're focused really on being our depositors primary checking account. We're focused on primacy overall. I think this quarter, once you normalize the activity, you can see the growth that I'm talking about in terms of mid-single digits. We're not really out there competing for the yield-seeking funds.

We're out there competing on service, trying to be people's primary checking account in the markets that we serve. I don't think we would be the best to ask, you know, the competitive questions. Yeah, I think it is competitive out there from what I hear, that's not really the market we compete in.

Okay. Appreciate the color on that. I guess going back to the capital discussion, I think you noted in prepared remarks you stepped up the share repurchase program this quarter, just over 1 million shares. I guess help us appreciate your capital allocation strategy and where buybacks come into play. I think J.R. already addressed M&A questions, so just put that aside for a second. Just I'm trying to appreciate the ROIC of around 12% based off kind of what you guys think about it. Any more color you can share on cap allocation and the buybacks?

Yeah. You know, one of the things I would point out is that even with the $32 million that we bought back this quarter and we stepped up the dividend, we still continue to grow our excess capital number. It went from $1.8 billion to $1.9 billion, as J.R. said. More than half of our tangible book value is excess capital. When we look at that excess capital and we look at where, you know, we value that at roughly $1 for $1, I don't know how else you'd value that. You strip out, you look at what our core capital is and compare that to any measure you want, trailing 12 months, next 12 months of expectation. Looking at 2027 earnings, we think the stock is still cheap.

If we intend to use that stock in M&A transaction, using, you know, having it that cheap is something that we'd like to work against. You know, we'd like to get that stock a little bit more value to the marketplace. J.R., anything you want to add to that?

No. I mean, to your point on ROIC, we do calculate it. We calculate it in the same way that we look at other bank acquisitions because we think that's a good practice. We look at several other methods as well. Practically speaking, it's the intuition of trading at a single-digit PE multiple on a forward basis when you look at the core bank is very attractive. Obviously, $32 million is a drop in the bucket compared to our excess capital. The one last thing I would add that we were pleasantly surprised with the increase in the liquidity in the stock, which will maybe provide us more opportunities on that front as we go forward here as well.

We were a little bit constrained in our initial, you know, resolution of the $50 million because we were concerned about impacting the liquidity of the stock. We've been pleasantly surprised to see it pick up here.

Okay. That's perfect, guys. Thanks for the color.

Thank you.

Thanks, Matt.

Thank you. One moment for the next question. Our next question will be coming from the line of Christopher McGratty of KBW. Your line is open.

Oh, great morning. Jim, on expenses, really good performance in the quarter. Can you speak to sustainability and maybe broader operating leverage expectations? Thanks.

Yeah. Great question. Look, I think what you saw on a quarter-over-quarter basis is that come down a little bit. What I would share with you on the current quarter, you know, we've signaled that we're going to have some additional costs of around $5 million a year in terms of public company expenses. When we look at it, the first quarter has about that, you know, run rate in it. The other thing I would share is that, you know, we are still in the middle of our core conversion, but during the quarter we only capitalized $700,000 of the dollars that we spent. I think the first quarter NII is fairly loaded. I think that's a fairly sustainable run rate.

There might be a little uptick because we do merit increases in March, but there's not gonna be much of an uptick, that I would expect.

Okay. That's that's helpful. If I could go to, I think it's slide five that the updated rate sensitivity static analysis. I think it was up a touch, call it 100 basis points from last quarter. The base case shows a pretty good ramp in both years. Can you speak to just any strategies being contemplated to, you know, lock in the margins given higher for longer is seemingly a base case? How we should be thinking about progression of NII as you get a little bit better growth in the loan fee adjustment that you talked about?

I think, Chris, I appreciate the question. I really go back to what I was talking with Nate about and answering Nate's question. You know, I think that, you know, one of our biggest opportunities is to continue to invest our excess cash. Because, you know, most of the quarter, the differential between the four-year point on the curve, the overnight point on the curve was slight. That's kind of steepened a little bit with an anticipation that we won't have a rate cut until sometime late in 2027. As that environment has improved, we've accelerated our investing strategy to put that excess cash to work.

Also having said that, I think the real opportunities, from, you know, continuing to grow non-interest bearing deposits, I think there's still some movement to do on the deposit cost side and managing those down. I'd point out that 90% of our deposit base is non-maturity. In order to work that down from the rate cuts we saw in late 2025, our market CEOs have to go out there every day and try to, you know, manually work that down with their depositors. It's not something that just mechanically comes down. We still think a low 20s beta is appropriate, because of that nature of the non-maturity deposits, that's going to take a little while to come in.

Then I point out the seasonality too, is we roll out of first quarter with the higher public fund deposits, that's why we put slide nine there, Chris, to help give you transparency on that phenomenon and the seasonality. As that comes down, like I said earlier, had we not mixed higher in public fund deposits, our cost of deposits would have been down 5 basis points on a linked quarter basis. As we see those pub fund deposits come down across Q2 and Q3, I expect that the mixing lower in those deposits will continue to benefit net interest margin as well.

Okay. Just if I could squeeze one on the like the excess cash. Where does that how does that settle in terms of proportional balance sheet over the next couple of years? Like, where do you want to run cash to earning assets?

I don't think of it as much that way as I think about. It's not necessarily percentage.

Good day, and thank you for standing by. Welcome to the Central Bancompany Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Ross, President and CEO. Please go ahead.

Good morning, and thank you for joining our inaugural earnings call. With me in the room today is our Chief Financial Officer, Jim Ciroli; Chief Customer Officer, Dan Westhues; and Chief Credit Officer, Eric Hallgren. Before we begin, I'd like to point out that today's discussion is subject to the same forward-looking considerations outlined on Page 4 of our press release. While the format of our calls may vary over time, today, we plan to be very brief in our discussion of fourth quarter highlights before opening the line for Q&A. Before doing that, however, please allow me to thank our team for their tireless contributions. In 2025, they delivered for their communities with over 28,000 hours of community service. They also delivered for their customers with our Net Promoter Score improving 2 points to 73 on a consolidated basis across our business lines. And finally, to our shareholders, with significant progress made in our technology modernization program and our financial results, which I will turn to now. For the fourth quarter, Central Bank posted net income of $107.6 million or $0.47 per fully diluted share. Return on average assets of 2.17%, net interest margin on an FTE basis of 4.41% and an efficiency ratio on an FTE basis of 47%. Our asset quality remained in line with 10 basis points of net charge-offs and our allowance covered 131 basis points of total loans. While too early to call it a trend, we are also encouraged by the resumption of balance sheet growth with ending loans up 1% quarter-over-quarter and nonpublic deposits up 1.7% quarter-over-quarter. Lastly, capital levels at the holding company remained well above target with approximately $1.8 billion of excess or $7.50 a share. We look forward to the challenge of repeating our historical earnings growth in 2026, including the critical objective of prudently deploying our ample excess capital. With that, I'd like to open the line for questions. Operator?

[Operator Instructions] And our first question comes from Manan Gosalia with Morgan Stanley.

First off, congratulations on your inaugural earnings release as a public company. And JR, maybe to start with, M&A has always been in the DNA of Central, and you guys have been pretty clear that M&A is a core part of your strategy here as you look to deploy some of this excess capital. I guess my question is, can you give us an update on the opportunity set that you're seeing as it relates to M&A right now?

Yes. I'll try to answer your question in a second. But for the broader group, let me just kind of level set for a few things that I know that you know. But over the last 50 years, we've done 47 acquisitions. So we do consider this a competency of the company. We have laid out in the context of our IPO very clearly what we're hoping to do, and we're looking to both grow in our existing markets, but also potentially expand into Texas as well. We're hoping to do that with deals of size, which we've roughly equated to $2 billion in assets. And we're looking for high-quality targets, both in terms of their deposit franchise and their credit franchise with cultures compatible to ours. And we outlined a list of about 30 names on that list that we think meet our criteria, and we are in a process and have been for a few years now of making introductions and having good conversations with at least half of the folks on that list. We do -- we are broadly encouraged by the environment. There is a lot of activity and conversations going on, which does on the margin help Boards think about their opportunity set more than they do, generally speaking. And we do have a currency now, which makes those conversations a lot more interesting to those who are more inclined to participate in the upside of the company that we've enjoyed for so long. Having said that, we're not going to go into this call or any other call in a lot of detail other than to tell you, we continue to diligently prosecute against that opportunity set, and we will likely have no specific update or detail for you until we're actually announcing a deal, which we look forward to do and hopefully in the not-too-distant future. But as we've said before, we're much more focused on doing the right deal than doing a timely deal. So no real estimate or guidance on when that might be.

Yes. And we're just going to -- we're going to be that way, Manan. And I think you guys can appreciate, we just don't want to leave any breadcrumbs or any signals when something might be or might not be happening. So we prefer to just continue to talk about what our target set is, but not really make any other comments.

Fair enough. And maybe as it relates to fourth quarter earnings, you spoke about the resumption of balance sheet growth. And I think in the slide deck, you noted less payoff activity as a tailwind to loan growth in the fourth quarter. How should we think about the pace of balance sheet growth from here? And where do you see the most opportunity?

So we're also not going to provide forward-looking guidance. What I will say is when you look at the detail of where our loan growth came from, it was pretty broad-based. And one of the things I'll point out to you that wasn't growing was our installment loan portfolio. And if you take out installment loans, and you look at loan growth, when you annualize those numbers for just the third quarter, you see a number that's kind of mid -- maybe even a bit over mid-single digits growth. But we -- look, we serve our markets and our customers are really going to dictate where that is. The one thing I would point out that is when we're in a risk-on environment, I think we're going to probably grow a little bit slower than average when we're in a risk-off environment because we don't really change our credit underwriting standards through the cycle. We've tried to be as consistent as possible. In a risk-off environment, we'll see more opportunities come to us, and we like that. We like sticking to our knitting and doing our things. So we're happy to see the loan growth. We think it's going to continue, but we're not going to provide any guidance as to how much and where it comes from is as much up to our customers as it is up to us.

Got it. Very helpful. I guess just without providing forward guidance, if you can just talk about the environment in the fourth quarter? And was that any different from the environment that you saw in the second and third quarter of 2025?

I would not say. So what we saw was there was just an abatement of some of the higher refi activity. We were pretty clear when we did the IPO roadshow that we thought that origination volume kind of year-to-date in 2025 was pretty robust and pretty strong, but it was muted by a higher level of payoffs that we saw earlier in the year. We think the payoff -- we think the pipelines continue to be strong and the payoffs have muted, and that's what's translated, especially when you look at the commercial numbers, that's what's translated into like the commercial and C&D growth that you're seeing at the period end balance sheet. Eric, is there anything that I'm leaving out there?

No, I don't think so. I appreciate the question, Manan.

Our next question comes from Nathan Race with Piper Sandler.

Congrats on a nice quarter out of the gates here. Curious if you can just provide some color just in terms of how you're seeing spreads hold up on new loan production in the quarter and just maybe what kind of the weighted average rate on new loan production was in the quarter relative to the 630 portfolio yield, give or take?

Yes. So there's a lot there. So keep track of how much I answer here. So we're not seeing spread compression. We keep in mind that in general -- I'll make two comments about our portfolio. In general, it's more granular. So i.e., look the median ticket size is probably lower than comparable $20 billion oversized banks. And we probably over-index on the fixed side. But we continue to see if you're comparing with the treasury curve, we're seeing spreads of around 300 basis points, and we've seen that for a long, long time. And we don't, especially in our markets, expect that really to change much. So whether that's variable or whether that's the fixed rate product typically with a kind of a 2- to 5-year tenor, we're seeing about 300-ish bps in spread over comparable treasuries.

Okay. Great. That's helpful. And then just maybe turning to the right side of the balance sheet. Your deposit growth in the quarter was quite strong. Curious if you can just remind us how much of that may be somewhat seasonal in nature versus just kind of blocking and tackling and taking market share or just growing balances across the existing client base?

Very good, Nate. I appreciate you remembering the seasonality. We've got a very large public funds-oriented deposit gathering business. It's about 17% of our deposit portfolio. And in the state of Missouri, property taxes are collected at the end of the year. So really, I'd say, focused in the December time frame, and I'm learning this myself being somewhat new to the company, deposit balances grow. So if we try to normalize for that, we'd say nonpublic deposits grew about 1.7% in the quarter. When you look at a year-over-year basis, we also saw some pretty nice growth. We saw about 6% growth on a comparison to prior year-end. That does include some of the seasonality, but it also shows you that even with that seasonality, we're growing deposits in the kind of mid- to upper single digits. I want to go back one comment, I forgot to give you on loan yields. When you look at the loan yield, it came down like a bp. So amazingly stable in light of the 75 basis points of rate cuts that we had at the end of the year there. And that kind of underscores what we continue to say in terms of our sensitivity to the front end of the curve is relatively neutral.

Okay. That's very helpful. Jim, if I could just sneak one more in for you. Just any update in terms of how you've contemplated or redeployed some of the capital or liquidity raised in the IPO?

It's early days, right? So we just raised that less than a quarter ago. I will still say our primary focus is looking at M&A opportunities. We think that's probably our greatest opportunity to add shareholder wealth. JR mentioned $7.5 a share represents excess capital, and we think we can deploy that in M&A transactions and earn something significantly above that $7.5. But look, everything remains on the table that in terms of deploying that capital, and our Board is very aware of its obligation as being good stewards of capital as to how best to deploy that. So we would look at every tool on the table from dividends and buybacks. When the time comes and when it's appropriate, we'll continue to evaluate what the best way to deploy that capital is.

I apologize, Jim. I was actually asking in terms of how you're managing the liquidity that you raised in terms of just keeping in cash or maybe investing in some short-term treasuries.

I'm sorry, I'm mishovered. That's my bad, Nate. Yes. So we look at some of the seasonality in the deposits. And we would expect that the seasonality we see picking up in December kind of runs out kind of -- it stays on the balance sheet through the second, maybe a little bit into the third quarter. And we'll keep the appropriate powder dry from a cash perspective and look to invest the rest. Now down to a certain level. Given the shape of the curve right now that -- and with that cash current earning, whatever the Fed is willing to pay us, there's not a real imperative to putting that out to use a little bit longer. But in terms of where the curve goes, if the forward curve is to be believed, and that's what we look at, we're not expecting to see a rate cut in the overnight rate until the second half of the year. So we're going to deploy that excess cash patiently in a disciplined way, the way we always have into safe risk -- relatively risk-free opportunities.

Got it. That's, again, very helpful. I appreciate all the color, guys. Congrats on all the accomplishments over the last 90 days or so.

Our next question comes from Terry McEvoy with Stephens.

Maybe first question, could you just provide an update on the wealth and treasury management initiatives? And I'm not sure you'll answer this question, but when you think about growth in those two business lines in '26, do you see similar growth within the brokerage and fiduciary services and payment services has been a little flat. When would you expect some of those initiatives to translate into organic growth?

Great question, Terry. I appreciate that. From a wealth perspective, I would point out to you that at the end of the quarter, our assets under advice grew to $16 billion, which was a nice pickup. That was the product of both investment performance, and I'd say investment outperformance because our guys are beating their relative benchmarks as well as we saw strong net new money coming into AUM all throughout the year, especially in the fourth quarter. And I continue to say our wealth business can compete with anyone out there. And I truly mean anyone. And so some of the other providers that are simply doing something that's simpler, but maybe even charging more, I think we win against every day. So wealth continues to be a great opportunity for us. From a treasury management side, I'm going to point out there's a couple of things that you're probably looking at. So from a payments perspective as well as a service charge perspective, we generally see a little bit of falloff going from Q3 to Q4, so there's some seasonality in those numbers. Not as much on the commercial side from a service charge perspective, but certainly, payments volume falls off in the fourth quarter. We continue to make investments in that business that we think are going to lead to us continuing the growth rate you've historically seen in our company.

And maybe just a follow-up, stepping out of the model. Could you discuss branch expansion plans in 2026?

We think there's tremendous opportunities, and we've got a number of things in the pipeline. I'm going to give Dan Westhues, a chance to speak because he's eager to and talk about where we're looking at putting those branches.

For 2026, we have two major locations where we know we are having branches come online at St. Louis and Colorado or Denver, Colorado. The first branch comes online here in the next couple of months in St. Louis with at least two more for sure in 2026 in St. Louis, and then we are negotiating some other spaces still looking. So branch expansion in St. Louis, we are finally trying to kind of rightsize that -- our footprint up there. We have one coming on in Colorado, and that should be on by the second quarter of this year as well. So two for sure, two more coming after that and the negotiations for the rest.

Congrats on your first company as a public company -- first quarter.

[Operator Instructions] Our next question comes from Chris McGratty with KBW.

Jim, maybe a question on Slide 5, if you could. The lower right part of Slide 5 gives you kind of the net interest income outlook with a static balance sheet and also kind of alternative rate scenarios. I'm interested in how we should interpret this given the conversation this morning. Obviously, loan growth little bit better, forward curve maybe having a cut or two. The base case would seem kind of where you'd want us to kind of land, but any kind of inside baseball on the nuances would be great.

Yes. I don't know that there's much in the way of nuances there. We show the steepener curve because, look, rates never -- we show the parallel moves, right, but rates never move in parallel. When we look at the forward curve, we think we're looking at more of a steepener scenario with two rate cuts. This is -- wasn't the modeling, two rate cuts later in this year, and that's just not in the steepener model. It's more of an instantaneous shock. But we see the forward curve having two rate cuts later this year. So we are looking at the steepener where we dropped the front end of the curve. And from about the 2-year point on out, we gradually increased that so that we've got a full 50 basis points baked in on the longer part of that curve, but 45 of that 50 is already baked in by the 5-year mark in the steepener scenario. So as we look at that, what we wanted to show is really that we're not really -- we don't think there's much impact to us. We go from a -- we go from 6% up in net interest income next year with that steepener scenario to a 3% up, which is very similar to what we were showing at the time of the IPO. And again, we don't have much sensitivity to the front end of the curve. Our exposure is really more in the intermediate part of the curve. And to the extent that rates are up, they're up this morning, they continue to rise a little bit in that part of the curve, we're going to see a net interest income benefit.

Okay. It feels like the base case is a fair place to start and then you make my assumptions on the balance sheet growth.

Balance sheet too, it doesn't include growth.

That's right. Yes. And on, I guess, credit, anything on the margin incrementally that you're hearing from customers, you're keeping your eye on? I mean you guys are a good barometer of credit. So I'm interested in your thoughts if anything has changed in the last 90 days.

Yes. I think those are fairly pristine numbers, Chris, especially with our net charge-off rate coming down. But I'll turn to Eric and see if there's any additional color he can add.

Yes. Thanks, Jim. So we haven't really seen anything specific that I would say points to weakness or pockets of weakness in the portfolio. On the watch list side, we've seen some evolution or composition shift from criticized into classified categories. But again, as we think about loss content, we don't see anything significant or moving in the portfolio. We are traditionally patient with our relationships and our loan relationships, but we're not holding or harvesting, delaying any potential resolutions. Markets are really diligent and focused on managing outcomes to the best possible extent for both the bank as well as the client. I think that's all I've got, Jim, did I miss anything that you want to add?

No.

Okay. And then what have you -- Jim, why the tax rate this quarter fair for going forward?

So you said the tax rate?

Yes.

So we did call out that there was about 40 bps of unusual items in the effective tax rate. So of that, I'd guess that 30 of that 40 is out of period and 10 of that is native to the period. That should be helpful to you.

I'm showing no further questions at this time. I would now like to turn it back to John Ross for closing remarks.

Thank you, operator. Just over 20 minutes that might be a record short earnings call, and I'm going to attribute that to solid numbers and a really good job that Jim did on his first call for us, having been here less than a year. So well done, Jim. I'd also like to thank the participants on the call for their time and interest and our investors more broadly for their support. We look forward to any opportunity to serve you better as we mature as a public company. Thank you again.

This concludes today's conference call. Thank you for participating. You may now disconnect.