Greetings and welcome to the AXOS fourth quarter 2026 earning conference call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Johnny Lai, SVP, Corporate Development and IR. Thank you, Johnny. You may begin.

Thanks, Alicia. Good afternoon, everyone, and welcome to our fourth quarter 2026 earnings conference call. Joining us today are the company's president and chief executive officer, Greg Garabrantz, and executive vice president and chief financial officer, Derek Walsh. Greg and Derek will review and comment on the financial and operational results for the quarter and fiscal year ended June 30, 2026, and we will be available to answer questions after the prepared remarks. Before I begin, I would like to remind listeners that prepared remarks made on this call may contain forward-licking statements that are subject to risks and uncertainties, and that management may make additional forward-licking statements in response to your questions. Please refer to the safe harbor statement found in today's earnings press release and in our investor presentation. This call is being webcast, and there will be an audio replay available in the IR section of the company's website, located at accessfinancial.com, for 30 days. Details for this call were provided on the conference call announcement and in today's earnings press release.

Now I'd like to turn it over to Greg for opening remarks. Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to Axos Financial's Fiscal 2026 Earnings Conference Call for the quarter ended June 30, 2026. I thank you for your interest in Axos Financial. We closed our fiscal 2026 with positive momentum, with double-digit year-over-year growth in net interest income, non-interest income, ending loan and deposits, EPS, and book value per share. We generated approximately $638 million of net loan growth linked quarter, resulting in a 15% annualized growth in net income. Excluding single-family mortgage warehouse, ending net loan balances increased by $750 million from March 31, 2026 to June 30, 2026. Other highlights in the quarter include non-interest income was $61.9 million for the quarter ended June 30, 2026, up from $41.3 million in the corresponding quarter a year ago. For the 12 months ended June 30, 2026, non-interest income was $233.6 million, compared to $131.1 million in fiscal year 2025. The primary contributor to the year-over-year growth in non-interest income for the 3- and 12-month period were verdant, prepayment fees, and the additional rental income from the commercial office building we purchased in January 2026 to be used as our future headquarters. Net interest margin was 4.54% for the quarter ended June 30, 2026, roughly flat, compared to 4.57% in the prior quarter. Excluding the impact from holding higher average cash balances and the addition of deposits acquired from Genius Bank, our net interest margin was up slightly quarter of a quarter. Non-insurance expenses were $205.9 million for the three months ended June 30, 2026, up by $20 million link quarter. Excluding the $21 million accrual related to a legal matter in our clearing business, we're down $1 million link quarter due to lower advertising, promotion, professional services, and other G&A expenses. We continue to maintain a low operating efficiency ratio despite ongoing investments in product, technology, and people. Our bank efficiency ratio was 42.2% for the 12 months ended June 30, 2026, compared to 40.8% in the fiscal year 2025. Not-performing assets were $159 million at June 30, 2026, down from $180 million at March 31, 2026, and $175 million at June 30, 2025. We remain well-reserved relative to our low current and historic level of net charge-offs with an allowance for credit losses to total loans of 1.34% at June 30, 2026. Net income was approximately $124.9 million in the quarter end of June 30, 2026, up 12.9% from the $110.7 million in the prior year's fourth quarter. The looted EPS was $2 for the quarter end of June 30, 2026, compared to $1.92 for share in the fourth quarter of fiscal 2025, representing a 12.5% year-over-year increase. Excluding the $21 million legal accrual, net income was $141.8 million, and diluted earnings per share was $2.46 for the three months end of June 30, 2026, up 28% from the prior year's comparable quarter. We repurchased $22 million of common stock during the three months end of June 30, 2026 at an average price of $87.95 per share. We have approximately $126 million remaining in our current share repurchase authorization. For investment, excluding single-family warehouse lending, increased 22% on a linked quarter basis, resulting in ending net loan growth of approximately $750 million. Loan growth was strong in capital call, real estate lender finance, floor plan landing, and equipment finance. Jumbo single-family, multifamily, and small-balanced commercial loan balances were roughly flat linked quarter. Average loan yields for the three months ended June 30, 2026, were 7.4%, stable compared to the prior quarter. Average loan yields for non-purchase loans were 7.2%, and average yields for purchase loans was 13%, which includes the accretion of our purchase price discount. The FDIC purchase loans continue to perform, and all loans in that portfolio remain. In the June quarter, we're 6.9% in our single-family mortgage business, 6.8% in multifamily, 6.6% in CNI lending, and 7.8% in our auto portfolio. Of $24.6 billion, we're up 17.9% year-over-year. Demand, money market, and savings accounts represent 98% of total deposits as of June 30, 2026, increasing by 22% year-over-year. We have a diverse mix of funding across a variety of business verticals, with consumer and small business representing 57% of total deposits, commercial cash, treasury management, and institutional representing 20%, commercial specialty representing 14%, AXO's fiduciary services representing 5%, and AXO Securities also representing 5%. We closed the Genius deposit acquisition in early May 2026, adding approximately $2.3 billion of deposit balances and over 56,000 consumer savings accounts. We have been successful in cross-selling checking accounts to Genius customers so far, adding over 3,400 new Exos consumer checking accounts in the few months since Juan boarded these Genius customers to UDB. Ending non-interest-bearing deposits increased by $439 million link quarter at $788 million year-over-year to over $3.8 billion as of June 30, 2026. The link quarter and year-over-year increase in non-interest-bearing deposits is a result of growth in Axos Clearing and Axos Advisory Services cash sweep deposits, increased cross-sell from certain commercial lending businesses, and growth in our small business deposits. Client cash sorting deposits ended the quarter around $1.2 billion, up from $1.1 billion at March 31, 2026. In addition to our securities deposits on balance sheet, we had approximately $475 million of deposits off balance sheet at partner banks. We remained focused on adding non-interest-sparing deposits from small business, custody clearing, fiduciary services, and commercial and treasury cash management verticals. The fund finance business had another strong quarter, contributing over $600 million of net new loan growth in the June quarter. We continue to identify opportunities to deepen our relationships with existing fund finance partners, as well as add new fund relationships. Our diverse product and service offerings in commercial cash and treasury management have enabled us to capture low-cost deposits through the fund finance vertical. The growth in our vendor ecosystem continues to gain momentum. the verdant equipment finance and non-marine floor plan lending teams actively collaborate on a variety of retail and wholesale lending opportunities both teams are leveraging their expertise and relationships across their vendor and dealer networks to gain share of wallet and to provide a more seamless and differentiated set of lending solutions to our vendor partners the floor plan lending business had its strongest court to date growing outstanding loans by over $100 million in the three months ended June 30, 2026. Demand in our commercial specialty real estate, fund finance, real estate lender finance, and asset-based lending businesses remain strong. Pipelines are up across several lending categories, making us confident that we will generate loan growth in the low to mid-teens on an annual basis this year. The credit quality of our loan book remains strong, and our historical and current net charge-offs remain low. Net charge-offs were 25 basis points in the quarter end of June 30, 2026, compared to 31 basis points in the prior quarter. We charged off the remaining $10 million of our principal balance in a syndicated CNI cash flow loan that was put on non-accrual over a year ago. Excluding the credit charge-off related to that loan, total net charge-offs were $5.9 million in the three months end of June 30, 2026, or nine basis points of net annualized charge-offs to average loans. That's where $159 million at June 30, 2026, down approximately $23 million from $180 million at March 31, 2026. Non-performing assets declined by approximately $21 million in CNI lending and held roughly flat across most other lending categories. Non-accruals and classified assets remain low across the majority of our real estate backed and structured credits. Total non-performing assets at total assets was 53 basis points, down nine basis points from March 31st, 2026 and down 18 basis points from June 30th, 2025. We remain well-reserved for our low level of credit losses with our allowance for credit loss to non-accrual loans equal to 221% at June 30th, 2026. We had another quarter of double-digit year-over-year growth in non-interest income. Total non-interest income for the three months ended June 30th, 2026 was $61.9 million, up 50% year-over-year. Banking and service fees in Q4 of 2026 were $36.8 million, compared to $9.5 million in the year-ago quarter. Verdant was the primary contributor to the year-over-year increase in banking and service fees. Pre-payment penalty fees were $4.2 million, compared to $0.2 million in Q4 of 2025. In access clearing, advisory and broker fees were up year-over-year due to higher asset and transaction-based income. Total assets under custody or administration increased by $8.4 billion year-over-year to $47.8 billion. Net new assets were approximately $85 million in the quarter end of June 30, 2026, bringing the net new asset total to $2.2 billion for fiscal year 2026. On and off balance sheet increased by over $100 million linked quarter to $1.67 billion. Ending margin balances were up 36% from the prior fiscal year. Pre-tax income in fiscal 2026 was $15.4 million on a reported basis and $36.4 million, excluding the $21 million legal accrual in the 12 months end of June 30, 2026. We continue to manage our non-interest expense while making investments across existing and new businesses, as well as technology and other infrastructure to support future growth across our three business segments. Total non-interest expense for the three months ended June 30, 2026, were $205.9 million, representing an efficiency ratio of 54.2%. Excluding the $21 million legal accrual and depreciation and amortization expenses, non-interest expenses were $158.1 million, equating to an efficiency ratio of 41.6%, down by 283 basis points from 44.5% in Q4 2025. We continue to evaluate and execute opportunistic and strategic mergers and acquisitions transactions. So far in calendar 2026, we've announced three separate deposit-related acquisitions, including Genius Bank in February, Capital One in April, and ARC Technologies in July. Genius Bank closed in May at approximately $2.3 billion of online savings and over 56,000 accounts. We received regulatory approval for the Capital One IRA savings and CD acquisition in May, and are actively working with Capital One on a conversion and a close date in Q3, 2026. We closed the ARK Technology transaction a few weeks ago. ARK Technology is a fintech that developed a cash management and debt marketplace technology for businesses. We believe ARK's service offering fills a gap for a segment of businesses previously underserved by Axos that value an AI-enabled digital treasury management solution and access to a wide range of potential lenders. Furthermore, we believe we can leverage the technology and third-party integrations and entitlements ARC has built as a foundation for other consumer and commercial banking services to accelerate our strategic roadmap. We are adding a team of talented product, sales, and software engineers who will help us accelerate these development efforts. The initial focus will be to integrate ARC into our banking platform to serve our tens of thousands of existing small business clients. We see tremendous opportunities to better serve our existing clients, cross-sell consumer clients with small businesses, and accelerate growth in new business banking segments such as early-stage startups. By leveraging one set of technologies and entitlements across the full spectrum of a client's life cycles, from startup to a mature small business to a middle market company and beyond, we believe will be able to attract, retain, and grow with our clients. Our ability to generate above-industry returns and growth provide us with multiple opportunities to deploy excess capital. In the past 12 months, we've funded over $3.5 billion of organic loan growth, added roughly $1.2 billion in leases and on-balance sheet securitizations from Verdant, closed the Genius Bank and Arc Technologies acquisition, and repurchased approximately $22 million of Axo's common stock. We remain highly profitable, generating return on assets of 1.76% and a return on average common stockholders' equity of 16.32% in the 12 months ended June 30, 2026. Including the $21 million legal accrual, our return on assets and return on equity would have been 1.92% and 17.82% this quarter, and 1.82% and 16.86% for the fiscal year. We continue to be nimble and opportunistic in deploying our excess capital where we see superior risk-adjusted returns. Now I'll turn the call over to Derek, who will provide additional details on our financial results.

A quick reminder that in addition to our press release, an 8K with supplemental schedules was filed at the SEC today and is available online through EDGAR or through our website. Thanks on a few topics. Please refer to our press release and our SEC filing for additional details. Non-interest expenses were approximately $206 million for the three months ended June 30, 2026, up by $20 million from $186 million in the three months ended March 31, 2026. Salaries and benefit expenses were up $1.1 million linked quarter, and professional service fees were down $1.5 million, $1.3 million quarter. Non-interest expenses in the three months ended June 30, 2026, were down by approximately $1 million length quarter. Interest expense categories, additional productivity initiatives, leverage of AI tools, $1 million per month. Turning to income taxes. Our income tax rate was 19.9% in the three months ended June 30, 2026, compared to 24.6 stock unit vestings. While we continue to explore tax credit opportunities that could provide future tax rate benefits, our expectation is to maintain an annual tax rate of approximately 26% to 27%, excluding such potential benefits. Provision for credit losses was $17.8 million in Q4-2026, compared to $41 million in Q3-2026. The primary driver for the quarter-over-quarter decrease in provision for credit losses was a less severe economic outlook and a minor shift of credit model scenario weightings towards 3% to 1.4% of total loans and leases. We wrap up with our loan pipeline and growth outlook. Our loan pipeline is robust at approximately $2.4 billion as of June 30, 2026, consisting of $92 million of multifamily and small business commercial, $68 million of auto and consumer drive low-to-mid-teen organic loan growth in the next year, excluding any potential acquisitions. We deployed some of the Genius Bank deposits to reduce temporary increases in FHLB borrowings this past quarter and plan to use the remaining Genius Bank deposits in combination with growth in our consumer commercial banking deposits to fund our strong loan growth.

With that, I'll turn the call back over to Johnny. thanks Derek Alicia we're ready to take questions thank you we will now be conducting a question and answer session if you would like to ask a question please press star 1 on your telephone keypad a confirmation tone will indicate your line is in the question queue you may press star 2 if you would like to remove your question from the queue for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys one moment please while poll for questions. Our first question comes from the line of David Severini with Jefferies. Please proceed.

My questions. I wanted to start on the net interest margin. How should we think about the NIM outlook from here? And can you also touch upon your expectations on deposit costs going forward?

Yes. So, we believe we'll have a fairly stable net interest margin outlook, and we also think that that's going to be with fairly stable deposit costs. Now, we obviously have the acquisition from Capital One coming, and there are some deposits that will eventually flow over from ARC because those deposits are controlled by ARC but are placed at other financial institutions. So I think the best forecast is relative stability. I think that's a reasonable outlook.

Got it. And are you observing any increase? Because you guys are one of the highest growth banks in my coverage, which is great to see. Are you seeing increased competitiveness on the deposit side as you go to market?

You know, I don't know if I'd say increased competitiveness from recent periods. I do think that what you're seeing is that other banks are more willing to adopt a model where they'll, let's say, high-cost savings account and account together. You know, that might not have been something you'd see a branch-based bank do. You might see some of them doing that now. So, you know, I do think, you know, obviously we've been able to raise the deposits we need to continue to grow our business. But we continue to be focused on it across a variety of different verticals that we continue to add and products we continue to develop. So I don't know if I'd say there's broad-based increase in competition. I just think, you know, we are seeing a few folks that it appears that they're having trouble raising deposits, and so they're being maybe a little more aggressive.

Well, thank you.

Our next question comes from the line of Kyle Peterson with Needham & Company. Please proceed.

Great. Good afternoon. Thank you for taking the questions. I want to start off on, you know, loan growth. Great to see, you know, the outlook for, you know, another strong year. Just wanted to get a sense or any more color, if you guys have it, on kind of where you guys see the most opportunity or, you know, if there's any areas that are giving you maybe a sense of pause just if, you know, there's structural issues or competition or people getting too So I guess, like, maybe areas on the asset side where you're more or less excited, you know, in the coming year would be helpful.

Yeah, it's a good question. I think that given the diversity of our lending businesses, you know, in any one quarter, getting deals closed, the pipelines may move around a little bit. But I think we'll have relatively balanced growth across our CNI platform. And, you know, I feel like there may be, you know, maybe there's some pullback in private credit in certain areas, but I don't really think that's going to translate into a lot of new opportunity for us because I think those credits were sort of outside the box and they may have to adjust more. but that might be something that's a positive in certain cases because I do think that there is some pullback in private credit in certain areas. A few deals in our lender finance were threatening maybe to leave because they were going to get higher advance rates from a private credit shop and then that didn't come to fruition. So maybe private credit will be less likely to be able to take some of our assets because we have great originations. For us, it's always the prepay side that, you know, we really have to pay attention to. So I think it's really a pretty sensitive segment that we're in, which we have to be very thoughtful about, is just the, you know, the direct lending to a sponsor-backed company. You know, to the extent, you know, we've had the documents are in good shape to LME transactions, things like that.

Great. That's super helpful. And then I wanted to switch over and maybe ask a higher-level question on ARK. It seems like a really interesting acquisition and a good fit, but I wanted to see if you could give us a little more color. I know you guys have said kind of immaterial the results, but just how it expands the product offering, monetization, and whether that is helping with deposit growth or fee income. How do you see that playing out over the long term once it's integrated and onboarded onto the broader platform.

Yeah, no, Kyle, I'm glad to get a chance to talk about that because I wanted to do that. So if you think about where we currently sit right now technologically, we've been opening thousands of small business accounts a month, but the reality of that small business platform is its capacity is limited. It sort of was derived from the consumer platform, and then we added the ability to, you know, have checks and debit cards and have essentially an account that is a small business account, but it has features that are similar to the consumer business. On the other side, we have a very sophisticated treasury management platform with a service offering where folks go through an extensive onboarding process, entitlements process for all their employees, all these other kind of things, and you can do whatever you need to do there, even if you're quite a large company. We bank some large companies as their primary bank, and they're able to do a lot. We benchmark ourselves, not without any gap, but those gaps are relatively limited, even with the larger money center banks. But in that, there's a lot of small businesses that outgrow us, and they tell us when they leave. They say, look, we really like you guys, but I've got three employees now. I need each of them to have a debit card. I need some form of positive pay because I want to let those employees write checks, but I don't want those employees to have access to an unlimited amount of the account. I need incremental fraud protections, things like that. And that's where ARC comes in. I want an expense management platform, something like, you know, a ramp has or something like that. So that's really where ARC comes in. And ARK has essentially created a very sophisticated digital platform for and even businesses that are middle market that might have a very specific set of use cases that are maybe, you might call them TM Lite, but frankly, ARK, it's even better than TM Lite. It's full TM. It may not have certain features and functionality that our broadest platform has. So we believe that by taking our existing small business clients and bringing those clients onto our clients, because they often have other banks that they're using for their more sophisticated services and keep those clients longer, Combinator companies that we're excited to serve, and we think we have our technology business. but front-facing, consumer-facing, or client-facing side of AI works. And we've done a lot on the AI front internally focused on improving internal operations and all those sorts of things, but we haven't yet had a product that we roll out to clients that will allow them to use artificial intelligence. And ARC has really figured that out and has done it really well for small business clients. And they've done that through a set of very interesting integrations and then creation of specific agents that are very useful for a small business to run consumer or small business clients and even our larger commercial clients. So, you know, and then the final element is that control allows us to really analyze all kinds of inbound calls. It allows us to just create workflows that automate certain processes and things. And it's allowed us to really, if we look at it, grow our deposit base more than seven times and barely add consumer deposit operations process. We don't have the ability to do that on the commercial side because right now we don't own all that technology. So although we use great technology there and it's working, we just switched to a new platform that was top, upper right, Gartner Group and whatnot. It's all third party. And so here this will gradually allow us to develop and utilize a lot of the services that we have in our consumer business. For example, we're rolling out crypto payments, right? in consumer. But that same set of rails may be used. And we have so much traction on the small business side that it really is difficult to get that really digital, you know, TM-style light experience and get it at a reasonable cost. So I think there's a lot here. We've got to get on it. There's some fees that are generated from it, I think. Derek is being a CFO and sandbag in a little bit, but I think right now they were, they were, we moved the deposits over. They'll be, but that's going to take a little time because we actually have to integrate their platform into all our APIs. And so we just closed them a couple of weeks ago. You know, we're working on a timeframe for that, but we don't quite have it ironed out yet. But, you know, they believe it's going to be relatively easy. But we want to just make sure that it is, in fact, helpful color.

Nice results.

Yeah, thank you, Colin.

Thank you. Our next question comes to the line of David Feaster with Raymond James. Please proceed.

Hey, good morning, everybody. Hi, David. Let's start on, I mean, look, you guys have been extremely active, right? You got three deposit-focused deals in the past six months. How has the integration and conversion been of all these? I mean, that's a lot at one time. And I guess, how have you been able to maybe deploy AI to help you with the integration and conversion? And then what's your appetite for additional deals, given all that you've already got going on?

Well, you know, these deals, well, there are deals different. But let's just talk about the Genius and Cap 1 deals. We've done so many of these just straight, raw, no-asset deposit deals that the team really has a playbook down. So I have to say that I expected them to do well on Genius' side, but they just did fabulously. I mean, like the number of accounts that were lost, they actually were essentially de minimis. They were next to nothing. There was almost no client complaints. Everybody pretty much stayed. We grew the deposit balances subsequent to that. We got great penetration on. We had a checking account offer that we, because Genius didn't have that, that we had as a companion. So as clients first logged in, they could click a button and get a checking account. Many of them did do that, and we're still seeing traction there. So that was really smooth. And then, given that scalability that we had talked about previously through the platform, there really wasn't – we were able to – we did deploy some additional folks in our offshore locations and staffed those up like we had done previously. But the calls quickly dissipated because the onboarding was smooth, and it really was very easy and almost kind of a non-event, frankly. Although it's a lot of accounts, we're growing a lot every month anyway. So it wasn't, you know, it was obviously a little bit of a shock but not much. I think similarly Capital One should be similar because it's who were floating around in the market who, you know, wanted to come to us and they're good folks and we're happy to have them. But we didn't have any people come with that. ARC was different in the sense that trickiness associated with that because we were putting in a slider so you could be on your consumer and small business and you just pull it over like Uber Eats and Uber Ride, and then you'd be able to have everything. So we've got to think about how all that works. So there's some tech stuff, but the team's great. They're super entrepreneurial, and we just have so much stuff going on on the tech side that we need that we had a bunch of recs open for people that we were going to essentially hire who were like that. Like we needed somebody who was going to do, you know, consumer and client-facing AI work, and now we have somebody. So that was really good. I think the tech there is going to put us ahead, building the platform and building up our small business platform. And then there are are deposits that come with that, but they also did something where they took some of those excess deposits and pushed them into treasuries, and we're charging a fee. So we have to kind of work that. So there's a little bit of integration there. But I don't think it's not going to be overwhelming, particularly given all the tech stuff we have going on here. We believe we're still open, which was a little bit later, but that works pretty well to look. And we think there's a lot of, you know, opportunity. We've done a lot of, you know, I think we sort of feel like we're trying to, we punch above our weight given our size with the diversity of what we do and the amount of time and effort we spend on building our own technology. And there's lots of banks that are bigger than ours that don't do that, but the technology is very scalable. So the ability to integrate like we did with, you know, with Genius and what we'll do with the cap one side really doesn't move the needle much on cost, seeing that from a standpoint of just some of that non-interest expense being more flat. It's AI, but it's also just scalability across platforms, because we have a certain number of platforms, we're spending money on them, and they can take a lot more volume through them without too much incremental cost. I don't know if that's what you're getting at, but if there's any follow-up you want.

Yeah, no, that's super helpful um and then you know just based on your preparator marks you know it sounds like burden in the marine business really starting to hit stride collaborating i was hoping you could elaborate a bit on what you're seeing from those two lines and whether any of these new businesses can help with the expansion or cross sale just based on your comments it sounds like arc um might be an opportunity to help those business lines but just kind of curious what you're seeing there yeah that's a yeah it's a very interesting question um but the lending side first so the the The Verdon side, obviously, you know, you're financing individual clients, businesses of vendors that come in and buy equipment.

And so those tend to be smaller ticket, but they're very valuable for the vendor because, obviously, if they can't sell their product, that's a problem. For them, Verdon has a nice white label platform that allows the vendors to have their name on the paper and things like that, which is not completely unique, but if you do it well. And then also there's a capital markets desk that also allows us to sell paper to non-bank lenders, so that allows Verdon to have a higher approval rate, which is important, obviously, for vendors who are trying to sell to clients that are not going to be happy if they get turned down to be able to buy something. So then conversely, we brought that floor plan team on, and the Verdant team, because they have so many salespeople, I mean, they're the biggest sales force we have by far, they're out there talking to all these vendors who also need floor plans because they're going to sell dish switches, but they also need to floor plan them. So there's a pipeline for the floor plan side driven by what Verdant does. Now, on the deposit side, we have arrangements, metrics, the Verdant sales team's plans to cross-sell and that sort of thing. But it's much easier to sell the actual vendor themselves on banking if you're doing that floor plan than trying to actually say that you're going to cross-sell deposits to the end client who buys that equipment. Now, that might be something we can do, but I think that's a little more pioneering. But if what happens is when that client logs in and they're logging in from a servicing perspective, which isn't the way it's happening now, into, let's say, the ARC platform that is then providing them AI-oriented information and things like that, and they can just sort of click to open the deposit account with some special offer, I think I could eventually see that working. Frankly, right now, Verdant stuff is serviced to a third party, so there's a lot of work that has to be done there. So that's not as near-term an opportunity as some of the other stuff we're doing, but I do see it as, like, you know, you touch us, we can bring you into a platform and cross-sell you. I do think there's an opportunity there, because I think this ARC platform integrated is special. I mean, it does some really neat stuff, and they just didn't have the funding to be able to get it out to as many folks.

That's helpful. And then, you know, you talked about, you know, most of the credit issues that you've had in the past have been really related to SNCCs. You know, philosophically, I guess, how do you think about SNCCs just given that experience? What's your appetite for those today? And is there a need for you to continue to do those? Or is there opportunity for you to maybe agent more of those deals, just given a more active approach to managing the relationship and credit?

Yeah, we're trying to do that. And we're definitely, you know, being more careful about the agents that we choose and looking for philosophical alignment, maybe looking for some more club deals. You know, I think it's interesting because there's a, I think, broadly syndicated stuff, I think definitely is becoming much and much less interesting. As you get smaller, because we do have a syndication desk now, and we have folks that are willing to allow us to agent deals, but there is something around this question of if you get a company that's of a small enough size that you're holding the entire loan and it still is a, whether it's sponsor-backed or family-owned or whatnot, not single enterprise that is subject to the fates of the economy and obsolescence of product and customer concentration and all the things that exist, it still might be a good loan, but it is a smaller company, whereas sometimes as you get to the club and you get to bigger, you have more resiliency because the company is bigger, but then you end up more under the the control of agents or types of, you know, wins that, like, sometimes the terms are a little bit looser or companies can throw their weight around a little bit more on the docks or something like that. So I think it's always an ongoing discussion, and, you know, we're not stopping that, but I think we're definitely looking at it and saying, okay, let's make sure that we're really thinking through which agents we want to work with. Super helpful.

Thanks, everybody.

Our next question comes from the mind of Andrew Luce with Sonex. Please proceed.

Good afternoon. Hey, Andrew. Welcome back.

How are you doing?

Thank you. Glad to be here. Just want to talk about the deposits that are going to come on from Capital One. Understand that the 2.3 from Genius, you've already used some of that to pay down some of those borrowings, but you have this 3.2 coming on with Capital One. Is that all going to fund loan growth? I mean, what's your initial thoughts on that? Do you hold that in cash for a little bit until the loan comes? How do we think about that new influx? Right.

Yeah, I mean, I think we're going to look and we're going to see, you know, I think in general, we'll probably look to look at any kind of higher cost, just fund loan growth and allow us to be on marketing expense or things like that. We'll have to look with kind of, you know, whether we can, whether that impacts some of the pricing on some of the other portfolio. But, yeah, that's basically it. So it would be looking first at institutional-type stuff, like there's a lot of cross-sell value or things like that, and then from there it'll end up on the balance sheet. you have to fund a loan growth a quarter overhang yeah there'll be a normal run rate there'll be overhang for a bit they didn't end but it in one effect nope that makes sense you've covered all my other questions I'll step back thanks Andrew

thank you our next question comes to the line of Kelly Moda with KBW please proceed hi thanks for the question hi Kelly I did want to touch on You had some really fabulous non-interest-bearing deposit growth this quarter, and I believe in your prepared remarks, you noted that you've been really successful at cross-selling non-interest-bearing accounts to the Genius, the accounts you brought over from Genius. Just wondering if you could provide any color commentary around the drivers of non-interest-bearing growth and what you saw from that channel and your expectations for the continued cross-sell of that ahead. Thank you.

Right, right. Yeah, no, we did have some nice cross-sell on the Genius Deposit on checking, but even given the relatively high number of those, the balances are not so crazy that they move the needle like here. The clearing sweep was around $150 million of that. Just direct CNI cross-sell for lending was another $100. What we're calling private banking, which is essentially something along some of those things is like another $100, and then some of the specialty and fund banking was around another $120 or something. So it was pretty broad-based, but I think it was great, and that was really good. But, yeah, the cross-sell strategy, you know, I always wanted to work more and faster, but we had a really good quarter there. Got it.

That's really helpful. It seems like, you know, with your expectation for, you know, stable margin, understanding there's some components here with potential excess liquidity, with the timing of things, but it seems like you're poised for another, you know, strong double-digit growth in operating revenues in the coming year. Just wondering how we should be thinking about, you know, I know you've given some commentary about operating leverage and, you know, potentially your ability to slow some marketing expenses and other things, you know, as you leverage what you've done. Any updated thoughts on that, Craig, would be helpful.

You know, we're – I've given previously that cap that said we wouldn't increase the sum of personnel expenses plus professional services a greater than our increase in our revenue, essentially our non-interest income and net interest income. I'm still holding to that, including what we're doing with... I think we do see a lot of benefit from AI. We also have the needs that are really, really positive, of like the speed at which you can on the product team so we're adding some product people and things like that but i feel pretty good about where it is i think you know on a conservative basis you know uh saying that we'll have a flat to improving efficiency ratio i think is a fair way to say it um but uh but yeah there's uh you know we uh we kind of we did we did get rid of a of the dead weight in the company there's not a lot of folks that are not performing right now and uh so that we're probably at a at a low level of uh underperformers uh even relative to our uh i think we have an historically low level but i think we're at a really historically low level now so that means you know that there may be a few ads here and there but it's i don't think it's going to be anything obviously the you know derek guided on the on that on that side with arc but also folks that we are kind of going to go out and hire anyway so that may pull it a little bit i feel pretty good about controlling expenses i mean there's some going on what we're doing just so much more efficient and so i feel pretty good about that that's not a perfect answer but i don't want to be overly optimistic but i think uh derek do you have any color there Not a whole lot.

Obviously, the jump up this past year was primarily due to sort of jump up from those operating leases that it should be.

For me, just because most have been asked and answered, just quickly on the buyback, you were a bit active during the quarter when the stock was trading a bit lower. Fair to say, given your outlook for continued strong growth and potential M&A ahead, that you're opportunistic but may not be repurchasing up here or any kind of guidepost in terms of how you're thinking about it, whether it be the earnback or capital, would be helpful.

We're always very flexible with those things. And, you know, as the prospects of the company continue to improve, you know, our willingness to buy back stock continues to increase, and so we always look at that as a balance. So I refuse to be pinned down on any such definitive statement, as you may say. But, you know, when the whims of the market, you know, blow against us, it often is a good time for us to jump in there and grab a few shares.

Got it. Fair enough. Thanks again. Thank you, Kelly.

Okay, bye.

Thank you. Our last question comes to the line of Tin Coffee with Breen Capital. Please proceed.

Good afternoon, everybody. How are you doing? Good, good. How much on the buyback is remaining again? I missed that, and you prepared the mark.

A little over $100 million, yeah.

Okay, so my quick question to kind of start with, is there a through rate between higher rates and lower prepayments as you look at your portfolio?

Yeah, candidly, not in the same, think about it, a lot of other banks, I think. And the reason why is we just have such low duration in what we're doing. So, you know, we just decide we have a bit of lower rates, but frankly, you know, since we had nothing over 5-1 arms, most of that is adjusting. The multifamily side, we had shortened that up so much, being worried about higher rates. You know, we were super well positioned for that, that that stuff is really what's happening is roll off because as much eventually that will, I think, slow down. We'll be able to grow that a bit. But, yeah, no, I don't come in if we had a longer-durated book. And then on the leasing side, which you do end up with a certain duration on those leases, there is no prepayability. So it's just you're paying or you can pay everything if you want.

Okay. That's a high-quality problem when I pay you back. Looking at non-interest income, if you strip out mortgage banking, Is it a reasonable expectation to think that number increases 2% a quarter or so?

Roughly speaking, yeah, I think that's reasonable. We obviously had a high prepayment penalty fee income quarter, so that's a little bit abnormal. So if you normalize that and then jump off of it.

Okay. Great. Those are my questions. Appreciate the time. Okay.

Thanks, Tim. Appreciate it. Thank you.

Thank you. So there are no further questions at this time. I'll pass it back to management for any closing remarks.

Thank you, everybody. We'll talk to you next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.