Good morning, ladies and gentlemen, and welcome to Live Oak Bankshare's fourth quarter 2020 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time.

I would now like to turn the conference call over to Greg Seward, Live Oak's General Counsel. please go ahead thank you and good morning everyone welcome to live oaks fourth quarter 2025 earnings conference call we're webcasting live over the internet and this call is being recorded to access the call over the internet and review the presentation materials that we will reference on the call please visit our website at investor.liveoak.bank and go to the events and presentations tab for supporting materials our earnings release is also available on our website. Before we get started, I'd like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results that differ materially from our expectations are detailed in the materials accompanying this call and our SEC files. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliation of those measures, the gap measures, can also be found in our SEC filings and in the presentation materials.

I will now turn the call over to our president, BJ Loesch. Thanks, Greg. Good morning, everybody. Thanks for joining us. Let's get started on slide four. 2025 was quite an interesting year, and here at Live Oak, I'm really, really proud of the way we navigated through those interesting times. Because macro uncertainty persisted throughout the year, whether it was Doge or tariffs or the uncertain economy, and ultimately three rate decreases from the Fed late in the year. We continued to navigate through a small business credit cycle, and our loan portfolio showed continued credit stabilization over the course of the year. We significantly improved our operating processes and controls. we successfully executed on our first preferred offering and we finished the year nicely with some outsized venture gains from our ventures portfolio and yet even with that busy and potentially distracting backdrop we produced some excellent results as you can see on slide 5 a few of the biggest highlights were record loan production, 17% loan growth, 27% core PPNR growth, 17% revenue growth, and 13% tangible book value growth, in addition to accelerating our momentum in our key growth initiatives of Live Oak Express and checking. I'm particularly proud of this two-year view of our production on slide 6. 57% growth in loan production across both our small business and commercial groups, and importantly, strong pipelines heading into 2026. And as proud as I am of those production results, what matters most is how you translate that into profitable operating leverage. And you can see on slide 7 that those results are simply outstanding. with adjusted PPNR of 27% over 2024 and adjusted EPS of 49%. New customer acquisition and growth like this doesn't just happen by accident. Our people and how we deliver excellent customer service make the difference. Our goal is to continue this momentum and deliver earnings outcomes that are more consistent and sustainable over time. While credit has been top of mind for us and for investors over the past year, perspective is always important. And on slide eight, you can see our credit trends over 10 years relative to all other SBA lenders. And while default rates have moved higher over the last two years, as PPP and stimulus tailwinds have burned off and rates rose rapidly, Live Oak's performance has consistently been well ahead of peers. Thankfully, we know small businesses and are great credit managers, and we're hopeful that these trends start to moderate back towards the long-term trend lines sooner rather than later. Finally, we continue extending our customer product offerings with checking and small-dollar SBA loan capabilities. capabilities. Both of these efforts launched in early 2024, and in just 24 months, our teams have made significant gains in winning customer checking relationships and serving more small business borrowers. At the beginning of 2024, only roughly 6% of our customers had both a loan and deposit relationship with us. Today, that percentage is 22%, and we've got a lot more runway to travel. On the small dollar 7A front, what we call Live Oak Express, production is ramping up meaningfully and will continue to do so. These loans are also very desirable on the secondary market that are leading to nice gain on sale increases. There's a lot more upside to this business as well. We're just starting. I couldn't be prouder of how our people They're taking care of customers, making our operations better, and profitably growing our company. Thank you to all LiveOakers for the momentum that they have built heading into 2026. And with that, Walt, how about running through some of the financial highlights for the quarter?

Thanks, BJ. Good morning, everyone. As outlined on page 11, we had an outstanding end to our 2025 campaign, with Q4 producing $44 million of net income and $0.95 of earnings per share, both of which were approximately three times Q4 of 2024. Our strong performance was aided by excellent growth in core profitability trends as seen in both our reported and adjusted PPR improvement year-over-year, generally improving credit trends in our fourth consecutive quarter of lower to stable provision expense, and $28 million of net gains in our ventures investment portfolio, primarily driven by the $24 million gain from the Aperture sale. Growth remains excellent, as Q4's loan production of $1.6 billion capped off our highest year of loan production in company history with $6.2 billion, driving the 17% annual loan balance growth. Outstanding loan origination that you just won't see replicated broadly across the industry. And we love to see the progress across our two focused initiatives of growing business checking and originating Live Oak Express loans. Business checking balances of $377 million doubled year-over-year, materially benefiting our interest expense lines, while Live Oak Express contributed $12 million towards our gain-on-sale totals in 2025. Now let's get into the details on the following pages. Page 12 provides a financial snapshot of our Q4 earnings results, with quarter-over-quarter demonstrated improvement across all major profitability and growth metrics. On the bottom right of the page, you will see several notable items included within our reported results, headlined by the $28 million net investment gains from our Labo Ventures investment portfolio. In addition, we had approximately $11 million of all sets from warrant losses, capitalized software, accelerated depreciation, severance, and allocation of funding to our donor-advised fund. I continue to be very excited about our operating leverage trends highlighted on slide 13, as was BJ. Q4's adjusted PPNR of $64 million, as detailed in slide 28, is 21% higher than Q4 of 2024, while our adjusted EPS has doubled over the same time period. That doesn't tell the full story, as it includes approximately $5 million of accelerated depreciation of capitalized software and severance expenses, as well as an intentional decision to delay some loan sales until 2026, which we'll touch on more shortly, due to the large aforementioned investment gain. Slide 14 breaks down the $1.6 billion of loan originations by vertical and business unit. A few quick things to hit on here. Approximately 70% of our verticals originated more production in 2025 than they did in 2024. And both small business and commercial lending teams delivered double-digit year-over-year balance sheet growth rates. Slide 15 illustrates our loan and deposit balance growth, highlighting these strong, consistent trends on both fronts. Our total loan portfolio grew approximately 4% late quarter, with year-over-year loan balances increasing approximately 17%. That's just outstanding, durable growth. Q4's customer deposit growth was slightly down late quarter, as was expected due to typical Q4 seasonality, yet our year-over-year customer deposit growth rate was 18%, which is fantastic growth in a very, very competitive market. As I mentioned earlier, we continue to be very excited about the momentum we are seeing business checking, as highlighted on page 16. We saw our fourth consecutive quarter of growth, with checking balances increasing 4% in late quarter to $377 million, and are highly encouraged by our progress in deepening customer relationships. As BJ noted, 22% of our customers now have both a loan and a deposit count with us, and 37% of new loan customers also open a checking count in Q4. Our total low-cost deposits, including non-interest bearing checking balances, low-cost collateral construction, and loan reserve accounts, now totals approximately 4% of our total deposit base, a 2x increase year-over-year, and tremendously accretive to our earnings profile. Our net interest income and margin trends are detailed on Slide 17. In Q4 of 2025, we saw our quarterly net interest income increase $8 million, or 7% in late quarter, and $26 million, or 26%, compared to Q4 of 2024, driving the Q4 increase in net interest income where both our continued outstanding growth, as well as our net interest margin expansion of five basis points quarter-over-quarter, aided by our deposit portfolio repricing downwards in response to the 50 basis points of Fed cuffs in Q4, while our variable quarterly adjusted loan portfolio did not reprice until January 1st. As in the past, when we have seen large Fed moves downward of 50 basis points in a quarter, year, you will see near-term compression as our deposit pricing and strong volume catch-up, and we continue our upward trajectory on that interest income. Historically, our model operates well in a lower interest rate environment once we navigate the journey down as our deposit pricing adjusts. Currently, our base outlook for the Fed consists of three Fed cuts in March, June, and September of 2026. Any less cuts or cuts later in the year will provide an earnings opportunity for the bank. Moving to guaranteed loan sale trends on slide 18, gain on sale was intentionally down this quarter as our large investment gains provided loan sale flexibility, essentially allowing us to delay sales until a future quarter while increasing our loans held for sale by approximately $60 million quarter over quarter to maximize net interest income for a few additional months. This is a similar tactic that we have deployed in the past when we have large investment Looking back to 2025, we are more than pleased with the momentum that we are seeing in our Live Oak Express product and the immediate impact it has had on our earnings, providing for a meaningful 20% of our gain on sale for $12 million, a 2x what it contributed in 2024. We remain very focused on ramping our Live Oak Express originations, as that will continue to be the primary driver of our gain on sale growth going forward. Expense and efficiency trends are detailed on slide 19. Q3 reported non-interest expense of $89 million included approximately $6.6 million of one-time expenses, detailed within the Notable Items section back on slide 12. We remain heavily focused on improving both our customer and our employee experiences and implementing technology and operational improvements across our entire business, all with the goal of creating raving fans, moderating expense growth, and thus improving efficiency, and providing a solid, mature foundation to support our growth. Taking a look at credit on slide 20, over 30 days past due remained low for the fifth consecutive quarter with $10 million, or nine basis points of our health care investment loan portfolio past due as of December 31st. The amount of non-accrual loans increased to $110 million, or 91 basis points of our unguaranteed health care investment loan portfolio in Q4. However, the late quarter increase in here was primarily driven by SBA credits and is consistent with the broader SBA industry trends, which LIBA continues to outperform. Our reserve levels declined modestly in line with the improving trends in past dues, classified assets, and net charge-offs. Altogether, improvements across these metrics show that the uptake in nonincruals is manageable. Capital levels remained healthy and robust, as shown on page 21. Q4 strong results matched our asset growth, keeping our capital levels relatively flat late quarter. A few thoughts on the forward outlook. We are very optimistic about the opportunity in front of us in 2026 and beyond. On the revenue front, we generally see a stable or low rate environment coupled with continued strong loan growth as a favorable backdrop for our bank's growth margin and credit outlook. Our two strategic initiatives in business checking and LabExpress are ramping nicely with plenty of runway to continue to drive deeper relationships, increase fee revenue, and lower funding costs. We have refocused our expense base and investments on the best opportunities, which will moderate the growth rate while better supporting strong revenue growth. The possibilities that AI and tech innovation provides across the bank are enticing and will enhance our customer service and efficiency with active efforts ongoing. going. And above all else, we have an amazing culture, team and brand here at Labo's Bank that is irreparable. With that being said, thank you again for joining this morning. B.J., back to you for closing comments before we hit the Q&A.

Excellent. Thanks, Walt. Let's just take some questions.

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchdown phone. Should you wish to cancel your request, please press the star followed by the two. If you're using a speaker phone, please lift the handset before pressing any case. Once again, that is star one, should you wish to ask a question. Your first question is from Chris Payne Ludd from Piper Sandler. Your line is now open.

Thank you. Good morning, everyone. Just first, NII and the NIMH, very strong in the quarter, nice expansion there. But can you just talk about some of the dynamics into the first quarter, the impact of the last two cuts, the impact of loan yield, that there's likely some lag, also deposit costs, and then just consequently NII in the NIM in the first quarter relative to the fourth. Well, I believe you mentioned some compression in the NIM, but higher NII, but if you just flesh that out a little bit, that'd be great.

Yeah. Hey, Chris, and Paul, thanks for the question. Yeah, I think you hit the nail on the head and kind of go back to some of the comments I made in the prepared remarks. You know, typically anytime you see 50 basis points of Fed cuts in the quarter or the following quarter, as you know, we have a large variable quarterly adjusted loan portfolio that reprices on the first business day. So that will drive both NIM and net interest income compression in the near term. The good news, which is essentially the beauty of Lavo is that as As the deposit price continues to adjust, growth really pushes –

Full color there. And then just on gain-on-sale income, down materially in the fourth, not a major surprise, at least directly because of the shutdown. And then you also mentioned the aperture gain drove some of that decision to hold more. I think you typically sell more in the back half of quarters, but is that changing in the first quarter because of the shutdown? Have you been active selling in early 26? And then just when you look at the first quarter, how do you think gain on sale income should tread just as you look at more normalized quarters like the first three of 2025? I would expect that it would be higher than that just when you look at the fourth. But I just want to kind of check to see what you're thinking there.

Yeah, thanks, Kristen. Paul, again, you know, I think the government shutdown really did impact us much in Q4. I think we saw a little bit of a timing delay in certain loans, but as you saw, the strong SBA production in the quarter, so we were able to get all our loans, as we talked about in the last earnings call, kind of positioned to close once the government and what we did. As you think about gain-on-sale trajectories, I don't think anything will change between when we sell loans versus January versus – I think it will still be much more to the mid, to the back end of the quarter. That's our tip. I think Q1 historically for us is our lowest quarter of the year. I know Q4 of 2025 was a little bit different because of FinTech games, but Q1 to be much more in line with.

So if I'm looking at 1Q25, so even if, even though that there was a little bit of lag there, it could be below that kind of 2Q3Q level.

I think it'd be closer to what you're see in Q1 of 2025. Yeah, so our Q1 of 2026 would be closer to what you see in Q1 of 2025, so it'll be a step up versus what you saw in Q4. I think Q1 of 2025 was in the $15 million range total gain on sale. That feels...

All right. Thank you. Appreciate it, Walt. Sure.

Yeah, thanks, Chris.

Thank you. Your next question is from David Feaster from Raymond James. We are liners that open.

All right. Good morning, everybody. I wanted to not to be the dead horse on the margin outlook, but I just wanted to maybe get some thoughts on the trajectory. Appreciate the commentary on the first quarter. You've got three cuts embedded in your guidance. Obviously, there's just going to be a lot of moving parts. You've got the tailwinds from the deposit repricing in the prior cuts, the headwinds on the assets repricing lower on the rate-sensitive stuff. I just was curious if you could help us think through, with the three cuts that you've got embedded, how do you think about the margin trajectory over the course of the year, do you think we can, given the tailwind from the prior cuts, we can actually see some expansion and kind of just help us think through that trajectory over the course of the year?

Yeah, I think, you know, David, this is Walt again. You know, really, you know, the thing that we think about is not only what the Fed cuts are going to do, it's the timing and severity of those cuts. You know, stable environments and it's worked really well for us. So if you saw Q4 of 2024, we saw compression. And then with a stable environment, we saw a nice NIM expansion throughout the year. With 25 basis points of Fed cut assumptions, that allows our deposit pricing to catch up relatively quickly. Ultimately, we'll expect that step down here in Q1, and then our expectation is to go back on that, start seeing the up and right trajectory or NIM expansion as we move through the year. largely is going to be driven by growth now obviously the positive market is very competitive and what kind of you know we have to do what we need to do to continue to fund our outstanding growth and you know David like we talked about in the past we we a lot of them even with a you know three you call it anywhere from a 315 to 350 NIM you know we think that's really attractive we focus a lot on that interest income you know and that's the beauty of kind of the Live Oak model, right, where you can have a double-digit net interest income growth year over year, even with some variations, you know, from your marketing trajectory.

Terrific. That's helpful. And then, you know, obviously there was a lot of noise on the expense side this quarter. You alluded to some of the things. Just was hoping you could give us some puts and takes on expenses. You know, you've got a lot of investments on the horizon. We talked about, you know, the Live Oak Express ramping up. We talked about embedded finance. Could you just help us think through a good core expense run rate from here? What you're investing in and how you think about funding those investments, just as I know you've really been focused on expense management.

Hey, David, that's one again. Great question. You know, we're really trying to do our best to make sure that we're balancing both revenue and, as BJ mentioned and I mentioned, kind of looking at the operating leverage slides. We've done a really good job of that, especially over the last few years. but even if you extend it past them with our PPNR trajectory, you know, I think from, you know, where we're investing, you know, the two strategic priorities for us of both business checking and Livework Express are, you know, heavy focal points. You know, the areas with AI and application and, you know, kind of across our operational areas of the bank and our loan origination platform is really exciting. You know, I think from, you know, expense growth rate, you know, we typically, you know, we mentioned in our prepared remarks, we expect, you know, that that's something probably likely in the single digits year over year just as we think through putting our money strategically in the room. Okay, that's helpful.

And then just quickly touching on credit, you know, there's some mixed trends there. I just wanted to get your color on what are you hearing from your clients? Where are some of the pressure points that you're seeing as you look into the portfolio? Are there any segments that there's more pressure? And what drove that increase in non-accruals? And just how do you think about credit? How do you think credit trends near term and any color on the classified asset trends specifically would be helpful as well?

Good morning. Mike McCarns here. I'm happy to talk about credit a little bit here. And my view on this quarter was it was a fairly uneventful and stable quarter when you compare it to where we were last quarter. The past dues are low. And to your point or your question, classified loans are flat, just slightly improving over the quarter. And when you think about non-accrual loans, those live within our classified loan portfolio. And so when we determine that they're a classified loan, at that point, we're assessing the reserve of potential losses against those loans and natural progression of a classified loan, or the reason we identify as a potential problem loan is because payment defaults could have non-accrual balances, but you're not seeing a spike. And when you look at a favorable forecast that happened in the back half of 2025, not of that quite yet, but they should in 2026, so I expect some of this or not, but the accrual balances and with all that I felt like that's great color thanks thank you your next question is from David Rochester from Cantor your line is now open hey good morning guys morning hey Walter I just want to go back to your

comments on the margin you mentioned down similar to that trend in 4q 24 I believe and so it looked like that was down about 18 basis points that quarter so just want to make sure that that was sort of the magnitude that you were thinking about and then on slide 17 you guys included a newer line in that some income from it was other loan income there was about six basis points on the margin for the quarter it was just wondering what that was exactly and is that something that's going to reverse as that rolls you know off of 1q or does that stay in the margin just trying to figure out if that's incremental to what you guys saw in terms of the trend in 4q 24 thanks

Thanks for that. Loan income, I'll start there. So that line was inflated more than we typically see in any given quarter. This really relates to a few large solar and senior housing loans that paid off that had pretty high prepayment penalties. So that's something that, you know, we don't expect to see in the run rate, you know, moving forward, and especially not to that degree. And then, you know, as you think about the trajectory, you know, back in Q4, you know, after the 50 basis points of cuts, yeah, I think that's, you know, that's in a reasonable I think the one thing that's helping us this year is that we were able to get out the front of the bearable loan portfolio repricing on January 1st with some deposit Q4. And also we're able to already start to reduce some pricing again here in Q1. So we're doing what we can to mitigate it. But I think the other factor there is our pipeline hasn't really slowed down at all. So we're expecting pretty strong Q1 in terms of growth. That's going to hopefully help.

Okay. Great, appreciate that. And then just on expenses, just want to make sure I heard you right, were you saying mid-single-digit growth for expenses next year, slower than that we saw this year? And then just on Live Oak Express, it's good detail you had in here, the $12 million of gain on sale for 25. Are you thinking, I guess bigger picture, what are you thinking for the trajectory there? Is that something that could double in 26? Could it go even higher than that? What are your thoughts there?

Yeah, dude, this is Walt again. I'll start, and then, BJ, you want to add in too. You know, I think we're doing what we can. Basically, we saw, you know, we did see a slowdown in our live work expression resistance back half of 2024 after the SBA, you know, that, you know, we had to essentially reset kind of, you know, our expectations to make sure that we had to rebuild that pipeline with borrowers or rebuild the pipeline with borrowers after, you know, just essentially updating them, educating them on what those SOP changes were, you know, look, I think doubling is very aspirational. I think it'll be something less than that. I'll let BJ talk and add in if he has any comments.

Yeah, I think at Cruise Altitude, I think, you know, we're, our aspirational goals are a billion dollars a year of production at Cruise Altitude. That's not next year. That's over time. When we started down the road of building out a Live Oak Express product, it was really by brute force. I think we've talked about it before that, you know, we just never really focused on the small dollar lines, you know, that we, our average loan size was more in the 1.2 or 1.3 million dollar average loan size range. And so, you know, we started just kind of trying to see how we could do it what we're doing now is intentionally building capabilities so that we can fill you know the top of funnels so to speak and get a lot more leads that we can then work in a much more efficient manner so for instance we are you know building and co-developing a next generation loan origination platform, which will make it simpler, easier, faster, and more efficient for our people to serve our customers much more quickly and get to decisions and funding a lot faster. We have engaged outside expertise in our marketing group that are expert in performance marketing to find ways to better target customers that are out there searching for loans that we can that we can do through our Live Oak Express product and we are making sure that our lenders which have been carrying the bulk of the water up to now in terms of referrals can even find more avenues for those referrals and we're encouraging them to do that both through how we how we provide them resources but then also making it part of the you know incentive plans that we have for them to grow the business so you know we've kind of got a multifaceted way of going after this intentionally so we think that we'll continue to see growth over the next several years towards that aspirational target of a billion a year.

All right.

Thank you. Your next question is from Tim Switzer from KBW. Your line is open.

Hey. Thanks for taking my questions. My first one is kind of a follow-up on this discussion around Live Oak Express. And, you know, we're more than six months now into these SOP changes regarding the smaller dollar loans, which I think we're now starting to see how that has pressured volume on maybe some of your competitors. So is there any way you're able to, maybe not quantify, but, you know, characterize the impact that has had on your competitors and, you know, is that made it a little bit easier for you to win some market share in the smaller dollar space and also, like, has that impacted pricing, yields, anything like that?

On the latter, I don't think that we've seen an impact on pricing or yields quite yet.

On the former, I think we've started to see that.

You know, we've started to see some lenders back away, first, the non-bank lenders, because they were seeing a lot of the biggest credit pressures, and, you know, we're starting to see bank lenders be a little more choosy on what they do which makes a lot of sense we want a healthy SBA 7a industry and we have always been very intentional from the outset on our small dollar lending products we don't play at the highest highest end of the pricing game we don't chase you know spotty credit, you know, we want businesses, small businesses to succeed. And so, you know, our total addressable market, so to speak, on the smaller side is going to be reduced somewhat because we're going to be cheesier about who we do business with. But on the flip side, we're going to make it so easy for customers to do business with us. And we're going to target people that have a propensity to do business with us like they want to and they're going to get the full power of our brand and our people in our technology over time such that we think that that's going to be a huge differentiator between what they currently get today particularly on the small dollar side and what Live Oak is going to deliver so I'm really excited about how we're actually thoughtfully building out this business, and I think it'll be quite substantial and a huge part of what we do on the SBA side for years to come.

Interesting. That was a great color. Thank you. I was also wondering, on the flip side of this, since everyone is not required to do basically full underwriting and, you know, the upfront guarantee fees and everything is essentially equal for the larger loans. Are you seeing some of your competitors now kind of move back to Live Oak's more traditional loan size at all?

Not necessarily. Not that we can discern. You know, we haven't seen much change from that perspective, Tim.

Okay. And then I was also looking for maybe an update on the opportunities and internal development you guys are doing with regards to AI. Shif has brought this up a few times on conference calls. I was looking for an update there. What are kind of the tangible use cases you're exploring and, you know, what are the benefits it can provide you, whether that's, you know, internal efficiency efforts or, you know, creating a better experience for customers?

Sure. I'll just give a quick update on that. I think starting with our technology and our labs teams, all of our developers are using Cursor, next generation, AI-based developing software. And I'm not sure that that's going on across the rest of the industry, but having all of our people well-versed in that, we made that pivot very quickly. So that's number one, and that's helpful. We are intentionally educating and introducing our people to AI, first with things like co-pilot, but then also things like, you know, putting our information into proprietary large language models that they can then query and use for analytics specifically related to our customer information, in our portfolios and our business. So that's kind of fundamental, and maybe a lot of people are doing that. But then what we're looking at is a multi-pronged approach on how we go after this. I think if you just look at modernizing what you do in technology or in operations or revenue-generating parts of an organization and just simply say, we want to put in AI. AI is going to solve everything. It's not. What we're looking at is a way to say, how do we go to major parts of the organization, understand what the pain points are that don't make it easy or simple or fast or efficient for our people and our customers, And to fix those, sometimes with just better process, sometimes with eliminating manual process, and then more and more with AI. And it's a combination of being intelligent around that. So we're going to major departments and groups like loan operations and, you know, secondary markets and deposit operations and those areas to modernize those using AI and other tactics. We're also asking everybody in our organization to be knowledgeable about just doing things better and more efficient, whether it's using AI or, you know, not using AI. And then thirdly, you know, we're going to create a dedicated team that is thinking about how over the next three to five years we create an AI native bank. What does that mean? What does that look like? We have the innovative history here and technology that was born out of our founders, and we're constantly thinking about how to do that better. And so, you'll see more and more use cases, tangible use cases from us over time as we start to build out what that means to be an AI native bank.

That was great. If I get one more question, kind of a follow-up on the credit discussion. I think Michael mentioned, you know, we're not seeing any kind of spike in the provision expense. Is that, you know, what should we expect going forward in terms of provision if credit continues to, you know, gradually improve over the course of the year like it has over the last few Should provision be stable, can it moderate a little bit further, or is this kind of where it's going to stay?

Tim and Swal, I'll jump in, too, and then Michael can add on. I think if you think about stabilizing credit trends, I think one thing you have to remember with us with being a high-growth bank, you know, that growth and CECL typically don't get along real well. So, you know, growth will continue to drive our provision expense along with our portfolio trends as well. You know, but I think, you know, kind of what you've seen over the last three quarters is a really good view of kind of like stabilizing, you know, or kind of stabilizing portfolio with stabilizing the credit trends and that should give you kind of a broad view of what you could expect kind of going forward um you know assuming the same level yeah that's fair fair point for vision so i guess we should think about maybe the reserve percentage staying about level yeah that's that's about right got it all right well thank you your next question is from billy young from katie calvin your line is now open hey good morning guys how are you um just a

I have a question on your business checking initiatives. Given the strong momentum in your comments and the strong performance you had over the past year, do you have any updated thoughts about how we should think about the funding mix looking out over the next year or two, given, you know, the increased growth in NIB?

Yeah, it's all started there, Billy. Yeah, I think the, you know, we've been able to get to about 4% of our non-interest-sparing deposits, as I mentioned earlier, you know, ultimately, you know, our aspirational goal over just like kind of, you know, BJ mentioned with Livebook Express is over time to get up towards in that 15% of our deposit base. Like, again, that's not going to happen next year. I think we saw 2% of non-interest-sparing a year ago, 4% this year. I think that trajectory makes sense, you know, to kind of move into 2026 if you just think about, you know, leveraging that growth rate.

That's helpful. And then just a couple of housekeeping items on the decision to hold on to more of your gain on sale loans. It's just did you size up how much the benefit was to the margin or NII from holding on to the higher health for sale loans this quarter? And then also, did you use this opportunity to maybe portfolio some more production in 4Q?

Yeah, I'll jump in on that, Billy. The benefit for NII of about $60 million of HFS, given our spreads and our margins, is, you know, likely in the, call it $1.8 to $2.5 million range. A year, sorry. Yeah, that's correct. So, divide that by four, that kind of gives you. So, it's not overly material for Q4 itself. You know, as far as portfolioing, I don't think that's what we'll likely do. I mean, I've always, you know, kind of aspired to get to the point where we're building a kind of what we used to call a treasure trap, but essentially it's a, it's a portfolio of health for sale guarantee loans that we can sell at any given point, gives us some good momentum going into Q1. So we'll likely monetize, you know, that additional in Q1, and then that gives us something in Q1 to then kind of give us a head start.

Thank you for taking my questions.

Thank you. There are no further questions at this time. I will now hand the call back over to Chip Mahan, Chairman and CEO, for the closing remarks.

See you next quarter. Thanks.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.