Andrew Steven Leischner

Andrew Leischner, on behalf of Chris McGratty, asked about the conditions First Horizon and its board would need to see from a market or regulatory perspective to become comfortable lowering the CET1 target from the near-term 10.75% to the longer-term 10-10.5% range. He also inquired about the specific sources of C&I loan growth, excluding mortgage warehouse, and future expectations.

Answer

Bryan Jordan, CEO, outlined two primary levers: economic data playing out (e.g., tariffs having minimal negative impact) and the regulatory backdrop, including peer comparisons and a general migration of capital levels down. He emphasized a measured, thoughtful approach to lowering capital levels. Thomas Hung, CCO, explained that C&I growth, excluding mortgage warehouse, was broad-based, coming from a diverse mix across regional footprints and specialty lines like equipment finance.

Andrew Leischner of KBW asked about the factors that would enable First Horizon to lower its CET1 target from the near-term 10.75% to the longer-term 10%-10.5% range. He also inquired about the specific sources of C&I loan growth, excluding mortgage warehouse, and expectations for future growth in those areas.

Answer

Bryan Jordan, CEO, identified two primary levers for lowering the CET1 target: the economic data playing out (e.g., minimal negative impact from tariffs) providing more comfort with the economy, and the regulatory backdrop, including peer comparisons showing a migration of capital levels down. He stated the approach is to take small, measured steps. Thomas Hung, Chief Credit Officer, explained that C&I growth, excluding mortgage warehouse, came from a diverse mix across all businesses, including strong production from the regional footprint and outsize growth in specialty lines like equipment finance, indicating a broad-based increase.

Andrew Leischner asked if First Horizon's share buybacks would continue to be primarily a function of loan growth as the bank progresses towards its 10.75% CET1 target, or if there would be a greater appetite for buybacks going forward.

Answer

CFO Hope Dmuchowski confirmed that the first priority for capital deployment is growing the balance sheet with loan growth, and any capital not deployed to loan growth would then be allocated to share buybacks.

Andrew Leischner from Keefe, Bruyette & Woods (KBW), on behalf of Chris McGratty, asked about the potential for incremental deposit repricing opportunities and questioned if there were any specific verticals or geographies showing signs of credit stress.

Answer

Senior EVP & CFO Hope Dmuchowski explained that deposit repricing opportunities exist but could move up or down, describing the cycle as more of a 'zigzag' due to market competition. CEO Bryan Jordan added that deposit costs will likely migrate up slowly over time. Head of IR Tyler Kraft addressed the credit question, noting stress in consumer-facing C&I sectors like trucking and auto finance, and in multifamily CRE due to high inventory coming online.

Andrew Leischner from Keefe, Bruyette & Woods, on behalf of Chris McGratty, asked about potential deposit repricing opportunities and inquired about any specific verticals or geographies showing signs of credit stress.

Answer

CFO Hope Dmuchowski characterized the deposit repricing environment as a "zigzag," noting that competition is increasing. CEO Bryan Jordan added that long-term deposit costs will likely migrate up. Head of IR Tyler Craft identified consumer-facing C&I sectors like trucking and auto finance, as well as multifamily CRE (due to high inventory), as areas being monitored more closely for stress.

Andrew Leischner asked for more details on current loan pipelines and the loan growth outlook for Q4 and 2026, and the expected pace of share buybacks given the CET1 ratio is above target.

Answer

John Ciulla (CEO) indicated robust loan pipelines but anticipated higher prepayments in Q4, leading to solid but not as strong growth as Q3, with a focus on capital allocation and core CNI categories. On buybacks, Mr. Ciulla stated that capital deployment priorities are loan growth and smaller strategic acquisitions in healthcare, with the pace of buybacks dependent on these opportunities and market volatility.

On behalf of Chris McGratty, Andrew Leischner of Keefe, Bruyette & Woods (KBW) asked about Webster's willingness to reduce its CET1 ratio and the anticipated near-term pace of its share buyback program.

Answer

Chairman & CEO John Ciulla responded that the 11% CET1 target is likely to remain for the balance of 2025, with a potential long-term reduction to 10.5%. He emphasized a disciplined capital approach, prioritizing organic growth and tuck-in acquisitions before share repurchases, suggesting buybacks would continue if other opportunities do not materialize.

Andrew Leischner of Keefe, Bruyette & Woods inquired about Webster's credit stabilization timeline, seeking confirmation on the mid-year target. He also requested details on the drivers of the quarterly increase in non-performing loans (NPLs) and the bank's strategy for share buybacks amidst economic uncertainty.

Answer

CEO John Ciulla confirmed that while the exact timing could be mid-year or Q3, positive trends in risk-rating migration support the expectation of a credit inflection point, noting that criticized assets declined quarter-over-quarter. Ciulla explained that the CRE office and health care portfolios contribute nearly half of the non-performers. Regarding capital, he stated that while organic growth and tuck-in acquisitions are priorities, the bank will repurchase shares if those opportunities are unavailable, assuming a stable economic environment.

Andrew Steven Leischner, on behalf of Chris McGratty, inquired about First Financial's strategy for reducing balance sheet asset sensitivity, the impact of rate cuts on net interest margin, and the company's stance on capital deployment, including M&A, amid tariff uncertainty.

Answer

Chief Financial Officer James Anderson explained that while the balance sheet is asset sensitive, declining deposit costs are expected to cushion the impact. He noted a 25 basis point rate cut would typically lower NIM by 5-6 basis points, but they aim to mitigate this by half. President and CEO Archie Brown added that M&A discussions have increased but may be prolonged by current economic uncertainties, though underlying interest remains.

Speaking for Chris McGratty, Andrew Leischner asked about capital deployment priorities, including the outlook for M&A. He also inquired about the drivers behind the guided Q4 step-up in noninterest income and the growth outlook for that line item into 2025.

Answer

President and CEO Archie Brown stated that while the bank is interested in M&A, it will remain patient and disciplined on pricing. CFO James Anderson noted that stock buybacks are not planned, with the focus remaining on growing tangible book value. Anderson explained that noninterest income growth is driven by capital markets (Bannockburn) and, significantly, by the continued ramp-up of the Summit operating lease portfolio.

Andrew Steven Leischner, on behalf of Chris McGratty, inquired about the net interest margin's sensitivity to potential interest rate cuts, the spot deposit cost at the end of the quarter, and the average margin for the month of March.

Answer

EVP and CFO Heng Chen explained that each 25 basis point rate cut would positively impact the full-year net interest margin (NIM) by approximately 4 basis points. He stated that the average margin for March was 3.39% (or 3.21% excluding interest recoveries) and the spot rate for total interest-bearing deposits was 3.36% as of March 31, 2025.

Andrew Steven Leischner, on behalf of Chris McGratty, inquired about the sensitivity of the high single-digit Net Interest Income (NII) growth outlook to fewer federal funds rate cuts and asked for the specific impact of a 25 basis point cut. He also requested details on the loan verticals expected to drive organic growth and the client conversations supporting that guidance.

Answer

Chief Financial Officer Julianna Balicka explained that the 2025 impact of fewer rate cuts on NII would be modest, as the effects on deposit costs and variable loan yields would largely offset each other. For loan growth, she highlighted building pipelines in Korean subsidiary sectors and specialized commercial lending verticals, such as healthcare, project finance, and structured finance, noting that recent hiring has supported this momentum.

Andrew Leischner of KBW, on behalf of Chris McGratty, asked about the sources of Wintrust's recent strong deposit growth and the outlook for future growth.

Answer

Executive Timothy Crane explained that deposit growth is expected to remain consistent with its current mix, driven by new commercial and consumer relationships, and will be managed to support loan growth. CFO David Dykstra added that Q1 deposit growth intentionally outpaced loan growth to pre-fund strong anticipated Q2 loan demand, a strategy supported by Wintrust's strong competitive position in the Chicago market.

Andrew Steven Leischner, on behalf of Chris McGratty, questioned the lack of a more active share buyback program given the stock's valuation and strong capital levels. He also asked about the expected growth pace of the investment portfolio.

Answer

Chairman and Executive Officer Curtis Myers reiterated the capital priority is supporting organic growth, but acknowledged buybacks are sensible in the current environment, noting a small purchase of 30,000 shares in Q1. Chief Financial Officer Rick Kraemer stated that reinvesting monthly cash flows of $40-$50 million is the priority for the securities portfolio, with further growth being market-dependent and likely to slow.