Anthony Elian

Anthony Elian followed up on loan growth, asking if the second quarter could show growth and if the full-year guidance of low-to-mid-single digits remains intact. He also asked about other loan portfolios, besides dealer floor plan, that are being monitored due to tariff and supply chain risks.

Answer

CEO Bob Harrison reiterated the full-year loan growth guidance but noted it is subject to economic uncertainty, making it hard to pinpoint growth by quarter. He identified the broader C&I portfolio as an area receiving heightened attention due to potential cost impacts on small businesses. CFO James Moses added that the risk teams view tariff impacts as customer-specific rather than portfolio-wide, underscoring the value of their direct client relationships.

Anthony Elian of JPMorgan asked about the potential impact on the NIM outlook if no rate cuts occurred in 2025 and sought clarification on the drivers behind the fee income guidance.

Answer

CFO Jamie Moses projected that with no rate cuts, the quarterly NIM expansion would likely be 1-2 basis points higher than the current guide. He explained the fee income guidance of ~$51 million per quarter reflects a normalization from the back half of 2024, which benefited from non-recurring items like insurance proceeds and extra BOLI income, and may include a touch of conservatism.

Anthony Elian requested the specific dollar amount of unexpected loan payoffs that impacted Q3 growth and asked if the current level of noninterest-bearing deposits, at 34% of total deposits, has reached a floor.

Answer

CFO Jamie Moses estimated the unexpected loan payoffs were in the range of $90 million to $95 million. Regarding deposits, he noted the noninterest-bearing mix has been stable for two quarters and expressed hope that this level, which is consistent with pre-pandemic figures, represents a floor as the bank focuses on growing relationships.

Anthony Elian inquired whether Flagstar Bank N.A.'s expected reduction in non-accruals for Q4 and through 2026 would occur organically or include asset sales. He also asked if the bank had conducted any reviews of procedures or policies, particularly within the asset-based lending (ABL) vertical of specialized industries, following recent credit events in the market.

Answer

Joseph Otting, Chairman, President, and CEO, and Lee Smith, Chief Financial Officer, clarified that most non-accrual reductions would be organic, employing various strategies such as DPOs, workouts, and some sales, often resulting in slight gains. They noted that a significant portion of non-accrual borrowers have never missed a payment. Joseph Otting confirmed a detailed review of the NDFI book, including MSR lending and lender finance, stating that the bank has no exposure to recently publicized names and feels confident about the quality of its book.

Anthony Elian asked for more details on the increase in non-accrual loans, particularly the construction loan and other commercial real estate migrations. He also questioned how low Valley National Bancorp's commercial real estate concentration could go and when CRE balances might start growing again.

Answer

Mark Saeger, Chief Credit Officer, explained that the increase was primarily due to a $135 million land loan with strong value, expected to be refinanced without issues. He noted that 50% of non-accrual loans are current on payment, indicating positive movement in the real estate market. Travis Lan, CFO, stated that Valley is targeting C&I growth to further reduce the CRE ratio, aiming for 300% by late 2026/early 2027, with C&I balances expected to stabilize and then grow.

Anthony Elian from JPMorgan Chase & Co. requested more details on the increase in non-accrual loans, particularly the construction loan and other commercial real estate migrations. He also inquired about Valley National Bancorp's commercial real estate concentration, asking how low the ratio could go and when CRE balances might resume growth.

Answer

Chief Credit Officer Mark Saeger clarified that the primary increase in non-accruals was a $135 million land loan with strong value and an anticipated refinance, expecting no loss. He noted that 50% of non-accrual loans are current on payment and observed positive movement in the real estate market. CFO Travis Lan stated that Valley National Bancorp targets low single-digit CRE growth for 2026 and beyond, aiming for the CRE concentration ratio to decline to 300% by late 2026 or early 2027.

Anthony Elian asked about the updated loan growth guidance of 3-5%, now expected at the low end, and whether Q2 could be a growth quarter or if growth would be back-half weighted. He also requested an update on the large nonperforming loans from Q4.

Answer

Executive Travis Lan stated that Q2 can 'absolutely be a loan growth quarter,' with momentum in C&I and consumer lending continuing and CRE originations picking up. CEO Ira Robbins supported this by noting the commercial pipeline grew from $2.0 billion to over $2.7 billion. Chief Credit Officer Mark Saeger confirmed the large Q4 problem loans were written down and resolved, with Q1 charge-offs stemming from two new, unique situations involving fraud.

Anthony Elian asked for details on the expected cadence of the reserve build throughout 2025 and inquired about the primary drivers behind the successful $1.7 billion growth in direct customer deposits.

Answer

Chief Credit Officer Mark Saeger indicated the reserve build would likely be more weighted towards the beginning of the year before tapering off. Executive Travis Lan and CEO Ira Robbins added that the deposit growth was broad-based across both branch and specialty channels, highlighting strong activity in international and technology verticals. Robbins emphasized that investments in technology, particularly the Treasury Solutions platform, were key drivers, contributing to a $0.5 billion increase in associated deposit balances in the latter half of the year.

Anthony Elian of JPMorgan Chase & Co. asked about the specific drivers behind the growth in specialized deposits, particularly in the technology segment, and inquired about the company's normalized loan growth potential.

Answer

Executive Travis Lan attributed the deposit growth to a strong pipeline of technology companies and broad-based strength in other commercial and online channels. President Tom Iadanza projected a normalized loan growth rate in the mid-single-digit range, as strong C&I growth will be partly offset by the managed reduction in CRE concentration through 2025.

Anthony Elian asked for details on the maturities of Certificates of Deposit (CDs) in Q4, including their maturing rates and recently posted rates. He also inquired about the firm's strategy now that the Return on Average Assets (ROA) target has been achieved, asking if it's purely about execution, incremental hires, or if new targets will be announced.

Answer

CFO Matt Scurlock stated that $765 million in CDs mature in Q4 at a weighted average rate of 4.22%, with current posted rates at 4%. CEO Rob Holmes emphasized that achieving the ROA target is a significant milestone, not the end goal. He highlighted the firm's excitement for the future, focusing on realizing revenue and cost synergies, meeting client demand, and leveraging investments in technology and operations. While not committing to new long-term guidance, he affirmed the management team's commitment to continued transparency.

Anthony Elian of JPMorgan Chase & Co. asked for more details on the timing and nature of planned derivative or securities actions and the timeline for implementing enhanced credit structures on the mortgage finance portfolio.

Answer

CFO Matt Scurlock confirmed that future securities actions are included in the revenue outlook and noted the addition of $300 million in forward-starting swaps this quarter. He mentioned significant swap maturities in Q2 and Q3 provide opportunities to manage balance sheet duration. Regarding the credit structures, Scurlock expects to have 30% of the mortgage finance portfolio moved into the new, more capital-efficient structure by the end of Q2.

Anthony Elian followed up on the 2025 outlook, questioning an implied change in the Net Interest Income (NII) guide based on the total revenue forecast. He also asked if the planned hiring of additional frontline talent was for existing business segments or an expansion into new areas.

Answer

CFO Matt Scurlock clarified that the NII outlook has not fundamentally changed and that achieving mid-to-high single-digit loan growth could push the firm to the higher end of the total revenue guide. CEO Rob Holmes responded to the hiring question, confirming that the new talent is being added to deepen the skill set within existing industry verticals and segments, such as investment banking and treasury services, rather than to launch entirely new product lines.

Anthony Elian asked if the increased range for ECR costs, while maintaining the NII range, was due to higher balances or a lower ability to reprice deposits. He also inquired if Western Alliance Bancorporation would review loan portfolio credit procedures more broadly beyond note finance and NDFIs, given investor concerns.

Answer

President and CEO Ken Vecchione stated that the increase in ECR costs was "really balance-driven," with higher-than-expected balances in Q3 impacting expenses and adjusted efficiency ratio/NIM. CFO Dale Gibbons emphasized that executive management is highly concerned with credit governance and asset quality, highlighting existing robust control environments, active credit risk review, and ongoing broad-scale portfolio reviews, assuring that these processes are continuously engaged.

Anthony Elian asked why Western Alliance Bancorporation increased its ECR costs range while maintaining the NII range, specifically if the ECR increase was balance-driven or due to lower repricing ability.

Answer

President and CEO Ken Vecchione stated that the increase in ECR costs was "really balance-driven," as the bank received more deposits in Q3 than anticipated, which he described as a "good problem to have." In a follow-up, regarding a broader review of credit procedures beyond note finance and NDFIs, CFO Dale Gibbons emphasized that executive management is highly concerned with credit governance. He highlighted the existing robust control environment, active involvement of the second line credit risk review, and ongoing broad-scale portfolio reviews as part of the bank's continuous process.

Anthony Elian asked for the potential impact on ECR deposit costs if no rate cuts occur and questioned the long-term growth potential for the digital asset deposit segment.

Answer

CEO Ken Vecchione advised looking at the total PPNR impact, noting that if rates don't fall, higher net interest income would offset higher ECR costs. CFO Dale Gibbons addressed the digital asset segment, stating the bank has a 4% concentration limit but could see it moving higher over time, while emphasizing that funding diversification remains a key principle.

Anthony Elian of JPMorgan Chase & Co. asked for anecdotal feedback from customers regarding tariff uncertainty and whether the bank was paying closer attention to any specific business lines.

Answer

President and CEO Kenneth Vecchione noted that clients are cautious, but growth is coming from longer-term projects like homebuilder finance that are less affected by immediate uncertainty. Chief Banking Officer Tim Bruckner emphasized that their diversified business model, with its ability to dial exposures up or down and its focus on domestic borrowers, is the core strategy for managing risk in any environment.

Anthony Elian asked about the potential impact on the NII and ECR cost outlook if the Fed does not cut rates in 2025. He also inquired about the bank's latest perspective on M&A, given the regulatory environment and its proximity to the $100 billion asset threshold.

Answer

Interim CEO and CFO Dale Gibbons asserted that the financial guidance would remain the same even with zero rate cuts, citing the bank's negligible and manageable interest rate sensitivity. On M&A, he stated the bank is not dependent on a deal to cross the $100 billion threshold, preferring to focus on its strong organic growth engine and complete its LFI transition before considering a major acquisition.

Anthony Elian asked if the Q4 2024 deposit guidance, which projects a $2 billion decline, includes any further paydowns of brokered deposits. He also questioned why other deposit-gathering channels are not expected to fully offset the seasonal outflows.

Answer

CFO Dale Gibbons stated that the Q4 deposit decline is driven almost entirely by seasonality in the mortgage warehouse business and that brokered deposit levels are expected to remain fairly flat. CEO Ken Vecchione explained that while other channels partially offset the outflow, the mortgage warehouse business is a very large contributor and its inflows were particularly strong in Q3 as competitors retreated, creating a larger-than-usual seasonal reversal.

Anthony Elian from JPMorgan Chase & Co. asked Chairman and CEO Harris Simmons for his perspective on whether investor concerns regarding Non-Deposit Funding Institution (NDFI) portfolios are overblown or reasonable, considering the broad spectrum of NDFI categories. He also followed up on slide 36, requesting identification of the highest and lowest credit quality concerns within the NDFI allocation buckets, beyond the generally safer capital call lines.

Answer

Chairman and CEO Harris Simmons stated that while NDFI is broad, he sees greater risk in private credit due to its rapid growth, lack of regulation, and potentially more liberal structures, which could pose spillover risk to credit markets. He noted that recent incidents might have led to unwarranted connections between different credits. Chief Credit Officer Derek Steward emphasized paying attention to all NDFI segments, including leveraged lending, and reiterated that capital call lines are typically more stable despite lower returns.

Anthony Elian asked Harris Simmons for his perspective on investor concerns regarding NDFI portfolios, specifically whether they are overblown or reasonable, and his views on private credit risk, potential spillover effects, and the impact of recent issues like Tricolor and First Brands. He also followed up on the new slide 36 detailing NDFI allocations, asking which buckets are of highest and lowest concern from a credit quality perspective, with a specific mention of leveraged lending.

Answer

Chairman and CEO Harris Simmons stated that NDFI is broad, with some safe categories like capital call lines. He expressed concern about private credit due to its rapid growth, lack of regulation, and potentially more liberal structures, seeing it as a 'yellow flag' for potential spillover risk to credit markets if stress occurs. He noted that recent events might have led to unwarranted connections between unrelated credits. Chief Credit Officer Derek Steward emphasized paying attention to all NDFI segments, including leveraged lending, but highlighted capital call lines as historically more stable despite lower returns.

Anthony Elian of J.P. Morgan asked if total deposits could return to growth in the third quarter after recent declines. He also followed up on the potential for stablecoins and digital assets to contribute to deposit growth, given Zions' new core system.

Answer

Chairman & CEO Harris Simmons responded that it was too soon to predict a return to deposit growth, emphasizing the focus remains on managing the total funding structure and cost. Regarding digital assets, he opined that tokenized deposits would likely be more impactful for the banking system than stablecoins, but noted Zions' new core platform provides the necessary plumbing to operationalize these innovations as they evolve.

Anthony Elian asked if Q1 loan growth was due to a pull-forward and requested details on portfolios with outsized exposure to tariffs and supply chain disruptions.

Answer

An executive clarified that the difference between period-end and average loan balances was due to the late-quarter First Bank branch acquisition. Another executive identified manufacturing, trucking and transportation (a <$500M portfolio), and retail as the primary segments being monitored for tariff-related impacts.

Anthony Elian asked whether the 'slightly increasing' loan growth guidance was more weighted to the second half of 2025 and requested more color on the increase in classified loans, specifically if it was broad-based or driven by large credits.

Answer

CEO Harris Simmons stated he expects steady loan growth throughout the year, not particularly back-half weighted. Chief Credit Officer Derek Steward explained the increase in classified loans was granular and distributed across the footprint, not driven by a single large credit. He specified the increases were primarily in CRE, driven by multifamily and industrial, due to construction delays, slower lease-up, and higher costs.

Anthony Elian of JPMorgan Chase & Co. questioned the change in the modeled NII benefit from rate sensitivity, which was guided at 6.3% last quarter but is now modeled at 1.4% on Slide 13. He also asked if the increase in classified multifamily loans was concentrated in specific markets.

Answer

An executive explained that a significant portion of the previously guided benefit has already been realized, contributing to a 4% NII increase. He also stressed that the 1.4% figure is based on the September 30 rate path, which has since changed, and that the official guidance is more important as it includes dynamic management assumptions. Chief Credit Officer Derek Steward stated that the increase in classified multifamily loans was not concentrated in any single market but was diversified across their footprint.

Anthony Elian asked if Webster Financial is scrutinizing any portfolios beyond NBFI after recent market events and about the types of commercial real estate (CRE) loans originated in Q3, and if this level of originations is sustainable.

Answer

John Ciulla (CEO) stated that no other portfolios are currently flashing yellow or red lights, mentioning small auto exposure, ongoing office resolution, and monitoring rent-regulated multifamily, but expressed overall comfort with the portfolio. Luis Massiani (President and COO) explained that Q3 CRE growth reflected pent-up pipeline activity, with diversified industrial and multi-asset class originations. He expects good but not Q3-level originations in Q4 and 2026 due to potential accelerated payoffs and the absence of pent-up demand. John Ciulla (CEO) added that the bank remains comfortable with its CRE concentration.

Anthony Elian from J.P. Morgan questioned whether the inflection in credit quality metrics is sustainable and if further improvement should be expected in the coming quarters.

Answer

Chairman & CEO John Ciulla confirmed that underlying credit trends are positive, with stabilized risk rating migration and no new problem areas. He noted that existing non-performing loans are concentrated in well-managed portfolios, suggesting that while cautious, the company expects the downward trend in problem assets to continue over time.

Anthony Elian of JPMorgan Chase & Co. pointed out that period-end loan balances were significantly higher than the quarterly average and asked for clarification. He also inquired about the biggest swing factors that could move Net Interest Income (NII) to the high or low end of its guidance range.

Answer

CEO John Ciulla confirmed that a number of large transactions closed late in the quarter, leading to higher period-end loan balances. CFO William Holland identified the long end of the yield curve as a key sensitivity for NII, noting that a 50 basis point move impacts NII by about $25 million. He added that more robust economic activity and loan growth could push NII to the high end of the guide, while a recession or flatter curve would push it toward the low end. Short-term rate changes were described as having a less material impact.

Anthony Elian from JPMorgan Chase & Co. asked about the sensitivity of the 2025 NII guidance to a delay in Fed rate cuts and inquired if the 4-5% loan growth forecast is back-half weighted, seeking details on the expected drivers.

Answer

CFO William Holland explained that NII guidance is not highly sensitive to the timing of rate cuts, with a "no cuts" scenario still falling within the guided range. CEO John Ciulla clarified that loan growth is expected to be steady throughout the year, driven by a diversified mix across sponsor finance, national businesses, middle market, business banking, and residential mortgages.

Anthony Elian from JPMorgan Chase & Co. questioned whether Pinnacle Financial Partners' legacy hiring strategy would remain effective post-merger, given the doubling of assets, and what factors underpin confidence in its continued success. He also asked about the specific drivers of BHG's strong Q3 originations and the rationale behind the projected decline in BHG income for Q4 to $30 million.

Answer

President and CEO Terry Turner expressed high confidence in the enduring success of Pinnacle's unique, relationship-driven hiring model, citing its proven track record even after previous acquisitions. CFO Harold Carpenter explained that BHG's Q3 originations were driven by strong production and demand from credit aggregators, while the anticipated Q4 income decline reflects a cautious outlook due to potential year-end personnel costs, despite continued strong production.

Anthony Elian from J.P. Morgan asked for more color on the drivers of the strong C&I loan growth and questioned whether the talent pool for experienced bankers in the Southeast remains robust amidst growing competition for hires.

Answer

CFO Harold Carpenter noted the 22% annualized C&I growth was broad-based across the franchise, not concentrated in any single area. President & CEO Terry Turner addressed the hiring question by emphasizing Pinnacle's differentiated recruiting model, which relies on internal referrals and a superior work environment. He pointed to Greenwich ratings and accelerating hiring momentum as evidence that their ability to attract top talent remains exceptionally strong, despite competition.

Anthony Elian from J.P. Morgan asked for more detail on the drivers of the strong C&I loan growth in the quarter and questioned whether the talent pool in the Southeast remains robust enough to support Pinnacle's hiring strategy amidst growing competition.

Answer

CFO Harold Carpenter noted that the C&I growth was broad-based across the franchise and not concentrated in any single area. President & CEO Terry Turner affirmed that their hiring success remains 'extraordinary,' citing the high volume and quality of new associates. He credited their differentiated recruiting model, which relies on internal referrals, and their top-tier service reputation (evidenced by Greenwich ratings) as key advantages that allow them to consistently attract the best talent.

Anthony Elian of J.P. Morgan asked for details on the drivers of the strong C&I loan growth and questioned whether increased competition for talent in the Southeast is shrinking the available pool of experienced bankers.

Answer

CFO Harold Carpenter noted the C&I growth was broad-based across the franchise rather than concentrated in a specific sector. CEO Terry Turner addressed the talent question by emphasizing their 'extraordinary success' in hiring, which he attributed to a differentiated recruiting model based on internal referrals and a superior service platform, as evidenced by top Greenwich ratings, which gives them a competitive advantage.

Anthony Elian of JPMorgan Chase & Co. asked for the size of the trucking loan portfolio, anecdotal feedback from clients on investment plans following tariff announcements, and whether the firm's Southeast footprint provides insulation for future loan demand.

Answer

Harold Carpenter (Executive) estimated the total transportation portfolio, which includes trucking, at approximately $700 million. M. Turner (Executive) stated that economic loan demand is near zero as clients pause amidst uncertainty, reinforcing that Pinnacle's growth relies on moving existing client relationships, not new economic activity. He agreed that the Southeast footprint is extraordinarily advantaged for growth once certainty returns.

Anthony Elian requested more color on the drivers of the exceptionally strong loan and deposit growth in Q4 and asked about any further business optimization plans at BHG following its exit from the SBA loan program.

Answer

M. Turner (executive) attributed the strong loan growth to fundamental performance across geographies and product lines. Harold Carpenter (executive) added that relationship managers are seeing increased inbound client interest, signaling growing confidence. Regarding BHG, Harold Carpenter revealed it also exited its 'buy now, pay later' business, reducing headcount to sharpen its focus on the core franchise.

Anthony Elian asked how a persistently inverted yield curve would impact the optimistic 2025 revenue outlook. He also sought clarification on whether the cumulative growth capacity figures shown for 2025-2026 represent a blue-sky scenario or an average expectation.

Answer

Executive Harold Carpenter responded that while a traditional, upward-sloping yield curve is better for all banks, Pinnacle is advantaged by its neutral balance sheet positioning, which helps manage through a difficult rate environment. He expressed hope for a more traditional curve from the overnight rate to the 5-year mark in 2025. Regarding the growth capacity slide, Carpenter clarified that the figures shown represent an average expectation based on their historical model, not a best-case scenario.

Anthony Elian asked for more color on the specific areas or drivers behind Synovus's consistent $2 billion loan production for the second straight quarter, and how sustainable that level is. He also inquired about the sustainability and potential for growth in capital markets income, especially with an outlook for lower interest rates.

Answer

CEO Kevin Blair indicated that loan production was broadly diversified across middle market banking, specialty lending, CIB, senior housing, and commercial real estate (CRE), with no single area dominating. He noted that Q4 pipelines suggest continued production at similar levels. CFO Jamie Gregory detailed that capital markets income was driven by derivatives (40%), syndication/lead arranger fees (40%), and debt capital markets (10%). He expressed confidence in continued momentum, citing client demand for fixed rates as rates decline, growth in larger loans, and opportunities to expand businesses like foreign exchange hedging and SBA loans, especially with the Pinnacle merger.

Anthony Elian of J.P. Morgan asked for more detail on the timeline for new banker hires and questioned the reason for the implied step-down in the second-half fee income guidance.

Answer

CEO Kevin Blair confirmed they are on track with their multi-year hiring plan, adding 12 of the 25 commercial bankers planned for 2025. EVP & CFO Jamie Gregory clarified that the fee income outlook for the second half is expected to be relatively stable and in line with Q2's performance, viewing Q1's lower result as an anomaly.

Anthony Elian asked if strong Q1 loan production was driven by clients stockpiling inventory ahead of tariffs and sought confirmation that the reduced expense guidance would not alter hiring plans for relationship managers (RMs).

Answer

CEO Kevin Blair stated that loan production was broad-based and not a pull-forward of demand due to tariffs, as confirmed by line utilization monitoring. He also affirmed that RM hiring plans remain unchanged, with CFO Andrew Gregory adding that the expense reduction came from other areas like project costs, facilities, and lower credit-related expenses.

Anthony Elian questioned the potential impact on the 3% to 7% revenue growth guidance if the Federal Reserve does not cut rates in the first half of 2025, and asked if expense growth would moderate if revenue comes in at the low end of the range.

Answer

CFO Jamie Gregory clarified that the negative lead-lag impact from rate cuts has been about half of what was previously modeled ($2-4 million per 25 bps cut) due to effective deposit repricing, implying that a delay in cuts would be a positive variance to guidance. He also confirmed that while some expenses are variable, strategic investments in hiring and technology are more fixed and are expected to proceed regardless of revenue performance within the guided range.

Anthony Elian from JPMorgan Chase & Co. asked about the potential catalysts needed to drive an increase in C&I loan utilization rates and whether noninterest-bearing deposit balances could begin to grow in 2025.

Answer

CEO Kevin Blair identified post-election certainty and continued consumer strength as key catalysts that could lift line utilization, potentially adding $1 billion in loan growth. CFO Jamie Gregory expressed optimism for growth in noninterest-bearing balances in 2025 but acknowledged that the trend remains uncertain.

Anthony Elian questioned First Horizon's maintained revenue outlook of flat to up 4% despite strong Q3 performance, asking if there was conservatism. He also asked Chief Credit Officer Thomas Hung about the bank's loan exposure to Non-Depository Financial Institutions (NDFIs) and if a deeper dive was being conducted given recent market events.

Answer

CFO Hope Dmuchowski indicated that First Horizon expects to be at the higher end of the revenue range, but noted FHN Financial's strong Q3 was partially offset by a recent slowdown. Chief Credit Officer Thomas Hung explained that the NDFI book is carefully monitored, broken into three components, and while consumer financing NPLs are elevated, they are well within control due to extensive expertise and collateral examination.

Anthony Elian from JPMorgan Chase & Co. questioned First Horizon's maintained revenue outlook despite strong NII and fee performance in Q3, asking if revenue was expected to trend towards the high end of the range. He also inquired about the company's loan exposure to Non-Depository Financial Institutions (NDFIs) and any deeper dives being conducted given recent market events.

Answer

CFO Hope Dmuchowski stated that, barring unexpected events, revenue is expected to be towards the higher end of the range, contingent on FHN Financial's performance. Chief Credit Officer Thomas Hung explained that the NDFI book is carefully monitored, with consumer lending remaining strong and the smaller consumer financing portion (auto and retail) having elevated but controlled NPLs and classifieds, supported by experienced field examiners.

Anthony Elian of J.P. Morgan asked if it was fair to assume the revenue growth mix for the year is now skewed more towards Net Interest Income (NII) rather than fee income. He also questioned whether the necessary technology infrastructure is fully in place to support the incremental $100 million PPNR opportunity.

Answer

Senior EVP & CFO Hope Dmuchowski confirmed that the revenue mix is absolutely more skewed towards NII, as delayed rate cuts have kept NII higher while weighing on countercyclical fee businesses. She also affirmed that the technology infrastructure to support the PPNR opportunity is now built out, with the benefits from these multi-year investments starting to open up revenue opportunities.

Anthony Elian of J.P. Morgan asked for confirmation that the revenue mix is now more skewed to NII and whether the tech infrastructure is fully in place to support the $100 million incremental PPNR opportunity.

Answer

CFO Hope Dmuchowski confirmed that the revenue mix has shifted more toward NII, as the lack of Fed rate cuts has supported net interest income while weighing on countercyclical fee businesses. She also affirmed that the necessary technology infrastructure to achieve the PPNR goal is now built out, with the benefits of this multi-year investment starting to materialize.

Anthony Elian asked if total deposits could grow in the second quarter, given new campaigns versus potential brokered deposit runoff. He also inquired about which loan portfolios are most exposed to tariff and trade uncertainty and their approximate size.

Answer

CFO Hope Dmuchowski stated that Q2 should be a 'great quarter for deposits,' driven by seasonal home buying boosting the mortgage warehouse business and new-to-bank promotional campaigns. Chief Credit Officer Thomas Hung identified retail trade, consumer finance, manufacturing, and construction as sectors receiving particular attention due to tariff risk, but emphasized the C&I portfolio is highly diversified with no single industry over 12% of exposure. Chairman, President and CEO Bryan Jordan added that the broader risk is a potential hit to the consumer, which would have a widespread credit impact.

Anthony Elian followed up on deposit costs, asking if further declines were expected beyond the 2.8% spot rate reported at year-end. He also asked about the expense control levers available if revenue growth comes in at the low end of the guidance range.

Answer

CFO Hope Dmuchowski acknowledged the lower spot rate will benefit Q1 averages but cautioned that the ability to continue cutting rates depends heavily on the competitive environment. Regarding expenses, she explained that lower revenue would naturally reduce commission-based expenses, and the company remains committed to finding operational efficiencies to deliver positive PPNR growth regardless of the revenue scenario.

Anthony Elian asked for specifics on the levers available to rightsize expenses to potentially beat the $190-$195 million quarterly guidance. He also sought to reconcile the reduced loan growth outlook with management's stated optimism for the Southern California market.

Answer

CFO Joseph Kauder and CEO Jared Wolff identified adjusting incentive compensation accruals and slowing project spending as key levers for expense management. Wolff explained the reduced loan growth forecast was a conservative nod to potential second-half slowdowns, not a change in their positive long-term view of the market opportunity.

Anthony Elian requested more detail on the growth of total client funds at SVB and its sustainability. He also asked about specific loan portfolios being monitored due to potential tariff and supply chain exposure.

Answer

Executive Marc Einerman attributed the client fund growth to SVB's ability to win business despite market headwinds but acknowledged future uncertainty. Executive Andrew Giangrave identified textile, footwear, retail, auto, and equipment finance as portfolios being watched closely, noting it is still early to assess the full impact.

Anthony Elian asked for more detail on the drivers of SVB's total client fund growth in Q4, particularly the impact of large, late-stage venture capital deals, and whether this growth is sustainable. He also inquired about Chairman and CEO Frank Holding's current perspective on M&A.

Answer

Executive Marc Cadieux responded that while a few very large financings contributed significantly to Q4 VC investment, the bank also performed well in capturing sub-$1 billion deals and benefited from lower client cash burn. He noted that expectations for SVB growth in 2025 are cautious. Chairman and CEO Frank Holding added that while the company remains opportunistic, it is not projecting any material M&A activity for 2025.

Anthony Elian asked for an update on the pace of new client additions within the SVB business and questioned if the elevated pace of the share buyback program would continue into mid-2025.

Answer

Executive Marc Cadieux confirmed that the bank continues to add new clients and see former clients return, viewing it as a positive sign despite market headwinds. Executive Tom Eklund stated that the current pace of share repurchases is expected to continue through year-end before slowing slightly to meet the $3.5 billion target by Q3 2025.

Anthony Elian asked if the fee income outlook includes an uptick in capital markets activity and inquired about current trends in that business. He also questioned the potential impact of supply chain issues and tariffs on the national dealer portfolio.

Answer

Chief Banking Officer Peter Sefzik confirmed the outlook assumes a capital markets uptick, citing strength in syndications, risk products, and a growing M&A advisory business. Regarding the dealer portfolio, he described a 'wait and see' approach from clients, who are well-prepared from their COVID experience but are currently cautious.

Anthony Elian asked if the 2025 loan growth outlook assumes an increase in loan utilization rates and requested more detail on the drivers behind the quarterly increase in non-performing assets (NPAs).

Answer

Chief Banking Officer Peter Sefzik confirmed the loan growth outlook does not factor in an increase in utilization rates. Chief Credit Officer Melinda Chausse explained the modest NPA increase was granular, noting one ~$30 million CRE loan and a theme of pressure from higher rates on companies serving the consumer discretionary sector. She added that NPA levels remain about half of the long-term average.

Anthony Elian asked if Comerica expects to grow loans faster than the industry once economic hurdles clear and inquired about the drivers of deposit growth in the equity fund services segment.

Answer

Chief Banking Officer Peter Sefzik stated that, excluding the CRE headwind, the bank expects to grow at or above the industry rate in 2025-2026, a sentiment echoed by CEO Curt Farmer, who highlighted the bank's strong positioning. Sefzik explained that growth in equity fund services deposits is driven by a strategy of securing more comprehensive bilateral relationships, which yields more core deposits and fee income.

Anthony Elian of JPMorgan Chase & Co. asked about the quarterly cadence of the 2025 expense guide and requested more detail on planned technology investments and their expected revenue impact.

Answer

CFO Ron Farnsworth explained that Q1 expenses will see a bump due to payroll taxes and insurance, with merit increases impacting Q2. CEO Clint Stein added that the timing of reinvestments, including five new branches and banker hires, will also shape the quarterly expense build. Regarding tech, Executive Torran Nixon described ongoing enhancements to payment platforms that drive core fee income, while Stein noted that specific monetization strategies are competitive but focus on developing scalable, recurring revenue streams from customer-driven solutions.

Anthony Elian asked for a follow-up on the adjusted net interest margin (NIM), questioning if a similar level of expansion seen in Q3 could be reasonably expected in Q4 given the outlined funding tailwinds.

Answer

CFO Ron Farnsworth tempered expectations, stating the NIM would likely "bounce along the bottom." He emphasized that deposit flows, which are historically variable, would have a much larger impact on the margin than the known repricing tailwinds, making a similar increase uncertain.