Anya Pelshaw

Anya Pelshaw (on behalf of Brett Rabatin) inquired about opportunities to lower CD funding costs, the progression of MoneyRails and BIN Sponsorship potential, and management's strategy regarding SBA business originations for the year.

Answer

CFO Bob Wahlman explained that CD funding costs are tied to wholesale funding and Fed interest rate movements, expecting gradual decreases over time. CEO Kent Landvatter expressed confidence in the BIN payments strategy, though timing may be pushed out, emphasizing diversification and concentration limits for funding. Bank CEO Jim Noone noted solid SBA demand, attributing a recent dip in originations to timing delays from a government shutdown rather than a demand issue, with a strong pickup in January.

Anya Pelshaw asked about opportunities to reduce CD funding costs, the progression of MoneyRails and BIN Sponsorship potential, and the outlook for the SBA business, including management's aggressiveness with originations.

Answer

Bob Wahlman, CFO, explained that CD funding costs are tied to Fed rates and are expected to decrease gradually over time. Kent Landvatter, Chairman and CEO, expressed confidence in MoneyRails and BIN payments, noting that while timing may be delayed, the strategy is sound and adheres to concentration limits. Jim Noone, Bank CEO, highlighted solid SBA demand and pipeline, with a nice pickup in closings in January, indicating a healthy business environment.

Anya Pelshaw inquired about potential mix shift changes impacting the Net Interest Margin (NIM) due to lower liquidity and other levers that could further aid NIM growth. She also asked about competitive dynamics, the potential for further reductions in the cost of funds with lower interest rates, and expanded on the stability of credit quality, seeking insights into factors that might alter it.

Answer

Orlando Berges, EVP and CFO, First BanCorp, explained that NIM levers would primarily come from cash flows on the investment portfolio and the repricing of deposit components as rates decline, projecting a 2-3 basis point quarterly improvement. He detailed that wholesale funding (brokered CDs) and time deposits are repricing at lower rates, while regular transaction accounts have a lower beta. Aurelio Alemán, President and CEO, First BanCorp, added that credit quality is expected to remain stable with no specific disruptors, noting normalized consumer delinquencies and charge-offs, and encouraging trends in portfolios.

Anya Pelshaw sought further details on credit quality, specifically whether management foresees any factors that might alter its current stable trend for better or worse.

Answer

Aurelio Alemán, President and CEO, affirmed the belief in credit stability, noting no specific disruptions. He acknowledged some normalization in consumer delinquencies and charge-offs. He highlighted that mortgages are at their lowest ever point and commercial credit is similarly strong, indicating no potential disruptors, while closely monitoring the unsecured market and consumer trends.

Anya Polshaw asked for insights into the competitive landscape for deposits and the company's strategy for deposit generation in its newer markets.

Answer

Rick Sems, Bank CEO, explained that deposit account gathering is strong due to recent changes, but balance growth remains challenging due to competition. He emphasized a disciplined pricing approach and expressed confidence in growing deposits in new markets like Oklahoma City and Omaha, leveraging the company's product sets.

Anya Polshaw asked about competitive dynamics in deposit gathering and strategies for deposit generation in Equity Bancshares' newer markets.

Answer

Rick Sems, Bank CEO, reported positive trends in deposit account gathering due to new processes, though balances remain challenging due to competition. He emphasized a disciplined pricing approach and confidence in growing deposits in new markets like Oklahoma City and Omaha, leveraging new product sets and strong community markets.

Anya Pelshaw, on behalf of Brett Rabatin, inquired about management's expectations for additional share repurchases from the Ayers estate, the current state and future needs of the mortgage banking platform, and the company's perspective on the M&A climate and potential for new deals.

Answer

CEO Chris Holmes stated that additional share repurchases from the Ayers estate are not anticipated based on current conversations. COO and CFO Michael Mettee reported that mortgage banking had a strong year, moving from a negative to a positive contribution, and while always open to 'tweaks' for revenue producers, the basic structure is sound. Chris Holmes added that mortgage banking has positive potential for overperformance in 2026. Regarding M&A, Chris Holmes noted many industry conversations and FB Financial's continued evaluation of opportunities, balancing potential benefits with the distractions caused by transactions like the Southern States acquisition.

Anya Pelshaw, on behalf of Brett Rabatin, inquired about potential additional share repurchases from the Ayers estate, the current state and future needs of the mortgage banking platform, and management's perspective on the M&A climate and optimism for future deals.

Answer

CEO Chris Holmes stated that no additional share repurchases from the Ayers estate are anticipated based on current conversations. COO and CFO Michael Mettee and CEO Chris Holmes expressed satisfaction with the mortgage banking platform's performance, noting its positive contribution in 2025 and potential for overperformance in 2026, with continuous 'tweaking' but no fundamental structural changes needed. Chris Holmes commented on an active M&A climate with many strategic evaluations, confirming FB Financial's willingness to pursue the right opportunities while prioritizing customer focus and weighing potential distractions from acquisitions.

Anya Pelshaw inquired about the growth observed from new lenders, particularly those hired in the Houston market.

Answer

President Keith Donahoe and CEO Lee Gibson reported positive traction and loan growth from new hires in Houston, noting their staggered start dates and contributions to both deposits and C&I growth, with overall Houston loan growth around 15% this year.

Anya Pelshaw inquired about the nature of the growth in Demand Deposit Accounts (DDA), specifically whether it was seasonal or sticky. She also asked for an update on the loan growth contributions from new lenders, particularly those in the Houston market.

Answer

President Keith Donahoe clarified that DDA growth was not seasonal, attributing it to large depositors from enterprise business, and expected moderation in Q4. He and CEO Lee Gibson reported positive traction from new C&I-focused hires in Houston, noting their success in gathering both deposits and loans, contributing to approximately 15% loan growth in Houston this year. They also highlighted C&I growth from existing East Texas markets.

Anya Pelshaw asked for more details on commercial loan payoff activity that might affect future growth. She also inquired if there were any other concerns regarding credit quality beyond what had already been discussed.

Answer

José Rafael Fernández, CEO and Chairman, explained that while payoffs are hard to predict, there's a small seasonal pattern in Q3 for lines of credit related to federal funding for certain clients, but no significant variability is expected in Q4. He reiterated that apart from two idiosyncratic commercial loans, there were no other credit quality concerns in the consumer or auto books, supported by the strong economic activity and liquidity in Puerto Rico.

Anya Pelshaw inquired about potential future payoff activity affecting commercial loans, seeking more detail beyond general loan growth discussions. She also asked if there were any other notable trends or concerns regarding overall credit quality, in addition to the charge-offs already discussed.

Answer

José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors, explained that while payoffs are hard to predict, there's a small Q3 seasonality for lines of credit related to federal funding cycles, with no significant variability expected in Q4. Regarding general credit quality, Mr. Fernández reiterated that apart from the two idiosyncratic commercial loans mentioned earlier, there are no other concerns in the consumer or auto books, supported by strong economic activity and liquidity in Puerto Rico.