Ben Gerlinger

Ben Gerlinger asked about the charge-off outlook, specifically the implication of the 65 basis points high end for the full year, suggesting it would require a 'draconian' fourth quarter. He also inquired about the 2026 expense guide, investment initiatives within the transformation plan, and whether these would lead to a step-up in costs or be offset by efficiencies.

Answer

Lidio Soriano, EVP and CRO, explained that the high end of the charge-off guidance accounts for the possibility of further charge-offs on the exposure reserved this quarter. Jorge García, EVP and CFO, added that the guidance spread is for idiosyncratic events, not broad issues. Regarding expenses, Jorge García stated the goal is to continue investing while slowing overall expense growth through ongoing initiatives and efficiencies. Javier Ferrer, President and CEO, noted that initial investments might have a disconnect with immediate results but are rational, and the bank aims to fund transformation through savings generated elsewhere.

Ben Gerlinger (Citi) sought clarification on the company's charge-off outlook, specifically the implication of the 65 basis points high end for Q4, given other fine-tuned guidance. He also probed for any anticipated expense initiatives or cost inflation beyond normal expectations for 2026.

Answer

Lidio Soriano, EVP and CRO, clarified that the higher end of the charge-off guidance range accounts for the possibility of future charge-offs on the commercial exposure reserved this quarter, while the rest of the book is expected to perform solidly. Javier Ferrer, President and CEO, added that the spread in guidance accounts for idiosyncratic events. Jorge García, EVP and CFO, declined to provide 2026 guidance but highlighted ongoing, sustainable cost discipline initiatives, including exiting the U.S. residential mortgage origination business, which aim to slow overall expense growth while allowing for reinvestment in value-adding areas.

Ben Gerlinger asked about the duration of the tailwind from rate movements on correspondent banking services, specifically if multiple rate cuts in Q4 would benefit Q1 of the following year or if the impact is short-lived. He also inquired about the company's growth strategy, asking if the focus remains on organic growth through hiring and loan expansion, or if small bolt-on M&A deals are also being considered.

Answer

Chief Strategy Officer Steve Young explained that while fixed income business benefits from rate cuts, interest rate swaps depend on the yield curve shape. He anticipates these businesses might offset each other, creating stability in correspondent banking revenue, noting that the best year was $110M (2020/2021) and the worst was $70M (last year). CEO John Corbett stated that the company's current view is that investing in SouthState is more interesting than M&A. This investment takes two forms: accelerating organic growth by increasing the sales force due to market dislocation, and purchasing SouthState shares through buyback authorization, citing strong capital formation and attractive valuation.

Ben Gerlinger asked about the duration of the tailwind from rate movements on correspondent banking income, specifically how long the benefit might last if rate cuts occur. He also questioned SouthState's capital allocation priorities, asking if the focus would remain on organic growth and hiring or if small bolt-on M&A deals were a possibility.

Answer

Steve Young, Chief Strategy Officer, explained that while fixed income business benefits from rate cuts, interest rate swaps might not perform as well if the yield curve changes, potentially creating stability in correspondent banking revenue. CEO John Corbett stated that SouthState's current priority is investing in the company through accelerating organic growth by increasing the sales force due to market dislocation, and through share repurchases, given strong capital formation and attractive valuation, rather than M&A.

Ben Gerlinger asked about the mortgage finance business, specifically what an appropriate full-year yield might be for next year, considering seasonal volatilities. He also inquired about the core loan yield, which was up 14% quarter-over-quarter, asking if this was due to idiosyncratic factors or a combination of hedging and new production.

Answer

CFO Matt Scurlock stated it was too early to provide a 2026 guide for mortgage finance yield but indicated a Q4 yield of about $3.8 million, with an 87% self-funding ratio and two Fed cuts. He explained that the impact of deposit cost reductions on yield takes a couple of months. Regarding the core loan yield, Matt Scurlock attributed the increase primarily to new production, with an additional $3 million pickup from late-quarter fees. He noted that expected rate cuts could push the total LHI yield (including mortgage finance) down to around 6%.

Ben Gerlinger inquired about Western Alliance Bancorporation's timeline for divesting the remaining four OREO office properties and potential gains from improved occupancy levels.

Answer

President and CEO Ken Vecchione stated there is no specific timeline, but the goal is to lease up and sell the properties as quickly as possible, hoping for a couple to be divested next year while maximizing value. CFO Dale Gibbons added that current appraisals show a significant disparity between as-is and as-stabilized values, indicating potential for value improvement as occupancy increases. In a follow-up, Dale Gibbons confirmed that the Canter loan was an NDFI loan within the mortgage banking category, classified as such because it was to a financial institution. The fraud stemmed from the borrower misrepresenting the bank's lien position.

Ben Gerlinger inquired about the timeline for Western Alliance Bancorporation to dispose of its remaining four OREO office properties, considering leasing activity and potential interest rate cuts. He also asked if the Canter Group 5 loan was an NDFI loan and its specific subcategory.

Answer

President and CEO Ken Vecchione stated there's no specific timeline for OREO disposition, but they aim to lease up and sell as quickly as possible to maximize value, hoping to see a couple leave next year. CFO Dale Gibbons confirmed Canter Group 5 was an NDFI loan within the mortgage banking situation, categorized as a financial institution, with the fraud issue arising from a failure to secure the expected first lien position.

Ben Gerlinger asked for color on Old National Bancorp's fourth-quarter loan growth guidance, which implies a step-up, inquiring if it's driven by deepening Bremer relationships, broad footprint growth, or specific highlights. He also questioned whether the anticipated savings and opportunities from the Bremer integration, expected to fully materialize in Q1 next year, already include reinvestment, or if the company might theoretically 'over-earn' initially due to a lag in investment.

Answer

President and COO Tim Burke stated that legacy Old National Bancorp pipelines were up close to 40% year-over-year, indicating strong positioning for Q4 guidance with a healthy mix. CFO John Moran explained that the company is in a good place regarding operating expense and investment, with a clear intent to be on offense with respect to investment, particularly for talent that quickly adds to the revenue line. CEO Jim Ryan added that investing in the future is part of their DNA, and they continuously seek efficiencies to self-fund investments, hoping to increase talent spending if it means hiring more people.

Ben Gerlinger asked for color on the drivers of the implied step-up in Q4 loan growth guidance, specifically if it was due to deepening Bremer relationships or broader footprint growth. He also inquired about the timing of reinvestment opportunities from cost savings, asking if Q1 2026 would already have reinvestment baked in or if the company might 'over-earn' initially.

Answer

President and COO Tim Burke stated that legacy Old National Bancorp pipelines were up close to 40% year-over-year, indicating strong positioning for Q4 guidance. CFO John Moran explained that the company is in a good place regarding operating expense and investment, with a focus on offense for investment, particularly in commercial banking talent. CEO Jim Ryan added that efficiency is part of their DNA, and they will look for ways to self-fund investments.

Ben Gerlinger asked for the spot rates on loans and securities and questioned the company's capital deployment strategy, particularly regarding the potential for share buybacks.

Answer

CFO John Moran provided spot rate details, noting new loan production yields are in the high 6% range. CEO & Chairman James Ryan addressed capital deployment, stating that while the bank is closer to considering buybacks due to a stronger-than-expected capital position post-merger, the immediate focus is on building capital and completing the Bremer systems conversion.

Ben Gerlinger asked about the current bank M&A market, noting it appears to be a seller's market with multiple bidders, and inquired about Cadence Bank's ongoing M&A conversations and the bid-ask spread. He also asked if Cadence Bank would lean towards growth-focused or deposit-focused deals in future M&A.

Answer

CEO Dan Rollins affirmed that Cadence Bank continues to see M&A opportunities, highlighting the team's busy year with two announced, closed, and integrated transactions. He reiterated the bank's consistent strategy of seeking more mass and density within its existing nine-state footprint in the Southeast and Texas, valuing both smaller markets with sticky deposits (like Industry) and higher-growth markets (like Savannah from First Chatham).

Ben Gerlinger followed up on the large client with substantial deposit relationships, asking for potential clarity on when they might refill their deposits and what Cadence lends against them.

Answer

CEO Dan Rollins explained that this is a long-standing customer (decades) whose cash flows are sporadic, and the bank does not always know when the money will flow in. He described them as a 'great customer that parks deposits with us for a while.'

Ben Gerlinger asked about the bank's hiring strategy and its impact on organic growth, noting it differs from peers who hire large teams. He also sought an update on the tangible book value (TBV) dilution from the Industry deal, initially guided at 8.5%.

Answer

CEO Dan Rollins explained that Cadence's strategy is to hire individual producers opportunistically rather than entire teams and that the bank has ample capacity to grow with its current staff. Regarding TBV dilution, both Mr. Rollins and CFO Valerie Toalson stated it was too early to provide a revised figure but expressed confidence in the deal's overall positive financial impact.

Ben Gerlinger from Citigroup asked about Cadence's hiring strategy and how it contributes to organic growth while integrating two acquisitions. He also asked for an update on the tangible book value (TBV) dilution from the Industry deal, which was initially estimated at 8.5%.

Answer

Chairman and CEO Dan Rollins explained that Cadence's practice is to hire good individual bankers opportunistically rather than entire teams, and they have capacity to grow with the current team. Regarding TBV dilution, both Rollins and CFO Valerie Toalson declined to provide a specific updated number, stating it was too early but that the deal remains very positive for the bank.

Ben Gerlinger from Citigroup inquired about the implications of the latent emergence online (slide 26), specifically regarding potential margin compression with 100 basis points rate cuts, the impact of deposit betas, and why the implied sensitivity is roughly one-third of what it previously was. He also asked about Zions Bancorporation's M&A strategy, including potential target sizes and acceptable dilution impacts, given its improved capital position and recent M&A activity in its operating footprint.

Answer

CFO Ryan Richards explained that while a down-rate environment makes interest income tougher, the NII forecast still shows upside when factoring in slightly to moderately increasing loan growth and conservative sensitivity assumptions, such as reinvesting only in securities. Chairman and CEO Harris Simmons stated that M&A would typically focus on smaller deals to increase market density, emphasizing sensitivity to dilution and the need for a sound strategic fit, but noted no compulsion to pursue deals.

Benjamin Gerlinger questioned the implications of the updated latent emergence online data, specifically how the lower Fed funds outlook might impact margin compression and the overall Net Interest Income (NII) forecast, considering the implied minimal improvement. He also asked about the bank's M&A strategy, including potential target sizes and acceptable dilution impacts, given improved capital and market opportunities.

Answer

CFO Ryan Richards clarified that while a down-rate environment makes NII tougher, the sensitivity analysis is illustrative and includes conservative assumptions, such as 100% reinvestment of securities in securities and no dynamic reinvestment in higher-yielding commercial loans. He emphasized that even with potential rate cuts, the bank expects NII upside from loan growth and other dynamic factors. Chairman and CEO Harris Simmons stated that M&A would typically focus on smaller deals to increase market density, expressing sensitivity to dilution and prioritizing a sound strategic fit, but noted no compulsion to pursue deals.

Ben Gerlinger with Citi followed up on First Horizon's M&A comments, asking if the company was taking itself off the table as a potential seller and if the focus was on smaller acquisitions. He also sought clarification on the margin's starting point for Q4 and next year, considering the Main Street lending program's impact and the cadence of potential rate cuts.

Answer

Chairman, President, and CEO Bryan Jordan clarified that his comments reinforced progress on existing priorities and the company's improving position to consider fill-in opportunities, not a change in optionality. He emphasized running the franchise for long-term shareholder value. CFO Hope Dmuchowski reiterated that the margin's starting point for Q4 would be in the high 330s or low 340s, adjusting for the one-time Main Street impact, and discussed the expected lag in deposit repricing following rate cuts.

Ben Gerlinger inquired about the implications of Hancock Whitney Corporation's investment opportunities (branches, hires) on slide 7 for 2026 expense growth, and sought clarification on the Q4 2025 guidance, particularly regarding PPNR, revenue, and expenses.

Answer

CFO Mike Achary clarified that the figures on slide 7 ($8.5 million for revenue, $6.2 million for facility expansion) represent annualized 2025 investment numbers, with plans to continue similar investments in other markets in 2026. Regarding Q4 2025 guidance, Achary confirmed that fee income growth is expected to be lower than Q3, and operating expense growth slightly higher, leading to PPNR growth in the 5%-6% range, biased towards the upper end. President and CEO John Hairston added that future expense growth will prioritize adding more bankers to ensure consistent loan growth, aiming for a net banker addition rate well north of 10%. He also noted that transactional fee income might see a lesser run rate in Q4 due to holidays.

Ben Gerlinger from Citigroup asked about the outlook for the Shared National Credits (SNC) portfolio and questioned how deposit pricing betas might react to smaller, 25-basis-point rate cuts.

Answer

President and CEO John Hairston indicated that the SNC portfolio is stable at around 9.5% of loans and is not expected to see significant runoff. CFO Michael Achary explained that with small rate cuts, he expects deposit betas to move closer to their cycle-end targets, emphasizing the company's proactive stance on reducing funding costs.

Ben Gerlinger of Citigroup requested the core net interest margin for the month of June to better understand the run-rate, given the flat guidance for Q3. He also asked about the underlying driver for the accelerated purchase accounting accretion from early loan payoffs.

Answer

CFO Ram Shankar declined to provide a specific June margin, noting it wouldn't be material due to various accruals, and reiterated confidence in the flat Q3 NIM guidance. CEO Mariner Kemper attributed the early payoffs and related accretion to the ongoing strategic alignment of the acquired Heartland loan portfolio, as certain credits were moved out sooner than anticipated.

Ben Gerlinger of Citigroup questioned the expected timeline for the rollover of non-performing assets, particularly in the office portfolio. He also asked about the bank's long-term, normalized net interest margin (NIM) target, considering current pricing discipline and balance sheet improvements.

Answer

CFO Leslie Lunak stated that the office credit situation will take time to play out, possibly one to two years, and noted the positive sign of the CMBS market reopening for office properties. Regarding the normalized NIM, Lunak projected a target in the 'mid-threes,' emphasizing that this would be driven by mix shift and pricing discipline. CEO Rajinder Singh reinforced the focus on profitable growth and NII growth as the ultimate goals.

Ben Gerlinger of Citigroup questioned the company's ability to lower deposit rates quickly in response to potential Fed rate cuts, given the significant deposit growth in the quarter.

Answer

EVP & CFO David Stoehr affirmed that Wintrust would be able to pass on a 25 basis point cut to its discretionary accounts, similar to past cycles. He added that while CDs take time to reprice, many current offerings have shorter terms, which would accelerate the benefit.

Ben Gerlinger of Citigroup asked about the long-term fee income potential from the Marathon joint venture and whether the partnership could extend to banking Marathon's other relationships.

Answer

COO & President Luis Massiani described a dual opportunity: near-term fees from capital markets activities on larger deals and a longer-term, recurring asset management fee stream from the JV. Chairman & CEO John Ciulla emphasized the JV's focus is on enhancing offerings for Webster's existing clients and did not comment on future opportunities with Marathon's other relationships.

Ben Gerlinger from Citigroup asked about the scale of the projected $19 billion in organic asset growth from the 2020-2024 cohort of new hires, questioning if this strong organic engine negates any appetite for M&A, and inquired about future geographic expansion.

Answer

President & CEO Terry Turner confirmed the growth potential from the recent hires, emphasizing that this reliable, low-risk organic model is preferred over M&A. He clarified that M&A is only considered within the context of long-term succession planning, not for accelerating growth. Regarding expansion, Turner stated the focus is on deepening their presence in existing markets, particularly in Florida, with Texas being a potential long-term consideration.

Ben Gerlinger from Citigroup inquired about the $19 billion asset growth projection from the 2020-2024 cohort of new hires, questioning the company's appetite for M&A given this strong organic growth engine and asking about future geographic expansion plans.

Answer

President & CEO Terry Turner confirmed the growth potential from recent hires, underscoring the firm's preference for its organic growth model. He explained that while M&A is not a primary growth strategy, it is one of five avenues the board considers for succession planning. Regarding expansion, Turner stated the focus is on deepening their presence in existing markets, particularly in Florida, with Texas being a potential long-term target.

Ben Gerlinger from Citigroup asked about the scale of organic growth from the 2020-2024 cohort of new hires, questioning if this robust pipeline reduces the company's appetite for M&A, and also inquired about future geographic expansion plans.

Answer

President and CEO Terry Turner confirmed the significant growth potential from the new hire cohort, stating this successful organic model makes M&A for growth purposes unlikely. He clarified that M&A is one of five succession planning avenues the board considers. Regarding geography, Turner said the focus is on deepening their presence in existing markets, particularly in Florida, with Texas as a potential future expansion area.