Benjamin Gerlinger • Citigroup Inc.

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President and CEO Jared Wolff defended the strategy, citing confidence in future margin expansion and loan growth. He stated the buyback was opportunistic and that the bank would be patient with its new authorization. Wolff emphasized that the credit coverage ratio is healthy at 1.43% for the core portfolio and that recent market consolidation presents a "tremendous opportunity" to gain market share and talent.

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CEO Jared Wolff explained that while major milestones are complete, further work is needed on technology initiatives, internal data programs, and the payments business to improve operating performance and efficiency. He also stressed a continued conservative stance on credit. Regarding HOA deposits, Wolff clarified that the ECR-related contracts are negotiated annually, often based on a formula tied to the Fed funds rate, providing certainty for the year.

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CFO Craig Nix stated that the bank's appetite for M&A has not changed and it remains a key long-term strategy, though the immediate priority is the current share repurchase plan. He also indicated that they do not believe the FDIC note needs to be fully repaid to execute a meaningful deal.

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CEO Ignacio Alvarez clarified that the cautious guidance is due to expected loan payoffs and general economic uncertainty causing clients to pause new projects. CRO Lidio Soriano explained that while customers use liquidity from tax refunds to pay down debt, the significant improvement in credit quality is also a direct result of credit tightening actions taken in 2023 and focused collection efforts. CFO Jorge Garcia added that deposit balances grew alongside the credit improvement, indicating a net positive financial position for customers.

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CFO Jorge Garcia confirmed the target is 'at least 12%.' He attributed credit slippage to the seasoning of the portfolio, the impact of higher-loss purchased fintech loans, and lumpy auto recoveries. CRO Lidio Soriano added that recent vintages are performing well. Garcia stated that transformation efforts are ongoing and expenses will not roll off in 2025, though the pace of increase should slow.

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CFO Christopher Del Moral-Niles reiterated the full-year expense guidance, noting ongoing investments in technology and risk. For NII, he explained that positive balance sheet growth would be offset by the diminishing benefit from CD repricing and the potential negative impact from rate cuts, which he estimated at $1 million per month for each 25 basis point cut.

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Chief Financial Officer Christopher Del Moral-Niles provided a concise outlook, stating that with no significant rate action expected in Q1, the combination of hedges rolling off and CDs repricing at lower rates will be positive for the margin. He summarized the near-term expectation by saying, "it will get better."

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CFO Christopher Del Moral-Niles suggested that a significant savings on rolling CDs seen in Q3 could potentially recur in Q1, market permitting. Chairman and CEO Dominic Ng noted that while client views vary, a clear signal of continued, steady rate cuts from the Fed would likely boost business confidence and loan demand.

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Executive James Ryan outlined three primary decision drivers: maintaining a double-digit CET1 ratio, total risk-based capital levels, and the ratio of CRE to total risk-based capital. Executive John Moran added that retaining the loans offers a valuable offset to potentially slower organic growth. James Ryan confirmed that not executing the sale would indeed imply upside to the full-year NII guidance.

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Executive James Ryan explained that it was too early to define specific capital allocation plans but noted that increased capital flexibility is expected by mid-year, with organic growth remaining the top priority. Executive Mark Sander added that the loan growth outlook is 'cautiously optimistic,' expressing confidence in the full-year 4% to 6% guidance despite an anticipated slow first quarter due to outsized payoffs and lower line utilization.

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Executive Mark Sander noted that hiring is opportunistic as the current team is strong. CEO James Ryan added a specific focus on acquiring talent for fee income businesses like treasury and wealth management. CFO John Moran confirmed the full $30 million annual run-rate savings from the CapStar integration will be realized in Q4, with the current focus shifting to investing for growth in the Nashville market.

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An executive reiterated that the total deposit spot rate was 1.7% at the end of March. He also confirmed the belief that there is still room to lower deposit costs, even without Fed action, due to the delayed repricing of the bank's term deposit portfolio.

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Chief Credit Officer Derek Steward stated there isn't a specific rate decrease that triggers refinancing; it's borrower-dependent. President and COO Scott McLean added that borrowers might refinance to longer-term, non-recourse debt to de-risk their portfolios. Regarding expenses, an executive explained that while they are focused on cost control, they will continue to invest in the business, particularly in technology. McLean emphasized that technology spend is unlikely to decrease materially and that Zions' cost reduction comes from a "big bucket of small items" rather than a few large cuts.

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CFO Michael Achary clarified that his previous comments about low M&A appetite were directed specifically at depository M&A. He confirmed that in the current environment, the company would be more open to acquiring non-depository, fee-income generating businesses, similar to the Sabal Trust transaction.

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CFO Michael Achary explained that M&A is viewed as complementary, not a deviation from, the organic strategy. He stressed the need for a diverse approach to growth, as the right M&A deal is never a certainty. Regarding size, Achary indicated a potential target could be around one-third of Hancock Whitney's current size, but smaller strategic deals would be considered, while a merger of equals is off the table.

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Chief Credit Officer Christopher Ziluca explained that credit ratings are based on current and past financials, so the benefit of future rate cuts is not yet reflected. He noted that the increase in modified loans is a normal part of the workout process in the special assets department, where loans are often renewed on short-term bases. President and CEO John Hairston added that credit rating is a 'rear view look,' reinforcing that future improvements are not yet in the numbers.

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Harold Carpenter (Executive) explained that Q2 is traditionally a tougher quarter for deposits due to tax payments, but loan pipelines remain strong. He acknowledged that a drop in the 5-year treasury could increase prepayments but expressed confidence in retaining those clients. He also confirmed there has been no change to Pinnacle's 49% ownership stake in BHG.

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Harold Carpenter (executive) explained that expense variability is mainly tied to incentive accruals and hiring pace, with limited levers on non-personnel costs. Regarding margin, he and M. Turner (executive) noted that beyond asset repricing, the bank is actively working to lower funding costs by repricing certain high-rate deposits and growing operating accounts, an initiative that is not dependent on future Fed rate cuts.

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Executive Harold Carpenter confirmed the focus is on hiring C&I and private bankers, who are expected to bring a significant portion of their books over time. Executive M. Turner added that, on average, new relationship managers bring a self-funded book of roughly $65 million on both sides of the balance sheet over five years. Regarding expenses, Turner stated that the company takes pride in its double-digit expense growth because it is outpaced by faster revenue growth, driven by the investment in new hires whose full revenue potential is yet to be realized. Harold Carpenter noted the largest factor for 2025 expense growth will be the reset of the incentive pool to a 100% target payout.

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CFO Dan Geddes explained that 2025 expense growth is driven by necessary investments in technology, compliance, and expansion, noting the growth rate is decelerating from prior years. CEO Phillip Green added that competition has intensified from both banks and nonbanks, highlighting a return to pre-COVID underwriting by some banks and increased activity from private equity in CRE bridge financing.

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Outgoing CFO Jerry Salinas explained that the expansion strategy is durable and that after completing the current projects, the bank will likely "double down" in existing major markets like Houston and Dallas to capture further growth. CEO Phillip Green acknowledged that a hotter market would increase competition, but stated that Frost's low cost of funds allows it to compete effectively on price. He reiterated that the bank will not compromise on credit structure, which is where they are willing to lose deals.

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Chairman and CEO J. Kemper acknowledged that HTLF's loan balances might initially be a drag but expressed confidence that UMB's strong organic growth engine could compensate. He emphasized that the significant earnings lift from the deal was always anticipated for 2026. Regarding credit, he clarified that HTLF's recent charge-offs were on credits identified during UMB's due diligence and that HTLF has reserved for all identified issues according to its own processes.

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CFO Ram Shankar detailed that 53% of deposits are indexed or soft-indexed, with a near 90% beta on the recent 50 bps cut, and these reprice quickly. Chairman and CEO J. Kemper added that there has been no significant client pushback and noted that Q3 is a seasonal low point for DDA balances, which should build in Q4. Regarding fee income, Shankar stated the performance was not 'overheated,' citing strong fundamentals in fund services, trading, and card services, with the only non-recurring item being a $1.1 million gain on a building sale. Kemper confirmed that pipelines remain strong across these businesses.

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CEO John Corbett stated the company would "definitely look at" a smaller deal (e.g., $5 billion) if it presented the right opportunity in a key market. President William Matthews noted that major platform investments were largely completed post-2020 and no extraordinary new projects are planned, though tech spending will continue to grow. Executive Vice President and Chief Financial Officer Stephen Young confirmed that incremental costs for operating as a larger bank are already factored into guidance.

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Executive Stephen Young explained that the NII/non-II relationship is tied to the average 10-year yield and the Q3 run rate is a reasonable baseline if the yield averages around 4%. He explicitly confirmed the 2025 exit NIM guidance of 3.75%-3.85% includes the IBTX merger. Regarding deposit pricing, he reported no notable negative customer response to the rate cuts, as they primarily affected the $10 billion in rate-sensitive, exception-priced accounts, not the core relationship deposit base.

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Executive Timothy Crane responded that fee-based businesses like wealth management and treasury services exhibit steady growth tied to relationship expansion and that while they are always looking for opportunities, there is nothing specific on the horizon. He added that expense plans include continued investment in growth markets like West Michigan, which is viewed as part of the normal growth plan rather than a source of new seasonality.

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CFO Martin Grunst stated that the expense range is influenced by long-term investments and variable compensation tied to transactional revenue. EVP Marc Maun asserted that interest rates do not change their C&I focus, which remains on high-quality credits. CEO Stacy Kymes added that current rates are historically normal and that a positively sloped yield curve is a net positive for the business.

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CFO William Holland confirmed the spending is planned as a "stair step build" rather than having large fluctuations. He clarified that the $40-$60 million is a net figure but emphasized that many of the investments in data, technology, and capital optimization are expected to make the bank more efficient and effective in the long run, beyond just meeting regulatory requirements.

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CEO Ira Robbins suggested a loan-to-deposit ratio in the low 90s would be a sensible long-term target. He also noted that client response to rate cuts has been minimal, stating that direct deposit balances have actually increased, and that internal teams and analysts were more sensitive to the changes than customers.

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