Christopher Marinac

Christopher Marinac asked about the persistence of non-recurring expense "noise" into the first half of 2026 and the significance of margin expansion in achieving the 1% ROA target. He also inquired about the drivers of deposit growth, specifically whether it comes from existing accounts funding more or continued new customer acquisition, and the future hiring plans for the mortgage business. Finally, Mr. Marinac sought an update on special mention loans, asking if any were expected to graduate to substandard or return to pass status.

Answer

CFO Matt Switzer indicated that the vast majority of expense noise is behind them, with minimal impact expected in Q1 2026. President and CEO Dennis Zember and Mr. Switzer emphasized margin expansion as a key component for ROA improvement, projecting healthy increases through 2026, alongside disciplined expense management and increased mortgage contributions. Mr. Zember detailed the focus on new customer acquisition, noting that balances from new customers tend to double over three years and that referrals are a significant growth driver. Regarding mortgage hires, Mr. Zember confirmed more hires are planned, but without the large upfront costs of previous teams, aiming to balance mortgage growth with the core bank. On special mention loans, Mr. Zember and Mr. Switzer provided specific details on several loans, including an office CRE, one with a strong guarantor, and an assisted living facility, expressing confidence that none are expected to become substandard or result in significant impairments.

Christopher Marinac from Janney Montgomery Scott inquired about the persistence of non-recurring expense "noise" into the first half of 2026, the significance of margin expansion in achieving the 1% ROA target, and the drivers of deposit growth—whether from existing accounts increasing balances or continued new account acquisition. He also asked about future production hiring plans for the mortgage business and the potential for special mention loans to graduate to substandard or return to pass status.

Answer

Matt Switzer, CFO, stated that the vast majority of expense noise is behind Primis Financial Corp., with minimal impact expected in Q1 2026. Both Matt Switzer and Dennis Zember, President and CEO, highlighted margin expansion as a crucial component for ROA improvement, projecting margins to reach mid-3.4s in Q1 and push 3.5% mid-year, supported by accretive growth and expense discipline. Dennis Zember explained that deposit growth is driven by both new customer acquisition, with balances doubling over three years, and relationship-based core deposits. Regarding mortgage, Dennis Zember and Matt Switzer confirmed plans for more incremental hires without significant upfront costs, aiming for a balanced growth with the core bank. On special mention loans, Matt Switzer and Dennis Zember detailed specific cases, indicating strong guarantors and cash flows, and do not foresee them moving to substandard, with some expected to be upgraded or paid off.

Christopher Marinac, Director of Equity Research at Janney Montgomery Scott LLC, questioned Primis Financial Corp. on how falling interest rates would affect deposit costs and the bank's ability to maintain margin. He also sought evidence regarding the stickiness of customers acquired through the digital banking platform and inquired about the expected resolution timeline for specific asset quality issues, including two Northern Virginia office real estate properties and two C&I loans, and their potential impact on future margins. Lastly, he asked for confirmation on the sustained improvement of expense numbers beyond the fourth quarter.

Answer

President and CEO Dennis Zember explained that while falling rates could present challenges, Primis's strong growth in checking accounts (up 16% year-over-year) allows it to remain competitive on rate-oriented products while maintaining low deposit costs and avoiding reliance on brokered funding. He affirmed the stickiness of digital banking customers, noting that over 90% have multiple products or have made referrals, with average balances exceeding $50,000 and retention rates above 90% despite rate adjustments. Mr. Zember attributed this to a relationship-focused, 'community bank style' approach, where every customer has direct access to a banker. CFO Matt Switzer corroborated, highlighting that recent aggressive rate cuts resulted in less runoff than anticipated. Regarding asset quality, Mr. Zember indicated that a larger C&I operating business loan might be resolved in Q4, positively impacting margin, while the Alexandria real estate properties could see improved debt coverage and potential resolution by mid-2026 due to ongoing leasing activity. He confirmed that expense numbers are expected to continue improving quarter-over-quarter.

Christopher Marinac inquired about the impact of falling interest rates on Primis Financial Corp's ability to attract deposits at favorable rates to enhance margin. He also asked for evidence of customer stickiness within the digital banking platform and the expected resolution timeline for specific problem loans, including their potential effect on future margins. Finally, he sought confirmation on the expectation for continued improvement in expense numbers beyond the fourth quarter.

Answer

President and CEO Dennis Zember explained that while falling rates could lead to increased competition for deposit betas, Primis's focus on driving checking accounts allows them to remain competitive on rate-oriented products while maintaining low deposit costs. He affirmed the stickiness of digital customers, citing high average balances, long relationship durations, multiple product usage, and referral rates, attributing this to a relationship-focused, 'community bank style' approach with dedicated bankers. CFO Matt Switzer added that aggressive rate cuts after the last Fed move resulted in minimal runoff, confirming the stickiness. Regarding asset quality, Dennis Zember indicated that a larger C&I loan might be resolved in Q4, potentially improving margin, while the Alexandria real estate deals are unlikely to be resolved until mid-2026, though leasing activity is positive. He confirmed that expense numbers are expected to continue improving over the next few quarters due to operating leverage.

Christopher Marinac inquired about the core bank's loan and deposit growth relative to the company's overall growth, the mortgage division's ability to hit targets without interest rate cuts, the potential for lower charge-offs given improving credit metrics, and the expected growth rate for core expenses over the next several quarters.

Answer

CEO Dennis Zember explained that the core bank's deposit growth will outpace the digital platform and that core loan growth is targeted at around 5%, limited by a cautious approach to investor CRE. He confirmed mortgage growth targets are not predicated on rate cuts. Both Zember and CFO Matthew Switzer indicated that while credit is improving, core charge-offs are unlikely to fall significantly lower. Switzer detailed a plan to reduce core non-interest expenses to an $18-$18.5 million quarterly run rate in 2026, after which it would grow at a normal 3-4% inflationary rate.

Christopher Marinac of Janney Montgomery Scott LLC inquired about potential roadblocks to achieving higher profitability in Q2 and the expected timeline for resolving the consumer loan portfolio.

Answer

President and CEO Dennis Zember and executive Matthew Switzer confirmed strong momentum heading into Q2, citing growth in earning assets, seasonal strength in mortgage, and controlled operating expenses, seeing no major wrenches. Regarding the consumer loan portfolio, Zember explained that the promotional loan book is expected to shrink to $4-5 million by year-end, while the standard book is paying down at approximately 7% per quarter.

Christopher Marinac asked for a recap of the loss on the consumer loan sale, whether it was a strategic exit, if other strategic changes were pending, the desired deposit mix between the core and digital banks in the next two years, and the growth and earnings outlook for the Panacea division.

Answer

Executive Matthew Switzer confirmed the consumer portfolio charge was a strategic decision to exit the business and that a significant recovery of the loss is not expected. President and CEO Dennis Zember added that other strategic initiatives include a focus on operating expense efficiency and recruiting new lenders for the core bank. He projected the core bank's deposits could grow to $2.5 billion in two years, while the digital bank will focus on improving its deposit mix rather than size. For Panacea, Mr. Zember expects it to be more profitable in 2025 and sees its deposit funding mix growing from 25% to potentially 35-40% over time, driven by new technology for its doctor client base.

Christopher Marinac of Janney Montgomery Scott sought confirmation that the financial figures in the press release reflect the new accounting changes, asked about trends in criticized and substandard loans, and questioned if the cost of funds had peaked and what the future outlook for deposit betas might be.

Answer

Executive Matthew Switzer confirmed that all quarterly numbers have been restated to reflect the accounting changes and noted that criticized loan trends are stable, with recent downgrades being on previously monitored credits. Switzer also stated that the cost of funds likely peaked in August. President and CEO Dennis Zember added that with over $1 billion in deposits set to reprice, a noticeable improvement in cost of funds is expected.

Christopher Marinac from Janney Montgomery Scott asked about Ameris Bancorp's strategy for growing deposit balances, particularly in DDA, non-interest, NOW, and money market accounts, given the increase in net new accounts. He inquired if treasury management success would impact both NOW and money market accounts. Additionally, he asked about opportunities to adjust deposit pricing to attract more funds while maintaining margin discipline amidst increasing competition.

Answer

CFO Nicole Stokes explained that the strategy involves both acquiring new accounts and deepening existing relationships, leveraging market disruption to capture more of customers' banking needs. CEO Palmer Proctor added that incentive plans are aligned with this behavior, emphasizing the value of consumer accounts and significant investments in treasury management for commercial deposit growth. He confirmed that treasury success impacts both NOW and money market accounts. Proctor acknowledged increasing competition in deposit pricing but stated Ameris Bancorp prioritizes core relationships over chasing high-yield "hot money," preferring to offer competitive rates to existing customers.

Christopher Marinac inquired about Ameris Bancorp's growth in DDA, NIB, NOW, and money market accounts, asking how the company incentivizes balance growth and the impact of treasury management success on different account types. He also questioned opportunities to adjust deposit pricing to attract more funds while managing margin.

Answer

CFO Nicole Stokes explained that the focus is on both growing the number of accounts/relationships and deepening existing relationships, leveraging market disruption. CEO Palmer Proctor added that incentive plans are geared towards this, emphasizing the value of sticky consumer accounts and significant investments in treasury management, which drives both NOW and money market account growth. He acknowledged increasing competition in deposit pricing but stated the focus remains on core relationships over 'hot money' chasing yield.

Christopher Marinac asked about the strategic trade-off between maintaining a high net interest margin versus pursuing faster balance sheet growth, and whether growing loan commitment lines would drive future allowance builds.

Answer

EVP & CFO Nicole Stokes responded that the bank is focused on 'profitable growth' and its strong 3.73% margin provides flexibility to compete on deposit pricing if necessary. Chief Credit Officer Doug Strange confirmed that growing commitments impacts the reserve. Stokes added that as unfunded construction lines are rebuilt, the associated reserve will also increase, shifting from the funded loan portion.

Christopher Marinac of Janney Montgomery Scott asked if the credit loss reserve build was primarily for loan growth or in anticipation of credit quality changes, and also inquired about the potential for acquiring non-bank businesses.

Answer

Chief Credit Officer Doug Strange clarified that the reserve level is driven by the bank's CECL model and economic forecasts, not an expectation of imminent credit deterioration. On M&A, CEO Palmer Proctor stated that acquiring non-bank entities is a lower priority than traditional bank M&A, given the strategic importance of securing core deposit funding, which non-banks typically lack.

Christopher Marinac from Janney Montgomery Scott LLC asked about the future trajectory of the credit loss reserve, potential changes in C&I credit loss trends, and whether loan betas would behave similarly on the way down in a rate easing cycle.

Answer

Chief Credit Officer Douglas Strange explained the reserve is model-driven and the current 1.60% level is considered healthy. He noted the C&I portfolio is diversified with minimal stress. Executive Nicole Stokes added that loan betas are expected to be symmetrical, with the loan book behaving like a 50/50 fixed/variable split due to short-duration assets.

Christopher Marinac asked about the expected shift in the mix of deposits, specifically C&I and Treasury, over the next 12 to 24 months as C&I lending grows, and if there's a general guidepost for how that mix will change.

Answer

Lee Smith, Senior Executive Vice President and CFO, stated that the bank expects to leverage C&I relationships to bring in a mix of deposits, including non-interest-bearing DDAs, interest-bearing DDAs, and money market deposits, as part of a full relationship business model. Joseph Otting, Chairman, President, and CEO, added that the growth in C&I and specialized deposit industries (like title, escrow, and insurance companies) will gain momentum, focusing on treasury management and cash management services. Both executives anticipate seeing movement in these deposit ratios and mix during the current year.

Christopher Marinac asked how the mix of deposits, specifically the C&I and Treasury components, is expected to shift over the next 12 to 24 months as C&I business grows.

Answer

Lee Smith, Senior Executive Vice President and Chief Financial Officer, expects a mix of non-interest-bearing DDAs (operating accounts), interest-bearing DDAs, and money market deposits, aiming for a full relationship banking model. Joseph Otting, Chairman, President, and CEO, added that the bank's improved credit profile enables it to attract more fee income and deposits. He also highlighted efforts to grow specialized deposit industries, such as title, escrow, and insurance companies, which primarily utilize treasury management and cash management services rather than debt vehicles, indicating a strong focus on expanding this segment of the deposit business.

Christopher Marinac of Janney circled back on deposits, asking about Flagstar Bank N.A.'s specific goals for deposit growth from its commercial C&I expansion over the next several quarters, particularly for non-interest-bearing (NIB) deposits, and how this growth contributes to margin expansion.

Answer

CEO Joseph Otting stated that the C&I group has a goal of roughly $6 billion in new deposits, originating from both lending relationships and a dedicated deposit-only group focusing on sectors like title, HOA, escrow, and insurance. CFO Lee Smith added that an additional $2.5 billion in deposits is tied to the CRE book, and the bank's strategy across all businesses, including the private bank, is to establish deeper relationship banking to drive NIB or low-interest deposit growth, which is a key component of margin improvement.

Christopher Marinac asked about Flagstar Bank N.A.'s specific goals for commercial C&I deposit growth over the next several quarters and the timeline for lending relationships to translate into core deposit growth.

Answer

Joseph Otting, Chairman, President, and CEO, outlined a goal of roughly $6 billion in new deposits from the C&I group, supported by a dedicated deposit-only team focusing on specific sectors like title, HOA, escrow, and insurance. Lee Smith, Chief Financial Officer, added that another $2.5 billion in deposits is tied to the CRE book, emphasizing that the bank's strategy across all businesses is relationship banking, aiming for deeper ties through deposits and fee income opportunities, not just balance sheet growth.

Christopher Marinac from Janney Montgomery Scott asked about deposit growth initiatives in the private and commercial banks and sought additional detail on which entities are refinancing the bank's multifamily loan payoffs.

Answer

Senior Executive Vice President & CFO Lee Smith confirmed a key strategy is leveraging new C&I relationships for deposit gathering. Executive Chairman, President & CEO Joseph Otting added they are building deep, full-service relationships, not just buying participations. Lee Smith reiterated that payoffs are going to agencies (~20%) and other banks, with JPMorgan being the most significant.

Christopher Marinac questioned whether Trustmark might forgo M&A in 2026 to focus solely on organic growth, leveraging market disruption, and also asked if the company is implementing new incentives for deposit growth compared to previous years.

Answer

President and CEO Duane Dewey and Chief Credit and Operations Officer Barry Harvey acknowledged that focusing exclusively on organic growth due to market disruption from competitors like Synovus, Pinnacle, Cadence, and Stellar is a strong and accurate consideration, indicating that Trustmark might indeed choose not to pursue a deal. Chief Financial Officer Tom Owens confirmed that Trustmark has increased internal incentivization for deposit growth and customer acquisition, with CRM bonus templates now emphasizing deposit growth. Barry Harvey added that personal and commercial balances were up 4.4% year-over-year, demonstrating successful cost-effective balance growth.

Christopher Marinac asked about Trustmark's broader strategy for funding the balance sheet over the next couple of years, including the target loan-to-deposit ratio and whether M&A plays a role in this funding strategy. He also touched upon the contribution of commercial deposit growth to the overall funding initiatives.

Answer

EVP and CFO Tom Owens stated that Trustmark aims to maintain the loan-to-deposit ratio in the mid-to-high 80s, avoiding the 90s, and is confident in its ability to fund loan growth cost-effectively, potentially adopting a more 'always-on' approach for promotional campaigns. President and CEO Duane Dewey added that treasury management talent has been added, and all relationship managers have deposit growth goals, with commercial deposit growth being a key part of the organic strategy. He confirmed that core deposits are a significant consideration in M&A discussions, though the focus remains on organic growth.

Christopher Marinac questioned Trustmark's long-term funding strategy, asking about initiatives to fund the balance sheet over the next couple of years, the expected trend for the loan-to-deposit ratio (LDR), and whether M&A plays a role in this funding strategy.

Answer

Tom Owens, EVP and CFO, stated that Trustmark aims to maintain the LDR in the mid-80s, avoiding the 90s, and is confident in its ability to fund loan growth cost-effectively, potentially adopting a more 'always-on' approach for promotional deposit campaigns. Duane Dewey, President and CEO, added that the organic strategy includes adding treasury management talent and setting deposit growth goals for all relationship managers, leading to solid commercial deposit growth in Q3. He confirmed that core deposits and funding are key considerations in M&A discussions, but the company remains focused on its disciplined organic strategy.

Christopher Marinac of Janney Montgomery Scott followed up on M&A strategy in light of regional consolidation, asked about the drivers for the revised credit provision guidance, and inquired about the expected tax rate.

Answer

President & CEO Duane Dewey affirmed that while Texas is an attractive market, the company's M&A focus remains broad across its entire Southeastern footprint. EVP Robert Harvey explained the lower credit provision was driven by a significant $71 million reduction in criticized loans and a $40 million drop in classified loans. EVP & Chief Accounting Officer George Chambers projected a full-year effective tax rate between 18.3% and 18.5%.

Christopher Marinac of Janney Montgomery Scott followed up on M&A, asking if recent industry consolidation affects their partnership strategy. He also questioned the implications of the revised provision guidance on the overall reserve level and asked for the expected tax rate.

Answer

President & CEO, Duane Dewey, clarified that while Texas is attractive, their M&A interest is broad and not limited by recent deals. Executive VP and Chief Credit & Operations Officer, Robert Harvey, explained the lower provision was driven by a $71 million reduction in criticized loans and significant upgrades, with the reserve ratio remaining stable at 1.25%. EVP & Chief Accounting Officer, George Chambers, projected the full-year effective tax rate would be in the 18.3% to 18.5% range.

Christopher Marinac of Janney Montgomery Scott followed up on M&A, asking if recent industry activity alters their partnership strategy. He also questioned if the positive revision in credit provision guidance implies changes for the reserve level and asked for the expected tax rate.

Answer

President & CEO Duane Dewey said that while markets like Texas are attractive, their M&A strategy remains broad, covering all contiguous high-growth markets. EVP and Chief Credit & Operations Officer Robert Harvey explained the lower provision was driven by a $71 million reduction in criticized loans and that the reserve ratio remains stable at 1.25%. EVP & Chief Accounting Officer George Chambers projected a full-year effective tax rate between 18.3% and 18.5%.

Christopher Marinac from Janney Montgomery Scott followed up on M&A, asking if recent industry consolidation affects their partnership strategy. He also questioned if the positive revision to credit provision guidance implies changes for the overall reserve level and asked for an update on the expected tax rate.

Answer

President & CEO Duane Dewey stated that while Texas is attractive, their M&A interest remains broad across all their high-growth markets. EVP and Chief Credit & Operations Officer Robert Harvey explained the lower provision was driven by a $71 million reduction in criticized loans and a $40 million drop in classified loans, with the reserve ratio moving to 1.25%. EVP & Chief Accounting Officer George Chambers projected the full-year effective tax rate would be in the 18.3% to 18.5% range.

Christopher Marinac of Janney Montgomery Scott followed up on M&A, asking if recent industry deals in Texas alter their strategy. He also inquired about the implications of revised provision guidance on the reserve level and asked for the expected tax rate.

Answer

President & CEO Duane Dewey stated that while Texas is an attractive market, it doesn't preclude them from pursuing opportunities in other high-growth contiguous markets. Robert Harvey, EVP and Chief Credit & Operations Officer, clarified that the lower provision was driven by significant reductions in criticized and classified loans, with the ACL ratio remaining stable at 1.25%. EVP & Chief Accounting Officer George Chambers projected a full-year effective tax rate between 18.3% and 18.5%.

Christopher Marinac of Janney Montgomery Scott followed up on M&A strategy in light of recent industry deals, the implications of revised credit guidance on the reserve, and the expected tax rate.

Answer

President & CEO Duane Dewey noted that while Texas is attractive for M&A, their interest remains broad across all high-growth contiguous markets. EVP Robert Harvey explained the lower credit provision was driven by a $71M reduction in criticized loans, not a major change in the reserve philosophy. EVP & Chief Accounting Officer George Chambers projected a full-year tax rate between 18.3% and 18.5%.

Christopher Marinac followed up on M&A, asking if recent industry consolidation could widen Trustmark's lens for potential partners. He also questioned if the positive revision to credit provision guidance implies changes for the overall reserve level and asked for the expected tax rate.

Answer

President & CEO Duane Dewey responded that while Texas is an attractive market, their M&A interest remains broad across all high-growth contiguous markets. EVP and Chief Credit & Operations Officer Robert Harvey clarified that the lower provision was driven by a $71 million reduction in criticized loans, with the reserve ratio remaining stable at 1.25%. EVP & Chief Accounting Officer George Chambers projected the full-year effective tax rate would be in the 18.3% to 18.5% range.

Christopher Marinac questioned if meeting loan growth targets allows for greater selectivity on new loans, impacting credit and deposit flexibility. He also asked about recent trends in C&I line utilization.

Answer

Chief Credit and Operations Officer Robert Harvey affirmed that the bank is always selective on credit structure, though pricing has become more competitive. He also noted that C&I line utilization was stable at 36%. CFO Thomas Owens added that the bank has significant flexibility on the deposit side, having grown core deposits and developed digital capabilities, which allows them to support loan growth cost-effectively without heavily relying on promotional pricing.

Christopher Marinac of Janney Montgomery Scott inquired about Trustmark's tolerance for higher net charge-offs to stimulate loan growth and asked for color on new deposit account opening trends.

Answer

Chief Credit and Operations Officer Robert Harvey stated that the bank's credit risk appetite is aligned with peers and growth depends more on market opportunities than on taking additional risk. He affirmed the bank is aggressive in rating credits to maintain quality. CFO Thomas Owens addressed the deposit question, clarifying that while promotional time deposits have increased account numbers, the core operating account base has experienced steady, natural churn without significant shifts in new account opening trends.

Christopher Marinac of Janney Montgomery Scott followed up on credit quality, asking if the recent interest rate cut could help upgrade credits in future quarters. He also inquired if interactions with commercial clients suggested any potential for new C&I loan inflows.

Answer

Chief Credit and Operations Officer Robert Harvey responded that while the 50 basis point cut is helpful, a more significant reduction of 100-125 basis points would be more impactful for improving credit performance, particularly for CRE projects. He also noted the potential downside of stabilized loans refinancing away in a lower rate environment. Regarding C&I inflows, he stated there was nothing to report.

Christopher Marinac asked for confirmation on the anticipated tax rate range for the upcoming period.

Answer

David Burg (CFO) confirmed that the 24-25% range is still a good estimate, noting that the recent tax bill had only a small, slightly negative impact due to some disallowed deductions.

Christopher Marinac asked about the trajectory of risk-adjusted returns in WSFS Financial Corporation's loan portfolio, especially after the Upstart divestiture, and whether the rate environment limits these returns. He also sought confirmation on the expected tax rate range for the upcoming year.

Answer

David Burg, CFO, explained that WSFS focuses on real estate-secured consumer loans (home lending, home equity, installment lines) for better risk-adjusted returns and loss profiles. In commercial, the C&I relationship product is primary, emphasizing service over lowest price, with commercial real estate grown with known sponsors. Rodger Levenson, Chairman, President, and CEO, added that the company aims to enhance overall franchise profitability by leveraging client relationships and referrals, particularly into wealth management. Mr. Burg confirmed that the 24-25% range remains a good estimate for the tax rate, noting a minor negative impact from recent tax bill changes.

Christopher Marinac asked for further details on the future growth of the wealth and trust business lines, specifically regarding new account openings versus expanding business with existing clients, beyond The Bryn Mawr Trust. He also questioned if the operating leverage is greater in the wealth space compared to the core bank operations.

Answer

CFO David Burg and COO Arthur Bacci detailed the diverse wealth business, noting strong growth in new accounts and transactions for institutional services (up 30% YOY) and The Bryn Mawr Trust Company of Delaware (up 20% YOY). Mr. Bacci highlighted robust pipelines and reputation in institutional services and international opportunities for Bryn Mawr Trust. Mr. Burg confirmed higher profit margins and significant operating leverage in the wealth business, particularly in institutional services and The Bryn Mawr Trust Company of Delaware, which Mr. Bacci added is highly scalable due to large deposits not utilizing the branch network.

Christopher Marinac from Janney Montgomery Scott asked for further details on the future growth of WSFS Financial Corporation's wealth and trust business lines, specifically regarding new account openings versus expanding business with existing clients, and whether operating leverage is greater in the wealth space compared to core bank operations.

Answer

David Burg, CFO, and Arthur Bacci, COO, explained that growth in new accounts and transactions is strong in institutional services (up 30% year-over-year) and Bryn Mawr Trust of Delaware (up 20% year-over-year). They highlighted a robust pipeline, improved reputation, and positive net client cash flow in private wealth management. They confirmed that the wealth business has higher profit margins and significant operating leverage, particularly in institutional services and BMT of Delaware, contributing large, scalable deposits.

Christopher Marinac from Janney Montgomery Scott asked about the new money rate for OceanFirst Financial Corp.'s Premier Banking deposits and the overall cost of that portfolio. He then inquired about the strategic opportunity to reset deposit rates following the Flushing Financial Corporation acquisition, drawing comparisons to the Premier Banking initiative, and whether this presents additional earnings potential beyond the initial deal underwriting.

Answer

Joseph Lebel III, President and COO, stated that while the specific new money rate wasn't immediately available, the overall Premier Banking deposit portfolio cost had decreased to 2.25%, with an increasing pace of non-interest-bearing accounts. Christopher Maher, Chairman and CEO, highlighted a significant opportunity with the Flushing acquisition, noting Flushing's success in building non-interest-bearing accounts and the potential for Premier teams to leverage Flushing's branch network. He emphasized that the combined entity would be more attractive for talent recruitment and that a balance sheet review would target higher-cost deposits and lower-yielding assets to enhance efficiency and unlock future earnings.

Christopher Marinac asked about the new money rate for Premier Banking deposits and explored the opportunity to reset deposit rates with Flushing Financial Corporation, specifically how the Premier Banking experience might inform strategies with Flushing.

Answer

Joseph Lebel III, President and COO, and Christopher Maher, Chairman and CEO, stated that the overall Premier Banking deposit portfolio cost is approximately 2.25%, with an increasing trend in non-interest-bearing accounts and expectations for lower yields on deposits, leading to faster growth in Q1. Mr. Maher described a 'tremendous opportunity' with Flushing, leveraging their non-interest-bearing account growth, integrating Premier teams with Flushing's branch network, and attracting top-tier talent as a larger regional bank. He anticipates optimizing higher-cost deposits and lower-yielding assets post-closing.

Christopher Marinac inquired about the sensitivity of OceanFirst Financial Corp.'s Allowance for Credit Losses (ACL) to potential increases in criticized loans and whether changes among regional bank competitors would influence the company's hiring strategy for bankers beyond the premier initiative.

Answer

Christopher Maher, Chairman and CEO, confirmed the ACL model is sensitive to criticized and classified loan levels, noting that while a decrease in Q3 would have allowed a reserve release, qualitative assessments guided the final provision. He stated that hiring decisions balance acquiring great talent with achieving return hurdles, aiming for double-digit return on tangible common equity next year.

Christopher Marinac asked about the sensitivity of OceanFirst Financial Corp.'s Allowance for Credit Losses (ACL) to potential increases in criticized loans and how provisioning would be affected. He also inquired if changes among regional bank competitors in their footprint would alter the company's hiring strategy beyond the premier banking initiative, balancing talent acquisition with return hurdles.

Answer

Christopher Maher, Chairman and CEO, confirmed that the ACL model is sensitive to criticized and classified loan levels, noting that a material movement would pressure the ACL. He explained that while a decrease in Q3 would have allowed a reserve release, management used qualitative assessments and economic indicators to guide final provisioning decisions, especially with the shift to C&I. Regarding hiring, Christopher Maher stated it's a balance of acquiring great talent, which drives business, with the focus on achieving double-digit return on tangible common equity next year. He indicated that while they will likely continue to add bankers, the number will be determined by their steady progress toward profitability improvements.

Christopher Marinac explored whether the $500 million deposit goal for the Premier Bank could be revised upward, the potential for the allowance for credit losses to grow with the loan mix shift, and the drivers behind the improvement in criticized assets.

Answer

Chairman & CEO Christopher Maher stated it was premature to revise the deposit guidance despite a strong start. He affirmed that the allowance for credit losses is expected to build as the C&I loan mix increases. Regarding credit, Maher noted that while some positive resolutions are possible, the overall criticized asset level is already quite low, and the portfolio is well-structured to avoid problem areas.

Christopher Marinac questioned how much of a new Premier Bank customer's wallet the bank expects to capture over time, the selectivity in hiring teams, and if the receipt of new annual financial statements impacts credit risk ratings.

Answer

President Joseph Lebel stated the expectation is to capture the majority share of a client's wallet over time, given the teams' long-standing and loyal relationships, and confirmed the bank is selective in pursuing teams. CEO Christopher Maher added that the goal is building durable franchise value. Regarding credit, Maher said that while new financials are reviewed, no concerning trends have emerged, but the recent reserve build reflects broader macroeconomic uncertainty.

Christopher Marinac inquired about the drivers behind the quarterly reserve build and the anticipated long-term change in the C&I loan portfolio's mix.

Answer

CEO Christopher Maher clarified that the reserve build was primarily driven by a non-recurring Day 1 CECL provision for the Spring Garden acquisition and macroeconomic model factors, not a deterioration in credit quality. He stated that the shift towards C&I lending will be gradual, with investor CRE trending down to create a more balanced and valuable company over time.

Christopher Marinac asked about the potential for credit upgrades as interest rates fall and whether the Washington D.C. market could become a larger presence for the bank than Philadelphia over time.

Answer

CEO Christopher Maher responded that the loan portfolio is not highly sensitive to rates and does not expect significant credit upgrades, as rent growth has largely offset rate stress. He confirmed the D.C. market could become larger over time, but growth will be measured as the focus is on building out the C&I business there.

Christopher Marinac inquired about the bank's long-term target for the reserve ratio, considering recent annualized losses and the average life of loans. He also asked for expectations regarding annualized losses and the potential for increased operating leverage and efficiency ratio improvement over the next 12-18 months, especially post-Progressive integration.

Answer

Chairman and CEO Jude Melville and CFO Greg Robertson stated an internal goal to move the reserve ratio to 1% or higher over time, noting that current charge-offs slightly reduced it. They mentioned reserving at 120 basis points on new loans and an all-in ratio of about 1.06% including credit marks, which will increase with the Progressive transaction. For annualized losses, they expect lower to mid-teens (10-12 basis points) next year, down from 19 basis points this year, as NPLs are resolved with minimal loss. Jude Melville and Greg Robertson confirmed plans to continue improving operating leverage, aiming for a sub-60% efficiency ratio on an annualized basis by year-end 2026, potentially reaching the 50s monthly post-Progressive integration, with a goal to be consistently in the 50s by 2027. Head of Investor Relations Matt Sealy also contributed to the discussion on annualized losses.

Christopher Marinac inquired about the company's target reserve ratio over time, considering annualized losses and the average life of loans, and asked for expectations on future annualized loss rates. He also questioned the outlook for efficiency, specifically regarding operating leverage and the expenses-to-assets ratio over the next 12-18 months, and the long-term efficiency ratio goals.

Answer

CFO Greg Robertson stated an internal goal to move the reserve ratio to 1% or higher, noting that they reserve at 120 basis points on new loans. He projected annualized losses for the next year to be in the lower to mid-teens (10-12 basis points), down from 19 basis points in 2025, with minimal to no loss on identified NPLs. CEO Jude Melville and Head of Investor Relations Matt Sealy concurred that operating in the 4-5 basis points charge-off range would be difficult for the industry going forward. Greg Robertson affirmed plans to continue improving operating leverage, aiming for a sub-60% efficiency ratio on an annualized basis post-Progressive integration, and into the 50s by 2027.

Christopher Marinac asked about Business First Bancshares' strategy for pricing new loans as interest rates decline, specifically how they ensure pricing for risk. He also sought feedback on customer sentiment regarding the economic outlook compared to earlier in the year.

Answer

Greg Robertson (CFO, Business First Bancshares) stated they adhere to a risk-adjusted capital pricing model, expecting new loan yields to adjust downwards from mid-7s to lower 7s/high 6s as rates and competition evolve. He and Jude Melville (CEO and Chairman, Business First Bancshares) observed customers are more optimistic with falling rates and are actively engaged in forward planning.

Christopher Marinac inquired about Business First Bancshares' strategy for pricing new loans as interest rates decline, specifically how they ensure pricing for risk. He also sought an update on customer sentiment, asking if clients were more bullish or cautious about the upcoming quarters compared to earlier in the year.

Answer

CFO Greg Robertson stated that the company adheres to a risk-adjusted capital pricing model, expecting new loan yields to logically decrease from mid-7s to lower 7s/high 6s as rates and competition shift. He noted that customers are more optimistic with falling rates, while CEO Jude Melville added that clients remain active in forward planning.

Christopher Marinac of Janney Montgomery Scott inquired about the growth trajectory of the Smith Sheldon Wilson correspondent banking business and the bank's target capital ratios following the Progressive Bank acquisition.

Answer

CEO Jude Melville expressed excitement about the correspondent banking business, noting its AUM has doubled since acquisition and highlighting growth in non-AUM areas like swaps and SBA services. He expects its impact to double in the next 12-24 months. EVP & CFO Gregory Robertson identified a "North Star" total risk-based capital ratio around 13.75% and a TCE ratio in the low 9% range. Melville added that while these are aspirational goals, the bank will remain opportunistic even while building towards them.

Christopher Marinac asked about the opportunity for organic deposit growth in the Dallas-Fort Worth market and sought clarification on whether the high 7% yield on new loans applies to both C&I and CRE categories.

Answer

CEO Jude Melville expressed confidence in the ability to drive deposit growth in Dallas, particularly after the Oakwood systems conversion is completed in September, which will enable a greater sales focus. CFO Gregory Robertson clarified that new loan pricing is nuanced: CRE is in the high 7% range, while C&I is closer to 7%. Melville added that recent IT investments in relationship-based pricing models are helping the bank compete more effectively for high-quality C&I clients.

Christopher Marinac asked about the potential for credit upgrades resulting from lower interest rates, the compositional difference between CRE and C&I loans on the watch list, and whether the current deposit mix is expected to remain stable.

Answer

CEO David Melville and CFO Gregory Robertson confirmed they expect lower rates to be a net positive for credit quality, as most of the recent watch list growth was driven by higher debt service costs. Robertson estimated the watch list is roughly 60% CRE and 40% C&I, with about 90% of the loans paying as agreed. He also stated that the current deposit mix is the result of a deliberate 12-18 month effort to create a more neutral balance sheet and should be stable going forward, absent a major acquisition.

Christopher Marinac questioned the potential for future surprises from currently pass-rated loans, particularly larger ones, the expected timeline for balance sheet stabilization and growth in 2026, and whether the company is still actively hiring C&I producers.

Answer

Ryan Riel, Chief Lending Officer for Commercial Real Estate, stated that surprises from pass-rated loans should be limited due to robust risk mitigation structures. He highlighted quarterly reviews for multifamily loans over $5 million and discussed specific situations like a land loan with new characteristics and a mixed-use residential construction loan with agency takeout challenges, both being actively managed. Eric Newell, CFO, added that proactive credit risk management aims to reduce surprises and enable early intervention. Eric Newell also projected that the balance sheet would likely see CRE declines in the first half of 2026, followed by stabilization and period-end growth in the second half. Susan Riel, President and CEO, confirmed that the company is actively seeking and reviewing candidates for strong C&I producers.

Christopher Marinac asked about the potential for currently pass-rated loans, particularly larger ones, to be downgraded in the future. He also questioned the 2026 balance sheet guidance, asking if shrinkage would continue for the entire year or if stabilization and growth might occur sooner. Finally, he inquired if the company is still actively hiring C&I producers given the recent growth in C&I balances.

Answer

Ryan Riel, Chief Lending Officer for Commercial Real Estate, stated that with proactive risk management and quarterly reviews of larger pass-rated multifamily and office loans, surprises should be limited. He detailed specific situations like a land loan with new characteristics and a multifamily construction loan expected to be paid off. Eric Newell, CFO, clarified that while the balance sheet is expected to shrink on average for 2026, he anticipates CRE declines in the first half, followed by stabilization and period-end growth in the second half. Susan Riel, President and CEO, confirmed that the company is actively looking for strong C&I producers and exploring candidates.

Christopher Marinac inquired about the performance and potential volatility of the government contract business amidst the ongoing government shutdown. He also sought clarification on the timing of held-for-sale dispositions and the risk of additional write-offs, as well as the expected inflow into criticized and classified loan categories in Q4 and Q1, particularly concerning the maturity wall.

Answer

Eric Newell, CFO, reported no significant concerns in the government contracting space, noting the portfolio's bias towards defense and security, and a 30% decrease in line of credit usage. Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, acknowledged that risk increases with a prolonged shutdown. Regarding held-for-sale dispositions, Ryan Riel reiterated the enhanced process of setting carrying values at the lower end of third-party valuations to mitigate further write-off risks. Kevin Geoghegan, Chief Credit Officer, stated that the recent comprehensive portfolio review aimed to prevent surprises, expecting a dramatic slowdown in migration into criticized and classified categories. Eric Newell added that criticized and classified loans are anticipated to decline into 2026.

Christopher Marinac of Janney Montgomery Scott asked about the current state of EagleBank's government contract business, potential volatility from the ongoing government shutdown, and the risk of additional write-offs for held-for-sale assets. He also sought visibility on future inflows into criticized and classified loans.

Answer

Eric Newell, CFO, and Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, indicated no significant concerns in the government contracting space, noting the portfolio's defense/security bias and a 30% reduction in line of credit usage. Ryan Riel reiterated confidence in the carrying value of held-for-sale assets, expecting reduced risk of further write-offs due to enhanced valuation processes. Kevin Geoghegan, Chief Credit Officer, and Eric Newell, CFO, stated that the recent comprehensive loan reviews were intended to prevent surprises, expecting a dramatic slowdown in criticized and classified loan migration and an overall decline into 2026.

Christopher Marinac of Janney Montgomery Scott inquired about the risk profile of new multifamily loans added to the criticized list, the specifics of the tenant eviction process in the DMV market, the future trajectory of FDIC insurance costs, and the relationship between C&I loan commitments and outstanding balances.

Answer

EVP Kevin Geoghegan described the multifamily issues as idiosyncratic and not systemic, noting strong market fundamentals. Senior EVP & Chief Real Estate Lending Officer Ryan Riel added that multifamily valuations have not seen the same risk as office and that while the D.C. eviction process is strenuous, loan structures provide support. Senior EVP & CFO Eric Newell explained that current FDIC insurance expenses are more than double a normalized level and will decrease as problem assets are resolved. Ryan Riel confirmed that a significant portion of C&I commitments are funded and that additional deposit flows from these new relationships are expected.

Christopher Marinac questioned the bank's appetite for more aggressive loan resolutions, such as loan sales or A/B structures, for troubled assets. He also asked about the process for updating appraisals on the 2026 office loan maturities disclosed in the presentation and sought confirmation on whether the C&I portfolio's share of total loans is expected to continue growing.

Answer

CFO Eric Newell confirmed that all aggressive resolution strategies are being considered, guided by a cost-benefit analysis for each asset. He and Chief Credit Officer Kevin Geoghegan clarified that appraisals are updated 90-120 days before maturity and that the investor deck now shows which loans have recent appraisals. CEO Susan Riel and her team affirmed that the C&I portfolio is expected to continue growing as a percentage of total loans, driven by new team members and a strong pipeline.

Christopher Marinac of Janney Montgomery Scott asked if the 2025 expense guidance includes FDIC costs and what might drive expenses higher. He also questioned the outlook for C&I deposit growth following a key new hire, and sought clarity on remaining 2024 loan maturities and the risk management strategy for 2026 maturities.

Answer

CFO Eric Newell confirmed the 2025 expense outlook includes flat FDIC costs and is not expected to be materially altered by new team build-outs. He and CEO Susan Riel noted that while C&I deposit growth is a long-term strategic priority supported by treasury management investments, it will take time to materialize. Retiring CCO Jan Williams clarified that 2025 is a light year for maturities and the focus is on 2026, for which the bank employs early intervention strategies like cash flow sweeps.

Christopher Marinac from Janney Montgomery Scott asked for clarification on the deposit incentive structure for the combined company, specifically if it differs from the separate legacy entities and how incentives compare across the new organization.

Answer

Kevin Blair (President and CEO, Synovus Financial) explained that all employees will be incentivized on the same top-of-house measurements: revenue growth and EPS growth, with no individual incentives for production. He emphasized that the leadership team's role is to ensure deposit growth is a key component of achieving these overall company goals, managing the margin, and executing the $8-$9 billion deposit growth plan.

Christopher Marinac from Janney Montgomery Scott asked for clarification on the deposit incentive structure for the combined company, specifically whether it differs from the separate legacy companies and how incentives are compared across the new organization.

Answer

Kevin Blair, President and CEO, Synovus Financial, explained that all employees in the combined company will be incentivized based on top-of-house goals: revenue growth and EPS growth, rather than individual production targets or scorecards. He emphasized that the leadership team is responsible for ensuring deposit growth is a key component of achieving these overall company objectives.

Christopher Marinac asked about Northpointe Bancshares' new digital deposit relationship, the potential for similar future opportunities, and the sensitivity and retention risk of these deposits. He also inquired about the significance of growth in custodial deposits within specialized mortgage servicing and its impact on the net interest margin. Finally, Mr. Marinac sought clarification on factors that could drive Northpointe to the upper end of its gain on sale margin guidance.

Answer

President Kevin Kamps confirmed a new partnership with an online platform for digital deposits, which brought in over $230 million, and stated that Northpointe continues to seek similar opportunities. He noted these customers are rate-sensitive but can be managed through competitive pricing. Mr. Kamps highlighted the importance of custodial deposits (related to MSRs and outsourced servicing) for the funding strategy and their potential to grow with MSR retention. CFO Brad Howes clarified that these specific deposits are not heavily embedded in current NIM guidance, representing potential upside, and that better-than-expected deposit betas could drive NIM to the upper end. For gain on sale, Mr. Howes attributed the lower guidance to expected increased competition and spreads, and the mix of loans (Consumer Direct having lower margins but similar net profitability).

Christopher Marinac from Janney Montgomery Scott inquired about Northpointe Bancshares' new digital deposit relationship, future opportunities for similar deposits, the sensitivity and retention risk of these deposits, the significance of growth in custodial deposits within specialized mortgage servicing, and factors influencing the upper end of the gain on sale margin range.

Answer

President Kevin Kamps detailed a new digital deposit partnership that brought in over $230 million in Q4 2025, confirming ongoing exploration for similar opportunities and the ability to manage sensitive customer retention through competitive rates. He emphasized the importance of custodial deposits, including those from MSRs and outsourced sub-servicing, as a key funding strategy. Mr. Kamps noted that significant new deposits are not embedded in current margin guidance but could provide upside if deposit betas outperform. CFO Brad Howes added that the upper end of the gain on sale margin range would be driven by less competition and favorable loan mix, particularly if Consumer Direct volume is a lower percentage of total saleable volume.

Christopher Marinac of Janney Montgomery Scott asked a strategic question about the competitive landscape for the MPP business, questioning if NorthPoint's growth is being aided by competitors exiting the market. He also asked for guidance on which specific interest rate index is the best indicator for predicting quarterly fair value adjustments.

Answer

Founder, Chairman & CEO Charles Williams clarified that the growth is organic and not due to competitor consolidation. He attributed their success to a superior sales team, an efficient technology stack, and a deep focus on the business line, which creates competitive advantages. EVP & CFO Brad Howes advised that while the 10-year Treasury is relevant, a mortgage rate index, such as the Fannie Mae conventional 30-year index, would be a more accurate indicator for tracking potential fair value changes on their assets.

Christopher Marinac sought clarification on First Horizon's Non-Deposit Funding and Investment (NDFI) loans, specifically if growth in mortgage warehouse lending would lead to a lower percentage of other NDFI loans or if other NDFI segments would also grow. He also asked for an update on the credit quality of the NDFI book, particularly regarding losses and non-accruals.

Answer

Thomas Hung, CCO, clarified that mortgage warehouse lending accounts for closer to two-thirds of NDFI exposure and detailed the robust risk management, including physical possession of notes and extensive field examinations. Hope Dmuchowski, CFO, reiterated the unique collateral management in mortgage warehouse. Bryan Jordan, CEO, confirmed that if NDFI grows, it's likely driven by faster growth in mortgage warehouse. Mr. Hung also stated that there were no losses in the mortgage warehouse book, and while non-mortgage warehouse NDFI had slightly higher classified assets and NPLs, they were not outliers.

Christopher Marinac of Janney Montgomery Scott asked about First Horizon's regulatory disclosures on NDFI loans, specifically whether growth in mortgage warehouse would lead to a lower percentage of other NDFI loans, or if other NDFI businesses would also see growth. He also inquired if the mortgage warehouse business still had no losses and very small non-accruals, as indicated by prior data.

Answer

Thomas Hung, Chief Credit Officer, clarified that mortgage warehouse accounts for closer to two-thirds of NDFI exposure, and its growth would likely drive any increase in the overall NDFI number. He emphasized the safety and soundness of the mortgage warehouse business, noting physical possession of notes and a full-time team of field examiners for non-mortgage warehouse NDFI. Hope Dmuchowski, Chief Financial Officer, reiterated that First Horizon's mortgage warehouse operates like a mortgage loan, with physical ownership of notes and control over closing attorneys. Mr. Hung confirmed that the mortgage warehouse book still has no losses, while non-mortgage warehouse NDFI has slightly higher, but not outlier, classified assets and NPLs.

Christopher Marinac inquired about the deposit opportunity with Non-Depository Financial Institutions (NDFI) customers, particularly outside the mortgage finance channel, and the potential for growth in the treasury area.

Answer

Chairman, President, and CEO Bryan Jordan highlighted significant progress in deposit gathering activities within specialty lines of business, noting deep expertise and the implementation of treasury management products to facilitate deposit growth from NDFI clients.

Christopher Marinac with Janney Montgomery Scott asked about the deposit opportunity with Non-Depository Financial Institutions (NDFI) customers, particularly outside the mortgage finance channel, and the potential for growth in the treasury area.

Answer

Chairman, President, and CEO Bryan Jordan stated that First Horizon has significantly focused on deposit gathering in its specialty lines of business, including NDFI, over the last several years. He noted progress in penetrating deposits and the implementation of treasury management products to facilitate this growth, expressing optimism for continued deposit growth in these areas.

Christopher Marinac from Janney Montgomery Scott asked about growth opportunities within the 'loans to other financial intermediaries' category, beyond the mortgage channel, and whether there were treasury management opportunities with these clients. He also inquired if M&A activity from other banks is expected to create opportunities for First Horizon in the next year.

Answer

Head of IR Tyler Kraft explained that lending to non-depository financial institutions (NDFIs) is a core part of the ABL business but offers minimal treasury management opportunities. CEO Bryan Jordan addressed the M&A question, stating that while industry change creates opportunities, First Horizon's primary focus remains on organic growth and executing its internal strategies to enhance profitability within its existing footprint.

Christopher Marinac from Janney Montgomery Scott asked about growth and treasury management opportunities within the 'other financial intermediaries' loan book and whether M&A activity by other banks could create opportunities for First Horizon.

Answer

Head of IR Tyler Craft explained that the 'other financial intermediaries' category primarily consists of high-yielding ABL opportunities with minimal associated treasury management business. CEO Bryan Jordan acknowledged that industry M&A creates opportunities, but stressed that First Horizon's main focus is on capitalizing on its own significant internal opportunities by standardizing its go-to-market strategy.

Christopher Marinac asked if the current environment of uncertainty and reserve-building is reminiscent of the early stages of the COVID-19 pandemic in 2020.

Answer

Chairman, President and CEO Bryan Jordan responded that while there are echoes of a supply shock, the current situation is 'nowhere near the severity' of March 2020. Chief Credit Officer Thomas Hung added that the bank has navigated numerous uncertainties over the last five years—including COVID, inflation, and a pending merger—while delivering consistent, strong credit performance, which he attributes to their relationship-focused model.

Christopher Marinac asked about the key technology spending accomplishments of 2024 and how those initiatives transition into 2025. He also sought to confirm if the expense guidance for 2025 includes further technology investment.

Answer

CFO Hope Dmuchowski highlighted the successful completion of a new general ledger system and a treasury management platform conversion as major 2024 projects. She noted this completes key 'run the bank' work, allowing the focus to shift to client-facing technology in 2025. CEO Bryan Jordan added he was proud of the team's work. Hope Dmuchowski confirmed that ongoing technology investments are fully embedded in the 2025 expense guidance.

Christopher Marinac of Janney Montgomery Scott questioned if any negative impact on NPAs or charge-offs is expected from the upcoming Shared National Credit exam and asked if any significant operational losses were included in other expenses.

Answer

Chief Credit Officer Thomas Hung stated he does not expect any significant fallout from the SNC exam, as the performance of the SNC book is in line with the overall C&I portfolio. CFO Hope Dmuchowski confirmed there were no significant fraud changes or large one-time operational losses in the quarter.

Christopher Marinac asked about the organic growth opportunities in Virginia, Maryland, and Philadelphia, seeking insight into the potential for expansion in these markets over the next several quarters. He also inquired whether commercial fee income typically tracks with commercial deposit growth or if there are other avenues for fee income expansion even with flat deposit balances.

Answer

Curt Myers, CEO and Chairman, highlighted organic growth opportunities driven by customer acquisition, expanding commercial banking and wealth teams, talent recruitment, and 'Fulton First' strategies for small businesses. He noted that while originations are decent, strategic headwinds have offset balance growth this year. Regarding commercial fee income, Myers explained it's a mix of transactional account-level fees (tied to account growth and activity volume) and swap fees (tied to originations), indicating steady overall performance.

Christopher Marinac asked about the organic growth opportunities in Virginia, Maryland, and Philadelphia, and whether commercial fee income tracks with deposit growth or if other opportunities exist for growth even with flat balances.

Answer

Curt Myers, CEO and Chairman, explained that organic growth is driven by winning customers, expanding commercial banking and wealth teams, talent recruitment, and Fulton First strategies for small businesses. He acknowledged that strategic headwinds had offset loan balances this year despite decent originations. For commercial fee income, Curt Myers clarified that it comprises various components, including cash management and account-level fees tied to account growth and activity, as well as swap fees linked to originations, indicating steady overall performance.

Christopher Marinac asked about Synovus's loans to private equity funds and other intermediaries, specifically if there's a deposit opportunity associated with this business. He also inquired if the growth in NDFI (Non-Deposit Financial Institutions) exposure is primarily related to the expansion of the structured lending group and if current reserves adequately capture this growth.

Answer

CEO Kevin Blair stated there is no material deposit opportunity with private equity/credit funds, and Synovus is not a significant lender in those markets. He clarified that approximately 60% of Synovus's NDFI exposure is within its structured lending division, which has a stellar credit track record with no charge-offs, NPLs, or criticized/classified loans, being 100% senior secured. Mr. Blair confirmed that NDFI growth is indeed related to the expansion of this structured group, noting that most of these loans receive preferential 20% risk-weighting due to strong security and collateral management, and that current reserves absolutely capture this growth.

Christopher Marinac of Janney Montgomery Scott followed up on deposits, asking if the focus on public funds was changing or just seasonal, and inquired about incentive structures for driving growth.

Answer

EVP & CFO Jamie Gregory confirmed the expected public funds growth is purely seasonal. CEO Kevin Blair explained that frontline commercial banker incentives are based on total revenue growth to encourage holistic client service, while leadership incentives are tied to EPS growth and ROA.

Christopher Marinac asked for an update on the $110 million of office loans that were maturing in the fourth quarter and inquired about the pipeline for new personnel lift-outs in 2025.

Answer

Chief Credit Officer Bob Derrick reported that most of the maturing Q4 office loans were renewed without material negative credit impacts, viewing it as a positive sign for the 23% of the portfolio maturing in 2025. CEO Kevin Blair added that the 2025 expansion plan includes hiring approximately 70 resources, with 35-40 being production personnel, and that these hires are expected in the first and second quarters.

Christopher Marinac from Janney Montgomery Scott asked for an update on the multifamily loan portfolio's credit trends and whether the recent increase in nonperforming loans stemmed from previously criticized assets.

Answer

An executive, Bob Derrick, clarified that while the multifamily portfolio has seen some special mention migration due to oversupply, it has minimal loss content and zero nonaccruals. He confirmed the quarter's NPL increase was driven by a single, previously rated office credit relationship. CEO Kevin Blair added that NPLs are concentrated in a few loans, supporting the company's loss guidance.

Christopher Marinac of Janney Montgomery Scott asked about the ongoing revenue mix shift's impact on fees, the timeline for achieving operating leverage, the outlook for expense ratios, and the strength of the OCIO business pipeline.

Answer

Richard Hough, Chairman & CEO, explained that the revenue mix shift towards lower-fee institutional mandates may continue to slightly lower the average fee rate, but this is beneficial long-term. He projected that achieving significant operating leverage will take time, likely through 2026, due to ongoing strategic investments in talent and initiatives in Atlanta, Dublin, and Singapore. Consequently, G&A and compensation ratios will remain elevated in the near term. Hough also noted that the OCIO pipeline has 'come down a bit' but they are actively working to rebuild it, citing an upcoming final for a $100 million mandate.

Christopher Marinac questioned the timing for achieving positive operating leverage given the current strategic investments and asked if the macro trend of international investors pulling capital from the U.S. poses a risk to the firm.

Answer

Executive Richard Hough addressed operating leverage by stating it's a long-term play, looking through the end of 2026 for margins to normalize. He noted that institutional flows would provide leverage more quickly, while high-net-worth growth is slower but stickier. On the macro question, Hough stated it is not a significant issue for Silvercrest, as the vast majority of assets are U.S.-based and the firm's global strategies continue to attract strong interest from international clients, which he personally observed on a recent trip to Asia.

Christopher Marinac of Janney Montgomery Scott questioned the company's path to achieving operating leverage, asking if a return to high-20s EBITDA margins by 2026 is feasible. He also inquired about further investment needs for the global fund and whether heightened geopolitical risk is driving more business to Silvercrest.

Answer

Executive Richard Hough affirmed that achieving higher operating leverage and returning to high-20s EBITDA margins is possible, potentially by 2026 if key initiatives fall into place. He noted that without current growth investments, margins would already be higher. Hough confirmed that the global fund will require some additional, though not major, investments in analysts, business development, and client relations. He also explained that while geopolitical risk creates volatility, it has been a net benefit, driving significant international client inquiries to Silvercrest as a safe-haven fiduciary, particularly from regions like Eastern Europe.

Asked about the outlook for organic loan and deposit growth, the drivers behind the projected EPS accretion from the TC Bancshares merger in 2026 versus 2027, and the company's appetite for future M&A.

Answer

Management expects organic loan growth to moderate to a 10-12% range for the rest of the year, with deposit costs remaining flat. The increase in EPS accretion from the merger is attributed to both the timing of expense changes and the continued organic growth of the combined entity. While the TC merger is the top priority, the company remains open to future acquisition opportunities.

Christopher Marinac of Janney Montgomery Scott asked about the outlook for organic loan growth and deposit costs. He also questioned the drivers behind the projected EPS accretion growth from the TC Bancshares merger and the bank's appetite for future M&A.

Answer

CEO Heath Fountain projected that loan growth would moderate to a 10-12% annualized rate and that deposit costs have stabilized. He attributed the merger's growing accretion to both expense synergies post-conversion and continued organic growth. Fountain confirmed that while integrating TC is the top priority, Colony Bankcorp will remain active in evaluating further M&A opportunities.

Christopher Marinac asked about the forward-looking profitability of the company, specifically if annualizing Q3 core earnings is a reasonable base for 2025 projections, and also inquired about the potential timing and scale of future investment portfolio asset sales.

Answer

Executive Derek Shelnutt affirmed that annualizing the quarter's earnings is a reasonable foundation for the next year, citing improving noninterest income, stable expenses, and conservative margin expansion. CEO T. Fountain added that the company is committed to maintaining efficiency as it returns to its historical 8-12% growth rate, with a goal of reaching a 1% ROA and top-quartile peer performance. Regarding asset sales, Fountain stated that any larger transaction would be a one-time event to avoid eroding earnings, with smaller, opportunistic sales continuing in future quarters.

Christopher Marinac asked about the Navitas gain-on-sale margin and how it might be impacted by future interest rate movements. He also directed questions to the Chief Risk Officer regarding the potential for the CECL model to provide future reserve relief and the current trends in criticized and classified assets.

Answer

Executive VP & CFO Jefferson Harralson explained that the Navitas gain-on-sale margin is tied to Treasury yields, with lower rates generally leading to wider margins. Chief Risk Officer Robert Edwards stated that while it's possible for the CECL model to provide relief, it depends on loan growth and economic forecasts. He also characterized the pipeline for criticized assets as stable, with no significant changes on the horizon.

The analyst inquired about the sustainability of loan growth, potential improvements in the funding mix and net interest margin, trends in asset quality and criticized loans, and the stability of the government contracting sector.

Answer

The company reaffirmed its low single-digit loan growth guidance, focusing on quality opportunities. They expect the funding mix to improve through CD repricing and new deposit relationships, aiming to manage the balance sheet to maximize earnings. Asset quality trends are positive, and they believe the government contracting business is stabilizing, supported by rigorous monitoring.

Christopher Marinac of Janney Montgomery Scott inquired about MainStreet Bancshares' sustainable loan growth pace, the potential for the funding mix to improve the net interest margin, current asset quality trends, and the stability of the government contracting business.

Answer

EVP & Chief Lending Officer Thomas Floyd reiterated guidance for low single-digit loan growth, focusing on quality opportunities. EVP & CFO Alex Vari noted that repricing CDs and growing new relationships should benefit the funding mix and margin. Regarding asset quality, Mr. Floyd expressed satisfaction with current trends and noted the bank's low exposure to office space. He also stated that the government contracting space is stabilizing, a point reinforced by Chairman & CEO Jeff Dick, who highlighted enhanced due diligence through updated borrowing base certificates.

Asked about the expected beta on funding costs as interest rates decline, the future expense run rate for the Avenu platform, and whether FDIC premium costs are expected to change.

Answer

Executives expect the deposit beta to be stronger in a declining rate environment, aided by the ability to quickly reprice 55% of noncore deposits. The expense run rate for Avenu is expected to remain consistent with the current year, plus the addition of software amortization. FDIC costs are anticipated to stay constant, increasing only in proportion to deposit growth.

Christopher Marinac inquired about the expected deposit beta as the Fed lowers rates, the future expense run rate for the Avenu platform, and any changes to FDIC insurance costs.

Answer

Richard Vari, Chief Accountant, noted that 2025 budget projections are still in development. CFO Thomas Chmelik added that the deposit beta will decline but may not match its upward trajectory. Chairman and CEO Jeff Dick elaborated that community bank betas are typically stronger in a declining rate environment, highlighting that 55% of non-core deposits can be repriced quickly. Regarding Avenu's expenses, Jeff Dick and Chief Lending Officer Tom Floyd confirmed the run rate would remain consistent, with additions for software amortization. CFO Thomas Chmelik stated that FDIC costs are stable, increasing only with deposit growth.

Christopher Marinac from Janney Montgomery Scott inquired about the company's strategy for recruiting talent in new states and whether the average loan size in the portfolio is expected to increase over time.

Answer

President & CEO William Carroll and Chairman Miller Welborn reiterated that the primary focus is on getting 'deeper' in their existing footprint (TN, AL, Gulf Coast) rather than major geographic expansion. Regarding loan size, Carroll and EVP & Chief Credit Officer Rhett Jordan stated that they do not expect the average loan size to move considerably, as they continue to focus on 'singles and doubles' for sustainable growth.

Christopher Marinac of Janney Montgomery Scott asked for an assessment of the equipment finance business post-acquisition and whether the company would consider a deposit-centric M&A transaction.

Answer

President and CEO William Carroll and executive Rhett Jordan expressed strong satisfaction with the Fountain acquisition, noting the portfolio has grown from mid-$50 million to about $140 million and remains profitable despite some earlier trucking-related credit bumps. On M&A, Carroll stated that while organic growth is the priority, a deposit-focused acquisition could be attractive if the right situation presented itself, given the importance of deposits.

Christopher Marinac from Janney Montgomery Scott asked for the outlook on the loan-to-deposit ratio and liquidity, and whether this presented an opportunity for further earnings progress. He also questioned if the bank had a tolerance for slightly higher credit losses to drive more revenue.

Answer

CEO William Carroll and CFO Ronald Gorczynski confirmed the 83% loan-to-deposit ratio provides room for growth and that the bank's liquidity position is strong at around 19%. Regarding credit, Carroll stated there is likely no tolerance for higher losses in the general loan book. He explained that while the equipment finance portfolio carries slightly more risk for a higher return, the bank can achieve its desired growth with solid credit quality elsewhere and does not plan to increase its risk appetite.

Christopher Marinac asked about the key drivers behind the company's recent net customer gains and market share growth. He also inquired about the potential business impact from the recent hurricane in the bank's Eastern Tennessee footprint.

Answer

President and CEO William Carroll attributed the growth to a refined sales process and strong performance across both new and legacy markets, also crediting the operations team for their support. Regarding the hurricane, Carroll stated he does not anticipate a significant direct balance sheet impact, aside from potential temporary deposit inflows from relief funds.

Christopher Marinac of Janney Montgomery Scott asked about the opportunities created by market disruption from new entrants in Texas and whether the bank was pursuing credit opportunities with non-depository borrowers.

Answer

President and CEO John Hairston stated that market disruption is generally positive, positioning Hancock Whitney as a 'safe haven' for talent and clients. Regarding non-depository borrowers, Chief Credit Officer Chris Ziluca and CEO John Hairston both characterized the approach as 'opportunistic' rather than a primary strategic focus.

Christopher Marinac of Janney Montgomery Scott asked about the reason for the increase in the unfunded commitment reserve, whether qualitative factors point to a future reserve build, and if a higher recession probability is already factored into the current allowance.

Answer

Chief Credit Officer Chris Ziluca explained the unfunded commitment reserve growth was due to an updated outlook for a higher conversion rate of unfunded lines to funded loans. He noted it was too early to comment on future reserve builds. CFO Michael Achary confirmed their model uses a blend of Moody's baseline and a 'slower growth' scenario, which does include a recession. Mr. Ziluca added that the economic scenarios have generally become more pessimistic compared to the prior quarter, embedding more risk.

Christopher Marinac of Janney Montgomery Scott inquired if C&I line utilization could increase from its stable 41-42% level and whether new loan rates might stabilize given market conditions.

Answer

CEO John Hairston explained that overall line utilization should naturally rise as new CRE construction projects, booked with zero utilization, begin to draw down funds in mid-2025. He noted that while stable C&I utilization reflects strong client liquidity, it remains below pre-pandemic levels. CFO Michael Achary agreed that new loan rates would likely stabilize if demand strengthens.

Christopher Marinac inquired about the outlook for risk-adjusted yields in the commercial loan book as rates fall and asked about fraud trends related to small business deposits.

Answer

Chief Credit Officer Christopher Ziluca stated that as the market normalizes, he expects risk and returns to become better aligned, and the bank remains focused on getting paid appropriately for risk. President and CEO John Hairston addressed fraud, noting that while it's a persistent industry challenge, HWC's fraud losses were down year-over-year due to investments in detection tools. CFO Michael Achary added that there was nothing unusual to call out in Q3.

Christopher Marinac from Janney Montgomery Scott asked if the growth in unfunded C&I commitments could be a leading indicator for future loan growth. He also inquired about the logistics of the pending systems conversion and whether the integration calendar could be a limiting factor for future M&A activity.

Answer

CEO Chris Holmes and CFO Michael Mettee acknowledged that potential C&I line utilization increases represent a tailwind for growth, noting utilization is in the mid-30s versus pre-COVID levels in the upper-40s. Holmes explained that the systems conversion, scheduled for completion in Q3, is a critical but not limiting factor for future M&A, emphasizing the efficiency of their integration teams and playbook.

Christopher Marinac asked how the significant external market noise of the past two weeks might influence the company's loan loss reserve in future quarters and whether it could lead to changes in customer behavior, such as increased draws on lines of credit.

Answer

CFO Michael Mettee explained that while they use a Moody's baseline model, they make qualitative adjustments for known risks and rely on their close customer relationships to understand potential impacts. Executive Christopher Holmes emphasized that the bank is built for stability and will intentionally maintain high capital and reserve levels through the uncertainty. Mettee added that while increased line utilization is possible, it has remained very stable year-to-date.

Christopher Marinac inquired about the bank's philosophy on managing expenses, specifically whether they target an efficiency ratio or a percentage of assets, and asked about the benefits of the newly implemented GL system.

Answer

CEO Raj Singh explained that the bank focuses on operating leverage—investing in expenses to generate greater revenue—rather than targeting a specific efficiency ratio. CFO Leslie Lunak added that the new GL system, which replaced a sunsetting system, should make internal processes more streamlined and efficient, though it won't have a visible impact on financial statements.

Christopher Marinac from Janney Montgomery Scott LLC asked about the potential for credit upgrades in commercial lines, driven by factors like lower rates or new borrower information. He also inquired about the nature of a regulatory inquiry that CEO Raj Singh had mentioned.

Answer

Executive Thomas Cornish stated there is a clear line of sight for upgrades in the CRE portfolio as rent abatements on new leases roll off. He noted it is harder to generalize for the C&I portfolio, but lower rates would be a positive catalyst for all credits. CEO Raj Singh clarified that his mention of a 'weekend' regulatory inquiry was simply him catching up on routine emails while on vacation.

Christopher Marinac asked about the timing and priority for making new hires in the recently acquired Texas and Colorado markets.

Answer

CEO John Corbett responded that while SouthState is actively recruiting, the immediate priority is to successfully complete the system conversion. After the conversion is in the 'rearview mirror,' the company will look to layer on additional middle-market bankers in Texas and Colorado. He noted the company had a strong recruiting quarter overall, including hiring a new Market President for a new LPO in Nashville and adding bankers in several other key markets.

Christopher Marinac inquired about the balance sheet and earnings impact of the FDIC purchase money note and its repayment timeline. He also asked for confirmation of the bank's asset sensitivity.

Answer

CFO Craig Nix clarified that the FDIC note is not expected to be paid down in 2025 and would only be paid down if the arbitrage opportunity diminishes, which could potentially occur in 2026 based on the forward curve. He also confirmed that the bank remains asset-sensitive.

Christopher Marinac inquired about the timeline for the capital impact of the loss share agreement to diminish to zero and the company's plans for its share buyback in 2025. He also asked for an update on credit trends for criticized and classified loans within the General Bank.

Answer

CFO Craig Nix stated the capital benefit from the loss share agreement is expected to shrink to a negligible level by the end of 2025. Nix and executive Tom Eklund explained the plan is to complete the current buyback and contemplate a new one in the second half of the year to manage the CET1 ratio down to its target range. Executive Andrew Giangrave confirmed there were no material or concerning credit trends in the General Bank's criticized and classified portfolios.

Christopher Marinac asked how potentially lower balance sheet growth might affect the share buyback plan beyond the current authorization and if the bank is carrying excess liquidity that could be redeployed.

Answer

CFO Craig Nix confirmed the plan to use the full $3.5 billion authorization and would consider another repurchase plan in late 2025 if earnings growth outpaces RWA growth. Executive Tom Eklund added that the bank holds approximately $7 billion to $10 billion in excess liquidity that could be redeployed, but they continue to manage liquidity conservatively.

Christopher Marinac from Janney Montgomery Scott asked about the potential lower bound for capital levels as the buyback is executed and the timeline for the current authorization. He also inquired about any signs of improvement in the venture capital space.

Answer

CFO Craig Nix stated that executing the current plan would result in a CET1 ratio in the mid-11% range, and a subsequent plan would be intended to reach the 10.5% target by the end of 2025. Executive Tom Eklund confirmed the buyback would be spaced over the next 4 to 5 quarters with a slight front-loading. Executive Marc Cadieux addressed the venture capital question, noting the outlook remains mixed; while Q2 investment volume saw an uptick, it was skewed by two very large deals, making the underlying trend look similar to previous quarters.

Christopher Marinac asked for an update on the office real estate portfolio, specifically regarding recent maturities, and inquired about the future of CD pricing and the bank's long-term target for its loan-to-deposit ratio.

Answer

Executive John Bordelon stated that the office portfolio is performing 'extremely well' with no criticized assets and that maturing loans have been successfully renewed. He clarified that CD pricing will likely remain somewhat elevated but should see incremental cost reductions. Regarding the loan-to-deposit ratio, Bordelon noted it will likely remain tight due to persistent loan demand, but the bank is actively working to attract more core deposits, particularly through its Houston expansion.

Christopher Marinac of Janney Montgomery Scott questioned the potential trajectory of deposit costs if the Federal Reserve does not cut rates and asked about the outlook for criticized and classified asset levels.

Answer

CFO Tracey Dexter and Treasurer Michael Young explained that while the forecast includes one rate cut, they expect deposit costs to stabilize. Young noted that even without a cut, any upward drift in deposit costs would be slight and outpaced by positive repricing on the loan side. CEO Charles Shaffer stated that he feels good about the bank's asset quality position and sees the level of criticized and classified assets as stable, with no known reason for an increase.

Christopher Marinac asked about the outlook for additional C&I loan utilization and the recent trends in upgrades and downgrades within the criticized and classified asset portfolios.

Answer

An executive responded that C&I utilization, which rose to 36%, is expected to remain stable. Chief Credit Officer Greg Schroeck added that criticized assets declined by $435 million in Q4, with 90% of the portfolio remaining current, indicating a positive trend and strong overall asset quality.

Christopher Marinac asked if regulatory actions against large bank competitors are creating new business opportunities for Fifth Third. He also questioned whether lower interest rates would help or hinder the bank's ability to achieve its targeted returns.

Answer

CEO Tim Spence acknowledged that competitor regulatory issues can create opportunities at the margins for well-positioned banks with the capacity to grow. CFO Bryan Preston explained that lower interest rates, if accompanied by a normalization of the yield curve, would be very beneficial for returns. However, he cautioned that a low, flat-rate environment remains challenging for the entire banking industry.

Christopher Marinac asked if the quarter's commercial charge-offs would lead to an improvement in criticized asset levels and whether any other upgrade trends were anticipated.

Answer

Management confirmed that charge-offs do reduce the criticized asset pool. Chief Credit Officer Greg Schroeck stated that criticized levels were stable quarter-over-quarter and are leveling off. He expects these levels to remain stable for the rest of the year, noting that recent growth in the category was concentrated in well-secured ABL facilities.

Asked about the trend in substandard and special mention loans and the future relationship between the company's cost of funds and the Fed funds rate.

Answer

Special mention and substandard loans are expected to continue to increase in Q4, though not at the same pace as before, and were higher at the end of September. The company's overall cost of funds is expected to maintain a roughly similar discount to the Fed funds rate over time, as about half the funding is short-term priced with a high beta, and the deposit mix will shift towards more transaction accounts.

Asked for more detail on the expense run-rate for the rest of the year and into next year, and inquired about the competitive landscape for deposits from other banks and credit unions.

Answer

The expense run-rate is expected to be in the $44 million range for Q3 and Q4, with a 3-4% increase budgeted for next year. The competitive environment for deposits has eased, with fewer aggressive campaigns from other banks or credit unions recently; competition is more on a one-off basis.

The analyst sought clarification on the composition of the office loan portfolio, the process for stress testing debt service coverage, trends in the multifamily portfolio, and the current environment for M&A conversations.

Answer

Executives confirmed the office portfolio figure includes construction, nonowner-occupied, and owner-occupied loans. They continue to use a 300 basis point rate shock for stress testing. The multifamily portfolio is performing well, with projects absorbing on schedule and no significant rent concessions. On M&A, they noted that while people are thinking about it, challenging math and market uncertainty, including new FDIC proposals, have limited the number of active conversations.

Inquired about the strategic learnings from the recent deposit special, whether recent key hires were net additions or replacements, the strategy for the Atlanta market, and any signs of economic softness or credit issues in the Gulf Coast footprint.

Answer

The deposit special was effective in halting deposit outflows, and those funds are expected to reprice lower upon maturity. The recent hires are a mix of replacements and strategic additions to fill gaps. The bank is actively looking to grow in Atlanta, including adding a private banker. Management reported no specific areas of credit softness across their footprint, noting strong pipelines, though some slowdown in residential real estate in tourism markets was observed.

The analyst asked about the long-term strategic value of the CDFI designation, the risk profile of their low-rise office real estate portfolio, and the future trend of accretion income.

Answer

The CDFI designation aligns with their CRA mission and provides grant opportunities, though the future is uncertain due to potential rule changes. They agreed their low-rise office portfolio is less risky and easier to repurpose than high-rise buildings. Accretion income is expected to level off at its current run rate through 2024.

Inquired about the drivers behind the decline in commercial deposits, the potential for new corporate inflows, and whether any stress in debt service coverage ratios is being observed.

Answer

The decline in commercial deposits was attributed to clients using cash for CapEx instead of borrowing at high rates, rather than a systemic issue. The company expects these balances to rebuild. Stress in debt service coverage is already reflected in internal ratings, with some performing loans showing narrower, but still acceptable, coverage margins.

Asked for details on the increase in criticized assets, the outlook for reserves, and current trends in deposit pricing, including exception pricing and flexibility on money market rates.

Answer

The increase in criticized assets is due to three specific credits with cash flow issues but strong support, and no significant change in loss content is expected. On deposits, promotional pricing persists, but the bank is preparing for Fed cuts by shortening CD durations and maintaining flexibility on money market rates as promotional periods expire.