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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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%.

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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%.

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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.

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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%.

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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.

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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%.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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