David Bishop

David Bishop from Hovde Group asked for a breakdown of Seacoast Banking Corporation's core deposit growth, specifically distinguishing between commercial and consumer inflows. He also inquired about the current spread between new loan origination yields and the yields of maturing or rolling-off loans.

Answer

Charles Shaffer, Chairman, President, and CEO, indicated some Q4 deposit outflow in CDs due to strategic decisions, but highlighted strong underlying core deposit dynamics from new commercial client onboarding, offering to provide a detailed breakdown post-call. Michael Young, EVP and Chief Strategy Officer, stated that new loan originations were in the low sixes, and the company is still seeing a positive spread of 50-100 basis points from repricing existing fixed-rate and adjustable-rate portfolios.

David Bishop inquired about the drivers of Seacoast Banking Corporation's strong core deposit growth in the quarter, asking for a breakdown between commercial and consumer inflows. He also asked about the spread between new loan origination yields and the yields of loans rolling off the balance sheet.

Answer

Charles Shaffer, Chairman and CEO, stated he didn't have the precise breakdown immediately available but noted some deposit outflow in Q4, primarily in CDs, due to backing off higher-priced options. He highlighted strong underlying core dynamics in DDAs and operating accounts, driven by new commercial client onboarding. Michael Young, EVP and Chief Strategy Officer, indicated that new originations were in the low sixes, while roll-off yields vary episodically. He estimated a positive pickup of 50-100 basis points between new add-on rates and the cumulative impact of fixed-rate and adjustable-rate repricing/fall-off rates.

David Bishop asked about current loan pricing and spreads in the market, noting the competitive environment and stable credit. He also sought more details on The Villages 2 build-out, including its timeline and any ring-fenced deposit or loan opportunities. Finally, he inquired if rising insurance costs in Florida were impacting new construction or overall behavior.

Answer

CEO Chuck Shaffer stated that credit spreads are incredibly tight, particularly for high-quality commercial real estate and strong cash-flowing operating companies, indicating a hyper-competitive market. He estimated The Villages 2 build-out would occur over the next 10-15 years, potentially growing a $4 billion-$6 billion bank. Regarding insurance costs, Mr. Shaffer noted that premiums are stabilizing or even coming down in some cases due to new market entrants and tort reform, though older properties remain challenging, while new homes are inexpensive to insure.

David Bishop asked about current market conditions regarding loan pricing and spreads, specifically the level of competitiveness and how credit is holding up, focusing on credit spread fronts.

Answer

Chuck Shaffer (CEO) noted hyper-competitive and remarkably tight credit spreads, particularly for high-quality commercial real estate and strong cash-flowing operating companies. He observed that many banks are 'back in the game' after pulling back in 2023, leading to low spreads in low-risk areas. Regarding The Villages 2 build-out, Chuck Shaffer (CEO) estimated a 10-15 year timeline, with two town centers already open, projecting the potential to grow a $4-6 billion bank in Villages 2 over the next decade. On Florida insurance costs, Chuck Shaffer (CEO) described it as 'noise,' noting stabilization and even some decreases in premiums due to new market entrants and tort reform. He explained a bifurcated market where new homes have inexpensive insurance, while older properties remain challenging, but overall, it's not as bad as 24 months prior.

David Bishop inquired about current trends in commercial real estate loan pricing and spreads, the outlook for net charge-offs given the unusually low level this quarter, and whether securities purchased ahead of the Heartland deal would be unwound.

Answer

EVP & Chief Credit Officer James Stallings confirmed that competition for high-quality CRE assets has intensified, causing some spread compression to below 200 basis points and pressure for longer interest-only periods. Chairman, President & CEO Charles Shaffer added that the bank remains disciplined in its credit approach. Shaffer also stated that credit quality is very stable and expected to remain so. EVP, Treasurer & Director - IR Michael Young noted that the recent low charge-offs reflect the runoff of a consumer fintech portfolio and that a mid-cycle rate of 20-25 basis points is a reasonable long-term expectation. Young clarified that securities balances would remain stable, but some wholesale borrowings would likely be paid down.

David Bishop asked about the normalized level for net charge-offs, the economic scenarios used for the credit loss allowance, and whether rising insurance rates in Florida are impacting local housing markets.

Answer

CEO Charles Shaffer indicated that 25 basis points is a reasonable assumption for net charge-offs in their internal models. CFO Tracey Dexter explained that the allowance uses a blend of Moody's economic scenarios, adjusted for recent market volatility. Shaffer commented that while Florida residential values have likely peaked, the market remains healthy and they have not seen weakness, supported by the state's overall economic attractiveness.

David Bishop from Hovde Group inquired about the deposit pipeline and the strategy for funding loan growth in 2025, and also asked for an outlook on purchase accounting accretion's contribution to the net interest margin.

Answer

CEO Charles Shaffer emphasized a focus on relationship-based deposits rather than high-rate CDs. Treasurer Michael Young added that due to the low loan-to-deposit ratio, deposits can grow at a slower pace than loans and still fund the book, supplemented by over $350 million in annual securities cash flow if needed. CFO Tracey Dexter projected that purchase accounting accretion would likely step down from the elevated Q4 level, suggesting a level closer to Q3 might be a reasonable estimate going forward.

David Bishop asked about loan payoff trends, the reasons for the uptick in nonaccrual loans, and the drivers of growth in the wealth management business, including the potential for M&A in that area.

Answer

Treasurer Michael Young reported that loan payoffs were lower than in previous periods, contributing to net growth. CFO Tracey Dexter explained the increase in nonaccrual loans was due to a few credits with sufficient collateral and no expected loss. CEO Charles Shaffer highlighted the strong returns and strategic fit of the wealth management business, confirming they would consider disciplined M&A opportunities to supplement organic growth.

David Bishop of Hovde Group questioned Colony Bankcorp's organic loan growth outlook, given increased competition and the strong Southeast economy, and how it balances growth with margin improvement. He also asked about the ability to organically fund loan growth with deposits, deposit pricing trends, and the impact of purchase accounting accretion on margin. Additionally, Bishop inquired about the ideal M&A target size and potential geographic expansion into contiguous states, and the outlook for the net operating expense ratio and effective tax rate.

Answer

Heath Fountain, CEO, discussed the intensifying competitive environment and disciplined pricing. Brantley Collins, Head of Investor Relations, further explained the balance between 8%-12% growth and margin improvement, noting the need for more competitive loan yields. Brantley Collins and Derek Shelnutt, CFO, detailed strategies for organic deposit growth, including aggressive rate adjustments and leveraging investment portfolio roll-offs, with Derek Shelnutt confirming that margin forecasts include purchase accounting accretion. Heath Fountain and Brantley Collins discussed M&A interest in Georgia and contiguous states, favoring smaller to mid-sized targets ($750M-$1B and below) due to less competition, and expressed readiness for multiple deals. Derek Shelnutt projected the net operating expense ratio to return to mid-1.40s post-conversion and the effective tax rate to remain around 21%.

David Bishop of Hovde Group asked about Colony Bank's organic loan growth trajectory, noting a potential shift towards the lower end of the 8%-12% target, and the competitive landscape in commercial lending. He also questioned the bank's ability to organically fund loan growth with deposits, trends in deposit pricing, and the strategic direction for M&A regarding target size and potential expansion into contiguous states. Finally, he inquired about the target for the net operating expense ratio and any changes to the effective tax rate post-merger.

Answer

CEO Heath Fountain stated that loan growth is becoming more competitive, leading to disciplined pricing and a willingness to forgo deals that don't meet return objectives, balancing growth with margin improvement. He expects loan yields to become more competitive, closer to prime, as rates stabilize. For funding, CEO Heath Fountain explained they have aggressively lowered deposit rates and are focusing on non-interest-bearing and low-interest DBAs, with growing deposit pipelines and aligned banker incentives. CFO Derek Shelnutt added that $65 million in investments rolling off in 2026 at a 3.10% yield will provide additional funding. For M&A, CEO Heath Fountain indicated they are open to Georgia and contiguous states (SC, TN, AL, FL), with a preference for more sizable transactions for greater financial impact, though smaller deals ($750M-$1B and below) are more numerous and can be executed in close succession. CFO Derek Shelnutt expects the net operating expense ratio to return to 1.45% later in the year after TC Federal-related expenses drop off and non-interest income increases, and the effective tax rate is projected to remain around 21%.

David Bishop of Hovde Group inquired about the specific drivers for expected loan payoffs, the types of construction projects being underwritten, the yield on new loan originations in the quarter, and whether the current fee income level represents a sustainable run rate.

Answer

CEO T. Fountain explained that expected payoffs are from projects reaching completion that have non-bank permanent financing. He noted construction growth is broad-based, driven by sponsors feeling more comfortable with rate stability. The average new loan origination yield for the quarter was 8.23%, down from a peak of around 8.60%. Fountain also stated he feels comfortable with the current fee income level, though mortgage banking faces challenges from inventory and fluctuating rates.

David Bishop from Hovde Group asked for specific commentary on the breakdown and trends of Renasant's loan pipeline at the end of the year compared to the previous quarter.

Answer

COO Kevin Chapman reported that the loan pipeline is consistent with prior quarters, showing strong contributions across all geographic areas (Tennessee, Alabama, Georgia, Coastal Area, Mississippi) and various channels (small business, middle market, corporate, specialty lines). He noted a deliberate pullback in consumer lending.

David Bishop asked for the Net Interest Margin (NIM) outlook for the first half of 2026 and throughout the year, considering potential Federal Reserve actions.

Answer

Jim Mabry (CFO) stated that the merger lessened asset sensitivity, and despite two anticipated Fed rate cuts, they expect the margin to remain relatively stable, leading to modest growth in Net Interest Income (NII) dollars with balance sheet growth. David Bishop also inquired about the specifics of the loan pipeline breakdown at year-end compared to the previous quarter, to which Kevin Chapman (COO) reported consistency across all geographic areas and channels, noting a slight, intentional pullback on the consumer side.

David Bishop asked about the surprisingly muted loan payoffs in Q3, the outlook for potential payoffs in Q4 given interest rate movements, and Renasant's strategy for recruiting talent and commercial clients amidst significant M&A activity in its operating footprint.

Answer

Kevin Chapman (President and CEO) acknowledged surprise at muted payoffs, noting that a 10-year Treasury yield below 4% is a key benchmark for increased prepayment risk, which only occurred in October. He expressed excitement about Renasant's unique position post-conversion to benefit from market disruption, potentially through hiring (e.g., 10 new Market Presidents/lenders in Q3) or by attracting business without additional hires.

David Bishop asked about the surprisingly muted loan payoffs in the quarter and the outlook for potential payoffs in Q4, particularly if borrowers are waiting for lower rates. He also inquired about Renasant's strategy for recruiting talent and commercial clients from recent M&A activity in the Southeast, and if such lift-outs could offset the need for whole bank M&A.

Answer

President and CEO Kevin Chapman confirmed that muted payoffs were unexpected, noting that a 10-year Treasury yield below 4% is a key benchmark for increased prepayment risk, which was not consistently met in Q3. He indicated a focus on lender updates for potential Q4 payoffs due to recent rate drops. Mr. Chapman stated that while talent lift-outs might not fully replace whole bank M&A, they offer a unique opportunity. He highlighted the hiring of 10 new Market Presidents or prominent lenders in Q3 and ongoing Q4 recruitment, emphasizing Renasant's strong position post-conversion to gain market share amidst industry disruption.

David Bishop of Hovde Group questioned Renasant's post-merger interest rate sensitivity, particularly to a potential Fed rate cut, and asked about untapped fee income opportunities from the combination.

Answer

Executive VP & CFO James Mabry explained that the merger has tempered the company's asset sensitivity, making it less impacted by potential rate cuts. President & CEO Kevin Chapman highlighted several fee income opportunities, including a rebound in mortgage, the rollout of treasury management solutions to the new footprint, and cross-selling capital markets, ABL, and factoring services, noting that early wins are already materializing.

David Bishop from Hovde Group asked about the bank's process for assessing loan book exposure to potential tariffs and economic policy changes, and for an outlook on the mortgage banking business for the second quarter.

Answer

Chief Credit Officer David Meredith explained that while direct exposure to government markets is low, the bank is conducting robust, ongoing conversations with all customers to assess risks from broader economic factors like tariffs and has contingency plans for underwriting. Executive Kevin Chapman stated that mortgage activity is subject to rate volatility but saw a seasonal Q1 uptick and remains well-positioned with its products and team, though Q2 performance will be highly dependent on interest rate movements.

David Bishop asked if the current economic outlook has changed Renasant's appetite for growth in any loan segments. He also inquired about the first quarter balance sheet strategy regarding cash and securities, and the repricing dynamics for CDs in the first half of the year.

Answer

David Meredith responded that the bank's appetite for loan growth remains unchanged and the outlook is positive for most asset classes in its markets. James Mabry stated that strong deposit growth provides flexibility, and the bank will likely be a net purchaser of securities in Q1. He also noted that about $2 billion in CDs with a blended rate in the low 4s will mature in the first half of 2025.

David Bishop questioned the bank's provisioning strategy, asking why more of the gain from the insurance agency sale was not allocated to the allowance for credit losses (ACL) given the recent increase in criticized loans. He also inquired about the intended use of the excess liquidity on the balance sheet.

Answer

EVP and Chief Credit Officer David Meredith stated that the bank allowed its CECL model to determine the provision and considers the current reserve of 1.59% to be 'very healthy.' EVP and COO Kevin Chapman added that the allowance was significantly built in 2020-2021 to address pandemic-related stresses, and the current credit trends are the realization of those anticipated issues. EVP and CFO James Mabry addressed liquidity, stating the preference is to deploy it into loan growth, but purchasing securities is also a possibility.

David Bishop asked about WesBanco's deposit pipeline for the first half of 2026 and the spot deposit costs exiting Q4. He also inquired if the types of loans being originated in new Loan Production Office (LPO) markets, such as Tennessee and Northern Virginia, differ in size or borrower profile compared to WesBanco's core legacy markets.

Answer

Jeffrey Jackson, President and CEO, indicated that the deposit pipeline remains strong, with typical seasonal patterns of a January dip followed by a build-up in February and March, expecting good deposit growth for the year. Daniel Weiss, Senior EVP and CFO, stated that the spot deposit rate for December was 2.38%, a slight decrease from the Q4 average of 2.45%. Jackson clarified that the types of loans in new LPO markets are largely similar to legacy markets, focusing on Commercial Real Estate (CRE), Commercial & Industrial (C&I), and healthcare, with no changes to WesBanco's credit culture or policies. He noted that while Northern Virginia is known for GovCon, WesBanco's activity there has primarily been in CRE, C&I, and healthcare.

David Bishop asked about the deposit pipeline for the first half of 2026, current spot deposit costs, and whether the types of loans originated in new Loan Production Office (LPO) markets like Tennessee and Northern Virginia differ in size or borrower type from WesBanco's core legacy markets.

Answer

Jeffrey Jackson (President and CEO, WesBanco) stated that the deposit pipeline remains strong, with typical seasonal patterns of a January dip followed by recovery in February and March, expecting good growth for the year. Daniel Weiss (Senior EVP and CFO, WesBanco) noted that spot deposit rates for December were 2.38%, down about seven basis points from the Q4 average of 2.45%. Jeffrey Jackson clarified that loan types in new LPO markets are similar to legacy markets (CRE, CNI, healthcare), adhering to the same credit culture and policies, and not significantly different in size or borrower profile.

David Bishop, Senior Equity Research Analyst at Hovde, inquired about the growth opportunity within WesBanco's new healthcare team, seeking to quantify its potential for loans, deposits, and fees. He also asked about the drivers behind the sequential increase in average deposit costs and the bank's strategy regarding deposit pricing amidst anticipated Fed rate cuts.

Answer

Jeff Jackson, President and Chief Executive Officer, highlighted the healthcare team's success, having closed approximately $250 million in loans, brought in $80 million in deposits, and generated $2 million in fees within six months, projecting $300-$500 million in annual loan production. Daniel Weiss, Senior Executive Vice President and Chief Financial Officer, clarified that the sequential increase in average deposit costs was primarily due to the temporary nature of acquired Premier CDs repricing, and he does not expect this to repeat, noting that CRE payoffs could provide relief on deposit pricing.

David Bishop inquired about the growth opportunity within WesBanco's new healthcare team, seeking to quantify the potential size of that portfolio, and also asked about the drivers behind the sequential increase in average deposit costs.

Answer

President and CEO Jeff Jackson reported that the healthcare team has closed approximately $250 million in loans, brought in $80 million in deposits, and generated $2 million in fees within six months. He projected annual loan production from this team to be between $300 million and $500 million next year. Senior Executive Vice President and CFO Daniel Weiss clarified that the sequential increase in average deposit costs was solely due to the temporary nature of acquired Premier Financial Corp. CDs repricing and rolling off, and he does not expect this trend to repeat. He also suggested that commercial real estate payoffs could offer some relief on deposit pricing.

David Bishop from Hovde Group asked about factors beyond CRE payoffs that could constrain loan growth and whether fee income was impacted by temporary waivers related to the Premier acquisition.

Answer

President and CEO Jeffrey Jackson identified elevated CRE payoffs as the primary factor that could keep loan growth from reaching high-single-digits, downplaying broader macro concerns. Senior EVP & CFO Daniel Weiss clarified that while there were no major waivers, fees on legacy Premier accounts were suppressed for the first month post-conversion, which could lead to a modest benefit in Q3.

David Bishop asked about any stress testing or analysis conducted on the loan portfolio's exposure to potential trade tariffs, particularly within the newly acquired Premier book. He also requested guidance on the outlook for fee income.

Answer

Jeffrey Jackson, President and CEO, responded that while the bank has reviewed both legacy portfolios, they do not feel there is significant exposure to tariffs, but acknowledged the situation remains uncertain. Daniel Weiss, Senior Executive Vice President and CFO, provided a framework for modeling fee income, suggesting that a full quarter's impact from Premier could be estimated by annualizing the one-month contribution seen in Q1, while cautioning about a non-recurring $700,000 tax preparation fee in Q1 trust income.

David Bishop asked for color on the success of WesBanco's revamped treasury management products and sought an update on the confidence level and timeline for the Premier Financial acquisition's regulatory approval.

Answer

CEO Jeffrey Jackson confirmed that the bank is winning larger commercial accounts and that treasury management fees grew nicely year-over-year, driven by new product adoption. He also expressed high confidence in a first-quarter close for the Premier deal, noting that applications are with the Fed and FDIC and that correspondence has been positive with no issues arising.

David Bishop asked for the current market rates for refinancing maturing FHLB borrowings and CDs. He also questioned if incentive compensation for deposit growth was fully accrued and how WesBanco has managed to avoid the large commercial real estate loan payoffs affecting peers.

Answer

CFO Daniel Weiss stated that current 1-month FHLB advances are priced around 10-15 basis points above Fed funds and that promotional CD rates are now around 4.00%. CEO Jeffrey Jackson confirmed that incentive costs are fully accounted for in the current expense run rate. He attributed the low CRE payoffs to strong customer relationships, noting that while Q4 payoffs might be slightly higher than Q3, no major events are anticipated.

David Bishop inquired about the geographic strength of C&I growth and the impact of expiring non-compete clauses for recently hired lenders. He also asked about the NIM headwind from a large deposit client's rate reset, the noticeable pickup in 30-89-day early stage delinquencies, and potential longer-term opportunities related to the Netflix studio development in Monmouth County.

Answer

Christopher Maher, Chairman and CEO, noted that C&I growth is geographically dispersed and acknowledged that expiring non-compete clauses could contribute to increased activity from new lenders, fostering a 'positive flywheel.' Patrick Barrett, CFO, and Joseph Lebel III, President and COO, clarified that the NIM headwind from a large deposit client's rate reset was a one-time, isolated incident fully reflected in Q4 and not expected to recur. Mr. Lebel attributed the increase in early stage delinquencies to a single loan with a federal government lease, where a payment was administratively delayed, with no long-term concern. Mr. Maher views the Netflix studio as a 'tremendous boon' for Monmouth County, a strong existing market, and doesn't anticipate needing new branches but highlighted the broader post-pandemic demand for infrastructure in the Jersey Shore market.

David Bishop from Hovde Group asked about the geographical distribution of OceanFirst Financial Corp.'s C&I growth and whether it was influenced by the expiration of non-compete clauses for recently hired lenders. He also inquired about the impact of a large deposit client's rate reset on Net Interest Margin (NIM) and sought commentary on a noticeable increase in early-stage delinquencies. Finally, he explored potential longer-term opportunities for the company related to the Netflix studio development in Monmouth County, including branch expansion and community branding.

Answer

Christopher Maher, Chairman and CEO, confirmed that C&I growth is geographically dispersed and that some activity is likely from new lenders whose non-compete clauses have expired, creating a positive 'flywheel' effect. Patrick Barrett, CFO, clarified that the deposit rate reset was a one-time, isolated incident fully reflected in Q4, with no expected drag into Q1. Joseph Lebel III, President and COO, explained that the early-stage delinquency was due to an administrative payment delay on a single federal government lease loan, with no long-term concerns. Christopher Maher concluded that the Netflix studio is a significant benefit for Monmouth County, where existing branches provide adequate coverage, and highlighted a broader 'seismic shift' in the Jersey Shore market post-pandemic, driving sustained demand and opportunities.

David Bishop asked for details on OceanFirst Financial Corp.'s Non-Depository Financial Institution (NDFI) exposure, its nature, and alignment with regulatory guidelines. He also requested an update on the Government Contractor (GovCon) loan portfolio's credit performance amidst potential government shutdowns and inquired about plans for refinancing or paying off subordinated debt.

Answer

Christopher Maher, Chairman and CEO, stated that NDFI exposure is small, primarily focused on commercial lending (e.g., equipment finance) rather than consumer lending, and is closely monitored with no current concerns. He noted that GovCon exposure is also small, around $100 million, concentrated in mission-critical contractors with strong liquidity and experience with shutdowns. Joseph Lebel III, President, added that their GovCon exposure is recent, avoiding legacy risks. Patrick Barrett, CFO, declined to discuss specific plans for subordinated debt refinancing or payoff on the call, noting details are available elsewhere.

David Bishop inquired about OceanFirst Financial Corp.'s exposure to Non-Depository Financial Institutions (NDFI), specifically the nature of lending and regulatory alignment. He also asked for an update on Government Contractor (GovCon) exposure, its credit quality, and any plans regarding sub debt refinancing or payoff.

Answer

Christopher Maher, Chairman and CEO, clarified that NDFI exposure is small and focused on commercial lending, not consumer, with close oversight. He noted GovCon exposure is about $100 million, concentrated in mission-critical contractors with strong liquidity, and Joseph Lebel III, President, added that recent GovCon entry avoided legacy risks. Patrick Barrett, CFO, declined to discuss sub debt details on the call.

David Bishop questioned if the deposit costs from the new Premier Banking teams would trend lower, inquired about loan generation from this new segment, asked about high-opportunity C&I verticals, and sought an update on plans for redeeming subordinated debt.

Answer

Chairman & CEO Christopher Maher expects the Premier team's deposit costs to align with the bank's average as non-interest-bearing balances grow to about 30% of the mix. President & COO Joseph Lebel confirmed they are already seeing significant loan pipeline activity from the new teams. Lebel noted C&I growth is broad-based geographically rather than concentrated in specific verticals. Maher added that the company is monitoring markets for its sub-debt and has optionality.

David Bishop asked about the drivers of the strong C&I loan growth, including any new sectors or geographic concentrations, and sought a near-term outlook on deposit cost trends.

Answer

President Joseph Lebel reported that the C&I growth was broad-based but highlighted concentrated growth in the newer government contracting business in the Virginia, Maryland, and D.C. metro area. CEO Christopher Maher noted that entering this business now allows for high credit selectivity. CFO Patrick Barrett indicated a stable near-term outlook for deposit costs, with no immediate plans to rely on wholesale funding as new deposit-gathering initiatives ramp up.

David Bishop asked about the remaining opportunity to lower deposit costs, the traction of the new premier banking division, and for details on a recent loan purchase.

Answer

CEO Christopher Maher noted there is 'a little more room' to methodically reprice deposits downward as competitive pressures ease. He described the premier banking initiative as being in 'very early days,' with significant banker hiring expected in Q2 and Q3. President Joseph Lebel detailed that the loan purchase was part of a multi-faceted relationship with Spring Garden Capital, which includes a white-label leasing business and has shown great credit quality.

David Bishop asked about the fee income and expense guidance related to the new acquisitions, the cautious outlook on loan yields, and for color on the increase in special mention and substandard loans.

Answer

CEO Christopher Maher explained that the caution on loan yields is specific to Q4 due to various moving parts, but he reiterated that net interest income has troughed. Regarding credit, he noted that criticized and classified assets remain well below historical and peer averages and the recent increase did not reflect a pattern or specific concern.

David Bishop from Hovde Group followed up on expense guidance, confirming the base for the 4% growth. He then asked for an update on loan yields, pricing, and the balance between repricing fixed-rate legacy loans higher and independent book loans lower. Additionally, he inquired about SouthState Bank's hiring efforts amidst market disruption, specifically regarding calling efforts, targeting bankers and clients, and the potential for "lift-ups" in 2026.

Answer

William Matthews, Head of Investor Relations, confirmed the 4% expense growth guidance was based on 2025 operating expenses of $1.407 billion. Stephen Young, COO, detailed that $4.3 billion in legacy fixed-rate loans repricing at ~5.06% in the next 12 months would move higher towards new origination rates of 6.06%. Conversely, $2 billion of the Independent book loans would reprice down from 7.25% to 6.25%, resulting in a net positive. He maintained a sustainable NIM in the 3.80%-3.90% range, noting that higher growth might slightly reduce the margin but increase Net Interest Income (NII). Stephen Young also explained that Richard Murray, President of the bank, leads a formal pipeline process for onboarding new bankers, with 237 bankers on their list in Q4, up from 200 in Q3, indicating active conversations for potential hires.

David Bishop asked about SouthState Bank's hiring efforts, specifically regarding the targeting of bankers and clients amidst market disruption, and if similar 'lift-ups' are expected in the latter half of 2026.

Answer

COO Stephen Young explained that Richard Murray, President of the bank, leads a formal pipeline process for onboarding new bankers. He noted that the list of bankers with whom they are having conversations grew from 200 in Q3 to 237 in Q4, indicating very active recruitment efforts.

John, on behalf of David Bishop, confirmed the timing of the IBTX system conversion and asked about management's expectations for potential deposit attrition from the acquired customer base.

Answer

CEO John Corbett confirmed the conversion is scheduled for Memorial Day weekend. Executive Stephen Young stated that the company is not modeling or expecting significant deposit attrition because all frontline bankers are being retained and customers will receive technology upgrades. Corbett added that the bank has conducted three practice conversions and is deploying 500 legacy SouthState employees to the new markets to ensure a seamless transition.

David Bishop of Hovde Group, LLC inquired about the deposit repricing strategy for the legacy IBTX book and the expected pro forma effective tax rate.

Answer

Executive Vice President and Chief Financial Officer Stephen Young explained that IBTX deposit pricing will be managed locally, similar to SouthState's current model, rather than through a centralized push. President William Matthews confirmed that the effective tax rate is not expected to change materially, and the current rate is a good basis for modeling going forward.

David Bishop asked about the expected distribution of the loan mix for the mid-single-digit growth in 2026, specifically if it would lean more towards C&I or CRE, and whether the OpEx guide includes aggressive hiring in new New Jersey markets.

Answer

Curt Myers, Chairman, President and CEO, Fulton Financial, stated that the strategy is to grow all loan segments, maintaining a diversified loan book, with opportunities in CRE, C&I, and business banking. He noted their CRE concentration is below 200%. Regarding OpEx, he clarified that the guidance incorporates normal opportunistic hires across all areas, not specific aggressive hiring in New Jersey.

David Bishop inquired about the expected distribution of loan mix changes for 2026, specifically if growth would be more concentrated in C&I versus CRE. He also asked about the OpEx guide's allowance for new hires, particularly in new New Jersey markets, and sought clarification on commercial interest rate swap income and the drop in other fee income.

Answer

Chairman, President and CEO Curt Myers stated that the strategy is to maintain a diversified loan book, growing all segments including CRE, C&I, and business banking, with potential for outsized growth in these three areas. He confirmed that the OpEx guide includes normal opportunistic hires across all markets, not outsized expenses for new hires. Myers also clarified that the northern New Jersey market is attractive, but expanding into metro New York City is not part of the current strategy. Regarding fee income, Myers noted that commercial interest rate swap income typically correlates with originations, especially larger deals. CFO Rick Kraemer explained that the drop in 'other fee income' was primarily due to a $1.7 million net decline in equity method investments during Q4, suggesting a normalized run rate of approximately $2.5 million.

David Bishop asked for an update on the commercial loan pipeline, specifically whether uncertainty from tariff talks was impacting demand. He also inquired about Fulton's current appetite for M&A, including geographic focus and size parameters, following the integration of the Republic acquisition.

Answer

CEO Curtis Myers stated that loan pipelines are up linked-quarter, but pull-through rates remain below historical norms due to customer caution amid economic uncertainty. Regarding M&A, Myers reiterated that the strategy is unchanged: focusing on disciplined, in-market acquisitions of community banks in the $1 billion to $5 billion asset range, while also monitoring larger, though less frequent, opportunities.

David Bishop requested an update on the indirect auto portfolio's runoff status and its quarter-end balance. He also sought to confirm the outlook for purchase accounting accretion for the remainder of the year.

Answer

Chief Financial Officer Rick Kraemer confirmed the indirect auto portfolio remains in runoff, with an estimated quarterly decline of $40 million and a remaining balance of about $260 million. He also adjusted the purchase accounting accretion forecast to a run rate closer to $12 million per quarter for the rest of the year, a slight decrease from the previous $13 million estimate.

David Bishop of Hovde Group asked for quantification of the cost savings from the FultonFirst initiative already in the run rate, trends in the retention of Republic Bank deposits, and the expected quarterly purchase accounting accretion for 2025.

Answer

CFO Rick Kraemer quantified that just under $5 million in FultonFirst cost savings were included in the Q4 run rate and guided for quarterly purchase accounting accretion to be in the $13.5 million to $14 million range. CEO Curtis Myers added that the acquired Republic deposit portfolio has stabilized and is performing ahead of initial runoff assumptions.

David Bishop questioned if the high liquidity level, with cash and investments over 18% of assets, would see a rundown. He also asked for more detail on the increase in nonaccrual loans and the source of the organic deposit growth from the acquired Republic Bank portfolio.

Answer

CFO Designee Rick Kraemer acknowledged that a small step back in liquidity was reasonable. Chairman and CEO Curt Myers explained the increase in nonperforming loans was diverse across borrowers and not concentrated in any one sector, attributing it to the macro environment. He added that the Republic deposit growth was encouraging, reflecting stabilization and retention.

David Bishop inquired about the increase in Atlantic Union Bankshares' loan pipeline relative to the start of the fourth quarter, seeking quantitative details and insights into near-term loan growth drivers, including traction from the legacy Sandy Spring portfolio and C&I growth. He also asked about the potential impact of the new Virginia governor on the state's business climate and growth capacity.

Answer

John Asbury, President and CEO, confirmed a modest increase in the total loan pipeline by year-end, which was unusual for a strong Q4, and expressed confidence in mid-single-digit loan growth guidance based on encouraging market feedback. Dave Ring, Executive Vice President, added that optimism and broad-based pipelines were observed across the footprint, including the former Sandy Spring franchise. John Asbury also stated confidence that the new Virginia governor would continue the state's tradition of business-oriented moderation.

David Bishop inquired about the increase in the loan pipeline relative to the previous quarter, seeking quantitative details and insights into near-term loan growth drivers, including traction from the legacy Sandy Spring portfolio and C&I growth. He also asked for management's view on the impact of the new Virginia governor on the state's business climate and growth capacity.

Answer

CEO John Asbury noted a modest, yet encouraging, increase in the total loan pipeline by year-end, which is unusual for a fourth quarter. Wholesale Banking Executive David Ring added that pipelines are strong and broad-based across the footprint, including the former Sandy Spring franchise. Asbury expressed confidence that the new Virginia governor would continue the state's business-oriented tradition.

David Bishop with Hovde Group asked about the opportunity to harvest more deposits behind new loan relationships in the Sandy Spring markets, leveraging expanded C&I lending capabilities. He also sought color on the $250 million decline in criticized assets, inquiring about the types of credits and segments that saw improvement.

Answer

EVP and CFO Rob Gorman, President and CEO John Asbury, and EVP and Wholesale Banking Group Executive David Ring explained that the Sandy Spring team has done well retaining and deepening deposits, with new products like escrow and litigation services expected to attract chunky deposits. They emphasized that new C&I client acquisition typically brings deposits and treasury management fees. John Asbury and EVP and Chief Credit Officer Douglas Woolley III attributed the $250 million decline in criticized assets to improvements across individual client levels, rather than specific industries or markets, reflecting conservative risk grading and the overall health of the client base.

David Bishop of Hovde Group asked for details on credit quality trends within the legacy Atlantic Union portfolio, the performance and pipeline of the GovCon loan segment, and the expected run rate for purchase accounting accretion income.

Answer

CEO John C. Asbury and Chief Credit Officer Doug Woolley stated that legacy credit quality is stable and the rise in NPAs was due to the Sandy Spring acquisition. Asbury and EVP David Ring noted the GovCon portfolio is performing well, benefiting from defense spending. CFO Robert Gorman suggested the current quarter's accretion income of approximately $45 million is a reasonable run rate going forward.

David Bishop asked about the long-term core loan growth outlook for the combined company post-Sandy Spring integration, sought details on a specific C&I credit that impacted the provision, and inquired about any unforeseen opportunities arising from the current market disruption.

Answer

EVP and CFO Rob Gorman projected mid-single-digit loan growth in the medium term, with a long-term goal of upper-single-digits, citing opportunities in the Sandy Spring footprint. Regarding credit, Gorman confirmed the quarter's provision increase was primarily driven by a qualitative overlay for economic uncertainty, though a small specific reserve was added for the C&I credit in question. President and CEO John Asbury and Head of Commercial Businesses David Ring highlighted that the disruption is helping build a strong pipeline in the former Sandy Spring markets, noting the pipeline had doubled in the prior three weeks.

David Bishop of Hovde Group questioned whether Atlantic Union's deposit pricing is becoming more tied to larger competitors as it grows, and asked about the potential for redevelopment of large government office buildings in Washington D.C.

Answer

President and CEO John Asbury and Head of Consumer and Business Banking Shawn O’Brien clarified that while large banks influence market pricing, AUB's strategy focuses on relationship value over being the price leader. Regarding D.C. real estate, Asbury suggested that converting old government buildings to multifamily housing is a significant opportunity but would likely require financial incentives to attract capital, noting it does not directly impact AUB's or Sandy Spring's current portfolios.

David Bishop of Hovde Group questioned if the post-merger business model would shift upmarket, inquired about client retention from the recent American National acquisition, and asked for more details on the expected increase in CRE paydowns.

Answer

CEO John Asbury clarified the model will expand, not change, by adding capabilities to serve larger middle-market clients while retaining all current business. CFO Rob Gorman and Head of Commercial Banking David Ring reported strong client retention from the American National deal, with lower-than-average attrition. Asbury described the expected CRE paydowns as a healthy market normalization, and Gorman affirmed the bank still projects mid-single-digit loan growth.

David Bishop asked about the trend of loan payoffs in the fourth quarter compared to the previous quarter and inquired about the line of sight for potential payoffs in the first or second quarter of the upcoming year. Bishop also sought information on average origination yields, specifically in light of tightening spreads mentioned in the preamble.

Answer

COO Tom Cornish explained that expected payoffs for the upcoming year would primarily stem from company sales and shifts to private credit, with a substantial reduction in strategic exits compared to 2025. Tom Cornish and Chairman, President, and CEO Raj Singh confirmed that spreads tightened in Q4, with new C&I production at 617 basis points and CRE at 570 basis points, and anticipated continued tightening throughout the year.

David Bishop (Hovde Group) sought clarification on loan payoffs in the fourth quarter compared to previous quarters and asked for insights into potential payoff activity expected in the first or second quarter of the upcoming year. He also inquired about the average origination yields observed during the fourth quarter.

Answer

Tom Cornish (COO) explained that Q4 payoffs were significantly less than previous quarters, with future payoffs likely driven by company sales and shifts to private credit, rather than strategic exits. He projected strategic exits to remain around Q4 levels. Jim Mackey (CFO) provided new production yields for C&I at 6.17% and CRE at 5.70%, with Tom Cornish estimating a 15-20 basis point compression in new production spreads in Q4, which is expected to continue. Raj Singh (Chairman, President, and CEO) added that the plan for next year assumes continued tightening of spreads.

David Bishop of Hovde Group asked about the loan yield outlook, specifically the rates on repricing fixed-rate loans and new originations. He also inquired about the remaining volume of thinly priced C&I credits and whether the current net charge-off rate is expected to hold steady.

Answer

COO Thomas Cornish noted that new C&I production is coming on at spreads of SOFR+200-225 bps, a significant pickup from the sub-SOFR+150 bps credits they are exiting, and stated they are near the end of that exit journey. CFO Leslie Lunak confirmed that the current net charge-off rate, in the mid-20s basis points range, is what they would expect to see on a running basis.

David Bishop asked if the worst of the downgrades in the New York City office CRE book is over, whether C&I attrition was due to runoff in syndicated national credits, and for details on the brokered deposit runoff during the quarter.

Answer

CFO Leslie Lunak stated she believes the bank is through the worst of the NYC office downgrades and doesn't expect surprises. COO Thomas Cornish confirmed some runoff was in broadly syndicated credits where the bank had a small percentage and opted not to renew. Leslie Lunak later provided figures showing brokered deposits declined by $528 million during the quarter.

David Bishop asked about the cause of the increased unrealized loss on securities, the near-term trend for loan yields, the yield on new loan production, and which loan portfolios might be exposed to potential tariffs.

Answer

CFO Leslie Lunak attributed the unrealized loss to rate and spread movements, not credit issues. She stated that loan yields should stabilize and rise if the Fed pauses, with new commercial production coming on at over 7.5%. CEO Raj Singh noted it was too soon to determine the impact of potential tariffs.

David Bishop from Hovde Group, LLC inquired about the bank's capacity and comfort level for growing its commercial real estate portfolio, particularly in multifamily. He also asked about management's confidence in maintaining the strong growth rate of noninterest-bearing deposits into 2025.

Answer

CEO Raj Singh and Executive Thomas Cornish explained that while there is ample capacity at the total CRE level (164% of risk-based capital), growth is constrained by self-imposed concentration limits in sub-segments like office and hospitality. They remain cautious even in favored classes like multifamily due to rising vacancies. Mr. Singh expressed optimism about maintaining strong NIDDA growth into 2025, citing the strength of the current pipeline.

David Bishop asked about the short duration of Northwest Bancshares Inc.'s certificates of deposit, specifically the weighted average costs rolling off over the next year and current put-on rates. He also inquired about the funding strategy for expected loan growth, whether it would be covered by securities run-off, cash flows, or deposit funding, and how the balance sheet's cash and securities might ebb and flow. Lastly, Bishop questioned the future trend of the securities portfolio as a percentage of total assets.

Answer

Doug Schosser, CFO, noted that over 90% of the CD portfolio matures before mid-2026, providing flexibility for repricing in a falling rate environment. He affirmed ample funding capacity for loan growth, citing low brokered CD positions, organic deposit growth focus, and the securities portfolio as additional sources. Louis Torchio, President and CEO, added that there are no specific public targets for the securities portfolio as a percentage of assets, with determinations made based on market opportunities, interest rate position, and liquidity management.

David Bishop asked for details on the short duration of Northwest Bancshares' certificates of deposit (CDs), including weighted average costs rolling off over the next year and current put-on rates. He also inquired about the funding strategy for expected loan growth, specifically whether it would be covered by securities runoff, cash flows, or deposit funding, and the expected trend for the securities portfolio as a percentage of assets.

Answer

Douglas Schosser (CFO, Northwest Bancshares Inc) noted that over 90% of the CD portfolio matures before mid-next year, providing flexibility for new rates. He affirmed ample funding capacity for loan growth, including low brokered CD positions, organic deposit growth, and the securities portfolio as a backup. Schosser did not provide a specific target for the securities portfolio as a percentage of assets but indicated it would be managed based on market opportunities, interest rate, and liquidity positions.

David Jason Bishop asked about the factors contributing to higher non-interest expenses, specifically the incentive accruals, and the outlook for compensation costs. He also inquired about opportunities arising from recent M&A activity in the bank's operating regions and the expected effective tax rate following the solar tax credit investment.

Answer

EVP and CFO David Sparacio clarified that the incentive accrual true-up occurred in the second quarter, making Q3 expenses appear higher, and projected Q4 non-interest expenses to be similar to Q3, emphasizing the bank's best-in-class efficiency ratio. President and CEO Tom Broughton noted that opportunities stem from various mergers, not just one, and that 80% of new business comes from existing client referrals. David Sparacio stated the 18.9% effective tax rate is expected to hold for 2025 and aims to keep it below 20% in the foreseeable future, exploring similar tax improvement opportunities.

David Bishop of Hovde Group sought clarification on future deposit cost trends, the expected financial impact of the July 1st increase in treasury management fees, the drivers behind the growth in construction loans, and the bank's comfort level with its loan-to-deposit ratio.

Answer

EVP & CFO David Sparacio stated that deposit costs are expected to normalize around the Q1 level of 3.57%, excluding the one-time adjustment this quarter. Chairman, President & CEO Thomas Broughton explained the treasury fee increase is primarily intended to drive growth in non-interest-bearing deposits rather than fee income directly. SVP & Chief Credit Officer Jim Harper added that construction loan growth was a mix of new production and funding for existing high-equity projects. Broughton also noted the adjusted loan-to-deposit ratio is in the mid-80s, a comfortable level.

David Bishop questioned how the influx of higher-cost municipal and correspondent funds impacted the cost of deposits, the expected trend for this cost as funds flow out, and requested a reiteration of the loan repricing forecast for the next 12 months.

Answer

CEO Thomas Broughton and CFO David Sparacio confirmed that the higher-cost municipal and correspondent funds were the primary driver of the increased cost of deposits. They anticipate this cost will decrease as these temporary funds exit the bank. David Sparacio reiterated the 12-month repricing outlook, which includes approximately $1.5 billion in cash flow from fixed-rate loans at 4.76% and an additional $900 million in fixed-rate loans repricing at a similar rate, plus $2.2 billion in variable-rate loans repricing at a weighted average rate of 7.52%.

David Bishop questioned recent trends in loan origination yields, the pipeline's C&I composition, the potential catalysts for an increase in credit losses from current lows, and the drivers of growth in the correspondent banking business.

Answer

Interim CFO Edison Woodie confirmed loan origination yields have remained stable. CEO Thomas Broughton noted that while credit losses are low, a normalization to 25-30 basis points should not be surprising over the long term, and current issues are company-specific rather than industry-wide. He speculated that a rise in unemployment would most likely affect residential AD&C, an area of limited exposure for the bank. Executive Rodney Rushing explained that correspondent growth was fueled by both seasonal Q4 liquidity builds and the successful addition of 24 new bank relationships during the year.

David Bishop of Hovde Group questioned the reason for the build in short-term cash, the forward outlook for core operating expenses, and sought clarification on the rate of loans that recently paid off.

Answer

CFO Kirk Pressley explained the higher average cash balance was a deliberate strategy to build liquidity ahead of loan growth, which impacted the NIM percentage but not dollar amount. CEO Thomas Broughton added that a high-rate municipal deposit outflow also contributed. Controller Ed Woodie projected Q4 core expenses to remain around the $44.8 million to $45 million level. Broughton confirmed the paid-off loans had an average rate of 4.89%.

David Bishop asked for a comparison of loan origination and payoff volumes in the second quarter versus the first quarter.

Answer

President Dave Antolik confirmed that loan production was up quarter-over-quarter while payoffs were down slightly, which drove the net loan growth of nearly $100 million. CEO Chris McComish added that the loan pipeline was also effectively replenished during the quarter.

David Bishop of Hovde Group asked about the bank's capacity for further growth in commercial real estate lending. He also inquired about the sustainability of the current run rate for treasury management fee income and the associated technology spending, and requested the spot cost of deposits at quarter-end.

Answer

President and CEO Sam Sidhu confirmed that the bank has 'a ton of capacity' for commercial real estate growth, noting their concentration levels are well below peers. He highlighted the attractive 4.4% net spread achieved on recent CRE loan and deposit relationships. Regarding noninterest income, Sidhu stated that the current treasury fee income represents a 'pretty good run rate' and that the major technology investments supporting it are now largely complete. He also confirmed the spot cost of deposits at the end of the quarter was 2.82%, the same as the quarterly average.

David Bishop from Hovde Group asked if the current salary and benefits expense is a good run rate for Q4 and 2025. He also inquired if 2025 would be a year of balance sheet growth and asked about the securities portfolio's sensitivity to lower interest rates after its repositioning.

Answer

CFO Philip Watkins confirmed the current salary expense is a reasonable starting point, noting a future shift to a profit-based incentive plan. CEO Samvir Sidhu affirmed that 2025 is expected to be a year of balance sheet growth after the deposit remix is complete. Watkins also explained the securities portfolio repositioning significantly reduced its sensitivity to lower rates by decreasing the floating-rate portion to about 30%.

David Bishop of Hovde Group asked about the average lead time for onboarding new commercial clients, sought confirmation on the expected quarterly deposit inflows, and requested details on the recently executed interest rate swap.

Answer

President and CEO Sam Sidhu detailed that onboarding new commercial clients is a complex process that typically takes between 30 and 90 days. He confirmed the bank expects gross commercial deposit inflows of $500 million to $1 billion per quarter. CFO Philip Watkins added that the new swap converted over $1 billion of fixed-rate liabilities to floating, will take effect in Q4 2024, and is projected to have a 4 basis point negative impact on NIM in that quarter.

Representing David Bishop of Hovde Group, an analyst asked about the quantitative impact of the hedging strategy on the margin in a rate-cut scenario and how low deposit costs could go without Fed action.

Answer

CFO Thomas Owens quantified that the bank's cash flow hedge portfolio would benefit NII by approximately $4.25 million in H2 2025 if two 25-basis-point rate cuts occur. He emphasized that the primary driver of near-term deposit cost reduction is the ongoing repricing of the existing short-duration time deposit book, independent of future Fed actions. He projected a full-year 2025 deposit cost beta of around 34% based on current models.

David Bishop of Hovde Group inquired about the drivers of recent loan growth, the impact of new banker hires, the scale of seasonal payroll deposits, the outlook for funding costs, potential exposure to federal government real estate, and trends in new loan origination yields.

Answer

CEO Nitin Mhatre explained that loan growth was broad-based across commercial segments from both new and existing bankers, with loan sizes remaining steady. CFO Brett Brbovic and CEO Nitin Mhatre quantified the seasonal payroll deposit increase at approximately $500 million, consistent with prior years, and noted expectations for modest NIM expansion from lower funding costs. Chief Risk Officer Greg Lindenmuth addressed real estate risk, stating that government leases are long-term with steep termination clauses. CEO Nitin Mhatre added that new loan originations were modestly higher and the pipeline remains strong year-over-year.

Asked if the pro forma company's business model would change to move upmarket, inquired about deposit retention from the recent American National acquisition, and sought more detail on the expected increase in commercial real estate paydowns.

Answer

The business model will expand, not change; they will continue current operations while adding capabilities (e.g., public finance, ABL) to serve larger middle-market clients. Retention from the American National deal has been very good, with client attrition lower than average. The expected CRE paydowns are a normalization of a previously suppressed market, as developers refinance or sell properties, which is seen as a healthy sign. Despite these paydown headwinds, they still project mid-single-digit organic loan growth.