David Chiaverini

David Chiaverini asked for Flagstar Bank N.A.'s anticipated total paydown activity for Q4 and how much of that could be substandard. He also sought an update on the potential impact of Mumdani's election win on provisioning for rent-regulated loans looking out to next year.

Answer

Joseph Otting, Chairman, President, and CEO, projected total paydown activity for Q4 to be in a similar range of $1 billion-$1.3 billion, noting robust refinance activity, particularly in the rent-regulated New York multifamily market. Regarding Mumdani's potential election, Joseph Otting explained that a proposed freeze on rent-regulated rate increases would likely be delayed until mid-next year. He emphasized that the bank has a strong handle on the portfolio through property-by-property analysis and appraisals, having seen no material changes this year. Lee Smith, Chief Financial Officer, added that current rent increases run through September 2026, and reductions in interest rates would significantly benefit property owners.

David Chiaverini of Jefferies asked about Flagstar Bank N.A.'s anticipated total paydown activity for Q4 2025, including the expected portion of substandard loans. He also sought an update on the potential impact of a Mumdani election win on provisioning, particularly regarding a proposed four-year freeze on rent-regulated rate increases.

Answer

CEO Joseph Otting projected Q4 2025 paydown activity to be in a similar range of $1-$1.3 billion, noting that the market for rent-regulated New York multifamily remains robust. Regarding the Mumdani election, Joseph Otting explained that a potential rent freeze decision would be made mid-2026. He stated that the bank has a strong handle on the portfolio through property-by-property analysis and appraisals, and did not see material changes in 2025 as major expense increases (insurance, labor, HVAC) had already occurred. CFO Lee Smith added that current rent increases run through September 2026, and reductions in interest rates would be a significant advantage for owners.

David Chiaverini followed up on the mortgage finance business, asking about its potential as a percentage of total loans over the next two to three years and any internal constraints. He also inquired about the competitive landscape for mortgage finance, specifically if competitors were pulling back, and highlighted BOK Financial's unique synergies in this space.

Answer

President and CEO Stacy Kymes stated that BOK Financial views concentrations in terms of capital and has significant capacity to grow mortgage finance, seeing a 'very long runway' without immediate internal constraints. He noted that while some competitors exited due to liquidity issues years ago, the current environment isn't seeing a widespread pullback, despite increased scrutiny on non-depository financial institution lending. Kymes emphasized BOK Financial's strong, experienced team, leading platform, and 'enormous synergy' with existing mortgage trading and TBA hedging businesses, as well as unexpected opportunities in treasury and cash management. CFO Marty Grunst later clarified that BOK Financial's mortgage warehouse lines are secured by loans registered at MERS, ensuring clear title and strong collateral, differentiating it from other warehouse finance flavors.

David Chiaverini of Jefferies followed up on borrower sentiment specifically within the core C&I and CRE portfolios and asked if more clients were moving off the sidelines to pursue projects.

Answer

Vice Chairman & Chief Lending Officer Richard Murphy described sentiment as 'cautiously optimistic,' noting that while there isn't a surge of 'animal spirits,' clients feel better than last quarter. He emphasized that Wintrust's strong market positioning in Chicago is a key growth driver, allowing it to win new business regardless of the broader economic sentiment.

David Chiaverini of Wedbush followed up on the written agreement, asking about any material limitations it imposes on the business and the expected timeframe for its resolution. He also asked for measurable bogeys to track progress.

Answer

CEO Samvir Sidhu stated that the agreement is public and contains no material limitations outside of the digital asset strategy, only typical notifications. He estimated that while most of the work would be completed within the first year, such orders typically remain in place for about two years. Progress, he noted, is measured by improvements in people (key hires), processes (enhanced via outside services), and technology (a new proprietary platform).

Brooks Dutton, on behalf of David Chiaverini of Wedbush Securities, asked about the potential losses that could be expected on the proposed $800 million multifamily loan sale and how that might compare to the previously contemplated $300 million sale.

Answer

Executive Mark K. Mason explained that the $800 million sale would involve longer-duration loans, resulting in a somewhat lower price compared to the other potential sale. CFO John Michel provided a valuation range of 91% to 95% of par value based on September 30 rates, noting the price would be adjusted based on yields at the time of sale. Mason added that since the total portfolio's fair value is roughly 93%, this lower-value subset would be priced slightly below that level.

David Chiaverini asked about the outlook for balance sheet growth following the $1.3 billion loan acquisition, the demand from credit buyers, and the overall growth and competitive dynamics of the consumer loan market.

Answer

CFO Drew LaBenne stated that while the balance sheet may see a slight decline in the next quarter, it is expected to resume growth in 2025. He noted that credit buyer demand is healthy, with banks returning and private credit asset managers remaining active. CEO Scott Sanborn added that the personal loan market is expected to grow as fintech capital availability improves, and while competition is always present, LendingClub monitors it closely.

David Chiaverini of Wedbush Securities Inc. inquired if further balance sheet optimization could involve additional loan portfolio sales and asked about other potential expense savings beyond the normalization of FDIC costs.

Answer

CEO Jared Wolff stated that additional loan portfolio sales are unlikely as the focus shifts to growing earning assets, making securities restructuring a more probable action. CFO Joe Kauder and Wolff emphasized that while FDIC cost normalization is a factor, significant work remains to hit the Q4 expense target. They pointed to ongoing optimization of operations, systems, and vendor spend as key drivers of future savings.

David Chiaverini noted the impressive level of single-family residential refinance volume (48% of originations) and asked about the mix of new versus existing clients for these loans and the future outlook for this refi percentage.

Answer

Chief Banking Officer Mike Selfridge clarified that the majority of this refinance volume comes from clients of other banks moving to First Republic. He projected that the refi mix could drop below its historical floor of 40% given the headwind of rising rates. CEO Mike Roffler added that this success in attracting new clients is a direct testament to the bank's high-touch service model, which becomes more attractive during periods of market volatility.