David Chiaverini

David Chiaverini asked about the drivers behind the $100 million reduction in Net Interest Income (NII) guidance, specifically inquiring if higher payoff activity was the primary cause. He also asked what percentage of the projected $3.5 billion to $5 billion in 2026 payoffs are expected to be substandard.

Answer

Lee Smith, Senior Executive Vice President and Chief Financial Officer, confirmed that higher payoff activity, particularly in multifamily and CRE loans, was the main driver, with excess cash used to deleverage the balance sheet by paying down FLUB advances and brokered deposits. Joseph Otting, Chairman, President, and CEO, added that higher rollover pricing encourages borrowers to refinance elsewhere, aligning with the bank's goal to reduce real estate exposure. Lee Smith anticipates 40% to 50% of 2026 payoffs will be substandard, consistent with 2025 trends.

David Chiaverini asked about the primary drivers behind the $100 million reduction in net interest income (NII) guidance, specifically inquiring if higher payoff activity was the main factor. He also sought details on the expected proportion of substandard loans within the projected $3.5 billion-$5 billion payoffs for 2026.

Answer

Lee Smith, Senior Executive Vice President and CFO, confirmed that higher multifamily and CRE loan payoff activity was the main driver, leading to deleveraging through FHLB and brokered deposit paydowns, alongside mortgage escrow seasonality and right-sizing of legacy C&I exposures. He noted that 40-50% of 2025 payoffs were substandard and expects this trend to continue in 2026. Joseph Otting, Chairman, President, and CEO, added that higher rollover pricing for these loans motivates borrowers to seek financing elsewhere, aligning with the bank's goal to reduce real estate exposure.

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 asked about Axos Financial's net interest margin (NIM) outlook, specifically confirming a projected 6 basis point decline from a normalized 4.72% and inquiring about the average remaining life of the FDIC purchased loans. He also asked about the pipeline for potential team liftouts and the availability of portfolio acquisition opportunities.

Answer

Gregory Garrabrants, CEO of Axos Financial, confirmed the expected 5-6 basis point decline in the adjusted margin, noting that robust loan demand could potentially offset some of this. Johnny Lai, SVP of Corporate Development and Investor Relations, added that the Signature FDIC loans have an average remaining life of about 3-4 more years, with expected steady accretion of approximately $6.5 million per quarter, subject to prepayments. Regarding team liftouts, Mr. Garrabrants stated that many investments have been made, and the focus is now on developing existing teams. For portfolio acquisitions, he indicated that strong organic growth reduces the need for large acquisitions, and attractive opportunities have been scarce.

David Chiaverini inquired about the pipeline for portfolio acquisitions and the availability of attractive portfolios for sale.

Answer

Gregory Garrabrants, CEO of Axos Financial, noted that the company's strong organic growth reduces the need for large portfolio acquisitions, and attractive opportunities for such acquisitions have been limited.

David Chiaverini inquired about the drivers behind the projected 15-20 basis point net interest margin expansion from Q4 2025 to Q4 2026, specifically asking about contributions from both the loan and deposit sides, including beta dynamics. He also asked for the anticipated cadence of net interest margin throughout 2026.

Answer

Travis Lan, CFO, explained that benefits would be balanced between loan and deposit sides. On deposits, lower customer rates, replacement of higher-cost brokered deposits with core, and $600 million of FHLB advances maturing at 4.7% would contribute. On loans, $1.8 billion of fixed-rate loans maturing in 2026 at ~4.7% would reprice 150-200 basis points higher, slowing asset yield compression. For cadence, he anticipated a slight dip in Q1 due to normalizing non-interest-bearing balances and day count, then growth to mid-3.30s by Q4.

David Chiaverini asked about the drivers behind the projected 15-20 basis point net interest margin expansion from Q4 2025 to Q4 2026, specifically inquiring about loan and deposit betas, and the expected cadence of net interest margin throughout 2026.

Answer

Travis Lan, Senior EVP and CFO, explained that benefits would be balanced between loan and deposit sides, driven by lower customer deposit rates, replacement of higher-cost brokered deposits, maturing FHLB advances at 4.7% to be replaced lower, and $1.8 billion of fixed-rate loans maturing at 4.7% repricing 150-200 basis points higher. For cadence, he anticipates Q1 2026 margin to decrease slightly from 3.17% due to late December non-interest-bearing spikes and fewer days, then grow to mid-3.30s by Q4 2026.

David Chiaverini asked how Prosperity Bancshares plans to manage multiple bank integrations simultaneously without distracting core operations. He also inquired about the cultural fit of the Stellar deal and the rationale behind the timing of the merger.

Answer

David Zalman (Senior Chairman and CEO, Prosperity Bancshares) stated that Prosperity has completed 40 such transactions and has well-seasoned, designated teams for integration, ensuring core operations remain focused. He mentioned the timing was right due to the regulatory environment and the long-standing relationship with Stellar's CEO, Bob Franklin, emphasizing a strong cultural fit and similar conservative approaches, likening it to a 'marriage made in heaven.'

David Chiaverini asked about Prosperity's strategy for managing multiple bank integrations simultaneously without distracting from core operations. He also inquired about the cultural fit between Prosperity and Stellar Bancorp and the timing of the deal.

Answer

David Zalman (Senior Chairman and CEO, Prosperity Bancshares) explained that Prosperity has dedicated, well-seasoned teams for integrations, having completed 40 such transactions previously, and that the current integrations are well-planned and on schedule. Asylbek Osmonov (CFO, Prosperity Bancshares) added that specific teams handle integration, allowing field personnel to focus on organic growth. Zalman emphasized the strong cultural fit with Stellar, citing a 20-year relationship with Stellar's CEO, Bob Franklin, and similar conservative banking philosophies, describing it as a 'marriage made in heaven'. He also noted that the current regulatory environment made the timing right for the deal.

David Chiaverini asked if Western Alliance's IBT network is competing with stablecoins and inquired about client uptake and growth outlook. He also questioned if average earning asset growth, particularly in the securities portfolio and held-for-sale loans, should be thought of similarly to deposit growth.

Answer

Vishal Idnani, CFO, clarified that the IBT network complements stablecoins rather than competes, as it facilitates the conversion between stablecoins and U.S. dollars, providing a crucial service for clients. Ken Vecchione, President and CEO, confirmed that deposit growth will indeed drive average earning asset growth, emphasizing their liability-based franchise value where strong, low-cost deposit growth enables quality lending and securities investments.

David Chiaverini asked about Western Alliance's IBT (Interbank Trading) network and tokenized deposits, specifically if the network competes with stablecoins and for insights into client uptake and growth outlook. He also inquired whether average earning asset growth, particularly in the securities portfolio and held-for-sale loans, should be thought of as growing similarly to deposit growth.

Answer

CFO Vishal Idnani clarified that the IBT network complements stablecoins rather than competing, as it facilitates the conversion of stablecoins to and from US dollars 24/7 within Western Alliance's walled garden, providing a crucial service for stablecoin providers. President and CEO Ken Vecchione confirmed that deposit growth would indeed drive average earning asset growth, emphasizing the bank's liability-based franchise value and the opportunity to make good loans or invest in high-quality securities when strong, low-cost deposit growth is achieved.

David Chiaverini inquired about the performance of the HSA Bank open enrollment season and the outlook for share buyback activity and the timing of reducing the CET1 ratio towards the long-term target.

Answer

President and COO Luis Massiani reported a positive open enrollment season for HSA Bank, with approximately 15,000 more accounts opened than last year, totaling nearly 250,000, and anticipated accelerated growth in the direct-to-consumer channel. CEO John Ciulla indicated that share repurchases could continue at a similar pace to 2025, and the bank is becoming more confident in moving the CET1 ratio below 11% after annual stress testing in Q1/Q2.

David Chiaverini inquired about the performance of the HSA open enrollment season, the anticipated pace of share buyback activity, and the timing for bringing the CET1 ratio down from 11.2% towards the long-term target of 10.5%.

Answer

President and COO Luis Massiani reported a successful HSA open enrollment season, with approximately 15,000 more accounts opened than last year, totaling nearly 250,000. CEO John Ciulla indicated that share repurchases could mirror 2025 levels, and the bank is likely to feel comfortable moving the CET1 ratio below 11% after annual stress testing in Q1/Q2.

David Chiaverini asked about East West Bancorp's net interest margin outlook for 2026, specifically how the bank's overall asset-sensitive position would interact with its near-term liability sensitivity. He also sought details on the drivers of the strong non-interest-bearing deposit growth in Q4 and its sustainability.

Answer

CFO Christopher Del Moral-Niles confirmed that East West remains an overall asset-sensitive bank, focused on growing dollar Net Interest Income (NII) by offsetting declining rates with balance sheet growth and consistent deposit repricing. He attributed the strong non-interest-bearing deposit growth in Q4 to an increased emphasis and focus by the retail and commercial teams on driving core commercial DDA balance activity throughout the year, indicating this focus will continue as a key priority for 2026.

David Chiaverini inquired about East West Bancorp's net interest margin (NIM) outlook and positioning for 2026, and the drivers and sustainability of the strong non-interest-bearing deposit growth observed in Q4 2025.

Answer

Christopher Del Moral-Niles, CFO, stated that the bank remains asset-sensitive, focusing on growing dollar Net Interest Income (NII) to offset declining rates through balance sheet growth and consistent deposit repricing. He attributed the strong non-interest-bearing deposit growth to an increased emphasis on driving core commercial DDA balances by both retail and commercial teams, a focus that will continue in 2026.

David Chiaverini asked about management's confidence that credit issues are largely resolved, any signs of lingering deterioration, the nature of buyer interest in loan dispositions, and expectations for a normalized loan loss provision level in 2026.

Answer

Eric Newell, CFO, expressed confidence in managing the $783 million criticized and classified portfolio through prudent credit management and proactive monitoring, noting no new developing trends and an expectation for the portfolio to decline throughout 2026. Susan Riel, President and CEO, reinforced the ongoing high attention to loan monitoring. Ryan Riel, Chief Lending Officer for Commercial Real Estate, described a diverse range of buyers for the two-thirds of HFS loans scheduled for Q1 resolution, including investors supporting local developers and existing ownership. Eric Newell indicated that while 2026 provision levels would not match 2025, they might be higher than 2024 due to the current criticized classified portfolio, but credit issues would not cause further book value degradation.

David Chiaverini asked about the confidence level that credit issues are largely resolved and if there are signs of lingering deterioration. He also inquired about the buyer interest and types of buyers in the secondary market for loan dispositions, and the expected normalized level for the loan loss provision going forward, comparing it to 2024 levels.

Answer

Ryan Riel, Chief Lending Officer for Commercial Real Estate, indicated that the criticized and classified portfolio is under prudent management, with no new developing trends, and is expected to decline throughout the year. Susan Riel, President and CEO, affirmed continued high attention to problem loans. Mr. Riel described buyers for dispositions as a range, including investors supporting local developers and existing ownership. Regarding the loan loss provision, Mr. Riel stated it would likely be higher than 2024 levels due to the current criticized and classified portfolio size, but significantly lower than 2025, emphasizing that credit will not cause further book value degradation.

David Chiaverini from Jefferies asked for clarification on the expected acceleration of loan growth throughout 2026, specifically if it's reasonable to anticipate mid-to-high single-digit growth in the first half and high single-digit to low double-digit growth in the second half. He also inquired about any observed changes in loan pricing spreads in recent months.

Answer

Kevin Blair, President and CEO, Synovus Financial, confirmed that the proposed loan growth acceleration is reasonable, with growth building throughout the year as new hires' portfolios are moved over. He noted a 10 basis point decline in loan pricing spreads in Q4 2025 compared to the first three quarters, attributing some of this to a mix shift towards upper-market businesses that generally carry lower spreads, while highlighting a 63% year-over-year increase in combined company production for the quarter.

David Chiaverini from Jefferies asked for confirmation on the expected acceleration of loan growth through 2026, specifically if it would be mid-to-high single digit in the first half and high single to low double digit in the second half. He also inquired about any observed changes in loan pricing spreads in recent months.

Answer

Kevin Blair (President and CEO, Synovus Financial) confirmed that the expected loan growth trajectory is reasonable, accelerating throughout the year as new hires' portfolios are moved over. He noted a 10 basis point decline in loan pricing spreads versus internal transfer pricing in the current quarter (to a 190 spread on production), attributing some of this to a mix shift towards upper-market businesses with generally lower spreads, but stated it was within expectations and included in 2026 guidance.

David Chiaverini requested further clarification on Wintrust Financial Corporation's run rate comments for 2026 guidance. He also asked about the mortgage banking outlook, including expectations for volume, gain on sale margins, and the overall level of optimism for the business.

Answer

Vice Chairman and COO David Dykstra clarified that the guidance uses the Q4 2025 annualized figure as a base for applying 2026 growth rates. David Dykstra expressed optimism for mortgage banking, citing a supply shortage and potential for increased refinancing if rates drop 25-50 basis points. President and CEO Tim Crane added that Wintrust's market share has likely increased due to independent broker exits.

David Chiaverini of Jefferies requested further clarification on Wintrust's guidance run rate, asking if it referred to 4Q26 versus 4Q25 or full-year 2026 versus 4Q25 annualized. He also inquired about the mortgage banking outlook, including expectations for volume, gain-on-sale margins, and overall optimism for the business.

Answer

Vice Chairman and COO David Dykstra clarified that the growth rates are applied to the 4Q25 annualized run rate for the full year 2026. Regarding mortgage banking, David Dykstra and President and CEO Tim Crane expressed optimism for an upside, noting a supply shortage and potential for increased refinancing if rates drop by 25-50 basis points. They highlighted the company's increased market share due to competitors exiting the market and do not expect volumes to go much lower.

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 asked about the factors that could drive Old National Bancorp's loan growth to the high or low end of its 4-6% guidance, including commercial borrower sentiment, and inquired about the company's appetite for M&A following the successful Bremer integration.

Answer

Tim Burke, President and COO, indicated more optimistic commercial borrower sentiment for 2026 due to lower rates, tax clarity, and M&A activity. He cited middle market C&I pickup, strategic talent additions, and strong growth in expansion markets as drivers for higher-end growth. Jim Ryan, Chairman and CEO, reiterated that the company is focused on organic growth and internal investments, with M&A not being a current priority.

David Chiaverini asked about the factors that could lead to the high versus low end of the 4%-6% loan growth guide, and current borrower sentiment on the commercial side. He also inquired about Old National's appetite for M&A going forward, given the successful integration of Bremer Bank.

Answer

Tim Burke, President and COO, noted more optimistic commercial borrower sentiment for 2026 due to lower rates, tax clarity, and increased M&A activity. He identified middle market C&I pickup, strategic banker hires in high-growth markets, and expansion market growth as drivers for the higher end of loan growth. Jim Ryan, Chairman and CEO, reiterated that the company is focused on investing in itself, organic growth, and being a better version of itself, stating that M&A is 'not a focus' currently.

David Chiaverini from Jefferies inquired about the drivers for achieving the mid-50s efficiency ratio target in the medium term, specifically what factors could lead to the high versus low end of that range. He also asked about the bank's AI spend and specific use cases being implemented.

Answer

Chairman and CEO Bruce Van Saun attributed the efficiency ratio improvement to the termination of swaps, fixed asset repricing, benefits from the 'Reimagine the Bank' program, and consistent positive operating leverage. President Brendan Coughlin detailed that past AI spend focused on foundational investments (cloud, data) and modest specific AI initiatives. For 2026, key use cases include call center modernization (aiming for 50% human call reduction), accelerating technology development (5-10x engineer productivity), and enhancing analytics for fraud and credit risk detection.

David Chiaverini asked about the efficiency ratio outlook, specifically the drivers for achieving the mid-50s medium-term target compared to the 62% in Q4 2025, and what factors could influence the high versus low end of that range. He also inquired about the bank's AI spend and specific use cases.

Answer

Bruce Van Saun, Chairman and CEO, attributed the efficiency ratio improvement to the termination of swaps, active swaps, fixed asset repricing, the 'Reimagine the Bank' program, and consistent positive operating leverage. Bruce Van Saun and Brendan Coughlin, President, discussed past foundational investments in AI (cloud migration, data capabilities) and modest specific AI investments. For 2026, key use cases include call center modernization (aiming for 50% human call reduction), accelerating technology development (5-10x engineer productivity), and enhancing analytics for fraud and credit risk detection and model improvement.

David Chiaverini asked about Regions Financial's pace of banker hiring, comparing the target of 120 bankers over two years (with 50 hired in 2025) to prior trends, and whether incremental hiring is expected due to M&A disruption. He also inquired if the low single-digit loan growth guidance for 2026 is a precursor to mid-single-digit growth in 2027.

Answer

Former CFO David J. Turner confirmed that the current hiring pace represents an uptick over previous periods, reflecting a commitment to growth in priority markets. He added that the bank continuously recruits top bankers, regardless of specific targets, to enhance customer service and team strength. David J. Turner indicated that while no guidance beyond 2026 is provided, it is reasonable to assume that momentum in loan growth will continue to build, potentially leading to mid-single-digit growth in 2027.

David Chiaverini followed up on loan growth and hiring, asking how the pace of hiring 120 bankers over two years (with 50 in 2025) compares to the prior three-to-five-year trend, and if incremental hiring is expected due to M&A disruption. He also inquired if the low single-digit loan growth guidance for 2026 is a precursor to mid-single-digit growth in 2027 as headwinds subside.

Answer

Former CFO David J. Turner confirmed that the current hiring pace represents an uptick, roughly double the pace of the previous three years, reflecting a commitment to priority markets. CEO John M. Turner, Jr. added that the company continuously recruits top bankers, regardless of specific targets. Regarding 2027 loan growth, David J. Turner stated it's reasonable to assume momentum will continue to build towards mid-single digits, though no official guidance beyond 2026 was provided.

David Chiaverini asked about M&T Bank's deposit beta assumption for the next 50 basis points of rate cuts and whether increased competitiveness on deposit costs is expected with higher loan growth.

Answer

Daryl Bible, Senior Executive Vice President and CFO, M&T Bank Corporation, stated that the bank's deposit beta has been holding in the low 50s and is expected to remain there for the next 50 basis points of cuts, though further cuts might lead to hitting floors on consumer portfolios. He affirmed that M&T's strategy is to grow operating accounts and offer competitive rates, noting that the bank successfully grew $2.2 billion in deposits in Q4 (business banking and commercial) and expects deposit growth to remain in sync with loan growth.

David Chiaverini asked about M&T Bank's assumed deposit beta for the next 50 basis points of rate cuts. He also inquired whether increased loan growth would lead to heightened competitiveness on the deposit cost front.

Answer

Daryl Bible (VP, Senior Executive and CFO, M&T Bank Corporation) stated that M&T Bank expects its deposit beta to remain in the low 50s for the next 50 basis points of rate cuts, though consumer portfolios might hit floors with further reductions. He emphasized an 'always-on' strategy for competitive rates and a focus on growing operating accounts, noting that deposit growth is expected to remain in sync with loan growth, as evidenced by the $2.2 billion growth in Q4 2025 in Business Banking and Commercial.

David Chiaverini of Jefferies asked about First Horizon's net interest margin (NIM) outlook, noting the outperformance against previous guidance and inquiring how the company frames the outlook from the current level. He also asked for an update on the $100 million incremental PPNR opportunity, how much has been achieved, and the expected split between 2026 and 2027.

Answer

Hope Dmuchowski, Chief Financial Officer, stated that the NIM outlook remains similar to the 340 range, with Q4's performance benefiting from mortgage warehouse growth and better-than-expected deposit cost reductions. She anticipates NIM to be in the mid-340s with quarter-to-quarter variations. Bryan Jordan, CEO, explained that the $100 million-plus PPNR opportunity, driven by greater penetration in Treasury and wealth management and broader client relationships, has seen significant progress in 2025 (e.g., improved mortgage investor CRE lending spreads). He expects it to build over 2026 and 2027, with more impact in 2027, and confirmed it's embedded in the 2026 outlook. Ms. Dmuchowski added that the goal is sustainable momentum, building quarter after quarter.

David Chiaverini asked about First Horizon's net interest margin (NIM) outlook, seeking an updated framing after outperforming previous guidance. He also inquired about the progress made on the $100 million incremental pre-provision net revenue (PPNR) opportunity and its expected split between 2026 and 2027.

Answer

Hope Dmuchowski, CFO, stated that the NIM outlook remains similar, in the mid-340s range, with Q4's outperformance attributed to mortgage warehouse growth and deposit cost reduction. Bryan Jordan, CEO, confirmed significant progress on the $100 million+ PPNR opportunity in 2025, with more expected in 2027 than 2026, and it is already embedded in the 2026 outlook. Ms. Dmuchowski added that this PPNR improvement would build quarter after quarter through sustainable momentum.

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 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.