David Feaster

David Feaster asked about the drivers of loan growth, specifically C&I, including pipeline strength, utilization rates versus new relationships, and geographic contributions from mainland versus Hawaii. He also inquired about the timing and impact of loan payoffs and paydowns on the full-year loan growth outlook, and the strategy for NIM expansion through deposit cost reductions and fixed asset repricing.

Answer

Robert Harrison, Chairman, President, and CEO, First Hawaiian Bank, explained that Q4 loan growth was broad-based, primarily local with some mainland draws and a new auto dealer. He noted that multifamily pipelines remain strong, with payoffs from the SVB-era slowdown expected to burn through in H1 2026, leading to more normalized growth in H2. James Moses, Vice Chair and CFO, First Hawaiian Bank, added that the NIM guide reflects continued deposit rate cuts (with an anticipated interest-bearing deposit beta of 30-35% for two rate cuts) and fixed asset repricing, estimating $400 million in quarterly cash flows with a 150 basis point repricing accretion.

David Feaster inquired about First Hawaiian Bank's loan growth trends, specifically seeking color on C&I growth drivers (utilization vs. new relationships), pipeline strength, and the geographic split between mainland and Hawaii. He also asked about the factors leading to earlier-than-expected payoffs and paydowns, and how these are factored into the loan growth outlook. Additionally, Feaster questioned the drivers of future NIM expansion, particularly the role of funding cost reductions and the effectiveness of reducing deposit costs without attrition.

Answer

Chairman, President, and CEO Robert Harrison explained that Q4 loan growth was broad-based, primarily local with some mainland draws and a new auto dealer relationship. He noted that multifamily pipelines remain strong, with anticipated normalized CRE growth in the second half of the year as the impact of past production slowdowns subsides. Harrison attributed earlier payoffs to permanent lenders seeking assets. Vice Chair and CFO James Moses clarified that the NIM guide reflects both continued deposit rate cuts (with an anticipated interest-bearing deposit beta of 30-35% for two rate cuts) and fixed asset repricing, estimating $400 million quarterly cash flows with a 150 basis point repricing accretion.

David Feaster asked about First Hawaiian Inc.'s loan growth outlook, including pipeline strength, demand, and potential for pool purchases or SNCS. He also inquired about core deposit growth drivers, liquidity deployment strategies, and the net interest margin's (NIM) potential to expand next year amidst anticipated Fed rate cuts.

Answer

Bob Harrison, Chairman, President, and CEO, noted strong production in the pipeline for Q4, particularly in C&I and CRE, expecting to end 2025 flat to year-end 2024. Jamie Moses, Vice Chairman and CFO, added that while pool purchases are considered, the focus is on areas of expertise like Hawaii residential loans. Moses also explained that deposit balances are expected to be flat Q3 to Q4, with public deposit outflows offset by retail and commercial growth driven by relationship banking. Harrison mentioned restarting investment portfolio purchases to deploy liquidity. Regarding NIM, Moses stated that expansion depends on the timing and magnitude of Fed cuts, but current loan growth and balance sheet roll impact provide tailwinds, though a floor on deposit cost reductions exists.

David Feaster from Raymond James & Associates Inc. inquired about First Hawaiian's loan growth outlook, specifically addressing challenges like dealer floor plan and C&I declines. He also asked about the current pipeline, demand, organic growth opportunities, and potential interest in pool purchases or SNCS. Additionally, Feaster sought clarification on core deposit growth, strategies for deploying excess liquidity, and the bank's approach to managing net interest margin (NIM) and deposit costs amidst anticipated Fed rate cuts, questioning if NIM expansion could continue into the next year.

Answer

Chairman, President, and CEO Bob Harrison acknowledged the unusual third-quarter paydowns in dealer floor plans and C&I but expressed bullishness for strong fourth-quarter production in C&I and CRE, expecting to end the year flat to 2024. Vice Chairman and CFO Jamie Moses added that the bank aims to return to flat loan balances by year-end 2025 compared to year-end 2024, focusing on loan growth in areas of expertise like Hawaii residential pools. Moses also noted expected flat total deposit balances by year-end, with public deposit outflows offset by retail and commercial growth driven by relationship banking. Harrison confirmed the investment portfolio would be held flat, with new purchases. Regarding NIM, Moses stated that expansion depends on the timing and magnitude of Fed cuts, but current loan growth and balance sheet roll impact (fixed-rate cash flows repricing higher) provide tailwinds. He projected deposit betas of 90% for the next cut, decreasing thereafter, indicating continued ability to lower deposit costs.

David Feaster inquired about the drivers of loan performance, the outlook for the loan pipeline, the competitive landscape for deposits, and the potential for further deposit cost reductions. He also asked about the expense trajectory for the year and areas of investment.

Answer

CEO Bob Harrison explained that the Q1 loan decline was due to normal course payoffs and participations, not weak demand, and that the pipeline remains strong despite uncertainty. CFO James Moses noted that while there's limited room to cut deposit costs without Fed rate cuts, CD repricing still offers a 20-30 bps spread. Moses also confirmed the full-year expense guidance, attributing the slow Q1 start to timing and stating that investments in projects with good ROI are being considered pending a clearer economic outlook.

David Feaster of Raymond James sought color on the strong deposit growth drivers, the competitive environment, the 2025 deposit growth outlook, client demand trends, and the interest rate assumptions underpinning the NIM guidance.

Answer

CFO Jamie Moses and CEO Bob Harrison attributed the broad-based deposit growth, especially in DDA, to the team's community engagement and technology investments. They noted that future deposit growth would first fund loans, with excess potentially going into short-duration securities. Harrison observed increased client activity and equity money coming off the sidelines, though construction loan payoffs are a headwind. Moses confirmed the margin guidance assumes two rate cuts in 2025 based on the forward curve.

David Feaster inquired about the outlook for loan growth, including key opportunities and competitive pressures, and asked for details on earning asset repricing dynamics, such as cash flow roll-offs and new loan yields. He also questioned the strategy for repricing deposits lower and the bank's appetite for a securities portfolio restructuring.

Answer

CEO Bob Harrison identified commercial real estate and dealer floorplan as primary growth areas, noting the consumer side remains soft. CFO Jamie Moses detailed that approximately $400 million in fixed-rate assets reprice quarterly, with new loans originating at 6.5-7%. Regarding deposits, Harrison emphasized transparent communication with customers on rate adjustments. Moses added that the bank currently favors share repurchases over a securities restructure, viewing it as a better way to return capital to shareholders.

David Feaster inquired about Seacoast Banking Corporation's adjusted efficiency ratio, seeking clarification on its calculation regarding intangible amortization and understanding the impact of new banker hiring on the 2026 outlook. He also asked about the drivers of the strong 15% annualized loan growth, distinguishing between new hires and existing team productivity, and how future hiring investments contribute to the high single-digit growth guide. Additionally, Feaster questioned the company's strategy for capital return, including dividends and buybacks, given higher-than-expected pro forma capital post-VBI acquisition and a reduced focus on M&A.

Answer

Tracey Dexter, EVP and CFO, clarified that the adjusted efficiency ratio now includes intangible asset amortization. Michael Young, EVP and Chief Strategy Officer, explained that the higher efficiency ratio reflects the timing of expense takeouts from acquisitions and aggressive banker hiring plans (15% increase in 2026), with benefits realized in 2027-2028. Charles Shaffer, Chairman and CEO, attributed roughly 10% of the 15% annualized loan growth to legacy Seacoast commercial banking, 2-3% to The Villages acquisition, and 1-2% to slower paydowns. He noted that the hiring investment primarily supports 2027-2028 growth and that capital allocation will be monitored, with the securities loss trade being a recent use of excess capital, while M&A is less of a focus due to the Villages integration.

David Feaster with Raymond James inquired about Seacoast Banking Corporation's adjusted efficiency ratio, specifically whether it includes intangible amortization, and sought insights into future expense investments, particularly related to new banker hiring. He also asked about the drivers of recent loan growth and the company's strategy for capital return given elevated capital levels and reduced M&A focus.

Answer

Tracey Dexter, EVP and CFO, clarified that the adjusted efficiency ratio now includes intangible amortization. Michael Young, EVP and Chief Strategy Officer, explained that the higher efficiency ratio reflects the timing of acquisition expense takeouts and strategic investments in banker hiring. Charles Shaffer, Chairman, President, and CEO, detailed loan growth attribution, noting contributions from legacy Seacoast, The Villages acquisition, and slower paydowns, and discussed the long-term benefits of hiring. Mr. Shaffer also addressed capital allocation, mentioning the recent securities loss trade and ongoing evaluation of dividends and buybacks.

David Feaster inquired about an update on The Villages deal, its early performance, near-term opportunities for value addition, the timeline for cross-selling additional products, and preparations for the conversion to minimize disruption and ensure seamless integration.

Answer

Chuck Shaffer (CEO) expressed excitement about The Villages deal, noting smooth integration and cultural alignment. He emphasized a clean, smooth conversion for customers in July next year, backed by extensive preparation. He also highlighted plans to build wealth management around the franchise and the potential to double the bank's size in that market over time, with current performance exceeding initial models. Regarding pipeline growth, Chuck Shaffer (CEO) cited strong, broad-based market demand across C&I and CRE, with no slowdown due to tariffs. He noted significant customer migration from larger banks to Seacoast as bankers' non-competes expire and low-rate loans mature, combining with M&A liquidity for future accretion. On Seacoast's growth and competition, Chuck Shaffer (CEO) detailed heavy investments in risk functions, enterprise risk management, and customer-facing technology. He mentioned ongoing work on the commercial treasury stack and Zelle for Business, expressing confidence in competing up-market with regional bank quality talent and treasury management, while acknowledging continued IT infrastructure investments.

David Feaster asked for an update on The Villages acquisition, focusing on early performance, near-term value-add opportunities, cross-sell timelines, and conversion preparation. He also questioned the drivers of the record-high loan pipeline, the complexity of the pipeline by segment and geography, and Seacoast's strategy for competing against larger institutions post-massive growth, including any necessary investments in technology or infrastructure. Finally, he inquired about loan pricing, spreads, and the impact of rising Florida insurance costs.

Answer

CEO Chuck Shaffer described The Villages deal as highly exciting and smooth, emphasizing a focus on a seamless conversion for customers in July 2026. He noted strong market demand driving the pipeline, with significant customer offloading from larger banks. Mr. Shaffer explained that Seacoast has invested heavily in risk functions and customer-facing technology, with ongoing plans to enhance commercial treasury offerings. He also commented on hyper-competitive loan pricing and stabilizing insurance premiums in Florida, with new construction being less affected.

David Feaster inquired about the primary drivers of Seacoast's strong loan growth, the competitive banking landscape in Florida, the outlook for funding costs, and the bank's balance sheet optimization strategy following recent acquisitions.

Answer

Chairman, President & CEO Charles Shaffer attributed the robust loan growth to successful talent acquisition from larger institutions and strong underlying economic demand in Florida, while acknowledging that the competitive landscape is intensifying. EVP, Treasurer & Director - IR Michael Young explained that after proactively managing deposit costs down, the focus will shift to growing core operating accounts and leveraging seasonal tailwinds. Shaffer emphasized that deposit growth is relationship-based. Young added that the long-term strategy involves using liquidity from the Heartland and Villages acquisitions to remix the balance sheet towards higher loan-to-deposit ratios, enhancing profitability.

David Feaster asked about loan growth opportunities and client sentiment amid trade war uncertainty, any changes to credit underwriting given market volatility, and the key drivers for the fee income outlook.

Answer

CEO Charles Shaffer reported that the loan pipeline remains solid with no fallout yet, though it's too early to determine the full impact of tariffs. He affirmed no major shifts in credit policy, just deeper diligence on new credits. Treasurer Michael Young added that growth is supported by new bankers bringing established relationships. Young also explained the fee income guide reflects seasonal factors and the absence of prior-quarter one-time gains, with underlying growth in areas like treasury management.

David Feaster from Raymond James asked about the drivers of expected loan growth acceleration, the appetite for additional hiring amid market disruption, and the outlook for profitability and operating leverage in 2025.

Answer

CEO Charles Shaffer attributed the growth outlook primarily to investments in talent, noting that demand remains reasonably strong. He confirmed continued opportunities for hiring but emphasized balancing growth with profitability. Treasurer Michael Young stated the bank expects to show positive operating leverage in 2025, driven by NII dynamics, and aims to manage within a 55% to 60% efficiency ratio range as it shifts toward an organic growth model.

David Feaster questioned the composition of the loan pipeline between CRE and C&I, client reception to lower deposit rates, the cost of new deposits, and the broader economic impact of hurricanes and insurance costs in Florida.

Answer

CEO Charles Shaffer stated that loan production is balanced at about 50/50 between CRE and C&I and expects this to continue. He noted that clients have accepted lower deposit rates without pushback. Treasurer Michael Young added that new deposit add-on rates were in the low 3s. Regarding the Florida economy, Shaffer acknowledged insurance cost challenges but expressed confidence in the state's resilience and ability to recover from the storms.

David Feaster asked about the factors driving Ameris Bancorp's strong loan production, distinguishing between banker productivity and market demand. He also sought insights into the competitive landscape for lending, focusing on pricing versus structural pressures, and the outlook for the premium finance segment.

Answer

CEO Palmer Proctor stated that strong loan production is due to a combination of focused individuals, market disruption opportunities, and high-growth markets. He noted that competition in lending is primarily on pricing, with structures holding up well, and Ameris is accustomed to competitive environments. For premium finance, he expects it to remain a steady, stable performer providing meaningful earnings, without significantly increasing its balance sheet composition, with full pipelines and commitment to the space.

David Feaster from Raymond James asked about the drivers of Ameris Bancorp's strong loan production, inquiring whether it stems from increased banker productivity or a shift in market demand. He also sought insight into the competitive lending landscape, specifically if pressure is primarily on pricing or also impacting loan standards and structures. Additionally, Feaster asked for an update on the premium finance segment, including growth expectations and new opportunities.

Answer

CEO Palmer Proctor attributed strong production to a combination of focused individuals, market disruption from M&A, and positioning in high-growth markets. He noted that competition in lending is mainly on pricing, with loan structures and standards holding up well across the industry. Regarding premium finance, Proctor stated it's a steady, stable performer expected to provide meaningful earnings without significantly increasing balance sheet composition, with full pipelines and ongoing market opportunities.

David Feaster of Raymond James asked about the key drivers behind the strong Q4 loan production, the outlook for loan growth in 2025, and expectations for expense growth and operating leverage.

Answer

CEO Palmer Proctor attributed the production surge to improved consumer sentiment and successful hiring, while emphasizing a focus on controlled, profitable growth over volume. CFO Nicole Stokes affirmed that consensus expense growth estimates of 4.5% to 5% for 2025 are reasonable, though Q1 may be seasonally higher. Proctor added that the bank maintains expense discipline by replacing underperforming bankers with new hires, rather than just adding headcount.

David Feaster of Raymond James asked about client reception to lower deposit rates, the growth outlook for the premium finance business, and the potential timing for a return to margin expansion.

Answer

Executive Nicole Stokes noted the blended rate on new deposits was under 3% and that pricing is managed via weekly meetings and market feedback. CEO H. Proctor emphasized the "human touch" in client retention and described the premium finance vertical as a stable "bright spot." He added that while margin expansion is conceptually possible, the primary focus is maintaining the current strong margin.

David Feaster asked about the key drivers and successful segments for Axos Financial's impressive deposit growth, particularly within specialty and commercial deposits.

Answer

Gregory Garrabrants, CEO of Axos Financial, highlighted strong deposit growth, projecting future growth of $700-800 million, with approximately 60% from consumer and the remainder from commercial and security segments, including HOA, title, escrow, and operating deposits. He also acknowledged the challenges of aggressive deposit repricing in declining rate environments.

David Feaster asked Gregory Garrabrants about the most impactful initiatives Axos Financial is currently pursuing, given its diverse growth engines. He also questioned the drivers behind the significant expansion in Commercial Real Estate Specialty Lending (CRESL) this quarter and how Axos Financial plans to continue funding its impressive loan growth, particularly within specialty and commercial deposits.

Answer

Gregory Garrabrants, CEO of Axos Financial, expressed excitement about the firm's advancements in AI and code development, anticipating a significant bending of the cost curve for development, enabling faster innovation and responsiveness to customer needs. He and Derrick Walsh, EVP and CFO, attributed the strong CRESL growth primarily to a slowdown in loan paydowns/repayments and some deals being pushed into the quarter. Regarding funding, Mr. Garrabrants highlighted strong deposit growth, expecting approximately 60% from consumer and the remainder from commercial and security segments, including HOA, title, escrow, and operating deposits.

David Feaster of Raymond James Financial asked about the primary opportunities on the funding side, the competitive landscape for deposits, and the bank's ability to manage funding costs while pursuing growth. He also questioned if fee income growth could keep pace with net interest income growth and inquired about current capital allocation priorities, including M&A.

Answer

President & CEO Gregory Garrabrants responded that new business verticals are providing favorably priced deposits, but acknowledged that very strong loan growth could put some pressure on funding costs. He identified the securities business as the main driver for fee income growth but noted it would be challenging for it to grow at the same pace as net interest income. Regarding capital, Mr. Garrabrants stated that organic growth is the top priority, followed by evaluating synergistic M&A opportunities in specialty finance and fee-income businesses, and opportunistic share repurchases.

David Feaster inquired about the pulse of loan demand, expense growth outlook, and the types of M&A opportunities that are most appealing to the company.

Answer

President and CEO Greg Garrabrants noted strong originations of $3.5 billion and improving pipelines in single-family and multifamily due to competitive exits and a better yield curve environment. He stated that expense growth must be managed with discipline until sustainable asset growth returns, highlighting productivity gains from technology like low-code platforms and AI. Regarding M&A, Garrabrants mentioned a preference for specialty finance businesses that add a unique niche, clarifying that the new ATM shelf is a proactive measure for potential opportunities and not an indication of an imminent deal.

David Feaster from Raymond James inquired about the deposit franchise, asking about any attrition from rate cuts and key growth verticals. He also asked for a status update on new business lines and the rollout of the white-label banking platform for advisers.

Answer

President and CEO Greg Garrabrants highlighted C&I verticals as key drivers for deposit growth and noted that while there was some consumer attrition from repricing, the category still grew. He provided updates on new verticals, stating that tech/VC and middle market teams are new but already bringing in deposits, while entertainment and marine floor plan are gaining traction. He confirmed the white-label banking platform is helping drive deposit growth through advisers and that feedback is being used to refine new products like the 'Axos One' account.

David Feaster inquired about the expected trajectory of low single-digit loan growth for 2026, anticipating a slower Q1 followed by acceleration. He also asked about current origination trends, the loan pipeline, and the primary drivers behind elevated payoffs and paydowns. Additionally, he sought insight into the competitive landscape for deposits in Hawaii and the proportion of core deposit growth from new versus existing clients, and if the cultural shift towards sales and customer primacy is boosting origination confidence.

Answer

David Morimoto, Vice Chairman and COO, confirmed the base case of a seasonally slower Q1 for loan growth, with acceleration expected later in the year. He noted Q4 originations were around $300 million, requiring higher levels for net growth. Elevated payoffs were attributed to the smaller construction portfolio, which the bank is actively working to build to critical mass. He explained that core deposit growth is a combination of new customer prospecting and deepening existing relationships, driven by initiatives like disciplined calling efforts and a focus on customer primacy, which also underpins confidence in accelerating originations.

David Feaster asked about the trajectory of loan growth for 2026, specifically if the low single-digit growth would be slower in the first half and accelerate later, given the focus on commercial optimization and delayed fundings. He also inquired about current origination trends, the loan pipeline, and the drivers behind elevated payoffs and paydowns. Additionally, Mr. Feaster sought insight into the competitive deposit landscape in Hawaii, the mix of new versus existing client growth for core deposits, and if this cultural shift is also driving confidence in accelerating originations.

Answer

David Morimoto, Vice Chairman and COO, confirmed that Q1 loan growth is expected to be slower, accelerating through the year. He noted that Q4 originations were around $300 million, requiring higher levels for net growth, and attributed elevated payoffs to the smaller construction portfolio, which the bank aims to build to critical mass. On deposits, Mr. Morimoto explained that core deposit growth is a mix of new clients and deepening existing relationships, driven by disciplined calling efforts and a focus on customer primacy, which also underpins confidence in accelerating originations.

David Feaster of Raymond James Financial inquired about Central Pacific's growth outlook, client demand, and the competitive landscape for the second half of the year. He also asked about the company's strategy for capitalizing on market disruption, the drivers behind the impressive non-interest-bearing deposit growth, the future core expense run rate, and the broader credit quality outlook following a single large charge-off.

Answer

Chairman, President & CEO Arnold Martines and Vice Chairman & COO David Morimoto confirmed that muted first-half growth was anticipated and reiterated a low single-digit full-year growth target, supported by a healthy pipeline with some Q2 deals slipping into Q3. Morimoto noted that deposit growth was driven by relationship-based prospecting. EVP & CFO Dayna Matsumoto provided a quarterly expense guidance of $43.5 million to $44.5 million. Senior EVP & Chief Risk Officer Ralph Mesick clarified that the quarter's large charge-off was an idiosyncratic event and not indicative of a systemic trend, with underlying credit metrics remaining strong.

David Feaster of Raymond James inquired about Central Pacific's loan growth outlook amid market volatility, the potential impact of trade policies on specific loan segments, the competitive landscape for deposits, and the bank's capital allocation priorities, including share repurchases.

Answer

David Morimoto, Vice Chairman and COO, reiterated the full-year guidance of low to mid-single-digit loan growth, focused on commercial and construction lending. Ralph Mesick, SEVP and Chief Risk Officer, noted that impacted industries represent about 10% of the loan book and expressed confidence in customers' ability to handle short-term turbulence. Dayna Matsumoto, EVP and CFO, stated that deposit costs should continue to trend down gradually and that the bank is evaluating how to best optimize and deploy its strong capital, with priorities including the dividend, organic growth, and share repurchases.

David Feaster from Raymond James inquired about the drivers behind the optimistic loan growth outlook, the impressive deposit performance, and the expense trajectory for 2025. He also followed up on specific credit issues in the C&I portfolio and the bank's capital allocation priorities.

Answer

Chairman, President and CEO Arnold Martines confirmed the positive loan growth outlook, driven by proactive efforts in the commercial and CRE segments. SVP & CFO David Morimoto detailed the deposit growth, noting a seasonal DDA benefit, and provided expense guidance aimed at positive operating leverage. SVP & Chief Risk Officer Ralph Mesick clarified that recent C&I losses were idiosyncratic and that overall credit trends are positive. Morimoto also outlined capital priorities, including the dividend, buybacks, and organic growth, emphasizing the bank's strong capital position.

David Feaster of Raymond James inquired about the drivers behind the recent loan decline, the outlook for loan growth, and the bank's appetite for share buybacks following the halt of strategic discussions. He also asked for details on new loan production yields, repricing dynamics, and the future trajectory of the net interest margin (NIM) amid potential rate cuts.

Answer

Arnold Martines, Chairman, President and CEO, attributed the loan decline to a market-wide demand issue caused by high interest rates, not a change in the bank's lending appetite, and noted that rising building permits signal future pent-up demand. David Morimoto, SVP and CFO, added that the bank is open to share repurchases as its capital ratios are healthy. Morimoto detailed that new loan yields were approximately 7.75% in Q3, significantly higher than the portfolio yield of 4.90%, with future growth expected in commercial real estate and C&I. He also stated the balance sheet is now neutral to interest rate risk and sees a path for the NIM to return to the 3.30% range.

David Feaster asked about the drivers behind the acceleration in loan originations during the fourth quarter, specifically inquiring about the contribution from new hires versus increasing demand. He also sought insights into the loan pipeline for the new year and areas of growth opportunity. Additionally, he questioned the competitive landscape for deposits, the bank's ability to sustain core deposit growth to fund loan expansion, and the strategy for recruiting bankers and business development officers (BDOs) amidst market disruption, including specific markets or segments of focus.

Answer

James Beckwith, President and CEO of Five Star Bancorp, explained that all verticals performed exceptionally well in Q4, with significant contributions from the food and ag group (due to seasonal lending cycles) and Bay Area deals. He described the 2026 loan pipeline as good. Regarding deposits, Mr. Beckwith acknowledged a highly competitive market for top-tier clients but highlighted the bank's competitive advantage through its 42 business development professionals, noting strong growth in Orange County, the Bay Area, North State, Redding, and Yuba City. He projected 10% total deposit growth for 2026, which necessitates 13% non-brokered deposit growth to offset the planned reduction of $175 million in brokered deposits. On recruitment, Mr. Beckwith noted successful expansion in Walnut Creek (East Bay) and identified the Peninsula or South Bay as potential future geographical expansion areas, while acknowledging the highly competitive and high-salary environment for seasoned bankers in the Bay Area.

David Feaster inquired about the drivers behind the acceleration in loan originations during the fourth quarter, distinguishing between new hires and increased demand. He also sought insights into the current loan pipeline and future growth opportunities. Additionally, Feaster asked about the competitive landscape for deposits, the bank's strategy for core deposit growth, and its ability to fund future loan growth. He also explored the bank's success in recruiting bankers and Business Development Officers (BDOs) amidst market disruption, and specific markets or segments of focus for expansion.

Answer

James Beckwith, President and CEO of Five Star Bancorp, explained that all verticals performed well in Q4, with significant contributions from the food and ag group due to seasonal lending cycles and Bay Area deals. He noted the pipeline looks good for 2026. Regarding deposits, Beckwith acknowledged a highly competitive market but highlighted the bank's competitive advantage through its 42 business development professionals focused on core deposit relationships. He projected 10% growth for both sides of the balance sheet in 2026, noting the need to work harder due to expected payoffs and the goal to eliminate brokered deposits. For recruitment, Beckwith mentioned interest in the Peninsula or South Bay for geographical expansion, acknowledging the competitive environment for seasoned BDOs in the Bay Area.

David Feaster of Raymond James Financial inquired about the drivers behind Five Star Bancorp's strong core deposit growth, the potential for further deposit cost reductions, the business climate and expansion opportunities in the San Francisco Bay Area, and the scalability of the bank's model toward a sub-40% efficiency ratio.

Answer

President and CEO James Beckwith attributed the robust deposit growth to the efforts of their 40 business development officers across all regions. He indicated that funding costs have likely stabilized but could improve with a better deposit mix, particularly non-interest-bearing accounts. Beckwith expressed optimism about the Bay Area, noting a positive shift in San Francisco and confirming plans for South Bay expansion after the Walnut Creek office opens. While a sub-40% efficiency ratio isn't a formal target, he acknowledged it's possible due to operating leverage, but stressed that strategic investments, like the new agribusiness vertical, remain a priority. EVP and CFO Heather Luck added that back-office infrastructure is already scaled to support growth without significant new investment.

David Feaster asked about the drivers of increased loan originations, the dynamics behind loan payoffs, the expected sources of future loan growth, and the overall business pulse of the San Francisco Bay Area market.

Answer

CEO James Beckwith attributed strong loan originations to the high activity of their expanded business development team rather than a broadly favorable rate environment. He characterized loan payoffs as a natural part of their business model, as clients refinance into agency or CMBS debt. Beckwith confirmed that future loan growth will be more diversified thanks to new teams in the Bay Area. He described the Bay Area as a prime market with ongoing opportunities from recent banking turmoil and detailed plans for further expansion, likely into the East Bay.

David Feaster asked about Bank of Marin's strategy for new hires, including opportunities across the footprint and target markets for talent acquisition. He also questioned client receptivity to deposit rate reductions, any resulting attrition, and the bank's approach to deposit growth and successful segments. Finally, he sought clarification on the pace and trajectory of net interest margin expansion, and if a +4% margin remains a reasonable long-term target.

Answer

Timothy Myers, President and CEO, and Dave Bonaccorso, CFO, stated they continue to seek hires who can drive new loan originations, with less geographical sensitivity, noting success in North Bay, Sacramento, East Bay, and San Francisco. Timothy Myers explained that deposit growth comes from new accounts (45% new to bank) and commercial banking, with fluctuations driven by large deposit-only customers. He added that deposit rate reductions are targeted and moderate, with attrition mainly from rate shoppers. Dave Bonaccorso detailed the NIM expansion from 3.12% (adjusted October) to 3.42% (December), citing loan growth momentum, back book repricing, and security cash flows. He confirmed that a +4% margin is a reasonable long-term target, though not for 2026, given incremental new business.

David Feaster asked about Bank of Marin's strategy for new hires and talent acquisition, deposit growth trends including client receptivity to rate reductions and attrition, and the outlook for net interest margin expansion, including the long-term potential for a 4% margin.

Answer

President and CEO Timothy Myers and CFO Dave Bonaccorso discussed ongoing efforts to hire talent that can significantly impact loan originations, noting success in diverse markets like Sacramento and the East Bay. They highlighted impressive deposit trends, including nearly 1,000 new accounts opened, with 45% new to the bank. Management explained their targeted approach to deposit rate reductions, balancing retention with managing rate-sensitive clients. Dave Bonaccorso detailed factors driving margin expansion, including loan growth momentum, back book repricing, and deposit cost reductions, expressing confidence in reaching a 4% margin over the medium term, though not in 2026.

David Feaster (Raymond James) asked about the current complexion of Bank of Marin Bancorp's loan pipeline and near-term growth opportunities. He also inquired about the bank's hiring appetite, changes to compensation and calling programs, and the drivers behind loan payoffs and paydowns. Finally, he sought the amount of interest recovered from a specific non-accrual loan paid off post-quarter.

Answer

President and CEO Tim Myers characterized the loan pipeline as highly diversified across geography and loan types, including significant CRE and CRA-related deals. He confirmed an appetite for opportunistic hiring, particularly in Sacramento, and detailed a shift to more active, managed calling programs designed to incentivize desired behavior. Myers clarified that only a small portion of recent loan payoffs ($2 million) was due to losing deals to other banks, with the majority stemming from asset sales, cash de-leveraging, and strategic workouts. He estimated approximately $670,000 in interest recovered from the post-quarter non-accrual loan payoff.

David Feaster asked about any changes in the complexion of Bank of Marin Bancorp's loan pipeline and where the most significant growth opportunities are emerging in the near term. He also inquired about the company's appetite for additional hires, the types of lenders being sought, and details regarding recent changes to compensation and calling programs. Furthermore, he sought a breakdown of loan payoffs and paydowns, distinguishing between losses to other banks, asset sales, and strategic de-leveraging, and asked for the specific amount of interest recovered from the $3.6 million non-accrual loan paid off after quarter-end.

Answer

President and CEO Tim Myers described the pipeline as very dispersed across the footprint, with significant activity in commercial real estate, CRA-related deals, and affordable housing, particularly in the North Bay, Marin, Napa, and Sacramento regions. He confirmed an appetite for opportunistic hires, especially in Sacramento, and detailed a more active calling process managed by David Blum, Head of Commercial Banking, aimed at new customer acquisition, supported by a comp plan designed to incentivize desired behavior. Tim Myers clarified that of the $24 million in commercial loan payoffs last quarter, only $2 million was due to third-party refinancing, with $4 million from asset sales, nearly $10 million from cash de-leveraging, and a $7 million proactive workout. He stated that approximately $670,000 in interest was recovered from the $3.6 million non-accrual loan paid off post-quarter.

Asked about client sentiment amid economic uncertainty, any changes to underwriting standards, and plans for deploying excess liquidity.

Answer

Clients are generally not expressing major concerns, except for nonprofits worried about future funding. Underwriting standards have not changed as their traditional approach is adaptable. Excess liquidity is being deployed into higher-yielding securities after being held to manage deposit inflows and loan pipeline growth.

David Feaster from Raymond James asked about the sentiment among the bank's clients given the uncertain macroeconomic backdrop. He also inquired if there have been any adjustments to underwriting criteria and what the plans were for deploying the bank's growing liquidity.

Answer

CEO Tim Myers responded that clients are not expressing significant concern, with the exception of nonprofits who are worried about future government funding levels. He affirmed that the bank's traditional, fundamental-based underwriting approach has not changed and remains adaptable to market conditions. CFO Dave Bonaccorso added that excess liquidity was already being deployed into securities purchases late in Q1 and into Q2, capturing yields 40-50 basis points above cash.

David Feaster from Raymond James inquired about client sentiment amid broader economic uncertainty, any adjustments to underwriting criteria, and the bank's plans for deploying its building liquidity.

Answer

CEO Tim Myers reported that clients are generally not expressing significant concern, with the exception of nonprofits who are worried about future government funding. He affirmed that the bank's traditional, fundamental underwriting approach has not changed. CFO Dave Bonaccorso added that the bank accelerated securities purchases late in Q1 and into Q2 to deploy excess liquidity, capturing yields 40-50 basis points above cash.

David Feaster asked if the strong loan origination was driven more by market share gains than improving demand and whether growth could accelerate. He also inquired about the potential for loan pool purchases. On the deposit side, he asked for quantification of seasonal dynamics and where the bank is seeing opportunities for new account growth.

Answer

President and CEO Tim Myers confirmed the growth was primarily from market share gains and team productivity, and that the bank is nearing an inflection point where originations could outpace payoffs. He stated the focus remains on organic growth over loan pool purchases. Regarding deposits, Myers explained that nearly all of the Q4 fluctuation was seasonal and that the bank is focused on acquiring new operating accounts from C&I clients, noting that over a third of new loan commitments were to new C&I companies.

David Feaster followed up on the integration of Guaranty Bank & Trust, seeking an early read on its progress, particularly in a new market like Texas, and what aspects of the integration and the new division Randy Chesler found most exciting. He also asked about the longer-term net interest margin outlook, specifically if the pre-pandemic mid-4% range is still achievable, and if robust margin expansion is expected into 2027.

Answer

Randy Chesler, President and CEO, highlighted the success of their model in minimizing disruption by retaining the bank's name, people, and leadership, noting a seamless cultural and credit fit. He expressed excitement about Guaranty's strong market positioning in East Texas and growth markets like Dallas-Fort Worth, College Station, Houston, and Austin, and the opportunity to leverage Glacier's sophisticated tools and larger balance sheet. Ron Copher, CFO, stated that while the immediate focus is on reaching 4% NIM, he could 'absolutely' see continued expansion beyond that into 2027, potentially towards the mid-4% range.

David Feaster inquired about Glacier Bancorp's loan growth, specifically the organic growth rate in the recent quarter and expectations for Guaranty Bank & Trust's contribution. He also asked about the net interest margin (NIM) trajectory, confidence in reaching a 4% NIM, and the core expense run rate for the upcoming year, including potential investments in hiring.

Answer

Randy Chesler, President and CEO, and Tom Dolan, Chief Credit Administrator, explained that Q4 is seasonally slower, with low- to mid-single-digit growth expected for 2026, supported by a record pipeline and construction tailwinds. Ron Copher, CFO, provided a Q1 2026 core non-interest expense guide of $189-$193 million, with a full-year core operating expense guide of $750-$766 million, noting typical seasonal increases and a focus on technology for efficiency. Byron Pollan, Treasurer, confirmed the expectation to hit 4% NIM in the second half of 2026, driven by structural repricing drivers independent of Fed cuts. Randy Chesler added that talent acquisition is selective and not expected to materially increase expenses.

David Feaster of Raymond James Financial inquired about the drivers of organic loan growth, including pipeline strength, client sentiment, and the competitive landscape for pricing and structure. He also asked about planned Q3 hiring and potential talent acquisition opportunities in Texas following recent market disruption.

Answer

Chief Credit Officer Tom Dolan noted that organic growth was solid due to seasonal strength and strong production yields of 7.35%, with competition focused on pricing rather than structure. President & CEO Randall Chesler explained that upcoming hiring is primarily for back-office infrastructure, and confirmed the Guaranty Bancshares team is actively monitoring talent opportunities in the dynamic Texas market.

David Feaster of Raymond James Financial questioned the drivers of organic loan growth, the current competitive landscape for loan pricing and structure, and the nature of planned hiring, including potential opportunities in the Texas market.

Answer

Chief Credit Officer Tom Dolan attributed strong organic growth to seasonality and increased line utilization, noting that customer optimism is rising and competitive pressures are primarily on pricing, not structure. President & CEO Randall Chesler clarified that upcoming hiring is mainly for back-office and infrastructure roles to support growth, while also acknowledging that the Guaranty Bancshares team is monitoring potential talent acquisition opportunities in Texas amid market disruption.

David Feaster of Raymond James asked about segments being watched closely due to economic uncertainty, the competitive landscape for loan pricing and spreads, and the current yields on new originations.

Answer

Chief Credit Administrator Tom Dolan noted that since their portfolio lacks multinational companies, they focus on domestic price impacts but are not seeing widespread project cancellations. He stated that competition is present but has not become irrational on structure or underwriting. He confirmed new loan spreads are holding around 300 basis points over the 5-year curve, with Q1 origination yields near 7.40%.

David Feaster of Raymond James & Associates, Inc. asked about opportunities for further deposit cost reductions, noninterest-bearing deposit trends, and credit quality. He also sought clarification on whether the 2025 margin guidance included the Bank of Idaho acquisition.

Answer

Treasurer Byron Pollan confirmed the 2025 NIM guidance of 3.20%-3.25% includes the Bank of Idaho acquisition. He noted customer reception to rate cuts has been understanding and sees further cost reduction opportunities in the CD portfolio, while attributing Q4 noninterest-bearing deposit outflows to seasonality. Chief Credit Administrator Tom Dolan and Executive Randall Chesler both affirmed that credit remains strong with no material negative trends.

David Feaster from Raymond James asked about the drivers of lighter organic loan growth, repricing dynamics within earning assets, and the company's high-level strategy regarding its geographic footprint, expansion priorities, and the balance between organic growth and M&A.

Answer

Chief Credit Administrator Tom Dolan attributed slower loan growth to a combination of weaker demand and elevated payoffs from construction projects. Regarding repricing, Treasurer Byron Pollan confirmed securities portfolio cash flows of $250 million per quarter, with new loan yields in the mid-to-upper 7s creating a positive lift. CFO Ron Copher stated the company pursues a dual strategy of organic expansion and M&A to build scale in its fast-growing eight-state footprint, keeping options open across all markets rather than prioritizing one.

David Feaster asked about the drivers of loan portfolio decline, distinguishing between intentional runoff and elevated paydowns, and the expected retention rate for transactional relationships. He also sought details on the timeline for Pac Premier's system integration, technology rollout, and cross-selling opportunities for fee income.

Answer

Ivan Seda, EVP and CFO, attributed the loan decline to transactional portfolio runoff and CRE construction/development. Tory Nixon, Co-President, noted a 75-80% retention rate for transactional multifamily loans and explained that 85% of construction loan exits are due to permanent financing by agencies. Clint Stein, Chair, CEO, and President, and Chris Merrywell, Co-President, discussed the ongoing system integration, aiming for full cost savings by Q2, and highlighted the successful adoption of Pac Premier's custodial trust business and API marketplace.

David Feaster inquired about the drivers of loan portfolio decline, distinguishing between intentional runoff and normal paydowns, and the expected retention rate of transactional loan relationships. He also asked about the timeline for Pac Premier system integration and cross-selling opportunities for fee income lines.

Answer

Ivan Seda (EVP and CEO) explained the loan decline was concentrated in transactional and CRE construction/development portfolios, with a 75-80% retention rate for repricing transactional loans. Clint Stein (Chair, CEO, and President) noted the full realization of cost saves by Q2 2026 as a guide for system integration. Chris Merrywell (Co-President) highlighted the adoption of Pac Premier's custodial trust technology. Tory Nixon (Co-President) emphasized strong C&I growth and a healthy core fee income pipeline from Pac Premier cross-selling.

David Feaster of Raymond James Financial inquired about the drivers behind the increase in loan originations, the potential for early execution on balance sheet optimization for the upcoming Pacific Premier acquisition, and current initiatives to grow fee income.

Answer

President and CEO Clint Stein attributed loan growth to strong banker activity in newer markets offsetting runoff in the legacy portfolio. On the acquisition, he noted they are positioned for a smooth close but will wait for day-one fair value marks on loans. Torran Nixon, President of Commercial Banking, detailed several fee income initiatives, including a predictive analytics program and working capital assessments, which have driven strong year-over-year growth in areas like commercial card (up 14%) and international banking (up 50%).

David Feaster of Raymond James Financial inquired about the drivers of increased loan originations, the outlook for fee income growth, and balance sheet optimization strategies ahead of the Pacific Premier acquisition.

Answer

President, CEO & Director Clint Stein and President - Commercial Banking Torran Nixon attributed loan activity to strong banker productivity and new market momentum, which is offsetting runoff. Nixon detailed significant year-over-year growth in fee income lines like commercial card (14%) and international banking (50%), driven by deliberate initiatives. Stein confirmed that while some securities have been pre-purchased for the combined entity, major balance sheet moves for Pacific Premier will wait until post-close to capture favorable accounting marks.

David Feaster of Raymond James questioned the success of small business campaigns, the drivers of recent loan growth, and the dynamics of deposit seasonality and repricing.

Answer

Executive Christopher Merrywell reported high retention (mid-80s) and growing average balances from past small business campaigns, with a new one recently launched. Executive Torran Nixon attributed strong loan growth to a combination of some increased demand, momentum from an evolving sales culture, and contributions from new hires across the footprint. CFO Ron Farnsworth quantified recent deposit outflows and noted customer conversations on repricing have been well-received, with Merrywell adding that significant CD maturities provide further repricing opportunities even without Fed rate cuts.

David Feaster asked for details on the successful small business deposit campaigns, the bank's expansion strategy in markets like Arizona and Colorado, and the outlook for the loan pipeline and organic growth.

Answer

EVP & Chief Commercial Banking Officer Christopher Merrywell explained the deposit campaigns are broad-based, relationship-focused, and will continue. President Torran Nixon highlighted successful de novo market entries and noted Southern California as a key growth area. CEO Clint Stein stated the immediate focus is on organic performance rather than M&A, pending clarity on the election and Fed policy. Nixon added the loan pipeline is stable with a healthy mix.

David Feaster from Raymond James sought details on the company's reinvestment plans following its cost-saving initiatives, the potential for further loan portfolio sales, and the outlook for loan growth and demand.

Answer

President and CEO Clint Stein detailed that reinvestments focus on people, facilities, and technology to drive long-term revenue, including new branches in Phoenix and attracting talent. He also noted that while the bank is open to selling more transactional loan portfolios, it depends on market rates and there are no immediate plans. President of Commercial Banking Torran Nixon described the loan pipeline as steady, with a shift from CRE to C&I, but overall demand remains benign. He anticipates low single-digit loan growth for the remainder of the year.

David Feaster asked about the competitive landscape for core deposits, where the bank is successfully acquiring new deposit business, and expectations for deposit betas following potential Fed rate cuts. He also questioned the competitive environment for loan growth, specifically regarding competitor aggressiveness on underwriting standards, and the potential for payoffs and paydowns to be a headwind in the coming year.

Answer

David A. Brager, President and CEO, explained that new deposit relationships are predominantly non-interest-bearing (75%+) and that the bank does not compete on offering the highest rates. He noted that during the last rate cut, they lowered rates by 0.25% on accounts earning over 1%. On loan growth, he stated that competition is primarily on pricing rather than underwriting, with some competitors offering lower rates for resets and maturities. He also mentioned an increase in shorter-term loan requests (3-5 years) and acknowledged that payoffs and paydowns are a constant factor, though lower in Q4 than Q3.

David Feaster asked about the competitive landscape for deposits, where the bank is winning new business, and expectations for deposit betas following potential Fed rate cuts. He also questioned the competitive environment for loans, specifically regarding pricing aggressiveness and underwriting standards, and the potential for payoffs and paydowns to be a headwind.

Answer

President and CEO David A. Brager explained that the bank targets operating companies, with new deposit relationships typically 75%+ non-interest-bearing, and noted that they are not a high-rate bank. He mentioned lowering rates by 0.25% on interest-bearing accounts over 1% after the last Fed cut and observed increased competition using earnings credit. For loans, Mr. Brager indicated that while payoffs are a constant factor, competition is more on pricing than credit, with new production yields around 6% to remain competitive, and an increase in shorter-term loans. He confirmed no significant pressure on underwriting standards.

David Feaster of Raymond James Financial, Inc. asked about the primary sources of loan competition, the outlook for originations outpacing payoffs, the contribution of the specialty banking group to deposit trends, and the current M&A environment.

Answer

CEO David Brager identified the 'fiercest' competition as coming from regional banks in the $100B-$250B asset range, not from private credit. He expressed confidence that originations can still outpace payoffs. Regarding the specialty banking group, he noted its performance is strong but below last year's record pace due to disciplined pricing on earnings credit rates (ECR). On M&A, Brager confirmed active conversations and acknowledged the bank may need to look 'further outside of our box' to secure a deal, noting a lack of recent in-market transactions in California.

David Feaster of Raymond James Financial, Inc. asked about the primary sources of loan competition and whether originations could outpace payoffs in the second half of the year. He also inquired about the specialty banking group's contribution to deposit growth and the competitive landscape for funding. Finally, he asked for an update on the M&A environment.

Answer

CEO David Brager stated that he believes originations can outpace payoffs and identified the 'fiercest' competition as coming from regional banks in the $100B-$250B asset range. He noted the specialty banking group is performing well despite intense competition on earnings credit rates (ECR). On M&A, Brager confirmed conversations are ongoing but seller pricing expectations are challenging. He remains hopeful for a deal by year-end, potentially requiring a move 'outside of our box,' as most recent bank M&A has occurred outside of California.

David Feaster of Raymond James Financial inquired about the source of loan competition and the outlook for originations outpacing payoffs. He also asked about the specialty banking group's contribution to deposit growth and the competitive landscape for funding. Finally, he requested an update on the M&A environment.

Answer

President & CEO David Brager stated that he expects originations to outpace payoffs, with competition coming primarily from regional banks in the $100B-$250B asset range, not private credit. He noted the specialty banking group continues to perform well by focusing on service over aggressive ECR rates. On M&A, Brager confirmed active conversations and a willingness to look 'outside of our box,' including potentially outside California, to secure a deal, possibly by year-end.

David Feaster of Raymond James Financial, Inc. asked about the source of loan competition, the outlook for originations versus payoffs, and the specialty banking group's contribution to deposit growth. He also inquired about the current M&A environment and the bank's appetite for deals.

Answer

President & CEO David Brager identified regional banks in the $100B-$250B asset range as the source of the "fiercest" competition and expressed confidence that originations can still outpace payoffs. He noted the specialty banking group continues to perform well by competing on service, not just price. On M&A, Brager confirmed conversations are ongoing and that the bank might consider deals "pushing a little further outside of our box," with a potential for an announcement by year-end.

David Feaster inquired about the bank's credit underwriting focus amid economic uncertainty, the drivers of its strong core deposit growth, and its capital priorities, specifically balancing share buybacks with potential M&A.

Answer

President and CEO David Brager explained that their disciplined underwriting approach remains unchanged, though debt yield assumptions are adjusted for the rate environment. He attributed strong deposit growth primarily to new relationships, especially within the Specialty Banking group. On capital, Mr. Brager and Executive E. Nicholson confirmed they have ample capacity for both share repurchases and M&A, with Mr. Brager noting ongoing M&A conversations and an improved position as a potential acquirer.

David Feaster of Raymond James inquired about client sentiment and loan demand for 2025, the bank's capital deployment priorities including M&A and buybacks, and the strategy for managing deposit costs and growing core deposits.

Answer

President and CEO David Brager confirmed a sense of optimism among clients and improving loan pipelines, though not yet at desired levels. He stated that while M&A conversations have increased, there's a valuation gap with potential sellers. Brager emphasized a disciplined approach to capital, noting the bank has capacity for both M&A and opportunistic buybacks under its 10b5-1 plan. He also expressed confidence in growing low-cost deposits, citing strong new relationship generation.

David Feaster asked about the loan growth outlook given tepid demand and intense competition. He also sought details on credit quality trends, including pressures on clients and the drivers behind recent deposit growth, questioning whether it came from new or existing customers.

Answer

CEO David Brager acknowledged that loan demand is slow and competition is fierce, with a focus on growing C&I operating company relationships to position the bank for 2025. On credit, he stated that recent nonperforming loan issues were one-off situations unrelated to the rate environment, highlighting strong underwriting with low loan-to-values. He attributed strong deposit growth primarily to winning new relationships across key business lines like government services and title escrow, rather than from existing customer balances, which are at multi-year lows.

David Feaster inquired about the projected Net Interest Margin (NIM) trajectory for the year, assuming three Fed rate cuts, and whether expansion is expected. He also asked for insights into expense trends, including a core expense run rate, key investment areas like Live Oak Express and embedded finance, and the bank's focus on expense management. Additionally, he sought color on credit trends, specific pressure points, the drivers behind the increase in non-accruals, and classified asset trends.

Answer

Walt Phifer (CFO, Live Oak Bancshares) stated that a stable or lower rate environment, with 25 basis point Fed cuts, allows deposit pricing to catch up, leading to NIM expansion after an initial Q1 step down, largely driven by growth. He projected mid-single-digit year-over-year expense growth, with strategic investments in Business Checking, Live Oak Express, and AI. Michael Cairns (Chief Credit Officer, Live Oak Bancshares) described Q4 2025 as a stable credit quarter with low past dues and flat to slightly improving classified loans. He explained that the increase in non-accruals, primarily in the SBA portfolio, is a natural progression within the classified loan portfolio, with potential losses already assessed, and noted Live Oak's outperformance compared to broader SBA industry trends.

David Feaster inquired about the projected Net Interest Margin (NIM) trajectory for the year, considering the three embedded Fed cuts and potential for expansion from prior cuts' tailwinds. He also asked about expense management, core expense run rate, and credit trends, including pressure points and drivers of non-accruals.

Answer

Walter Phifer, CFO, indicated an expected NIM step down in Q1, followed by an upward trajectory driven by growth, emphasizing focus on net interest income. He projected mid-single-digit year-over-year expense growth, prioritizing investments in Business Checking, Live Oak Express, and AI. Michael Cairns described Q4 credit as stable, with low past dues and flat classified loans, explaining non-accruals as a natural progression of classified loans with assessed losses, and noted Live Oak's outperformance in SBA trends.

David Feaster questioned whether underwriting standards have been adjusted given broader economic uncertainties and tariffs, and explored opportunities to leverage technology and AI for improved underwriting and earlier credit risk identification. He also sought further clarification on the government shutdown's impact on organic growth and the SBA's ability to manage backlogs. Finally, he requested an update on the embedded finance build-out and Live Oak's strategy regarding stablecoins and potential deposit growth.

Answer

President and COO William Losch III confirmed consistent underwriting with occasional modifications, such as requiring direct operating experience in specific verticals. He detailed AI's role in streamlining underwriting by ingesting documents, creating credit memos, and performing market analysis. CFO Walter Phifer reiterated that the SBA quickly processes backlogs post-shutdown, and pre-pulled PLPs ($900 million) would likely prevent any significant impact on Q4 growth, with conventional lending as a last resort for extended shutdowns. William Losch III updated on embedded finance, noting a pivot to a partnership model for accelerated growth, and stated that Live Oak is actively studying stablecoins, leveraging new board member Patrick McHenry's expertise, to stay ahead of market evolution.

David Feaster inquired about adjustments to underwriting standards amid broader economic uncertainty and the potential use of technology and AI to enhance underwriting and early credit identification. He also sought further clarification on the government shutdown's impact on organic growth and the embedded finance build-out, including opportunities in stablecoin.

Answer

William Losch III, President and COO, explained that underwriting standards are consistently tweaked across verticals, sometimes requiring direct operating experience, and detailed AI's role in ingesting documents, creating credit memos, and performing competitive analysis. Walter Phifer, CFO, reiterated that a short government shutdown would likely not impact SBA growth due to pre-pulled PLP reservations. William Losch III also updated on embedded finance, noting a pivot to a partner platform for acceleration, and confirmed active study of stablecoin participation, with Chip Mahan, Chairman and CEO, adding context on Canopy's venture investment strategy.

David Feaster from Raymond James Financial inquired about the drivers behind strong loan origination, the notable increase in loan payoffs, the outlook for growth, and the competitive pricing landscape. He also asked about the strategy for reducing deposit costs and the basis for management's confidence that the small business credit cycle is nearing its end.

Answer

CFO Walt Phifer explained that higher payoffs were driven by a few specific, non-thematic loans and reiterated a 12-20% annual growth outlook. He also noted potential for further deposit rate reductions. President William C. Losch III attributed strong originations to consistency and brand strength in SBA lending, particularly as competitors pull back. Chief Credit Officer Michael Cairns cited improving metrics like past dues, defaults, and non-accruals as the basis for confidence in the credit cycle's end.

David Feaster inquired about the bank's primary areas of focus for credit monitoring, which segments are experiencing the most pressure, and how the bank's vertical-based business model is helping manage risk. He also requested an update on the syndication (Simply) and embedded finance initiatives.

Answer

Chief Credit Officer Michael Cairns noted a holistic portfolio review, with skepticism on new transactions in auto dealerships and government contracting, but highlighted encouraging signs like low past dues. William C. (BJ) Losch III added that the bank is proactively building reserves. Regarding innovation, Losch stated that while the main focus remains on core lending and deposits, the bank continues to incubate long-term projects like Simply and its next-generation technology platform.

David Feaster asked for clarification on being more 'creative' in helping borrowers, inquired about hiring plans to support growth, and sought details on the momentum in business checking and the outlook for the small-dollar SBA loan program.

Answer

Chairman and CEO James Mahan provided an example of creative assistance, where the bank connected a struggling business with an expert to advise on implementing price increases. Executive BJ Losch discussed hiring, but emphasized scalability through AI to automate manual processes. He noted they can do 'far better' than the current 35% deposit attachment rate for new loans and would be disappointed if the small-dollar loan program didn't more than double its $125 million 2024 production in 2025, aided by new technology.

David Feaster asked for an update on the small dollar SBA origination program's progress and its expected timeline to become a material revenue contributor. He also inquired about the status of the embedded banking initiative and the recently announced Simply syndication platform.

Answer

Executive William C. (BJ) Losch III reported that the small dollar SBA program (Live Oak Express) surpassed $100 million in production and could reach $130 million by year-end, primarily driven by people, with significant technology enhancements expected next year. He projected it could become a $0.5 billion to $1 billion annual business. On embedded banking, Losch described it as a 'moonshot effort,' highlighting the first partnership with Anatomy Financial and plans for a second. He framed the Simply partnership as an example of successful internal incubation. Chairman and CEO James Mahan emphasized that the bank's proprietary fintech core is a critical advantage for its embedded banking ambitions.

David Feaster inquired about the drivers of Simmons First National Corporation's strong fourth-quarter loan growth, the composition of the loan pipeline, and the implications for 2026 growth. He also asked for clarity on the fourth-quarter net interest margin (NIM), the impact of the backbook repricing, and expectations for margin expansion. Additionally, he sought insights into current market competition for deposits and loan pricing. Finally, he questioned the company's asset quality, the resolution of problem credits, potential divestitures, and any shifts in underwriting. He also asked about opportunities across the company's footprint, hiring strategies, and an update on the 'Better Bank' initiative's progress in improving processes and procedures.

Answer

President and CEO James Brogdon highlighted the highest loan production in years, strong 'ready-to-close' pipelines, and a 2026 outlook for low to mid-single-digit growth, while maintaining caution on credit and pricing. CFO Daniel Hobbs detailed the NIM expansion, attributing it to balance sheet restructuring and core business practices, and projected a stable NIM for 2026 with tailwinds from backbook loan repricing and moderating deposit betas. Brogdon noted intense loan pricing competition, particularly in CRE, due to 'irrational pricing' from smaller banks, while deposit competition was manageable. Regarding asset quality, Brogdon confirmed stable credit outlook after resolving legacy non-performers and divesting the equipment finance portfolio. He also expressed excitement about talent acquisition across all business areas and provided an update on the 'Better Bank' initiative, noting significant progress in efficiency and automation, with expenses below 2022 levels, and a focus on self-funding future investments. COO Chris Steenburg added details on continuous improvement, vendor spend optimization, and facilities reduction.

David Feaster from Raymond James inquired about Simmons First National Corporation's asset quality, specifically the resolution of problem credits and the sale of the Equipment Finance business. He asked if the deep dive into NPAs revealed anything that shifted underwriting or if other divestitures are being considered. Feaster also sought insights into market opportunities, strategic positioning to capitalize on disruption, and the company's appetite for talent acquisition across segments and markets. Lastly, he requested an update on the 'Better Bank initiative,' focusing on process and procedure improvements and near-term priorities for efficiency.

Answer

President and CEO James Brogdon stated that reserve levels were adequate for the actions taken on problem credits and the Equipment Finance portfolio, which was a legacy acquisition in runoff. He characterized the credit outlook as stable, with early indicators supporting this view, and noted that the deep dive primarily cleaned up unique, long-standing non-performers. Brogdon indicated that opportunities are strong across the entire footprint (southwest, midwest, southeast) for both revenue-generating and support roles, with robust talent pipelines. He described the 'Better Bank initiative' as being in the 'middle innings,' with significant automation and standardization already achieved, resulting in 2025 expenses below Q4 2022 levels. Brogdon explained that current efficiency efforts aim to self-fund investments in talent and technology, aligning with the 2-3% year-over-year expense guide. CFO Daniel Hobbs added that the company has adopted a continuous improvement mindset, with ongoing vendor spend optimization and a 6% reduction in square footage across facilities (60% retail, 40% corporate) as examples of efficiency gains. COO Chris Steenberg highlighted the focus on accelerating successful initiatives and the significant opportunity in the small business segment for deposit-rich customers.

David Feaster asked for the expected resolution timeline for the two large nonperforming credits, the key drivers of the 43% increase in the commercial loan pipeline, and the strategy for deposit growth amid a competitive landscape.

Answer

President Jay Brogdon stated that while they aim to resolve the problem credits by year-end, the timeline is flexible to ensure the best financial outcome. He attributed the strong loan pipeline to broad-based demand across C&I, CRE, and agriculture, with some borrowers pulling projects forward. Regarding deposits, Brogdon and CFO Daniel Hobbs described a competitive environment but highlighted success in remixing customer deposits into lower-cost accounts and noted the first quarter of near-flat non-interest-bearing deposit performance in some time.

David Feaster questioned the client reception to lower deposit rates amid a competitive landscape, the composition of the loan pipeline, and the overall credit outlook, asking what specific areas management is watching closely.

Answer

President Jay Brogdon described the deposit market as competitive but noted client elasticity has been favorable. CFO Daniel Hobbs added that over 75% of balances from maturing relationship CDs were retained. Regarding loans, Mr. Brogdon stated the pipeline is well-diversified and that pricing discipline will be maintained. On credit, he characterized the environment as a 'normalization,' with the primary focus on a small, known runoff portfolio and no new notable concerns emerging.

David Feaster of Raymond James inquired about the potential for more opportunistic balance sheet repositioning and funding optimization, particularly with maturing FHLB advances. He also asked for the outlook on the net interest margin (NIM) trajectory and loan growth prospects.

Answer

President Jay Brogdon stated that Simmons will remain opportunistic with the bond portfolio as market conditions permit. CEO Bob Fehlman added that current earnings are a key factor in sizing any sales. Regarding the NIM, Brogdon projected a stable Q4 with more notable positive inflection in 2025. He also noted that while the appetite for loan growth is strong, broad-based demand has not yet materialized due to macro uncertainty.

David Feaster asked about Stellar Bancorp's loan growth dynamics, including drivers of payoffs and paydowns, the competitive landscape in Texas, and the overall growth outlook. He also inquired about the bank's credit quality, management approach, stress testing, and monitoring processes. Additionally, he sought details on the strong deposit growth, its drivers (new vs. existing clients), and plans for deploying excess liquidity.

Answer

Ray Vitulli, President of Stellar Bancorp and CEO of Stellar Bank, explained that payoffs increased by $50 million quarter-over-quarter, with 44% related to asset/business sales and 25% to competitive refinances. He noted that loan originations were up 62% year-to-date with a healthy pipeline. Bob Franklin, CEO of Stellar Bank, emphasized managing credit at origination, the shift to a larger community bank with a lower loan-to-deposit ratio (low 80s%), and a focus on C&I and real estate in dynamic markets. On deposits, Ray Vitulli highlighted that 51% of new deposits came from new customers, reflecting brand awareness and improved customer satisfaction. Bob Franklin added that the bank prioritizes low-cost deposits and plans to deploy liquidity in loans and securities, while avoiding 'credit light' competition despite M&A disruption.

David Feaster asked about the drivers of loan growth, specifically the impact of payoffs and paydowns, competition versus asset sales, and the overall growth outlook in the competitive Texas market amidst recent disruption. He also inquired about Stellar Bank's credit quality concerns, their broad observations on credit trends, and their approach to credit management, collateral, stress testing, and ongoing monitoring. Finally, he asked about the drivers behind strong deposit growth, the mix of new versus existing clients, and plans for deploying excess liquidity.

Answer

Ray Vitulli (President of the Company and CEO of Bank) explained that payoffs were higher than the run rate, with 44% related to collateral/business sales and 25% to competitive refinances. He noted that loan originations were up 62% year-to-date, and the pipeline remains healthy. Bob Franklin (CEO) emphasized managing credit by focusing on quality at origination, performing stress testing, and monitoring portfolios. He highlighted the shift towards stickier C&I credits and continued real estate lending in dynamic markets like Houston and Dallas. Regarding deposits, Ray Vitulli stated that 51% of new deposits came from new customers, reflecting brand awareness and banker success. Bob Franklin added that the bank prioritizes low-cost deposits and plans to deploy liquidity into loans and securities, while remaining disciplined in a competitive market with 'credit light' offerings.

David Feaster of Raymond James Financial inquired about Stellar Bancorp's loan growth outlook, the competitive landscape for both loans and funding, and the strategy for managing expenses while remaining open to opportunistic investments in talent.

Answer

Senior EVP & CFO Paul Egge noted that new loan originations nearly doubled in Q2, setting a baseline for future growth. He described a measured approach to deposit pricing and success in acquiring new customers. On expenses, Egge stated the strategy is to 'hold the line where we can' to maintain flexibility for opportunistic spending. Executive Chairman & CEO Robert Franklin added that the bank is always open to hiring new talent to drive growth.

David Feaster inquired about the outlook for loan growth, asking for insights into client sentiment amid economic uncertainty, pipeline trends, and the balance between loan payoffs and new originations. He also questioned the competitive dynamics in the deposit market and the bank's success in winning new relationships. Finally, he asked for color on credit quality, specifically the migration in nonaccruals and any concerns related to new tariff policies.

Answer

CEO Bob Franklin and President Ramon Vitulli addressed loan growth, explaining a strategic effort to reconfigure the loan portfolio by letting smaller real estate loans roll off while building a stronger pipeline for new customer acquisition, with growth expected in the second half of the year. Mr. Vitulli noted payoffs have been around $275-$300 million per quarter. On deposits, Mr. Vitulli and CFO Paul Egge highlighted strong new account growth from new customers, achieved through relationship banking rather than leading on price. Chief Credit Officer Joe West clarified that recent nonaccrual migration was due to specific management issues in owner-occupied CRE, not tariffs, and that the bank maintains its cautious underwriting standards focused on cash flow.

David Feaster asked for an update on the Houston economy, the competitive landscape for loans and deposits, and the current environment for hiring experienced lenders.

Answer

CEO Robert Franklin described the Houston economy as resilient and underappreciated, with tailwinds from stabilized interest rates. He noted that competition is intense, but Stellar's localized approach allows it to win business from larger national banks. President Ramon Vitulli added that strong deal flow and new customer acquisition trends show momentum. Regarding hiring, Franklin acknowledged it's competitive but highlighted the success of their internal ODP training program in developing effective young talent.

David Feaster of Raymond James inquired about the drivers behind the quarterly loan decline, the dynamics of deposit costs ahead of Fed cuts, and the forward-looking trajectory for the net interest margin.

Answer

President and Bank CEO Ramon Vitulli explained that while originations increased, a strategic posture in construction lending led to net runoff where payments exceeded advances. CEO Robert Franklin added that the bank is repositioning its portfolio. On funding, Vitulli noted strong new account growth at lower rates. CFO Paul Egge highlighted discipline in letting wholesale funds mature and expressed confidence in defending the net interest margin, with potential for improvement depending on loan growth and rate cuts.

David Feaster questioned the competitive landscape and the reasons for the quarter-over-quarter decline in loan originations, asking if it was due to weaker demand, slower pipeline pull-through, or increased competition, particularly from larger banks. He also sought insight into new origination yields, spreads, and whether competitive pressures were impacting underwriting standards. Additionally, he asked about the strategic investments Banner Corporation has been making, where the most benefits are being realized, current investment areas (technology, talent), and future plans.

Answer

Chief Credit Officer Jill Rice stated that the competitive landscape remains largely unchanged, with some players offering different terms but underwriting generally holding up, though there's an ask for longer interest-only periods. She attributed the decline in originations to strong pull-through in the prior quarter and muted reaction to the initial rate cut, expecting stronger fourth-quarter growth. CFO Rob Butterfield detailed technology investments, including a new deposit and loan origination system for scalability, fraud-related technology, and a strategic AI roadmap, emphasizing long-term benefits over immediate cost reductions. Jill Rice added that talent acquisition continues, particularly in commercial and commercial real estate teams across the West Coast, driven by Banner's operating model.

David Feaster of Raymond James Financial inquired about the drivers behind the significant increase in loan originations, the competitive landscape for deposits, and the strategy for funding loan growth if it outpaces deposit growth.

Answer

EVP & Chief Credit Officer Jill Rice explained that the strong loan originations were partly seasonal and represented a pull-through of muted activity from Q1, while maintaining a mid-single-digit growth forecast for the year. EVP & CFO Robert Butterfield added that deposit competition is not intensifying significantly and that the bank's relationship-focused model, particularly with deposit-rich small businesses, supports core funding. He confirmed FHLB advances were a temporary plug for funding this quarter and expects seasonal deposit inflows in Q3 to cover growth, noting securities portfolio cash flows are approximately $60 million per quarter.

David Feaster inquired about the drivers behind the significant increase in loan originations, asking if customer sentiment had improved and how loan pipelines were holding up. He also asked about the funding strategy, including deposit competition, initiatives for core deposit growth, and plans to fund loan growth via securities cash flow, FHLB advances, or asset sales.

Answer

EVP & Chief Credit Officer Jill Rice attributed the strong originations to seasonality and a catch-up from a slower Q1, reaffirming the mid-single-digit growth forecast for the year. EVP & CFO Rob Butterfield noted that deposit competition has not intensified recently, emphasizing the bank's relationship-focused strategy. He confirmed FHLB advances were a temporary funding plug and that the bank expects seasonal deposit inflows in Q3 to help fund growth, supplemented by approximately $60 million in quarterly securities cash flows.

David Feaster of Raymond James Financial asked about the drivers behind the significant increase in loan originations, the competitive landscape for deposits, and the strategy for funding loan growth if it outpaces deposit growth.

Answer

EVP & Chief Credit Officer, Jill Rice, explained that the Q2 origination surge was partly a pull-through from a slower Q1 and reiterated the mid-single-digit growth forecast for the year. EVP & CFO, Robert Butterfield, noted that deposit competition is not intensifying significantly and that FHLB advances were a temporary funding plug, with securities cash flows at $60 million per quarter and an expectation for seasonal deposit inflows in Q3.

David Feaster inquired about the drivers behind the significant increase in loan originations, the status of loan pipelines, and the competitive landscape for deposits. He also asked about the strategy for funding loan growth, including the use of securities portfolio cash flows and FHLB advances.

Answer

EVP & Chief Credit Officer, Jill Rice, attributed the strong originations to some Q1 activity pulling through into Q2 and reaffirmed the company's expectation for mid-single-digit loan growth for the full year. EVP & CFO, Robert Butterfield, noted that deposit competition is not intensifying significantly and that the bank's relationship-focused model supports core funding. He confirmed securities cash flows are about $60 million per quarter and that FHLB advances were used as a temporary funding bridge, with seasonal deposit inflows expected in Q3.

David Feaster of Raymond James asked about loan demand, competitive dynamics, and pipeline health. He also questioned the potential impact of trade tariffs, the strategy for managing funding costs, and the drivers of recent growth in California.

Answer

EVP & Chief Credit Officer Jill Rice noted that growth opportunities are diverse and that while uncertainty caused a pause, pipelines are rebuilding. She detailed a granular approach to monitoring tariff risks, believing small businesses will be most impacted. EVP & CFO Robert Butterfield discussed the stable funding cost environment and the strength of the bank's core deposit base. Regarding California, Jill Rice credited the growth to the successful hiring of talented bankers who have brought new clients to the bank.

David Feaster inquired about the sentiment among clients and the drivers of the recent uptick in C&I originations. He also asked about the success of reducing deposit costs without client attrition and sought commentary on credit trends, particularly within the agriculture portfolio.

Answer

Executive Jill Rice described client optimism as 'tempered' and noted C&I growth was diversified across California and Washington. CFO Robert Butterfield and CEO Mark J. Grescovich stated that deposit cost reductions have been well-received by sophisticated clients without causing attrition, noting that total account numbers actually increased. Rice addressed credit, explaining that the ag portfolio is seeing some strain from lower commodity prices, leading to increased reserves, but emphasized it remains a small part of the overall loan book.

David Feaster asked about the sustainability of core deposit growth, the loan growth outlook and key drivers, the potential for CRE refinancing activity, the expected trajectory of the net interest margin, and the bank's appetite for securities portfolio repositioning.

Answer

EVP and CFO Robert Butterfield stated that while Q3 deposit growth was exceptionally strong, he expects loan growth to outpace deposit growth long-term, with small business relationships being a key source of core deposits. EVP, Commercial Banking Jill Rice projected continued low-to-mid-single-digit loan growth, potentially rising to mid-single-digits in 2025, and has not yet seen accelerated CRE payoffs. Robert Butterfield added that the margin could remain stable with gradual Fed cuts but would see initial compression with more aggressive cuts. He also noted that the math for a securities repositioning is currently challenging under their three-year earn-back target.

David Feaster of Raymond James Financial inquired about potential opportunities to further optimize the balance sheet beyond the current held-for-sale (HFS) loan sales and asked for an update on the private banking initiative, including talent acquisition, system needs, and potential growth contributions.

Answer

CEO Thomas Shafer clarified that the primary focus remains on reducing the commercial real estate (CRE) concentration and exiting the HFS portfolio, with no plans to accelerate sales of other assets. Regarding private banking, Mr. Shafer expressed strong optimism, noting a program has been in development for four months and they are actively recruiting a new leader. While some early cross-sell success has occurred, he indicated that the new leader would finalize the strategy's details.

David Feaster of Raymond James inquired about new CEO Tom Shafer's high-level balance sheet strategy, the plan for funding maturing brokered CDs, demand for the multifamily loan portfolio, and the specifics behind the first-ever multifamily loan loss.

Answer

CEO Thomas Shafer stated his initial focus is on reviewing methodologies and establishing high standards appropriate for the bank's size to ensure long-term sustainability. Executive Jamie Britton outlined a multi-pronged funding strategy, including continued sales of held-for-sale loans, investments in new commercial bankers to drive core deposit growth, and expected runoff from multifamily loan rate resets. Britton also confirmed strong demand for the held-for-sale portfolio, with over 30 parties under NDA. Shafer clarified the small multifamily loss was an isolated incident in San Francisco involving unique property management issues after the owner's death and is not indicative of a broader trend.

David Feaster inquired about the expected timeline for selling the $1.9 billion in loans moved to held-for-sale, the pricing of potential sales relative to the initial mark-to-market adjustment, the impact of Earnings Credit Rate (ECR) deposits on expenses, and the outlook for organic loan growth.

Answer

Executive Jamie Britton explained that the company will be methodical with the loan sales to ensure best execution, noting a ~$500 million securitization is planned for Q4 2024, with other sales and securitizations possible in 2025. Executive Scott Kavanaugh confirmed that ongoing sales conversations are at better pricing than the initial discount. Regarding ECR deposits, Kavanaugh and Executive Christopher Naghibi stated that rate adjustments are instantaneous with Fed moves, with 100% betas on both increases and cuts. Naghibi added that the C&I growth engine is a priority, with growth expected to accelerate into mid-2025 as new bankers are onboarded in key markets.

David Feaster of Raymond James Financial inquired about Butterfield's bond investment strategy amid the current yield curve, the status of previously mentioned temporary deposits, and the bank's rebalanced capital return strategy, specifically the prioritization of M&A versus shareholder returns.

Answer

President & Group Chief Risk Officer Michael Schrum and Group CFO Craig Bridgewater explained that the bank is reinvesting maturities into a mix of 15-year mortgage-backed securities and a 2-5 year U.S. Treasury ladder, shortening duration while capturing higher rates. Bridgewater confirmed some non-core deposits remain but inflows have offset some outflows, with Michael Schrum noting that FX movements masked some of the underlying activity. Chairman & CEO Michael Collins clarified that the capital priority is dividends, followed by M&A and then buybacks, highlighting a recent dividend increase as a rebalancing effort after years of significant share repurchases.

David Feaster inquired about credit migration in the residential mortgage portfolio, the broader housing market outlook, progress on retail expansion in the Channel Islands and Singapore, the M&A landscape, and the trajectory of the net interest margin amidst market volatility and repricing dynamics.

Answer

Michael Schrum, President and Group Chief Risk Officer, addressed credit, noting pressure in Bermuda and London is manageable due to low LTVs and is primarily related to debt service ratios and policy changes, not systemic credit issues. Michael Collins, Chairman and CEO, highlighted successful growth in the Channel Islands and the smooth integration of the Credit Suisse trust business in Singapore. On M&A, both executives emphasized a disciplined focus on private trust businesses with high AML standards. Craig Bridgewater, Group CFO, explained that while recent rate cuts pressure loan yields, reinvestments into higher-yielding securities should support continued, albeit slower, NIM expansion.

David Feaster inquired about Butterfield's deposit trends, asking why expected outflows haven't occurred and when balances might normalize to the guided range. He also asked about the trajectory for the net interest margin (NIM), the levers being used to defend it, and the company's capital allocation priorities, specifically regarding share buyback price sensitivity and the status of M&A conversations.

Answer

Michael Schrum, President and Group Chief Risk Officer, explained that deposit levels are a 'business as usual' story, though he identified two specific large deposits totaling a few hundred million that are expected to flow out in the first half of the year. Michael Collins, Chairman and CEO, added that the deposit base is now less concentrated and stickier. Regarding the margin, Craig Bridgewater, Group CFO, projected a slow expansion of NIM in the coming quarters, driven by active management of deposit costs and reinvesting in the securities portfolio at significantly higher yields. On capital, Michael Schrum outlined priorities as the dividend, supporting organic growth, and M&A, noting that buybacks are a 'risk-free trade' at current valuations and the bank is not holding capital for an imminent deal.

David Feaster inquired about the status of transitory deposits, the outlook for balance sheet size, credit migration in the mortgage portfolio, and the performance of the trust business.

Answer

Group CFO Craig Bridgewater explained that while some at-risk deposits remain, balances have held up better than expected, partly due to FX tailwinds and new deposit gathering in the Channel Islands. President and Group Chief Risk Officer Michael Schrum addressed credit, noting a legacy hospitality facility is working through a sale process and some London loans have delayed repayments, but the portfolio remains well-collateralized. Chairman and CEO Michael Collins added that property valuations in their key island markets remain strong due to supply shortages. On the trust business, Collins highlighted the successful integration and growth of the Singapore operations acquired from Credit Suisse.

David Feaster of Raymond James Financial requested an update on the remaining OREO property and the credit outlook. He also asked about the performance of the new Manhattan branch, plans for further expansion, and client sentiment amid economic uncertainties like tariffs.

Answer

Chairman & CEO Li Yu described the OREO situation as 'unlucky,' with a sale falling through, stating the bank will not 'fire sell' it and has no firm resolution timeline. He confirmed the new Manhattan branch is performing well in loan generation and announced plans to open a Silicon Valley branch in the second half of the year. On the economy, he noted that the bank is closely monitoring clients affected by tariffs and supply chain issues, but it's still too early to know the full impact.

David Feaster from Raymond James followed up on loan growth, asking about the drivers of payoff activity and the competitive landscape. He also probed for what might spur client investment and the overall credit health of the borrower base.

Answer

Executive Li Yu attributed higher Q4 payoffs to asset sales facilitated by lower rates and stated that clients are waiting for more significant rate cuts before becoming more active. On credit health, Executive Wellington Chen described the client base as "very healthy." Li Yu and Executive Nick Pi emphasized that the bank's underwriting focuses on strong sponsor guarantees, which ensures borrowers are motivated to work with the bank to resolve any issues, a key factor in maintaining portfolio stability.

David Feaster asked for details on the increase in criticized loans, the competitive landscape for loan pricing, progress in new markets like Silicon Valley, and the long-term outlook for net interest margin and net interest income into 2025.

Answer

Chairman & CEO Li Yu and Executive Nick Pi clarified that the rise in criticized loans was due to a single relationship with payment irregularities, noting that several of the loans are now current and the underlying properties are strong. Li Yu discussed the competitive environment and the strategy of hiring new producers. Regarding the long-term margin, Executive Edward Czajka suggested that if the Fed Funds rate settles around 3-3.5%, the margin could stabilize north of 3.50% by mid-to-late 2025.

David Feaster asked for an update on client sentiment and loan pipeline health amid market volatility. He also inquired about the competitive landscape for deposits and whether the bank had tightened its underwriting standards.

Answer

President and CEO Jared Wolff described Q1 loan growth as broad-based and continuing into Q2, though the full-year forecast was tempered due to second-half uncertainty. He characterized the deposit market as "very, very competitive," with wins driven by new full-service relationships. He clarified that while the credit box hasn't tightened, they are re-emphasizing core principles like full recourse on construction loans.

David Feaster inquired about loan demand sentiment and drivers, the timing and cost of deposit growth, and the specific investments included in the expense outlook.

Answer

CEO Jared Wolff noted improving sentiment and loan demand across all segments, including C&I and real estate, though he expects growth to be more back-half weighted. He stated deposit growth will move in concert with loan growth. Wolff detailed investments in hiring business teams and systems like Encino, Salesforce, and data harmonization projects to support future growth and efficiency.

David Feaster of Raymond James & Associates, Inc. asked about the loan growth outlook as the bank shifts from an internal to an external focus, questioning where organic growth opportunities lie. He also inquired about the strategy for core deposit growth and the target loan-to-deposit ratio.

Answer

CEO Jared Wolff explained that broad loan growth will likely remain muted until interest rates fall further, but the bank is well-positioned for a recovery. He identified warehouse lending, fund finance, and the newly reacquired lender finance business as near-term growth areas. Wolff stated that while loans typically grow faster than deposits, the bank is focused on building new deposit relationships now and expects to maintain a comfortable loan-to-deposit ratio, avoiding the high 90s.

David Feaster of Raymond James & Associates, Inc. questioned the repricing dynamics of the bank's loan and deposit books, the key factors driving new client acquisition, and the primary focus of the company's current technology and digital strategy.

Answer

CEO Jared Wolff explained that the net interest margin is expanding as funding costs fall and loan yields rise, noting the deposit book is intentionally short-duration to benefit from future rate cuts. He attributed new client growth to market disruption from competitor mergers and the appeal of the bank's experienced relationship managers. Wolff highlighted tech initiatives like ServiceNow, Salesforce, nCino, and client-facing payment platforms as key priorities. CFO Joe Kauder added that approximately 40% of assets are floating rate or will reprice within a year.

David Feaster inquired about the drivers of success in the credit sponsorship business, the factors behind strong growth in working capital finance, and the outlook for the tax solutions segment.

Answer

CEO Brett Pharr attributed growth in credit sponsorship directly to regulatory pressure causing competitors to misstep, which has driven new partners and volumes to Pathward. He clarified that growth in working capital finance stems from improved distribution capabilities, not economic shifts. Regarding the tax business, Pharr credited the experienced management team for gaining market share but deferred detailed comments until after the season concludes.

David Feaster of Raymond James inquired about Pathward's updated fiscal 2025 guidance, asking about the key drivers for the high and low ends of the range, the impact of potential rate cuts, and whether it includes the planned securities restructuring. He also questioned the strength of the Partner Solutions pipeline, the pace of new partner inquiries, and the status of renewal negotiations. Finally, he asked about the strategy for redeploying capital following the commercial insurance premium finance loan sale and how rate changes might affect the SBA loan sale strategy.

Answer

CFO Gregory Sigrist explained that the guidance incorporates two 25 basis point rate cuts and that while further cuts have a modest negative impact, they can be mitigated through balance sheet management. He noted strong pipelines are a key driver. CEO Brett Pharr clarified the guidance explicitly excludes the impact of the insurance premium finance sale and the subsequent securities restructuring, which is a 12-18 month process. Pharr confirmed the Partner Solutions pipeline strength is from both new and existing partners, with recent deal closures being a key development. He added that post-sale, the focus is on redeploying capital into higher-yielding assets and creating a flow business for SBA/USDA loans.

David Feaster questioned what is needed for organic growth to meet the bank's targets, the outlook for new loan yields amid rate competition, and how the bank is prioritizing capital allocation between buybacks and restructurings.

Answer

CEO Steven Gardner stated that the existing team is in place to drive growth and expects organic originations to meet or exceed runoff within a couple of quarters. He noted new loan yields in the high 6% range are attractive and is constructive on the ability to reprice the portfolio up over time. Regarding capital, Gardner reiterated that they are assessing a multitude of options, including buybacks, and will act opportunistically.

David Feaster asked what is needed for organic growth to meet the bank's targets, the outlook for new loan yields, and the bank's current thinking on capital allocation priorities like buybacks.

Answer

CEO Steven Gardner stated that the existing team is in place to drive organic growth and expects originations to meet or exceed payoffs within the next couple of quarters, with loan purchases used tactically. He noted new origination yields are attractive in the high 6% range and is constructive on the ability to reprice the portfolio up over time. Regarding capital, he reiterated that they are assessing a multitude of options, including share buybacks, to maximize shareholder value.

David Feaster inquired about the loan growth trajectory for 2025, key areas of opportunity, new loan yields, strategic uses for the company's capital, and the bank's appetite for new hires.

Answer

CEO Steven Gardner stated that loan growth is focused on C&I, with some opportunities in construction and SBA, but not multifamily. He noted the loan pipeline has grown recently. On capital strategy, Gardner prioritized maintaining the dividend, followed by redeploying excess liquidity into loans. He confirmed the Board is also assessing balance sheet repositioning and a potential share repurchase plan. Regarding hiring, the focus is on acquiring talented individuals with strong client relationships rather than on specific geographies.

David Feaster of Raymond James questioned the basis for management's confidence in stabilizing loan and deposit balances in the latter half of 2024. He also inquired about specific areas of loan activity and the bank's appetite for deploying its capital through M&A, loan purchases, or balance sheet repositioning.

Answer

CEO Steven Gardner explained that confidence stems from client conversations, seasonality in deposit outflows, increased loan origination, and anticipated economic certainty post-election. He noted good origination on the C&I side and a modest pickup in construction lending. Regarding capital deployment, Gardner confirmed they are considering all options, including M&A and balance sheet repositioning, but will remain thoughtful and analytical, acknowledging the uncertain regulatory environment.

David Feaster questioned the potential ancillary impacts of Fed rate cuts on loan growth and fee income, the drivers behind weak loan originations, and the specifics of recent problem loan sales.

Answer

Executive Steven Gardner explained that the impact of rate cuts depends on the economic driver behind them, noting a soft landing could boost fee businesses and credit demand, though such an outcome is historically rare. He attributed weak originations to a deliberate slowdown since 2022 combined with muted client demand amid economic uncertainty. Regarding credit sales, Gardner stated there was no common denominator among the loans sold and that the bank will continue to use this proactive credit management tool.

Liam, on behalf of David Feaster from Raymond James, asked about the drivers of CRE and construction loan commitments, the expense run rate outlook for 2025, and the expected effective tax rate.

Answer

CEO of Heritage Bank Bryan McDonald noted that while Q4 saw higher CRE activity, the goal is to balance it with C&I lending, with the current pipeline near a 50-50 split. Chief Accounting Officer Jennifer Nino projected the quarterly expense run rate to be in the $41 million to $42 million range for 2025, accounting for merit increases and new initiatives. She also guided for a 2025 effective tax rate of 15% to 16%, up from the normalized 12.5% in 2024.

David Feaster from Raymond James asked for guidance on a core net interest margin starting point post-BTFP unwind and the Home Federal acquisition, the outlook for deposit betas in a competitive market, and the expected trajectory for margin expansion. He also inquired about success drivers in the retirement and wealth businesses, the timeline for efficiency improvements, and the strategy for funding future loan growth.

Answer

CFO Alan Villalon provided a starting point for the legacy Alerus margin (2.41%) and the acquired HMNF margin (2.8%), noting deposit betas may lag on the way down but that a path to a 3% NIM remains. He suggested margin expansion would be more back-half weighted. Chief Retirement Service Officer Forrest Wilson highlighted that retirement business margins will improve steadily over time through efficiency, new revenue from partnerships like one with MassMutual, and reduced turnover. Chief Revenue Officer James Collins added that the company is still actively hiring and has specific strategies to grow core deposits.

David Feaster of Raymond James asked for an update on the credit sponsorship business, including its rollout, pipeline, and yields. He also inquired about the forward-looking net interest margin (NIM) trajectory given potential rate cuts and sought an explanation for the one-time loss related to a transaction processing delay.

Answer

CEO Damian Kozlowski detailed that the credit sponsorship business is ramping up, primarily with Chime, and is expected to grow from approximately $280 million to $400 million in footings by year-end 2024, with a target of $900 million to $1 billion by the end of 2025. He projected a stable NIM for 2025 in the 4.90% to 5.00% range, assuming the Fed funds rate settles around 4%. Kozlowski explained that the transaction processing loss was a one-time event caused by a rare application glitch and that multiple new controls have been implemented to prevent a recurrence.

The analyst inquired about the progress with new U.S. partners, the expected growth trajectory, the economics of the U.S. RPP program, the strategy for funding growth in the U.S., and requested quantification of onetime costs incurred during the quarter.

Answer

The executive stated that the U.S. reception is strong, with one partner nearly operational. The economics in the U.S. are about 1% better than in Canada due to lower funding costs. The bank can immediately raise deposits in the U.S. and has partnered with Raymond James and another brokerage firm for this purpose. Onetime acquisition-related costs in Q3 were approximately $700,000, with an additional margin impact of about $600,000 due to lagging deposit rate adjustments in Canada.

David Feaster of Raymond James asked about VersaBank's U.S. expansion, inquiring about the pipeline for new Receivable Purchase Program (RPP) partners, the expected growth trajectory, and the specifics of the more favorable economics in the U.S. market. He also questioned the strategy and timeline for raising U.S. deposits and sought quantification of the onetime acquisition-related costs impacting the current and upcoming quarters.

Answer

Executive David Taylor described the U.S. reception as 'tremendous,' noting one partner is close to being operational with a larger pipeline expected over the next year. He explained that U.S. economics are roughly 1% better than in Canada due to lower funding costs. Taylor confirmed they can immediately raise U.S. deposits, highlighting a new partnership with Raymond James. He quantified Q3's direct acquisition-related costs at approximately $700,000 and noted an additional ~$600,000 margin impact from the lag in Canadian deposit rate adjustments.

David Feaster inquired about the organic growth outlook for the point-of-sale (POS) business, including partner pipelines and product expansion. He also asked about the credit health of partners and trends in funding costs.

Answer

Executive David Taylor acknowledged seasonal softness but expects a resurgence in POS growth in H2, driven by new products and a potential U.S. market entry. Taylor explained that while partners see higher defaults, the bank's model results in faster repayments, protecting it from credit losses. He also highlighted that rising insolvencies are boosting low-cost deposit growth.

David Feaster inquired about the organic growth outlook for the point-of-sale (POS) business, citing macro softness in Canada. He asked about the pipeline for new partners, potential product expansion beyond HVAC, the credit performance of partners' underlying receivables, and the overall health of their retail partners.

Answer

Executive David Taylor acknowledged a seasonal slowdown in Q2 but expects a resurgence in consumer POS purchases in the second half of the year, noting May was already showing improvement. He confirmed the bank is exploring new, innovative POS products and is awaiting a U.S. regulatory decision for expansion. Taylor explained that while partners are seeing higher defaults, this translates to faster repayments for the bank, protecting its balance sheet from credit losses but dampening net portfolio growth.