David Konrad

David Konrad asked about the expected trend of First Financial Bancorp's efficiency ratio throughout 2026, anticipating it to be in the very low 50s. He also inquired about the contribution of Westfield to trust income and the outlook for Q1.

Answer

CFO Jamie Anderson projected the efficiency ratio to be in the mid-50s (55-56%) in the back half of 2026, clarifying that the accounting for Summit's operating leases (rental payments in fee income, asset depreciation in expense) skews the ratio by a couple of hundred basis points. Without this impact, it would be in the 52-53% range. President and CEO Archie Brown clarified that Westfield did not contribute to wealth management income, as they only had a private banking team. He attributed the strong Q4 wealth management performance to new asset inflows, overall assets under management growth, and a strong quarter from their small M&A advisory unit.

David Konrad asked about the expected trend of the efficiency ratio through the year, anticipating it to be in the very low 50s. He also inquired about the contribution of Westfield to the strong wealth management/trust quarter and the outlook for the first quarter.

Answer

Jamie Anderson, CFO, clarified that the efficiency ratio is expected to be in the mid-50s (55-56) in the back half of the year, noting that the accounting for operating leases in the Summit business skews the ratio higher by a couple of hundred basis points. Archie Brown, President and CEO, stated that Westfield did not contribute to wealth management as they didn't have a wealth division, but the strong Q4 was due to new asset inflows, overall AUM growth, and a strong performance from their small M&A advisory unit.

David Konrad of Keefe, Bruyette & Woods (KBW) questioned the slight increase in C&I non-accrual loans and asked how the upcoming acquisition of Westfield Bank might alter the company's asset sensitivity profile.

Answer

Chief Credit Officer William Harrod clarified that the rise in non-performing assets was driven by downgrades of two specific commercial borrowers. CFO & COO Jamie Anderson added that Westfield Bank is slightly liability-sensitive, and its integration will help move First Financial's balance sheet closer to neutral, although the overall impact will be marginal given Westfield's relative size.

David Konrad asked for a big-picture perspective on Community Financial System's fee income ratio to total revenues, currently around 38%, and its peer-leading 22.7% Return on Tangible Common Equity (ROTCE). He questioned where these metrics might trend over the next 3-5 years and their implications.

Answer

CEO Dimitar Karaivanov stated that while the banking business currently benefits from margin expansion and asset growth, this tailwind will eventually temper. He emphasized the company's commitment to investing capital in businesses with the highest tangible returns, including ongoing organic and inorganic opportunities in fee income segments. He noted that the company completes 8-12 acquisitions annually, mostly smaller deals in fee income businesses, and aims for continued growth across all core businesses.

David Konrad inquired about the company's long-term strategy for its fee income ratio to total revenues over the next 3 to 5 years, given its current 38% fee income and peer-leading ROTCE, and the implications for future ROTCE.

Answer

CEO Dimitar Karaivanov explained that while banking currently benefits from margin expansion and asset growth tailwinds, the company continues to invest heavily in both organic and inorganic fee income opportunities. He emphasized deploying capital to businesses with the highest tangible returns, noting that most of their 8-12 annual acquisitions are in fee income businesses, with a goal to grow all core businesses.

David Konrad sought clarification on the investment portfolio's quarter-over-quarter yield decrease to the low 2% level and requested an outlook on its cash flows, duration, and future yield trajectory.

Answer

Dimitar Karaivanov, President and CEO, attributed the investment portfolio's yield fluctuations to the timing of FHLB/FR3 dividends, noting no significant purchases are planned. He outlined substantial treasury maturities: approximately $350 million in 2026, over $600 million in 2027, $600 million in 2028, and $300-400 million in 2029. Mr. Karaivanov stated these cash flows would primarily be redeployed into higher-yielding loans (Plan A) or used to pay down FHLB borrowings (Plan B), which would lead to balance sheet shrinkage and margin expansion.

David Konrad, an analyst at KBW, requested further details on Community Financial System's investment portfolio, specifically its yield, cash flows, duration, and the outlook for future yields, as a follow-up to the net interest margin discussion.

Answer

Dimitar Karaivanov, President and CEO, clarified that fluctuations in investment portfolio yield are partly due to FHLB/FRB dividends, with no significant new purchases expected. He outlined treasury maturities, including approximately $350 million in 2026, over $600 million in 2027, and similar amounts in 2028, which will primarily be redeployed into loans (Plan A) or used to pay down FHLB borrowings (Plan B), potentially shrinking the balance sheet and increasing the margin.

David Konrad of Keefe, Bruyette & Woods inquired about the expected run rate for fee income for the rest of 2025, given the pull-forward of insurance contingency payments, and asked about overall year-over-year growth expectations for the segment.

Answer

CEO Dimitar Karaivanov clarified that insurance contingency payments were received in Q1 this year instead of the typical Q2. He noted that year-to-date, the insurance business revenue is up 13% and that the company remains on track to achieve its historical target of high-single-digit to low-double-digit revenue growth for the full year.

David Konrad from Keefe, Bruyette & Woods (KBW) asked for guidance on the fee income run rate for the remainder of the year and the full-year 2025 outlook, given the pull-forward of insurance contingency payments into the first quarter.

Answer

CEO Dimitar Karaivanov explained that while the timing of insurance contingency payments shifted from Q2 to Q1, the company is still on track to achieve its historical target of high single-digit to low double-digit revenue growth for the full year in that business. He noted that year-to-date growth is 13% and that Q3 is typically another strong renewal quarter.

David Konrad of Keefe, Bruyette & Woods asked about the run rate for fee income for the remainder of 2025, considering seasonality and the pull-forward of insurance contingency payments into Q1.

Answer

CEO Dimitar Karaivanov explained that the Q1 insurance revenue strength was due to contingency payments typically received in Q2. He affirmed the company is on track to meet its historical high-single-digit to low-double-digit growth target for the insurance business for the full year, with year-to-date growth at 13%. He noted Q3 is another strong renewal quarter, while Q4 is typically slower.

David Konrad of Keefe, Bruyette & Woods (KBW) asked for guidance on the fee income run rate for the remainder of the year and the full-year 2025 growth expectations, given the seasonal shifts and the pull-forward of insurance contingency payments into Q1.

Answer

CEO Dimitar Karaivanov clarified that the timing of insurance contingency payments boosted Q1 results but that the business is on track to meet its historical high-single-digit to low-double-digit annual growth target. He noted that year-to-date revenue growth is 13%, with Q3 being another strong renewal quarter, positioning the company to achieve its long-term average growth rate of around 11% for the full year.

David Konrad of KBW inquired about the net interest margin (NIM) outlook for the upcoming year, noting that deposit costs have decreased to 2% and the commercial loan book's new origination rates are now closely aligned with portfolio yields, potentially limiting further repricing opportunities.

Answer

Annette Burns, CFO of NBT Bancorp, stated that the 3.65% NIM is strong and expects margin expansion of 2-3 basis points per quarter. She identified residential mortgage (125-130 basis points of room) and the investment securities book ($25M in monthly cash flows) as key repricing opportunities. Burns noted that $6 billion of deposits are price-sensitive, with 77% of the CD book repricing in the next two quarters, but further significant repricing will be limited. Scott Kingsley, President and CEO, added that commercial new activity rates in Q4 2025 were similar to portfolio yields due to yield curve changes, and noted pressure on spreads for highly rated credits. He also highlighted the short duration of CDs and customers' expectation for yield.

David Konrad asked for the net interest margin (NIM) outlook for the upcoming quarters, noting that while deposit costs are low, further repricing might be challenging, and commercial book yields are now close to new origination rates.

Answer

CFO Annette Burns and President and CEO Scott Kingsley stated that NBT's NIM of 3.65% is strong, and they are neutrally positioned. They anticipate margin expansion of 2-3 basis points per quarter. The largest repricing opportunity is in the residential mortgage book (125-130 bps room) and the investment securities book ($25M cash flows/month). While funding costs are low, 77% of the CD book reprices in the next two quarters, offering some room. Net interest income improvement will be driven more by earning asset growth. Scott Kingsley added that the commercial crossover (new vs. portfolio yields) was close in Q4 due to the 2-5 year yield curve decline, and some markets are seeing pressure on spreads for highly-rated credits. He also noted the short duration of CDs and customers' expectation for yield.

David Konrad followed up on the commercial banking platform, questioning the mid-single-digit growth guidance for 2026 despite significant hiring in H2 2025 and 9% organic growth in 2025, asking about potential market headwinds or upside to the growth rate. He also inquired about the specific type of loans in the business segment being exited.

Answer

Jeffrey Tengel, President and CEO, explained that the 2026 guidance includes a headwind from exiting a $100 million floor plan business for small used car dealerships, which didn't fit their risk profile or system capabilities. He suggested that excluding this runoff, the growth rate could be higher, acknowledging the momentum from new hires.

David Konrad requested a breakdown of the securities portfolio, distinguishing between legacy and Enterprise books, including their respective yields and the new investment run rate. He also inquired about the new money yields on commercial real estate (CRE) loans.

Answer

Mark Ruggiero, CFO and EVP, estimated the yield on the acquired Enterprise securities book to be in the low 4% range, consistent with new investments replacing runoff from the legacy portfolio. He projected approximately $700 million in cash flows from the combined securities book in 2026, with a significant portion being reinvested at higher yields. For new CRE loans, Ruggiero indicated yields were around 6%, with some competition pushing rates slightly below, and noted an uptick in swap activity from borrowers.

David Konrad of Keefe, Bruyette & Woods (KBW) questioned the sustainability of driving deposit costs lower for NIM expansion and asked for the expected pro forma CET1 ratio following the Enterprise acquisition.

Answer

CFO Mark Ruggiero explained that future net interest margin expansion is now primarily dependent on asset repricing, as deposit costs are expected to remain stable amid competitive pressures. He also stated that the pro forma CET1 ratio is projected to be in the mid-12% range.

David Konrad asked for an update on asset quality, specifically regarding two new loans in non-performing assets (NPAs) and the progress on a larger relationship with specific reserves from the previous quarter. He also questioned the target range for the TCE ratio given the current CET1 ratio of approximately 10.7%.

Answer

President and CEO Mark R. DeFazio explained that the two new NPA loans are in-market multifamily properties expected to result in little to no loss upon sale. He added that the workout process for the larger relationship with specific reserves is ongoing, with cautious optimism for a resolution by the end of the current quarter. Mr. DeFazio indicated that the bank's focus for capital is on the TCE ratio, targeting a trend from the current high 8s (around 8.8%) to the low 9s, which is considered a comfortable operating range.

David Konrad inquired about the bank's capital targets, specifically the Common Equity Tier 1 (CET1) ratio, which he noted was around 10.7%, and the desired range for this ratio as the balance sheet expands.

Answer

Mark R. DeFazio, President and CEO, clarified that the bank primarily focuses on the Tangible Common Equity (TCE) ratio, aiming for it to trend from the current high 8s (around 8.8%) to the low 9s, which is considered a comfortable operating range for the institution.

David Konrad of Keefe, Bruyette & Woods (KBW) questioned if the bank is seeing increased deposit competition and pricing pressure, and asked about the potential impact of proposed Medicaid legislation on its skilled nursing loan portfolio.

Answer

President & CEO Mark DiFazio stated that the bank's success in gathering deposits stems from strong execution across all its specialized verticals, not just municipal, which insulates it from the intense competition faced by competitors focused on acquiring teams. Regarding Medicaid, he explained that the bank does not anticipate cuts to affect payments for existing, eligible residents in nursing homes, thus expecting minimal impact on its portfolio.

David Konrad followed up on deposit trends, specifically asking about the outlook for the non-interest-bearing deposit mix in 2026, given the current 31% level and recent municipal deposit activity.

Answer

Avinash Reddy, COO and CFO, explained that the non-interest-bearing deposit mix has fluctuated from 35-40% post-merger to 25% and now 30-31%. He aims for a minimum floor of 30% and gradual growth, emphasizing the focus on full operating accounts with 20-30% DDA. Stuart Lubow, President and CEO, added that new teams' balances have a 38% DDA component, suggesting the 31% mix could increase during the year.

David Konrad of Keefe, Bruyette & Woods (KBW) asked about capital deployment priorities, noting the strong CET1 ratio and questioning if organic growth remains the top priority over shareholder returns like buybacks.

Answer

CFO Avinash Reddy confirmed that supporting organic growth is the primary focus for capital in the near term. He stated that maintaining a best-in-class capital ratio is a competitive advantage for attracting new business. While acknowledging the stock appears undervalued, Reddy indicated that the company would reevaluate capital return strategies, such as a buyback, toward the end of the year or in early 2026.

David Konrad followed up on the net interest margin, asking about the current deposit beta compared to other cycles and expectations for the next few quarters. He also inquired about the strong performance in wealth management, including any impact from Evergreen, and the overall outlook for the business.

Answer

Bradley Adams, COO and CFO, indicated that CD runoff and rising overnight borrowing rates would increase liability sensitivity, which helps with sensitivity to forward rate cuts. He noted the loan-to-deposit ratio might tick higher but expressed satisfaction with the current rate positioning. James Eccher, President and CEO, highlighted an exceptionally strong quarter for wealth management with over 25% fee increase, driven by key hires, new assets under management, and market performance, expressing a desire to continue growing the business.

David Konrad inquired about the deposit beta following the Evergreen deal, asking about the room for change and expectations over the next few quarters. He also asked for an outlook on the wealth management business, noting its strong performance and potential impact from Evergreen.

Answer

Bradley Adams, COO and CFO, indicated that liability sensitivity would increase due to CD runoff and rising overnight borrowing rates, which would help with sensitivity to forward rate cuts. James Eccher, President and CEO, highlighted the exceptionally strong quarter in wealth management with over 25% fee increase, attributing it to key hires and new assets under management, in addition to market performance.

David Konrad of Keefe, Bruyette & Woods followed up on the Evergreen acquisition, asking for color on the cost of funds being brought over and the potential for Old Second to leverage its own deposit franchise to lower those costs over the next year.

Answer

COO & CFO Bradley Adams stated that Evergreen's cost of funds was in the 4% range and that he expects to reduce reliance on market-rate funds by $100-200 million by the end of the next quarter. He projected that Evergreen's standalone cost of funds could decrease by 30 to 70 basis points. He also noted that as they exit next year, he expects a 90% loan-to-deposit ratio with a cost of funds substantially better than a simple combination of the two banks.

David Konrad of Keefe, Bruyette & Woods (KBW) asked a long-term strategic question about asset generation and its connection to growing non-interest-bearing deposits. He sought to understand how the bank plans to increase its mix of non-interest-bearing deposits and what types of asset generation could support that goal.

Answer

President & CEO James Nesci explained that the strategy to grow non-interest-bearing deposits focuses on securing full banking relationships from all borrowers, including commercial real estate clients, not just C&I customers. He stated that by offering compelling products to both commercial and consumer clients, the bank aims to attract more core deposits from its existing loan customer base, a strategy that he believes is proving effective.

David Konrad asked a long-term strategic question about asset generation and its connection to growing non-interest-bearing deposits, specifically inquiring about plans to increase the C&I loan mix to support this goal.

Answer

President & CEO James Nesci explained that the strategy to grow non-interest-bearing deposits involves seeking full banking relationships from all types of borrowers, including commercial real estate, not just C&I clients. He stated that by providing good products, they can attract more core deposits from their existing loan customers, a strategy that he believes is proving effective.

David Konrad of Keefe, Bruyette & Woods (KBW) asked a long-term strategic question about asset generation and its connection to deposit growth, specifically inquiring about the bank's plans to increase its level of non-interest-bearing deposits as it expands its commercial and industrial (C&I) loan portfolio.

Answer

President & CEO James Nesci explained that the bank's strategy focuses on securing full banking relationships from all commercial borrowers, not limited to the C&I segment but also including commercial real estate clients. He stated that by offering compelling products and actively pursuing deeper relationships with existing loan customers, the bank aims to grow its core, non-interest-bearing deposits. He expressed confidence that this strategy is proving effective.

David Konrad of Keefe, Bruyette & Woods asked about BlueFoundry's long-term strategy for asset generation and its connection to growing the bank's level of non-interest-bearing deposits, particularly in relation to the expansion of its C&I loan portfolio.

Answer

President & CEO James Nesci explained that the strategy to grow non-interest-bearing deposits extends beyond just C&I lending. He emphasized the focus on securing full banking relationships from all commercial borrowers, including commercial real estate clients, by providing attractive products. Nesci expressed confidence that this approach is working and will continue to attract core deposits.

David Konrad asked a long-term strategic question about asset generation, specifically focusing on how the company plans to grow its non-interest-bearing deposits and whether increasing the mix of C&I loans is a key part of that strategy.

Answer

President & CEO James Nesci confirmed that growing non-interest-bearing deposits is a key focus. He explained that the strategy is broad, targeting full banking relationships from all commercial borrowers, not just C&I, but also commercial real estate clients. He stated that by providing good products and service, they are successfully attracting more core deposits from their existing and new loan customers, a trend they expect to continue.

David Konrad of Keefe, Bruyette & Woods (KBW) asked about the bank's long-term strategy for asset generation, specifically how it plans to increase its mix of commercial and industrial (C&I) loans to drive growth in non-interest-bearing deposits.

Answer

President & CEO James Nesci explained that the strategy to grow non-interest-bearing deposits is not limited to C&I lending. He stated the bank is focused on securing full banking relationships from all commercial borrowers, including commercial real estate clients. Nesci emphasized that by providing attractive products and service, they can capture more core deposit relationships from their existing and new loan customers, a strategy he believes is proving effective.

David Konrad asked for clarification on the expense guidance for the second half of the year, questioning whether the quarterly expense run-rate would remain flat around $15 million or build progressively.

Answer

CFO Courtney Sacchetti confirmed that the expense level should remain relatively flat in the second half of 2025, with a quarterly run-rate of approximately $15 million being a fair assumption. She noted that key investments were made in the first half and compensation structures are now being adjusted for the new teams, leading to an expected leveling-off of expenses.

David Konrad of Keefe, Bruyette & Woods (KBW) questioned the quarterly progression of noninterest expenses for the second half of 2025, asking if the run rate would be flat at approximately $15 million per quarter or if it would build throughout the period.

Answer

CFO Courtney Sacchetti confirmed that a flat quarterly expense run rate of around $15 million is a fair assumption. She explained that investments and team additions were largely made in the first half of the year, and compensation structures have been adjusted, leading to an expected leveling-off of expenses in the back half of 2025.

David Konrad of Keefe, Bruyette & Woods inquired about the expected progression of noninterest expenses for the remainder of the year, given the updated guidance and the costs associated with hiring new deposit teams.

Answer

CFO Courtney Sacchetti clarified that noninterest expenses are expected to remain relatively flat in the second half of the year. She projected expenses to level off at approximately $15 million per quarter, as the primary investments and compensation adjustments for the new teams have already been factored into the current run rate.

David Konrad asked for clarification on the expense run rate for the second half of the year, questioning if the guided $30 million would be flat at $15 million per quarter or ramp up over time.

Answer

CFO Courtney Sacchetti confirmed that assuming a relatively flat expense run rate of approximately $15 million per quarter for the second half of 2025 is a fair assumption. She explained that costs associated with investments and new team hires made in the first half are now being reflected, leading to an expected leveling off of expenses.

David Konrad of Keefe, Bruyette & Woods questioned the progression of noninterest expenses for the second half of 2025, asking if the quarterly run-rate would remain flat around $15 million or build throughout the year.

Answer

CFO Courtney Sacchetti confirmed that a flat quarterly expense run-rate of approximately $15 million is a fair assumption for the second half of the year. She noted that key investments were made in the first half and compensation structures are now being adjusted for the newly hired teams, leading to an expected leveling-off of expenses.

David Konrad from Keefe, Bruyette & Woods (KBW) questioned the outlook for repricing yields on non-CD deposits going forward.

Answer

CEO John Buran responded that there is limited opportunity to reduce funding costs on non-CD deposits until the Federal Reserve lowers rates. He emphasized that future net interest margin expansion will primarily be driven by asset repricing from the loan portfolio, with minimal support expected from the liability side of the balance sheet.

David Konrad of Keefe, Bruyette & Woods (KBW) questioned the outlook for repricing yields on the non-certificate of deposit (CD) portion of the bank's deposit base.

Answer

President and CEO John Buran responded that there is limited opportunity to reduce funding costs on non-CD deposits until the Federal Reserve begins cutting rates. He emphasized that future net interest margin expansion will primarily be driven by asset repricing from the loan portfolio, with minimal expected benefit from the liability side in the current rate environment.

David Konrad from Keefe, Bruyette & Woods (KBW) questioned the outlook for repricing yields on the non-CD deposit portfolio moving forward.

Answer

President and CEO John Buran responded that there is limited opportunity to reduce funding costs on non-CD deposits until the Federal Reserve begins cutting rates. He emphasized that near-term net interest margin expansion will be driven primarily by the contractual repricing of assets on the loan side of the balance sheet, with minimal contribution expected from the liability side.

David Konrad asked for the near-term outlook on expenses for the third quarter on a standalone basis, given the strong expense control demonstrated in the second quarter.

Answer

Co-President and CFO Carl Carlson confirmed that the second quarter's expense level is a good run rate for the third quarter and suggested that expenses could even be slightly lower.

David Konrad asked for the near-term outlook on expenses and whether the current quarter's level represents a good run rate for Q3 on a standalone basis.

Answer

Co-President and CFO Carl Carlson confirmed that the current expense level is a good run rate for the third quarter, adding that expenses might even decrease slightly.

David Konrad of Keefe, Bruyette & Woods (KBW) asked for clarification on the near-term outlook for expenses, questioning if the current quarter's level is a good run rate for Q3 on a standalone basis.

Answer

Co-President and CFO Carl Carlson confirmed that the Q2 expense level is a solid run rate for the third quarter. He added that if there were any change, expenses would likely be down slightly from the current level.

David Konrad of Keefe, Bruyette & Woods asked for an outlook on the net interest margin (NIM), focusing on new loan yields. He also questioned the expected expense run-rate for Q3 and the bank's long-term capital return strategy, including the dividend.

Answer

CFO Jason Darby provided new loan yields, projecting a flat NIM for Q3 with potential expansion in Q4. He guided for a Q3 expense increase while maintaining the full-year target of $170 million. For capital returns, Darby reiterated a 20-25% total payout ratio target, aiming for a 2-2.5% dividend yield and suggesting a continued pace of annual dividend increases.

David Konrad of Keefe, Bruyette & Woods (KBW) asked for an outlook on the Net Interest Margin (NIM), focusing on the yields of new loans booked late in the quarter. He also inquired about the expected expense run-rate for Q3 and the bank's longer-term capital return philosophy regarding dividends and buybacks.

Answer

CFO Jason Darby provided new loan yield ranges from high 5% to 7% and explained that while Q3 NIM is expected to be flat due to a drag from the securities portfolio, he anticipates margin expansion in Q4. Darby projected a rise in Q3 expenses due to new hires and a digital platform launch but reaffirmed the full-year $170M OpEx target. Regarding capital, he reiterated a 20-25% total payout ratio target and a dividend yield goal of 2-2.5%, suggesting a pace of more frequent dividend increases going forward.

David Konrad questioned the outlook for deposits, focusing on the company's ability to continue remixing its deposit base and managing costs. He also asked about the net interest income (NII) guidance, noting that a flat performance could meet the high end, and inquired about the expected NII exit rate for the year.

Answer

CFO Richard Kraemer responded that while deposit betas are slowing, deposit costs are likely near a trough, barring rate cuts, due to competition and the desire to fund loan growth with customer deposits. He noted that while fixed-rate asset repricing is a tailwind for NII, competitive pressures on loan yields and funding costs are headwinds, suggesting a 'steady state modest growth' in NII assuming no Fed moves.