David Long

David Long of Raymond James Financial inquired about the fee revenue side of the Heartland acquisition, asking if the company is beginning to realize any revenue synergies from the acquired franchise.

Answer

CEO Mariner Kemper and President Jim Rine indicated that while it's still early, the 'energy' is high and pipelines are building. Jim Rine provided concrete early examples, including 270 new mortgage applications from the HTLF network, the rollout of credit card sales, and a strong opportunity for corporate trust referrals. They feel good about the activity levels and future direction.

David Long questioned the assumptions behind the Q2 core net interest margin (NIM) guidance of 2.75%-2.80%, asking why it wasn't higher with a full quarter of HTLF's impact. He also inquired about the nature of HTLF's net charge-offs.

Answer

CFO Ram Shankar explained the NIM guidance balances the benefit of Heartland's cheaper deposits against an assumed June rate cut and the impact of an extra day in the quarter. CEO J. Kemper stated the HTLF charge-offs were related to credits identified during due diligence and that the combined portfolio's performance is expected to align with UMB's strong historical credit trends.

David Long asked about potential headwinds for UMB's fee-based businesses in 2025 and inquired about the expected seasonal dynamics for deposits, particularly outflows from public funds.

Answer

Chairman and CEO J. Kemper stated there are 'no headwinds at all' for fee income businesses, citing strong forward-looking profiles for fund services, corporate trust, and wealth management, which should also benefit from the expanded HTLF footprint. CFO Ram Shankar confirmed the typical seasonality of public fund deposits, with inflows in late December and outflows beginning in early February, noting these are the primary drivers of deposit fluctuations in Q1.

David Long inquired about the pricing on new, non-indexed deposits and whether the market was rational post-rate cut. He also asked if further rate cuts could stimulate additional loan demand from commercial customers.

Answer

Chairman and CEO J. Kemper described the deposit market as rational, noting that any new deposits are being brought on at lower rates than before, representing a marginal improvement. CFO Ram Shankar added that on the institutional side, pricing is disciplined and benchmarked against borrowing costs and money market funds. Regarding loan demand, Kemper stated that UMBF's growth is primarily driven by market share gains, not broad economic activity. He suggested that while a stronger economy could provide some upside, the bank expects to continue its historical trend of outperforming peers on a relative basis regardless of the economic environment.

David Long from Raymond James inquired about Byline Bancorp's net interest margin (NIM) and net interest income (NII) sensitivity to interest rate cuts, specifically asking about the assumptions built into their asset-sensitive model and the bank's ability to further lower deposit costs.

Answer

Tom Bell (CFO) and Alberto Paracchini (President) explained that the bank has been outperforming model assumptions due to an improved competitive environment in Chicago, better analytical segmentation of customers, and disciplined deposit pricing. They noted some room to reprice the short-term CD book lower but acknowledged limits on rack rate deposits.

David Long followed up on credit, asking whether the decrease in the allowance for credit losses was primarily due to loan mix, portfolio performance, or the economic outlook. He also asked how the SBA shutdown, potentially leading to longer loan holding periods, would impact the bank's reserving process.

Answer

President Alberto Paracchini clarified that the decrease in the allowance was mainly due to the resolution of loans with specific reserves. Regarding the SBA shutdown, he explained that if loans are held longer due to a protracted shutdown, they would still likely be carried as held for sale, and reserves would be set by looking through the guaranteed portion to the unguaranteed exposure.

David Long asked for an explanation of the uptick in criticized and classified loans during the quarter and questioned the economic forecasts being used in the bank's current reserve calculations.

Answer

Executive Mark Fucinato explained that the increase in criticized loans was not driven by any systemic theme but rather by individual transaction movements. President Alberto Paracchini added that the overall trend remains positive and the current level is still reasonably low. Paracchini also confirmed that the bank uses Moody's forecasts for its CECL model, primarily weighting the base case, and acknowledged that a deteriorating economic outlook would likely require further reserve builds.

David Long sought clarification on whether the projected 4% expense growth for 2026 was inclusive of Evergreen's impact. He also asked about the core commercial loan pipeline, the appetite for hiring incremental lenders, and the pipeline and capacity of the sponsor finance team.

Answer

Bradley Adams, COO and CFO, clarified that the 4% expense growth for 2026 was exclusive of Evergreen, with cost saves expected to offset Evergreen's inflationary impact. James Eccher, President and CEO, reported robust commercial loan pipelines, a two-year high, and anticipated low single-digit growth for 2025. He confirmed the company is always open to hiring additional CNI talent. Eccher also noted that the sponsor finance group, after a soft first half, saw significant growth in Q3 and expects a meaningful Q4, consistently generating $150-200 million in originations annually.

David Long inquired whether the projected 4% expense growth for 2026 was inclusive of the Evergreen acquisition's impact. He also asked about the core commercial loan pipeline and the company's interest in hiring additional lenders, specifically within the sponsor finance team, and their pipeline.

Answer

Bradley Adams, COO and CFO, clarified that the 4% expense growth for 2026 was exclusive of Evergreen's impact, as cost saves are expected to offset inflationary pressures. James Eccher, President and CEO, reported robust pipelines, at a two-year high, expecting low single-digit growth in 2025, and confirmed an ongoing openness to hiring additional C&I talent. He noted the sponsor finance group had a soft first half but significant growth in Q3, anticipating a strong second half of 2025.

David Long of Raymond James Financial asked about the current sentiment among commercial clients regarding business growth and loan appetite. He also inquired about the performance of the recently acquired Evergreen Bank and any notable employee turnover associated with the transaction.

Answer

CEO & Chairman James Eccher noted that while capital expenditure appetite has been muted, loan pipelines for the second half of the year are strong, particularly in sponsor finance and powersports. COO & CFO Bradley Adams added that Evergreen is performing well ahead of initial projections, with profitability already at levels he had assumed for the following year, leading to a slightly higher earnings expectation from the deal.

David Long questioned the current sentiment among commercial clients regarding global tariff uncertainty and its impact on loan demand. He also asked for the rationale behind the reserve level given the economic outlook.

Answer

Executive James Eccher characterized client sentiment as a "wait and see" approach, leading to modest loan demand, and stated the bank is not projecting significant growth in Q2 but is hopeful for an uptick in the second half of the year. Executive Bradley Adams defended the reserve level, explaining that Old Second's credit trends have been improving for two years, with criticized and nonperforming loans declining, which he believes positions the bank differently from peers who may be seeing worsening trends.

David Long of Raymond James & Associates, Inc. asked for clarification on the base for the 2025 expense growth forecast and inquired about the company's strategy for building commercial banking capabilities, including investments and hiring.

Answer

Executive Bradley Adams confirmed the expense growth guidance is based on the full-year 2024 results, excluding OREO and merger-related costs. Executive James Eccher explained that the company has the internal team for mid-single-digit loan growth as pricing improves and remains open to hiring new commercial banking talent, including teams or individuals.

David Long asked what conditions would be necessary for Old Second to increase its appetite for loan growth and questioned the potential for the bank to record net recoveries in upcoming quarters.

Answer

Executive James Eccher stated that improved demand and better risk-adjusted returns are needed to accelerate loan growth. Executive Bradley Adams added that the inverted yield curve makes the marginal return on new loans unattractive. Regarding credit, Adams said that while they are hopeful of recovering prior losses, it's uncertain, but he does not foresee any large, lumpy charge-offs.

David Long questioned the specific tools Orrstown Financial Services has to offset potential Net Interest Margin (NIM) compression if rate cuts occur, beyond just pricing adjustments. He also asked about the assumptions regarding the shape of the yield curve that underpin the company's 4.0% to 4.15% NIM outlook for the coming quarters.

Answer

Tom Quinn, President and CEO, explained that offsetting NIM compression primarily comes from pricing adjustments, specifically the capacity to reduce deposit costs, as the bank had intentionally kept rates higher post-merger and system conversion. He noted that new funding opportunities also play a role. Quinn emphasized the balance between generating growth and maintaining margin, suggesting that if growth makes sense, the margin might come down slightly. He stated that their modeling assumes the existing curve, expecting it to flatten over time, and that a steepening yield curve would benefit the bank.

David Long of Raymond James Financial requested color on the current sentiment of commercial clients and inquired about the bank's strategy for hiring middle-market bankers, including where they are sourcing talent.

Answer

Senior EVP & COO Adam Metz indicated positive client sentiment, evidenced by the loan pipeline being the largest since the merger. President & CEO Thomas Quinn provided a recent example of hiring a top middle-market lender from a $40 billion regional bank. Metz added that they continue to successfully attract talent by offering a compelling, relationship-focused banking model.

David Long inquired about the commercial customer sentiment Orrstown is observing amid economic headwinds and how this affects the bank's mid-single-digit loan growth outlook. He also asked how the bank reconciles declining nonperforming assets with a worsening economic forecast when determining its loan loss reserves.

Answer

EVP & COO Adam Metz stated that despite some uncertainty, loan pipelines have grown over 40% since year-end and the local economy remains sound. Regarding credit reserves, Chief Risk Officer Robert Coradi explained that qualitative factors in their model allow for adjustments to the current environment. CFO Neelesh Kalani added that prior qualitative adjustments were deemed sufficient. CEO Thomas Quinn further noted that proactive reviews of all loans over $2 million for tariff impacts and other risks have positioned the bank comfortably.

David Long asked if Wintrust is paying closer attention to any specific segments or industries on the credit front, or if it's pulling back its lending appetite in any verticals. He also inquired about the biggest risk to Wintrust's ability to maintain a stable net interest margin (NIM) around the 3.50% level.

Answer

Richard Murphy, Vice Chairman and Chief Lending Officer, stated that Wintrust is not pulling away from any segments but is closely monitoring higher education and healthcare, in addition to previously discussed office and transportation exposures. He noted that customers are generally well-capitalized. Timothy Crane, President and Chief Executive Officer, identified irrational competition dramatically altering loan or deposit pricing as the biggest risk to NIM stability, though he currently sees no high likelihood of this. Dave Dykstra, Vice Chairman and Chief Operating Officer, added that an inverted yield curve would also be a risk, but they expect the current slope to persist.

David Long of Raymond James Financial inquired about the momentum of core C&I loan growth, current commercial client sentiment, and the reasons for the slight increase in nonperforming loans within the CRE office portfolio.

Answer

Vice Chairman & Chief Lending Officer Richard Murphy noted that client sentiment has improved to 'cautiously optimistic' as economic uncertainty has eased. He explained that the uptick in CRE office NPLs was due to a couple of small, specific deals and was not indicative of a broader trend, given the portfolio's granular nature.

David Long of Raymond James asked about deposit cost trends and competitive behavior following the recent interest rate cut. He also inquired about strategic plans to leverage the Macatawa acquisition, particularly regarding hiring veteran bankers in the Grand Rapids market.

Answer

Timothy Crane, President and CEO, stated that the deposit beta on the way down is expected to be in the mid-60s, similar to its performance on the way up, and noted that competitor promotional rates have already decreased. Regarding Macatawa, he expressed confidence in the existing team and highlighted that Wintrust is already seeing inbound inquiries for specialty loans in the new market.

David Long of Raymond James Financial sought confirmation on the deposit cost outlook, asking about the assumptions behind the guided 8-10 basis point increase for Q3 and the overall competitive environment for deposits.

Answer

EVP & CFO Al Villalon confirmed the 8-10 basis point deposit cost increase for Q3, expecting stability thereafter. EVP & Chief Banking and Revenue Officer Jim Collins described deposit competition as 'tough' but affirmed their strategy is focused on full C&I relationships. Al Villalon added that an expected deposit mix shift from non-interest-bearing to interest-bearing also contributes to the cost pressure.

David Long questioned the outlook for hiring veteran bankers, particularly with C&I experience, how that aligns with expense management, and whether the 1% return on assets achieved this quarter is sustainable.

Answer

Chief Banking and Revenue Officer Jim Collins stated that the company will be opportunistic in hiring C&I talent but will realign resources to avoid increasing net costs. Regarding profitability, an executive confirmed that consistently achieving a 1% ROA is the company's goal.

David Long asked about the competitive environment and growth outlook for synergistic deposits in the Retirement division. He also inquired about the breakdown of AUM growth between market appreciation and net new business, and whether the expense guidance incorporates future talent acquisition.

Answer

Chief Retirement Services Officer Forrest Wilson noted a steady trend for synergistic deposits with a significant growth opportunity in the HSA space. He also stated that while markets fueled AUM growth, Q4 saw positive organic asset inflows. Chief Banking and Revenue Officer Jim Collins added that the wealth business saw strong new client acquisition. CFO Al Villalon confirmed that potential talent investments are included in the expense guidance.

David Long of Raymond James Financial asked for a big-picture perspective on the economic outlook within Horizon's primary operating footprints of Northern Indiana and Michigan.

Answer

CEO Thomas Prame expressed a very positive view, highlighting significant infrastructure investment in Northern Indiana, an outflow of business from Illinois, and strong growth on the western side of Michigan. He described both Indiana and Michigan as favorable markets for banking, with good communities and talented teams contributing to the company's success and growth prospects.

David Long from Raymond James asked how Horizon balances its efficiency initiatives with the potential need to hire new commercial bankers. He also questioned how the company is incorporating a worsening economic forecast into its reserve levels, considering a recent specific reserve release.

Answer

EVP & Chief Commercial Banking Officer Lynn Kerber explained that the commercial team is stable and currently has sufficient capacity, so there are no plans for wholesale additions of new lenders. Regarding the reserve, she acknowledged that a large specific reserve release masked the impact of negative economic forecast adjustments made in the quarter. She anticipates that future economic forecasts could have a greater impact on the allowance ratio as the year progresses.

David Long inquired about strategic growth plans for 2025, asking if Horizon intends to add new commercial lending lines beyond the recent equipment finance expansion and if related hires are in the expense outlook. He also asked for commentary on the deposit competition and pricing environment in Horizon's key markets.

Answer

Executive Thomas Prame stated that there are no plans to add new lending lines in 2025, as the focus will be on capitalizing on the 2024 investments in equipment finance, with a stable FTE count expected. On deposits, Prame described the landscape as 'fluid' but noted Horizon successfully navigates it through its strong branch network, relationship banking model, and enhanced treasury management team, which helps mitigate the impact of any irrational pricing from competitors.

David Long sought clarification on the net interest margin (NIM) outlook, specifically its stability in a falling rate environment, and asked about the expected timing for resolving the new nonperforming loans (NPLs) without losses.

Answer

CFO and COO Keene Turner reaffirmed the stable margin outlook, attributing it to successful deposit repricing and a larger investment portfolio that provides durable earnings. Chief Credit Officer Doug Bauche addressed the NPLs, stating that while the bankruptcy process makes timing difficult to predict, the loans are well-secured with strong collateral and recourse, and he is confident in a favorable outcome with full repayment.

David Long from Raymond James questioned the sustainability of the strong growth in noninterest-bearing deposits seen in the quarter. He also asked if the two specific nonperforming loan relationships mentioned were indicative of any early warning signs in particular loan segments.

Answer

Executive James Lally acknowledged that while some Q4 DDA growth is seasonal, the bank's C&I-focused model supports maintaining DDA levels in the low 30% range of total deposits. Chief Credit Officer Doug Bauche clarified that credit quality has returned to historical norms and the increase in nonperformers was concentrated in two isolated relationships—a C&I chemical company and a medical management firm—and did not represent broader weakness in the portfolio.

David Long from Raymond James questioned the decision to maintain the loss provision guidance amid a seemingly worsening economic forecast. He also requested an update on expansion plans and investment appetite for the Nashville market given the current environment.

Answer

Executive John Moran defended the provision guidance, stating they feel confident in the ultimate loss content and noting that credit metrics are in line with expectations. He highlighted the conservative 100% weighting on Moody's S2 scenario plus additional qualitative reserves. Executive James Ryan addressed the Nashville question, affirming that the economic backdrop has not altered their desire to grow and invest in the market, which they view as a long-term play that will receive an 'outsized portion of investment.'

David Long of Raymond James asked how revenue growth might impact the pace of investment in high-growth markets like Tennessee and what the primary catalysts are for increasing commercial loan demand.

Answer

CEO James Ryan stressed that investing in high-growth markets like Tennessee is a priority, even if it temporarily impacts expense ratios, due to the long-term opportunity. Executive Mark Sander identified the removal of uncertainty—specifically, clarity on a soft landing and the post-election environment—as the key catalyst for loan demand. CFO John Moran added that the bank's own disciplined client selection also influences growth rates.

Inquired about the impact of economic uncertainty on the CECL model and reserve levels, and asked about the pipeline for expansion in new markets and verticals.

Answer

The CECL model is capturing more risk quantitatively as economic scenarios soften, which is then supplemented by a qualitative overlay to maintain strong reserves. The bank continues to 'play offense,' accelerating its branch expansion in the Carolinas and planning to add new verticals this year, while having contingency plans for various economic outcomes.

David Long of Raymond James inquired about the apparent strategic shift to grow the auto loan portfolio after years of decline. He also asked about the thought process behind the recent repositioning of the investment securities portfolio.

Answer

CFO Mike Santomassimo clarified that the auto lending change is not a strategic shift but a reaction to better spreads and the result of investments in lending capabilities. On the portfolio repositioning, he explained that the actions were disciplined, targeting a payback period of roughly 2 to 2.5 years, and they will continue to evaluate opportunities based on market conditions.

David Long asked about the mechanics of the asset cap, specifically if it could be removed before the entire consent order is lifted, and also about the drivers of volatility in trading gains.

Answer

CEO Charlie Scharf directed investors to the 2018 Fed consent order, summarizing that lifting the asset cap requires work to be 'adopted and implemented,' while lifting the full order requires it to be 'effective and sustainable.' CFO Michael Santomassimo explained that trading gains are driven by market volatility and seasonality, but the bank's methodical investments in capabilities and technology have led to seven consecutive quarters of strong performance.

David Long asked about the current competitive environment for deposit gathering and pricing, and how management expects these trends to evolve throughout 2025.

Answer

CFO John Stern described the competitive landscape as variable. He noted that on the consumer side, the prospect of Fed rate cuts has begun to ease pricing pressures. On the institutional side, competition is fairly standard, though quantitative tightening (QT) remains a headwind by reducing system-wide liquidity. Overall, the bank expects to remain competitive and achieve its modest deposit growth targets for the year.

David Long asked about the market dynamics that caused SVB deposit balances to be relatively flat in Q3 after showing strong improvement in Q2.

Answer

Executive Marc Cadieux attributed the flat deposit growth to several headwinds: diminished venture investment activity, clients maintaining multiple bank accounts, and a slight uptick in client cash burn. He emphasized that maintaining stability amidst these challenges demonstrates successful execution and positions the bank well for a market recovery.

Asked about the scope of the footprint review and if it could include the sale of a subsidiary bank. Also requested clarification on the baseline for the $6 million incremental NII from the balance sheet restructuring and whether to expect non-core expenses related to HTLF 3.0.

Answer

Regarding the footprint review, 'everything is on the table,' including the potential sale of a subsidiary, as the bank is now looking at all units through a single consolidated lens. The $6 million incremental NII is a quarterly benefit, half of which was realized in Q4. Most expenses for HTLF 3.0 are included in the run rate, though some could arise with a quick earn-back.