Feddie Strickland

Feddie Strickland noted the positive trend of declining classified assets and asked if this trend is expected to continue through 2026, given the outlook for declining credit costs. He also inquired if the CRE concentration ratio is projected to continue declining in 2026, considering higher growth rates in C&I, consumer, and residential loans.

Answer

Mark Saeger, Chief Credit Officer, confirmed the expectation for the trend of declining adversely classified assets to continue into 2026 and 2027, citing substantive decreases over the past three quarters due to payoffs and net upgrades. Travis Lan, CFO, stated that CRE concentration is expected to see a modest improvement or further decline, with loan growth split across C&I, net CRE, and resi/consumer, and capital growth supporting this trend.

Feddie Strickland inquired if the trend of declining adversely classified assets is expected to continue through 2026, and whether the CRE concentration ratio will further decline given higher growth rates in C&I, consumer, and residential loans.

Answer

Mark Saeger, Chief Credit Officer, confirmed expectations for continued decline in adversely classified assets in 2026 and 2027, assuming a stable economy, driven by payoffs and net upgrades. Travis Lan, Senior EVP and CFO, stated that a modest improvement or further decline in the CRE concentration ratio is anticipated, with loan growth split approximately $1 billion each for C&I and net CRE, and $500 million for residential and consumer.

Feddie Strickland inquired about the geographic distribution of Valley National Bancorp's CRE and C&I pipelines, specifically if more business is expected from outside the Northeast. He also asked for the outlook on the capital markets and insurance businesses for the next quarter and into 2026.

Answer

Gino Martocci, President of Commercial Banking, indicated that originations are split roughly one-third each in the Southeast, Northeast, and specialty businesses, with Florida remaining strong. Ira Robbins, CEO, highlighted Florida's significant organic growth. Ira Robbins, CEO, anticipated general stability for fee income in Q4, with momentum expected in capital markets (syndications, FX, swaps) heading into 2026 due to expanding commercial client base and increased CRE originations.

Feddie Strickland from Hovde Group asked about the geographic distribution of Valley National Bancorp's CRE and C&I pipelines, specifically if the trend of more business originating from outside the Northeast footprint is expected to continue. He also sought an outlook for the capital markets and insurance businesses for the upcoming quarter and into 2026, considering potential seasonality.

Answer

President of Commercial Banking Gino Martocci stated that originations have consistently been split 1/3 each for the Southeast, Northeast, and specialty businesses, with Florida remaining strong for CRE. CEO Ira Robbins highlighted Florida's significant organic growth over the past decade. Regarding fee income, CEO Ira Robbins anticipated general stability for capital markets and insurance in Q4, with capital markets showing momentum into 2026 driven by syndications, FX, and swaps.

Feddie Strickland asked about the potential for loan yields to increase in early 2026, given the rising pipeline yield and backbook repricing. He also inquired about the slight decrease in wealth AUM from the prior quarter and the company's organic geographic expansion plans.

Answer

Tom Lyons (SVP and CFO) and Adriano Duarte (SVP and Investor Relations Officer) confirmed expectations for stable to slight improvement in loan yields, driven by a lift in the five-year rate. Tom Lyons explained that while wealth AUM was down slightly on a spot basis, it was up on average, with some net outflows offset by strong business production. Anthony Labozzetta (President and CEO) expressed excitement for Beacon Trust's 2026 prospects due to new talent and deeper client penetration. He also confirmed plans for organic geographic expansion in areas like Long Island, Westchester, Rockland, and the Philly suburbs.

Feddie Strickland asked about the potential for loan yields to increase in early 2026, the reasons for a slight decrease in wealth AUM last quarter despite positive market moves, and opportunities for organic geographic expansion.

Answer

Thomas Lyons, Senior Executive Vice President and Chief Financial Officer, indicated stable to slight improvement in loan yields, with Adriano Duarte, SVP and Investor Relations Officer, adding that a 20 basis point lift in the five-year rate contributed to yield improvement. Mr. Lyons clarified that wealth AUM was down slightly on a spot basis but up $80 million on average, with some net outflows offset by strong business production. Anthony Labozzetta, President and CEO, expressed excitement for Beacon Trust in 2026 due to new talent and teams, expecting deeper client penetration. Mr. Labozzetta confirmed interest in organic expansion in adjacent geographies like Long Island, Westchester, Rockland, and the Philly suburbs, where lending teams are already active.

Feddie Strickland of Hovde Group inquired about the expense guidance, asking if the company could potentially operate at the lower end of its projected range. He also asked about the seasonality of municipal deposit flows and the strategy behind using brokered deposits.

Answer

CFO Thomas M. Lyons confirmed it is possible to come in at the lower end of the expense guidance, though he noted some non-recurring severance costs in Q2 and that incentive accruals are typically reviewed in the second half of the year. President and CEO Anthony Labozzetta explained that brokered deposits were strategically used to offset seasonal municipal outflows and replace maturing high-yield CDs. He anticipates strong municipal inflows in Q3, with Mr. Lyons adding that Q2 is historically the trough for these deposits.

Feddie Strickland of Hovde Group inquired about the expected trajectory of expenses for the remainder of 2025, the seasonality and growth outlook for insurance commission income, and the company's capital allocation priorities, particularly regarding share buybacks.

Answer

CFO Tom Lyons confirmed that quarterly expenses are expected to track toward the lower end of the guided $113 million to $115 million range for the rest of the year. CEO Anthony Labozzetta described the insurance business as seasonal, with Q1 and Q2 being the strongest, and noted it has been growing at a rate close to 20% year-over-year. On capital, Lyons stated that while they want the flexibility for opportunistic buybacks, their primary focus is deploying capital to fund the strong and profitable organic loan growth pipeline.

Feddie Strickland asked for an update on upcoming CD maturities and repricing, opportunities to increase wealth management fees, and the potential for resolving nonperforming loans in 2025.

Answer

CFO Tom Lyons detailed that approximately $3 billion in CDs will reprice over the next 12 months, noting the balance sheet is very neutral to rate changes. Regarding wealth management, Lyons stated there is little room to increase the fee rate, which is already strong. CEO Tony Labozzetta added that the focus is on growing assets under management (AUM) through cross-channel synergies. On credit, Lyons confirmed they are actively working to resolve the remaining nonperforming assets and REO through customer workouts and potential note sales.

Feddie Strickland asked about the expected cadence of expense growth throughout 2026, particularly if any specific quarter would see higher increases, and also sought an update on Trustmark's M&A strategy, including the likelihood of a deal in 2026 and preferred geographies/partner characteristics.

Answer

Chief Accounting Officer Tom Chambers and Chief Credit and Operations Officer Barry Harvey explained that non-interest expense typically sees a higher increase in the second half of the year due to annual merit increases effective July 1st and potential year-end bonuses/commissions, alongside normal technology investments. President and CEO Duane Dewey and Barry Harvey noted increased M&A discussion, with preferred geographies including Houston to Dallas, Arkansas, Louisiana, and Tennessee, targeting opportunistic deals between $1 billion and $10 billion. They emphasized a focus on organic strategy, with M&A pursued only if there's a good cultural fit, talent, and market opportunity, while also considering share buybacks as a capital deployment option.

Feddie Strickland sought clarification on Trustmark's fourth-quarter expense outlook, specifically whether non-recurring professional fees and ORE expenses would lead to a decrease or if overall expenses would still increase. He also inquired about the near-term net interest margin (NIM) outlook, expecting some compression due to the asset-sensitive balance sheet, and asked for trends in classified and criticized loans, linking them to the lower provision for credit losses.

Answer

Tom Chambers, Chief Accounting Officer, confirmed that non-recurring items should fall off, but a slight increase in expected expenses (excluding non-recurring items) is anticipated for Q4, aligning with mid-single-digit year-over-year growth guidance. Tom Owens, EVP and CFO, explained that while Trustmark is slightly asset-sensitive, proactive deposit rate cuts aim to maintain NIM around 3.80%-3.83%, acknowledging potential choppiness quarter-to-quarter. Barry Harvey, Chief Credit and Operations Officer, reported a positive trend with a $49 million decrease in criticized loans this quarter, contributing to a $123 million reduction over the first three quarters of the year, which was a factor in the lower provision.

Feddie Strickland sought clarification on Trustmark's fourth-quarter expense guidance, specifically whether non-routine professional fees and ORE expenses would lead to a net decrease or increase. He also inquired about the expected trajectory of the net interest margin given the asset-sensitive balance sheet and recent trends in classified and criticized loans, and their impact on the provision for credit losses.

Answer

Chief Accounting Officer Tom Chambers confirmed that non-recurring expenses should fall off, but a slight increase in expected expense (excluding non-recurring items) is anticipated for Q4, maintaining mid-single-digit year-over-year growth. EVP and CFO Tom Owens explained that while asset-sensitive, the company aims to maintain NIM around 3.80%-3.83% through proactive deposit rate cuts, acknowledging potential choppiness. Chief Credit and Operations Officer Barry Harvey reported a positive trend with a $49 million decrease in criticized loans this quarter, contributing to the lower provision for credit losses.

Feddie Strickland from Hovde Group asked for details on the drivers of non-interest income growth and requested an update on Trustmark's M&A criteria, specifically regarding geography and target size.

Answer

President & CEO Duane Dewey attributed the non-interest income growth to broad-based improvement across wealth management, brokerage, and mortgage banking. On M&A, he reiterated the focus on contiguous Southeastern markets for targets generally in the $1 billion to $5 billion asset range, while noting an increase in available opportunities and a willingness to be opportunistic.

Feddie Strickland from Hovde Group asked for details on the drivers of rising non-interest income and requested a refresh on the company's M&A criteria, specifically regarding target size and geography.

Answer

President & CEO, Duane Dewey, stated that the growth in non-interest income was broad-based, with positive contributions from wealth management, brokerage, and an improving mortgage business. Regarding M&A, he reiterated interest in contiguous markets across the Southeast and specified a target size range of $1 billion to $5 billion as a good starting point, while remaining opportunistic for other value-additive deals.

Feddie Strickland from Hovde Group asked for the specific drivers of non-interest income growth and requested a refresh on the company's M&A criteria regarding size and geography.

Answer

President & CEO Duane Dewey explained that non-interest income growth was broad-based, benefiting from positive market performance impacting wealth management and brokerage, alongside steady improvement in the mortgage business. Regarding M&A, Dewey reiterated interest in contiguous markets across the Southeast and suggested a target size in the $1 billion to $5 billion range would be a good fit, while remaining opportunistic for any value-creating transaction.

Feddie Strickland of Hovde Group asked for details on the drivers of rising non-interest income, specifically questioning the impact of wealth management and mortgage. He also requested a refresh on the company's M&A criteria, including target size, geography, and financial metrics.

Answer

President & CEO Duane Dewey confirmed that the non-interest income growth was due to 'all of the above,' citing positive impacts from market performance on wealth management and brokerage, alongside steady improvement in mortgage banking. Regarding M&A, Dewey outlined a focus on contiguous markets in the Southeast and Texas, suggesting a target size in the $1 billion to $5 billion range would be a good fit, while emphasizing they remain opportunistic.

Feddie Strickland from Hovde Group asked for details on the drivers of rising non-interest income and requested a refresher on Trustmark's M&A criteria, including size and geography.

Answer

President & CEO Duane Dewey explained that the non-interest income growth was broad-based, driven by market performance boosting wealth management and brokerage fees, along with steady improvement in mortgage banking. Regarding M&A, he reiterated interest in contiguous markets across the Southeast and suggested a target size in the $1 billion to $5 billion range would be a good starting point, while remaining opportunistic.

Feddie Strickland from Hovde Group asked for details on the drivers of non-interest income growth and requested a refresh on the company's M&A criteria, including size and geography.

Answer

President & CEO Duane Dewey stated that non-interest income growth was broad-based, with positive contributions from wealth management, brokerage, and mortgage banking. Regarding M&A, he reiterated a focus on contiguous markets in the Southeast and Texas, with a target size in the $1 billion to $5 billion range, while remaining opportunistic.

Feddie Strickland inquired about the expected trajectory of Class 5 and non-performing assets (NPAs), asking when a shift might be seen as Home Bancorp works through existing credits. He also asked about the current loan pipeline's composition, potential long-term shifts in the portfolio, and customer sentiment across the company's footprint, specifically comparing New Orleans and Houston.

Answer

David Kirkley and John Bordelon, Chairman, President, and CEO, explained that while some credits take longer to resolve, particularly in Louisiana and Mississippi, Texas credits typically move faster. They highlighted specific properties, including two Texas subdivision loans totaling $5.5 million expected to be resolved by February third, which could significantly reduce NPAs. They clarified that the increase in NPAs is due to one-off circumstances, not an economic downturn. Regarding the loan pipeline, Mr. Bordelon noted that 2025 saw significant payoffs and paydowns, and loan growth in 2026 depends on a reduction in these. On customer sentiment, Mr. Bordelon reported no negative feedback across markets, with lower rates potentially leading to a more positive outlook, despite national economic concerns.

Feddie Strickland asked about the expected shift in the trajectory of Class 5 and non-performing assets (NPAs), the current makeup and potential long-term shifts in the loan pipeline, and customer sentiment across different parts of the bank's footprint, specifically New Orleans versus Houston.

Answer

David Kirkley and John Bordelon, Chairman, President, and CEO, Home Bancorp, discussed specific credit situations, including two Texas townhome development loans expected to resolve by February 3rd, potentially reducing NPAs by $5.5 million. They clarified that current credit issues are not economically driven but rather one-off scenarios. John Bordelon noted that 2025 saw significant loan payoffs, and he hopes for fewer in 2026, which would support loan growth. He also reported no negative customer feedback in any markets, with sentiment leaning positive due to falling interest rates, despite general national economic concerns.

Feddie Strickland of Hovde Group sought clarification on the pace of net interest margin (NIM) expansion, suggesting it might slow in Q3 before re-accelerating. He then asked for an update on the company's M&A criteria, including target size, geography, and partner characteristics.

Answer

CFO David Kirkley acknowledged NIM expansion from repricing might slow slightly in Q3 but expects more opportunities in Q4 and beyond as fixed-rate loans mature. CEO John Bordelon addressed M&A, stating the bank's higher stock valuation now allows them to consider larger partners, potentially up to $1 billion in assets. He confirmed that while they have had discussions in Louisiana, the bulk of opportunities have been in Texas.

Feddie Strickland of Hovde Group sought clarification on the pace of Net Interest Margin (NIM) expansion from loan repricing, questioning if it might slow in Q3 before reaccelerating. He also asked for an update on Home Bancorp's M&A criteria, including target size and geography.

Answer

CFO David Kirkley acknowledged that the pace of NIM expansion from loan repricing might see a slight slowdown in Q3 but is expected to pick up again in Q4 and beyond as more fixed-rate loans originated in 2021 mature. On M&A, Chairman, President & CEO John Bordelon explained that the bank's improved stock valuation has expanded its potential target size up to the $1 billion asset range. He noted that while conversations have occurred in both Louisiana and Texas, the bulk of opportunities have been in Texas.

Feddie Strickland from Hovde Group inquired about potential lumpiness in noninterest expenses beyond the planned salary adjustments and new branch. He also asked about the composition of the current loan pipeline, long-term growth opportunities, competitive loan pricing pressures, and the expected mix of core fee income versus gain-on-sale revenue in the future.

Answer

CFO David Kirkley responded that no significant expense lumpiness is anticipated, with increases being gradual. Executive John Bordelon detailed the loan strategy, highlighting a focus on C&I lending to foster full banking relationships, and noted that loan pricing has stabilized. Regarding fee income, Bordelon acknowledged potential regulatory pressure on deposit fees, while Kirkley pointed to expected growth in treasury management fees, SBA loan sales, and mortgage loan sales as key drivers for noninterest income.

Feddie Strickland of Hovde Group asked if loan growth could return to a mid-to-high single-digit rate in 2025 with Fed rate cuts and which geographies would drive that growth. He also inquired about the specifics of new nonaccrual loans, the practical impact of gradual rate cuts on net interest margin versus the bank's shock scenario disclosure, and the outlook for significant expense growth in late 2025.

Answer

Executive John Bordelon confirmed that a series of rate cuts could restore loan growth, particularly in the 1-to-4 family portfolio, and identified Houston, New Orleans, and Lafayette as the strongest growth markets. He clarified that a key nonaccrual credit was related to a partner dispute on performing rental properties and is expected to be fully resolved. CFO David Kirkley and Bordelon explained that gradual rate cuts allow them to manage repricing more effectively than the disclosure's shock scenario suggests, potentially protecting the margin. Kirkley noted that while annual merit raises occur in April, no other material expense drivers are anticipated for 2025.

Feddie Strickland asked about the impact of higher commercial real estate (CRE) payoffs on future loan growth, considering the run-off portfolios, and requested an update on loan pipelines across different geographies, specifically Rochester and Buffalo. He also inquired if a mid- to lower single-digit growth rate is a reasonable expectation for 2026, and followed up on the Q1 margin outlook given accretion income trends and the seasonality of fee income.

Answer

President and CEO Scott Kingsley and CFO Annette Burns explained that unscheduled CRE payoffs in 2025 (approx. $150M-$175M) were primarily due to agency money and private funding, posing a potential risk for 2026 growth. They noted strong loan pipelines across the franchise, with a focus on holistic relationships, and expressed bullishness on Western New York opportunities due to new hires. Scott Kingsley confirmed that a mid- to lower single-digit growth rate is a good target for 2026, factoring in the $100M annual run-off of the solar loan portfolio and improved consumer lending. Annette Burns stated that the Q1 margin is expected to be fairly stable, potentially affected by 1-2 basis points, barring changes in normalized accretion. She also clarified that seasonal activity accounted for $300K-$400K in wealth management fees, with BOLI and securities gains contributing $1M-$1.5M, and Scott Kingsley added that Q1 typically incurs $0.04-$0.05 higher operating costs due to seasonality and payroll/stock-based compensation.

Feddie Strickland of Hovde Group inquired about expectations for commercial real estate (CRE) payoffs in upcoming quarters, particularly after higher payoffs in 2025, and how this trend might influence overall loan growth, considering existing run-off portfolios. He also asked for an update on loan pipelines, opportunities by type and geography, specifically in Rochester and Buffalo, and whether a mid-to-lower single-digit growth rate is a reasonable expectation for 2026. Additionally, he followed up on the impact of accretion income on the first quarter net interest margin (NIM) and the extent of seasonal activity-based fees in the wealth management line.

Answer

Scott Kingsley, President and CEO of NBT Bancorp, and Annette Burns, CFO, explained that 2025 saw $150M-$175M in unscheduled CRE payoffs, primarily to agency money and private funding, which they view as an outsized number but a potential risk for 2026 growth. They reported strong loan pipelines across the franchise, focusing on holistic relationships, and expressed bullishness on Western New York (Rochester and Buffalo) despite fewer multifamily projects. Kingsley confirmed a mid-to-lower single-digit growth rate for 2026 is good, factoring in the $800M solar loan portfolio run-off (decreasing ~$100M annually) and improved Q4 consumer lending. Regarding NIM, Burns noted accretion is hard to predict but expects Q1 margin to be fairly stable, potentially affected by 1-2 basis points. She estimated $300K-$400K in seasonal wealth fees, while Kingsley added that overall seasonality is less noticeable, with insurance thriving in Q1/Q3 and benefits administration in Q1/Q2/Q3. He also highlighted $0.04-$0.05 higher operating expenses in Q1 due to seasonal costs, higher payroll, and stock-based compensation.

Feddie Strickland with Hovde Group LLC inquired about NBT Bancorp's expense outlook, specifically regarding the achievement of cost savings from the Evans Bancorp merger and the expected total expense run rate for the upcoming quarter and 2026. He also asked about net new loan growth expectations for the next couple of quarters, considering anticipated runoff in residential, solar, and other consumer loan portfolios. Later, he followed up on capital management strategies, including target capital ratios and the potential for share buybacks beyond offsetting stock-based compensation, and sought clarification on the net interest margin trajectory, particularly regarding initial pressure and potential for future improvement.

Answer

NBT Bancorp's CFO, Annette Burns, stated that cost savings from the Evans merger were largely achieved in Q3, with an appropriate run rate of $110 million for expenses going forward, expecting a typical 3.5%-4.5% increase in 2026 due to merit increases. CEO and President, Scott Kingsley, indicated that low to mid-single-digit loan growth is appropriate for early to mid-2026, noting robust activity and a strong pipeline despite higher-than-anticipated payoffs. He also highlighted comfort with an 85% loan-to-deposit ratio, allowing for earning asset growth beyond just loans, supported by steady core deposit growth. Regarding capital, Mr. Kingsley explained that after completing the Salisbury and Evans transactions, NBT Bancorp is now comfortable with its capital position, arguing they have "too much" given risk attributes, and suggested being more active with repurchases beyond covering equity-based compensation due to current valuations. Ms. Burns added that while initial margin pressure is possible in Q4 due to immediate asset repricing versus active deposit management, potential for improvement exists in 2026, especially with a steeper yield curve, though not at the same level as 2025.

Feddie Strickland from Hovde Group asked about the interest cost savings from the recent subordinated debt redemption and inquired about the outlook for net charge-offs, questioning if the current low level is sustainable.

Answer

EVP & CFO Annette Burns explained that the company paid off $118 million of sub-debt with a 5.45% rate that was set to reset to nearly 9%. By using liquidity costing around 4.25-4.4%, the bank realized significant savings. Regarding credit, Burns stated that while Q2 performance was excellent, the low level of net charge-offs is not expected to recur. She guided that a more normalized quarterly range for net charge-offs is likely between $3 million and $5 million.

Feddie Strickland from Hovde Research asked for confirmation that future charge-offs would likely be concentrated in the Auto and Residential Solar portfolios and inquired about the total assets under management and administration.

Answer

CFO Annette Burns confirmed that the majority of future charge-offs are expected to come from the Auto and Residential Solar books, as commercial charge-offs are more episodic. Executive Scott Kingsley noted that the specific AUM/AUA figures were not in the presentation but offered to provide them offline.

Feddie Strickland from Hovde Group asked about USCB Financial Holdings' net interest margin (NIM) outlook, specifically if a Q1 2026 spike is expected from balance sheet restructuring, followed by steady growth. He also inquired about loan growth expectations and the driver behind the increased tax rate guidance.

Answer

CFO Robert Anderson indicated a conservative outlook for NIM in Q1 2026, expecting it to be flat to slightly up, citing runoff in moderately priced deposits and backfilling with pricier FHLB advances. He guided for high single-digit to low double-digit loan growth. Robert Anderson clarified that the increased tax rate guidance of 26.4% for 2026 is primarily due to self-identified state tax liabilities for out-of-state loans from prior periods.

Feddie Strickland from Hovde Group asked about USCB Financial Holdings' net interest margin (NIM) outlook, specifically whether to expect a significant spike in Q1 2026 due to balance sheet restructuring or more steady growth throughout the year. He also sought clarification on loan growth expectations and the drivers behind the updated tax rate guidance for 2026.

Answer

CFO Robert Anderson indicated a conservative outlook for NIM in Q1 2026, expecting it to be flat to slightly up, rather than a significant spike. He explained that runoff in moderately priced deposits, backfilled by pricier FHLB advances, would temper immediate expansion, with future growth dependent on deposit backfilling and potential rate cuts. Anderson guided loan growth expectations to high single digits, potentially low double digits, given strong Q4 2025 production. He clarified that the increased tax rate guidance of 26.4% for 2026 is primarily due to self-identified state tax liabilities for out-of-state loans from prior periods, ensuring compliance.

Feddie Strickland from Hovde Group asked about the loan pipeline mix for the next six months, the potential impact of rate cuts on it, the outlook for gain on sale of SBA loans, and the primary drivers of the recent increase in DDA balances.

Answer

CEO Luis de la Aguilera described the loan pipeline as balanced across verticals like yacht loans, association banking, and commercial real estate, and projected that SBA 7(a) loan volume could double from the previous year, suggesting a rebound in gain-on-sale income. CFO Rob Anderson attributed the growth in DDA to strategic initiatives focused on making USCB the primary bank for clients, supported by new deposit-focused hires and company-wide incentives.

Feddie Strickland from Hovde Group asked about the composition of the loan pipeline for the next six months and how potential rate cuts might alter it. He also inquired about the outlook for gain on sale of SBA loans and the primary drivers behind the recent growth in DDA balances.

Answer

President, CEO & Chairman Luis de la Aguilera described the loan pipeline as balanced across verticals like yacht loans, association banking, and commercial real estate, and projected strong SBA 7(a) volume for the year-end, which should increase gain-on-sale income. CFO Rob Anderson added that the DDA growth stems from a company-wide strategic focus on gathering low-cost core operating accounts from clients.

Feddie Strickland from Hovde Group asked about the composition of the loan pipeline for the next six months, the potential impact of rate cuts on the pipeline, the outlook for gain on sale of SBA loans, and the primary drivers of the recent increase in DDA balances.

Answer

President, CEO & Chairman Luis de la Aguilera described the loan pipeline as balanced across verticals like yacht loans, association banking, and commercial real estate, and projected a doubling of SBA 7A volume compared to last year, which should boost gain-on-sale income. CFO Rob Anderson stated that the DDA growth was driven by a company-wide strategic focus on gathering low-cost operating accounts and becoming the primary bank for clients.

Feddie Strickland from Hovde Group inquired about the composition of the loan pipeline for the next six months and how potential rate cuts might alter it. He also asked for the outlook on gain on sale income from SBA loans and the primary drivers behind the quarterly increase in DDA balances.

Answer

President, CEO & Chairman Luis de la Aguilera described the loan pipeline as balanced across verticals like yacht loans, association banking, and commercial real estate, and projected strong SBA 7(a) loan volume that could double from last year, boosting gain on sale income. CFO Rob Anderson attributed the DDA growth to a focused strategy, including new hires dedicated to deposit gathering and team-wide incentives to secure low-cost core operating accounts.

Feddie Strickland of Hovde Group asked about the loan pipeline mix for the next six months, the potential impact of rate cuts, the outlook for gain on sale of SBA loans, and the primary drivers of the quarter's increase in DDA balances.

Answer

President, CEO & Chairman Luis de la Aguilera described the loan pipeline as balanced and strong, particularly highlighting the SBA 7(a) pipeline, which he expects to double in volume year-over-year, suggesting a rebound in gain-on-sale income. CFO Rob Anderson explained that DDA growth is a key focus supported by new hires and incentive programs aimed at making USCB the primary bank for its clients.

Feddie Strickland asked about the composition of the loan pipeline for the next six months and how potential rate cuts might impact it. He also inquired about the outlook for gain on sale of SBA loans and the primary drivers behind the quarterly increase in DDA balances.

Answer

President, CEO & Chairman Luis de la Aguilera described the loan pipeline as balanced across multiple verticals and projected hitting Q3 targets, noting the SBA 7(a) pipeline is particularly strong and could double last year's volume, suggesting higher gain-on-sale income ahead. CFO Rob Anderson explained that the DDA growth was driven by a company-wide focus on gathering low-cost operating accounts, with new hires dedicated to deposit gathering to support strong loan growth.

Feddie Strickland probed deeper into the Net Interest Margin, asking why the outlook wasn't more positive given late-quarter loan growth and higher DDA balances, and whether competitive pressures were the main offset. He also inquired about the potential impact of trade tariffs on the correspondent banking portfolio and if the recent upward trend in nonperforming assets could reverse.

Answer

CFO Robert Anderson cited competitive deposit rate pressures, higher cash balances, and the mix of lower-yielding (though full-relationship) correspondent banking loans as factors tempering the NIM outlook, reiterating the "flat to up" guidance. Executive Luis de la Aguilera stated they do not anticipate a significant tariff impact on their correspondent banking clients. Chief Credit Officer William Turner confirmed he expects both nonperforming and classified loan levels to improve in Q2, citing the resolution of a specific nonperforming yacht loan.

Feddie Strickland asked for the outlook on swap fee income for the coming quarters, following a strong performance. He also inquired about the potential for growth in SBA-related fees and which specialty lending segments, such as yacht financing, showed the most promise for 2025.

Answer

CFO Robert Anderson projected that swap fee activity, which exceeded $3 million in 2024, would likely decrease in 2025, with the bank aiming to offset this with growth in other areas like TM, wire, and SBA fees. Executive Luis de la Aguilera stated a plan to more than double SBA fee volume in 2025. He expects steady growth in yacht financing, expansion of existing global banking relationships, and 'tremendous opportunities' in HOA lending due to state-mandated building certifications.

Feddie Strickland of Hovde Group inquired about the outlook for interest rate swap fee income into 2025, the bank's priorities for capital deployment between dividends and buybacks, and the general sentiment among the customer base.

Answer

CFO Robert Anderson stated that the swap fee pipeline is robust for Q4 and the near term, suggesting the current income level is a good modeling number for the next six months before potentially moderating. He outlined capital deployment priorities as first supporting organic growth, then evaluating dividend levels, and using buybacks opportunistically. CEO Luis de la Aguilera confirmed that customer sentiment remains steady, allowing the bank to be selective, and that the diversified business model supports a consistent low double-digit growth outlook.

Feddie Strickland asked about the strategy for growing non-interest-bearing deposits (DDAs), considering public funds seasonality and year-over-year declines. He also inquired about the growth opportunities and contributions from swap fees, brokerage commissions, and the SSW and F.A. groups within non-interest income. Finally, he sought clarity on whether the recent loan growth balance between Southern Louisiana and Texas was a deliberate strategy or a quarterly fluctuation.

Answer

Chairman and CEO Jude Melville and CFO Greg Robertson explained that DDA migration to interest-bearing accounts has slowed, and the Progressive Bank acquisition will provide a lift. They plan to focus on elevating deposit gathering through Treasury and non-interest-bearing sources in 2026. For non-interest income, Jude Melville and Greg Robertson see continued expansion, particularly from the SBA group (Waterstone) and the SSW/brokerage business, projecting mid-to-upper $13 million quarterly non-interest income with Progressive. Jude Melville clarified that the balanced loan growth across regions reflects a deliberate strategy of building a diversified footprint where different markets can contribute at different times, ensuring consistent moderate growth. President of B1 Bank Jerry Vascocu added that new client acquisition by tenured bankers is a significant driver. Chief Banking Officer Philip Jordan highlighted the opportunity to deepen relationships with Progressive Bank's addition.

Feddie Strickland asked about the strategy to grow non-interest-bearing deposits (DDAs) given year-over-year declines and seasonality, especially with the Progressive Bank acquisition. He also inquired about the opportunities and expected contributions from various non-interest income streams, including swap fees, brokerage commissions, SBA lending, and the SSW and Fay Group.

Answer

CEO Jude Melville and CFO Greg Robertson noted that DDA declines were largely due to migration to interest-bearing accounts, which has slowed. They expect a lift from Progressive Bank's non-interest-bearing deposits and plan to focus on elevating deposit gathering through Treasury and non-interest-bearing sources in 2026. Greg Robertson projected mid-to-upper $13 million quarterly non-interest income, with continued expansion in swap fees (despite potential rate challenges), SBA lending (especially with a lower rate environment), and brokerage. Jude Melville highlighted the dual benefit of swaps for risk management and client options, and the opportunity to cross-sell products within their correspondent banking network. President of B1 Bank Jerry Vascocu emphasized new client acquisition driving growth, and Chief Banking Officer Philip Jordan mentioned deepening relationships with Progressive.

Feddie Strickland asked about the trajectory of non-interest income, specifically if quarter-over-quarter growth is expected in Q4 and if accelerated year-over-year growth is anticipated for 2026, considering the impact of acquisitions. He also questioned the company's strategic focus on future M&A versus organic growth and the potential for share repurchases.

Answer

CFO Greg Robertson noted that Q4 non-interest income might be flat quarter-over-quarter due to potential government shutdown impacts on SBA loan sales, but confirmed expectations for over 20% annual growth. CEO Jude Melville emphasized prioritizing execution on existing acquisitions and organic opportunities over aggressive M&A, while expressing openness to share repurchases given strong capital accretion and attractive stock valuation.

Feddie Strickland inquired about the trajectory of non-interest income growth for Q4 and 2026, especially with the Oakwood and Progressive Bank deals. He also asked about the company's strategic focus on M&A versus organic growth and the potential for share repurchases.

Answer

Greg Robertson (CFO, Business First Bancshares) noted non-interest income momentum but cautioned Q4 could be flat due to potential government shutdown impacts on SBA sales, while Jude Melville (CEO and Chairman, Business First Bancshares) expects over 20% annual growth. Jude Melville emphasized prioritizing execution on current acquisitions and organic growth, not aggressively seeking new M&A, but confirmed that strong capital ratios and an attractive stock price make share repurchases a viable option for capital deployment in the coming years.

Feddie Strickland from Hovde Group inquired about the duration of excess liquidity from the core conversion, the specifics of the quarter's credit migration, and the outlook for Non-Performing Assets (NPAs) in the second half of the year.

Answer

EVP & CFO Gregory Robertson explained that the excess liquidity was necessary for a correspondent bank transition and will be maintained through the upcoming Oakwood conversion. He clarified that the credit migration involved previously identified relationships moving to nonaccrual, for which the bank is adequately reserved. CEO Jude Melville emphasized these were not surprises and resolutions are being pursued cooperatively. Robertson projected that as these credits resolve, NPAs should decline significantly through the end of the year.

Feddie Strickland inquired about which loan portfolio areas might see de-emphasized growth and questioned the long-term M&A strategy, specifically asking about interest in new Louisiana markets or expanding eastward versus the current Texas and Louisiana focus.

Answer

CEO Jude Melville responded that the bank is not looking to significantly down-scope any particular loan area, having already managed down its C&D exposure. The focus remains on maintaining a balanced portfolio and improving execution in C&I lending. On M&A, Melville was clear that the priority is to grow within the existing Louisiana and Texas footprint, filling in current markets. He stated that expanding east is not a priority at this time.

Feddie Strickland inquired about the company's strategy for its borrowings, the retention and repricing dynamics for maturing loans, and the geographic source of recent loan growth.

Answer

CFO Gregory Robertson indicated an opportunity to pay down approximately $50 million in FHLB maturities in the coming year, contingent on continued organic deposit growth. Regarding loan renewals, CEO David Melville emphasized the focus is on disciplined repricing for the entire relationship, whether retaining existing loans or originating new ones. Melville also explained that the recent strength in Louisiana-based loan growth was a logical outcome of a strategic de-emphasis on construction lending, which was more concentrated in the Dallas market.

Feddie Strickland inquired about the expense growth outlook for late 2025 after the Oakwood integration and asked about the company's medium-term strategy regarding M&A, team lift-outs, and organic growth.

Answer

CFO Gregory Robertson stated that the Q4 consensus noninterest expense estimate of approximately $50 million is a fair run rate and a good launching point for 2025. He clarified that significant cost savings from the Oakwood deal are not expected until late 2025 and into 2026, as originally modeled. CEO David Melville detailed the growth strategy, stating the top priority is organic growth within the current footprint, followed by team lift-outs and then opportunistic M&A. He emphasized that while Texas is a key growth market, the core Louisiana franchise continues to perform strongly.

Feddie Strickland followed up on the bank's growth strategy, asking if a "team lift-out" in a new or adjacent geographic area would be a likely possibility, separate from M&A.

Answer

Mark R. DeFazio, President and CEO, stated that team lift-outs are generally not part of the bank's cultural DNA, preferring to acquire individual talent within existing markets to avoid the financial and cultural integration risks associated with teams. He affirmed the bank's commitment to its current growth strategy.

Feddie Strickland inquired about the loan mix, specifically the potential for C&I loan growth after recent declines, the stability of CRE concentrations given owner-occupied CRE growth, and the contribution of new branches in New Jersey and South Florida to municipal deposit growth.

Answer

President and CEO Mark R. DeFazio stated that core C&I is not expected to grow substantially, with focus remaining on healthcare-related C&I, and risk management will continue at the current pace. He also confirmed that CRE concentration increases relative to risk-based capital are expected to be stable. Regarding new branches, Mr. DeFazio noted that New Jersey branches have contributed to municipal deposit growth due to an earlier start, while Florida branches are expected to contribute significantly in the future.

Feddie Strickland from Hovde Group asked for more information on the proportion of Metropolitan Commercial Bank's CRE loan book that is located out of market. He also inquired about the primary opportunities for deposit growth, specifically whether EB-5 title and escrow remain key drivers or if other verticals are emerging. Additionally, he sought clarification on the expected ramp-up of digital transformation expenses in Q1 2026 and the feasibility of the net interest margin approaching 4% in 2026 given multiple anticipated rate cuts.

Answer

Mark DeFazio, President and CEO, directed Feddie to page 14 of the investor deck for geographical breakdown, noting that a good percentage of the portfolio is outside the greater New York City area, typically following existing New York-based sponsors expanding their franchises. He emphasized the diversified nature of deposit verticals, stating that opportunities are spread fairly evenly and new opportunities are being developed for early 2026. Daniel Dougherty, EVP and CFO, confirmed that digital transformation expenses would be approximately $3 million in Q4 and less than $2 million in Q1 2026. Regarding the NIM, Daniel Dougherty stated that piercing 4% is very much feasible in 2026 with continued modest liability sensitivity and anticipated rate cuts (one in Q4, three next year). Mark DeFazio added that the bank is actively working on replacing GPG and developing other deposit opportunities to drive lower cost of funds and support margin expansion independently of Fed actions.

Feddie Strickland from Hovde Group asked for clarification on the expense guidance, specifically if it was all-inclusive, questioned the strategy for share repurchases at the current stock price, and inquired about future opportunities for deposit growth, particularly in the municipal vertical.

Answer

EVP & CFO Daniel Doherty confirmed the $45-46 million quarterly expense guidance is 'all-in' and stated that share repurchases would not be aggressive at current prices, with the strategy focused on supporting the stock below book value. President & CEO Mark DiFazio added that the tech project's timeline extension would not increase its overall budget and expressed confidence in continued deposit growth across all verticals, not just municipal.

Feddie Strickland of Hovde Group asked for more detail on the projected 2025 net interest margin trajectory, current occupancy trends in the office portfolio, and the competitive landscape for loan pricing.

Answer

Executive Daniel Dougherty clarified the NIM outlook, projecting a Q1 margin around 3.60% and a full-year 2025 margin of 3.70% to 3.75%, likely ending the year closer to 3.80%. Executive Mark DeFazio addressed the other topics, stating that while office occupancy trends are more positive, they vary significantly by building class and location. He asserted that MCB faces no significant competitive pricing pressures on loans, as the bank is capitalizing on market dislocation while competitors are focused on restructuring.

Feddie Strickland inquired whether a prior GPG client cost arrangement was included in the recent reserve, asked about the impact of recent hurricanes on the Florida healthcare portfolio, and questioned if there were any changes to the digital transformation budget or timeline.

Answer

Executive Mark DeFazio explained that the prior GPG cost arrangement was a reimbursement and not part of the reserve; he also noted the departing client is covering 75% of remaining exit costs. Regarding weather, DeFazio confirmed the bank surveyed all Florida clients and collateral and found only very minor, non-adverse damage from the hurricanes. On the digital budget, DeFazio stated there was no increase, and CFO Daniel Dougherty added that post-project IT expenses would align with the previous run rate.

Feddie Strickland from Hovde Group inquired about the potential for further reducing the already low criticized, classified, and nonperforming asset levels. He also asked about the company's strategy for balancing capital deployment, such as share repurchases, with the need to manage its commercial real estate (CRE) concentration.

Answer

Senior EVP & CFO William Burns responded that he doesn't foresee major changes in classified/criticized assets but noted potential opportunities to unload some loans given the write-downs. Regarding capital, Burns explained that the CRE concentration is expected to decrease naturally due to new originations and strong capital accretion. While the bank initially planned to pause share repurchases post-merger, he indicated that capital ratios are looking stronger than anticipated, leaving the door open for future buybacks.

Feddie Strickland asked for more detail on credit quality trends, loan and deposit pricing dynamics over the next year, and whether the expected net interest margin expansion is driven more by funding costs or loan yields.

Answer

CFO William Burns responded that credit quality has been steady and improving, with delinquencies at historically low levels and no significant workout pipeline. He noted that about $1 billion in loans are set to reprice through 2026, following a successful repricing of a similar amount since mid-2023. Mr. Burns explained that margin expansion is driven by both sides: repricing CDs on the funding side and a large portfolio of adjustable-rate loans that will benefit as deposit costs potentially fall.

Feddie Strickland of Hovde Group inquired about Bankwell's long-term target for demand deposit accounts (DDAs) as a percentage of total deposits, the future trajectory of brokered deposit levels, and any new developments concerning its healthcare loan customers.

Answer

CEO Christopher Gruseke stated that while there isn't a hard target for DDAs, the bank aims to meaningfully expand this percentage and reduce its wholesale funding ratio. He also noted that future reductions in brokered deposits will be balanced against loan growth opportunities. President & Chief Banking Officer Matthew McNeill added that the healthcare portfolio remains strong and is not expected to be materially impacted by recent Medicaid legislation.

Feddie Strickland inquired about Bankwell's long-term target for demand deposits as a percentage of total deposits, the future trajectory of brokered deposit levels, and any updates on the bank's healthcare customer portfolio.

Answer

CEO Christopher Gruseke stated that while there isn't a hard target for DDA growth, the bank is focused on meaningfully expanding it and reducing its wholesale funding ratio. He also noted that brokered deposits will continue to decrease over time, contingent on deposit gathering efforts and market opportunities. President & Chief Banking Officer Matthew McNeill added that the healthcare book remains strong and profitable, with borrowers not appearing to be significantly impacted by recent legislative changes.

Feddie Strickland of Hovde Group inquired about Bankwell's long-term targets for non-interest-bearing deposits (DDAs) as a percentage of total deposits, the future trajectory of brokered deposit levels, and any updates on the bank's healthcare customers.

Answer

CEO Christopher Gruseke explained that while there isn't a hard target for DDAs, the bank aims to meaningfully expand this category and reduce wholesale funding, driven by recent investments in new teams. He also noted that brokered deposits, already reduced by half, will likely continue to decrease over time depending on market opportunities. President & Chief Banking Officer Matthew McNeill added that the healthcare loan portfolio remains strong and is not expected to be negatively impacted by recent legislative changes.

Feddie Strickland inquired about Bankwell's long-term target for the demand deposit accounts (DDA) to total deposits ratio, the expected trend for brokered deposit levels, and an update on the bank's healthcare customer portfolio.

Answer

CEO Christopher Gruseke responded that while there is no hard target for the DDA ratio, the bank is focused on meaningfully expanding it through recent investments in new teams. He also noted that brokered deposits will continue to decline over time, but the pace will depend on market opportunities and loan growth. President & Chief Banking Officer Matthew McNeill added that the healthcare loan book remains strong and is not expected to be materially impacted by recent legislative changes.

Feddie Strickland of Hovde Group inquired about Bankwell's long-term targets for DDA as a percentage of deposits, the outlook for brokered deposit levels, and any updates on the healthcare loan portfolio.

Answer

CEO Christopher Gruseke stated there is no hard target for DDAs but the bank aims to meaningfully expand them and will reduce brokered deposits based on market opportunities. President & Chief Banking Officer Matthew McNeill added that the healthcare portfolio is performing well and is not expected to be materially impacted by recent legislation.