Jackson Singleton

Jackson Singleton questioned the conservatism of Webster Financial's 5%-7% loan growth guide given the 11% annualized growth in Q4, and asked about any ceiling for the loan-to-deposit ratio and the expected mix of deposit growth in 2026.

Answer

CEO John Ciulla explained that Q4's strong loan growth was partly due to lower-than-anticipated payoffs, and the 5%-7% guide reflects optimal profitable growth. CFO Neal Holland stated there's no formal loan-to-deposit ratio ceiling, but 80%-85% is optimal, and deposit growth mix will be similar to loan growth, with strong contributions from HSA Bank's Bronze opportunity and Ametros.

Jackson Singleton questioned the conservative 5%-7% loan growth guidance for 2026, given the strong 11% annualized growth in Q4, and inquired about the target loan-to-deposit ratio and the expected mix of deposit growth.

Answer

CEO John Ciulla attributed the strong Q4 loan growth partly to lower-than-anticipated payoffs and emphasized a focus on profitable growth and deliberate capital allocation. CFO Neal Holland stated that while there's no formal ceiling, the optimal loan-to-deposit ratio is in the low-to-mid 85% range, with deposit growth expected to be similar to current loan growth, including strong contributions from HSA and Ametros.

Jackson Singleton from Autonomous Research inquired about recent credit trends, specifically the factors driving the year-over-year increase in provision guidance. He also asked about the drivers for Q1 2026 Net Interest Margin (NIM) and a potential modeling range.

Answer

CFO Matt Scurlock attributed a modest linked-quarter increase in special mention loans to a handful of multi-family properties experiencing net operating income pressure due to rental concessions in Central Texas markets. He noted that the ratio of criticized loans to LHI at year-end marked the best level since 2021. For NIM, he projected Q1 2026 NII at $250 million-$255 million with flattish margins in the mid-330s, factoring in lower SOFR, a stable mortgage finance self-funding ratio, and cumulative deposit beta reaching the low 70s by January.

Jackson Singleton inquired about recent credit trends and the factors driving the increase in provision guidance year over year, and subsequently asked for insights into the net interest margin (NIM) drivers for Q1 2026 and a modeling range.

Answer

CFO Matt Scurlock addressed credit trends, noting a modest linked-quarter increase in special mention loans tied to a handful of multi-family properties experiencing net operating income pressure, but highlighted that criticized loans to LHI were at their best level since 2021. He explained the prudent decision to move the provision guide to 35-40 basis points. For NIM, Matt Scurlock projected Q1 NII of 250-255 with flattish margins in the mid-threes, factoring in lower SOFR rates and a 67% through-cycle deposit beta. Chairman, President, and CEO Rob Holmes reiterated that clients are less price-sensitive on rates when the firm adds value in diverse ways.

Jackson Singleton asked about the total cumulative interest-bearing deposit beta expectation underpinning Wintrust's stable NIM guidance, noting a historical beta around 65% versus 55% at the end of Q3. He also inquired about the outlook for Premium Finance P&C growth, which has shown strong performance this year.

Answer

Timothy Crane, President and Chief Executive Officer, confirmed that a mid-60s deposit beta is still considered appropriate. He noted that Wintrust's interest-bearing deposit costs are higher than some peers, providing more room to reduce costs if rates decline further, thus supporting the 3.50% NIM. Richard Murphy, Vice Chairman and Chief Lending Officer, expressed continued bullishness on P&C premium finance, citing consistent market share gains and account growth over the past five years, with the market remaining firm.

Jackson Singleton, on behalf of Casey Haire from Autonomous Research, asked for the specific drivers that could lead to a net interest margin (NIM) increase in the third quarter and for expectations on deposit beta performance going forward.

Answer

CFO Harold Carpenter explained that potential NIM upside in Q3 would be driven by continued lift from fixed-rate loan repricing and stable non-interest-bearing deposit balances. He stated that while there is always room for improvement, he does not anticipate significant changes in deposit betas in the near term. However, a Fed rate decrease would be the key catalyst to more aggressively lower deposit costs.

Jackson Singleton, on behalf of Casey Haire from Autonomous Research, asked for more color on the drivers behind the potential Net Interest Margin (NIM) increase in Q3 and for expectations on deposit beta performance going forward.

Answer

CFO Harold Carpenter attributed the stable-to-upwardly biased NIM outlook to continued fixed-rate loan repricing and the stability of non-interest-bearing deposits. He noted that he does not expect significant changes in deposit betas until the Federal Reserve enacts a rate cut, which would create an opportunity to reprice deposits lower.

Jackson Singleton from Autonomous Research asked for more color on the drivers of the Net Interest Margin (NIM) and what could lead to an increase in Q3. He also inquired about expectations for deposit betas going forward.

Answer

CFO Harold Carpenter explained that potential NIM stability or a slight upward bias in Q3 would be driven by ongoing fixed-rate loan repricing and stable non-interest-bearing deposit balances. He noted that deposit betas are expected to remain stable in the near term and that a rate decrease from the Federal Reserve would be the primary catalyst needed to meaningfully lower deposit costs.