Janet Lee

Janet Lee asked for clarification on the expected interest-bearing deposit beta of 30%-35% after two rate cuts, specifically if it represents a step down from the 47% observed in Q4. She also inquired about the 2026 expense guide of $520 million, asking if it signifies a normalization of expense growth, increased hiring, or other factors, given the flattish expense growth in prior years.

Answer

James Moses, Vice Chair and CFO, First Hawaiian Bank, confirmed that the interest-bearing deposit beta is expected to step down over time, remaining healthy but lower than previous levels. Robert Harrison, Chairman, President, and CEO, First Hawaiian Bank, explained that past expense control was due to technology investments enabling the exit of higher-cost delivery and termination of expensive vendor relationships. He stated that most of these savings have been captured, and 2026 reflects a return to a more normalized expense growth number, despite ongoing hiring challenges.

Janet Lee asked for clarification on the expected interest-bearing deposit beta of 30-35% after two rate cuts, specifically if it represents a step down from the Q4 2025 beta. She also questioned the drivers behind the projected 4-5% expense growth for 2026, asking if it signifies a normalization of expenses or increased hiring, especially after two years of relatively flat expense growth.

Answer

Vice Chair and CFO James Moses confirmed that the interest-bearing deposit beta is expected to step down over time, acknowledging First Hawaiian Bank's already low deposit costs. Chairman, President, and CEO Robert Harrison explained that past expense control was due to technology investments enabling the exit of higher-cost delivery methods and vendor relationships. He stated that most of these cost-saving opportunities have been captured, leading to a more normalized expense growth rate in 2026, although the bank is still actively trying to hire.

Janet Lee followed up on First Hawaiian Inc.'s M&A stance, asking for clarification on what type of mainland opportunities would be considered. She also inquired about the potential positive impact on residential mortgage activity if interest rates decline to the five handle, considering Hawaii's supply issues. Finally, she asked if the $130 million paydown on corporate lines was seasonal or a one-off event.

Answer

Bob Harrison, Chairman, President, and CEO, reiterated that M&A consideration would be limited to the Western States, with no further details to share. Jamie Moses, Vice Chairman and CFO, stated that lower rates would increase residential mortgage activity, which would be constructive for balances despite supply constraints. Harrison clarified that the $130 million paydown on corporate lines was not seasonal but rather the repayment of earlier draws for specific projects that coincidentally landed in the same quarter.

Janet Lee from TD Securities revisited the M&A topic, asking First Hawaiian to clarify its current stance on potential mainland M&A opportunities and what specific criteria or characteristics would make sense for such an acquisition in the mainland. She then inquired about the potential positive impact on the bank's residential mortgage business if interest rates were to drop to the 5% range, questioning whether this would be helpful given Hawaii's supply constraints. Lastly, Lee asked for clarification on the $130 million paydown on corporate lines, specifically if it was a seasonal occurrence or a one-off event.

Answer

Chairman, President, and CEO Bob Harrison reiterated that the bank is open to talking to people about M&A in the Western U.S. and would consider the right opportunity, with no further specifics to share. Vice Chairman and CFO Jamie Moses stated that lower rates would increase activity in the residential mortgage business, which would be constructive for balances, acknowledging that supply constraints exist but increased activity would still be helpful. Bob Harrison clarified that the $130 million paydown on corporate lines was not seasonal but rather the repayment of earlier draws for specific projects that happened to land in the same quarter, noting that the draws themselves were not in the same quarter.

Janet Lee inquired about the average deal size for C&I loans ($25 million) and requested additional underwriting metrics, given that C&I is a newer segment for Flagstar Bank. She also asked about the factors contributing to the wide range of the net interest margin (NIM) guide (2.40%-2.60%), seeking clarity on what would drive the bank to the higher versus lower end.

Answer

Joseph Otting, Chairman, President, and CEO, explained that C&I growth is concentrated in specialized industries and corporate/regional banking, targeting primary bank relationships and smaller bank groups. Lee Smith, Senior Executive Vice President and CFO, detailed a robust credit process with first, second, and third-line reviews, noting average spreads to SOFR of 2.25-2.30% and 70% utilization. For the NIM guide, Lee Smith cited multiple moving parts: multifamily/CRE runoff (with low coupon resets), C&I growth, new CRE originations, consumer mortgage additions, continued reduction in deposit costs (CD maturities, wholesale paydowns), and the reduction of non-accrual loans, all contributing to the range.

Janet Lee asked if the C&I average deal size of $25 million indicates syndications and requested other underwriting metrics for this newer segment. She also inquired about the factors that would place Flagstar Bank at the higher versus lower end of its 2.40% to 2.60% Net Interest Margin (NIM) guidance.

Answer

Joseph Otting, Chairman, President, and CEO, explained that C&I growth is concentrated in specialized industries and corporate/regional banking, with a focus on being the primary bank in smaller groups for corporate/regional and bilateral/participations in specialized industries. Lee Smith, Senior Executive Vice President and Chief Financial Officer, added that risk is managed by deal size ($25 million to $30 million average), a robust credit process, average spread to SOFR of 2.25% to 2.30%, and 70% utilization. For NIM, Lee Smith cited multiple variables: multifamily/CRE runoff (low coupon), C&I growth, new CRE loans, consumer book growth (residential mortgages), reducing core deposit costs (CD maturities, wholesale borrowings), and reducing non-accrual loans, all contributing to the wide guidance range.

Janet Lee inquired how the projected 15-20 basis point NIM expansion would change if there were no rate cuts, and asked for commentary on the anticipated pace of share buybacks, considering remaining authorization and capital generation.

Answer

Travis Lan, Senior EVP and CFO, explained that in a vacuum, no rate cuts would be a slight NII headwind, but the implied forward curve for longer rates (2, 5, 10-year) would offset this. He detailed that CET1 is expected to increase 130-140 basis points, with 50 basis points for loan growth, 50 for dividends, leaving 30-40 basis points for buybacks, equating to $150 million-$200 million, consistent with Q4 2025 pace. Andrew Giannetti, Head of Investor Relations, added that they plan to re-up the authorization.

Janet Lee asked how the projected 15-20 basis point NIM expansion would change if no rate cuts occurred, given the company's neutral stance on the front end of the curve and fixed-rate asset repricing benefits. She also inquired about the pace of share buybacks, considering the remaining authorization and capital generation.

Answer

Travis Lan, CFO, explained that in a vacuum, no Fed cuts would be a slight NII headwind (0.5%-1%), but implied forward curve increases in longer-term rates would offset this. He noted outperformance of beta assumptions during Fed cuts. For buybacks, he projected $150-200 million worth of stock repurchases for 2026, consistent with the Q4 pace, and confirmed plans to re-up the authorization expiring in April.

Janet Lee asked about the specialized deposit growth, its role in replacing indirect deposits, and whether commercial and small business deposits could sustain a $2 billion annual growth pace. She also inquired if the Q3 headwinds from commodity C&I payoffs were temporary and if any other parts of Valley's portfolio are targeted for runoff.

Answer

Travis Lan, CFO, confirmed that specialized deposits (healthcare, HOA, Cannabis, National Deposits Group) are a focus and should grow at an above-average rate, but emphasized that deposit growth is broad-based across all markets, including commercial deposits in New Jersey, New York, and Florida. Travis Lan, CFO, clarified that the commodity C&I payoffs were a temporary dynamic unique to Q3, and no other parts of the portfolio are targeted for runoff, noting that total loans were up 2.5% annualized over the last six months despite these headwinds.

Janet Lee from TD Cowen questioned Valley National Bancorp on the drivers of specialized deposit growth, its role in replacing indirect deposits, and whether the growth pace in other commercial and small business deposits could sustain a $2 billion annual rate. She also asked if the Q3 headwinds from commodity C&I payoffs were temporary and if any other parts of the portfolio are targeted for runoff.

Answer

CFO Travis Lan detailed that specialized deposit growth was broad-based, including contributions from healthcare, HOA, Cannabis, and National Deposits Group, alongside significant commercial growth across New Jersey, New York, and Florida markets. He expects specialty deposits to grow at an above-average rate but noted it's not the sole source. CFO Travis Lan confirmed that the commodity C&I payoffs were a temporary, unique dynamic for the quarter, and no other parts of the portfolio are targeted for runoff, suggesting a broader view of loan growth over a longer period.

Janet Lee asked if the pro forma CET1 ratio of 13.5% after the Stellar deal, which is more normalized compared to Prosperity's historically higher CET1, would change Prosperity's appetite for M&A or the type of deals it might pursue in the future. She also asked for clarification on the loan growth trajectory for 2026, given the expectation that acquired portfolio runoffs from Stellar would not be material.

Answer

David Zalman (Senior Chairman and CEO, Prosperity Bancshares) stated that the pro forma CET1 would not change their M&A appetite, emphasizing the substantial excess cash flow of over $600 million annually and the ability to rebuild capital within a couple of years. Kevin Hanigan (President and COO, Prosperity Bancshares) confirmed that a low single-digit loan growth assumption for 2026 is fair, noting that Stellar and American Bank have been growing faster and their portfolios are of high quality, minimizing runoffs.

Janet Lee asked about the impact of the pro forma CET1 ratio (approximately 13.5%) on Prosperity Bancshares' future M&A appetite, given it's more normalized than historical levels. She also inquired about the 2026 loan growth trajectory, assuming minimal runoff from acquired portfolios.

Answer

David Zalman (Senior Chairman and CEO, Prosperity Bancshares) stated that the pro forma CET1 level does not change M&A appetite, as the bank generates over $600 million in excess cash flow annually, allowing capital to rebuild quickly within a couple of years. Kevin Hanigan (President and COO, Prosperity Bancshares) confirmed that low single-digit loan growth is a fair assumption for 2026, noting that Stellar and American Bank have been growing faster and have high-quality portfolios, minimizing runoff concerns.

Janet Lee observed that Q4 2025 profitability metrics (ROA, ROTCE, efficiency ratio) have reached levels projected from The First acquisition and asked if there are updated thoughts on future profitability goals or if it's now about scaling.

Answer

Jim Mabry (CFO) confirmed they are on pace with merger economic benefits, expecting Q1 2026 to be a clean quarter. Kevin Chapman (COO) clarified that while initial projections were met, the peer group has advanced, placing Renasant in the middle, not the top quartile. He emphasized the goal is to continue improving to become a 'top-performing company,' citing momentum and a focus on execution to move up the rankings, noting that maintaining allowance for credit losses has slightly weighed on ROA. Janet Lee also asked about the confidence in the mid-single-digit loan growth guide for 2026, specifically if payoffs have moderated versus Q4 2025 levels, to which Kevin Chapman (COO) stated confidence is based on a longer 12-month period for normalization, acknowledging quarter-to-quarter lumpiness.

Janet Lee from TD Cowen followed up on Renasant's mid-single-digit loan growth guidance for 2026, asking what gives the company confidence in this outlook, particularly regarding whether loan payoffs have moderated from Q4 2025 levels.

Answer

COO Kevin Chapman expressed confidence in the mid-single-digit growth rate over a 12-month horizon, expecting normalization despite potential quarterly lumpiness. He noted it's too early to definitively gauge Q1 2026 payoffs but anticipates similar elevated levels as Q4 2025, with confidence stemming from strong production and team opportunities.

Janet Lee asked for clarification on how Renasant plans to drive increased profitability from the revenue side, beyond expense management, and whether the mid-single-digit loan and deposit growth target remains appropriate given recent trends.

Answer

Kevin Chapman (President and CEO) explained that revenue growth comes from improving scale and performance at individual and market levels, noting that the company is achieving above-average growth with over 300 fewer employees since the acquisition announcement. He emphasized increased accountability for individual and market returns. Regarding growth targets, he stated that mid-single digits remain the target, baking in potential Q4 payoff elevation due to a lower rate environment, but the focus is on finding every good opportunity.

Janet Lee asked for clarification on what 'expectations being raised further internally' for profitability means on the revenue side, seeking examples beyond expense management, such as low-cost deposits or fee-income products. She also inquired if the mid-single-digit loan and deposit growth target remains appropriate, given the recently muted payoffs.

Answer

President and CEO Kevin Chapman explained that improved profitability on the revenue side involves gaining scale by enhancing performance at individual and market levels, such as average loan per lender and deposit per branch. He noted that the company is achieving above-average growth with over 300 fewer employees since the acquisition announcement, reflecting increased accountability. Mr. Chapman reiterated the mid-single-digit growth target, which accounts for an anticipated uptick in Q4 payoffs due to a lower rate environment, and stated that new expectations would be set after evaluating Q4's prepayment speeds.

Janet Lee from TD Cowen sought confirmation on UMB Financial's net interest margin (NIM) commentary, specifically if the company is neutral to interest rate changes through 2026 and if the 76% deposit beta observed in the quarter is sustainable. She also asked about the company's philosophy on loan and deposit growth, and its ideal loan-to-deposit ratio.

Answer

CFO Ram Shankar confirmed UMB Financial is "pretty neutral" to interest rate changes, with a matched asset and liability base, and expects NIM to be generally consistent with Q4 core NIM (adjusted for one-time items) if no further rate cuts occur. He noted that the 76% deposit beta was due to outperformance on soft index deposits and that further leverage on deposit costs is limited without additional Fed cuts. Chairman and CEO Mariner Kemper stated that the focus is on bringing in cost-effective, core, and granular deposits, letting loans "end up where they end up." He expressed comfort with a higher loan-to-deposit ratio (up to 75%) but emphasized building the franchise through high-quality loans and deposits, not aiming for a specific ratio, and highlighted the company's strong deposit-generating capabilities, including $20 billion off-balance sheet.

Janet Lee from TD Cowen sought confirmation on the bank's interest rate neutrality for NIM through 2026, assuming deposit beta can be maintained, and whether the 76% deposit beta in the quarter was sustainable or an outsized event. She also asked about the philosophical approach to loan and deposit growth and the ideal loan-to-deposit ratio.

Answer

CFO Ram Shankar confirmed the bank's neutral position to interest rate changes, with NIM largely dependent on DDA balances, interest rates, and deposit mix, and noted that the 76% deposit beta was driven by outperformance on SOFR-indexed deposits, with limited further leverage until more Fed rate cuts occur. Chairman and CEO Mariner Kemper stated that the focus is on bringing in cost-effective, core, and granular deposits and generating high-quality loans, allowing the loan-to-deposit ratio to naturally evolve. He expressed comfort with higher ratios (up to 75%) but not in the nineties, emphasizing the bank's strong deposit-generating capabilities, including off-balance sheet funds.

Janet Lee asked about the key drivers behind the strong growth in UMB Financial's institutional banking division, particularly trust and securities processing fees and assets under administration, and sought an outlook for this division. She also asked for clarification on the fee income run rate, excluding a one-time $6 million benefit.

Answer

Mariner Kemper, Chairman and CEO, attributed growth to asset servicing (alternatives, hedge funds, private equity) where UMB is a top national player, benefiting from market disruption and the democratization of private investing. He also cited corporate trust, where UMB is a consolidator, expanding into new markets like LA and New York, and new verticals. Jim Rine, President and CEO of UMB Bank, confirmed this is legacy UMB business that will benefit from Heartland referrals. Ram Shankar, CFO, provided a detailed breakdown, indicating a fee income run rate around $190 million, adjusting for security losses, BOLI death benefits, legal settlements, and derivative fees, while noting potential volatility from private investment monetizations and equity investments.

Janet Lee from TD Cowen questioned the primary growth drivers for UMB Financial's institutional banking division, including trust and securities processing and assets under administration, and sought an outlook for the division, including the impact of the 'Big Beautiful Bill' on HSA deposits. She also asked for clarity on the sustainable fee income run rate for Q4 after adjusting for Q3's one-time benefits.

Answer

Chairman and CEO Mariner Kemper attributed institutional banking growth to strong performance in asset servicing (alternatives) and corporate trust, driven by market disruption, strategic partnerships, and expanded geographic reach, while downplaying the 'Big Beautiful Bill' impact on HSA. CFO Ram Shankar detailed Q3 fee income adjustments, suggesting a Q4 run rate around $190M, subject to BOLI/COLI volatility, private investment monetizations, and equity investment changes, noting strong derivative team contributions.

Janet Lee asked how the favorable migration and reduction in problem assets and NPAs, reaching a two-year low, might influence the net charge-off (NCO) expectations relative to the 35-45 basis points guide.

Answer

David Burg (CFO) confirmed the positive migration and payoffs in problem assets. He reiterated the 35-45 basis points NCO guide for 2026 (consistent with 2025 excluding Upstart), noting that commercial loan losses may remain uneven. He highlighted the high level of recourse in commercial real estate (80% office, 86% multifamily) and the strong performance of the real estate-secured consumer portfolio post-Upstart divestiture.

Janet Lee inquired about the drivers of WSFS Financial Corporation's strong non-interest-bearing deposit growth, particularly the contribution from Wealth and Trust, and whether this growth rate is sustainable. She also asked how the favorable migration in problem assets and NPAs impacts the net charge-off (NCO) expectations against the provided guidance.

Answer

David Burg, CFO, stated that non-interest-bearing deposit growth is expected to align with interest-bearing growth, aiming to maintain or increase the NIB ratio, though the recent 6% quarter-over-quarter growth is likely not sustainable every quarter. He noted that growth predominantly came from trust and private banking this quarter, but NIB deposits are broadly distributed across consumer, trust/private banking, and commercial segments, driven by relationship growth. Regarding credit, Mr. Burg confirmed the favorable migration and payoffs/paydowns in problem assets. He reiterated the 35-45 basis points NCO guide (40 bps excluding Upstart in 2025), expecting commercial losses to remain uneven, and highlighted high recourse levels in commercial real estate and low NCOs in the real estate-secured consumer portfolio.

Janet Lee inquired about the Cash Connect business, specifically how revenue and Net Interest Income (NII) benefit would be impacted if interest rates were to decline, and whether this would lead to compression or increased financial benefit. She also asked about the pace and total impact of payoffs from consumer partnerships, such as Spring EQ, and their effect on commercial loan growth guidance.

Answer

CFO David Burg explained that a reduction in Cash Connect fee revenue due to lower rates would be more than offset by reduced expenses, resulting in a pre-tax profitability benefit of approximately $300,000 per 25 basis point rate cut. COO Arthur Bacci clarified this benefit flows through fee income and non-interest expense. Mr. Burg also noted increasing profit margins in Cash Connect due to pricing leverage and efficiency. Regarding loans, Mr. Burg detailed the $85 million Upstart portfolio sale and the expected $15-17 million monthly runoff from Spring EQ, which is being offset by strong growth in home lending and WSFS-originated consumer loans. He acknowledged commercial loan impacts from problem loan payoffs and lower line utilization but emphasized a strong $300 million commercial pipeline and recent talent acquisition.

Janet Lee from TD Bank inquired about the impact of declining interest rates on WSFS Financial Corporation's Cash Connect business revenue and profitability, specifically how NII benefits or compresses. She also asked about the company's low single-digit commercial loan growth guidance, including problem loan payoffs, and the expected pace and total impact of consumer partnership loan payoffs (Upstart, Spring EQ).

Answer

David Burg, CFO, and Arthur Bacci, COO, clarified that while Cash Connect fee revenue would reduce with lower rates, this would be more than offset by reduced expenses, leading to increased profitability (approximately $300,000 pre-tax benefit per 25 basis point cut). They noted the profit margin trajectory from 6% to 10% year-over-year. Regarding loans, David Burg detailed the $85 million Upstart portfolio sale and the expected $50 million quarterly runoff from Spring EQ, anticipating $15-$17 million per month. He highlighted strong double-digit growth in home lending and WSFS-originated consumer loans offsetting this runoff. Commercial loan growth was impacted by problem loan payoffs and lower line utilization, but the pipeline remains strong at $300 million, supported by talent acquisition.

Janet Lee asked for the composition of Western Alliance's ECR deposits among Mortgage Warehouse, HOA, and Juris, both currently and as internal targets for the end of the year, noting that confidence in the 2026 ECR deposit cost guide seemed to stem from a remix towards lower-cost ECR deposits. She also inquired about any updates on Cantor or First Brands, given the expected increase in the ACL ratio.

Answer

President and CEO Ken Vecchione declined to provide specific deposit levels for individual ECR businesses due to competitive reasons but ranked them as Mortgage Warehouse, followed by HOA, then Juris. Regarding First Brands (Point Bonita subsidiary of Jefferies), he reported the loan continues to pay down at an accelerated pace, currently at $124 million outstanding (down from $168 million), and is performing as expected. For Cantor, Mr. Vecchione stated that a receiver has been appointed, and appraisals for all properties are expected in early March, after which the bank will have a better understanding of collateral value relative to the $98 million outstanding loan. He expects more clarity by the Q1 earnings call.

Janet Lee asked for the composition of Western Alliance's ECR deposits among Mortgage Warehouse, HOA, and Juris, and sought an update on specific credit situations, Canter and Point Bonita (First Brands), given the expected increase in the ACL ratio.

Answer

Ken Vecchione, President and CEO, declined to provide specific deposit levels for competitive reasons but ranked them as Warehouse Lending, HOA, and Juris. Regarding credit, he reported that the Point Bonita loan (subsidiary of Jefferies) continues to pay down faster than modeled, with $124 million outstanding. For Canter, due to ongoing legal action, a receiver has been appointed, and appraisals are expected in early March to assess collateral value against the $98 million outstanding loan, with more clarity anticipated by Q1 results.

Janet Lee inquired about Western Alliance Bancorporation's credit picture, specifically their comfort level with current reserves given NDFI exposure and potential for future increases.

Answer

President and CEO Ken Vecchione expressed comfort with asset quality, anticipating stability and no losses from Canter Group 5 or Point Bonita Fund 1, citing collateral, guarantees, and a $25 million mortgage insurance policy. He noted that CECL reviews are ongoing, based on macroeconomic factors, interest rates, and portfolio composition, and does not foresee another significant reserve increase. Regarding a follow-up on PP&R growth, interest expense, ECR deposit beta, and mortgage revenue, CFO Dale Gibbons clarified ECR beta is closer to 70%, with credit-related ECR deposits having a 100% beta. Ken Vecchione highlighted strong mortgage-related income due to lower 30-year mortgage rates, expecting continued momentum despite seasonal Q4 declines, and optimism for 2026.

Janet Lee asked about Western Alliance Bancorporation's comfort level with limited loss potential on First Brands and Canter Group 5 exposures, and the adequacy of current reserves for NDFI exposure. She also inquired about beta expectations for ECR deposits and the outlook for mortgage revenue.

Answer

President and CEO Ken Vecchione expressed comfort with asset quality, anticipating no losses from Canter Group 5 due to collateral, guarantees, and a $25 million mortgage insurance policy, and no large reserve increases. CFO Dale Gibbons clarified ECR beta is closer to 70%, with credit-related deposits at 100% beta. Ken Vecchione highlighted strong mortgage-related income, up 21% quarter-over-quarter, driven by lower 30-year mortgage rates, and expressed optimism for 2026 despite seasonal Q4 declines.

Janet Lee asked about potential upside in fee income, specifically from HarborOne's mortgage banking business if rates were to drop, and the outlook for the investment advisory business fees. She also inquired about the timeline for getting the CET1 ratio down to 12% beyond the June guidance of 12.7%.

Answer

CFO David Rosato clarified that the fee income guide assumes no market appreciation in wealth management, implying upside if the S&P 500 performs well. Executive Chair Bob Rivers noted HarborOne's mortgage business could contribute 8%-10% of total fee income and would benefit significantly from rate drops, though they are not counting on it and plan to keep residential mortgage portfolio flat. Bob Rivers explained that assuming the existing buyback authorization finishes mid-year, they would seek approval for another buyback, with the intent to continue managing the CET1 ratio down towards 12% with additional buybacks, though without a precise timeline.

Janet Lee inquired about potential upside for fee income, specifically from HarborOne's mortgage banking business if interest rates decline, and the outlook for investment advisory fees. She also asked for a timeline for managing the CET1 ratio down to 12% beyond the mid-year guidance.

Answer

CFO David Rosato clarified that the fee income guidance for wealth management assumes no market appreciation, implying upside if the S&P 500 performs well. Executive Chair Bob Rivers noted that HarborOne's mortgage business could contribute 8-10% of total fee income and would benefit from lower rates, though the company is not relying on this, and plans to keep the residential mortgage portfolio flat. Bob Rivers further explained the strategy to complete the current share repurchase authorization by mid-year, seek additional approval, and continue managing the CET1 ratio towards 12% through further buybacks, without a precise timeline but with a clear commitment.

Janet Lee asked about East West Bancorp's plans for aggressive expansion into new cities or port cities beyond California. She also questioned the conditions under which the bank might consider lowering its allowance for loan loss reserve levels, given resilient credit trends and declining criticized loans.

Answer

CFO Christopher Del Moral-Niles stated that the bank continuously seeks opportunities to diversify its branch network and is talent-driven rather than map-driven, with Chairman and CEO Dominic Ng adding that they continue to look at growing existing presences in regions like Texas and New York. Chief Risk Officer Irene Oh explained that the allowance is primarily driven by CECL model assumptions and macroeconomic factors, noting that while credit quality is strong, the allowance also serves as an extra cushion.

Janet Lee asked about East West Bancorp's plans for aggressive expansion into new cities beyond California as part of its hiring strategy, and at what point the bank would consider lowering its allowance for loan losses, given resilient credit trends.

Answer

Christopher Del Moral-Niles, CFO, and Dominic Ng, Chairman and CEO, stated they are talent-driven, continuously seeking opportunities to diversify their branch network and grow in existing regions like Texas and New York. Irene Oh, Chief Risk Officer, explained that the CECL model relies on macroeconomic factors and multi-scenario models, which haven't changed significantly, and the allowance serves as an extra cushion, with Mr. Del Moral-Niles affirming its appropriateness.

Janet Lee asked for confirmation on the baseline expectations for earning assets, projecting them to remain in the $60.5-$61 billion range or modestly trend down throughout 2026. She also sought clarification on the Net Interest Margin (NIM) trajectory, specifically if it would surpass 4% in Q2 or Q3 and continue to trend upwards thereafter. Additionally, she inquired about fee income growth expectations for 2026.

Answer

Ivan Seda, EVP and CFO, confirmed the earning asset projection. For NIM, he stated it would dip to 3.90-3.95% in Q1, then grow sequentially each quarter, surpassing 4% in Q2 or Q3, and continuing to trend upward. For fee income, he advised modeling core fee income in the low-to-mid $80 million range, noting that Q4 was a banner quarter with high watermarks in swap and syndication revenue.

Janet Lee sought clarification on the baseline expectations for earning assets and net interest margin (NIM) throughout 2026, and asked about core fee income growth expectations for the year.

Answer

Ivan Seda (EVP and CEO) confirmed earning assets are expected to stay relatively flat ($60.5-$61 billion) throughout 2026. He clarified that NIM would dip in Q1 (3.90-3.95%) but then grow sequentially each quarter, surpassing 4% in Q2/Q3 and continuing upward. He modeled core fee income in the low-to-mid $80 million range, noting Q4 was a banner quarter with high watermarks in certain areas.

Janet Lee from TD Cowen inquired about the direction of Net Interest Margin (NIM) beyond Q1 2026, specifically if a flattish NIM can be sustained despite potential rate cuts, considering a possible improvement in the mortgage self-funding ratio and its implications for NII growth. She also asked about the underlying factors for the anticipated 10% year-over-year decline in commercial real estate (CRE) balances, which differs from broader industry trends.

Answer

CFO Matt Scurlock detailed expectations for deposit repricing, self-funding, and commercial non-interest-bearing deposits, noting continued investment in the securities book and selective additions to the swap book to manage earnings at risk. He highlighted the firm's ability to deliver increasing NII and PP&R across various rate environments due to diversified client relationships. Chairman, President, and CEO Rob Holmes reiterated that clients are less price-sensitive when the firm adds value in multiple ways. Regarding CRE, Matt Scurlock expressed perplexity at industry trends, stating that low volumes and a focus on through-cycle return on equity mean the firm won't chase lower spreads, anticipating a couple of years for the market to absorb supply before new originations pick up, thus expecting no CRE growth in 2026.

Janet Lee inquired about the net interest margin (NIM) direction beyond Q1 2026, specifically if a flattish NIM can be sustained despite rate cuts, and how this impacts NII growth given the fee income range. She also asked about the firm's commercial real estate (CRE) outlook, contrasting it with industry trends of stabilization.

Answer

CFO Matt Scurlock provided detailed expectations for deposit repricing, self-funding, and commercial non-interest bearing deposits, noting that the firm's reduced reliance on NII supports NII and margin due to less price-sensitive clients. He also mentioned selective additions to the swap book. Regarding CRE, Matt Scurlock expressed perplexity at industry trends, stating that the firm anticipates continued balance reductions due to historic low volumes and a focus on through-cycle return on equity rather than chasing lower spreads. Chairman, President, and CEO Rob Holmes added that the CRE outlook reflects a healthy portfolio with regularly scheduled payoffs.

Janet Lee asked about the mortgage finance self-funding ratio, specifically if there's a structural opportunity to reduce it further beyond the expected 85% for Q4, given the firm's increasing client deposits. She also sought clarification on the 'maturation of the platform' commentary regarding expenses, asking if it implies less need for significant talent hiring compared to previous years.

Answer

CFO Matt Scurlock confirmed that reducing reliance on mortgage finance deposits by growing commercial client deposits is an ongoing goal, as it improves margin, beta profile, and liquidity quality. CEO Rob Holmes added that the mortgage business is now viewed as a profitable industry vertical with diverse revenue streams beyond just warehouse yield. Regarding expenses, Rob Holmes clarified that while the firm will continue to add front-office talent, the extensive infrastructure build-out (operating risk, controls, accounting, compliance) is largely complete. This means incremental headcount additions are now much smaller on the margin, as the underlying support structure is already in place.

Janet Lee asked for clarification on Atlantic Union Bankshares' 2026 financial guidance, specifically regarding the net interest income range, factors influencing the higher or lower end, and the impact of deposit seasonality and loan performance. She also inquired about the forecast for cumulative interest-bearing deposit beta and the drivers behind the deposit remix observed in the quarter.

Answer

Rob Gorman, Executive Vice President and CFO, explained that achieving the higher end of the net interest income guidance ($1.35 billion to $1.375 billion) would depend on elevated accretion income, further reductions in deposit costs, higher loan growth, and stable term rates. He confirmed the forecast for interest-bearing deposit beta remains in the mid-50s (50%-55%) and total deposit beta in the 40%-45% range, noting that deposit remix was primarily due to reclassifications post-Sandy Spring conversion.

Janet Lee asked for clarification on the 2026 net interest income (NII) guidance, inquiring about factors that could lead to the higher or lower end of the projected range, especially considering the current NIM and loan/deposit trends. She also questioned the cumulative interest-bearing deposit beta forecast and the drivers behind the deposit remix observed in the quarter.

Answer

CFO Rob Gorman explained that the higher end of the NII guidance would depend on elevated accretion income and the ability to further reduce deposit costs. He reiterated the forecast for interest-bearing deposit betas in the mid-50s and total deposit betas in the 40-45% range. Gorman attributed the deposit remix primarily to reclassifications following the Sandy Spring conversion.

Janet Lee with TD Cowen inquired if the C&I loan decline was solely due to lower utilization and if the projected mid-single-digit loan growth for Q4 relies on utilization picking up. She also asked about the core NIM trajectory for 2026, considering asset sensitivity and potential yield curve steepening. Additionally, she questioned management's primary concerns if a government shutdown were prolonged.

Answer

President and CEO John Asbury and EVP and Wholesale Banking Group Executive David Ring clarified that while reduced line utilization was a material factor in the C&I loan decline, Q4 loan growth targets are supported by current pipelines and not solely predicated on a reversal in line utilization. EVP and CFO Rob Gorman and John Asbury projected low single-digit core NIM expansion per quarter, dependent on term rates and fixed-rate loan repricing, noting less asset sensitivity post-Sandy Spring acquisition. John Asbury expressed no particular concern about a prolonged government shutdown, citing past resilience of government contractors and minimal consumer impact, though it could further slow economic activity.

Janet Lee sought clarification on Wintrust Financial Corporation's mid-to-high single-digit loan growth outlook for 2026, specifically whether it assumes a significant drop in mortgage rates or if such a drop would represent additional upside. She also asked about potential drivers for an increase in net interest margin (NIM) and any ongoing spread compression on fully funded CRE loans.

Answer

President and CEO Tim Crane clarified that the loan growth assumption includes a slightly improved mortgage market in line with MBA projections, not a dramatic rate drop, and a very material lift would require rates below 6%. Regarding NIM, Tim Crane discussed competitive pressures for fully funded loans, largely from peers seeking growth, but reiterated Wintrust's focus on relationship-based arrangements. He noted the first quarter's fewer days have a mathematical impact on the margin and that Wintrust remains neutral to rate changes and the competitive environment.

Janet Lee of TD Cowen sought clarification on Wintrust's mid-to-high single-digit loan growth outlook, specifically whether it assumes a significant drop in mortgage rates or if a rate reduction would represent additional upside. She also asked about potential drivers for increasing the Net Interest Margin (NIM) through 2026 and if spread compression on fully funded CRE loans persists.

Answer

President and CEO Tim Crane clarified that the loan growth outlook assumes a slightly improved mortgage market in line with Mortgage Bankers Association projections, not a dramatic drop in rates, and that a very material lift would require rates to go below 6%. Regarding NIM, he noted that competitive pressures, particularly for fully funded loans, could impact the margin, but Wintrust remains focused on relationship-based arrangements and is largely neutral to rate changes.

Janet Lee asked about the strategic growth trajectory of premium finance loans, considering seasonality and its share of the loan portfolio. She questioned how Wintrust's appetite for premium finance versus C&I loans would change if C&I growth picked up, given premium finance's comparable yields and lower credit risk but lack of deposit generation. She also sought color on whether the four basis point decline in loan yields was solely due to variable rate loan impact or if there was incremental spread compression.

Answer

Dave Dykstra, Vice Chairman and Chief Operating Officer, stated that premium finance typically constitutes about a third of the balance sheet, and Wintrust aims to grow all good businesses. He indicated that they wouldn't reduce focus on premium finance even with increased C&I growth, and if concentration became an issue (e.g., around 40%), they might sell off excess production. Timothy Crane, President and Chief Executive Officer, confirmed that the loan yield decline was mostly due to the timing around variable rate loans. He acknowledged increased market competitiveness for fully funded loans but reiterated Wintrust's selective approach to client acquisition and its ability to maintain the margin.

Janet Lee inquired about the drivers behind Old National Bancorp's solid new money yields on its securities portfolio and whether the portfolio size is expected to remain stable. She also asked if total deposit costs could decrease further from current levels, or if fixed-rate asset repricing is the primary driver for NIM expansion.

Answer

John Moran, CFO, expects the securities portfolio, as a percentage of earning assets, to remain stable in 2026, with cash flow reinvested into plain vanilla instruments targeting a four-year duration. He stated that both deposit cost reduction and fixed-rate asset repricing contribute to NIM expansion, noting that the exception-priced deposit book (36% of total deposits) still has room for further rate reductions.

Janet Lee asked about the underlying drivers of the securities portfolio's new money yields (5%) and whether the portfolio level is expected to remain stable or decrease in 2026. She also inquired if the total deposit cost could further decrease from the current spot rate of 1.68%, or if the primary benefit to NIM will come from fixed-rate asset repricing.

Answer

John Moran, CFO, expects the securities portfolio (as a percentage of earning assets) to remain stable in 2026, with cash flow reinvested in plain vanilla instruments targeting a four-year duration. He stated that both deposit cost reduction and fixed-rate asset repricing will contribute to NIM, noting that the exception price book (36% of total deposits) still has room for further rate reductions, having achieved nearly a 90% beta.

Janet Lee asked for the size of the Bremer loan runoff in Q3 and clarified if the Q4 loan growth guidance, stated as 'excluding Bremer' for the full year, also excludes the impact of Bremer runoffs or just the initial added loan amount. She also inquired about the drivers of the strong fee income, particularly capital markets, and if the Q3 performance represents a sustainable run rate.

Answer

CFO John Moran stated that the Q3 Bremer runoff was about $200 million. He clarified that the full-year loan growth guidance (4-5% excluding Bremer) accounts for Bremer not being present for the first four months, but the Q4 guidance (3-5%) is inclusive of all Old National and Bremer operations. He confirmed that Bremer runoffs are expected to reduce in coming quarters. Regarding fee income, Moran indicated that the right run rate for total fee income is around $120 million, with Q3 being exceptionally strong, especially in capital markets, and expects it to normalize in Q4, along with seasonal mortgage income.

Janet Lee asked for the size of the Bremer loan runoff observed in Q3 and sought clarification on whether the loan growth guidance 'excluding Bremer' also accounts for these runoffs or only the initial added loan amount. She also inquired about the nature of the strong fee income performance, particularly the jump in capital markets, other fee, and bank fees, asking if these represent organic trends or unusual occurrences, and if they indicate a sustainable run rate for growth.

Answer

CFO John Moran stated that the third-quarter Bremer runoff was about $200 million. He clarified that the fourth-quarter loan growth guidance is inclusive of everything (Old National plus Bremer), while the full-year guidance excludes Bremer because it wasn't present for the first four months. He confirmed that future runoffs from Bremer-related lines of business are expected to be reduced compared to the $200 million. Regarding fee income, John Moran indicated that the right run rate for total fee income is probably around $120 million, with Q3 being exceptionally good, especially in capital markets due to rate volatility, which he expects to normalize. Mortgage income was also seasonally strong in Q3 and will decline in Q4.

Janet Lee asked about the expectation for net charge-offs in 2026, specifically if they would be similar to 2025 (around 50 basis points), and whether the bank plans to draw down on reserves or take similar provision amounts. She also inquired if 2026 would see more migration within classified/criticized assets or new credits migrating into these categories.

Answer

George Gleason, Chairman and CEO, stated the bank will do "the right thing" based on economic conditions and portfolio quality. He anticipates that if the CRE cycle winds down as expected, the ACL percentage may continue to modestly decrease as provided-for losses are absorbed. He explained that the special mention category is fluid, with loans often resolving favorably and returning to pass status. He reiterated expectations for a "handful of additional sponsors who give up on projects" in 2026, similar to 2024/2025, for which the ACL is built.

Janet Lee, VP of Equity Research at TD Securities, asked for clarification on Bank OZK's expectation for 2026 net charge-offs relative to 2025, and whether the bank plans to draw down on its allowance for loan losses or maintain a similar provision level. She also questioned whether future credit migration would primarily be within existing classified assets or from new credits.

Answer

George Gleason, Chairman and CEO, stated that the bank will do "the right thing" regarding reserves based on economic conditions and portfolio quality. He anticipated that if the CRE cycle winds down as expected, the ACL percentage might modestly decrease as provided-for losses are absorbed. He explained that the special mention category is fluid, with loans often returning to pass status, and reiterated that 2026 is expected to be similar to 2024/2025 regarding a "handful" of sponsors giving up on projects, for which the ACL is built.

Janet Lee asked for more clarity on the Boston office loan that moved to substandard accrual, specifically regarding the baseline expectation for securing a potential tenant and the likely path of the loan given the current reserve. She also inquired about the low loan origination volume in Q3, asking if it was an outlier and if higher volumes are expected in Q4 and beyond, considering declining RESG commitments are driven by payoffs.

Answer

George Gleason, Chairman and CEO, stated that the bank would not preempt the sponsor's negotiations on the Boston office loan, noting the sponsor is actively pursuing leasing and recapitalization options. He reiterated that the reserve adequately covers a wide range of potential scenarios. Regarding loan originations, George Gleason confirmed that declining RESG commitments are indeed due to payoffs. He indicated that Q3's low origination volume was likely an anomaly, with significant closings already occurring in Q4 that were anticipated in Q3. Despite market competition, he expects a return to more typical origination volumes in Q4 and future quarters.

Janet Lee of TD Cowen sought clarification on whether First Horizon's 'flat-ish' expense guidance would still hold if the company achieved the higher end of its 3%-7% revenue growth guide. She also asked if the mid-single-digit loan growth guidance was conservative, given the positive narrative around C&I, mortgage warehouse, and CRE inflection.

Answer

Hope Dmuchowski, Chief Financial Officer, confirmed that the 'flat-ish' expense guidance would still hold even with higher-end revenue growth, noting that increased countercyclical commission businesses would cause expenses to rise above 0%. Regarding loan growth, Ms. Dmuchowski stated that First Horizon is a disciplined lender, typically performing at peer-average levels, and aims for great clients with strong underwriting. She does not foresee the economy supporting above mid-single-digit loan growth without additional stimulus. Bryan Jordan, CEO, added that while consumer mortgage growth might not be rapid, the company feels good about growth opportunities in C&I, mortgage warehouse, and CRE.

Janet Lee asked for clarification on First Horizon's 'flat-ish' expense guidance, specifically if it holds true even if the company achieves the higher end of its 3-7% revenue growth guide. She also questioned if the mid-single-digit loan growth guidance was conservative, given positive narratives around C&I, mortgage warehouse, and CRE inflection.

Answer

Hope Dmuchowski, CFO, confirmed that the flat-ish expense guidance does hold, with any increase above 0% attributed to higher countercyclical commission businesses if the higher end of revenue is achieved. Regarding loan growth, Ms. Dmuchowski explained that First Horizon is a disciplined lender, aiming for peer-average growth, and does not foresee the economy supporting above mid-single-digit loan growth without stimulus. Bryan Jordan, CEO, added that while consumer mortgage portfolio growth might be slower, other enumerated businesses offer strong growth opportunities.

Janet Lee from TD Cowen sought more color on FHN Financial's trading revenue, specifically what drove the 40% increase in ADR in Q3, its sustainability, and if it was related to rate cuts or securities repositioning. She also asked about the change in C&I loan growth pace and the company's M&A strategy regarding contiguous vs. core footprint and crossing the $100 billion asset threshold.

Answer

CFO Hope Dmuchowski explained that FHN Financial's momentum picked up before the rate cut signal and continued into early October, with no significant balance sheet repositioning noted. She linked sustainability to future rate cuts and yield curve shape. Chief Credit Officer Thomas Hung clarified that the C&I loan growth pace was consistent, with minor lumpiness. Chairman, President, and CEO Bryan Jordan reiterated a focus on the core franchise for M&A in 2026 and beyond, expressing increased confidence in crossing the $100 billion asset threshold.

Janet Lee sought more color on FHN Financial's trading revenue strength, particularly in September, asking if it was linked to rate cuts, the yield curve shape, and its sustainability, or if it involved securities repositioning. She also asked about the change in C&I loan growth pace and the comfort level with mid-single-digit loan growth for 2026. Finally, she inquired if potential M&A would focus on contiguous footprint and comfort crossing the $100 billion asset threshold.

Answer

CFO Hope Dmuchowski explained FHN Financial's momentum picked up before the rate cut signal and continued into early October, with less balance sheet repositioning than year-end. Chief Credit Officer Thomas Hung and Chairman, President, and CEO Bryan Jordan confirmed good C&I momentum, with lumpiness, and maintained comfort with mid-single-digit loan growth for 2026. Bryan Jordan clarified M&A focus on the core franchise (2026+ timing) and increased confidence in crossing $100 billion due to an improved regulatory environment.

Janet Lee asked for an update on the company's sensitivity to rate cuts, specifically if the prior guidance of a one to two basis point NIM improvement per 25 basis point cut still holds, and whether this guidance included accretion. She also inquired about the implications of IBTX bankers adopting SouthState's business model, particularly concerning expenses, incentives for deposit costs or loans, and the potential impact on the growth profile.

Answer

Chief Strategy Officer Steve Young clarified that the prior guidance on NIM improvement per rate cut is impacted by the revised loan accretion forecast (down to $125M for 2026 from $150M) and the deposit beta. He noted that while the deposit beta for the first 100 basis points of cuts was 38%, the company is modeling 27% for future cuts, similar to the 2019-2020 easing cycle, with a potential lag. He expects NIM to start in the mid-$3.80s and move higher by late 2026/early 2027 as the deposit beta potentially improves. CEO John Corbett explained that IBTX's incentive system will align with SouthState's approach in 2026, basing incentives on PP&R growth and loan growth, with adjustments to encourage recruiting by not penalizing regional presidents for new hires' first-year compensation.

Janet Lee asked if the previous guidance of a 1-2 basis point NIM improvement per 25 basis point rate cut still holds, clarifying if it applied to core NIM or included accretion. She also inquired about the implications of IBTX bankers adopting SouthState's business model in 2026 on expenses, incentives, and growth profile.

Answer

Steve Young, Chief Strategy Officer, clarified that the core NIM guidance has changed due to a revised loan accretion forecast (down by 4 basis points for 2026) and a lower deposit beta assumption of 27% for the easing cycle, compared to 38% previously. He expects NIM to start in the mid-380s and move higher by late 2026/early 2027 as deposit beta potentially increases. CEO John Corbett explained that in 2026, IBTX incentives will align with SouthState's P&L-based approach for Regional Presidents, focusing on PP&R growth, with adjustments to encourage recruiting by not penalizing for new hire compensation in the first year.

Janet Lee sought clarification on the NII guide, specifically confirming the expected 2-3 basis point lift to earning asset yields per quarter and the assumption of reinvesting half of the securities runoff, requesting details on underlying assumptions. She also asked for confirmation that CNI would be a bigger driver for commercial loan growth than CRE, and about commercial borrowers' optimism regarding rate cuts and the potential positive impact of bonus depreciation returning in 2026 on CNI loan growth.

Answer

CFO Ryan Richards confirmed the expected range for earning asset yield pickup and stated that the bank has consistently reinvested about half of gross cash flows from the securities portfolio, though this may taper. He noted that future reinvestment depends on liquidity stress tests, loan growth opportunities, and wholesale funding paydowns. President and COO Scott McLean confirmed that CNI loans are expected to be the greater portion of growth in 2026. He suggested that borrower enthusiasm is more tied to macroeconomy concerns than just rates, and while lower rates are welcome, they weren't the primary retardant to growth. Ryan Richards added that bonus depreciation would likely support capital investments, but no specific modeling was available yet.

Janet Lee from TD Cowen sought confirmation on the NII guide assumptions, specifically a 2-3 basis point lift to earning asset yields per quarter based on the forward curve and whether half of the securities runoff would be reinvested. She also inquired if Commercial & Industrial (CNI) loans are expected to be a larger driver of commercial loan growth than Commercial Real Estate (CRE) over the next 12 months, and if commercial borrowers are showing increased optimism due to anticipated rate cuts and potential bonus depreciation.

Answer

CFO Ryan Richards confirmed the 2-3 basis point range for earning asset yield pickup, noting consistent reinvestment of about half of gross securities cash flows, though future reinvestment depends on liquidity tests and loan growth opportunities. President and COO Scott McLean confirmed CNI will be the greater portion of growth in 2026, adding that borrower enthusiasm is more tied to macroeconomy concerns than solely rate changes. Ryan Richards noted that bonus depreciation would likely support capital investments, but no specific modeling was available.

Janet Lee asked about the drivers of CNI loan growth and whether 2026 loan growth is expected to exceed the previously anticipated 4-5% for 2025, given commercial real estate (CRE) runoffs. She also questioned if recent NBFI headlines would change Webster Financial's appetite for growing its NBFI exposure.

Answer

John Ciulla (CEO) stated that Webster is not yet ready to guide for 2026 but would consider mid-single-digit loan growth as solid, emphasizing diverse, full-relationship growth and onboarding good risk-return assets. Regarding NBFI, Mr. Ciulla acknowledged optical sensitivity but fundamentally views their existing NBFI categories (fund banking, lender finance) as low-risk and suitable for continued origination within the overall portfolio context, unless broader market cracks emerge.