Joseph Yanchunis

Joe Yanchunis with Raymond James inquired about South Plains Financial's strategy to expand its lending team by up to 20% next year, specifically asking about the proportion of true lenders versus support staff and the current base number of lenders. He also sought clarification on key markets driving this growth, the reported increase in subprime and deep subprime concentrations within the indirect auto portfolio, and any incremental P&L costs associated with the $50 million subordinated debt redemption.

Answer

President Cory Newsom clarified that the 20% growth target is entirely for production lenders, not support staff, and the company is already over 10% towards this goal, with the base being about 40% of current lenders. He highlighted growth in the Permian, Houston, and Dallas MSA markets. CFO Steve Crockett addressed the indirect auto portfolio data, explaining that the reported figures were updated borrower credit scores, not origination scores, which caused the apparent change. Steve Crockett and Cory Newsom confirmed there were no P&L expenses for redeeming the subordinated debt as it was repaid at the end of its call period.

Joe Yanchunis inquired about South Plains Financial's plan to expand its lending team by up to 20%, seeking clarification on the proportion of true lenders versus support staff and the base number of current lenders. He also asked about specific growth markets and the observed increase in subprime and deep subprime concentrations within the indirect auto portfolio. Additionally, Yanchunis questioned the incremental P&L costs associated with the $50 million subordinated debt redemption.

Answer

President Cory Newsom stated that the 20% growth target is for production lenders, not support staff, with a current base of approximately 40 lenders, and over 10% of this growth already achieved. He highlighted Permian, Houston, and Dallas MSA as key growth markets. CFO Steve Crockett clarified that the indirect auto portfolio data in the deck was updated information, not origination data, explaining the perceived shift in credit scores. Steve Crockett also confirmed there were no P&L expenses incurred for the sub debt redemption as it occurred at the end of the call period. Chairman and CEO Curtis Griffith added context on compensation structure for new hires.

Joseph Yanchunis of Raymond James Financial asked about the strategy in the Dallas market, questioning if recent hiring was a response to loan contraction there, and sought to understand the source of the growth in non-interest-bearing deposits, specifically from new versus existing customers.

Answer

President Cory Newsom clarified that the loan contraction in metro markets like Dallas was primarily due to the strategic resolution of a large non-accrual loan and the planned runoff of lower-priced credits, not underperformance. He stated the hiring initiative is opportunistic and company-wide. Regarding deposits, both Newsom and Chairman & CEO Curtis Griffith explained that while they couldn't provide a precise new-versus-existing customer breakdown, the growth is a result of a concerted effort to cross-sell treasury services to all loan clients, reinforced by their lender incentive plans.

Joseph Yanchunis of Raymond James asked about the current hiring landscape for lending talent, the concentration and recent growth of the energy loan portfolio, and the outlook for fee income excluding the mortgage business.

Answer

President Cory Newsom explained that the bank is actively and selectively looking to hire talent in all its markets but will not hire just to increase headcount. CEO Curtis Griffith provided a recent example of a strategic mortgage hire. Regarding energy loans, Chief Credit Officer Brent Bates clarified the concentration is around 4% of the portfolio, primarily in the energy service sector. On fee income, executive Steven Crockett and President Cory Newsom noted that non-mortgage fee income lines have been growing year-over-year and they remain focused on increasing this revenue stream.

Joseph Yanchunis inquired about the historical retention rate for loans coming up for renewal to better understand the repricing opportunity and asked for an update on a previously discussed large multifamily problem loan.

Answer

Chief Credit Officer Brent Bates stated that the bank has been successful in retaining desirable loans, though some payoffs occur as clients realize gains. President Cory Newsom added that prepayment penalties on loans repricing before maturity aid in retention. Regarding the problem loan, Bates confirmed it is performing as expected and that they are actively working the plan, expressing overall optimism about credit quality trends.

Joseph Yanchunis of Raymond James questioned if the robust loan pipeline could drive loan yields higher and asked for specifics on how CD rates have trended post-Fed cut. He also inquired about the strategy for the bond portfolio, given the recent increase in value, and sought guidance on noninterest expenses for 2025.

Answer

Chief Credit Officer Brent Bates and President Cory Newsom confirmed they expect loan yields to improve, citing good pricing on new loans and the repricing of older assets. Executive Steven Crockett noted that CD rates for 6-month to 1-year terms were dropped by 25 to 50 basis points following the Fed's cut. Regarding the bond book, CEO Curtis Griffith stated the bank is not actively adding securities or restructuring the portfolio at this time. For 2025, Steven Crockett and Cory Newsom anticipate noninterest expenses will be relatively flat, with normal pressures on personnel and IT costs.

Joe Yanchunis (Raymond James) asked about changes in demand for early wage access loans, including potential impacts from the government shutdown, and the implied growth for the tax business within the fiscal year 2026 EPS guidance, considering recent tax law changes. He also inquired about the peak of non-performing loan (NPL) concentrations and the expected pace of share repurchases and buyback ratio for 2026.

Answer

CEO Brett Pharr indicated no immediate impact on early wage access from the government shutdown, emphasizing the significant volume expected from the Claire’s/Intuit partnership. Pharr and CFO Greg Sigrist noted that while tax law changes are generally positive, the 2026 EPS guidance implies a solid tax year with mid-single-digit growth, building on a strong prior year. Regarding NPLs, Pharr clarified that NPLs and past-due loans are not directly correlated, and the focus remains on managing collateral and net charge-offs. Sigrist added that specific well-collateralized loans are expected to resolve within the next few quarters. Sigrist also stated that the share buyback ratio is anticipated to return to its historic 80% to 90% payout range after slowing to build capital.

Joe Yanchunis questioned the demand trends for early wage access loans, potential impacts of recent tax law changes on the tax business, the outlook for non-performing loans (NPLs) and portfolio concentration, and the anticipated pace of share repurchases for fiscal year 2026.

Answer

CEO Brett Pharr noted no immediate impact from the government shutdown on early wage access but highlighted significant volume potential from the Claire’s/Intuit partnership. Pharr and CFO Greg Sigrist discussed the positive but not 'huge' growth expectations for the tax business, aligning with mid-single-digit historic growth. Pharr clarified that NPLs are not directly correlated with past-due loans due to collateral management, emphasizing net charge-offs as the key metric. Sigrist added that three specific loans constitute half of current NPLs, expected to resolve within one to three quarters. Sigrist also stated that the buyback ratio is expected to return to historic norms of 80%-90% payout.

Joseph Yanchunis asked about the operational distraction and timeline for the ongoing accounting restatement, the associated incremental expenses, recent degradation in credit quality, and the company's strategic approach to artificial intelligence (AI).

Answer

EVP & CFO Greg Sigrist stated that the company is in the 'middle to later innings' of the restatement process and pointed to the new eight-quarter financial data in the investor deck for preliminary impact details. CEO Brett Pharr clarified that the rise in non-performing loans was due to three isolated, well-collateralized commercial loans, not a systemic portfolio issue, and emphasized focusing on the net charge-off rate. Regarding AI, Mr. Pharr explained Pathward is exploring it for internal efficiencies and partner oversight but does not expect a dramatic P&L impact in the intermediate term.

Joseph Yanchunis of Raymond James Financial asked for an update on the Aubrey property renovations, potential expenses related to the new Block partnership, and details on how productivity gains and AI would contribute to the 'Project Seven' EPS target.

Answer

CEO Damian Kozlowski detailed that renovations at the Aubrey property have significantly improved occupancy and will be completed by The Bancorp if a near-term sale does not occur. He noted that while the Block partnership will require some incremental hiring, the company's infrastructure is highly leverageable. Kozlowski elaborated that 'Project Seven' relies on reallocating resources from traditional banking to the high-growth fintech segment, with AI expected to drive further efficiencies in 2026 and beyond.

Joe Yancunis asked for confirmation that the credit sponsorship program could reach its year-end targets with only its four current programs. He also questioned if the company would front-load its share repurchase activity given the stock's recent performance. Finally, he inquired if The Bancorp's extensive payment volume data revealed any changes in consumer behavior amid economic uncertainty.

Answer

CEO Damian Kozlowski confirmed that the four existing credit sponsorship programs are projected to surpass the $1 billion year-end target. Regarding capital allocation, he reiterated the plan to use ~$100 million of net income to repay debt and $150 million for buybacks, but noted that refinancing the debt to increase buybacks is under consideration, though no decision has been made. On consumer behavior, Kozlowski explained that inflation is a net positive for their nominal GDV and that their payment volume is largely non-discretionary, making it resilient to downturns in consumer spending.

Joseph Yanchunis asked about internal concentration limits for the credit-enhanced program, whether growth would come from new or existing partners, and trends in recent contract negotiations. He also inquired about the timing of debt repayment and the outlook for share buybacks in 2026.

Answer

CEO Damian Kozlowski confirmed that conservative internal limits are in place for the credit program and that the bank has a clear path to over $1 billion in balances in 2025, driven mostly by an existing partner with new ones ramping up. He noted that recent contract talks are less price-sensitive as fintechs seek long-term, stable partners. Kozlowski stated the plan is to repay $96 million in senior debt from cash flow, which temporarily reduces the 2025 buyback, but affirmed a commitment to returning net income to shareholders, implying buybacks would likely increase again in 2026.

Joseph Yanchunis questioned the internal concentration limits for the credit-enhanced program, the source of its near-term growth, trends in partner contract negotiations, the timing of debt repayment, and the outlook for share buybacks.

Answer

CEO Damian Kozlowski stated that the bank has conservative internal limits and sees a clear path to over $1 billion in credit sponsorship balances in 2025, primarily from an existing partner. He noted that contract negotiations are less price-sensitive as partners seek long-term stability and broader product enablement. He confirmed the plan to repay the $96 million of senior secured debt from cash flow, after which the bank is 'dedicated 100% [to] repatriation of our net income' through buybacks, as there are no other major capital needs.

Joseph Yanchunis of Raymond James Financial inquired about FinWise's strategy regarding AI and stablecoins, the average balance and provision ratio for credit enhanced loans, and the overall health and pipeline of its fintech partners.

Answer

CEO Kent Landvatter discussed using AI for back-office functions like fraud detection and compliance, and noted that while stablecoins are not a near-term initiative, the company is monitoring for a strong domestic use case. Bank CEO James Noone explained that credit enhanced loan balances grew late in the quarter, making a simple provision ratio extrapolation misleading, and confirmed that existing partners are healthy with strong loan demand, with a pipeline on track to add one to two more partners by year-end.

Joseph Yanchunis inquired about the quarter-end balance of credit-enhanced loans, the feasibility of reaching the year-end target with current partners, the timeline for the new Backd program to contribute, the rationale for the extended held-for-sale product, and the overall health of FinWise's strategic partners.

Answer

Bank CEO James Noone confirmed the $50-$100 million year-end target for credit-enhanced loans is achievable with existing partners, noting the Backd program would likely scale up in Q4. CFO Robert Wahlman specified the credit-enhanced balance was just under $2 million at quarter-end. Wahlman also explained the extended held-for-sale product was a custom, low-risk solution for a partner needing temporary balance sheet capacity. Noone stated there are no current concerns about partner health but acknowledged a potential macroeconomic risk from a slowdown in consumer spending.

Joseph Yanchunis of Raymond James asked for a high-level, 3-4 year outlook on the company's business mix, revenue ramp from new card and payments initiatives, and the evolution of its risk profile. He also questioned the criteria for selecting new fintech partners and inquired about management's primary concerns.

Answer

CFO Bob Wahlman projected an exciting few years, highlighting substantial growth in the credit enhanced balance sheet, and provided specific 2025 guidance for it to increase by $50-$100 million. CEO Kent Landvatter noted that their expanded product suite is attracting more mature, established fintech partners. He identified cybersecurity, regulatory compliance, and fintech oversight as key areas of focus that require constant vigilance, though he feels confident in the company's risk management framework.

Joseph Yanchunis of Raymond James Financial asked about the expected productivity of new branch locations in Houston and the strategy behind the strong growth in demand deposit accounts (DDA). He also questioned if any one-time items influenced the net interest margin (NIM) and requested the NIM for the month of June.

Answer

CEO John Bordelon explained that the new Houston branch is expected to attract more core deposits from commercial customers due to improved convenience. He attributed strong DDA growth to a strategic focus on core funding, revised incentive plans, and a slowdown in low-deposit CRE lending. Bordelon confirmed the NIM for June was approximately 4.04% and stated there were no one-time positive adjustments to the quarterly NIM.

Joseph Yanchunis of Raymond James Financial asked about the expected productivity of new branch locations in Houston, the strategy behind the strong growth in noninterest-bearing deposits (DDA), and whether any one-time items contributed to the quarter's Net Interest Margin (NIM) expansion.

Answer

Chairman, President & CEO John Bordelon stated that the new full-service Houston branch is expected to be highly productive in attracting more core deposits from commercial customers. He attributed the strong DDA growth to a deliberate strategic shift, including updated incentive plans that prioritize core deposits over loan growth and a slowdown in non-owner-occupied CRE lending, which typically carries lower deposit balances. Mr. Bordelon also confirmed that there were no significant one-time adjustments that artificially inflated the NIM for the quarter.

Joseph Yanchunis inquired about Home Bank's forward-looking net interest margin (NIM) expectations, the NIM for March, the impact of a potential rate cut, and details on two specific loan relationships that moved to non-accrual status.

Answer

Executive John Bordelon and CFO David Kirkley explained that they expect the NIM to continue expanding, driven by loan repricing, even without Fed rate cuts. Kirkley noted the March NIM was 3.95% and projected that a 25-basis-point rate cut would result in a stable to slightly increasing NIM due to offsetting factors. Bordelon provided details on the two non-accrual loans: a condominium development in Mississippi and a hotel renovation in Houston, expressing confidence in the underlying collateral and anticipating no material principal losses.

Joseph Yanchunis from Stephens Inc. asked for details on the bank's expectation for Net Interest Margin (NIM) expansion throughout 2025, inquiring if this outlook assumes a static rate environment or includes rate cuts. He also questioned the strategy for deposit betas and money market rates given the rising loan-to-deposit ratio, and sought clarification on the new Northwest Houston branch's opening timeline and its impact on occupancy expenses.

Answer

Executive John Bordelon stated that Home Bank expects NIM to expand in both static and slight rate-cut scenarios, driven by the repricing of loans and CDs. He noted the bank's fixed-rate loan portfolio provides protection from Fed rate cuts. CFO David Kirkley added that deposit betas on non-maturity accounts might be slower as rates weren't raised aggressively. He clarified that the new Houston branch is a conversion of an existing LPO expected in late 2025, and the projected decrease in 2025 occupancy expense is due to exiting a separate, sizable lease from a prior acquisition.

Joseph Yanchunis inquired about the gross loan production for the quarter to understand the impact of payoffs and how payoffs might behave in a rate-cutting environment. He also asked about deposit pricing competition, the expected behavior of deposit betas on the way down, the forward trajectory for Net Interest Income (NII), the bank's plan for maturing BTFP funding, and the potential for achieving positive operating leverage in 2025.

Answer

CFO David Kirkley reported Q3 new loan originations were about $80 million, with growth muted by higher payoffs, including a one-off $19 million C&I loan payoff. Executive John Bordelon noted that competitors are also lowering deposit rates, and Kirkley added that the bank's fixed-rate loan portfolio should provide downside protection for yields. Kirkley stated they are exploring options like overnight advances and term funding to replace the maturing BTFP borrowings. Both executives expressed confidence in their ability to stabilize or increase the Net Interest Margin (NIM) and achieve positive operating leverage in 2025, depending on the pace of Fed rate cuts.

Joseph Yanchunis of Raymond James Financial followed up to ask if Factoring as a Service (FAS) volumes are included in the total invoices purchased and about potential seasonality in the intelligence segment.

Answer

Kim Fisk, President of Triumph Factoring, confirmed that FAS is included in the reported figures and noted that future growth will be driven by new customers like RXO. Dawn Salvucci-Favier, President of Triumph Intelligence, stated that the intelligence business has no seasonality and has demonstrated stable growth in various market conditions.

Joseph Yanchunis of Raymond James Financial, Inc. asked about the expected average revenue per Load Pay account, competitive reactions to Triumph's disruptive technologies, the mix of volumes in the factoring segment, and potential seasonality in the new Intelligence business.

Answer

President of Payments & Banking Todd Ritterbusch noted mature Load Pay accounts can exceed $700 in annual revenue. CEO Aaron Graft detailed the competitive landscape, highlighting greenfield opportunities in payments. President of Factoring Kim Fisk clarified that current growth is from core factoring, with Factoring as a Service (FAS) volume expected to grow. President of Intelligence Dawn Salvucci-Favier stated there is no seasonality in the intelligence business.

Joseph Yanchunis asked about the expected pace of noninterest expense growth in 2025, the unit economics of the Factoring-as-a-Service (FaaS) product, the 2025 adoption targets for LoadPay, and the potential pace of market share gains in the core factoring business.

Answer

Executive William Voss projected "low to mid-single digits" growth in noninterest expense for the year, driven by compensation resets and investments. CEO Aaron Graft discussed FaaS economics, noting that as volume grows through the established "factory," operating margins should expand significantly. For LoadPay, Graft stated a successful 2025 would see 5,000 to 10,000 active users. Regarding factoring market share, he expressed that gaining only 1% would be disappointing and expects to do better, especially when the market turns. Executive Melissa Forman confirmed all FaaS volume will be reported within the Factoring segment.

Joseph Yanchunis asked about the long-term viability of the independent owner-operator base amid a difficult freight market. He also questioned the TriumphPay volume pipeline, particularly with C.H. Robinson, and the strategy for onboarding new factoring companies to the network.

Answer

COO Kim Fisk and CEO Aaron Graft asserted that the small carrier market is cyclical and essential to the freight ecosystem, expressing confidence in its eventual recovery. President of TriumphPay Melissa Forman confirmed C.H. Robinson's volume is onboarding, with significant revenue impact expected in H2 2025. Graft addressed the factoring pipeline, attributing slow adoption to the 'innovator's dilemma' faced by legacy factors but noted that Triumph's superior, integrated technology is positioned to capture new market entrants.

Joseph Yanchunis of Raymond James Financial, Inc. asked for insight into the consolidated revenue split between the first and second half of the year, given multiple growth drivers. He also questioned the remaining financial opportunity from migrating legacy clients to the next-gen audit platform and the terms of these new contracts.

Answer

Executive Aaron Graft declined to provide specific revenue guidance but stated that transportation business revenue must 'go up materially' from the current quarter's $206 million. He identified Factoring and Payments as the largest near-term contributors. Executive Todd Ritterbusch added that the migration to the next-gen audit platform is in its 'early stages,' with 'well less than 50%' of the opportunity captured, and that it will continue to play out over the next several quarters.

Joseph Yanchunis inquired about the near-term outlook for digital deposit receipts (DDRs), the forward-looking run rate for noninterest expenses, and the expected growth trajectory for U.S. RPP volume throughout the year.

Answer

Executive David Taylor explained that a U.S. pilot for DDRs is planned soon, with a potential rollout by mid-to-late year. He confirmed the current noninterest expense level is a reasonable run rate, possibly slightly higher due to currency exchange effects on U.S. costs. For the U.S. RPP, Taylor noted momentum is building after the first partner signing, and the initial USD 290 million target for the year is 'easily attainable'.

Joseph Yanchunis asked for an updated outlook on Renasant's Net Interest Margin (NIM) after it beat prior guidance, and also inquired about near-term loan growth trends and new loan origination yields in the fourth quarter.

Answer

James Mabry stated that due to better-than-expected deposit pricing, the outlook for NIM has shifted from modest compression to modest expansion. He also noted that new and renewed loan yields were around 7.35% for the quarter. CEO Mitchell Waycaster added that the loan pipeline remains strong at $174 million entering Q1, with robust production across all geographies and business lines, signaling optimism for continued growth.

Joseph Yanchunis of Raymond James asked for a more precise forecast on deposit betas as rates fall, questioning if the trend would be linear or lumpy and if there were differences between domestic and international customers. He also inquired about near-term growth targets for the brokerage and advisory business (AUM) and trends in loan payoffs and prepayment penalties.

Answer

CFO Sharymar Calderon projected down-rate deposit betas to be around 40-45 basis points, noting the bank is acting quickly to reprice accounts while managing competitive pressures. She added that a significant portion of international deposits are noninterest-bearing and thus unaffected. CEO Jerry Plush stated that AUM growth is expected from both domestic and international clients, with the new focus on international banking being a key driver. He also noted that loan payoffs have not been material due to the bank's focus on full relationships.