Justin Crowley

Justin Crowley inquired about Civista Bancshares' projected mid-single-digit loan growth for 2026, specifically asking about the expected split between commercial (C&I and CRE) and residential real estate. He also asked about the potential impact of the new digital deposit channel on growth targets and the Net Interest Margin (NIM) trend under different interest rate scenarios, as well as the anticipated expense run rate post-Farmers acquisition.

Answer

President and CEO Dennis Shaffer and President Chuck A. Parcher explained that commercial and C&I growth would likely lead, with residential potentially moving to the secondary market if rates drop. They emphasized aligning loan growth with deposit funding, noting the digital channel's early success but not expecting it to substantially exceed mid-single-digit growth immediately due to margin considerations. For NIM, Dennis Shaffer projected a 2-3 basis point expansion in Q1 and another 3-4 basis points beyond, assuming rate cuts in June and Q4. Regarding expenses, Dennis Shaffer anticipated Q1 expenses around $29-$29.5 million, with Q2 reflecting merit increases offsetting post-conversion reductions, as the company invests in technology and personnel.

Justin Crowley inquired about Civista Bancshares' projected mid-single-digit loan growth for 2026, specifically asking about the expected split between commercial and residential lending, the potential impact of the new digital deposit channel on growth, and the anticipated trend for the net interest margin (NIM) under different interest rate scenarios. He also sought clarity on the run rate for non-interest expenses, considering the Farmers acquisition and upcoming merit increases.

Answer

Dennis Shaffer, President and CEO, and Chuck Parcher, President of Civista Bancshares, explained that commercial and C&I growth are expected to lead in 2026, with residential growth potentially moderating if interest rates allow for secondary market sales. They emphasized aligning funding with loan growth and the potential for accelerated digital channel growth in 2026, though not expecting it to substantially exceed mid-single-digit loan growth. For NIM, they projected a 2-3 basis point expansion in Q1 and another 3-4 basis points beyond, assuming rate cuts in June and Q4. First-quarter expenses are anticipated to be in the $29-$29.5 million range, with Q2 reflecting merit increases and investments in technology and personnel.

Justin Crowley of Piper Sandler & Co. inquired about Civista's potential for further funding cost reduction and the sustainability of net interest margin (NIM) expansion. He also sought clarity on the normalization of operating expenses and the full-year cost outlook, considering planned technology investments.

Answer

CEO Dennis Shaffer and CFO Ian Whinnem confirmed continued opportunity for margin expansion, projecting 4-5 bps in Q2 and 2-3 bps in Q3, even with two Fed rate cuts factored in. They noted $110 million in loans will reprice higher in the next two quarters. Regarding expenses, Ian Whinnem and COO Rich Dutton explained that while some Q4 professional fees normalized, Q2 would remain flat due to merit increases, followed by investments in digital banking in the second half. They affirmed that keeping full-year 2025 expenses flat compared to 2024 is realistic, with H2 quarterly expenses expected to be below $28 million.

Justin Crowley asked for details on the net interest margin, including the original yields on $180 million of fixed-rate loans set to reprice. He also questioned the strategy for lowering deposit costs beyond CD repricing and sought guidance on the expense run rate for 2025.

Answer

CEO Dennis Shaffer and EVP Richard Dutton estimated the repricing loans carried yields in the 'high 4s to low 5s' and would likely reprice into the 'low 7s'. Shaffer explained that while the bank is proactively managing rates, overall deposit costs might rise slightly due to volume growth, but total funding costs should decline. CFO Ian Whinnem projected Q1 expenses to be around $28.8 million, expecting them to remain stable, excluding potential new investments for digital deposit initiatives.

Justin Crowley inquired about the outlook for Civista's net interest margin (NIM), plans for paying down borrowings, the effectiveness of deposit gathering initiatives, the potential for further deposit rate cuts, capital management strategies concerning the TCE ratio, and the overall credit outlook.

Answer

SVP and CFO Ian Whinnem stated that the company will use new relationship deposits to reduce overnight borrowings and reprice brokered CDs. President and CEO Dennis Shaffer added that they have already lowered CD rates by 70 basis points this year and anticipate a further 5 basis point NIM lift in Q4. Shaffer also affirmed their ability to be aggressive in lowering deposit rates due to their relationship banking model. Regarding capital, Shaffer and SVP & COO Rich Dutton emphasized their focus on rebuilding the TCE ratio to their 7-7.5% target before resuming share repurchases. On credit, Shaffer and Chief Credit Officer Mike Mulford confirmed the allowance is healthy, with the recent increase driven by slower loan prepayments rather than credit deterioration.

Justin Crowley inquired about the factors influencing S&T Bancorp's loan growth pace, specifically whether demand or pricing components are holding back a potential ramp to mid-to-high single-digit growth, and the strategic focus of their hiring efforts. He also asked about the drivers behind the recent margin expansion, competitive pressures on funding, and the company's M&A strategy, including the impact of the new share repurchase authorization.

Answer

President Dave Antolik and CEO Christopher McComish explained that loan growth is managed to maintain asset quality and is supported by adding bankers in C&I, CRE, and business banking. They noted that competitive intensity on deposit rates eased later in Q4, contributing to margin expansion. CEO McComish confirmed active M&A dialogues across geographies, emphasizing that the $100 million share repurchase authorization does not impede M&A opportunities.

Justin Crowley asked about the factors influencing loan growth, specifically why it wasn't accelerating to a mid-to-high single-digit pace, and whether demand, pricing, or other elements were at play. He also inquired about the focus of hiring efforts, the trend of competitive pressures on deposit costs, and an update on M&A discussions.

Answer

President David Antolik explained that loan growth is managed to maintain asset quality and is supported by adding staff and bankers, particularly in C&I and ABL. CEO Christopher McComish added that growth estimates consider the overall economy and organic market availability, with no constraints on hiring. Regarding deposit costs, David Antolik noted that competitors were slower to reduce rates, but the company is confident in its NIM guidance. Christopher McComish observed higher competitive intensity early in Q4, which later rationalized. On M&A, Christopher McComish stated active dialogue across geographies remains a priority, and the share repurchase authorization does not hinder M&A opportunities.

Justin Crowley inquired about S&T Bancorp's net interest margin drivers, the potential for upward pressure on deposit costs, the impact of a 'higher for longer' rate scenario, the strategy for crossing the $10 billion asset threshold, and the current M&A environment.

Answer

CFO Mark Kochvar explained that while successful deposit gathering could offset borrowing costs, the incremental margin on new growth might be slightly lower. He quantified the 'higher for longer' upside as a couple of basis points and noted the bank could manage its balance sheet to delay crossing the $10 billion mark for a short time. CEO Chris McComish added that M&A conversations are positive and ongoing, with a strategic focus on Pennsylvania, Ohio, and the Mid-Atlantic.

Justin Crowley inquired about the expected timing and confidence level for the remaining Held-for-Sale (HFS) loans, the potential for future HFS inflows, trends and stabilization in the multifamily portfolio, the trajectory of loan loss reserves, and the company's medium-term capital management strategy regarding buybacks and dividends.

Answer

Eric Newell, CFO, stated that $90.7 million in HFS loans at year-end, with two-thirds scheduled for Q1 2026 resolution, are carried at the lower of cost or fair value. He noted that while future HFS moves are possible from the $783 million criticized and classified portfolio, they won't be at the 2025 pace. Ryan Riel, Chief Lending Officer for Commercial Real Estate, highlighted proactive problem loan identification and strong multifamily valuations (sub-6% cap rates in the region), expecting continued stabilization. Eric Newell also explained that the Allowance for Credit Losses (ACL) attributed to performing office loans is quantitatively driven by past losses and is expected to ease as loss content decreases. He emphasized a prudent and cautious approach to capital management, requiring sustained improvement in criticized and classified loan levels over several quarters before considering more offensive strategies.

Justin Crowley asked about the remaining held-for-sale (HFS) loans, their expected disposition timing, and the confidence in their current carrying value. He also inquired about the potential for additional loans to be moved into the HFS bucket, trends and stabilization in the multifamily portfolio, the future trajectory of the total loan portfolio reserves, and the company's medium-term capital planning regarding buybacks and dividends.

Answer

Eric Newell, CFO, stated that $90.7 million in HFS loans remained at year-end, with two-thirds scheduled for Q1 resolution, and the current mark-to-market adjustments reflect fair value. He noted that while further HFS moves from the criticized and classified portfolio are possible, they are not expected at the 2025 pace. Ryan Riel, Chief Lending Officer for Commercial Real Estate, highlighted proactive problem loan identification and stable multifamily valuations, expecting continued stabilization. Mr. Newell explained that the allowance for credit losses (ACL) coverage is expected to decline as loss content in the look-back period eases, and capital management will remain prudent until criticized and classified loan levels show a sustained downward trend over several quarters.

Justin Crowley of Piper Sandler inquired about EagleBank's confidence in avoiding further losses on held-for-sale (HFS) assets after recent charge-offs and independent reviews, and sought specifics on the timeline for asset disposition. He also asked about future charge-off expectations, the drivers behind increased criticized multifamily balances, and details on a specific $56 million special use loan.

Answer

Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, explained that EagleBank has enhanced its valuation process for HFS loans, using conservative broker opinions and accounting for disposition costs to minimize future losses. He indicated material HFS dispositions are expected in Q4 2025. Eric Newell, CFO, stated that current activity doesn't suggest significant future book value degradation from credit, with Q4 charge-offs unlikely to impact provision expense meaningfully, supported by thorough loan reviews. Ryan Riel further clarified that multifamily criticized balances are primarily due to higher interest rates impacting debt service coverage, not asset impairment, with NOI often meeting or exceeding expectations. He detailed the $56 million special use loan as a self-storage property facing disputed operating expenses, but with strong top-line performance.

Justin Crowley asked about the bank's comfort level regarding potential future losses from held-for-sale transactions, the timeline for asset dispositions, charge-off expectations for the upcoming quarter and 2026, the adequacy of reserves to absorb future hits, and detailed metrics on the increase in criticized multifamily loans. He also inquired about a specific $56 million special use loan in Montgomery County and later asked about factors influencing the net interest margin, including fixed loan repricings and adjustable resets.

Answer

Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, explained that the bank has implemented an enhanced process for determining carrying values for held-for-sale loans, using brokers' opinions at the bottom of value ranges and considering disposition costs, expecting material action in Q4 2025. Eric Newell, CFO, stated that based on independent and internal loan reviews, he does not anticipate continued degradation of book value from credit or a meaningful impact on provision expense in the near term. Ryan Riel further clarified that multifamily transaction volumes remain strong, and while debt service coverage is challenged by higher interest rates, net operating income is generally at or above underwritten levels. He detailed the Montgomery special use loan as a self-storage property facing higher operating expenses due to disputed real estate taxes, with top-line performance meeting expectations. Eric Newell later added that while specific repricing data was unavailable, margin improvement is expected from investment portfolio cash flows, C&I loan growth, and reduced wholesale funding, noting 40% of the loan book is fixed with a short average duration of three to four years.

Justin Crowley of Piper Sandler Companies inquired about the timeline for provisioning against office loan losses, the pricing on asset sales, and the net interest margin's sensitivity to potential Federal Reserve rate cuts.

Answer

EVP Kevin Geoghegan stated that while he wouldn't specify an 'inning,' he expects Q3 net charge-offs to be similar to Q2 but with less impact on the income statement due to the reserve build. Senior EVP & CFO Eric Newell added that cycle-to-date office charge-offs total $113 million, with $109.5 million in remaining reserves. He noted the weighted average discount on asset sales is approximately 40% off the original loan balance. Regarding the margin, Newell explained that the bank's interest rate risk position is neutral, and they do not anticipate material changes from Fed rate movements. Senior EVP & Chief Real Estate Lending Officer Ryan Riel also mentioned that over half of the 2026 office loan maturities are already being addressed in the current quarter's results.

Justin Crowley inquired about the drivers behind the reserve build for the office loan portfolio, the transparency of valuation trends, and the risk assessment for 2026 maturities. He also asked about credit risks outside of office, specifically in government contracting, and the key assumptions supporting the forecast for net interest margin (NIM) expansion, including its sensitivity to potential Federal Reserve rate cuts.

Answer

CFO Eric Newell explained the reserve build was driven by an annual reassessment of default probabilities based on appraisal experience, increasing the performing office loan coverage to 5.78%. He noted the NIM expansion is based on a new pricing structure for a payment processing relationship, redeployment of investment portfolio cash flows, and C&I-driven deposit growth, adding the forecast is neutral to Fed rate changes. Chief Lending Officer for Commercial Real Estate, Ryan Riel, added that office market valuations have stabilized at a low point. Chief Credit Officer Kevin Geoghegan stated the government contracting portfolio is modest and closely monitored.

Justin Crowley inquired about the recently downgraded office loan, asking if the appraisal volatility on a Class A suburban property changes the risk outlook for the broader portfolio. He also asked for more detail on the improving fundamentals of the nonaccrual loan, the bank's exposure to potential federal government office space sales, and opportunities arising from a competitor's merger.

Answer

Executive Janice Williams explained that while suburban office properties are more insulated than those in the Central Business District, appraisal volatility remains a factor, noting she was surprised by an 11% discount rate on a Class A suburban property. She expressed cautious optimism, citing improving leasing activity, reduced tenant improvement allowances, and a stabilized value projection of $110 million by 2027 for the property. Williams also stated that the bank has very little exposure to GSA-leased properties and sees potential for increased private sector leasing. CEO Susan Riel and CFO Eric Newell confirmed they view a competitor's merger as a positive opportunity, having mobilized a team to target shared customers and attract new business and talent.

Justin Crowley from Piper Sandler asked for more detail on the increase in nonperforming loans, particularly in the assisted living portfolio. He also inquired about the outlook for the office portfolio regarding appraisals and occupancy rates, and sought guidance on the allowance for credit losses and charge-off expectations for 2025.

Answer

Retiring Chief Credit Officer Jan Williams provided a detailed breakdown of the nonperforming loans, attributing the increase to specific properties, including an assisted living facility facing stabilization issues. She noted continued volatility in office appraisals but stable occupancy in the suburban market. CFO Eric Newell provided a 2025 charge-off forecast of 25 to 50 basis points on average loans, adding that future reserve builds would likely be driven by specific loans rather than broad qualitative adjustments.

Justin Crowley of Piper Sandler Companies inquired about the outlook for BlueFoundry's net interest margin (NIM), asking for specifics on loan repricing volumes and rates for the remainder of 2025 and into 2026. He also questioned the strategy for CD pricing, the potential for consumer loan purchases, and any other levers the company might pull to accelerate its return to profitability.

Answer

EVP & CFO Kelly Pecoraro detailed the loan repricing schedule, noting approximately $23 million at 4.75% will reprice in the back half of 2025, with a more significant $75 million at 3.75% repricing in 2026. She confirmed NIM expansion would be limited for the rest of 2025. Regarding consumer loans, the portfolio could grow from 5% to 7-8% of total loans. President & CEO James Nesci added that the company is constantly evaluating expenses and seeking efficiencies through technology to improve profitability.

Justin Crowley of Piper Sandler Companies inquired about the outlook for BlueFoundry's net interest margin (NIM), asking for specifics on loan repricing volumes and rates for the remainder of 2025 and into 2026. He also questioned the potential for further reductions in CD costs, the overall trajectory for NIM expansion, the strategy for consumer loan purchases, and other potential levers to accelerate the company's return to profitability.

Answer

EVP & CFO Kelly Pecoraro detailed the loan repricing schedule, noting approximately $23 million will reprice in H2 2025, with a more substantial $75 million set to reprice in 2026. She confirmed that NIM expansion would be limited in H2 2025. Regarding consumer loans, she stated the bank is comfortable growing the portfolio to 7-8% of total loans and that they come with a 3% credit reserve. President & CEO James Nesci added that CD pricing is subject to market competition and that the company is constantly exploring expense efficiencies, including through technology, to improve profitability.

Justin Crowley of Piper Sandler Companies inquired about the outlook for BlueFoundry's net interest margin (NIM), seeking details on loan repricing volumes for late 2025 and 2026, the potential for further funding cost reductions, and the strategy for purchasing credit-enhanced consumer loans.

Answer

EVP & CFO Kelly Pecoraro detailed the loan repricing schedule, noting $23 million at 4.75% for the rest of 2025 and a more significant $75 million at 3.75% in 2026. She confirmed NIM expansion would be limited in late 2025 and that the consumer loan portfolio could grow to 7-8% of total loans, protected by a 3% credit reserve. President & CEO James Nesci added that the bank is constantly seeking expense efficiencies to accelerate profitability.

Justin Crowley asked for details on the net interest margin (NIM) outlook, including the volume and rate of loan repricing for the remainder of 2025 and into 2026. He also inquired about CD pricing strategy, the potential for consumer loan purchases, the credit structure of those loans, and broader strategies to accelerate profitability.

Answer

EVP & CFO Kelly Pecoraro detailed that $23 million in loans at 4.75% will reprice in H2 2025, with a more significant $75 million at 3.75% repricing in 2026. She noted NIM expansion would be limited for the rest of 2025. Pecoraro also stated the consumer loan portfolio could grow to 7-8% of total loans and carries a 3% credit reserve. President & CEO James Nesci added that the bank is constantly evaluating expenses and technology like AI to improve efficiency and drive toward profitability.

Justin Crowley inquired about the outlook for the net interest margin (NIM), seeking details on loan repricing volumes and rates for the remainder of 2025 and into 2026. He also asked about the CD pricing strategy, the potential for consumer loan portfolio growth, the structure of associated credit enhancements, and any other strategies being considered to accelerate the return to profitability.

Answer

EVP & CFO Kelly Pecoraro detailed the loan repricing schedule, noting approximately $23 million will reprice in the back half of 2025, with a more substantial $75 million repricing in 2026. She confirmed NIM expansion would be limited for the rest of 2025. Regarding consumer loans, she stated the portfolio could grow from 5% to 7-8% of total loans and carries a 3% credit reserve. President & CEO James Nesci added that deposit pricing is subject to market competition and that the company is constantly exploring efficiencies, including AI, to manage expenses and improve profitability.

Justin Crowley of Piper Sandler Companies inquired about the drivers for net interest margin (NIM) through the end of 2025 and into 2026, seeking specifics on loan repricing volumes and rates. He also asked about the outlook for CD pricing, the potential for consumer loan portfolio growth, the structure of associated credit enhancements, and any other strategies being considered to accelerate the path to profitability.

Answer

EVP & CFO Kelly Pecoraro detailed that significant loan repricing is expected in 2026, with about $75 million at a 3.75% rate set to reprice, while H2 2025 will see a more modest $23 million reprice. She confirmed that NIM expansion would be limited in the back half of 2025. Pecoraro also stated the bank is comfortable growing its credit-enhanced consumer loan portfolio from 5% to 7-8% of total loans, noting these loans come with a 3% credit reserve. President & CEO James Nesci added that CD pricing is subject to market competition and that the company is constantly evaluating all expenses, including leveraging AI, to improve efficiency and profitability.

Justin Crowley inquired about the net interest margin (NIM) on a spot basis for March, the key drivers for future margin expansion including loan repricing yields, and the potential to lower certificate of deposit (CD) rates. He also asked for details on the purchased consumer loans, including the product type, yield, credit enhancement structure, and the company's strategy for future purchases.

Answer

CFO Kelly Pecoraro projected further NIM expansion of 5 to 10 basis points in Q2, noting that significant loan repricing benefits are expected in 2026-2027 rather than 2025. She detailed that $335 million in CDs at a 4.11% cost are maturing next quarter, providing an opportunity to lower costs. Pecoraro described the purchased consumer loans as professional loans yielding around 7% with credit reserves, serving to augment organic growth. CEO James Nesci added that these purchases are a transitional strategy to boost yields and will not continue indefinitely.

Justin Crowley inquired about the commercial loan pipeline, deposit cost trends, and the outlook for asset yields heading into the new year.

Answer

CFO Kelly Pecoraro confirmed the loan pipeline has improved, highlighting $60 million in letters of intent at a yield around 7.7%. She noted that while deposit costs improved to 2.90%, there are about $500 million in CDs repricing in the first half of the year, with Q1 maturities coming off a ~4.75% rate and resetting to a current promotional rate of 4%. Pecoraro also expects overall loan yields to trend higher, though the construction loan portfolio could be a headwind if the prime rate declines.

Justin Crowley inquired about the drivers behind the quarterly Net Interest Margin (NIM) compression, the strategy for lowering deposit rates, the nature of recent consumer loan pool purchases, and the potential for increased share buybacks.

Answer

CFO Kelly Pecoraro explained that NIM was impacted by the timing of commercial loan funding and earlier repricing of high-rate CDs. She noted the company has since lowered its promotional CD rate and aims to shift customers to core products. Pecoraro described the consumer loan purchase as a credit-enhanced opportunity with attractive rates and confirmed they are open to similar deals. Regarding buybacks, she stated the company is already repurchasing the maximum volume allowed under SEC rules.