Manuel Navas

Manuel Navas asked about potential areas for upside or downside regarding the company's Return on Average Assets (ROA) improvement target. He also inquired if a back-half weighted loan growth projection implies more share buybacks in the first half of the year, and how this aligns with the growth progression. Additionally, he asked about deposit targets, including Q1 seasonality, the appearance of deposit pipelines, and specific initiatives to achieve low single-digit deposit growth for the year.

Answer

CFO W. Jack Plants II stated that accelerated asset originations could push ROA higher, but the company maintains a prudent model with strong pricing constraints, prioritizing profitability over growth, and is comfortable with the ROA guidance. Regarding buybacks, CFO W. Jack Plants II noted that $15 million of additional liquidity was raised through the December sub debt offering, with some deployed in December and more still available. He reiterated that the Common Equity Tier 1 (CET1) low mark is 11%, the company ended at 11.1%, and is projected to add 40-50 basis points, indicating capacity for continued execution. On deposits, CFO W. Jack Plants II explained the focus is on core deposit acquisition (DDA, savings, NOW), with money market and time deposits expected to remain flat. He mentioned that growth in core deposits typically accompanies loan inflows and highlighted the success of the treasury management offering on the commercial side in 2025, which is expected to continue. President and CEO Martin K. Birmingham added that significant effort has been put into positioning the sales force (commercial, retail) to understand the importance of deposits and resetting incentives for 2026 to reward strong performance in this area.

Manuel Navas inquired about potential areas for upside or downside regarding the company's return on average assets (ROA) improvement target, whether a back-half weighted loan growth projection implies more share buybacks in the first half of 2026, and the current appearance of deposit pipelines along with initiatives to achieve low single-digit deposit growth for the year.

Answer

CFO W. Jack Plants II indicated that accelerated asset originations could influence ROA, but the company prioritizes profitability over growth and is comfortable with its ROA guidance. Regarding buybacks, Jack Plants reiterated the additional liquidity from the December sub debt offering and the company's CET1 position, suggesting capacity for continued execution. For deposits, Jack Plants stated a focus on core deposit acquisition (DDA, savings, NOW accounts), with money market and time deposits expected to remain flat. He highlighted the success of treasury management offerings and commercial deposit growth in 2025, expecting continued momentum. President and CEO Martin K. Birmingham added that efforts have been made to position the sales force and reset incentives to drive deposit growth.

Manuel Navas questioned whether Univest Financial Corporation's share buyback pace is linked to balance sheet movements and if it could accelerate with slower loan growth. He also asked about the provision for credit losses, specifically if the stepped-up Q4 pace is indicative of future levels given expected loan growth. Finally, he requested details on the progress and pipeline of deposit initiatives, particularly for commercial outreach.

Answer

Brian Richardson, CFO, explained that the buyback pace is guided by the goal of not meaningfully growing regulatory capital ratios, driven by a combination of earnings and balance sheet growth. Regarding the provision, he stated that the 2026 guide of $11 million-$13 million accounts for normalized charge-offs (12-13 basis points) and growth, implying a lower run-rate provision than Q4. Mike Keim, COO, detailed deposit initiatives, including working with commercial lending, a small business initiative, and specific programs for title companies, labor unions, and upcoming law firm outreach. He also mentioned testing money market campaigns and efforts to increase consistent operating accounts in municipal banking to lower the cost of funds.

Manuel Navas asked about the relationship between Univest Financial's share buyback pace and balance sheet movements, such as slower loan growth, and the potential for buyback acceleration. He also inquired about the appropriate provision for credit losses level for the upcoming year, comparing it to the fourth quarter's step-up. Lastly, Manuel requested an update on Univest's deposit pipeline and the progress of its commercial outreach initiatives.

Answer

Brian Richardson (CFO) clarified that the buyback pace is guided by the goal of not meaningfully growing regulatory capital ratios, driven by a combination of earnings and balance sheet growth. He explained that the 2026 provision guide ($11 million-$13 million) accounts for normalized charge-offs in the 12-13 basis point range, coupled with expected loan growth, which would generate less provision on a run-rate basis than Q4's step-up. Mike Keim (COO) detailed deposit initiatives, including working with commercial lending teams, a small business initiative, specific programs for title companies, labor unions, and an upcoming launch for law firms, alongside efforts to increase consistent operating accounts within municipal banking to lower the cost of funds and improve NIM.

Manuel Navas asked for a quantification of the expected net interest margin dip in Q1 and the basis point impact of non-performing loans on the Q4 NIM. He also inquired about the implications of the loan sale on the loan-to-deposit ratio and the company's aggressiveness on deposits, as well as any other impacts from the sale on operational expenses or the loan loss reserve.

Answer

CFO Jim Reske stated that non-performing loans had about a 3 basis point impact on the total NIM in Q4. He projected a Q1 NIM dip of 5-10 basis points, followed by an upward drift of approximately 5 basis points per quarter, ending 2026 around 4%. Post-loan sale, the loan-to-deposit ratio is expected to be in the low nineties, allowing for potentially less aggressive deposit pricing. Reske confirmed that loan loss reserve impacts and marks related to the sale were already reflected in Q4 financials, with no significant operational expense impacts as physical locations were exited earlier. Chief Lending Officer Mike McCuen added that the sale allows management to refocus resources on more profitable growth in other markets.

Manuel Navas from Piper Sandler sought clarification on the expected size of the Net Interest Margin (NIM) dip in Q1 2026 and the specific basis point impact of non-performing loans (NPLs) on Q4 2025 NIM. He also asked about the implications of the loan sale on the loan-to-deposit ratio and potential impacts on operating expenses or the loan loss reserve.

Answer

CFO Jim Reske estimated a Q1 NIM dip of 5-10 basis points, with NPLs contributing about 3 basis points to Q4 NIM. He confirmed the loan sale would improve the loan-to-deposit ratio, allowing for less aggressive deposit pricing and enhanced liquidity. Jim Reske and Chief Lending Officer Mike McCuen clarified that the financial impacts on the loan loss reserve were already reflected in Q4, and there would be minimal operational expense impact as physical locations were exited earlier, allowing management to refocus resources on other growth markets.

Manuel Navas of D.A. Davidson questioned the mid-single-digit loan growth outlook, the desired loan mix, and the underlying dynamics of the net interest margin (NIM) guidance, including pressures on loan yields and deposit costs.

Answer

CEO Thomas Michael Price confirmed the mid-single-digit loan growth guidance, citing the imperative to fund growth with deposits, and a desire to rotate the mix toward C&I. CFO James Reske elaborated on the NIM guidance, explaining he tempers the model's higher projections to account for competitive pressures on loan spreads and the need to price up deposits. He noted that macro swap maturities in 2026 should provide a future tailwind to the NIM, even with potential Fed cuts.

Manuel Navas inquired about the expected trend for credit provisioning and the allowance for credit losses. He also asked for an update on the strategic benefits of the now-closed CenterBank acquisition and whether the bank's broader M&A appetite has changed.

Answer

President and CEO Thomas Michael Price and Chief Credit Officer Brian Sohocki expect the reserve level to remain relatively stable, with provisioning moving in line with loan growth and the macroeconomic outlook. On M&A, Price highlighted that the CenterBank deal brought unexpected talent, is highly accretive, and strengthens their Cincinnati presence. Bank President Jane Grebenc added that CenterBank's mortgage operation was a 'nice surprise.' Price noted their M&A appetite remains disciplined and strategic, with an increase in conversations recently.

Manuel Navas questioned the sensitivity of the NIM forecast to fewer rate cuts, the potential for NIM stability in 2026, the drivers of recent deposit cost trends, and whether the bank would consider synthetically defending its NIM later in the year.

Answer

CFO James Reske responded that fewer rate cuts would be beneficial to the NIM, with a stable rate environment being a 'great environment'. He noted that deposit rotation has slowed, providing an opportunity to manage deposit costs down, though this is not heavily factored into their conservative forecast. Reske clarified that the bank prioritizes long-term, steady growth in earnings and shareholder value over defending a specific NIM level in the short term. President and CEO Thomas Michael Price added that a steeper yield curve would also boost demand in fee-generating businesses like mortgage.

Manuel Navas inquired about the drivers for the Q4 fee income range, the impact of new rate forecasts on the swap benefit, potential NIM upside from a steeper yield curve, and the bank's appetite for further deposit growth.

Answer

President and CEO Mike Price and CFO Jim Reske pointed to SBA, wealth management, and a potential mortgage rebound as key fee drivers. Mr. Reske noted the swap benefit might be slightly lower under the new rate forecast and confirmed a steeper yield curve is a long-term positive. He and Bank President Jane Grebenc emphasized a strategy of steady deposit growth to fund future lending and improve the loan-to-deposit ratio.

Manuel Navas asked about the asset side dynamics impacting the net interest margin (NIM), specifically the contribution of back book repricing to loan yields and the rates for new loan originations. He also inquired about WesBanco's capital deployment priorities and sought more detail on the growth expectations for fee initiatives, including treasury management and commercial swaps, and the Premier team's adoption of these products.

Answer

Daniel Weiss, Senior EVP and CFO, noted that approximately $400 million of fixed-rate loans are repricing from a weighted average of 4.5% to a projected low 6% to high 5% range. He stated that the weighted average yield on new loans originated in Q4 was around 6.15%, with the December spot rate just above 6%. Additionally, $250 million per quarter in securities cash flows are repricing from 3.3% to about 4.7%. Jeffrey Jackson, President and CEO, outlined capital priorities as dividends, loan growth, buybacks (targeting 10.5%-11% CET1), and then M&A as a distant fourth. Daniel Weiss added that the CET1 ratio is building 15-20 basis points per quarter, expected to comfortably exceed 10.5% by the end of Q2. Jackson also detailed the significant growth in treasury management fees ($2M in 2023, $4M in 2024, $6M in 2025), projecting double-digit growth for 2026, driven by the commercial purchase card program. He expects gross commercial swap fee income to exceed $10 million and highlighted wealth management assets under management topping $10 billion.

Manuel Navas asked about the asset side dynamics influencing WesBanco's net interest margin (NIM), specifically regarding back book repricing, current new loan yields, and the impact of the securities portfolio. He also inquired about WesBanco's capital deployment priorities, including where M&A and buybacks fit in given the improving capital ratios.

Answer

Daniel Weiss (Senior EVP and CFO, WesBanco) stated that $400 million of fixed-rate loans would reprice over the next 12 months from 4.5% to an anticipated low 6%/high 5% range. He noted that new loan yields in Q4 2025 averaged 6.15%, with December spot rates around 6.01-6.02%. The securities book also contributes, with $250 million in quarterly cash flows repricing from 3.3% to 4.7%. Jeffrey Jackson (President and CEO, WesBanco) outlined capital priorities: dividends, funding loan growth, buybacks (targeting 10.5%-11% CET1), and M&A as a distant fourth. Daniel Weiss added that CET1 is growing 15-20 basis points per quarter, comfortably exceeding the 10.5% target by Q2 2026.

Manuel Navas from D.A. Davidson inquired about the deposit pipeline's ability to fund loan growth, future expansion plans, and the contribution from the newly acquired Premier (PSC) teams.

Answer

President and CEO Jeffrey Jackson expressed confidence in funding loan growth with deposits, citing a robust pipeline, a new deposit campaign, and growth from commercial treasury management. For future expansion, he mentioned Richmond as a potential LPO market and a focus on adding bankers in Indiana and Nashville. He noted that legacy Premier teams contributed about $400 million to the current $1.4 billion commercial pipeline and expects their contribution to grow in Q3.

Manuel Navas asked for clarification on the net interest margin build, the status of remaining balance sheet restructuring items, and the key drivers behind the loan and deposit growth outlook, including pipeline strength and regional performance.

Answer

Daniel Weiss, Senior Executive Vice President and CFO, clarified that the 3-5 basis points of organic NIM improvement is additive to the merger accretion. He identified a $140 million loan sale and the MSR business exit as key remaining restructuring items. Jeffrey Jackson, President and CEO, highlighted a strong $1.4 billion loan pipeline with solid pull-through rates, particularly from LPOs and Ohio markets. He added that deposit growth is expected to be strong, largely driven by commercial banking relationships.

Manuel Navas asked for follow-ups on the Premier deal's impact on CRE concentration, other transaction updates, clarification on margin guidance for both legacy and pro forma operations, and inquired about key geographic markets for future growth.

Answer

CFO Daniel Weiss confirmed the improved capital position lessens the day-one CRE concentration and that the bank is considering restructuring Premier's securities portfolio for additional yield. CEO Jeffrey Jackson identified Nashville, Knoxville, and Indianapolis as key markets for expansion. Weiss also clarified Q1 margin guidance is based off the full Q4 NIM, not the December spot rate.

Manuel Navas asked how the changing interest rate trajectory affects the management of the commercial real estate concentration ratio. He also inquired about the geographic and business-line drivers of the strong deposit growth and sought an update on the talent pipeline and recruiting efforts.

Answer

CEO Jeffrey Jackson and CFO Daniel Weiss confirmed that a lower rate environment relieves pressure on the 300% CRE concentration ratio. Jackson added that the strong deposit growth was broad-based across the footprint, driven by both commercial banker incentives and a new consumer account. He also stated that despite the focus on the Premier deal, WesBanco is still actively recruiting in markets like Nashville and Knoxville.

Manuel Navas asked for more detail on the opportunities for strong mid-single-digit deposit growth across WSFS's various businesses, beyond the trust segment.

Answer

David Burg (CFO) highlighted continued market share increase in institutional services, significant untapped opportunities from referrals between Commercial and Wealth, and the C&I portfolio as important deposit sources. He also mentioned accelerating growth in small business deposits.

Manuel Navas inquired about the drivers behind WSFS Financial Corporation's strong commercial loan growth trends, including sentiment, line utilization, and originations, and later asked for clarification on capital return parameters beyond CET1, the nature of double-digit EPS growth, shifts in the NIM hedging profile, and opportunities for deposit growth across various businesses.

Answer

David Burg, CFO, explained that commercial loan growth was driven by increased clarity on legislative and tax issues, leading to strong Q4 originations after a Q3 pipeline build, with good momentum expected. Regarding capital return, Mr. Burg stated that WSFS considers CET1, TCE (including AOCI), and stock price dips, aiming to return approximately 100% of net income annually through buybacks, with flexibility for investment opportunities or market stress. He clarified that double-digit EPS growth refers to core EPS. For NIM, Mr. Burg noted no wild cards, managing rate cuts through deposit pricing, a $1.3 billion in-the-money hedging program, and reinvesting the securities portfolio at higher yields. He also highlighted institutional services, commercial and wealth referrals, C&I portfolio growth, and small business as key drivers for mid-single-digit deposit growth.

Manuel Navas from D.A. Davidson inquired about the Net Interest Margin (NIM) outlook for the second half of the year, noting the guidance implies a slight decline, and asked where potential upside could originate. He also questioned the strategy behind the substantial share buybacks, including how pricing and AOCI impact the decision-making process.

Answer

EVP & CFO David Burg explained the softer NIM outlook is primarily driven by two anticipated rate cuts and the sale of the Upstart portfolio. He noted that the immediate 2-3 bps impact per cut should mitigate to 1 bp over time as deposit betas adjust. Offsetting tailwinds include ongoing deposit repricing opportunities and securities portfolio rollover. Regarding buybacks, Burg confirmed WSFS accelerated repurchases to capitalize on lower stock prices but will maintain a gradual glide path toward its 12% CET1 target, with organic investment remaining the top priority for capital deployment.

Manuel Navas asked for updates on deposit beta expectations, the timeframe for the new 12% CET1 target, the influence of the macro environment on buybacks, and the role of AOCI in capital planning.

Answer

Executive David Burg confirmed that WSFS has already achieved its deposit beta goal but will continue to optimize. He outlined a 2-3 year glide path to the 12% CET1 target, signaling a clear intention to lean into share repurchases. Burg noted that while the macro environment is a consideration, the bank is very well-capitalized. He also described AOCI as a secondary metric to the primary CET1 target, with its influence diminishing over time.

Manuel Navas requested more detail on the loan growth outlook, including the mix, pipelines, and how consumer originations will offset portfolio runoff. He also asked if new originations are adding households, if strong capital generation could lead to increased buybacks, and for further takeaways from the new three-year strategic plan.

Answer

Executive David Burg detailed the loan outlook, stating that growth in WSFS-originated residential mortgages and HELOCs will offset the runoff from the Upstart and Spring EQ portfolios, keeping consumer loans flat while commercial grows mid-single digits. He and COO Arthur Bacci confirmed new originations serve as both an entry point for new clients and a cross-sell opportunity for existing ones. Regarding capital, CEO Rodger Levenson and David Burg reiterated that excess capital and liquidity will be managed through their established return philosophy, noting they recently used cash to pay off the BTFP facility. Levenson described the new strategic plan as a continuation of optimizing their unique market position and investments, with a high bar for any M&A.

Manuel Navas asked about the assumptions embedded in Community Financial System's Net Interest Income (NII) guide regarding the securities book repricing, specifically whether reinvestment, loan growth, or paying off borrowings is assumed. He also inquired about the deposit growth guidance, including the extent of remixing, the contribution from new branches, and the overall progress of de novo branch expansion.

Answer

CEO Dimitar Karaivanov clarified that the securities maturities primarily in late Q4 2026 have minimal impact on the current year's NII guide. The primary plan is to deploy these funds into loans, and if not immediately possible, they would offset longer-term borrowings maturing in 2027. Regarding de novo branches, he stated that 15 branches opened in late Q3/Q4 2025 ended the year with roughly $100 million in footings, with a goal to double that in 2026. He noted that approximately 60% of de novo deposits are commercial, expressing satisfaction with the progress towards the long-term goal of over $1 billion in deposits from this strategy.

Manuel Navas followed up on the securities book repricing, asking what assumptions are included in the Net Interest Income (NII) guide regarding reinvestment into loans or offsetting borrowings. He also inquired about the deposit growth guide, specifically how much is attributed to new branches and the progress of de novo branch openings.

Answer

CEO Dimitar Karaivanov clarified that the securities maturities primarily in late Q4 2026 do not significantly impact the 2026 NII guide. The primary plan is to deploy funds into loans, or if not immediately possible, to offset longer-term borrowings maturing in 2027. Regarding de novo branches, he stated that 15 were opened in 2025, mostly in late Q3/Q4, ending the year with roughly $100 million in footings, with a goal to double that in 2026, noting that approximately 60% of de novo deposits are commercial.

Manuel Navas questioned whether the company is actively seeing loans that fail to meet its credit standards or merely anticipating this. He also asked if the stated economic uncertainty was connected to regional issues like the Chips Act.

Answer

Executive Dimitar Karaivanov clarified that they are seeing competitors aggressively refinance assets that the company deems 'criticized,' but their own credit box has not changed. He attributed the broader economic uncertainty to macro factors like unpredictable costs of goods for clients and labor availability, stating that the Chips Act has had very little impact on their markets to date.

Manuel Navas inquired about the market conditions that would influence Popular's share buyback pace, specifically regarding valuation, pricing, or total return targets, and sought confirmation on the company's satisfaction with the current buyback pace.

Answer

Jorge García, EVP and CFO, Popular, explained that 10b5-1 plans are subject to changes in market prices and the broader global political and macroeconomic environment, which can impact the execution speed of repurchases. He reiterated management's belief that Popular's shares are attractive at current prices and confirmed that the total dollar volume spent on buybacks in the quarter serves as a good baseline for future activity.

Manuel Navas asked Northwest Bancshares to elaborate on the drivers and progression of the Net Interest Margin (NIM) throughout 2026, considering CD repricing, the bank's neutral position, and benefiting securities and loan yields. He also sought assumptions on the progression of the 20-27 basis point charge-off range for 2026, especially after Q4's significant credit workout. Lastly, he inquired about the expected mix of loan growth across different segments for the low-to-mid single-digit guide, including the roles of CRE and C&I.

Answer

CFO Doug Schosser projected a slightly improving NIM later in 2026 due to anticipated rate cuts and lower funding costs, aiming to maintain the low 3.70s range without significant downward pressure. Regarding charge-offs, Mr. Schosser stated that after Q4's significant credit workout, the bank expects a more normalized and steady charge-off rate throughout 2026, at the lower end of its long-term 25-35 basis point guide. For loan growth mix, Mr. Schosser indicated opportunities across the entire book, including indirect, mortgage, CRE, and national verticals, aiming for broad-based growth. CEO Lou Torchio concurred, emphasizing a balanced book nearing 50/50 commercial/consumer, which provides diversification and flexibility, with strong growth expected in both consumer (mortgage, home equity, indirect) and commercial sectors.

Manuel Navas asked about the drivers and progression of the Net Interest Margin (NIM) across the year, the assumptions underlying the charge-off range and its progression, and the expected mix of loan growth across different segments for the low-to-mid single-digit guide in 2026.

Answer

CFO Doug Schosser indicated a slightly improving margin later in the year due to lower funding costs, aiming to maintain the low 3.70s range. He explained the charge-off guide reflects a return to normalized flow after a significant Q4 credit workout, anticipating a steady rate within the 20-27 basis point range. CEO Lou Torchio and CFO Doug Schosser discussed a balanced loan growth mix across consumer (mortgage, home equity, indirect) and commercial (national verticals, in-market business banking), targeting a 50/50 commercial/consumer split, leveraging diversification and flexibility.

On behalf of Manuel Navas, a question was asked about the current state of the commercial loan pipeline and for an update on expectations for credit provisions going forward.

Answer

CFO Douglas Schosser described the commercial loan pipeline as 'cautiously optimistic,' noting it is slightly stronger than the prior year due to new verticals, though tariff impacts remain a watch item. Regarding credit provisions, Schosser stated that significant economic volatility makes it difficult to predict future levels and the bank will continue to follow CECL methodology based on macroeconomic conditions at the end of each quarter.

Manuel Navas asked for an update on Northwest's M&A strategy, including financial hurdles, geographies, and target size. He also inquired about areas of strength in commercial lending and the assumptions for deposit betas in the NIM guidance.

Answer

CEO Louis Torchio stated the M&A focus is on accretive, in-market deals of $1B-$3B within their four-state footprint, particularly in growth markets like Columbus and Indianapolis. CFO Douglas Schosser added that commercial loan growth is broad-based across new verticals like sponsor and franchise finance, and that late-quarter deposit rate cuts in Q3 will benefit the Q4 NIM.

Manuel Navas of Piper Sandler followed up on the competitive response to OFG's Libre and Elite deposit products, asking if other institutions on the island had adjusted pricing and where these products were seeing the most success. He also inquired about the new yields for auto and commercial loan originations, given the bank's adjusted client targeting. Lastly, he asked about the sustainability of the accelerated share buyback pace from Q4 and any price sensitivity for future repurchases.

Answer

CEO José Rafael Fernández stated there has been no price response from competitors to Libre (a non-interest-bearing account) or Elite, as their value proposition extends beyond rates. He highlighted Libre's success in attracting new customers (75% new, 40% under 29 years old). For new loan yields, he noted commercial originations are 50% fixed/50% variable, ranging 275-350 basis points above the lending term, while auto yields are stabilizing around 8.30-8.50%, with 90% in prime/super prime. Regarding buybacks, CEO José Rafael Fernández indicated no specific price target but suggested that given current valuation and lower loan growth expectations, there might be increased capacity for buybacks as part of ongoing capital management.

Manuel Navas of Piper Sandler followed up on the competitive landscape, asking if OFG Bancorp's new Libre and Elite deposit products had prompted a price response from other banks in Puerto Rico and where these products were seeing the most success. He also inquired about the demographic of new clientele, specifically if younger customers were being attracted to these digital-forward accounts. Additionally, he asked about the new yields on auto and commercial loan originations, given the shift in client targeting and market adjustments, and sought clarification on the pace and price sensitivity of share repurchases following an accelerated Q4.

Answer

José Rafael Fernández (CEO) clarified that Libre is non-interest bearing and Elite pays 1.28%, emphasizing that their success stems from a strong value proposition, functionality, and service, not high rates, thus eliciting no direct price-based competitive response. He confirmed that 75% of Libre accounts are new customers, with 40% being 29 or younger, which is highly positive for long-term relationships. For new loan yields, commercial originations are 50% fixed/50% variable, with rates 275-350 basis points above the lending term, while auto yields are stabilizing around 8.30-8.50% due to a focus on prime/super prime borrowers. Regarding buybacks, he stated there's no specific price target, but given current valuation and lower loan growth, more capital might be deployed through repurchases as part of ongoing capital management.

Manuel Navas from D.A. Davidson & Co. sought clarification on the net interest margin (NIM), asking for a quarter-end spot rate and confirming whether the guided 'few basis points' of improvement applied to the overall NIM or just loan yields. He also asked if the lower fee income ratio post-merger increases the bank's appetite for fee-based acquisitions or lift-outs.

Answer

EVP & CFO Annette Burns did not provide a spot rate but confirmed the full impact of Evans' accretion in Q3 would add a couple of basis points to the 3.59% NIM. She clarified that the expected 'few basis points' of improvement was for the overall NIM, driven by asset yield repricing and stabilized funding costs. President & CEO Scott Kingsley added that relief from the yield curve inversion could provide further upside. Regarding fee income, Kingsley affirmed that growing these businesses organically and via M&A is a strategic priority, as their diversified, capital-light nature remains highly attractive despite the mix change from the Evans deal.

Manuel Navas from D.A. Davidson & Co. questioned if further deposit cost reductions were possible, how the Evans deal might impact the NIM and other expectations, and what the legacy expense run rate would be heading into the merger.

Answer

Executive Scott Kingsley indicated that the pace of deposit cost declines would likely slow without further Fed rate cuts, especially as the bank ensures ample liquidity for the Evans closing. CFO Annette Burns provided updated guidance for the Evans deal, now expecting around 4% tangible book value dilution and $0.30 of earnings accretion, down from previous estimates due to purchase accounting mark changes. Burns also confirmed the Q1 operating expense of $98.7 million is a good run rate for the legacy business.

Manuel Navas of D.A. Davidson & Co. asked about the legacy loan growth outlook, recent tangible developments in the CHIPS corridor, and the potential for further deposit cost reductions to support the net interest margin. He also inquired about post-merger financial metrics and fee growth opportunities from the Evans deal.

Answer

Executive Scott Kingsley noted that market optimism remains consistently high, supporting loan growth, and cited specific progress at Micron and GlobalFoundries as positive developments. CFO Annette Burns confirmed there is more room for deposit costs to decline. Management stated they feel positive about the combined entity's NIM but will provide updated metrics after Evans' full-year results are released.

Manuel Navas of D.A. Davidson asked about the long-term NIM range of $3.60-$3.65, questioning what factors could potentially drive it higher. He also inquired about the current pipeline for noninterest-bearing deposits and the specific reason for the quarter's increase in the securities portfolio yield.

Answer

CFO Nicole Stokes explained that the NIM could be pushed higher by strong performance in deposit gathering, a Federal Reserve rate cut that allows for rapid deposit repricing, and continued growth in noninterest-bearing deposits. CEO H. Palmer Proctor added that the pipeline for noninterest-bearing deposits is accelerating, mirroring loan production trends. Stokes clarified that the securities yield increased because the company added approximately $200 million in securities at a 4.88% yield while about $260 million matured at a 2.77% yield.

Manuel Navas questioned the reserve build, asking about the potential impact of a more pessimistic scenario and whether tariff concerns are appearing in loan pipelines. He also asked about the securities portfolio build and new investment yields.

Answer

Chief Credit Officer Doug Strange stated the reserve model was updated due to a Moody's forecast addendum on tariffs, but it's too soon to see direct customer impact. EVP & CFO Nicole Stokes explained they are rebuilding the bond portfolio; Q1 purchases of $285 million yielded 4.62%, which will replace $283 million in securities maturing in Q2 at a much lower 2.83% yield, providing a positive lift.

Manuel Navas of D.A. Davidson & Co. requested details on the yields of new accretive loan production, the repricing dynamics between loans and deposits following the Fed rate cut, and the plan for managing seasonal municipal deposit outflows.

Answer

CFO Nicole Stokes detailed that new loan production yields were around 7%, well above new interest-bearing deposit costs of ~3.25%, creating margin accretion. She noted the bank acted quickly to lower deposit costs post-Fed cut, while loans have a natural lag in repricing down. She confirmed the seasonal outflow of ~$550 million in municipal deposits in Q1 would likely be replaced with short-term brokered funding.

Manuel Navas from D.A. Davidson & Co. questioned Ameris's mortgage banking capacity in a falling rate environment, the hypothetical NIM performance with a steeper yield curve in mid-2025, and the primary drivers of recent deposit growth.

Answer

CEO H. Proctor stated there are no capacity constraints in mortgage due to technology and infrastructure. Executive Nicole Stokes projected that a steeper curve could create a tailwind for mortgage income and that margin expansion would be driven by accretive new loan growth. Both executives attributed strong deposit growth to core relationship banking strategies and new account generation.

Manuel Navas from D.A. Davidson sought clarification on the loan growth guidance, asking about borrower sentiment, and inquired about other fee income lines with near-term growth potential beyond the SBIC-related business.

Answer

EVP & CFO Gregory Robertson clarified the full-year loan growth forecast is in the low 4% range, with a 4-6% annualized run rate expected for the second half. CEO Jude Melville noted improving borrower sentiment as businesses move past uncertainty, alongside increased competition from other banks. For fee income, Melville and Robertson highlighted growing momentum in SBA loan servicing through Waterstone and in the derivatives/interest rate swap business, both for the bank's own clients and as a service offered to other community banks.

Manuel Navas questioned the net interest margin's (NIM) sensitivity to a potential Fed rate cut, the competitive landscape for deposit costs, and the potential upside and downside risks to the bank's loan growth forecast.

Answer

CFO Gregory Robertson estimated that a 25 basis point rate cut would likely add 1-2 basis points of expansion to the NIM, on top of the low single-digit improvement already expected. He noted that without Fed cuts, further reducing deposit costs would be challenging due to market competition. CEO Jude Melville identified broader economic uncertainty as the primary variable for loan growth; a return to certainty could push growth to the higher end of their guided range, while continued uncertainty could keep it at the lower end.

Manuel Navas sought clarity on the rate assumptions behind the NIM guidance, the potential for margin expansion, the outlook for credit quality and charge-offs, and the future level of the loan loss reserve.

Answer

CFO Gregory Robertson stated the NIM guidance assumes a flat rate environment and that the opportunity to pay down wholesale funding is a potential upside, not baked into the core guidance. He described the higher Q4 charge-offs as a "cleanup quarter" and expects a return to prior, lower levels. CEO David Melville expressed confidence in the portfolio's health for 2025. Robertson noted the reserve should hold steady or rise slightly, while Melville highlighted that the total loss absorption capacity is strong, with the reported reserve now near 1% plus an additional ~20 basis points in remaining credit marks.

Manuel Navas sought clarification on the new deposit beta slide, asking about the assumptions behind the 'low single-digit core NIM expansion' per 50 basis point rate cut. He also asked about customer acceptance of lower money market rates and requested an update on the Oakwood integration.

Answer

CEO David Melville and CFO Gregory Robertson clarified that the projected NIM expansion from rate cuts is additive to the expansion already expected in a flat-rate environment. They confirmed that an additional 6 basis points of improvement from 150 bps of cuts would be a reasonable expectation. Robertson noted that since the recent Fed cut, money market accounts have seen slight growth with no significant run-off. Regarding Oakwood, he mentioned the deal is proceeding as planned, though higher-than-expected loan growth at Oakwood used some of the cash that was to be deployed.

Manuel Navas asked about the sustainability of the loan growth guidance, what factors are preventing a faster expansion of the net interest margin, and whether the company's hiring initiatives for the year are now complete.

Answer

President & COO Joseph Lebel expressed high confidence in the loan growth outlook, citing a record pipeline. Chairman & CEO Christopher Maher added that the pace of net balance sheet additions moderates NIM expansion. Maher also confirmed that hiring is largely complete for 2025, with no plans for geographic expansion, though the company remains opportunistic for top talent.

Manuel Navas asked about the size of the new hires' prior book of business, the long-term growth potential of Premier Bank, differences in product or compensation versus prior firms, and the outlook for loan growth and share buybacks.

Answer

CEO Christopher Maher stated the new hires' prior book of business was around $2.5 billion, which serves as a target. He stressed that while Premier Bank is a long-term growth driver, the entire bank will grow to maintain diversification. He also noted that lower-cost deposits enable more competitive loan pricing. With the preferred stock redemption resolved, Maher said the bank has more capital flexibility and expects to be active with share repurchases if market conditions remain favorable.

Manuel Navas inquired about the customer profile driving deposit growth, potential synergies from the new fee businesses, and the interest rate assumptions embedded in the NIM and NII forecast.

Answer

CEO Christopher Maher attributed strong deposit growth primarily to regaining wallet share from existing consumer households. He noted the new businesses add valuable talent and a focus on speed. CFO Patrick Barrett stated the forecast assumes Fed cuts in line with the Street and that the bank remains close to neutral on asset sensitivity, with faster cuts providing a modest near-term NII benefit.

Manuel Navas of D.A. Davidson sought more detail on the primary drivers for the net interest margin (NIM) outlook for the second half of the year and requested commentary on the competitive environment for deposits.

Answer

CFO Thomas M. Lyons identified asset repricing as the main driver for NIM expansion, noting about $6 billion of the loan book is repricing in the next year. President and CEO Anthony Labozzetta added that management is focused on growing net interest income (NII), even if it means sacrificing a few basis points of NIM. Regarding competition, Mr. Labozzetta highlighted that the most intense pressure is on consumer deposits, particularly CDs, while business deposits remain stable and growing.

Manuel Navas inquired about the factors that could drive the net interest margin to the high or low end of its guidance range. He also asked about the dynamics of lowering deposit costs and sought more detail on the geographic expansion opportunities in Pennsylvania and Westchester.

Answer

CFO Tom Lyons identified the shape of the yield curve as the biggest driver of NIM, with accretion volatility and balance sheet growth also being factors. He confirmed that deposit rate cuts effective in January were well-communicated and met with no pushback. CEO Tony Labozzetta added that strong consumer deposit inflows were a positive sign. Labozzetta then detailed the geographic expansion, noting the addition of a four-person team in Pennsylvania and more lenders in both Pennsylvania and Westchester to build out a focused, full-service commercial and treasury presence.

Manuel Navas of D.A. Davidson asked about the sustainability of deposit cost declines into 2025, the expected deposit betas, and potential fee revenue synergies from the Lakeland merger now that the integration is complete.

Answer

CEO Anthony Labozzetta confirmed the bank successfully repriced deposits down by about 38 basis points with minimal pushback due to proactive customer communication and expects similar betas going forward. CFO Tom Lyons added that their 2025 model assumes a ~31% beta on interest-bearing deposits. Labozzetta highlighted significant early revenue synergies, with strong cross-sell activity in insurance and wealth from the legacy Lakeland side and the ability to handle larger transactions due to the combined scale.

Manuel Navas from D.A. Davidson & Co. asked about a potential slowdown in loan growth in June, the initial results from the new Mantle digital deposit platform, the impact of leasing recovery on lease balances, and the drivers behind shifts in deposit costs.

Answer

EVP & Chief Lending Officer Charles Parcher stated that the loan runoff rate was consistent. President & CEO Dennis Shaffer noted the Mantle platform had only just launched in July and it was too early for significant results. CFO Ian Whinnem confirmed that a leasing recovery would increase on-balance sheet leases and explained that some deposit cost shifts were due to pricing adjustments for larger public fund balances.

Manuel Navas of D.A. Davidson & Co. asked if the anticipated slowdown in capital expenditures was already impacting the loan pipeline and what factors would influence whether loan growth hits the high or low end of guidance. He also sought expectations for the leasing business's performance for the remainder of the year.

Answer

CEO Dennis Shaffer stated the current $231 million pipeline is not yet impacted by CapEx slowdowns but future activity might be. COO Rich Dutton added that the key governor for loan growth is the ability to attract low-cost deposits; success here, especially with the upcoming digital account opening platform, would push growth toward the higher end of the guided range. Regarding the leasing business, management projected about $115 million in total originations for the year, with about half expected to be sold, and noted that the first quarter is seasonally the slowest.

Manuel Navas requested details on future deposit-gathering initiatives, the outlook for the net interest margin (NIM) in 2025, the current state of pricing competition, and the strategic role of the securities portfolio.

Answer

CEO Dennis Shaffer detailed several initiatives, including new banker dashboards and a significant investment in the MANTL platform for digital account opening. CFO Ian Whinnem projected the NIM could expand to the 'low to mid-3.40s' by Q2 2025 before leveling out. Management described the competitive environment as stable and noted the securities portfolio will be maintained at a similar size relative to deposits to serve as a key source of liquidity.

Manuel Navas requested clarification on the net interest margin outlook under different rate cut scenarios, asked for more detail on the $800,000 operational expense reserve, and inquired about the fee income outlook, particularly for leasing and mortgage banking.

Answer

SVP and CFO Ian Whinnem projected the NIM could reach the low 3.20s in Q4 with continued expansion into 2025, supported by their ability to aggressively reprice deposits downward. SVP & COO Rich Dutton explained the $800,000 reserve is a conservative measure against a reconciling item found during a system conversion and they do not expect it to increase. On fees, SVP and Chief Lending Officer Chuck Parcher noted that leasing pipelines are growing for Q4 and gain on sale will likely exceed portfolio growth. Ian Whinnem specified that of the Q3 gain on sale, 45% was from leasing and 55% from mortgage. Parcher added that a significant mortgage refi boom is unlikely until rates fall further, given how many homeowners have low legacy rates.

Manuel Navas of D.A. Davidson & Company requested details on loan repricing volumes for the second half of 2025, the current deposit balance of the private banking group, and the bank's longer-term loan growth potential.

Answer

CFO Avinash Reddy specified that approximately $400 million in loans will reprice in Q3 and $200 million in Q4. He also disclosed that the deposit teams hired since 2023 have grown their portfolios to $2.2 billion. Regarding growth, Reddy explained that while near-term balance sheet growth will be in the low single digits due to planned CRE runoff, the bank is positioned for mid-to-high single-digit growth in the medium to long term as new verticals ramp up.

Manuel Navas asked about the potential of the new Lakewood, New Jersey branch, the focus of the hiring pipeline, and the current competitive landscape for both talent and loan/deposit pricing.

Answer

Executive Stuart Lubow described the Lakewood expansion as a strategic first step into New Jersey, leveraging strong ties to the Brooklyn community and significant market opportunity. CFO Avinash Reddy added that the hiring pipeline is a mix of loan and deposit talent, focused on key markets like Manhattan and New Jersey with a disciplined approach to profitability. Stuart Lubow characterized the current pricing environment for loans and deposits as rational.

Manuel Navas from D.A. Davidson inquired about customer reactions to deposit rate cuts, the future deposit growth potential from existing teams, the relationship between deposit and loan growth, and the long-term target for the multifamily portfolio.

Answer

CEO Stuart Lubow and CFO Avinash Reddy described customer reactions to rate cuts as rational, noting that the bank's ability to continuously add new customers provides flexibility. They see a long runway for deposit growth from existing teams, who are still actively opening accounts. CEO Lubow clarified that credit decisions are driven by quality, not deposit flows. CFO Reddy reaffirmed the medium-term target for the multifamily portfolio is 25-30%, aligning with their overall CRE concentration goals.

Manuel Navas requested clarification on the year-end total loan target, asked about borrower sentiment's impact on the loan pipeline, and sought details on the expected pace for increasing the loan loss reserve.

Answer

CFO Avinash Reddy confirmed the year-end gross loan target is approximately $11 billion. CEO Stuart Lubow noted that borrower sentiment is strong, particularly in C&I, owner-occupied CRE, and healthcare, driving a robust pipeline. Reddy explained the plan to build the reserve to the 90-100 basis point range over the next 9-12 months, likely through a 5-6 basis point build per quarter, excluding any major model changes like the one in Q3.

Manuel Navas of D.A. Davidson requested more details on the Argent Financial investment, specifically asking about its growth expectations and the potential for a valuation write-up in the third quarter. He also asked for a regional performance update, with a focus on the Southeast markets.

Answer

CFO Wally Wallace confirmed there will be a valuation write-up of the Argent investment of approximately $7 million in Q3. He and President and CEO of Origin Bank, Lance Hall, also projected an annualized income contribution of about $6 million starting in 2026 from the investment, while noting they are limited in what they can share about the private company. Lance Hall then provided a regional update, stating that the Southeast markets have strong pipelines despite some project delays. He added that Louisiana and Mississippi have seen growth of 8% and 5% respectively, exceeding budget, and that C&I production in Texas remains strong.

Manuel Navas from D.A. Davidson & Co. asked about current new loan yields, competitive pricing on the lending side, and sought an update on the remaining components of the 'Optimize Origin' initiative, including the wealth firm partnership.

Answer

President and CEO of Origin Bank, Lance Hall, reported that new loan yields are holding strong in the 7.3% to 7.5% range with rational competition. He also provided updates on 'Optimize Origin,' detailing the mortgage business restructuring and the expectation that a new valuation could allow Origin to increase its stake in its wealth firm partner above 20%. CFO Wally Wallace confirmed that potential benefits from increasing this stake are not yet included in financial guidance.

Manuel Navas asked about the growth potential of the Argent Financial investment, the near-term growth expectations for the new Southeast markets, and the primary variables influencing the wide range of the net interest margin (NIM) outlook.

Answer

CFO Wally Wallace clarified the Argent investment would 'partially' offset the Durbin impact and noted its history of extraordinary growth. President and CEO of Origin Bank, Lance Hall, expressed high excitement for the Southeast, projecting both loans and deposits to reach nearly $115 million by year-end 2025, viewing it as a key driver beyond the 1% ROA target. Wally Wallace identified liquidity mix, loan growth, and deposit betas as the three biggest wildcards for the NIM.

Manuel Navas asked about near-term net interest margin (NIM) dynamics, focusing on the outlook for purchase accounting accretion (PAA), current loan and deposit pricing trends, and the potential drivers for the higher or lower end of the company's operating expense guidance.

Answer

Kathryn Bailey, EVP & CFO, projected that PAA would contribute in the low-to-mid teens basis points to NIM for the rest of the year. She reiterated that deposit costs are being actively managed down and loan pricing discipline is holding firm. Regarding operating expenses, Bailey identified variable medical expenses and performance-based variable compensation tied to fee income and loan production as the primary factors that could push costs toward the high or low end of the guided range.

Manuel Navas of D.A. Davidson asked about near-term Net Interest Margin (NIM) dynamics, including the outlook for purchase accounting accretion, loan and deposit pricing trends, and the NIM's sensitivity to potential Fed rate cuts. He also inquired about the key variables driving the quarterly operating expense guidance.

Answer

CFO Katie Bailey projected that accretion's benefit to NIM would remain in the low-to-mid teens (basis points) for the rest of 2025. She noted that loan pricing remains disciplined and deposit costs are being actively managed. Regarding rate cuts, the immediate impact would be on the 54% of the loan portfolio with variable rates. Bailey identified variable medical expenses and performance-based incentive compensation as the primary drivers of the OpEx range.

Manuel Navas from D.A. Davidson asked about near-term net interest margin (NIM) dynamics, including expectations for accretion income and trends in loan and deposit pricing. He also inquired about the potential NIM impact from restoring the leasing business's profitability, the sensitivity of the NIM to Fed rate cuts, and the drivers of the operating expense range.

Answer

CFO Kathryn Bailey projected accretion income's contribution to NIM would remain in the mid-to-low teens in basis points. She noted that restoring the high-yield leasing portfolio's growth would benefit the margin. Regarding rate cuts, the immediate impact is on the 54% of the loan book that is variable-rate. Bailey also identified variable medical expenses and performance-based compensation as key factors influencing the quarterly expense run rate.

Manuel Navas asked about near-term net interest margin (NIM) dynamics, including the outlook for accretion income, loan and deposit pricing trends, and the potential NIM impact from the three anticipated Fed rate cuts. He also inquired about the key drivers for the quarterly operating expense range.

Answer

CFO Kathryn Bailey projected accretion income would contribute in the low-to-mid teens to the margin for the rest of the year. She noted the immediate impact of rate cuts would be on the 54% variable-rate loan portfolio, with a lag on deposit repricing. Bailey identified variable medical expenses and performance-based compensation as the primary factors that could push operating expenses to the higher or lower end of the guided range. CEO Tyler Wilcox added that loan pricing discipline has been consistent.

Manuel Navas from D.A. Davidson asked about near-term net interest margin (NIM) dynamics, including the outlook for purchase accounting accretion and loan and deposit pricing. He also inquired about the potential NIM impact of restoring the leasing business to prior profitability and the key drivers of variability in the operating expense guidance.

Answer

CFO Katie Bailey projected that accretion's benefit to NIM would remain in the low-to-mid teens in basis points for the rest of the year. She noted that restoring growth in the high-yielding (19-20%) leasing portfolio would be beneficial to the margin. For operating expenses, Ms. Bailey identified variable medical expenses and performance-based variable compensation as the primary factors that could push costs toward the high or low end of the guided range.

Manuel Navas sought clarification on the provision outlook, the strategy for holding more mortgage loans on the balance sheet, and the flexibility within the operating expense guidance under different revenue scenarios.

Answer

Kathryn Bailey, CFO, confirmed the provision is expected to remain elevated in Q2 before normalizing in the second half of the year, assuming stable economic forecasts. Tyler Wilcox, President, explained that holding more mortgages is a strategic choice to deploy capital, which is continuously evaluated against the fee income trade-off. Both executives affirmed they have flexibility and levers to control operating expenses, as a large portion is variable incentive compensation tied to production and performance.

Manuel Navas inquired about the biggest wildcard for achieving the 2025 positive operating leverage target, the drivers of strong noninterest-bearing deposit growth, and expectations for funding loan growth.

Answer

Executive Tyler Wilcox cited outsized loan growth as a potential positive factor and external economic conditions as the main risk to operating leverage. CFO Kathryn Bailey attributed strong DDA growth to a focused sales effort across retail and commercial lines. She anticipates annual deposit growth of around 3%, which may necessitate borrowings to support the 4-6% loan growth target.

Manuel Navas sought confirmation on the potential for NIM and NII expansion later in 2025, asked for details on CD repricing, and inquired how commercial loan pipelines and demand are reacting to rate cuts.

Answer

CFO Kathryn Bailey confirmed the potential for stability and upside in NIM/NII later in 2025 and noted current retail CD offerings are around 4.5% for a 5-month term. Executive Tyler Wilcox highlighted that accelerated paydowns in investment commercial real estate (10x higher than last year) are tempering the loan growth outlook, despite good demand. He added that new commercial loan yields are stable around 7.5%.

Manuel Navas of D.A. Davidson & Co. asked for the basis of management's confidence in deposit growth, how FNB is competing in the Carolinas, and what specific factors are driving the increase in the C&I loan pipeline.

Answer

Chairman, President & CEO Vincent J. Delie attributed deposit growth confidence to FNB's diverse footprint, technology investments (eStore, AI), a refocused sales culture, and strong treasury management capabilities. He stated that success in competitive markets like the Carolinas comes from having good people, aligned incentives, and effective lead generation. Delie suggested the C&I pipeline surge was due to pent-up demand released after tax reform clarity, particularly regarding bonus depreciation, which spurred clients to move forward with equipment financing and expansion plans.

Manuel Navas from D.A. Davidson asked for the expected cadence of Net Interest Income (NII) and Net Interest Margin (NIM) through 2025, the outlook for commercial loan pipelines, and the potential impact of a steepening yield curve.

Answer

CFO Vincent J. Calabrese projected the NIM would rise a few basis points in Q1 and build gradually, noting that fewer Fed cuts would be additive in the short term. CEO Vincent J. Delie stated that commercial loan pipelines remain lower but are expected to build momentum throughout the year, led by the Carolinas and Pittsburgh. Delie added that while a steeper yield curve would be a positive, the company manages its balance sheet to a neutral interest rate risk position.

Manuel Navas inquired about the specific geographies driving deposit market share gains and the potential for fee income upside if interest rates are cut significantly next year.

Answer

CEO Vincent J. Delie and CFO Vincent J. Calabrese highlighted that deposit growth was broad-based, with notable success in the Carolinas, Central Pennsylvania, and Pittsburgh. Delie explained that significant rate cuts could boost fee income from mortgage banking, commercial swaps, and syndications as client activity increases. He also mentioned the company is building out new advisory and public finance capabilities that should contribute to fee generation in 2025.

Manuel Navas asked about the consumer loan pipeline's strength and seasonality, and whether the 'Fulton First' initiative was a key driver of the strong fee and expense performance. He also requested color on the uptick in non-performing loans (NPLs) and broader credit trends.

Answer

CEO Curtis Myers confirmed that Q2 consumer loan growth was solid and reflected typical seasonality, not an anomaly. He stated that while Fulton First initiatives contribute to long-term growth, the Q2 fee performance was due to broad-based business execution. CFO Richard Kraemer noted Fulton First has realized about $8.5M in net benefits. Myers explained the NPL increase was mainly one identified mixed-use project for which a reserve is already established, and that overall credit metrics remain stable despite a cautious outlook.

Manuel Navas asked about the flexibility in the operating expense guide if revenue weakens, potential headwinds for fee income, and the near-term outlook for the Net Interest Margin (NIM).

Answer

Chief Financial Officer Rick Kraemer noted some flexibility in OpEx timing but expressed comfort with the current guidance. Chairman and Executive Officer Curtis Myers acknowledged potential fee income headwinds from market volatility in wealth and mortgage, aligning with guidance for the lower half of the range. For NIM, Kraemer highlighted pressure from slowing deposit cost declines and the repricing of subordinated debt in March, which will increase interest expense.

Manuel Navas from D.A. Davidson & Co. asked for more detail on the revenue initiatives within FultonFirst, the status of the commercial loan pipeline, and whether headwinds from the Republic loan repositioning and indirect auto runoff were largely complete.

Answer

CEO Curtis Myers highlighted that revenue initiatives are focused on core strengths, with a significant emphasis on growing the small business segment. CFO Rick Kraemer provided details on the remaining indirect auto runoff. Mr. Myers added that while Republic loan repositioning headwinds will moderate, the commercial loan pipeline is currently flat, with growth dependent on improved borrower confidence rather than pipeline size.

Manuel Navas asked about the timing of a potential trough in net interest income given the bank's move to a more neutral rate position. He also inquired about CD growth dynamics, the flexibility of the Fulton First initiative's timeline, and the company's updated capital deployment priorities.

Answer

Chairman and CEO Curt Myers stated that NII timing depends on future rate movements and that the capital strategy remains focused on organic growth first, followed by corporate initiatives and potential buybacks in 2025. CFO Designee Rick Kraemer provided details on upcoming CD maturities, noting a significant downward repricing opportunity.

Manuel Navas questioned the spot deposit pricing at year-end, the potential for further deposit cost reductions following Fed cuts, the 78% CD retention rate and competitive landscape, and how the strategic shift towards profitability will impact the future loan mix.

Answer

Executive Susan Cullen provided a spot rate for non-maturity deposits between 3.25% and 3.30% and confirmed the company would lower rates if the Fed cuts, noting a 51% downward beta. She stated the 78% CD retention rate is historically normal and that deposit competition in the New York market remains intense. Executive John Buran added that changes to the loan mix will be gradual, with a focus on limiting CRE concentration and transitioning to more relationship-based business.

Manuel Navas asked about the sensitivity of the near-term NIM guidance to different paces of Fed rate cuts and the credit performance of recently repriced loans. He also inquired about the competitive environment for deposits, the impact of a large competitor's struggles, and the rationale for repricing only half of the non-maturity deposits on October 1.

Answer

Executives John Buran and Susan Cullen explained that NIM sensitivity involves many variables, but reiterated that a steepening yield curve is the primary positive driver. Susan Cullen noted that recently repriced loans are performing well due to initial stress testing. John Buran stated that a major competitor's exit from the CRE market should benefit Flushing. Susan Cullen confirmed there was minimal customer pushback on the October 1 deposit rate cuts and that the bank repriced the portion it felt it could at the time, with ongoing evaluations.

Manuel Navas requested a deeper dive into the assumptions behind the net interest margin (NIM) outlook, including deposit betas and swaps. He also asked about the timing of deposit cost declines, the potential for fee income growth from mortgage banking, and the company's geographic interests for inorganic growth.

Answer

Executive Mark Kochvar detailed the NIM assumptions, which include a 200 bps rate drop model, exception pricing strategies, a maturing swap ladder, and a short-duration CD portfolio. He confirmed deposit costs peaked in Q3. He also noted a plan to sell more mortgage production could add a couple of million in fee income. CEO Chris McComish reiterated that their M&A focus is on their core Pennsylvania/Ohio footprint and adjacent markets like Maryland and Northern Virginia.

Inquired about the key drivers of recent deposit growth, the expected mix of future loan growth, and the potential acceleration of net interest margin (NIM) expansion with Fed rate cuts.

Answer

Deposit growth is broad-based across branches, digital channels, and commercial banking, not from a single initiative. Loan growth of 1-2% will be driven by a growing pipeline of C&I and owner-occupied real estate loans. NIM expansion is expected to accelerate from 2-4 bps per quarter to 5-10 bps per quarter once the Fed starts cutting rates, assuming a favorable yield curve shift.

Inquired about the drivers behind the net charge-off guidance, potential risks in the repricing multifamily and hotel loan portfolios, drivers of wealth management fee income, and the progress of cross-selling to new high-yield savings account customers.

Answer

Management explained that the net charge-off outlook is hard to predict but a 5-10 bps range would be reasonable, though not explicitly forecasted. They are monitoring newly stabilized multifamily properties but have no major concerns. Wealth management income is driven by market performance and new assets, not seasonality. It is still too early to report on the success of cross-selling to high-yield savings customers, but a new DDA product has been launched to target them.

Asked about the source of deposit inflows driving confidence, the timing of the guided loan growth throughout the year, and its dependency on potential interest rate cuts.

Answer

Deposit inflows are coming from retail time deposits and high-yield savings, with optimism for new relationship growth via new digital channels. Loan growth is expected to build after a seasonally soft Q1 and is not seen as dependent on rate cuts, as it's focused on winning C&I and small business market share.

Manuel Navas from D.A. Davidson & Co. asked for details on recent wholesale borrowings, the bank's remaining funding capacity, the mix of the loan pipeline, and the prospects for achieving positive operating leverage in the near term.

Answer

CFO Eric Lemke described the new funding as short-term FHLB borrowings and institutional deposits tied to fed funds rates, used to support loan growth. While significant borrowing capacity remains, CEO Jeffrey Ludwig stressed a desire to keep the loan-to-deposit ratio below 100%. Ludwig noted the equipment finance pipeline is at a record high, while CRE growth is being managed down as the bank approaches its internal concentration limits. He affirmed that achieving positive operating leverage is the goal, though it depends on both expense management and NIM performance.

Manuel Navas of D.A. Davidson asked for a high-level overview of the strategy to enhance franchise value, specifically focusing on what makes the St. Louis market an attractive area of growth for Midland.

Answer

President and CEO Jeff Ludwig explained that the company made a strategic decision in 2019 to increase its focus on the St. Louis market, where it has had a presence since 2014. This involved a leadership change 18 months ago, adding bankers and treasury management staff, and implementing disciplined sales processes. Ludwig stated that this combination of executive energy and team building is now generating significant traction and growth in the large, opportunity-rich market.

Manuel Navas of D.A. Davidson & Co. asked about the key metrics to watch for the company's banking-as-a-service initiatives and Fintech partnerships. He also inquired about any changes to the outlook for the GreenSky portfolio, how a recent interest rate swap would be reflected in financial statements, and whether AOCI volatility was impacting M&A discussions in the market.

Answer

President and CEO Jeff Ludwig stated that the primary focus for new Fintech partnerships will be on deposit gathering and payments-related interchange income, with a secondary goal of diversifying their Fintech loan originators beyond GreenSky. He confirmed no change in the GreenSky portfolio outlook, as it's near its limit. CFO Eric Lemke clarified the swap's impact would appear in loan yields. Regarding M&A, both executives noted that while they are monitoring AOCI, it is not a major issue for them due to their smaller securities portfolio and focus on smaller, all-cash deals, which are not being hindered.