Mark Fitzgibbon

Mark Fitzgibbon with Piper Sandler asked about NBT Bancorp's solar loan portfolio, specifically if there are ways to accelerate their exit and the market depth for selling these loans. He also inquired about any current pressure on auto loan delinquencies. Mr. Fitzgibbon sought clarification on the net interest margin outlook, asking if it is expected to decline or remain close to current levels. Finally, he requested any updates on the timing for the Micron project.

Answer

CEO and President, Scott Kingsley, stated that there is currently no viable way to accelerate the exit of solar loans without incurring a fair value loss, as the assets are performing as expected despite lower yields than current market demands. He reported no significant pressure on auto loan delinquencies, noting consistent performance in the A and B paper classes within NBT Bancorp's footprint. CFO, Annette Burns, clarified that for Q4, the margin might face a "little bit of a challenge to hold," potentially seeing a few basis points movement, but could stabilize and improve quarter-over-quarter in 2026 with opportunities to reprice the loan book. Mr. Kingsley added that NBT Bancorp is deliberate about holding spreads on new assets and not "reaching for growth." Regarding the Micron project, Mr. Kingsley confirmed expectations for shovels in the ground late in Q4 for site improvement (fill), with actual building anticipated to start mid to late 2026.

Mark Fitzgibbon from Piper Sandler Companies inquired about the potential impact of a 25 basis point rate cut on NBT's net interest margin (NIM), the outlook for NIM in Q3, potential revenue synergies from the completed Evans Bancorp merger, areas of credit concern, and the expected run rate for non-interest expenses.

Answer

EVP & CFO Annette Burns stated the balance sheet is neutrally positioned for rate cuts, with potential for a slight lag on repricing funding costs downwards. For Q3, she anticipates a few basis points of NIM improvement from a full quarter of Evans accretion and asset repricing, with funding costs stabilizing. President & CEO Scott Kingsley added that competition could temper NIM expansion. He also highlighted significant revenue synergy opportunities in wealth management and insurance from the Evans customer base. On credit, Kingsley noted a focus on full banking relationships over transactional CRE, with no major concerns. Burns projected a Q3 expense run rate by adding one more month of Evans' costs (around $11-12 million/quarter) to the current base.

Mark Fitzgibbon asked about the percentage of Flagstar Bank N.A.'s $1.7 billion C&I originations in Q3 that were participations, whether the bank had any exposure to Tricolor or First Brand, and the current state of the note sale market for modestly challenged New York multifamily loans.

Answer

Joseph Otting, Chairman, President, and CEO, stated that 50%-60% of C&I loans are participations, but emphasized that these involve direct relationships with management and high expectations for fee income and deposits. Lee Smith, Chief Financial Officer, confirmed no exposure to First Brands or Tricolor. Regarding the note sale market, Lee Smith noted continued strong demand for New York City rent-regulated multifamily loans from other lenders and GSEs, leading to significant payoffs ($1.3 billion in Q3, with 42% substandard), indicating a robust market despite recent noise.

Mark Fitzgibbon from Piper Sandler Companies asked for an update on the timeline for potential stock repurchases, questioning if the previously mentioned mid-2026 timeframe could be moved up given the bank's strong capital position.

Answer

Senior Executive Vice President & CFO Lee Smith stated that the current priority is deploying excess capital into C&I loan growth. He noted that while buybacks are not an immediate focus, they could be reconsidered in mid-2026 if the stock remains at a discount to book value. Executive Chairman, President & CEO Joseph Otting added that the board will evaluate all options for excess capital once the bank is well into its profitable phase in 2026.

Mark Fitzgibbon asked how Amalgamated Financial Corp. can best position itself to avoid becoming a target for regulators, given the current conversations around 'debanking' in Washington.

Answer

Priscilla Brown (President and CEO, Amalgamated Bank) emphasized that the bank consistently follows all laws and regulations, focuses on risk management, and delivers solid, consistent performance, as evidenced by phenomenal core deposit growth across all segments.

Mark Fitzgibbon asked how Amalgamated Bank is positioning itself to avoid becoming a target for regulators amidst aggressive 'debanking' efforts and increased scrutiny in Washington.

Answer

Priscilla Brown, President and CEO, affirmed that Amalgamated Bank consistently adheres to all laws and regulations, prioritizes robust risk management, and delivers solid, consistent performance. She highlighted strong core deposit growth across all segments as evidence of their resilience and commitment to being a bank first and foremost.

Mark Fitzgibbon of Piper Sandler Companies inquired about Amalgamated Financial's California expansion strategy, specifically whether it would be organic or involve M&A. He also asked for details on a troubled syndicated C&I credit and the outlook for future provisioning levels.

Answer

President and CEO Priscilla Sims Brown confirmed the bank sees significant organic growth opportunities in California and is not making any M&A announcements. CFO Jason Darby clarified the C&I credit is to an originator of consumer solar loans and its resolution is fluid. Darby also stated that while provisioning could increase, the bank currently feels comfortable with its reserve levels for the multifamily and CRE portfolios.

Mark Fitzgibbon of Piper Sandler Companies inquired about Amalgamated Financial's expansion plans in California, asking whether growth would be organic or involve M&A. He also sought details on a specific syndicated C&I credit issue and questioned if provisioning levels might increase due to pressures in multifamily and green energy sectors.

Answer

President and CEO Priscilla Sims Brown confirmed the immediate focus for California is organic expansion, leveraging new hires to grow in the LA and East Bay areas, without making any M&A announcements. CFO Jason Darby detailed the C&I credit issue, identifying it as a loan to a consumer solar originator and explaining the ongoing workout negotiations. Darby also stated that the bank feels comfortably reserved, assessing provisions quarterly, and noted that while they are monitoring market pressures, current coverage ratios reflect confidence in the portfolio's credit quality.

Mark Fitzgibbon of Piper Sandler inquired about potential funding disruptions for clean energy projects, strategies to protect Amalgamated from political targeting, and the intended aggressiveness of the share buyback program, including target capital ratio levels.

Answer

President and CEO Priscilla Sims Brown and Chief Banking Officer Sam Brown confirmed they see no slowdown in clean energy project funding, citing strong market demand. Priscilla Sims Brown stated the bank's defense against political risk is its strong operational performance, high capital, and robust liquidity. Executive Jason Darby addressed the buyback, noting a new $40 million authorization allows for more aggressive repurchases, and he is comfortable with the Tier 1 leverage ratio remaining above the 9% threshold even with an accelerated buyback plan.

Mark Fitzgibbon of Piper Sandler inquired about Amalgamated Bank's 2025 growth strategy, asking for clarification on the apparent discrepancy between the 2% quarterly loan growth target and the 3% annual balance sheet growth guidance. He also requested details on the current loan pipeline's size and composition, the reasons behind the uptick in criticized C&I loans, and any potential credit impact from the California wildfires on the PACE portfolio.

Answer

Jason Darby, an executive, confirmed that the bank plans to shrink its securities portfolio to fund the targeted loan growth. Chief Banking Officer Sam Brown added that the loan pipeline is robust and diversified, with CRE rates in the mid-to-high 6s and C&I rates in the low-to-mid 7s, supporting the growth target. Regarding credit, Sam Brown attributed the C&I downgrades to the higher interest rate environment but noted the loans have strong structures and are still performing. Jason Darby elaborated that the bank is conservative with risk ratings and that upgrades in other parts of the portfolio largely offset these downgrades. He also confirmed there has been no material impact on the PACE portfolio from the California wildfires.

Mark Fitzgibbon of Piper Sandler inquired about strategic plans for the trust business, the projected trough for political deposits, a specific consumer solar charge-off, and the expense growth outlook.

Answer

President and CEO Priscilla Sims Brown outlined plans to enhance the trust business by investing in sales capacity and digital tools. She and Chief Banking Officer Sam Brown confirmed the political deposit trough is expected between $850 million and $875 million, with a rebuild starting in Q1. An executive, Jason Darby, clarified that a recent charge-off was in the traditional consumer solar portfolio, not the PACE portfolio, and that reserves for that segment were increased. Darby also projected Q4 expenses to be around $40 million to $40.5 million, similar to Q3, due to pulled-forward investments.

Mark Fitzgibbon of Piper Sandler asked about the company's plans for stock repurchases given strong capital ratios and expected flat balance sheet growth in Q4. He also inquired about the amount and accounting line for a mentioned fraud recovery. Finally, he sought Stuart Lubow's broader industry perspective on the current credit cycle, asking if it's in its later innings, if it will worsen, muddle along, or if the worst has passed.

Answer

Avi Reddy, CFO, stated that discussions about stock repurchases have begun, noting common equity tier 1 is over 11.5% and total capital over 16%, with the CRE concentration ratio now below 400%. He emphasized deploying capital for organic growth in new lending verticals but acknowledged the stock's undervaluation and past capital returns. He confirmed the fraud recovery was $1.5 million and recorded in other non-interest income, related to a Legacy Bridge incident from 2018/2019. Stuart Lubow, President and CEO, expressed his view that the industry credit cycle is in its "later innings," expecting it to "muddle along" rather than significantly worsen, citing a strong local economy and effective management of credit issues by the industry.

Mark Fitzgibbon inquired about the company's plans for stock repurchases given strong capital ratios and flat balance sheet growth, sought clarification on the amount and accounting for a fraud recovery, and asked for a high-level perspective on the current stage of the industry-wide credit cycle.

Answer

CFO Avi Reddy confirmed that discussions about stock repurchases have begun, citing strong capital ratios (CET1 over 11.5%, total capital over 16%) and the reduction of the CRE concentration ratio to the low 400s. He noted the stock is undervalued and while capital deployment for new lending teams is a priority, repurchases are being considered. He also clarified that a $1.5 million fraud recovery, related to a Legacy Bridge incident, was recorded in "other non-interest income." President and CEO Stuart Lubow expressed a view that the industry is in the "later innings" of the credit cycle, expecting a period of muddling along rather than significant stress, supported by a strong local economy and an anticipated lower rate environment.

Mark Fitzgibbon of Piper Sandler sought clarification on the Q3 expense guidance, the NIM impact of a Fed rate cut, the future trajectory of hiring, the bank's M&A appetite, and the potential impact of New York politics on the rent-regulated loan book.

Answer

CFO Avinash Reddy confirmed the Q3 core cash expense guidance of $61.5 million and reiterated the expected 5 basis point NIM expansion for every 25 basis point rate cut. Both Reddy and CEO Stuart Lubow indicated that the most significant hiring phase is complete for now. On strategy, Lubow stated that while Dime is open to M&A, the primary focus is organic growth. He also expressed confidence in the granular and resilient nature of the rent-regulated multifamily portfolio to withstand potential political shifts.

Mark Fitzgibbon asked about the large cash balance and its potential as a margin driver, whether the bank intentionally slowed deposit growth, and sought details on the increase in non-owner-occupied commercial real estate.

Answer

CFO Avinash Reddy explained the high cash balance is a strategic decision to manage the ALM profile for the medium-term but agreed it will be deployed for loan growth. He attributed slow Q1 deposit growth to seasonality and a disciplined approach to cost. Executive Stuart Lubow added that the bank actively manages high-cost municipal deposits to control funding costs. Reddy clarified the uptick in non-owner-occupied CRE was due to a single credit expected to be resolved in Q2.

Mark Fitzgibbon of Piper Sandler inquired about the drivers behind the 2025 noninterest income guidance, the rationale for the low single-digit loan growth forecast, and the company's potential for M&A activity.

Answer

CFO Avinash Reddy explained that the higher noninterest income guidance of $40-$42 million is primarily due to a BOLI restructuring that will add approximately $5-$5.5 million in income. CEO Stuart Lubow and CFO Reddy clarified that the modest loan growth forecast is a result of strong business loan origination being offset by intentional run-off in the CRE and multifamily portfolios to manage concentration risk. Regarding M&A, CEO Lubow stated that while the company is well-positioned and open to strategic opportunities in the Tri-State area, it is also focused on its significant organic growth prospects.

Mark Fitzgibbon sought confirmation that the increase in nonperforming loans was an isolated issue, asked for the target CRE to risk-based capital ratio, questioned the ability to hold expenses flat while hiring, and inquired about the company's appetite for M&A.

Answer

CFO Avinash Reddy confirmed the nonperformer increase was due to a partnership dispute with no specific reserve needed. He stated the goal is to bring the CRE to risk-based capital ratio to the 'low 400s' over the next 12 months. Reddy explained that hiring for 2025 wouldn't impact the next couple of quarters and that new teams typically pay for themselves within six months. CEO Stuart Lubow and Reddy emphasized that their primary focus is on organic growth and talent acquisition from market disruption, viewing M&A as opportunistic rather than a top priority.

Mark Fitzgibbon inquired about the remaining shared national credits portfolio size, the reasons for an increased charge-off on a specific loan despite prior reserves, the confidence in current office property appraisals, wealth management client flows, and the outlook for the net interest margin.

Answer

Bill Wray, SEVP and Chief Risk Officer, stated the shared national credits book is $173 million, split between CNI and commercial real estate. He explained that new information in a Chapter 11 context led to a significantly reduced recovery on the specific credit. For office appraisals, he noted that validity depends on the property and market, with the problematic asset being in a submarket with no recent deals. Ron Ohsberg, SEVP, CFO, and Treasurer, indicated that Washington Trust no longer discloses wealth management client flows to align with peer disclosures and projected a 5 basis point margin expansion for Q4.

Mark Fitzgibbon inquired about the current size and composition of Washington Trust's shared national credits (SNCs) portfolio.

Answer

Bill Wray, SEVP and Chief Risk Officer, stated the SNC portfolio is approximately $173 million, divided between CNI and commercial real estate.

Mark Fitzgibbon of Piper Sandler Companies inquired about the outlook for Washington Trust's net interest margin, assumptions for Federal Reserve rate cuts, and the composition of Q2 mortgage originations. He also asked about the strategic rationale for expansion into Massachusetts given recent market consolidation and questioned the ongoing net outflows in the Wealth Management division and the plans to reverse this trend.

Answer

SEVP, CFO & Treasurer Ronald Ohsberg projected a modest margin expansion of a few basis points for Q3, noting deposit costs are peaking. President & COO Mary E. Noons stated that mortgage originations were 75-80% purchase-related, with saleable loans being mostly 30-year fixed. Chairman & CEO Edward Handy addressed strategy, prioritizing organic growth in Rhode Island over de novo branching in Massachusetts but remaining open to M&A. Regarding wealth management, Handy cited recent talent additions and a core system conversion as key initiatives to improve client experience and stem outflows.

Mark Fitzgibbon inquired about the outlook for the net interest margin, assumptions for Fed rate cuts, mortgage origination mix, and potential strategic expansion into Massachusetts. He also questioned the persistent net outflows in the Wealth Management unit and the strategies being implemented to reverse this trend.

Answer

SEVP, CFO & Treasurer Ronald Ohsberg projected modest NIM expansion of a few basis points in Q3, noting deposit costs are peaking. President & COO Mary Noons stated mortgage originations are 75-80% purchase-driven, with a mix of 30-year fixed and 7/1 hybrid ARM products. Chairman & CEO Edward Handy addressed strategy, prioritizing organic growth in Rhode Island over immediate Massachusetts expansion but remaining open to M&A. Regarding wealth management, Handy cited adding new talent and a core system conversion as key initiatives to improve client experience and stem outflows.

Mark Fitzgibbon of Piper Sandler Companies inquired about the outlook for the net interest margin, assumptions for Fed rate cuts, the composition of mortgage originations, potential strategic expansion into Massachusetts, and actions to address net outflows in the Wealth Management division.

Answer

Ronald Ohsberg, SEVP, CFO & Treasurer, projected modest margin expansion in Q3, noting deposit costs are peaking. Mary E. Noons, President & COO, stated that mortgage originations are 75-80% purchase-driven, with a mix of 30-year fixed and 7/1 hybrid ARM products. Chairman & CEO Edward Handy addressed strategy, indicating a focus on organic growth in Rhode Island before considering a larger Massachusetts expansion, while also reaffirming the company's desire to remain independent. Regarding wealth management, Mr. Handy highlighted recent talent additions and a core system conversion as key initiatives to improve performance and stem outflows.

Mark Fitzgibbon of Piper Sandler inquired about Washington Trust's net interest margin outlook, assumptions for Fed rate cuts, the composition of mortgage originations, potential strategic expansion into Massachusetts, and the ongoing net outflows in the Wealth Management unit.

Answer

SEVP, CFO & Treasurer Ronald Ohsberg projected modest NIM expansion of a few basis points in Q3, noting deposit costs are peaking. President & COO Mary E. Noons stated mortgage originations are about 75% purchase-driven, with a mix of 30-year fixed and 7/1 hybrid ARMs. Chairman & CEO Edward Handy acknowledged Massachusetts expansion as a possibility but prioritized strengthening the brand in Rhode Island first. Regarding wealth management outflows, Handy cited adding new talent and a core system conversion as key initiatives to improve client experience and reverse the trend.

Mark Fitzgibbon of Piper Sandler Companies inquired about the outlook for the net interest margin, assumptions for Fed rate cuts, the composition of mortgage originations, strategic expansion opportunities in Massachusetts, and the ongoing net outflows in the Wealth Management division.

Answer

SEVP & CFO Ronald Ohsberg projected modest NIM expansion of a few basis points in Q3, noting that while deposit costs are peaking, the bank is less liability-sensitive than before. President & COO Mary E. Noons stated that purchase mortgages constitute 75-80% of originations, with a mix of 30-year fixed loans for sale and 7/1 hybrid ARMs for the portfolio. Chairman & CEO Edward Handy addressed expansion, indicating a preference for building out their brand in Rhode Island before considering de novo branches in Massachusetts, though M&A remains a possibility. He also confirmed the company's focus on remaining independent. Regarding wealth management, Mr. Handy highlighted recent talent additions and a core system conversion aimed at improving client experience and stemming outflows.

Mark Fitzgibbon of Piper Sandler inquired about the outlook for the net interest margin, assumptions for Fed rate cuts, the composition of mortgage originations, potential strategic expansion into Massachusetts, and the ongoing net outflows in the Wealth Management division.

Answer

Ronald Ohsberg, SEVP, CFO & Treasurer, projected a modest NIM expansion of a few basis points in Q3, noting deposit costs are peaking. Mary E. Noons, President & COO, detailed that mortgage originations are 75-80% purchase-related, with a mix of 30-year fixed and 7/1 hybrid ARM products. Chairman & CEO Edward Handy addressed strategy, stating that while Massachusetts expansion is a possibility, the current focus is on strengthening their brand in Rhode Island. He also affirmed the company's desire to remain independent but would consider an accretive M&A deal. Regarding wealth management, Handy mentioned recent talent additions and a core system conversion aimed at improving client experience and reversing outflows.

Mark Fitzgibbon of Piper Sandler inquired about the future run-rate for operating expenses following a sale-leaseback and pension curtailment, the size and composition of loan pipelines, the expected trajectory of the net interest margin, and the company's long-term targets for its dividend payout ratio.

Answer

CFO Ronald Ohsberg clarified that expense impacts were already included in prior guidance and that the dividend payout ratio is expected to improve to the mid-to-low 80s by year-end. CEO Ned Handy noted the commercial loan pipeline is over $100 million, supporting low single-digit growth guidance. For the net interest margin, Ohsberg provided Q2 guidance of 2.35% but refrained from guiding further due to rate uncertainty.

Mark Fitzgibbon inquired about the commercial loan pipeline size and rate, the normalization of cash balances, the future trajectory of the net interest margin, and specifics on credit quality, including a delinquent loan and classified office loans.

Answer

CFO Ronald Ohsberg stated the commercial pipeline is $90 million at FHLB + 250 bps and that elevated cash is temporary. He expects the net interest margin to be flat in Q4 before expanding in 2025, assuming Fed rate cuts. Chief Risk Officer William Wray provided details on the maturity schedule for classified office loans, noting a resolution is imminent for a significant portion.

Mark Fitzgibbon asked about the assumptions regarding Fed rate cuts within the 4-6 basis points margin expansion guidance for Q4. He also questioned plans for restructuring or shrinking the acquired Enterprise securities portfolio, sought details on the $16.8 million in new non-accruals, and inquired about the rationale for stock buybacks given tangible book value dilution. Finally, he asked about the company's M&A appetite given the current regulatory environment.

Answer

Mark Ruggiero, CFO and EVP, stated that the margin guidance is largely moot to Fed cuts, as the bank is positioned to neutralize their impact. He confirmed no immediate plans to restructure the Enterprise securities portfolio, viewing it as market securities. Ruggiero detailed the new non-accruals, noting three loans over $1 million, with the largest being a $4.5 million construction loan from Enterprise, and expressed optimism for no material losses. Regarding buybacks, Ruggiero acknowledged valuation considerations but indicated a continued reassessment of appropriate buying levels. Jeff Tengel, President and CEO, reiterated the company's focus on organic growth and Enterprise integration, not M&A, despite the conversion being complete.

Mark Fitzgibbon of Piper Sandler sought clarification on the net interest margin (NIM) outlook, questioned whether credit quality issues have peaked, and asked for details on a significant loan modification.

Answer

CFO Mark Ruggiero confirmed the Q3 NIM guidance of mid-3.6% and stated the bank is well-positioned for potential Fed cuts. CEO Jeffrey Tengel expressed caution about declaring the worst is over for credit, citing property-specific issues. Both executives detailed the modification of a large syndicated office loan, which was restructured to allow for lease-up, with the loan remaining on non-performing status.

Mark Fitzgibbon inquired about the details of a new $30.5 million nonperforming loan, the bank's confidence in resolving problem loans, the outlook for the 2026 net interest margin (NIM) guidance, and the current loan pipeline's size and composition.

Answer

CFO Mark Ruggiero explained that the new nonperforming loan, a syndicated office credit, was charged down to its appraised value, resulting in an $8.1 million loss. Executive Jeffrey Tengel expressed high confidence in resolving the largest problem loans, stating they are in the final stages. Ruggiero reaffirmed the 2026 NIM guidance of 3.70% to 3.75%, noting the accelerated sub-debt raise would be offset by purchase accounting. Tengel described the loan pipeline as 'robust' with a strategic shift towards more C&I business.

Mark Fitzgibbon asked for clarification on the source of increased delinquencies, queried management's view on a mid-2025 credit quality inflection point, questioned the rationale for reclassifying owner-occupied CRE, and inquired about wealth management client flows.

Answer

CFO Mark Ruggiero clarified that the uptick in delinquencies was driven by a $30 million syndicated loan reaching maturity. Executive Jeffrey Tengel expressed cautious agreement with a potential mid-2025 credit inflection but noted his confidence depends on resolving large legacy problem loans. Tengel also explained that reclassifying owner-occupied CRE to C&I better reflects the underlying business risk and aligns with regulatory measures. Ruggiero added that the wealth business saw about $20 million in net outflows for the quarter.

Mark Fitzgibbon of Piper Sandler asked if a specific reserve exists for the $30 million classified office loan and questioned if the general office portfolio reserve of ~2.5% is adequate compared to peers. He also inquired about commercial and home equity line utilization rates, the relative size of the $54.7 million problem loan, and the likelihood of M&A activity versus share buybacks.

Answer

CFO Mark Ruggiero confirmed the $30 million loan does not currently have a specific reserve, citing a recent appraisal. He defended the 2.5% reserve level by highlighting that the vast majority of the portfolio is pass-rated. Executive Jeffrey Tengel added that the $54.7 million loan is not the bank's largest office credit. Ruggiero provided utilization rates, noting home equity lines ticked up to 35% while C&I utilization remains low at 28%. Regarding capital deployment, Tengel described M&A as possible but dependent on the right target, while both executives confirmed that stock buybacks are under active and frequent consideration.

Mark Fitzgibbon inquired about Webster Financial's lending exposure to the private credit industry (NBFI) and specific areas the bank might be avoiding, as well as the bank's stance on whole bank M&A if the Category 4 regulatory threshold is lifted.

Answer

John Ciulla (CEO) clarified Webster's $6 billion NBFI exposure, with 90% concentrated in low-risk fund banking and lender finance, highlighting a 10-year history of zero losses and a focus on top-tier asset managers. Regarding M&A, Mr. Ciulla reiterated that lifting the Category 4 hurdle would not alter their strategy, stating that whole bank acquisitions are highly unlikely in the short to medium term, though smaller, healthcare-related acquisitions for fee and deposit growth remain a consideration.

Mark Fitzgibbon of Piper Sandler Companies asked about the outlook for deposit costs amid expected rate cuts and questioned how a potential change in the Category IV asset threshold would affect Webster's M&A strategy.

Answer

Senior EVP & CFO Neal Holland noted that while rate cuts would help lower deposit costs, significant competition limits further reductions. Chairman & CEO John Ciulla added that while a higher regulatory threshold increases M&A optionality, the bank's primary focus remains on organic growth and strategic tuck-in acquisitions, making large-scale M&A unlikely in the near term.

Mark Fitzgibbon of Piper Sandler asked for an update on the Health Savings Account (HSA) business, specifically regarding the renewal season and any pressure on deposit costs or fees. He also inquired about the spending and timeline for becoming a Category IV compliant bank.

Answer

President and COO Luis Massiani stated there is no significant pressure on HSA deposit costs, which remain stable. He noted a successful 2025 enrollment season and expressed optimism for the 2026 cycle, which will benefit from a fully developed product suite. CFO William Holland estimated that of the planned $20 million in 2025 spending for Category IV readiness, about $5 million was spent in Q1. CEO John Ciulla added that the goal is to be compliant within approximately two years, while monitoring potential changes in the regulatory landscape.

Mark Fitzgibbon of Piper Sandler inquired about Webster's M&A appetite if Category 4 bank regulations were eased and asked for details on the Q4 increase in C&I non-performing loans (NPLs).

Answer

CEO John Ciulla stated that a change in the regulatory paradigm could accelerate inorganic growth plans, but it's not in the 2025 outlook. He noted the C&I NPL increase was from 3-4 credits, primarily in office-related and other previously discussed sectors, and that overall negative risk rating migration moderated in Q4.

Mark Fitzgibbon of Piper Sandler asked for details on a media report about two large, defaulted office loans in New Jersey, questioning if they were on non-accrual status and had specific reserves. He also inquired about the total reserve level for the entire office loan portfolio.

Answer

CEO John Ciulla confirmed the two loans are on non-accrual and were the primary drivers of the quarterly increase in non-performers, but clarified Webster's exposure is significantly less than reported ($<45M and $<25M). He stated that appropriate charge-offs and reserves were taken. Ciulla also disclosed that the reserve on the remaining office portfolio stands at approximately 6%.

Mark Fitzgibbon from Piper Sandler Companies inquired about the recent deposit decline, the bank's interest rate sensitivity, the potential impact of the NYC mayoral election on rent-regulated lending, and the likelihood of share buybacks given the stock's valuation.

Answer

CEO John Buran explained that the deposit decline is seasonal due to municipal outflows and that a steeper yield curve would benefit the net interest margin. He also noted that the mayor's power over rent control is limited by state oversight. CFO Susan Cullen added that while the stock's valuation is attractive, the current priority is building capital, making near-term buybacks unlikely.

Mark Fitzgibbon of Piper Sandler Companies inquired about the drivers of a recent deposit decline, the net interest margin's sensitivity to a Federal Reserve rate cut, the potential impact of a new NYC mayor on rent-regulated lending, and the likelihood of share buybacks given the stock's valuation.

Answer

President and CEO John Buran attributed the deposit decline to seasonal outflows in government deposits, which he expects to recover. He also noted that a steeper yield curve would be positive for the margin and downplayed the risk from a new mayor, citing the state's authority over rent controls. Senior EVP and CFO Susan Cullen stated that share buybacks are not a near-term priority, as the company is focused on building capital to be more in line with peers.

Mark Fitzgibbon from Piper Sandler Companies inquired about the drivers of the Q2 deposit decline, the net interest margin's sensitivity to a potential Fed rate cut, the impact of New York's mayoral election on rent-regulated lending, and the likelihood of share buybacks.

Answer

President and CEO John Buran attributed the deposit decline to seasonal outflows in government deposits, which are expected to recover. He confirmed that a steeper yield curve from a rate cut would positively impact the margin. Regarding political risk, he noted that rent changes require state-level approval, limiting a mayor's unilateral power. CFO Susan Cullen stated that while the stock's valuation is attractive, the current priority is to continue building capital rather than executing buybacks.

Mark Fitzgibbon asked for the potential magnitude of net interest margin (NIM) expansion in Q2, questioned the CD repricing opportunity given high posted rates, and inquired about the impact of trade tariffs on the bank's Asian community clients. He also asked about the cause for a surge in NOW account balances.

Answer

Executive Susan Cullen declined to quantify future NIM expansion due to rate volatility, while Executive John Buran highlighted commercial real estate loan repricing as the most significant opportunity. Regarding CDs, Buran noted a key rate was set to decrease on May 1. He stated the bank has no direct trade finance exposure and expects minimal impact from tariffs on its domestically-focused clients. The increase in NOW balances was attributed to seasonality in government and business banking, which is expected to reverse in the summer.

Mark Fitzgibbon inquired about the remaining steps in the balance sheet restructuring, details on the planned branch expansion and its cost implications, preparations for crossing the $10 billion asset threshold including the Durbin impact, whether an acquisition is preferred for growth, and the potential year-end Net Interest Margin (NIM) for 2025.

Answer

Executive Susan Cullen clarified that the loan sales component of the restructuring is expected to be completed in Q1. She and Executive John Buran confirmed two new branches are planned for 2025, with costs included in the 5-8% non-interest expense growth guidance. Cullen stated that costs for crossing the $10 billion threshold are largely baked in with no significant Durbin impact. Buran confirmed an acquisition would be the preferred method to cross that threshold. Regarding the NIM, Cullen projected a range of 2.30% to 2.40% by year-end, viewing 2.50% as slightly aggressive.

Mark Fitzgibbon inquired about the theoretical peak for the net interest margin in a steep yield curve environment and the company's long-term target for return on tangible common equity (ROTCE). He also asked about the average rate on new CDs booked in Q3 and whether the bank has a target for its commercial real estate (CRE) concentration.

Answer

Executive Susan Cullen stated the long-term goal for the NIM is to return to approximately 3%, though it will take time. Executive John Buran confirmed the company's ROTCE target is 10%, which he believes is achievable, citing performance in 2021 and 2022. Susan Cullen specified that new CDs in Q3 were booked at an average rate of around 4.25%. John Buran concluded that the bank does not have a specific target for CRE concentration and is comfortable with its current position.

Mark Fitzgibbon of Piper Sandler Companies asked about the likelihood of future securities portfolio restructurings, the drivers behind the significant drop in non-performing loans (NPLs), and the company's strategic plans for its Rhode Island franchise following the Harbor One merger.

Answer

CFO David Rosato explained that while another portfolio restructuring is possible, share buybacks are a higher priority post-merger. He attributed the $40 million drop in NPLs to the successful resolution of five credits by the managed asset group, not loan sales. CEO Denis Sheahan stated that Eastern plans to build out its presence in Rhode Island but has no current strategic plans to expand banking operations into Connecticut or New York.

Mark Fitzgibbon from Piper Sandler asked for clarification on the effective tax rate for the remainder of 2025, the strategic plans for HarborOne's mortgage business, and whether the merger was a negotiated deal or an auction.

Answer

CFO R. Rosato clarified that the full-year effective tax rate is expected to be around 11% due to the securities repositioning. He also detailed that HarborOne's larger, gain-on-sale focused mortgage business presents a significant fee opportunity that will be optimized with Eastern's balance-sheet-focused model. CEO Denis Sheahan confirmed the merger was a negotiated process that originated from a strong existing relationship with HarborOne's leadership.

Mark Fitzgibbon of Piper Sandler inquired about the current size and composition of the loan pipeline, the expected trajectory of the net interest margin into 2025, and the specific breakdown of the $85 million increase in non-performing loans.

Answer

CEO Denis Sheahan reported that the commercial loan pipeline has grown significantly to $438 million from $228 million at the end of June, with a balanced mix of commercial real estate, C&I, and community development lending. CFO David Rosato added that the net interest margin is four times more sensitive to a normalizing yield curve than to parallel rate shifts. Regarding credit, Denis Sheahan explained that the increase in non-performing loans was primarily driven by acquired PCD loans from the Cambridge merger, mostly in the office sector, which have been conservatively reserved for.

Mark Fitzgibbon of Piper Sandler Companies inquired about the growth strategy for the Beacon Trust business, the rationale behind the reserve release, the provisioning outlook for the remainder of the year, and the company's capacity for M&A given its recent stock performance.

Answer

President and CEO Anthony Labozzetta explained that the Beacon strategy is focused on enhancing its sales force and integrating it with other business lines to grow AUM, rather than a fundamental strategy change. CFO Thomas M. Lyons attributed the reserve release to an improved economic forecast from Moody's, specifically the commercial property price index. Both executives indicated that provisioning is expected to remain modest due to strong credit quality. Regarding M&A, Mr. Labozzetta stated that while organic growth is the primary focus, the company remains open to strategic opportunities and feels its stock price is beginning to better reflect its intrinsic value.

Mark Fitzgibbon from Piper Sandler & Co. asked for an update on the two large loans that moved to nonaccrual status, the bank's target for its Commercial Real Estate (CRE) concentration ratio, and the outlook for M&A activity.

Answer

CFO Tom Lyons addressed the nonaccrual loans, stating there is no certain resolution timeline but expressed confidence due to favorable, recent appraisals and low loan-to-value ratios. CEO Anthony Labozzetta explained that while there is no specific CRE concentration target, they expect the ratio to naturally decline toward the 420% range over the long term as other loan categories grow, not from a planned reduction in CRE lending. Regarding M&A, Labozzetta stated that repurchasing their own stock is the most attractive option at current valuations, but future M&A targets would require a strong cultural fit and be additive to the business.

Mark Fitzgibbon inquired about the drivers for the 2025 fee income projection, the normalized run-rate for BOLI, the components of the expense guidance, the net interest margin sensitivity to rate cuts, and the company's top strategic priorities.

Answer

CFO Tom Lyons explained that the $26 million quarterly fee income projection is an annual average, with seasonality and volatile items like loan sale gains evening out results. Both Lyons and CEO Tony Labozzetta confirmed the current quarter's BOLI is a normal run-rate. Lyons detailed that the expense guide reflects the full realization of merger cost savings, with an expected decline in the second half of the year. He also noted the balance sheet is very neutral to rate changes, with minimal impact on NII. Labozzetta outlined key priorities as nurturing company culture post-merger, driving growth across all sectors, deepening customer relationships, and maintaining operational efficiency.

Mark Fitzgibbon asked about the estimated closing timeline for the merger of equals with Berkshire, the planned systems conversion date, the potential size of credit relationships post-merger, details on specific Eastern Funding credits, and the sensitivity of the net interest margin (NIM) to a potential Fed rate cut.

Answer

Chairman & CEO Paul Perrault clarified the systems conversion is set for mid-February and optimistically projected a September merger closing, pending regulatory approval. He noted post-merger credit relationships could approach $90-100 million. Co-President and CFO Carl Carlson added that the Q3 NIM guidance of a 4-8 basis point increase does not assume a rate cut, and an initial 25 bps cut would likely have a flat impact. He also confirmed an additional $1 million in reserves was added to each of the two Eastern Funding credits (a commercial laundry and a grocery exposure).

Mark Fitzgibbon of Piper Sandler Companies inquired about the expected closing and systems conversion timeline for the merger with Berkshire Hills, the potential size of credit relationships post-merger, details on specific challenged credits, and the net interest margin's sensitivity to a potential Fed rate cut.

Answer

Chairman & CEO Paul Perrault estimated a potential September closing for the merger of equals, with a systems conversion planned for mid-February. He suggested the combined entity could handle credit relationships approaching $90-100 million. Co-President and CFO Carl Carlson added that the NIM guidance for a 4-8 basis point increase in Q3 does not assume any rate cuts, and a 25 basis point cut would likely have a flat initial impact due to offsetting repricing on assets and liabilities. Carlson also noted that an additional $1 million in reserves was added to each of two specific commercial credits.

Mark Fitzgibbon inquired about the expected closing timeline for the merger of equals with Berkshire Hills, the potential systems conversion date, and the combined entity's capacity for larger credit relationships.

Answer

Chairman & CEO Paul Perrault clarified the systems conversion is targeted for mid-February and optimistically projected a September merger closing, pending regulatory approval. He also estimated the combined bank could handle credit relationships approaching $90 million to $100 million. Co-President and CFO Carl Carlson added that the Q3 margin guidance of a 4-8 basis point increase does not assume any Fed rate cuts, and a 25 basis point cut would likely have a flat initial impact due to offsetting repricing on assets and liabilities.

Mark Fitzgibbon of Piper Sandler & Co. inquired about the potential impact of a Federal Reserve rate cut on the net interest margin, the specifics of a large commercial charge-off, and the effect of tariffs on the loan book.

Answer

CFO Carl Carlson explained that a rate cut would generally be beneficial but is highly dependent on the yield curve and market conditions, confirming the current guidance excludes any cuts. He detailed that the charge-off was related to a previously reserved $13 million C&I credit. CEO Paul Perrault noted that while customers are uneasy about tariffs, there has been no tangible impact yet, though it is now a factor in underwriting.

Mark Fitzgibbon of Piper Sandler inquired about the expected regulatory approval timeline for the merger with Berkshire Hills Bancorp, the specifics of a $5.1 million equipment finance charge-off, and the bank's strategy regarding the pace of deposit rate reductions.

Answer

Chairman and CEO Paul A. Perrault stated that while there has been contact with regulators regarding the merger, a firm timeline is not yet available, partly due to waiting for year-end numbers for the filings. CFO Carl M. Carlson initially identified the large charge-off as related to an industrial laundry client but later corrected this, stating it was a grocery loan. Regarding deposit rates, Mr. Perrault explained that while they aim to be aggressive, they are also cautious to maintain their funding base.

Mark Fitzgibbon inquired about a specific non-accrual equipment finance loan, the spot net interest margin for September, the current composition of the loan pipeline, and the performance metrics of the Clarendon Private wealth management unit.

Answer

CFO Carl M. Carlson clarified the non-accrual loan relates to two grocery stores and has a $5 million specific reserve. He stated the September spot margin was 3.13%. Chairman and CEO Paul A. Perrault described the loan pipeline as seeing more institutional business and projected 4-5% loan growth in 2025. Regarding Clarendon Private, Mr. Carlson noted it is not yet profitable, has around $350 million in AUM, and is transitioning to more balanced portfolios, with about 70% of customers coming from the bank.

Mark Fitzgibbon of Piper Sandler Companies inquired about the likelihood of a near-term capital raise following the dividend and buyback announcements, plans to grow fee-based revenues, the future mix of loan originations, and sought clarification on the loan loss provision.

Answer

President & CEO Mark DiFazio confirmed a capital raise is unlikely in the near term and stated that replacing fee income from the exited GPG business is a top priority for 2026. He also noted the Q2 loan mix was due to timing and expects a balanced portfolio by year-end. EVP & CFO Daniel Doherty clarified that $2.4 million of the $6.4 million provision was for a single, specific credit.

Mark Fitzgibbon asked for clarification on Q2 expense guidance, the finality of GPG-related financial items, the potential impact of the 'Gold Card' program on the EB-5 business, seasonal deposit patterns, and board discussions about initiating a dividend.

Answer

Executive Mark DeFazio and CFO Daniel Dougherty responded. DeFazio projected Q2 expenses around $44.8 million, confirmed no further GPG fee income or expenses are expected, and positioned the 'Gold Card' program as a potential 'bolt-on' product rather than a threat. He also noted no significant seasonality in deposit growth. Regarding a dividend, DeFazio confirmed the board is having 'very active discussions' on the matter.

Mark Fitzgibbon of Piper Sandler & Co. sought clarification on whether the 2025 expense guidance of $175-$177 million includes the $11 million in technology charges, the exit timeline for the remaining GPG deposits and related fees, and current trends in the skilled nursing facility portfolio.

Answer

Executive Daniel Dougherty confirmed the $175-$177 million operating expense guidance for 2025 is inclusive of the $11 million in one-time technology-related charges. He also stated that the remaining GPG deposits are expected to be gone within 60 days, with no further GPG revenue anticipated. Executive Mark DeFazio commented on the skilled nursing facility space, noting that operators had an 'extraordinary' 2024 and remain optimistic, focusing on market share growth rather than specific benefits from any new administration.

Mark Fitzgibbon asked about the unexpected $10 million regulatory reserve, the bank's target for the CRE to risk-based capital ratio, the confidence in the Q4 Net Interest Margin (NIM) guidance, the timeline for the GPG revenue wind-down, and the outlook for deposit flows.

Answer

Executive Mark DeFazio clarified the reserve relates to a state attorney general matter from 2020, not a new issue, and expects no further costs. Regarding the CRE ratio, both DeFazio and CFO Daniel Dougherty stated they are comfortable operating above the 300% regulatory guidance, with an internal limit north of 350% that has not raised regulatory concerns. Dougherty expressed high confidence in the Q4 NIM forecast of 3.45%-3.50%, noting Q3's reported NIM was an outlier due to high prepayment penalties. He also confirmed GPG revenues would be fully eliminated by Q1 2025 and detailed a robust deposit pipeline to replace the outflows.

Mark Fitzgibbon of Keefe, Bruyette & Woods questioned how macro headwinds might affect the company's strategy for crossing the $10 billion asset threshold and inquired about the potential for share buybacks given the strong capital position.

Answer

Chairman, President and CEO Drake Mills stated that the company's intention remains to grow and cross the $10 billion threshold, but they would reconsider if significant negative market impacts occurred near year-end. He also confirmed that share buybacks are a consideration, calling the stock a 'bargain,' and noted that capital will also be deployed for a planned $75 million subordinated debt call in November.

Greg Zingone, on behalf of Mark Fitzgibbon of Piper Sandler, asked about potential future balance sheet actions to prepare for the merger of equals and sought clarity on the effective tax rate for the upcoming quarters.

Answer

CEO Nitin Mhatre stated that there are no further balance sheet actions planned ahead of the merger. CFO Brett Brbovic explained that the fourth quarter's elevated tax rate was due to non-deductible merger expenses and guided for a normalized rate of around 22-23% for 2025.

Mark Fitzgibbon of Piper Sandler questioned the likelihood of future Upstart or Firestone loan sales, sought more details on the check fraud incident, asked about capital allocation priorities including M&A readiness, and inquired about the timing for an update on the bank's BEST goals.

Answer

CEO Nitin Mhatre stated there are no plans for further loan sales from the runoff portfolios. He described the fraud as an isolated 'check washing' incident and noted that preventative measures have been implemented. Mhatre confirmed the top capital priority remains organic growth and said an update on BEST goals will be provided with annual guidance in January.

Mark Fitzgibbon of Piper Sandler asked about the likelihood of future sales from the Upstart or Firestone loan portfolios. He also sought more details on the $1.5 million check fraud incident and the bank's prevention measures. Additionally, he inquired about current capital allocation priorities, the company's readiness for M&A, and the expected timing for an update on its BEST strategic goals.

Answer

CEO Nitin Mhatre stated that the runoff portfolios are now minimal and performing as expected, with no further sales planned. He characterized the fraud as an isolated check-washing incident and confirmed that controls have been updated to prevent recurrences. Mhatre reiterated that the top capital priority is organic growth, followed by dividends and opportunistic buybacks. He noted the bank is well-positioned to consider M&A but is currently focused on internal performance. An update on BEST goals is anticipated with the annual guidance in January.

Inquired whether Steven Mnuchin would need to sell his NYCB holdings if he returned to a government role, and asked about hiring trends in the Private Client and commercial lending teams.

Answer

The CEO deferred the question about Mr. Mnuchin to Mnuchin himself but praised his contributions as lead director. Regarding hiring, the bank has seen stability and growth in the private client group and has made several key senior hires in C&I and private banking to drive future growth, with more expected soon.