Matthew Breese

Matthew Breese focused on cash and securities, asking what drove the lower cash balances in Q4 and the expected breakdown between cash and securities growth for the year to reach the $2.5 billion midpoint of total growth. He also inquired about the cost of deposits at year-end or more recently, and the blended rates for maturing CDs.

Answer

Lee Smith, Senior Executive Vice President and CFO, explained that the reduction in cash was due to deleveraging (paying down brokered deposits and FHLB advances) and the purchase of an additional $1 billion in securities in Q4. He noted that cash and securities are somewhat fungible, and decisions are made in real-time on how to best deploy excess cash. The spot rate for all deposits (including non-interest bearing) at year-end was 2.56%. For CDs, $5.4 billion matured in Q4 at a 4.29% weighted average cost (WAC), with 86% retained at 40-50 basis points lower. In Q1, $5.3 billion of CDs are maturing at a 4.13% WAC, expected to yield a 25-35 basis point benefit, with another $4.2 billion maturing in Q2 at a 4% WAC. He confirmed the provided share counts are fully diluted, including warrants.

Matthew Breese asked what factors led to lower cash balances in Q4 and inquired about the breakdown between cash growth and securities growth to reach the $2.5 billion midpoint of total growth for the year. He also requested the cost of deposits at year-end and the blended rates for maturing Certificates of Deposit (CDs).

Answer

Lee Smith, Senior Executive Vice President and Chief Financial Officer, explained that the reduction in cash balances was due to deleveraging, including paying down $1.7 billion in brokered deposits and $1 billion in FHLB advances, as well as purchasing an additional $1 billion in securities. He noted that cash and securities are fungible, used for deleveraging or building the securities book. The spot rate for all deposits (including non-interest-bearing) at year-end was 2.56%. In Q4, $5.4 billion of CDs matured with a weighted average cost of 4.29%, with 86% retained at 40-50 basis points lower. For Q1 2026, $5.3 billion of CDs maturing at a 4.13% weighted average cost are expected to roll at 25-35 basis points lower, with another $4.2 billion maturing in Q2 at a 4% weighted average cost.

Matthew Breese asked about the percentage of Flagstar Bank N.A.'s current loan portfolio that is pure floating rate, the spot cost of deposits at quarter-end, the reason for the change in the tangible book value outlook, and the expectations for average diluted versus common shares outstanding for Q4 and early 2026. He also inquired if the bank still expects to be profitable in Q4.

Answer

Lee Smith, Chief Financial Officer, stated that C&I loans are floating rate, and residential loans are typically ARMs that float after an initial fixed period. He reported the spot cost of deposits was 2.82%. The change in tangible book value outlook and share count (from 416 million to 480 million) is due to warrants kicking in during Q4. Lee Smith affirmed the expectation for profitability in Q4, citing consistent progress made over recent quarters.

Matthew Breese from Stephens Inc. asked about the asset size threshold for regulatory stress tests and sought an update on previous comments about diversifying the capital stack with preferred capital.

Answer

General Counsel Bao Nguyen confirmed the bank will be under the asset threshold and that the holding company merger makes the requirement moot. Executive Chairman, President & CEO Joseph Otting acknowledged the capital stack is a 'one trick pony' and said diversifying it with instruments like preferred capital will be a consideration for the board as the bank returns to significant profitability in 2026.

Matthew Breese (Stephens Inc) questioned the updated loan growth guide, asking about the drivers of payoff activity and how the pipeline compares to previous periods, seeking to understand why the loan growth outlook isn't better. He also asked for a holistic view on the expense base, the use of new technologies like AI, operating leverage, and regulators' stance on AI in compliance. Finally, he inquired about a potential lower bound for M&A deals and interesting target markets.

Answer

William Burns, CFO, attributed the tempered loan growth outlook to lower loan rates due to competition and allowing non-relationship-based loans to drift off. Frank Sorrentino III, CEO, highlighted the integration of AI through vendor partnerships, driving internal efficiencies and allowing growth without significant back-office additions. He noted regulators are generally on board with AI but with some limitations. Regarding M&A, Mr. Sorrentino stated it's hard to set a lower bound, as transformative small deals are possible, but the focus remains on the New York Metro market, including Southeast Florida.

Matthew Breese asked about ConnectOne Bancorp's updated loan growth guidance, specifically inquiring about the drivers behind payoff/prepayment activity and whether spread compression or better offers from agencies/insurance companies were factors. He also asked about the current loan pipeline's size and rate compared to previous periods, seeking to understand why the loan growth outlook wasn't more optimistic. Additionally, he explored the company's holistic view on its expense base, the use of newer technologies like AI, their impact on productivity and operating leverage, and regulatory adoption of these technologies. Finally, he questioned the lower bound for M&A deals given the bank's $14 billion size, and which markets (contiguous or financial deals) would be of interest.

Answer

CFO William Burns attributed the tempered loan growth outlook to lower loan rates due to competition and the intentional shedding of non-relationship-based loans, suggesting that contractual repricing might not fully materialize. CEO Frank Sorrentino III discussed the significant role of technology, including AI, in driving efficiencies and replacing labor, noting that vendors are also incorporating AI. He emphasized that ConnectOne Bancorp's long-standing investment in technology allows them to maintain a top-tier efficiency ratio and grow the balance sheet with minimal additions beyond revenue-producing staff. He also mentioned regulatory acceptance of AI, with some limitations, and the need for a holistic approach to data and systems for effective implementation. Regarding M&A, Frank Sorrentino III stated that a lower bound is hard to set, as even small, transformative deals could be considered. He reiterated focus on the New York Metro market (including Southeast Florida) within a 100-150-mile radius of NYC, prioritizing additive, synergistic deals that build franchise value.

Matthew Breese asked about near-term expense growth, incremental loan yields and spreads, the expected closing timeline for the merger, and the status of the planned capital raise.

Answer

CFO William Burns projected stand-alone expense growth at 4-5% annually and noted some merger cost saves were already realized. CEO Frank Sorrentino added that they may phase in saves to properly nurture acquired client relationships. Mr. Burns stated new loan yields are around 7.25-7.40%. Mr. Sorrentino confirmed the deal is expected to close in Q2, implying imminent regulatory approval, and that the planned sub-debt raise will likely occur before closing in a favorable market.

Matthew Breese of Stephens Inc. inquired about the drivers behind ConnectOne's improved loan growth, the current pipeline and spreads, and the recent positive shift in market sentiment. He also asked for details on the strong noninterest-bearing deposit growth and the bank's plans for a potential capital raise to address upcoming sub-debt repricing.

Answer

Chairman and CEO Frank Sorrentino attributed stronger loan growth to a robust pipeline, a strategic de-emphasis on non-relationship business, and increased client confidence. He noted deposit growth stemmed from a focus on relationship banking and capitalizing on market disruption. CFO Bill Burns provided specifics, stating Q4 loans were booked at 7.45% with a pipeline average of 7.62%, and confirmed plans to issue $175 million to $200 million in sub-debt to cover the transaction and upcoming repricing.

Matthew Breese asked for clarification on the timing for loan growth, which is expected to be muted near-term, and inquired about expectations for loan and deposit betas following the Fed's rate cuts. He also sought an update on the planned $100 million subordinated debt raise associated with the First of Long Island merger.

Answer

Chairman and CEO Frank Sorrentino clarified that loan growth would likely remain muted for another one to two quarters before returning to a mid- to high-single-digit pace by Q2 2025, driven by organic efforts and merger synergies. CFO Bill Burns addressed the other points, stating the deposit beta for the next rate cut could range from 60-100%, but he is modeling 80% for now. He confirmed the plan to raise sub-debt in Q1 2025, likely combining it with a repricing for a total $175 million offering.

Matt Breese requested more color on loan growth and pipeline from a geographic perspective, specifically asking about C&I and CRE activity in Florida, the Mid-Atlantic, Northeast, and national lines, and any differences in origination trends or spreads. He also inquired about the new blended rate for CDs as elevated time deposits mature and the trend in the cost of deposits.

Answer

Gino Martocci, Senior EVP, Commercial Banking, stated the pipeline is well-balanced geographically, with strong activity in healthcare, New York, New Jersey, Florida, and affiliate markets, noting minor spread compression. Travis Lan, CFO, indicated new/rollover CD rates are around 3.50%, with $1.2 billion of brokered deposits (costing ~4.50%) maturing next year. He provided the total portfolio spot deposit rate of 2.32% (below Q4 average of 2.45%), core rate ~2.10%, and brokered ~4.20%, noting new Q4 deposit relationships were at 2.17%, down from 2.91% in Q3. Mark Saeger, Chief Credit Officer, attributed the pickup in 30-59 day past due loans to three unique, non-trending situations.

Matt Breese asked for more color on loan growth and pipeline from a geographic perspective (Florida, Mid-Atlantic, Northeast, national lines) and any notable differences in origination trends or spreads. He also inquired about the new blended rate of CDs as a proxy for future costs and the reasons behind the pickup in 30-59 day past due loans.

Answer

Gino Martocci, Senior EVP, Commercial Banking, stated the pipeline is well-balanced geographically across New York, New Jersey, Florida, and affiliate markets, with a strong concentration in healthcare, and consistent, minor spread compression. Travis Lan, Senior EVP and CFO, noted new CD rates are around 3.50%, with $1.2 billion of brokered deposits maturing at 4.50%. The total spot deposit rate was 2.32% (core 2.10%, brokered 4.20%), and new Q4 deposit relationships were originated at 2.17% (vs. Q3 at 2.91%). Mark Saeger, Chief Credit Officer, attributed the 30-59 day past due increase to three unique, specific loans, not a portfolio trend, with resolutions expected in Q1 and Q2.

Matthew Breese of Stephens sought clarification on Valley National Bancorp's normalized loan growth target of 4%-6% for 2026 and inquired about the corresponding deposit growth outlook, specifically if a further reduction in the loan-to-deposit ratio is anticipated. He also asked CEO Ira Robbins for his thoughts on all strategic alternatives, including a potential sale, given the current M&A environment for larger banks.

Answer

CFO Travis Lan confirmed the 4%-6% loan growth expectation for 2026 and stated that deposit growth is anticipated to exceed loan growth, with a long-term goal of reducing the loan-to-deposit ratio from 96.4% to 90%. He also mentioned efforts to lower the loans-to-non-brokered deposits ratio. CEO Ira Robbins reiterated that the organization's approach to strategic alternatives, including M&A or a potential sale, is always "shareholder first."

Matthew M. Breese sought clarification on the 4-6% normalized loan growth range for 2026 and the outlook for deposit growth, including the potential for a further lowering of the loan-to-deposit ratio. He also asked about Valley National Bancorp's thoughts on strategic alternatives, including a potential sale, given the opening M&A window for big banks.

Answer

Travis Lan, CFO, confirmed the 4-6% loan growth expectation for 2026, anticipating deposit growth to exceed loan growth, with a long-term goal of reducing the loan-to-deposit ratio to 90% and loans to non-brokered deposits closer to 100%. Ira Robbins, CEO, reiterated that all strategic decisions, including M&A, are guided by a 'shareholder first' principle.

Matthew Breese from Stephens Inc. asked for the blended price on new CDs and questioned the narrative of deposit quality improvement given high and rising deposit costs. He also asked about the potential for a stock buyback due to the valuation disconnect and followed up on the timeline to achieve a 1% ROA and 15% ROTCE.

Answer

SEVP & CFO Travis Lan clarified that CD growth was a mix of promotional retail and brokered CDs, and highlighted strong core deposit tailwinds, including $1.8B in new deposits at a 2.77% rate. Chairman & CEO Ira Robbins added a strategic view on long-term value creation from new account growth. Regarding capital, Robbins stated they have significant flexibility for a buyback but are balancing it with strong organic growth opportunities. He affirmed a clear path to 1% ROA by year-end and a glide path toward 15% ROTCE in 2027.

Matthew Breese from Stephens Inc. asked for the blended price on new CDs and questioned why deposit costs remain high despite strategic improvements. He also explored the potential for a share buyback given the stock's valuation and followed up on the timeline to achieve a 1% ROA and 15% ROTCE.

Answer

SEVP & CFO Travis Lan clarified that CD growth was partly promotional and partly a shift from brokered money market accounts, and that new customer deposits came in at a favorable 2.77% rate. Chairman & CEO Ira Robbins addressed the valuation, stating that while a buyback is an option, the focus is on organic growth to create long-term value. He reaffirmed the path to a 1% ROA by year-end and a clear glide path towards 12-12.5% ROTCE next year, eventually reaching 15%.

Matthew Breese from Stephens Inc. asked about the cost of new CD growth, deposit cost pressures, the potential for a share buyback given the stock's valuation, and the timeline for achieving a 1% return on assets (ROA) and 15% return on tangible common equity (ROTCE).

Answer

SEVP & CFO Travis Lan clarified that CD growth was a mix of retail promotions and a strategic shift from other brokered types, with new customer deposits costing 2.77%. Chairman & CEO Ira Robbins addressed capital allocation, stating that while the bank has significant flexibility for buybacks, it is balancing that against strong organic growth opportunities. Robbins confirmed a clear path to 1% ROA by year-end and a glide path toward 15% ROTCE in 2027.

Matthew Breese from Stephens Inc. asked about the blended cost of new CDs, opportunities to reduce overall deposit costs, and the potential for a stock buyback given the valuation disconnect. He also inquired about the path and timeline to achieving a 1% ROA and 15% ROTCE.

Answer

SEVP & CFO Travis Lan clarified that new customer deposits were added at a 2.77% rate and that CD growth was a mix of promotional and brokered activity. Chairman & CEO Ira Robbins stated that while the bank has flexibility for a buyback, the focus is on balancing it with strong organic growth opportunities. Robbins reaffirmed the clear path to a 1% ROA by year-end 2025 and a glide path toward 15% ROTCE by 2027, driven by sustained NII growth and strategic execution.

Matthew Breese from Stephens Inc. asked for the blended price on new CD growth and questioned why deposit costs remain elevated despite investments in relationship banking. He also explored the potential for a share buyback given the stock's valuation and asked about the timeline for achieving a 1% ROA and 15% ROTCE.

Answer

SEVP & CFO Travis Lan clarified that CD growth was a mix of retail promotions and a strategic shift from brokered money market accounts to brokered CDs. Chairman & CEO Ira Robbins emphasized the long-term strategic value of growing deposit accounts and treasury capabilities, which will drive costs down over time. Regarding capital, Robbins stated that while the bank has flexibility for buybacks, it is currently balancing that against strong organic growth opportunities. He reaffirmed a clear path to reaching 1% ROA by year-end and progressing toward a 15% ROTCE in subsequent years.

Matthew Breese asked about funding expectations, specifically for core deposit growth and the remaining balance of brokered deposits to run off. He also questioned the significant move in loan yields, seeking to understand the impact of spread compression, and requested the end-of-period cost of deposits.

Answer

CEO Ira Robbins linked funding needs to moderated loan growth expectations. Executive Travis Lan confirmed the bank is on track for its 6% annual core deposit growth target and highlighted a $6 billion pool of brokered CDs maturing over the next 12 months, which presents a repricing opportunity. He clarified that the Q1 loan yield was significantly impacted by having two fewer days in the quarter, which was a larger factor than spread compression. He did not have the spot deposit cost available.

Matthew Breese asked about the deployment strategy for the elevated cash position, the target for the securities portfolio as a percentage of assets, the latest total cost of deposits, and details on the renewed focus on retail branch banking.

Answer

Executive Travis Lan stated that the elevated cash will normalize throughout the year as it is put to work, with the securities portfolio expected to grow by over $500 million in 2025. He noted the December average cost of deposits was 2.87%. CEO Ira Robbins addressed the retail strategy, explaining that costs for branch investments are in the guidance and that there are significant opportunities for growth within the existing New Jersey footprint due to market disruption, in addition to recent openings in other markets like Beverly Hills.

Matthew Breese of Stephens Inc. asked about the Net Interest Margin (NIM) outlook in a rate-cutting cycle, the conservative Q4 fee income guide, the timeline to a sustainable 1% ROA, and the potential magnitude of Q4 charge-offs.

Answer

Executives Travis Lan and Ira Robbins stated that NIM is expected to expand, driven by outperforming deposit betas and the repricing of fixed-rate assets. The flat fee income guide was described as conservative, and CEO Ira Robbins suggested a 1%+ ROA is achievable soon after credit normalizes. An executive noted Q4 charge-offs could be elevated due to isolated loans but would not be materially out of line for the full year.

Matthew Breese from Stephens Inc. followed up on First Commonwealth Financial Corporation's securities book, inquiring about the outlook for securities yields in Q1, cash flow estimates for the year, and the portfolio's duration, anticipating a more aggressive pickup in yields later in the year or next.

Answer

CFO Jim Reske explained that the philosophy is to replace runoff in the securities portfolio, with reinvestment rates for the held-for-sale proceeds estimated around 4.5% to 4.75%, which will naturally allow securities yields to drift upward. He noted the securities portfolio's duration was 4.28% in Q4, indicating repricing opportunities as it rolls over.

Matthew Breese followed up on the securities book, noting its stable range but declining yields, and asked about the expected reinvestment rate for the held-for-sale portfolio proceeds into securities. He also sought an outlook for securities yields in Q1, cash flow estimates for the year, and the potential for a more aggressive pickup in securities yields later in 2026 or 2027, along with the current duration of the securities portfolio.

Answer

CFO Jim Reske stated that the reinvestment of held-for-sale loan proceeds into securities was assumed at a 4.5% repurchase rate, but opportunities in the high 4s (e.g., 4.75% for plain vanilla investments) are being observed. He clarified that the philosophy is to replace runoff, not expand the portfolio. Reske also mentioned that the securities portfolio's duration was 4.28 in Q4, indicating repricing opportunities as it rolls over.

Matthew Breese from Stephens Inc. asked about the target level for the securities portfolio as a percentage of assets, strategic market share opportunities, and the potential impact of AI and data center investments in Pennsylvania.

Answer

CFO James Reske stated the company is comfortable with the current securities level (13.5% of assets) and does not feel a need to increase it, citing over $5 billion in available liquidity. CEO Thomas Michael Price expressed confidence in doubling the bank's size within its existing Ohio and Pennsylvania footprint by gaining market share and enhancing product penetration, rather than entering new markets. He also commented positively on the significant economic potential from AI and data center-related power investments in the region.

Matthew Breese asked for an extended net interest margin (NIM) outlook into 2026 and whether competitive pressures might cap margin expansion. He also inquired about current new loan yields, SBA credit trends and on-balance-sheet exposure, and the specific balance sheet impact of expiring macro swaps.

Answer

CFO James Reske projected the NIM could remain in the high 3.80s in 2026 in a flat-rate scenario, or around 3.80% with rate cuts, noting this assumes no recession. Chief Lending Officer Michael McCuen stated new loans are yielding around 7% but competitive pressure is increasing. Chief Credit Officer Brian Sohocki reported the on-balance-sheet SBA portfolio is diverse and around $165 million, with no notable credit concerns. Reske clarified that expiring swaps directly increase loan yields as they reprice from a low fixed rate to a higher variable SOFR-based rate.

Matthew Breese asked about the outlook for cash balances and the securities portfolio, inquired about concentration limits for the equipment finance book, and requested specific accounting details for the Center Bank deal, including share issuance and accretable yield.

Answer

CFO James Reske stated that cash balances have normalized after paying down BTFP borrowings and the securities portfolio is expected to remain relatively flat. President and CEO Thomas Michael Price indicated the target concentration for the equipment finance book is around 10% or less of total loans, emphasizing the long-term goal is to grow the core C&I book. For the Center Bank deal, Reske provided key figures, including an issuance of 3 million shares and an expected EPS accretion of about $0.01 per quarter, noting that the accretable yield impact would be minimal.

Matthew Breese sought clarification on the true floating-rate loan exposure, the maturity profile of the fixed-rate book, the specific yields on repricing fixed-rate loans, and the outlook for nonperforming assets and charge-offs.

Answer

CFO Jim Reske clarified that while over 50% of loans are variable, only 33% are tied to short-term indices like SOFR. He provided a total loan portfolio duration of 2.76 years and specified that new fixed-rate loans were originated at 7.24% while run-offs were at 5.52%. President and CEO Mike Price stated he believes NPAs are near a peak and that the core bank's normalized charge-off rate is in the low teens.

Matthew Breese inquired about the details surrounding the commercial real estate office loan charge-off, including why it was classified for two years, the pricing achieved relative to underwriting, and what this implies for commercial real estate pricing trends. He also asked about the repricing schedule and blended cost of CDs, the impact of maturing securities on the balance sheet, and the company's M&A strategy, including potential interest in the Boston market.

Answer

Simon Griffiths, President and Chief Executive Officer, explained that the charge-off was for an underperforming office property, classified for nearly two years with a $1 million reserve, and the short sale resulted in an 88% recovery. He noted that office loans represent only 3.7% of the portfolio and are generally in good condition. Mike Archer, Executive Vice President and Chief Financial Officer, stated that about 40% of CDs are repricing in the next three months at a blended rate of around 3.35%, with nearly 95% repricing over the next twelve months. He also mentioned steady securities cash flow of $10 million-$11 million per month, which will be reinvested. Mr. Griffiths reiterated a focus on organic growth and opportunistic M&A in contiguous markets, similar to the Northway acquisition, but viewed Boston as outside their typical sweet spot.

Matt Breese from Stephens Inc. sought more detail on the syndicated C&I credit, including the total loan size and Camden's exposure. He also questioned the guidance for fee income and expenses, the timing of Northway cost synergy realization, and whether the company would consider a stock buyback given the share price reaction.

Answer

President & CEO Simon Griffiths stated Camden's exposure to the syndicated loan is $12 million out of a total facility of around $200 million involving five or six other banks. EVP & CFO Michael Archer explained the slightly lower Q3 fee income guidance ($12M-$13M) is due to potential volatility in mortgage pipeline valuation and BOLI, and he confirmed the Q3 expense target is near $34 million as Northway synergies are realized. Regarding the stock, Griffiths acknowledged the buyback program is an available option while emphasizing a positive outlook for the second half of the year.

Matt Breese of Stephens Inc. sought more details on the syndicated C&I credit, including the total loan size and Camden's exposure. He also questioned the guidance for a slight pullback in fee income, the expense run-rate after realizing Northway synergies, and the company's interest in share buybacks given the stock's reaction.

Answer

President & CEO Simon Griffiths stated Camden's exposure is $12 million out of a total facility of around $200 million involving five or six other banks, and he reiterated that broader credit trends are healthy. CFO Michael Archer explained the conservative Q3 fee income guidance of $12-13 million is due to potential volatility in BOLI and fair value adjustments on mortgage pipeline loans. He guided Q3 non-interest expenses to around $34 million as Northway synergies are realized. Griffiths confirmed a buyback program is in place and remains an option, expressing confidence in the company's second-half performance.

Matthew Breese asked for clarity on the future run rate for fee income and core operating expenses, and questioned management on the progress of the Northway Financial integration.

Answer

EVP & CFO Mike Archer projected fee income could reach the $12.0-$12.5 million range in Q2, approaching $13 million by year-end. Both Archer and President & CEO Simon Griffiths confirmed a core quarterly expense run rate of $34.5-$35.0 million is a good near-term estimate, with more savings expected in the second half of the year. Griffiths described the integration as exceptionally smooth with strong employee retention and positive client feedback, and affirmed an appetite for future M&A.

Matthew Breese asked for specifics on the Northway deal's financial impact, including the CECL Day 2 provision, expected reported NIM with accretion, and future M&A appetite.

Answer

EVP and CFO Michael Archer stated that purchase accounting is being finalized but expects the CECL impact to be consistent with initial estimates. He projected a reported NIM potentially in the 2.85%-2.90% range and noted goodwill would likely be slightly higher than the original $40-$45 million forecast. President and CEO Simon Griffiths added that while the current focus is on integration, the bank maintains an appetite for the 'right deal' in contiguous markets.

Matthew Breese asked for an introduction to the ClearPoint transaction, specifically its role in the 'death care industry,' the expected $8 million in fee income, and how Community Financial System plans to leverage this acquisition. He also sought clarification on the starting point for non-interest expenses in Q1 2026 and the structural upside for Net Interest Margin (NIM), including the impact of securities book repricing later in 2026.

Answer

CEO Dimitar Karaivanov described ClearPoint's business as trust administration for pre-need funeral and cemetery expenses, highlighting the aging population as a tailwind and the niche's complexity. He noted opportunities to leverage Nottingham Advisors for asset management and banking products like dedicated escrow and SBA financing. CFO Marya Burgio Wlos confirmed that Q1 2026 non-interest expenses are expected to be at the higher end of the guidance range due to seasonal factors and prior investments. She also confirmed a 2-4 basis point NIM expansion for Q1 2026 and acknowledged that securities rebalancing at the end of 2026 would be a tailwind for future NIM expansion.

Matthew Breese sought details on Community Financial System's ClearPoint transaction, specifically regarding the 'death care industry' niche, the expected strategic benefits, and how the company plans to leverage ClearPoint's $8 million in fee income. He also inquired about the starting point for non-interest expenses in Q1 2026 and the expected trajectory throughout the year, and the Net Interest Margin (NIM) outlook, including structural upside and the impact of securities book repricing.

Answer

CEO Dimitar Karaivanov explained that ClearPoint operates in the pre-need death care planning space, which benefits from an aging population and increasing costs. He highlighted ClearPoint's leading position, nationwide reach, and the opportunity to cross-sell wealth management (via Nottingham Advisors) and banking products (escrow, SBA financing) to its customer base of funeral homes and cemeteries. CFO Marya Burgio Wlos confirmed that Q1 2026 expenses are expected to be at the higher end of the guidance range due to seasonal factors and incentive accruals, with a trend towards the middle as the year progresses. She guided for 2-4 basis points of NIM expansion in Q1, noting that securities rebalancing at year-end 2026 will provide a tailwind for future expansion.

Matthew Breese from Stephens Inc. requested details on the loan pipeline, financial targets for loan growth, and the composition and cost of acquired deposits. He also asked for updates on the de novo branch rollout, planned closures, loan yield trends, and the status of the Micron project.

Answer

CEO Dimitar Karaivanov reiterated a mid-single-digit loan growth target, likely at the lower end (4-5%) for the year, and described the acquired deposits as granular with a cost just below 2%. CFO Marya Burgio Wlos confirmed 7 of 19 de novo branches are open, with 17 closures planned to maintain a net-neutral footprint, and stated recent loan yield expansion was not atypical. Mr. Karaivanov added the Micron project is on track to break ground in Q4.

Matthew Breese of Stephens Inc. requested more detail on the loan pipeline, confirmation of the 5-7% loan growth target, the composition and cost of acquired deposits, the status of the de novo branch rollout and related closures, the reason for the quarterly loan yield increase, and an update on the Micron project.

Answer

CEO Dimitar Karaivanov clarified the full-year loan growth target is closer to 4-5% and described the acquired deposits as granular with a blended cost just under 2%. CFO Marya Burgio Wlos confirmed 7 of 19 de novo branches are open, with 17 closures planned to keep the expansion net-neutral to cost, and stated the loan yield increase was not atypical. Mr. Karaivanov also confirmed the Micron project remains on track for a Q4 groundbreaking.

Matthew Breese of Stephens Inc. requested details on the loan pipeline, clarification on loan growth targets, the composition and cost of acquired deposits, an update on the de novo branch rollout versus closures, the nature of the recent loan yield increase, and the status of the Micron project.

Answer

CEO Dimitar Karaivanov confirmed a mid-single-digit loan growth target for the year, likely in the 4-5% range, and detailed the acquired deposits as granular, low-cost, and intended to fund loan growth over the next 5-6 years. CFO Marya Burgio Wlos updated that 7 of 19 de novo branches are open, with 17 closures planned to ensure the expansion is net neutral, and confirmed the loan yield increase was not unusual. Dimitar Karaivanov concluded that the Micron project remains on track for a Q4 groundbreaking.

Matthew Breese of Stephens Inc. asked for details on the loan pipeline, clarification on loan growth targets, the composition and cost of acquired deposits, an update on the de novo branch rollout and related closures, the reason for strong loan yield performance, and the status of the Micron project.

Answer

CEO Dimitar Karaivanov affirmed a full-year loan growth target at the lower end of the mid-single-digit range (4-5%), supported by a robust pipeline. He detailed the acquired deposits as granular with a cost just under 2%. CFO Marya Burgio Wlos confirmed 7 of 19 de novo branches are open, with 17 closures planned, and noted the loan yield increase was not atypical. Mr. Karaivanov also confirmed the Micron project's Q4 groundbreaking is on track.

Matthew Breese requested an outlook for Net Interest Income (NII), asking for specifics on cash flows and roll-off yields from the loan and securities portfolios. He also asked if the competitive environment would alter the company's M&A strategy and sought guidance on the expense outlook for 2025.

Answer

Executive Joseph Serbun detailed that the loan portfolio's back book yield is just over 5.50% while new volume is near 7%, providing NII lift. He noted minimal securities runoff in 2025 but significant repricing opportunities in 2026-2029. Executive Dimitar Karaivanov stated that the M&A strategy remains focused on quality and is unchanged by the environment. Joseph Serbun projected mid-single-digit growth in operating expenses for the year, driven by strategic investments.

Matthew Breese focused on the cadence of loan yield expansion, payoff activity, and the duration of the loan book. He also asked whether the bank was seeing pressure to raise deposit costs or had opportunities to lower them, and concluded by asking about the M&A outlook given the new leadership at the FDIC.

Answer

Executive Joseph Sutaris indicated that the recent 7 basis point quarterly loan yield expansion is likely not sustainable due to the impact of potential rate cuts on the floating-rate book. Executive Dimitar Karaivanov noted that loan prepayment activity is below average. On deposits, Karaivanov stated there is 'no pressure to increase costs' and the bank is actively reducing them. Regarding M&A, he acknowledged a more constructive regulatory tone but said it doesn't fundamentally change their opportunistic approach, as the bank's strong organic growth means it doesn't need to pursue a transaction.

Matthew Breese inquired about the outlook for Net Interest Income (NII) and Net Interest Margin (NIM), the drivers behind recent loan growth, the trajectory of credit provisions and reserves, and the economic activity in Upstate New York.

Answer

Executive Dimitar Karaivanov and Executive Joseph Sutaris explained that NII is expected to continue expanding, driven by loan repricing and deposit cost management following the Fed rate cut. Mr. Karaivanov clarified that recent strong loan growth was boosted by a few large deals and is expected to normalize. He also suggested that while credit reserves are currently high, they may increase by a few basis points in coming quarters. He attributed strong Upstate New York economic activity to manufacturing onshoring and government subsidies.

Matthew Breese of Stephens inquired about NBT Bancorp's charge-off expectations, asking if they should be reframed lower given the winding down of consumer balances, and what a 'normal' charge-off rate would be for the current loan book composition. He also asked if the appetite to sell the solar loan book has changed, specifically if the company is listening to bids or re-evaluating its mark. Finally, he questioned the catalysts or triggers for share repurchases and whether the level seen in Q4 2025 is indicative of future repurchase activity in early 2026.

Answer

Annette Burns, CFO of NBT Bancorp, explained that historical charge-off rates of 25-30 basis points were influenced by large unsecured consumer and residential solar books. As these wind down, she expects a new normalized rate of 15-20 basis points. Scott Kingsley, President and CEO, added that indirect auto lending losses are typically 20-35 basis points, and mortgage losses have been exceptionally low. Regarding the solar book, Kingsley stated that while assets perform well, the low rates from 2020-2023 production make a sale a 'substantial outcome,' and NBT Bancorp, as 'purists,' will not sell if the terminal value is not above zero, preferring to wait for customer repayments. On share repurchases, Kingsley identified value/price (believing the stock is undervalued) and capital capacity as triggers. He noted that the Q4 2025 repurchases (over $10M) were self-funded without impacting capital ratios, and he believes NBT Bancorp can sustain this level quarterly, with additional capacity.

Matthew Breese asked about NBT Bancorp's charge-off expectations, specifically if they should be reframed lower given the wind-down of consumer balances, and how to characterize a 'normal' charge-off rate for the current book. He also inquired if the appetite to sell the solar loan book has changed and about the catalysts or triggers for share repurchases, asking if the Q4 2025 level might be seen again in early 2026.

Answer

CFO Annette Burns and President and CEO Scott Kingsley explained that past charge-off rates of 25-30 bps were influenced by large unsecured consumer and residential solar portfolios. As these wind down, they expect lower normalized charge-offs in the 15-20 bps range. Scott Kingsley highlighted strong performance in indirect auto lending (20-35 bps losses) and very low mortgage losses ($31K from 2020-2025). Scott Kingsley and Annette Burns stated that the dilemma with selling the solar book is its low-rate production from 2020-2023, making marketability a rate question despite good asset performance. They are 'purists' and won't sell if the terminal value isn't above zero. Scott Kingsley and Annette Burns noted that Q4 2025 share repurchases (over $10M) were driven by perceived undervaluation and capacity, as they were self-funded without impacting capital ratios. They believe this pattern could continue, potentially every quarter, with more capacity available.

Matthew M. Breese posed several margin-related questions, including the spot cost of deposits at quarter-end or the most recent date, and the roll-on versus roll-off dynamics for fixed and adjustable-rate loans. He also questioned when NBT Bancorp expects a more pronounced pickup in securities yields as the back book resets or matures. Finally, Mr. Breese inquired about the potential for near-term securities growth as part of earning asset expansion, and the extent to which the company might utilize its excess cash position for this purpose.

Answer

Scott Kingsley, NBT Bancorp's CEO and President, noted that the spot cost of deposits was not immediately available but likely slightly lower in October than September due to post-Fed rate change adjustments. Annette Burns, CFO, detailed loan roll-on/off dynamics, indicating a 50 bps differential for commercial loans, near parity for indirect auto (depending on the yield curve belly), and about 160 bps room for residential mortgages between portfolio and new origination yields. Mr. Kingsley explained that the securities portfolio is cash-flowing, primarily mortgage-backed, with orderly cash flows of a couple hundred million dollars annually, and acknowledged that portfolio yields are below peers due to not undertaking a one-time restructuring. Regarding earning asset growth, Mr. Kingsley confirmed flexibility for securities growth, emphasizing a duration-based risk-reward approach and no plans for significant duration mismatches, with a primary focus on collateralization for municipal deposits rather than incremental earnings from large security additions.

Matthew Breese, Managing Director and Research Analyst at Stephens, Inc., posed several margin-related questions to NBT Bancorp. He asked for the spot cost of deposits at quarter-end or the most recent date and sought color on the roll-on versus roll-off dynamics for fixed and adjustable rate loans. Mr. Breese also inquired about when a more pronounced pickup in securities yields could be expected as the back book resets or matures. Lastly, he asked about the extent of potential securities growth and how NBT Bancorp might lean into its excess cash position to achieve earning asset growth beyond loans.

Answer

CEO and President, Scott Kingsley, did not have the exact spot cost of deposits but noted that October's cost of funds were likely slightly lower than September's. CFO, Annette Burns, detailed roll-on/roll-off dynamics: commercial portfolio has about a 50 basis point differential between portfolio yields and origination rates; indirect auto is similar, dependent on the yield curve; residential mortgages have the most room, with about 160 basis points difference. Mr. Kingsley explained that the securities portfolio is cash-flowing (mostly mortgage-backed securities) at a couple hundred million dollars a year, and while yields are below peers, NBT Bancorp has not done a one-time charge or restructuring. Regarding earning asset growth, Mr. Kingsley confirmed flexibility to grow beyond loans, emphasizing a duration-based risk-reward approach. He stated that NBT Bancorp would not take a real mismatch in duration and that the focus for investment securities is collateralization for municipal deposits rather than incremental earnings from large security purchases.

Matthew Breese from Stephens Inc. questioned the plans for deploying excess liquidity, the target level for the securities portfolio, the latest developments regarding the CHIPS Act and Micron's project, and the company's M&A appetite now that the Evans deal is closed.

Answer

President & CEO Scott Kingsley explained that excess liquidity resulted from the Evans deal, modest loan growth, and strong deposit growth. EVP & CFO Annette Burns added that near-term uses include the recent sub-debt repayment and expected municipal outflows, with the remainder supporting loan growth. Regarding the securities portfolio, Kingsley indicated they are reinvesting cash flows and are open to opportunistic purchases. He confirmed Micron's recommitment and noted additional tax incentives are a net positive. On M&A, Kingsley emphasized the focus remains on successful integration but said the bank is well-capitalized and methodically evaluating opportunities to fill in its geographic footprint.

Matthew Breese of Stephens Inc. asked about the potential for CHIPS Act funding to be rescinded or delayed, the outlook for fee income drivers, the revised forecast for loan growth, and details on a specific commercial real estate charge-off.

Answer

Executive Scott Kingsley acknowledged that while the government has contractual obligations for the CHIPS Act, adjustments are possible, but he believes the core goal of domestic manufacturing will remain. CFO Annette Burns projected a stable fee income run rate around $46 million. Kingsley revised the full-year loan growth outlook down from 3-5% to 2-3%, citing a slow first quarter. Burns confirmed the CRE charge-off was on a previously disclosed credit, with the remaining exposure now written down to fair value.

Matthew Breese from Stephens Inc. questioned the company's timeline for future whole-bank M&A following the Evans deal, the expected tax rate for the upcoming year, and key areas of internal investment. He also asked for clarification on a comment about 'going to market' and its relation to capital plans.

Answer

Executive Scott Kingsley stated the company is 'mono-focused' on the Evans integration with no set M&A timeline, instead highlighting numerous organic growth opportunities. CFO Annette Burns provided a 2025 tax rate estimate of 22.5% to 23%. Kingsley clarified that his market comment was not about a capital raise and noted the company has flexibility regarding its upcoming sub-debt maturity.

Matthew Breese questioned if the quarterly expense level was higher than management expected and sought to confirm a normalized run rate for Q4. He also asked if any unusual items contributed to the strong NIM performance, requested details on fee income seasonality, and inquired if the slight decline in reserves could continue as certain loan portfolios run off.

Answer

CFO Annette Burns stated the expense level was not a surprise and was driven by a 'catch-up' on incentive compensation accruals due to strong performance; she confirmed a normalized quarterly expense range of $92-$94 million. She also affirmed there were no unusual items in the NIM. Regarding fee income, she explained Q3's strength in insurance is tied to typical commercial renewal timing. On reserves, she agreed that the mix shift away from higher-reserve runoff portfolios (like solar) is reducing the overall coverage ratio and that this trend could continue for a few more quarters before leveling off. Executive Scott Kingsley added context on the scale of the fee businesses and reinforced the reserve coverage rationale.

Matthew Breese asked Northwest Bancshares for the exact amount of the Bank-Owned Life Insurance (BOLI) death benefit recorded in Q4. He also inquired about the blended new cost of Certificates of Deposit (CDs) given 43% maturing in Q1 2026, and the potential for further lowering core deposit costs amidst competitive conditions. Finally, he questioned the bank's appetite for whole bank M&A following its recent acquisition, and whether there are active conversations.

Answer

CFO Doug Schosser confirmed the BOLI death benefit was approximately $6.5 million. He estimated a 10-15 basis point opportunity on CD repricing as markets come down, dependent on competitive pressures. Mr. Schosser noted a longer lag (30-45 days) between Fed rate changes and bank reactions for core deposit costs, but still sees opportunities to lower them. CEO Lou Torchio stated that Northwest Bancshares is currently focused on successful accretion and driving organic growth in 2026, aiming to string together strong results before entertaining further whole bank M&A. He added that while open to opportunistic deals later in 2027, any M&A would need to fit culturally, be earnings accretive, and remain within the bank's geographic footprint.

Matthew Breese inquired about the exact amount of the BOLI death benefit, the blended new cost of CDs and their near-term trajectory, the remaining room to lower costs in the core deposit book given competitive conditions, and the bank's appetite for whole bank M&A and current conversation levels.

Answer

CFO Doug Schosser confirmed the BOLI death benefit was approximately $6.5 million. He estimated a 10-15 basis point opportunity for CD repricing, noting competitive pressures. He acknowledged a lag in core deposit cost reductions following Fed rate changes (30-45 days). CEO Lou Torchio stated the bank is focused on organic growth and successful integration post-acquisition, with no imminent M&A plans, but remains open to culturally fitting, value-driving deals within their geographic footprint, potentially later in 2027.

Matt Breese asked about Northwest Bancshares Inc.'s most recent spot rate of deposits and expectations for deposit betas over the next 12-18 months, particularly given the current low overall cost of deposits. He also sought quantification of the loan pipelines, identifying pockets of strength and areas expected to grow more than others. Finally, Breese inquired about overall blended loan yields within the pipeline and whether the company is observing any spread compression.

Answer

Doug Schosser, CFO, stated the total cost of deposits was stable at $1.55, benefiting from the acquisition, and estimated deposit betas in the mid-20s through the rate cycle, indicating a neutral position for future rate cuts. He described strong pipelines in national verticals like sports finance, franchise finance, and equipment financing, which are expected to drive decent support, with slightly more growth anticipated from national verticals than in-market. Schosser also noted that overall rates coming onto the book are in the low sevens, acknowledging competitive pressures and potential future yield pressure from expected rate reductions. Louis Torchio, President and CEO, emphasized the prescriptive and measured growth of specialty businesses, focusing on deposit gathering and fees, with strong credit performance.

Matt Breese asked for the most recent spot rate of deposits and expectations for deposit betas over the next 12-18 months. He also requested quantification of loan pipelines, identifying pockets of strength within national and specialty verticals, their proportion within the commercial and industrial (C&I) book, and distinguishing between participations and standalone relationships. Finally, he inquired about overall blended loan yields in the pipeline and any signs of spread compression.

Answer

Douglas Schosser (CFO, Northwest Bancshares Inc) stated the total cost of deposits was stable at $1.55, with promotional money market rates around 4%, and estimated the overall deposit beta in the mid-20s. He described strong pipelines in national verticals like sports finance, franchise finance, and equipment financing, constituting about 20% of the C&I book, primarily standalone relationships. Louis Torchio (President and CEO, Northwest Bancshares Inc) added that these businesses are growing prescriptively. Schosser noted blended loan yields in the pipeline are in the low sevens, acknowledging competitive pressure and expected future yield pressure.

Matt Breese from Stephens Inc. asked about the potential for non-accrual loan creation following the increase in classifieds, deposit growth prospects, and the recent uptick in home equity and consumer loan balances. He also questioned the current roll-on versus roll-off yields.

Answer

CFO Douglas Schosser stated the bank is adequately reserved and expects to reduce non-performing assets by year-end without material losses. He also noted deposit competition has eased. President and CEO Louis Torchio characterized the consumer loan growth as opportunistic rather than a strategic shift, leveraging the bank's flexibility. Schosser added that new commercial loan yields are near 7%, while consumer loan roll-on/roll-off rates are relatively stable.

Matthew Breese asked about the competitive landscape, areas of spread compression, and the roll-on versus roll-off yields for loans. He also followed up on whether consumer lending is a lever the bank would pull if commercial loan growth slows.

Answer

CFO Douglas Schosser noted that new commercial loans are originating at 7.26% while old ones are rolling off at 6.76%. CEO Louis Torchio added that the bank is maintaining pricing discipline, which could constrain volume. Torchio confirmed that consumer lending, particularly indirect auto and home equity, is a strategic lever they can use, but its deployment is actively balanced against credit quality risk and overall yield, with the flexibility to pull back if the consumer credit environment weakens.

Matthew Breese asked about Northwest's strategy for commercial real estate (CRE) lending, noting that some peers are re-entering the space, and questioned if Northwest might grow this portfolio if yields are attractive. He also sought expectations for loan and deposit betas and whether the net interest margin has an upward bias given the yield curve. Finally, he asked for guidance on the provision expense and the expected level for the loan loss reserve.

Answer

CFO Douglas Schosser stated that while the bank will execute on good CRE deals, it is not a strategic focus to materially grow the portfolio, confirming a 'flattish' outlook is a fair assumption. Chief Credit Officer Thomas Creal added they are being strategic about CRE opportunities. Schosser agreed the current rate environment provides an opportunity for margin expansion, guiding for continued growth. Regarding the provision, he indicated that it should see slight increases to support projected loan growth, assuming a stable credit environment.

Matthew Breese requested a breakdown of floating-rate loans and their yields, the expected pace of C&I loan growth, and whether the reserve-to-loan ratio would increase as the loan mix shifts toward C&I.

Answer

CFO Douglas Schosser directed the question on loan mix to the earnings presentation, which showed 24% of loans are floating rate. CEO Louis Torchio explained that while there is no specific C&I target percentage, the goal is a more balanced book with ancillary fee and deposit benefits. Both executives confirmed the allowance for credit losses will prudently increase over time to reflect the risk profile of the C&I-focused strategy.

Matthew Breese from Stephens Inc. expressed surprise at OceanFirst Financial Corp.'s maintained 100% loan-to-deposit ratio guidance, expecting a reduction with the Premier Banking initiative, and questioned if 30% DDA from Premier Banking remains the long-term target. He also sought a detailed description of the higher-cost and highest-quality deposit components within Flushing Financial Corporation's $7.3 billion deposits. Finally, he asked for an outlook on deposit costs for the year, including peak levels and year-end expectations without rate cuts, and the blended all-in cost of time deposits as they reset.

Answer

Patrick Barrett, CFO, stated that while OceanFirst Financial Corp. aims for a loan-to-deposit ratio under 100%, it won't be dramatically lower, given robust deposit verticals, and expects a gradual decrease over several quarters. Joseph Lebel III, President and COO, confirmed that 25%-30% DDA from Premier Banking remains the long-term target, anticipating a higher percentage in 2026 as unfunded operating accounts migrate. Christopher Maher, Chairman and CEO, identified Flushing's higher-cost deposits as national online platforms and some government/money market accounts, while highlighting long-term consumer accounts in Queens and Asian communities, and commercial operating accounts as high-quality. Patrick Barrett indicated that deposit costs are trending down, lagging rate cuts, and spot rates are already lower than quarterly averages, with loan growth pace influencing future costs. Joseph Lebel III added that the balance sheet restructure would prioritize letting short-duration brokered deposits (high threes, ~4-month duration) run off.

Matthew Breese questioned the loan-to-deposit ratio outlook, given Premier Banking efforts, and the long-term DDA target for Premier Banking. He also sought a description of Flushing Financial Corporation's higher-cost and highest-quality deposit components, the deposit cost outlook for the year, and the blended all-in cost of time deposits as they reset.

Answer

Patrick Barrett, CFO, and Christopher Maher, Chairman and CEO, stated their aim for a loan-to-deposit ratio 'substantially lower than 100%' but not dramatically, balancing earnings and opportunistic growth. Joseph Lebel III, President and COO, confirmed that 25-30% DDA remains the long-term target for Premier Banking, expecting higher DDA percentages in 2026 as unfunded operating accounts migrate. Mr. Maher identified Flushing's national deposit verticals (e.g., iGObanking) and some government deposits as higher-cost, while highlighting long-term, high-quality consumer accounts (especially in Asian communities) and commercial operating accounts as the highest quality. Mr. Barrett expects deposit costs to continue declining, initially lagging rate cuts but accelerating. Mr. Lebel and Mr. Barrett noted that brokered deposits (in the high threes, declining) would be the first to run off post-merger, with a weighted average duration under six months, allowing for rapid price adjustments.

Matthew Breese sought clarity on the NIM impact from rate cuts, why new higher-cost deposits won't raise the bank's average, the trend in securities yields, the outlook for loan yield expansion, and the role of CRE payoffs in loan growth guidance.

Answer

CFO Patrick Barrett indicated a minimal NIM impact from rate cuts, at less than a penny per share annually per 25 bps. Chairman & CEO Christopher Maher explained new deposit costs will moderate as low-cost operating balances build over time. Maher also confirmed that 4 bps is a good proxy for quarterly loan yield expansion and that the bank expects CRE balances to remain steady, not in runoff.

Matthew Breese inquired how the anticipated deposit growth from Premier teams would impact the balance sheet size, whether any teams have a national focus, and for an update on the bank's commercial real estate (CRE) concentration and strategy.

Answer

CEO Christopher Maher estimated that new deposits would be split between funding balance sheet growth and remixing higher-cost funding, depending on loan demand. He confirmed the teams are New York metro-centric. Regarding CRE, Maher stated the concentration is down to 3.93% at the holding company level due to competitive pressures, not a strategic de-emphasis. He added the bank would not do bulk sales and sees a significant margin opportunity in repricing a $1.2 billion CRE portfolio maturing over the next two years.

Matthew Breese sought more color on the potential impact of new hiring teams on deposits and expenses, and questioned the timeline for the net interest margin (NIM) to return to the 3% level.

Answer

CEO Christopher Maher was hesitant to provide specific figures before hiring concludes but confirmed conversations with teams that could bring in hundreds of millions in deposits with a favorable mix, including 35-45% noninterest-bearing accounts. Regarding the NIM, Maher projected a return to 3% is more likely a 2026 event than 2025, anticipating a 'steady, slow march' upward as the loan book reprices in the current rate environment.

Matthew Breese asked for clarification on the expense run rate, the contribution of Garden State to the mortgage pipeline, CRE competition, and capital strategy concerning the upcoming reset of subordinated debt and preferred stock.

Answer

CFO Patrick Barrett provided a Q4 expense guide of $63-$65 million and noted the acquisitions are near-term EPS accretive. CEO Christopher Maher explained the higher Q4 run rate is due to the timing of the Spring Garden closing. Regarding capital, he stated the bank is keeping all options open for its repricing instruments but is 'loath to issue common' equity.

Matthew Breese asked about Webster Financial's strategy for deposit pricing, potential for further deposit cost reductions, the period-end cost of deposits, and current spreads on Commercial Real Estate (CRE) and Commercial & Industrial (C&I) loans, and if growth in lower-risk sectors could lead to reserve reductions.

Answer

CEO John Ciulla and CFO Neal Holland noted aggressive deposit pricing in Q4, with the average cost of deposits at 1.91% in December, down from 1.99% for the quarter. John Ciulla added that credit spreads have tightened, particularly in CRE, and growth in stabilized, lower-risk assets could lead to further reserve reductions if credit environments remain benign.

Matthew Breese inquired about Webster's strategy for deposit pricing, potential for further cost reductions, and the period-end cost of deposits, as well as current spreads on Commercial Real Estate (CRE) and C&I loans and their impact on reserve levels.

Answer

CEO John Ciulla noted a thoughtful approach to deposit pricing amidst competition. CFO Neal Holland reported an average cost of deposits at 1.91% for December, down from 1.99% for the quarter, and assumed a 30% overall beta for the cycle. John Ciulla added that credit spreads have tightened, and growth in lower-risk sectors could lead to further reductions in the reserve as a percentage of loans.

Matthew Breese inquired about the drivers of NIM compression, specifically new loan spreads and commercial real estate yields, and the pronounced drop in commercial loan yields. He also asked about Webster Financial's strategic options regarding a potential sale of the bank.

Answer

John Ciulla (CEO) attributed NIM compression to onboarding higher-quality credits and market-driven credit spread compression, noting that new commercial real estate deals are coming in at lower yields. Neal Holland (CFO) specified that recent CRE originations are in the low 6% range. Regarding a sale, Mr. Ciulla stated Webster is not actively looking to sell but would pragmatically evaluate any opportunity to become part of a larger bank, emphasizing their focus on high-level operations and organic growth.

Matt Breese of Stephens Inc. asked about the sustainability of strong C&I loan originations, the dynamics of commercial real estate payoffs, and the potential risk from its New York City rent-regulated loan portfolio.

Answer

Chairman & CEO John Ciulla and COO & President Luis Massiani expressed confidence in loan growth, citing broad-based activity and building pipelines. Regarding the rent-regulated portfolio, they emphasized it is seasoned, granular, and well-underwritten, and they do not foresee a material credit impact from potential regulatory changes.

Matthew Breese from Stephens requested details on Webster's loan growth pipeline, focusing on the bank's appetite for commercial real estate (CRE), expectations for the Marathon partnership's impact on C&I growth, and the recent strength in residential lending. He also asked about the provisioning outlook.

Answer

CEO John Ciulla stated that while economic uncertainty has delayed some client investment, underlying demand supports the 4-5% annual loan growth forecast. He noted Webster is selectively participating in the CRE market, which has become more competitive. The Marathon joint venture is expected to go live late Q2 or early Q3, with its financial impact excluded from current forecasts. Ciulla explained that residential growth helps balance the portfolio, but its pace may slow. He also expressed hope for provisioning tailwinds if the economy stabilizes.

Matthew Breese of Stephens Inc. sought details on deposit cost and beta expectations within the 2025 margin guidance and inquired about Webster's long-term strategy for its geographic footprint.

Answer

CFO William Holland noted that deposit costs were declining and the bank anticipates a terminal beta of around 30% for the current rate cycle. CEO John Ciulla explained that Webster plans to expand its national businesses (like sponsor finance and ABL) rather than opening new local branches, unless a compelling M&A opportunity arises to expand its core footprint.

Matthew Breese from Stephens Inc. asked about expectations for loan and deposit betas in a falling rate environment and inquired about the outlook for expense growth, particularly costs associated with preparing to cross the $100 billion asset threshold.

Answer

CFO William Holland detailed that the bank has already achieved a ~60% down-beta on a significant portion of its deposit portfolio and anticipates a 30% beta on the total portfolio over the next five quarters of rate cuts, positioning the bank neutrally. CEO John Ciulla and CFO Holland explained that while there will be costs to prepare for Category 4 status, they will be spread out over 3-4 years and partially offset by efficiency savings, with full guidance coming in January.

Matthew Breese asked about S&T Bancorp's loan yields, specifically the roll-on versus roll-off yields and expectations for backbook repricing in 2026. He also requested updated cost of funds and deposit figures, particularly for CDs, and explored the company's current and future use of AI tools, including their impact on the P&L and how far away significant savings might be from affecting guidance.

Answer

President Dave Antolik noted positive contributions from fixed-rate products and the received swap book supporting loan yields, with about $1 billion in fixed loans to reprice annually. He provided December figures for CD costs at 3.82% and overall interest-bearing deposits at 2.50%. CEO Christopher McComish detailed AI applications in BSA/AML compliance, fraud protection (yielding millions in savings by preventing losses), regulatory compliance, commercial underwriting, and internal communication, while clarifying that significant P&L impact from AI savings is still 'a long way' off.

Matthew Breese inquired about the current roll-on versus roll-off yields for loans and expectations for backbook repricing in 2026. He also asked for updated cost of funds and deposit figures, particularly regarding the elevated CD costs and potential for downside with rate cuts. Additionally, he questioned the current and future use of AI tools and their potential impact on the P&L.

Answer

President David Antolik noted positive contributions from fixed-rate loans and the received swap book, though this tailwind will diminish. He provided December figures for CD costs (around 3.82%) and overall interest-bearing deposit costs (around 2.50%). CEO Christopher McComish explained that AI is currently used in BSA, AML compliance, and fraud protection, generating millions in savings by preventing losses. He also mentioned its application in commercial underwriting, portfolio management, and communication, emphasizing that significant P&L impact from operating expense reductions is still a long way off.

Matthew Breese questioned the net interest margin outlook for the rest of the year, asked for details on the securities portfolio including new purchase yields, probed the bank's view on its excess capital, and inquired about the economic impact of regional energy and infrastructure investments.

Answer

CFO Mark Kochvar guided to a stable NIM in the mid-3.80s range, with new securities being purchased at 4.5-5% yields. He stated the current TCE ratio over 11% is higher than necessary and a level around 9% would be comfortable, reinforcing the case for M&A. CEO Chris McComish expressed strong optimism about regional infrastructure projects in Western Pennsylvania, noting his personal attendance at a recent summit and the bank's active engagement.

Matthew Breese asked for more detail on the drivers of customer optimism, the expected net interest margin (NIM) trajectory towards year-end 2025, and the outlook for net interest income (NII) growth.

Answer

CEO Christopher McComish attributed customer optimism to a general increase in confidence stemming from more clarity on interest rates and the post-election environment, rather than specific geographic or industry trends. Executive Mark Kochvar indicated that while an upward NIM trajectory is possible by late 2025, it depends heavily on deposit pricing competition needed to fund loan growth. He projected modest, low single-digit year-over-year growth for NII, with Q1 likely flat before a pickup in Q2.

Matthew Breese asked about the possibility of additional securities restructurings and the yield pickup from recent transactions. He also probed the drivers of commercial real estate loan payoffs, seeking to understand how much was strategic versus driven by competitive pressures from insurance companies or other banks.

Answer

Executive Mark Kochvar stated that further significant securities restructurings are unlikely as the cost-benefit has diminished, and he provided the yield pickups from the two prior restructurings (370 bps and 270 bps). President Dave Antolik explained that the large multifamily payoffs were a normal course of business, as customers moved from construction loans to permanent, non-recourse financing, which is outside the bank's risk appetite. CEO Chris McComish added that while bank competition is not a major factor, some credit unions have become more competitive.

Matthew Breese asked for insights into deposit growth and composition expectations for the year, including the most recent spot cost of deposits. He also inquired about the year-over-year commercial pipeline comparison, the strategy for expanding into the metro New York City market, and the expected run rate for commercial interest rate swap income and other fee income.

Answer

Chairman, President and CEO Curt Myers highlighted strong momentum in consumer, small business, and Treasury/cash management, which are driving growth in low-cost operating deposits. CFO Rick Kraemer reported that the spot cost of total deposits in December was 1.80%, which was 6 basis points lower than the quarterly average. Myers confirmed that the commercial pipeline is up more than 10% year-over-year, with an improved pull-through rate. He reiterated that expanding into the metro New York City market is not within their current strategy. Myers also reiterated that commercial interest rate swap income fluctuates with originations, particularly larger deals. Kraemer reiterated that the decline in 'other fee income' was due to a $1.7 million net decline in equity method investments in Q4, with a normalized run rate around $2.5 million.

Matthew Breese inquired about deposit growth expectations for the year, including composition, the most recent cost of deposits, the commercial pipeline's year-over-year percentage, expansion into the metro New York City market, and the run rates for commercial interest rate swap income and other fee income.

Answer

Curt Myers, Chairman, President and CEO, Fulton Financial, highlighted strong momentum in consumer, small business, and Treasury/cash management deposits, driving low-cost operating deposits. Rick Kraemer, CFO, Fulton Financial, reported the period-end cost of deposits for December was 1.80%. Curt Myers noted the commercial pipeline is up more than 10% year-over-year with improving pull-through rates. He clarified that expanding into metro New York City is not part of their strategy for northern New Jersey. He also explained that swap income correlates with larger originations and naturally fluctuates quarter-to-quarter. Rick Kraemer attributed volatility in 'other fee income' to equity method investments, suggesting $2.5 million as a reasonable normalized level.

Matthew Breese asked about the mismatch in securities purchases versus maturities, the optionality going forward, and the desired percentage of cash and securities to total assets. He also inquired about when a more pronounced acceleration in securities yields might be observed and the strength of the loan pipeline, expected growth areas, and the long-term average loan growth rate. Finally, he asked about capital priorities and room for continued share repurchases as loan growth approaches the 4% threshold.

Answer

Rick Kraemer, CFO, stated that the target for investments as a percentage of total assets is around 16-17%, with opportunistic buying. He confirmed new securities yields are in the high fours and that cash flow is steady, referring to slide 21 for repricing schedules. Kraemer and Curt Myers, CEO and Chairman, explained that while pipelines are up, pull-through rates are lower, and the company aims to return to the low end of its 4-6% long-term growth trend, emphasizing diversified growth across all categories. Myers reiterated capital priorities: organic growth, corporate activities (M&A/asset purchases), then buybacks, noting $86 million remaining in the current authorization.

Matthew Breese inquired about the mismatch in securities purchases versus maturities, the desired percentage of cash and securities to total assets, the timing for a more pronounced acceleration in securities yields, and the company's loan growth outlook and capital priorities.

Answer

Rick Kraemer, CFO, stated that the company aims to manage investments around 16% to 17% of assets, being opportunistic with purchases. He confirmed new securities yields are in the high fours and that cash flow is steady, referring to slide 21 for repricing schedules. Rick Kraemer and Curt Myers, CEO and Chairman, discussed aiming to return to a 4% loan growth rate, noting that pipelines are up year-over-year but pull-through rates are lower. Curt Myers reiterated capital priorities: organic growth, corporate activities (M&A), and then buybacks, mentioning $86 million remaining authorization. Rick Kraemer clarified that $600 million in strategic actions this year masked an underlying 3.5% annualized growth.

Matthew Breese asked for details on the loan pipeline's composition, particularly the mix between C&I, commercial real estate, and residential. He also inquired about trends in new loan spreads, the future trajectory of accretable yield from the Republic acquisition, and the company's appetite for further share or subordinated debt repurchases.

Answer

CEO Curtis Myers emphasized a commitment to a diversified loan book, noting C&I is a strategic focus but is currently very competitive. CFO Richard Kraemer added that new loan origination spreads have compressed by about an eighth to a quarter from their peaks. He projected accretable yield to be in an $11M-$12M range. Myers stated that capital allocation prioritizes organic growth, with buybacks considered opportunistically.

Matthew Breese asked if interest recapture from loan payoffs boosted Q1 NIM, sought details on risk management actions impacting loan growth, and inquired about exposure to Washington D.C. office real estate.

Answer

Chief Financial Officer Rick Kraemer confirmed no material interest recapture occurred. Chairman and Executive Officer Curtis Myers explained that risk actions included a high volume of troubled asset resolutions, prudent decisions on construction loan conversions, and exiting some auto dealer relationships. He specified that D.C. office exposure is limited to $105 million in the metro area, reflecting a historically cautious approach to properties with federal government leases.

Matthew Breese from Stephens Inc. requested details on the loan portfolio's rate mix, the outlook for loan yields amid expected Fed cuts, the deposit pricing environment relative to beta goals, and specific areas of anticipated loan growth for 2025.

Answer

CFO Rick Kraemer directed him to the earnings supplement for loan mix details and explained that while loan yields face near-term pressure, they should rebound as the adjustable-rate portfolio reprices. He also noted deposit betas are improving. CEO Curtis Myers stated that loan growth will be diversified but is tempered by headwinds from the indirect auto runoff and acquired loan repositioning, resulting in a low to mid-single-digit growth forecast.

Matthew Breese delved into the mechanics of the net interest margin, asking where the bank has room to cut deposit costs, its expectations for deposit betas on the down-cycle, and the corresponding loan beta. He also sought to clarify whether the 2024 and 2025 expense guidance included or excluded core deposit intangible (CDI) amortization.

Answer

CFO Designee Rick Kraemer detailed that the bank had already lowered rates on about $10 billion in deposits and expects a long-term down-cycle deposit beta near 30%. He also clarified a misstatement in the presentation, confirming that the operating expense guidance for both 2024 and 2025 excludes CDI amortization.

Matthew Breese inquired about the strategy and timeline for deploying the bank's significant cash position and what a 'normalized' cash level might be. He also asked for an update on the percentage of floating-rate loans in the total portfolio and the expectation for the next year. Additionally, he questioned the trend in commercial real estate and multifamily prepayment activity, seeking insight into whether it might decline.

Answer

Avinash Reddy, COO and CFO, stated there is no specific timeline for deploying cash into securities, preferring balance sheet flexibility, and does not expect a significant near-term reduction in cash, aside from seasonality. He noted that cash would be used for loan growth in the second half of 2026. Mr. Reddy also indicated that new business from commercial banking verticals is predominantly floating rate, with floating-rate loans currently comprising 35-40% of the balance sheet. He reported Q4 prepayment rates for CRE/multifamily at 15%, down from 20-25% in Q3, suggesting short-term rates need to drop further for a significant payoff wave, while relationship CRE shows strong retention.

Matthew Breese from Stephens Inc. inquired about the strategy and timeline for deploying the bank's significant cash position, the current percentage of floating-rate loans in the portfolio and future expectations, the trends in commercial real estate and multifamily prepayment activity, and the specific deposit categories impacted by anticipated municipal deposit outflows.

Answer

COO and CFO Avinash Reddy stated there's no rush to deploy cash into securities, with $150 million purchased in Q4, emphasizing balance sheet flexibility and a neutral ALM profile. He noted that floating-rate loans, primarily from new business verticals, constitute 35-40% of the portfolio. Reddy also explained that CRE prepayment activity, which was 15% in Q4, is currently aiding the bank's goal of reducing its CRE concentration, with strong retention for relationship-based CRE. He clarified that municipal deposit outflows would impact both interest-bearing and non-interest-bearing categories, with a larger portion being interest-bearing.

Matthew Breese followed up on credit quality, seeking clarification on "normalized" charge-off levels and the impact of new business lines. He also inquired about selection bias in multifamily loan reductions, expectations for deposit betas amidst potential rate cuts, and the company's stance on M&A as a buyer or potential seller given increased market interest in Long Island.

Answer

CFO Avi Reddy stated that year-to-date charge-offs are within the initial 20-30 basis point guidance, with new businesses not expected to add to future charge-offs. He anticipates charge-offs returning to historical Dime levels in 2026 and the reserve building to 90-100 basis points due to higher CNI loan reserving. Regarding multifamily, he noted no significant delineation between market rate and rent-regulated loans at maturity, with 80-90% refinancing out. For deposit betas, he explained that the recent Fed cut allowed a 19 basis point reduction in total deposit costs, and similar benefits are expected from future cuts, potentially adding 5+ basis points to NIM per cut. President and CEO Stuart Lubow emphasized a focus on organic growth, deploying liquidity with new teams, and maximizing shareholder value through internal initiatives, while acknowledging M&A interest.

Matthew Breese of Stephens Inc. followed up on credit, asking Avi Reddy to clarify the definition of "normalized" charge-offs given the business bank build-out and if a return to historical Dime levels is expected. He also inquired about selection bias in multifamily loan reductions, specifically whether market-rate or rent-regulated properties were more likely to refinance away. Additionally, he sought expectations for deposit betas in a declining rate environment and the company's stance on M&A as a buyer, as well as consideration of strategic alternatives like a potential sale amidst increased interest in the Long Island market from larger banks.

Answer

Avi Reddy, CFO, stated that year-to-date charge-offs are at 31 basis points, within the previously guided 20-30 basis point range, and new specialty verticals are expected to have zero losses. He anticipates the allowance for loan losses to build to 90-100 basis points due to higher reserving for CNI loans, and expects charge-offs to return to historical Dime levels in 2026. Regarding multifamily, he noted no delineation between free market and rent-regulated loans at maturity due to low LTVs, but rent-regulated loans might be more likely to stay at reprice. For deposit betas, he highlighted a 19 basis point cut in total deposit costs following the recent Fed rate cut, attributing this to new deposit inflows and a more aggressive approach to existing deposits, expecting similar benefits from future rate cuts. Stuart Lubow, President and CEO, emphasized the focus on organic growth, deploying excess liquidity with new teams, and maximizing shareholder value through strong NIM expansion and bottom-line benefits, while remaining open to strategic alternatives.

Matthew Breese of Stephens Inc. asked about the outlook for deposit costs without rate cuts, the characteristics of new lending verticals (pricing, spreads, loss history), their potential scale, the target for the loan loss reserve, and the strategy for deploying excess cash.

Answer

CFO Avinash Reddy stated that deposit costs are expected to be stable, with future NIM expansion driven by asset repricing. Reddy and CEO Stuart Lubow described the new verticals as primarily floating-rate with spreads of 250-300 bps over SOFR and low historical loss content, aiming for each to become a $500 million business. Reddy noted the goal is to build the ACL ratio toward the 90-100 basis point range over time. Both executives confirmed the plan is to deploy excess cash into these new loan verticals rather than securities to drive long-term earnings power.

Matthew Breese inquired about the trajectory of deposit costs absent Fed cuts, the potential impact of tariff noise on lending, hiring opportunities related to the Signature Bank failure anniversary, the full-year fee income guidance, and the bank's stance on share buybacks.

Answer

CFO Avinash Reddy noted that while most rate cuts are priced in, some deposit cost reduction is still possible from repricing CDs. Executive Stuart Lubow stated it's too early to see tariff impacts and the bank has limited direct exposure. Reddy clarified that hiring opportunities are now broad-based, not just from one bank. He also reaffirmed the $40-$42 million fee income guidance and explained that buybacks are on hold to preserve capital for strong loan growth opportunities and to improve the CRE concentration ratio.

Matthew Breese of Stephens Inc. asked for details on new loan yields, payoff activity, competition from non-banks in CRE, the health of the rent-regulated and office portfolios, and the outlook for deposit growth and betas in 2025.

Answer

CEO Stuart Lubow stated the new loan pipeline yields an average of 7.75%, weighted towards C&I. CFO Avinash Reddy noted that while CRE payoffs were stable, business loan payoffs were elevated in Q4. On credit, Reddy projected 2025 charge-offs in a 20-30 bps range, while Lubow confirmed the rent-regulated portfolio is performing well with no non-performers. For 2025, CFO Reddy expects solid deposit growth, with the DDA mix stable to slightly up, and anticipates future deposit betas will be similar to the ~55% total beta seen on recent rate cuts.

Matthew Breese asked for the underlying deposit and loan beta assumptions in the NIM forecast, the percentage of floating-rate loans, which deposit categories saw the most successful repricing, and the role of shared national credits (SNCs) in C&I loan growth.

Answer

CFO Avinash Reddy estimated a total deposit beta of 55-60% and a loan beta of 20-25% based on recent rate cuts. He stated that approximately 35% of loans are floating rate, including hedges. CEO Stuart Lubow and Reddy attributed successful deposit repricing to a focus on money market, business, and municipal accounts, aided by a low volume of time deposits. Lubow clarified that the bank has almost no exposure to SNCs, with only one $15 million credit, focusing instead on direct relationship and club deals.

Matthew Breese of Stephens Inc. focused on cubiX deposits, asking about their interest-bearing status and the risk of conversion. He also inquired about the deposit cap and the underlying collateral in the recent securities sale. Lastly, he asked if the two-year anniversary of the March 2023 banking crisis would unlock new hiring opportunities.

Answer

President and CEO Sam Sidhu confirmed 100% of cubiX deposits are noninterest-bearing and that the previous 15% concentration cap is no longer in place since all such deposits are held in cash. CFO Philip Watkins and CEO Sam Sidhu clarified the securities sale involved corporates, CLOs, and non-agency CMBS, and did not include the bank's securitized consumer loans. Regarding hiring, Sidhu acknowledged that while some talent lockups are expiring, Customers Bank's recruitment pipeline is primarily driven by its reputation as a high-performing platform, attracting talent from a wide range of stable institutions.

Matthew Breese asked for details on purchase discount accretion and its expected impact in 2025. He also inquired about the provisioning outlook and where the reserve-to-loan ratio might settle. Additionally, he sought clarity on the new cap for crypto-related deposits, whether recent growth came from new customers, and how to reconcile the bank's commentary on reducing brokered deposits with relatively flat call report data.

Answer

EVP and CFO Philip Watkins stated that discount accretion is now immaterial and not a significant factor for 2025 NII. He noted the reserve ratio decline was due to loan mix shifts and that while current levels are appropriate, continued loan growth could require higher provisions. President and CEO Samvir Sidhu explained that there is no new formal cap on crypto deposits as management assesses activity levels, and confirmed growth came from existing customers. He clarified that a significant reduction in brokered deposits occurred in Q4 and that these higher-cost funds remain a primary target for the ongoing deposit remix.

Matthew Breese from Stephens Inc. questioned the net interest margin (NIM) cadence through year-end, balance sheet expectations including cash-to-assets ratio, whether the current expense base fully reflects new hires, and the bank's position on regulatory comments about crypto and venture capital deposits.

Answer

CFO Philip Watkins guided that NIM would likely see modest expansion in Q3 before a boost in Q4, and confirmed the Q2 expense base is a reasonable run rate. President and CEO Sam Sidhu reiterated the bank's self-imposed 15% limit on digital asset-related deposits and stressed that its venture banking deposits are diversified and relationship-focused, mitigating concentration risks highlighted by regulators.

Inquired about the Avenu platform, specifically the delayed breakeven timeline, the actual cost of current Avenu deposits, the conservatism of the financial projections, and the regulatory treatment and potential volatility of these deposits.

Answer

Executives attributed the delayed breakeven timeline to the later-than-expected launch of Avenu and confirmed they are using conservative projections from an independent consultant. They clarified that current Avenu deposits are very low cost (some at 2%, others non-interest-bearing) and that the model prioritizes low-cost deposits over fee income. They acknowledged the need to analyze deposit stickiness to determine volatility and how funds can be deployed, noting a robust liquidity plan is in place.

Matthew Breese asked for an update on Avenu's growth expectations, questioning the revised breakeven timeline, the deposit contribution from current partners, the cost of Avenu deposits, and their regulatory classification and volatility.

Answer

Chairman and CEO Jeff Dick attributed the delayed breakeven timeline to ensuring regulatory compliance and confirmed the use of conservative projections from consultant FS Vector. He noted current partners like Flutterwave and PaySii have contributed some initial deposits but are in early stages. On costs, he clarified the goal is attracting low-cost DDA deposits, with a fee structure that incentivizes fintechs to forgo interest. Regarding volatility, Jeff Dick explained the bank will perform decay rate analysis to determine deposit stickiness, while Chief Accountant Richard Vari added that a robust liquidity plan is in place.

Matthew Breese questioned the normalization timeline for the excess cash position, the composition and yield of the loan pipeline, details on deposit repricing actions following recent Fed cuts, and the reasonableness of the fee income growth guidance for 2025.

Answer

CFO Brian Richardson explained that average excess liquidity would be stable in Q4, with $150-$250 million running off due to seasonal muni outflows, leaving the rest available for deployment. He also detailed that Univest has about $2 billion in indexed deposits that reprice automatically and that the bank actively repriced $325 million of exception-priced deposits down by 50 basis points. Executive Jeff Schweitzer described the loan pipeline as healthy, primarily in C&I, with new loan pricing above 7%. Brian Richardson concluded that the 7-9% fee income growth range is a reasonable baseline for 2025, with some potential upside.

Inquired about the drivers of declining loan yields (accretion, nonaccruals) and when they might expand, and asked about the rationale for the projected decline in earning assets and the strategy regarding the $100 billion asset threshold.

Answer

The decrease in loan yields is mainly due to nonaccruals; there's minimal accretion left. Yields should turn positive in Q4 and into '25 as incremental nonaccruals lessen and loans reprice higher. Regarding the $100B threshold, going below it doesn't immediately remove enhanced standards, and it's not a strategic goal. The decline in earning assets is more from deploying cash to pay down debt, not a significant decrease in the loan portfolio itself.

Asked about the balance sheet size outlook, the timing of Category 4 stress testing, the near-term NIM forecast, future cash levels, the dilutive impact of warrants, and the reason for negative loan administration income.

Answer

The bank plans to remain above $100 billion in assets and expects to be part of the official Fed stress test in 2026. NIM is expected to drift slightly lower in the near term. Excess cash will be used to pay down wholesale borrowings. The impact of warrants is dependent on the share price, and loan administration income is expected to be zero after the mortgage servicing sale is complete.

Asked about the need for additional capital actions like issuing sub-debt to reach peer levels for total risk-based capital, balance sheet mix targets for cash and securities, the appropriateness of excluding multi-family from CRE concentration metrics, and the reason for the increased urgency in addressing the bank's status as a $100B+ institution.

Answer

The current focus for capital is on building CET1 through retained earnings and the dividend adjustment. The bank aims to increase its cash and securities to around 22-23% of assets to get closer to peer levels, which will be done in Q1/Q2. They acknowledged the point on CRE concentration but stressed their strategy will reduce it over time. The urgency stems from the Signature acquisition accelerating their entry into the Category IV bank class, requiring them to quickly align with enhanced prudential standards ahead of their April capital plan submission.

Asked a wide range of questions on funding (wholesale borrowings), asset balances, credit (multifamily NPAs), the potential valuation impact from the FDIC's loan sale, and the size of the syndicated loan portfolio.

Answer

The bank plans to refinance maturing borrowings, expects asset balances to stabilize in Q1 2024, sees multifamily NPAs as isolated issues, does not expect the FDIC loan sale to impact their own valuation, and clarified that it uses syndication primarily as a risk management tool to sell down positions.