Russell Gunther

Russell Gunther asked about the expected net interest margin (NIM) for Q1 2026, considering the securities actions in Q4 2025 and Q1 2026, and inquired about the overall level of purchase accounting accretion embedded in the full-year NII guidance. He also questioned if there was appetite for additional securities restructurings beyond what's currently planned and how average earning asset levels are expected to trend throughout 2026. Finally, Gunther sought clarification on the cadence of cost savings from The Villages acquisition, particularly regarding the July conversion, and asked for insights into a normalized expense growth rate for Seacoast beyond 2026.

Answer

Michael Young, EVP and Chief Strategy Officer, projected a 10-15 basis point NIM expansion in Q1 2026, despite a slight decrease in average earning assets. Tracey Dexter, EVP and CFO, noted that purchase accounting accretion is difficult to predict due to the long contractual life of Villages loans, with volatility expected from accelerated payoffs, and that the Q4 2025 run rate is used for 2026. Michael Young added that the net effect of purchase accounting marks on revenue and expenses largely balances out. He stated that no additional securities restructurings are expected or reflected in the guidance, as most other loss positions are in the HTM portfolio. Average earning assets will remix slowly, driven by the delta between high single-digit loan growth and low-to-mid single-digit deposit growth. Regarding expenses, Michael Young explained that The Villages' base expense rate of $64 million will come out post-conversion in early Q3, offset by banker hiring investments. Charles Shaffer, Chairman and CEO, suggested a long-term efficiency ratio target in the low-to-mid 50s.

Russell Gunther from Stephens inquired about Seacoast Banking Corporation's first-quarter net interest margin outlook and the impact of purchase accounting accretion on the net interest income guide. He also asked about the potential for further securities restructurings in 2026, the expected trend of average earning assets, and the cadence of cost savings from The Villages acquisition. Additionally, Mr. Gunther sought insights into a normalized expense growth rate for the company beyond 2026.

Answer

Michael Young, EVP and Chief Strategy Officer, projected a 10-15 basis point margin expansion in Q1 despite a $200 million decrease in average earning assets. Tracey Dexter, EVP and CFO, explained that purchase accounting accretion would be volatile but Q4 2025 serves as the run rate for 2026, with Michael Young adding that net purchase accounting impacts largely balance out. Mr. Young confirmed no further securities restructurings are planned. He also noted that average earning asset trends would be driven by the difference between loan and deposit growth. Regarding expenses, Mr. Young outlined The Villages' cost saves post-Q3 conversion, offset by banker hiring, and Charles Shaffer, Chairman, President, and CEO, indicated a long-term efficiency ratio target in the low-to-mid 50s.

Russell Gunther sought clarification on the core net interest margin's glide path from Q3 to the 3.45% target for Q4, including the September NIM, excess liquidity deployment, and remaining securities restructure. He also asked about the expected pro forma securities to average earning asset contribution in Q4 and the progress toward reducing it in 2026, as well as expectations for deposit beta and the core growth rate for the pro forma franchise.

Answer

Chief Strategy Officer Michael Young confirmed the 3.45% NIM target for Q4, citing the earlier close of The Villages transaction, wholesale funding payoffs, and securities restructuring as key drivers. He noted a September cost of funds of 1.92% and expected a lower deposit beta (closer to 30%) for 2026. Mr. Young explained that the securities restructuring is ongoing with a focus on best execution, expecting lower AOCI and less dilution than initially anticipated. He projected a high single-digit loan growth for 2026, leading to positive balance sheet remixing.

Russell Gunther asked about Seacoast Banking Corporation of Florida's net interest margin discussion, specifically the glide path from Q3 to the 3.45% guide, the September NIM, and how continued excess liquidity deployment is considered.

Answer

Michael Young (CSO) explained the 3.45% NIM target for Q4, attributing it to an earlier Villages close, wholesale funding payoff in November, and securities restructure completion. He noted September cost of funds at 1.92% (vs. 1.96% reported) and the benefit of low-cost deposits from The Villages, expecting expanding margin into 2026 and a lower deposit beta (closer to 30%). He confirmed the securities restructuring began October 1, focusing on best execution, and noted lower AOCI than anticipated due to compressed credit spreads, potentially leading to higher book value and less dilution. He expects the loan-to-deposit ratio to be below 75% in Q4, with positive remix in 2026 driven by higher loan growth relative to deposit growth. For core expense growth, Michael Young (CSO) stated it historically aligns with inflation (3-4%), anticipating potential for increased banker hires due to merger disruption, balancing hiring with strong profitability delivery in 2026.

Russell Gunther sought confirmation of the mid-to-high single-digit loan growth outlook extending into 2026, asked about opportunities from recent market disruption, and requested clarification on the net interest margin guidance, specifically how the two acquisitions impact the core and reported figures.

Answer

Chairman, President & CEO Charles Shaffer reaffirmed the mid-to-high single-digit loan growth outlook for the remainder of 2025 and into 2026. He noted that any market disruption is beneficial and that Seacoast is well-positioned with its strong capital, liquidity, and culture to attract talent. EVP, Treasurer & Director - IR Michael Young and Shaffer clarified the NIM guidance: the standalone core NIM is expected to exit the year around 3.35%, and the two acquisitions will add approximately 10 basis points, resulting in a pro-forma core NIM of around 3.45% in Q4, before any purchase accounting accretion.

Russell Gunther questioned the forward trend for the cost of deposits, the pipeline for hiring new revenue producers and its expense impact, and which loan sectors are being monitored closely due to potential tariffs.

Answer

Treasurer Michael Young noted continued opportunities for tactical reductions in deposit costs, with growth in noninterest-bearing deposits being a key positive driver. CEO Charles Shaffer stated that the team is largely built and the focus will shift to leveraging existing investments for profitability rather than significant new hiring. Chief Credit Officer James Stallings identified C&I businesses as the primary area of focus for tariff impacts but observed that many clients have been proactively adjusting their business models.

Russell Elliott Gunther of Stephens sought clarification on the Q4 loan sales, the expected pace of loan payoffs in 2025, the potential for further securities portfolio restructuring, and the expense run rate outlook for the upcoming year.

Answer

CFO Tracey Dexter clarified that Q4 sales included $20 million in consumer fintech loans and $20 million in nonperforming commercial real estate loans. Treasurer Michael Young added that loan payoff headwinds are expected to lessen in 2025 compared to Q4. He also stated that while the bank continually evaluates securities restructuring, none is currently planned or included in guidance. Dexter noted that while expenses will see seasonal first-quarter increases, the bank remains focused on disciplined expense management.

Russell Elliott Gunther inquired about the net interest margin (NIM) performance in September, the drivers behind the Q4 core NIM expansion guidance, the outlook for loan growth into 2025, and the bank's Return on Assets (ROA) target.

Answer

Michael Young, Treasurer and Director of Investor Relations, explained that deposit costs began to decline in September and that the Q4 margin guidance of 5-10 bps expansion assumes two Fed rate cuts. CEO Charles Shaffer projected mid-single-digit loan growth for the next few quarters, driven by investments in talent, though noting a slight temperance in Q4 due to hurricanes and maturities. Regarding profitability, Shaffer stated the primary objective is to drive ROA north of 1% over time through operating leverage and margin expansion.

Russell Gunther (via Nick) inquired about Primis Financial Corp.'s projected mortgage warehouse balances for 2026, considering existing commitments and business seasonality, and also asked about overall loan growth expectations for the year. He further questioned the expense sensitivity related to improving mortgage banking and fee income, and the target sustainable ROA for the full year 2026.

Answer

President and CEO Dennis Zember and CFO Matt Switzer outlined expectations for mortgage warehouse balances to average $500 million in 2026, with seasonal peaks, and noted the business's strong ROA. For overall loan growth, Mr. Zember projected 5-7% for the core bank, focusing on C&I and owner-occupied loans, with specific targets for Panacea and Warehouse divisions. Regarding expenses, Mr. Switzer clarified that the core expense guidance excludes mortgage-related volatility, while Mr. Zember and Christopher Marinac (Director of Research) discussed the scaling profitability of mortgage banking. Mr. Switzer confirmed the target sustainable ROA for 2026 is 1%, with seasonal variations.

Russell Gunther with Stephens Inc. inquired about Primis Financial Corp.'s loan growth projections for the fourth quarter and 2026, specifically addressing potential seasonality in the Mortgage Warehouse division, consumer loan runoff, and the expected loan mix. He also asked about the timeline for achieving a 3.30% net interest margin and the strategy behind continued shifts in deposit mix.

Answer

President and CEO Dennis Zember indicated that while Mortgage Warehouse typically sees seasonality, its current growth trajectory might mitigate significant Q4 runoff. He projected Panacea Financial Division's loan balances could reach $150 million or more next year, with some potential loan sales in Q4, and anticipated 6-8% growth in the core bank. Overall, he expects 10-12% loan growth for the next year. CFO Matt Switzer concurred, noting that new customer additions in Mortgage Warehouse could offset utilization drops. Regarding margin, Mr. Switzer stated the company aims to be closer to a 3.30% margin by year-end or Q1 next year, driven by a strategic focus on increasing non-interest-bearing deposits to 20% of total deposits. Mr. Zember emphasized that deposit strategies, leveraging technology, are central to the bank's long-term value and margin improvement.

Russell Gunther asked about Primis Financial Corp's loan growth projections for the fourth quarter and 2026, considering Mortgage Warehouse seasonality and consumer runoff. He also sought clarification on the timing to achieve a 3.30% net interest margin and the strategy behind continued shifts in deposit mix.

Answer

President and CEO Dennis Zember and CFO Matt Switzer discussed loan growth, noting that while Mortgage Warehouse typically has seasonality, its growth path with new customers might offset runoff, potentially sustaining current levels. They projected Panacea's annual production capacity to be around its current balance sheet, with potential sales to third parties, and core bank growth of 6-8%. For 2026, they anticipate 10-12% overall growth. Regarding margin, Matt Switzer expects to be closer to 3.30% by Q1 next year, emphasizing a focus on increasing non-interest-bearing deposits to 20% of total deposits across the institution. Dennis Zember highlighted the bank's strong technology and strategies for driving low-cost deposits, which he believes is key to long-term value and maintaining competitiveness.

A representative for Russell Gunther asked for an outlook on loan growth for the remainder of 2025 and into 2026, with a specific focus on the Panacea and Mortgage Warehouse divisions. He also inquired about the expected trajectory of the core Net Interest Margin (NIM) in a no-rate-cut environment.

Answer

CEO Dennis Zember projected that the Mortgage Warehouse could average $250-$350 million in 2026, while Panacea's growth would be managed through capital market solutions, with Primis absorbing $100-$150 million of its originations. CFO Matthew Switzer clarified that overall loan growth for the back half of 2025 would be in the low-to-mid single digits. Switzer also stated that the core NIM is expected to continue expanding by approximately two basis points per month, potentially reaching the mid-3.20s by the end of the year.

Russell Elliott Gunther of Stephens Inc. asked for the net interest margin outlook, a projection of the Q4 expense run rate including savings, the future trend for charge-offs, and the timing of the Panacea deconsolidation.

Answer

Executive Matthew Switzer projected 5-10 bps of margin expansion in Q2, potentially reaching 10-20 bps by year-end. President and CEO Dennis Zember detailed a path to an $18-18.5 million quarterly core expense run rate after tech savings are realized, likely in 2026. Switzer noted that while consumer charge-offs will remain high, the provision impact should be minimal due to existing reserves. He also explained the Panacea deconsolidation could be effective as of March 31, with a gain based on a third-party valuation.

Russell Elliott Gunther inquired about the net loan growth outlook for 2025, the expected cadence for the net interest margin (NIM) to reach its target range, core net charge-off levels post-consumer portfolio exit, and the potential valuation upside from the Panacea deconsolidation.

Answer

President and CEO Dennis Zember outlined that 2025 loan growth will be primarily bank-focused, targeting $125-$175 million, with mortgage warehouse growing by approximately $300 million to replace the exited Life Premium book. Executive Matthew Switzer projected the NIM would reach the upper end of the 3.25% to 3.50% range, with expansion beginning in Q1 2025. He also noted that core charge-offs are expected to be low, around 5-10 basis points, with modest provisioning of about $1 million per quarter. Regarding Panacea, Dennis Zember stated he is confident its value is greater than the last valuation, driven by significant product development, but did not provide a specific number, emphasizing the deconsolidation is a strategic move to unlock value.

Russell Gunther from Stephens inquired about the net interest margin, specifically the yield on new loan production relative to the incremental cost of deposits and the margin's consistency throughout Q4. He also asked about Ameris Bancorp's capital targets (CET1 and TCE) and how the company plans to deploy excess capital. Finally, he sought clarification on the drivers of Q4 net charge-off activity, including any specific contribution from Balboa.

Answer

CFO Nicole Stokes stated that Q4 loan production yielded about 6.35% across all divisions, while deposit production cost around 2%, resulting in a 4.35% spread accretive to margin. She noted the Q4 margin was consistent at 3.85%. CEO Palmer Proctor outlined capital priorities: organic growth, opportunistic share buybacks, dividends, and then external activity, targeting a TCE ratio of 10-10.5% and a CET1 ratio of around 12% long-term. Chief Credit Officer Doug Strange explained that Q4 charge-offs included consumer medical notes, with equipment finance remaining consistent, and noted that Q4 followed two low charge-off quarters (14 bps), reiterating a 20-25 bps guidance for the upcoming year.

Russell Gunther followed up on the margin, asking about the yield on new loan production relative to incremental deposit costs and the Q4 margin cadence. He also inquired about Ameris Bancorp's capital targets (CET1, TCE) and deployment plans, as well as the drivers of Q4 net charge-offs, including any contribution from Balboa.

Answer

CFO Nicole Stokes stated Q4 loan production yield was 6.35% across all divisions, with deposit production at 2%, resulting in a 4.35% spread, accretive to margin, and noted the Q4 margin was consistent at 3.85%. CEO Palmer Proctor outlined capital priorities: organic growth, opportunistic buybacks, dividends, and then external activity, targeting TCE around 10-10.5% and CET1 around 12% long-term. Chief Credit Officer Douglas Strange explained Q4 charge-offs included consumer medical notes, with equipment finance consistent, and reiterated 20-25 basis points guidance for the year.

Russell Gunther with Stephens asked about the potential for Ameris Bancorp's loan growth to accelerate beyond mid-single digits, the future size and strategy for the investment portfolio, and the company's current prioritization of organic growth versus M&A opportunities.

Answer

CEO Palmer Proctor expressed optimism for elevated loan growth, potentially reaching upper single or double digits, driven by market disruption and an improving macro economy. CFO Nicole Stokes stated the investment portfolio target is 9%-10% of assets, noting the optionality it provides with deposit growth. Mr. Proctor reiterated that organic growth is a higher priority than M&A given current market opportunities and the potential for distraction.

Russell Gunther asked about the potential for loan growth to accelerate beyond mid-single digits next year, given market strength and dislocation. He also questioned the future size of the investment portfolio and the company's M&A strategy, specifically whether organic growth is prioritized over buy-side opportunities.

Answer

CEO H. Palmer Proctor Jr. expressed optimism for accelerating loan growth, potentially reaching upper single or double digits, citing the company's strong market position and ability to capitalize on disruption and a healthy macro economy. CFO Nicole S. Stokes stated the investment portfolio is currently at 9.3% of assets, with a target of 9-10%, indicating room to add about $175 million. H. Palmer Proctor Jr. emphasized that organic growth is a higher priority now due to new opportunities from market disruption, suggesting that M&A would be a distraction.

Russell Gunther of Stephens Inc. requested details on the net interest margin's cadence during the quarter, including the exit rate for June. He also asked for an update on the equipment finance portfolio's balances and charge-off trends, and sought guidance on the outlook for noninterest expense in the third quarter.

Answer

CFO Nicole Stokes stated that the NIM grew steadily throughout the quarter but noted that the June exit rate contained anomalies, leading her to guide for a relatively flat Q3 margin. CEO H. Palmer Proctor reported that equipment finance loans constitute about 7.2% of total loans and that charge-offs in that portfolio are now within the company's target range. For expenses, Stokes projected Q3 noninterest expense to be consistent with Q2, in the $156 million to $158 million range.

Russell Gunther followed up on loan yields, asking for the quarter-end Balboa premium finance balance and its expected growth, and also inquired about capital deployment priorities, including buybacks and callable subordinated debt.

Answer

EVP & CFO Nicole Stokes reported Balboa balances ended the quarter at $1.5 billion and are expected to grow in line with the company's mid-single-digit forecast. CEO H. Proctor added that this could be diluted if CRE lending accelerates and noted they have loan sale conduits to manage exposure. On capital, Proctor prioritized organic growth first, followed by evaluating callable sub-debt, and then share buybacks, stressing the importance of capital for both 'offensive and defensive purposes.'

Russell Gunther of Stephens Inc. inquired about the 2025 outlook for mortgage banking gain on sale, capital deployment priorities, and the characteristics of a potential M&A target. He later asked for the spot deposit cost at year-end.

Answer

CFO Nicole Stokes guided the mortgage gain on sale margin to a 2.25% to 2.40% range. CEO Palmer Proctor outlined capital deployment priorities as 1) organic growth, 2) selective M&A, and 3) buybacks. He described an ideal M&A target as being in the Southeast with a strong core deposit base and cultural fit. Stokes provided the December spot deposit cost of ~2.00% but noted it was skewed low by temporary public funds and noninterest-bearing inflows.

Russell Gunther of Stephens Inc. sought clarification on the near-term Net Interest Margin (NIM) guidance and the loan growth outlook for 2025, considering factors like potential paydowns.

Answer

Executive Nicole Stokes reiterated the NIM guidance of bouncing around the 3.50% level, plus or minus a few basis points. CEO H. Proctor confirmed confidence in the mid-single-digit loan growth guidance, noting the bank is well-positioned with new commercial hires to accelerate growth when appropriate in its diversified markets.

Russell Gunther inquired about WesBanco's expense guidance, confirming if the full savings from recent branch closures are captured, and asked about the cadence of the net interest margin (NIM) outlook, specifically the drivers behind the flat Q1, step-up in Q2, and moderation later in the year.

Answer

Jeffrey Jackson, President and CEO, confirmed that the anticipated $6 million in annual savings from the 27 branch closures are captured in the expense guide, beginning midway through Q1 2026. He also stated that WesBanco continuously evaluates its branch network for further optimization, though any future actions are not yet reflected in the 2026 commentary. Daniel Weiss, Senior EVP and CFO, explained that the Q4 margin improvement was accelerated by exceptional deposit growth, effectively pulling forward Q1 expansion. He noted Q1 typically sees seasonal deposit outflows, while Q2 will benefit from continued loan and security repricing, lower funding costs, and the repricing of $2.1 billion in Certificates of Deposit (CDs) over the next two quarters, projecting the NIM to reach the high 3.60% range by the second half of the year.

Russell Gunther inquired about WesBanco's expense guidance, specifically confirming if the full savings from the recent branch closures are captured in the 2026 outlook and if further branch network evaluations are anticipated this year. He also asked for details on the puts and takes behind the net interest margin (NIM) cadence for 2026, including the flat Q1, step-up in Q2, and modest growth in the back half.

Answer

Jeffrey Jackson (President and CEO, WesBanco) confirmed that the branch closure savings are included in the guide and that the company continuously evaluates its branch network, with potential for further closures not yet reflected in the 2026 numbers. Daniel Weiss (Senior EVP and CFO, WesBanco) explained the NIM cadence, attributing the flat Q1 to extraordinary Q4 deposit growth pulling forward margin expansion and typical Q1 deposit outflows. He noted that continued loan and security repricing, expected reductions in funding costs (especially short-term FHLB borrowings), and CD repricing (with $2.1 billion repricing in Q1/Q2 at lower rates) would drive the 3-5 basis point improvement in Q2 and modest growth into the high 3.60% range in the latter half of 2026.

Russell Gunther, Equity Research Analyst at Stephens, asked about WesBanco's target capital levels, specifically for CET1, and the likelihood of reversing the CECL double count. He also questioned the bank's priorities for excess capital utilization, including the appetite for share buybacks, and explored potential for new vertical or adjacent add-ons beyond the current healthcare and LPO strategies.

Answer

Daniel Weiss, Senior Executive Vice President and Chief Financial Officer, stated internal CET1 targets are 10.5%-11%, with a projected build of 15-20 basis points per quarter. He noted that reversing the CECL double count is unlikely given the time elapsed and pending FASB guidance. Weiss also indicated that buybacks are a lower priority, as the bank is currently in a capital build mode. Jeff Jackson, President and Chief Executive Officer, emphasized a strong focus on organic growth through LPOs and the healthcare vertical, with no immediate plans for other new verticals.

Russell Gunther asked for clarification on WesBanco's target capital levels, specifically for CET1, and sought an update on the potential to reverse the CECL double count. He also inquired about the future use of excess capital and the appetite for share buybacks.

Answer

Senior Executive Vice President and CFO Daniel Weiss stated that WesBanco's internal CET1 target is between 10.5% and 11%, with projections for 15-20 basis points of quarterly growth. He noted that total risk-based capital would be up 70 basis points compared to Q2 after the Series A preferred stock redemption. Regarding the CECL double count, he indicated it is unlikely, as the FASB needs to issue an ASU, and the likelihood decreases over time. Weiss added that WesBanco is currently in a capital build mode, with buybacks typically a lower priority and less likely in the near term. President and CEO Jeff Jackson emphasized the focus on capital buildback, followed by dividends and loan growth. Jackson also mentioned the current focus on the successful healthcare vertical and LPO strategy, with no immediate plans for other vertical add-ons or M&A.

Russell Gunther from Stephens Inc. asked about the long-term loan growth outlook, questioning if a high-single-digit rate is achievable, and inquired about potential for future branch rationalization.

Answer

President and CEO Jeffrey Jackson responded that the company still targets mid-to-upper single-digit loan growth. He noted that increased CRE payoffs are the primary headwind that could keep growth below the high-end of that range. Jackson also confirmed that WesBanco conducts an annual branch network review and will do so in the second half of the year, which is expected to result in some closures and associated cost savings.

Russell Gunther sought confirmation that the Q4 expense run rate guidance is fully inclusive of all merger-related cost savings and asked about the expected normalized expense growth rate thereafter. He also inquired about capital management priorities, including the appetite for buybacks or M&A.

Answer

Daniel Weiss, Senior Executive Vice President and CFO, confirmed the low-$140 million Q4 run rate includes all cost savings and projected a roughly 4% growth rate from that base into 2026. Jeffrey Jackson, President and CEO, stated that the company is currently in 'capital build mode' and is focused on integrating the Premier acquisition. He indicated that any new M&A would not be considered until late 2025 or early 2026 at the earliest.

Russell Elliott Gunther asked for details on WesBanco's net interest margin (NIM), inquiring about the repricing of the CD portfolio, the pro forma NIM outlook with the Premier Financial acquisition, and clarification on the assumptions behind the updated guidance.

Answer

CFO Daniel Weiss explained that approximately $1.2 billion in CDs at a 4.25% rate are expected to reprice down by 75-100 basis points in Q2. He also confirmed the pro forma NIM outlook is now around 3.50% to 3.55%, an improvement from the initial deal announcement, which is based on an updated interest rate mark but does not yet include potential benefits from securities restructuring.

Russell Elliott Gunther asked for more detail on the net interest margin, seeking clarity on the core NIM step-up into early 2025 and the expected pro forma margin after the Premier Financial acquisition. He also inquired about the use of the $4 million in savings from branch consolidations and the bank's core expense growth rate.

Answer

CFO Daniel Weiss provided a comprehensive margin outlook, detailing repricing dynamics of FHLB borrowings, CDs, and variable-rate loans, projecting a continued NIM increase into Q1 2025 and reaffirming a pro forma margin with Premier around 3.46%. He also stated the $4 million in savings should largely drop to the bottom line, with the Q4 expense run rate expected to be similar to Q3.

Russell Gunther asked about the anticipated mix of deposit growth, the willingness to adjust pricing given the below-peer loan-to-deposit ratio, and expectations for the overall balance sheet size, including the investment portfolio and cash balances.

Answer

David Burg (CFO) noted a reduction in the CD book due to aggressive pricing, enabled by strong growth in other businesses. He emphasized growing non-interest-bearing deposits and core client relationships. For the securities portfolio, he stated the intention to keep it flat at around 21% of assets, reinvesting maturities at higher yields (4.3-4.4% vs. 2.35-2.4% portfolio yield).

Russell Gunther asked about the anticipated revenue impact on Cash Connect from projected rate cuts, the expected margin improvement, and the specific actions driving profitability. He also questioned areas for outright expense reduction to support a lower non-interest expense run rate and the anticipated mix of deposit growth, including balance sheet expectations for the investment portfolio and cash.

Answer

David Burg, CFO, estimated a roughly $2.5 million annual revenue impact per 25 basis point rate cut on Cash Connect, noting that margin improvement is driven by interest rates, pricing leverage, expense optimization, and a strategic shift towards higher-margin smart safes. For expenses, Mr. Burg highlighted productivity actions like real estate portfolio optimization, divestment of non-central businesses (Upstart, Commonwealth, Powdermill), and strong discipline in headcount, while maintaining flexibility to invest in the franchise. On deposits, he mentioned reducing the CD book due to aggressive pricing and focusing on non-interest-bearing deposits, while the securities portfolio will be kept flat at around 21% of assets, with reinvestments at higher yields.

Russell Gunther from Stephens Inc. inquired about WSFS Financial Corporation's base case scenario for achieving its medium-term CET1 target, including assumptions for organic growth, acquisitive growth, and potential acceleration of buybacks. He also asked about asset quality trends, reserve levels amid macro volatility, and specific loan portfolio sectors under closer scrutiny.

Answer

David Burg, CFO of WSFS Financial Corporation, explained that the company is buying back approximately 100% of net income, with significant dry powder for two to three years, and may accelerate buybacks further. He emphasized disciplined originations, proactive client engagement, and stress testing for asset quality, noting conservative qualitative offsets to reserves despite macro data suggesting release capacity.

Russell Gunther asked about WSFS Financial Corporation's base case scenario for achieving its medium-term CET1 target, including assumptions for organic growth, acquisitive growth, and potential acceleration of buybacks. He also inquired about asset quality resolution trends, reserve levels amid macro volatility, and specific loan portfolio sectors under closer scrutiny.

Answer

CFO David Burg explained that the company is buying back approximately 100% of net income, with significant dry powder for buybacks for 2-3 years, and may accelerate buybacks further, prioritizing capital investment in the business. Regarding asset quality, Mr. Burg highlighted disciplined originations, proactive client engagement, and strong consumer asset quality. He noted that while macro data suggests capacity for reserve release, conservative qualitative offsets are maintained due to potential volatility.

Russell Gunther of Stephens Inc. asked for an outlook on commercial loan growth, particularly in C&I, and inquired about any shifts in commercial borrower sentiment regarding tariffs. He also questioned the expense run rate for the remainder of the year and the potential role of M&A in managing the company's CET1 capital ratio.

Answer

EVP & CFO David Burg stated that WSFS is focused on accretive loan growth, emphasizing C&I relationships while being selective in commercial real estate. Chairman, President & CEO Rodger Levenson noted a 'mild uptick in optimism' from borrowers as tariff uncertainty settles. Burg confirmed the Q2 expense level is a good run rate for future growth. Regarding capital, Levenson explained that while share buybacks are active, the primary use of excess capital is investment in the business, with a preference for fee-based and wealth management opportunities, though traditional bank M&A is not ruled out.

Russell Elliott Gunther questioned the absence of a guidance slide, the outlook for net charge-offs following a significant one-off credit event, and the expected expense run rate for upcoming quarters.

Answer

Executive David Burg clarified that updating guidance mid-year is standard practice for WSFS and does not signal reduced visibility. He explained that excluding the one-off acquired loan, net charge-offs were in line with expectations at 27 basis points. Regarding expenses, Burg noted that Q1 was unusually low due to about $8 million in one-time items and timing, suggesting a normalized quarterly run rate closer to $160 million.

Russell Elliott Gunther inquired about the 2025 expense outlook, seeking clarity on the dollar expense run rate from Q4 and the assumptions within the efficiency ratio guidance. He also asked about levers to improve Cash Connect's profitability independent of interest rates and the targeted year-end size of the securities portfolio.

Answer

Executive David Burg explained that Q4 expenses were elevated due to a $1.9 million one-time item in Cash Connect and variable rate-related costs. He noted that normalized expenses grew due to incentive compensation true-ups and strategic headcount additions in Wealth, Commercial, and Technology. Burg stated the 60% efficiency ratio is a full-year goal, implying revenue and expense growth will be parallel. For Cash Connect, he identified growth, optimizing cash logistics, and pricing leverage as key profit drivers. Regarding the securities portfolio, he confirmed the target is around 20% of assets, down from the current 22%, with cash flows primarily funding business growth.

Russell Elliott Gunther inquired about the net interest margin (NIM) outlook, specifically the impact of the hedge program per 25 basis point rate cut. He also asked about the Q4 and 2025 outlook for fee revenue from the credit, debit, and ATM line, particularly Cash Connect, and requested the specific revenue impact from the Spring EQ earn-out in the quarter.

Answer

EVP and CFO David Burg explained that the 7 basis point NIM decline was driven by the investment portfolio write-up, nonaccruals, and higher deposit costs. He confirmed the $1.5 billion hedging program is complete and will mitigate asset sensitivity as rates fall. For Cash Connect, Burg noted the focus is on optimizing the network gained from market share wins, which should expand profitability in a down-rate environment despite lower top-line revenue. He also confirmed the Spring EQ earn-out was approximately $2 million for the quarter.

Russell Gunther from Stephens asked about the specific drivers behind Amerant Bancorp's projected expense reductions for 2026, the expected normalized expense levels for 2027 and 2028, the anticipated progression of non-performing loan (NPL) and classified loan levels, and the necessary provisioning for future loan growth. He also inquired about the impact of recent events in Venezuela on international deposit gathering efforts and any potential concerns.

Answer

Sharymar Calderón, Senior EVP and CFO, explained that expense reductions stem from optimizing higher-cost deposits, rationalizing marketing and advertising spend, and strategic hiring, leading to a progressive reduction to $67 million-$68 million by 4Q 2026. Carlos Iafigliola, Senior EVP and Interim CEO, added that future expense growth would maintain the target efficiency ratio below 60%. Regarding asset quality, Sharymar Calderón noted that Q4 migration was due to extensive credit reviews, and 2026 is expected to see outflows outweighing inflows, projecting an improvement in the criticized portfolio. Provisioning is estimated at 40-45 basis points for the year, driven by loan growth, portfolio composition, and loss content. Carlos Iafigliola, Senior EVP and Interim CEO, discussed the positive outlook on Venezuela, citing potential for increased oil production and wealth generation, which could positively impact international deposit and AUM growth, with no current lending strategy in that market.

Russell Gunther inquired about the trend in Amerant Bancorp's international deposit levels year-to-date, the potential impact of recent Venezuelan events on deposit gathering, and any big-picture concerns despite the perceived tailwind.

Answer

Interim CEO Carlos Iafigliola highlighted Amerant's historical strength in international capacities and its vertically integrated platform for customers. He noted promising signs from Venezuela, expecting a surge in oil production to create wealth and increase international deposits, though it's too early to quantify the impact. CFO Sharymar Calderón added that personal international account balances increased in Q4, while commercial reductions were business as usual, and reiterated the focus on deposit and AUM growth without a lending strategy in Venezuela.

Russell Gunther inquired about Amerant's loan growth outlook for 2026 and whether the current slowdown reflects a strategic shift or market conditions. He also asked about expectations for realized losses in the second half of 2025 and what credit loss assumptions are embedded in the 1% ROA target.

Answer

CEO Jerry Plush clarified that the company expects to return to double-digit loan growth, stating the current priority has been asset quality but new talent will rebuild the pipeline. He noted that a significant portion of Q2 charge-offs were previously covered by specific reserves, keeping the core charge-off rate stable. CFO Sharymar Calderón added that the 1% ROA target for H2 2025 already accounts for provisions needed for expected loan growth.

Russell Elliott Gunther of Stephens Inc. asked for details on the lowered loan growth outlook, including the balance between paydown headwinds and new lender contributions. He also inquired about asset quality, seeking visibility on the migration of problem assets, potential losses, and confirmation of the 1% ROA target for the second half of the year.

Answer

Chairman and CEO Gerald Plush stated the lowered loan growth guidance is a prudent measure due to commercial customer pullback, but he expects a return to higher growth later in the year. CFO Sharymar Yepez added that prepayment behavior reflects the high-rate environment and macro uncertainty. Regarding profitability, Yepez confirmed the charge-off level is expected to rise in Q2 due to a specific sale before normalizing. She also reaffirmed the target of a 1% ROA in the second half of 2025, supported by expected expense reductions from the mortgage business restructuring.

Russell Elliott Gunther from D.A. Davidson & Co. inquired about Amerant's asset quality, seeking clarification on the expected $14.2 million reduction in non-performing loans (NPLs) and the trend for classified assets. He also asked for the outlook on net charge-offs, the allowance for credit losses (ACL), the future size of the investment portfolio, and the expense trajectory needed to achieve the company's efficiency ratio target.

Answer

Executive Sharymar Yepez confirmed the $14.2 million reduction would come from the NPL bucket and that classified assets are expected to decrease quarter-over-quarter. Executive Gerald Plush added that management is 'laser-focused' on reducing NPLs. Yepez reiterated net charge-off guidance of 25-30 basis points, noting the runoff of the indirect consumer portfolio will help. Plush stated the investment portfolio size should remain stable. Regarding expenses, Yepez explained that while the first half of the year has seasonally higher costs, the path to the target efficiency ratio is primarily driven by revenue growth, not significant expense reductions.

Russell Elliott Gunther of Stephens Inc. inquired about the drivers of Amerant's strong loan growth and expectations for 2025. He also asked for the outlook on net interest margin (NIM) for Q4 and early 2025, including new loan yields and deposit beta assumptions under potential Fed rate cuts. Finally, he requested more detail on the strategic initiatives for the newly separated international banking unit.

Answer

Chairman and CEO Jerry Plush attributed the robust loan growth to the continuous addition of high-quality relationship officers across all business lines and Florida markets. CFO Sharymar Calderon projected the NIM would expand to the mid-3.50s in Q4 and reach 3.55% to 3.60% in the first half of 2025, driven by new loan yields of 7.5-8% and the securities portfolio repositioning. Regarding international banking, Mr. Plush explained the organizational change aims to increase focus on this area as a key, cost-effective funding source.

Russell Gunther asked for clarification on the elevated paydowns impacting Q4 loan growth compared to previous quarters, and sought details on the asset class and geographic leaders expected to drive the high single-digit loan growth forecast for 2026, specifically whether this growth assumes current staff or incremental hires. He also questioned the Q4 expense run rate, identifying non-run rate items, and asked if the willingness to hire commercial lenders had materialized, including any changes to the compensation structure.

Answer

COO and CFO Michael Mettee explained that Q4 paydowns were elevated, particularly in the last week, but the company expects to grow through them. He confirmed the high single-digit growth forecast for 2026 is based on the existing team, with contributions from new markets like Asheville and Tuscaloosa, and broad-based growth across asset classes. CEO Chris Holmes emphasized that projections are based on current players and normal activity, not acquisitions or large team hires. Michael Mettee clarified Q4 non-interest expenses, noting $3 million in performance-based incentives, $1.2 million in higher franchise tax, and $1.5 million in non-run rate professional services related to the share repurchase. He reiterated the 2026 expense guide, stating a willingness to invest in revenue producers and market expansion for the right talent, emphasizing competitive compensation and a strong culture.

Russell Gunther asked about the impact of elevated paydowns on Q4 loan growth, how those levels compared to the previous quarter, and details on the high single-digit loan growth guidance for 2026, including asset class and geographic leaders, assuming current staff. He also inquired about the Q4 expense run rate, non-run rate expenses, willingness to exceed the expense guide for commercial lender hires, and any changes to the compensation structure to attract talent.

Answer

COO and CFO Michael Mettee confirmed elevated paydowns in Q4, particularly in the last week, but stated the 2026 growth forecast is based on the current team. He highlighted growth opportunities in Asheville, Tuscaloosa, metro areas, and community markets, aiming for broad-based growth across asset classes and both sides of the balance sheet. CEO Chris Holmes added that without the late-quarter paydowns, loan growth would have been higher, and emphasized budgeting for current players and normal activity, noting Nashville's significant contribution. On expenses, Michael Mettee clarified that $3 million in performance-based incentive, $1.2 million in franchise tax, and $1.5 million in professional services for the share repurchase were non-run rate, reiterating the 2026 expense guide. He stated the company is willing to invest in the right talent, playing both offense and defense in recruiting. Chris Holmes emphasized ensuring fair compensation for existing employees and competing aggressively for top talent based on culture, long-term vision, and client care.

Russell Gunther from Stephens Inc. asked for details on the net interest margin guidance, including assumptions for Fed rate cuts and the potential for further deposit cost reductions. He also questioned the sustainability of mid-to-high single-digit loan growth on a larger balance sheet and whether recent capital actions signaled a change in the M&A outlook.

Answer

CFO Michael Mettee stated the NIM forecast includes two rate cuts in late 2025 and noted that about 35-40% of deposits would reprice lower upon a cut. CEO Chris Holmes reaffirmed confidence in achieving mid-to-high single-digit growth long-term, supported by strong pipelines and growth from the Southern States franchise. Holmes also clarified that recent capital deployment does not limit future M&A due to the company's strong capital position, with a CET1 ratio over 12%.

Russell Gunther asked for the assumptions underlying the net interest margin (NIM) guidance, including Fed rate cuts and yield curve shape. He also inquired about the Q2 outlook for mortgage banking fee income and the company's charge-off expectations for the remainder of the year.

Answer

CFO Michael Mettee stated the NIM forecast assumes two rate cuts, consistent with their view from the start of the year, resulting in a stable outlook. He noted the pro forma NIM guide includes some conservatism due to economic uncertainty. On mortgage, Mettee was pleased with Q1 performance and expects continued profitability, though momentum is subject to rate volatility. Executive Christopher Holmes and Chief Bank Officer Travis Edmondson indicated they expect full-year charge-offs to be slightly below the Q1 level of 0.14%, noting that recent charge-offs were credit-specific and that overall credit trends are positive.

Russell Gunther questioned the outlook for loan growth in 2025, the hierarchy of capital deployment priorities including buybacks, and expectations for expense efficiency within the mortgage business.

Answer

Executive Christopher Holmes stated the bank is targeting a high single-digit to low double-digit loan growth rate for 2025. Executive Michael Mettee clarified that organic growth and M&A are the top capital deployment priorities, with share buybacks and securities restructuring considered opportunistic levers. Mettee also noted the mortgage segment has seen four straight quarters of positive contribution and is expected to operate more efficiently in 2025.

Russell Elliott Gunther of Stephens Inc. asked for a big-picture view on how future rate decreases would act as an earnings growth catalyst for FB Financial in 2025. He also inquired about the assumptions for deposit betas during a rate-cutting cycle and later followed up on asset quality, asking if inflows to adversely classified loans still outpaced outflows and how rate cuts might impact this dynamic.

Answer

Executive Christopher Holmes explained that with a well-matched balance sheet, including a significant portion of indexed deposits, the company is positioned to maintain or expand its margin in a gradual rate-cutting environment. Executive Michael Mettee added that the goal for deposit betas on the way down is to mirror the ~60% beta experienced on the way up, noting that recent wholesale funding provides optionality. Regarding asset quality, Executive Travis Edmondson stated that while there were two large commercial inflows, the overall flow is business as usual, and he does not expect rate changes to have a material impact on credit trends, which are currently driven by idiosyncratic issues.

Russell Gunther asked about the sustainability of SmartFinancial's double-digit organic loan growth into 2026, the status of the recruitment pipeline beyond the Columbus expansion, and the projected core expense growth rate for the year, considering investments in franchise and technology.

Answer

Billy Carroll, President and CEO of SmartFinancial, indicated a target of high single-digit plus loan growth (8-9%) for 2026, acknowledging the challenge of maintaining double-digit percentages with a larger balance sheet. He also stated that the company is actively recruiting talent across all key zones, prioritizing cultural fit over specific markets. Ron Gorczynski, CFO, added that core expense growth for 2026 is projected to be around 5%, staying within a $34.5-$35 million band, balancing investment with prudence.

Russell Gunther from Stephens inquired about the sustainability of SmartFinancial's double-digit loan growth into 2026, the status of the recruitment pipeline beyond Columbus, and the projected core expense growth rate for the year, considering investments and hiring plans.

Answer

Billy Carroll, President and CEO of SmartFinancial, stated that while double-digit growth is challenging, the company targets high single-digit plus growth (8-9%) for 2026 and is actively recruiting across all key zones. Ron Gorczynski, CFO, added that they anticipate overall expense growth of around 5% year-over-year, aiming to stay within a $34.5 million-$35 million band, while continuing prudent investments.

Russell Gunther asked about the sustainability of SmartFinancial's positive operating leverage streak into 2026, considering ongoing banker hires and tech investments. He also sought an update on the expected margin expansion beyond Q4 2025, referencing previous guidance.

Answer

President and CEO Billy Carroll affirmed confidence in continuing the positive operating leverage streak into 2026, driven by revenue growth outpacing expense run rates. CFO Ron Gorczynski added that expenses would be contained, projecting a range of $34 million to $35 million for the full year 2026. Ron Gorczynski also updated the margin expansion outlook, projecting five to seven basis points of expansion quarter-over-quarter for 2026.

Russell Elliott Gunther inquired about SmartFinancial's streak of six consecutive quarters of positive operating leverage, asking if this trend is expected to continue into 2026 given ongoing banker hires and tech initiatives. He also sought an update on the margin expansion outlook beyond Q4 2025, specifically whether the previously guided 2-3 basis points quarterly expansion would change.

Answer

Billy Carroll, President and CEO, expressed confidence in continuing the positive operating leverage streak into 2026, citing strong revenue growth from production and repricing that is expected to outweigh expense growth. Ron Gorczynski, CFO, added that the company aims to keep its expense base contained, projecting a range of $34 million to $35 million for the full year 2026. Regarding margin expansion, Ron Gorczynski stated a more bullish outlook, anticipating 5-7 basis points of expansion quarter over quarter for 2026.

Russell Gunther from Stephens Inc. questioned the strength of commercial loan pipelines, borrower sentiment, the status of the talent recruitment pipeline, and the timeline for achieving the 1% Return on Assets (ROA) target.

Answer

President & CEO William Carroll and EVP & Chief Credit Officer Rhett Jordan described commercial pipelines as being as strong as they have been all year, with a balanced mix across geographies and products. Carroll and Chairman Miller Welborn highlighted a continuous recruiting focus ('Always Be Recruiting'), particularly in expansion markets like Nashville and Birmingham. Regarding the 1% ROA target, Carroll expressed confidence they will get 'real close' in the back half of the year.

Russell Gunther from Stephens Inc. questioned the expense growth trajectory for the remainder of 2025 and asked for details on loan portfolio exposures related to tariff volatility.

Answer

President and CEO William Carroll emphasized the focus on stabilizing the expense line, with most future growth coming from talent acquisition. CFO Ronald Gorczynski reiterated guidance for 2.5% to 3% expense growth for the year. Regarding tariffs, Carroll and executive Rhett Jordan identified trucking (via the Fountain subsidiary) and auto dealer floor plan/manufacturing as areas receiving close attention, though they stressed their continuous, broad-based credit monitoring process.

Russell Elliott Gunther questioned the conservative loan growth guidance of mid-to-high single digits given recent outperformance. He also sought clarity on the drivers for the Q4 net interest margin (NIM) forecast of 3.10% to 3.15%, including Fed rate cut assumptions and expected deposit beta performance.

Answer

President and CEO William Carroll, along with executive Rhett Jordan, explained the loan growth guidance accounts for potential paydowns, though pipelines remain strong. CFO Ronald Gorczynski specified the NIM forecast is for Q4 2024, with expansion expected through 2025, and the bank is modeling a downward deposit beta of approximately 40%.

Russell Gunther inquired about F.N.B. Corporation's mid-single-digit loan growth outlook for 2026, specifically asking if residential mortgage growth would align with this target and if C&I and CRE would outpace it, along with the drivers for commercial loan growth. He also questioned the company's capital management strategy, including the target for the CET1 ratio and the acceptable concentration level for CRE.

Answer

Chairman, President, and CEO Vincent Delie explained that the company reset its balance sheet in 2025 to aggressively grow CRE and C&I loans, citing a strong loan-to-deposit ratio (89.7%) and a CRE concentration of 197% of capital, which provides significant lending capacity. He noted that residential mortgage growth would be more tempered due to a strategic sale of performing loans to free up capital for higher-returning categories. CFO Vincent Calabrese stated that the CET1 ratio at 11.4% and strong internal capital generation provide flexibility for capital deployment, with buybacks expected to be at or higher than 2025 levels. Vincent Delie added that the company could originate nearly $1 billion in CRE loans without significantly altering the concentration level, and while the goal is to stay below 200%, moving slightly above is acceptable.

Russell Gunther asked about F.N.B. Corporation's mid-single-digit loan growth outlook for 2026, specifically if residential mortgage growth would align with this, and if C&I and CRE growth would outpace it. He also inquired about capital management, including the target CET1 ratio for 2026 and the willingness to adjust CRE concentration levels.

Answer

Chairman, President, and CEO Vincent Delie explained that strong underlying production, particularly in C&I, despite Q4 payoffs, positions F.N.B. for growth. He highlighted the company's reset balance sheet, with a loan-to-deposit ratio below 90% and CRE concentration at 197% of capital, providing significant capacity for C&I and CRE lending. He expects mortgage business growth to be more tempered, with more loans moving off the balance sheet to free up capital for higher-returning categories. CFO Vincent Calabrese stated that the CET1 ratio at 11.4% provides flexibility, with organic growth as the primary use of capital. He noted that F.N.B. generates enough capital to support high single-digit loan growth and could originate nearly $1 billion in CRE loans without changing the concentration level. He also mentioned that buybacks are expected to be at or higher than 2025 levels, and a dividend increase is a topic for board discussion.

Russell Gunther of Stephens Inc. inquired about F.N.B.'s expense management, noting the improved efficiency ratio and positive operating leverage, asking if the 50-55% efficiency target remains relevant and if the recent improvements are sustainable into 2026. He also asked Chief Credit Officer Gary L. Guerrieri to elaborate on the 'risk removal' from the portfolio in Q3 and the bank's assessment of exposure to a potential government shutdown.

Answer

Chairman, President, and CEO Vincent J. Delie and CFO Vincent J. Calabrese affirmed a strong focus on expense optimization, with a sizable initiative planned for next year, leveraging digital workstreams, common application, AI, and renegotiating vendor contracts to drive positive operating leverage and further reduce the efficiency ratio. Chief Credit Officer Gary L. Guerrieri clarified that risk removal involved a $113 million reduction in criticized assets through client exits and performance upgrades, and stated that F.N.B. has seen no material impact from government shutdown threats, continuously monitoring potentially affected portfolios.

Russell Gunther of Stephens Inc. inquired about deposit cost expectations amid competition, the potential for incremental margin, and the factors that could push net interest income to the high end of the guidance range, particularly in the absence of Fed rate cuts.

Answer

CFO Vincent J. Calabrese stated that interest-bearing deposit costs would likely remain around current levels until a Fed rate cut. Chairman, President & CEO Vincent J. Delie expressed confidence in deposit gathering due to FNB's diverse footprint and strategic investments. Calabrese noted that the absence of a September rate cut would be a positive driver for NII, along with the loan mix, reinvestment spreads, and success in growing non-interest-bearing deposits.

Russell Elliott Gunther of Stephens Inc. inquired about F.N.B. Corporation's net interest income (NII) outlook, including the timing of swap maturities, the assumptions behind the high end of the NII guidance, and the expense forecast for Q2 and the full year.

Answer

CFO Vincent J. Calabrese explained that the full-year NII guide assumes rate cuts in June and September. He detailed the declining quarterly drag from swap maturities, starting at $8 million in Q1 and falling to $6 million in Q2 before rolling off. He noted that no further securities portfolio restructuring is currently planned. Regarding expenses, Calabrese confirmed that the guidance already includes $15-20 million in cost savings initiatives and that the firm maintains its disciplined approach to cost management.

Russell Elliott Gunther from Stephens asked about the expected progression of deposit costs in 2025, the outlook for net interest margin, and which markets F.N.B. plans to target for market share growth, including its stance on M&A.

Answer

CFO Vincent J. Calabrese stated the goal is to outperform peers on deposit costs as rates decline, targeting a cumulative down-beta in the mid-30s. CEO Vincent J. Delie addressed strategy, noting that while the environment is becoming more favorable for M&A, F.N.B.'s primary focus is organic growth by building out its presence in the Carolinas and the Mid-Atlantic region, while leveraging its digital platform to gain share in mature markets.

Russell Gunther inquired about the drivers for third-quarter expenses exceeding guidance, the outlook for the fourth-quarter expense range, and the potential for achieving positive operating leverage in 2025.

Answer

CFO Vincent J. Calabrese attributed the higher Q3 expenses to strategic marketing for deposit growth ($2M) and increased compensation ($5M) from production incentives and key hires. He guided for Q4 expenses to be lower sequentially, in the $225M-$235M range. Both Calabrese and CEO Vincent J. Delie stated that positive operating leverage in 2025 is achievable, though a steeper yield curve would be a key driver for significant net interest income growth.

Russell Gunther with Stephens Inc. inquired about the sustainability of mid-single-digit loan growth for 2026, the potential for high single-digit growth on the expanded balance sheet, and opportunities within specialty lines. He also asked about the 4Q expense outlook, the 45% efficiency ratio target for 2026, and strategies for managing the absolute expense base while expanding in North Carolina.

Answer

President and CEO John Asbury confirmed expectations for mid-single-digit loan growth in 2026, noting the potential for high single-digit growth in a normalized environment. EVP and Wholesale Banking Group Executive David Ring highlighted strong new client acquisition, growing pipelines, and increased average loan growth quarter-over-quarter. EVP and CFO Rob Gorman stated that the company expects a mid-40s efficiency ratio in 2026, inclusive of North Carolina investments, with a projected flat expense base year-over-year when pro forma for the Sandy Spring acquisition.

Russell Gunther from Stephens Inc. inquired about the pro forma loan growth outlook, the sustainability of the mid-40% efficiency ratio target given North Carolina expansion plans, and capital deployment priorities, including the potential for share buybacks.

Answer

CEO John C. Asbury and EVP & Wholesale Banking Group Executive David Ring confirmed strong loan pipelines support a solid growth outlook. CFO Robert Gorman reaffirmed the mid-40s efficiency ratio target for 2026, which includes planned investments. Gorman also outlined capital priorities as organic growth, dividends, and then potential share repurchases once the CET1 ratio approaches 10.5-11%.

Russell Gunther asked to what extent the qualitative reserve build has 'ringfenced' the overhang from potential government cutbacks and also inquired about the net interest margin outlook for the legacy Atlantic Union Bank in Q2 before the inclusion of Sandy Spring.

Answer

EVP and CFO Rob Gorman stated that potential government cutbacks were not a big factor in the qualitative overlay; the primary driver was the increased probability of a national recession resulting from tariff policies. President and CEO John Asbury added that government-related issues are localized to the Greater Washington region and not a major concern elsewhere in their Virginia and North Carolina footprint. For the legacy AUB margin, Gorman expects continued expansion in Q2 from the Q1 level of 3.45%, driven by repricing of CDs and fixed-rate loans.

Russell Gunther of Stephens Inc. inquired about the expected pro forma net interest margin after the merger, the strategy for growing Sandy Spring's C&I loan portfolio, and the specific characteristics of the CRE loans slated for sale.

Answer

CFO Rob Gorman projected a pro forma NIM in the 3.75% to 3.85% range post-close, including accretion. CEO John Asbury and Head of Commercial Banking David Ring detailed the C&I growth plan, which involves deploying Atlantic Union's playbook and product capabilities like equipment finance into Sandy Spring's markets. Asbury also clarified the sale portfolio consists of high-quality, performing loans, primarily in retail and multifamily.

Russell Gunther asked about United Community Banks' outlook for average earning assets and the investment portfolio's trajectory, and whether the bank is considering any restructuring actions for its investment portfolio.

Answer

EVP and CFO Jefferson Harralson explained that average earning assets would see a seasonal boost in Q4 from public funds, with the securities portfolio expected to be flat to slightly down in the near term, flattening out in 2026. He confirmed that investment portfolio restructuring has been discussed at the board level over the last six months but indicated no imminent actions.

Russell Gunther asked about the expected trend for average earning assets and the investment securities portfolio going forward. He also inquired whether United Community Banks is considering any restructuring actions for its investment portfolio.

Answer

Jefferson Harralson, EVP and CFO, explained that average earning assets would see a seasonal boost in Q4 from approximately $400 million in public funds inflow. He noted that the securities portfolio's trend is a derivative of deposit growth, expecting it to be flat to slightly down in the near term and flatten out in 2026. Regarding investment portfolio restructuring, he confirmed it has been discussed at the board level, but nothing is imminent.

Russell Gunther followed up on loan growth, asking for an update on the commercial pipeline's status versus the prior quarter and any shifts in commercial borrower sentiment. He also inquired about the recruitment pipeline, specific markets targeted for increased density, and the bank's appetite for using excess capital for securities portfolio restructurings.

Answer

President & Chief Banking Officer Richard Bradshaw confirmed the commercial pipeline is larger than last quarter and that hiring efforts are focused on top talent within the existing footprint. Chairman & CEO H. Lynn Harton added that client sentiment is positive. Regarding capital, Executive VP & CFO Jefferson Harralson acknowledged that a securities restructuring is something they evaluate but noted they like running with high capital ratios and have not made a decision. Mr. Harton reiterated that organic growth and M&A remain top priorities for capital.

Russell Gunther inquired about capital deployment plans, including both offensive (buybacks, M&A) and defensive options, given the strong 11% CET1 ratio. He also asked which portfolio segments are under closer scrutiny.

Answer

CEO John Corbett acknowledged that the strong capital position creates future options for dividends, buybacks, or M&A, but the immediate priority is navigating economic uncertainty. Executive William Matthews added that the CET1 ratio is projected to accrete 20-25 basis points per quarter. Defensively, Corbett stated the primary risk is a widespread recession rather than specific sectors, though the team is closely monitoring $200 million in industrial warehouse exposure near ports.

Russell Gunther of Stephens Inc. asked for an outlook on legacy SouthState deposit cost trends, CD repricing opportunities, and the expected performance of the correspondent banking business.

Answer

CEO John Corbett projected the pro forma company's deposit costs to be around 2% in Q1 2025, highlighting a better-than-modeled beta on deposit pricing. He also guided for noninterest income to be in the 50-55 basis points range of average assets. He noted the correspondent bank, a recent driver of outperformance, is expected to start the year with an annualized revenue run-rate of approximately $80 million, with potential to rise toward $90 million if the Fed implements rate cuts.

Russell Gunther asked for clarification on potential actions with the bond book, specifically whether any restructuring would be incremental to the NII guide or a measure to support it if needed.

Answer

Harold Carpenter (executive) clarified that any potential tactics related to the securities portfolio are not included in the current guidance. He stated that if pursued, such actions would be incremental to the plan and would not be as influential as the major restructuring executed in Q2 2024.

Russell Elliott Gunther inquired about Pinnacle's current appetite for M&A, referencing the company's past success with acquisitions. He also asked for the outlook on BHG's revenue trajectory for 2025, given commentary about lower rates and improving credit trends.

Answer

Executive M. Turner stated that future bank acquisitions are very unlikely. He emphasized that the company's ability to drive rapid organic growth through hiring and market extensions offers a significantly lower risk profile than M&A. The previous acquisitions were highlighted to show the power of Pinnacle's organic growth model once applied to new markets. Regarding BHG, executive Harold Carpenter indicated that while 2025 planning is ongoing, he anticipates mid-to-high single-digit revenue growth for BHG next year, pending further analysis of their expense base.

Inquired about the pro forma net interest margin post-deal, the playbook for growing C&I loans in Sandy Spring's markets, and the specific profile (asset class, geography) of the CRE loans intended for sale.

Answer

The pro forma NIM is projected to be in the 3.75% to 3.85% range post-close, including accretion. The C&I growth playbook involves leveraging Sandy Spring's existing business segmentation and introducing Atlantic Union's capabilities like equipment finance and asset-based lending to serve the middle market more effectively, with an expectation of real revenue synergies. The CRE loans identified for sale are primarily high-quality, performing retail and multifamily loans, and the portfolio has been priced down to the individual note level.

Asked for details on the risk-weighted asset (RWA) optimization, the volume of fixed-rate loan repricing in 2025, and the outlook for fee income growth for the year.

Answer

The RWA reduction of $360M came from reclassifying over $700M in home equity lines of credit, with more review underway. Fixed-rate loan repricing will slow to $200M-$300M per quarter in 2025. Fee income growth is expected in the high single-digit to low double-digit range, depending on market performance and the timing of new SBA loan sale gains.

Asked for details on the commercial loan growth outlook and mix, the strategy for recruiting C&I and SBA lenders, the percentage of deposits indexed to Fed funds, and color on a specific CRE credit moved to OREO.

Answer

The company is targeting 3% commercial loan growth in Q2, focusing on C&I and owner-occupied lending while keeping the CRE portfolio level. Recruiting is focused on individual hires rather than teams. Between $300M-$500M in deposits are directly tied to Fed funds. The OREO transfer was a small office property on which the bank feels it is well-collateralized and expects to move off the books without significant issue.

Inquired about the assumed deposit beta for the net interest margin recovery, the nature of the funding mix, the status of digital transformation spending within the expense guidance, and targets for loan growth and the loan-to-deposit ratio.

Answer

Executives expect high betas on savings products (90%+) during rate cuts. No deposits are formally indexed to Fed funds, but significant expensive borrowings will mature in 2024, providing a tailwind. The major retail digital build-out is complete, with commercial platforms planned for late 2024/2025, so its cost is not in the current flat expense guidance. The company is targeting mid-to-upper single-digit loan growth for 2024, with a long-term goal of a mid-90s loan-to-deposit ratio.