Sharanjit Cheema

Sharanjit Cheema, on behalf of Manuel Navas, asked about the deposit growth pipeline for the second half of the year, the current competitive landscape, and the spread between new loan yields and yields on loans paying off.

Answer

President Dave Antolik noted the deposit pipeline is focused on the business space and will benefit from seasonal public fund inflows in Q3. He described the competitive landscape as geographically varied. CFO Mark Kochvar provided specifics on loan yields, stating new loans were originated at approximately 6.52% versus payoffs at 6.36%, resulting in a positive 16 basis point spread for the quarter.

Sharanjit Cheema, on for Manuel Navas, questioned the drivers of the 40% loan pipeline growth, the company's hiring plans for 2025, and the potential to add more production teams.

Answer

President Dave Antolik attributed the strong pipeline growth primarily to the successful recruitment of C&I bankers, noting a 15% increase in calling officers. He indicated that hiring in 2025 would be more targeted. While optimistic about growth supported by new hires, he cautioned that macroeconomic uncertainty could impact loan pull-through rates.

Speaking for Manuel Navas, Sharanjit Cheema questioned the stability of the net interest margin (NIM) if more rate cuts occur, the impact of the December Fed cut on Q1 deposit costs, and the pricing of new loans in the pipeline.

Answer

Executive Mark Kochvar expressed confidence that the NIM could remain stable around the mid-3.70% level even with more Fed cuts, citing increased opportunities to reprice deposits lower. He noted that Q1 would be more significantly impacted by the repricing of over $100 million per month in CDs than by the December cut. President Dave Antolik clarified that new loan pricing would be similar to Q4, with growth driven by increased banker presence and customer demand rather than price competition.

Sharanjit Cheema, on for Manuel Navas, asked for an update on a potential securities portfolio restructuring at current interest rates and inquired about any concerns related to the CHIPS Act given recent political commentary.

Answer

Executive Dimitar Karaivanov responded that a securities portfolio restructuring is 'unlikely' at this time as the economics do not make sense. Regarding the CHIPS Act, he expressed no concern, stating that the Micron project subsidy is finalized, construction is proceeding, and the initiative has bipartisan support. He emphasized that the company's strategic plans are not dependent on the project.

Speaking on behalf of Manuel Navas, Sharanjit Cheema asked for an update on the loan and deposit growth pipeline mix following a strong quarter.

Answer

Executive Dimitar Karaivanov stated that the loan pipeline is healthy and more consistent with the growth rates of Q1 and Q2, rather than the elevated rate seen in Q3. On the deposit side, he noted that Q3 growth was boosted by seasonal municipal inflows, but expressed cautious optimism as non-municipal deposit trends improved for the first time in several quarters.

Speaking on behalf of Manuel Navas, Sharanjit Cheema from D.A. Davidson & Co. asked about the expected deposit betas in a falling rate environment, what specific deposit pricing actions have been taken since the September rate cut, and the current state of the commercial loan pipeline.

Answer

EVP and CFO David Burg detailed proactive measures, including reducing CD pricing and shortening tenors. He projected a near-term deposit beta in the high teens or 20% for Q4 but noted future betas depend on the pace of rate cuts and the strategic goal of gaining market share. Chief Commercial Banking Officer Stephen Clark added that the 90-day weighted average commercial pipeline is consistent with past quarters at about $230 million, indicating stable near-term closing expectations.