Steve Moss

Steve Moss inquired about potential upside to the loan growth guidance given the strong pipeline and declining transactional CRE runoff, and how the reserve outlook might evolve with the continued decline in criticized and classified assets.

Answer

Travis Lan, Senior EVP and CFO, noted that the 5% midpoint of loan growth guidance includes $500 million of runoff, implying higher growth absent that. Gino Martocci, Senior EVP, Commercial Banking, confirmed a very strong, geographically distributed pipeline, particularly in healthcare, driven by client confidence. Travis Lan, Senior EVP and CFO, expects general stability in the allowance coverage ratio, as increasing C&I in the portfolio will offset the hypothetical benefit from lower criticized and classified loans.

Steve Moss asked about potential upside to loan growth guidance, given the strong pipeline and decline in CRE runoff, and what offsets might exist. He also inquired about the long-term outlook for the allowance coverage ratio, specifically if a meaningful reserve decline could occur if criticized and classified loans normalize.

Answer

Travis Lan, CFO, noted that the 5% midpoint of loan growth guidance includes $500 million of Tier 3 transactional CRE runoff, implying higher growth without it. Gino Martocci, Senior EVP, Commercial Banking, confirmed a very strong, geographically distributed pipeline with a slight C&I concentration. Travis Lan, CFO, stated that while a decline in reserves directionally makes sense with lower criticized and classified loans, the increasing C&I portion of the portfolio would offset this, leading to general stability in the allowance coverage ratio.

Steve Moss inquired about the coupon on new loan originations within Valley National Bancorp's $3.3 billion pipeline. He also asked about the pricing strategy for larger, upstream loans, potential for syndication, and how these would drive profitability. Additionally, he sought quantification of the decline in criticized assets and whether substandard assets also decreased.

Answer

Travis Lan, CFO, stated that new origination yields were 6.8% in Q3, consistent with the prior quarter, and pipeline yields are similar, possibly slightly lower due to benchmark rates. Gino Martocci, President of Commercial Banking, explained that Valley is increasing its focus on larger loans, with pricing typically thinner (175-225 bps over benchmark), and is building out its syndications platform. These relationships are expected to be fulsome, driving profitability through deposits and fees. Mark Saeger, Chief Credit Officer, reported a $100 million reduction in total criticized assets for the period, but would need to follow up on the specific substandard component.

Steve Moss of Raymond James & Associates, Inc. asked about the drivers of strong C&I loan growth, the reasons for the increasing reserve allocation to that portfolio, and the outlook for criticized and classified assets.

Answer

President Tom Iadanza explained that C&I growth is relationship-driven, stemming from middle-market teams hired over five years, especially in Florida, and is not reliant on participations. An executive added that the higher C&I reserve is due to a higher loss-given-default expectation and some migration in the current rate environment, but they expect this migration to abate and potentially improve in 2025.

Steve Moss inquired about the projected total purchase accounting accretion for 2026, the impact of adjustable rate loan repricing on the core margin, plans for new hirings in 2026, and the outlook for the credit reserve given its recent decline.

Answer

Thomas Lyons, Senior Executive Vice President and Chief Financial Officer, projected approximately $60 million in purchase accounting accretion for 2026, subject to prepayment volatility. He confirmed that backbook repricing would add about 4 basis points to the margin, noting that not all adjustable loans carry rate marks due to a blend of legacy and acquired loans. Anthony Labozzetta, President and CEO, outlined hiring plans focused on insurance, wealth, and particularly the middle market segment ($75M-$500M client size), expecting 3-5 additional complements this year, along with investments in treasury management. Mr. Lyons explained that the credit reserve is largely model-driven by macroeconomic variables, feeling like it's at a base, and is supported by strong credit metrics and low net charge-offs.

Steve Moss asked for guidance on total purchase accounting accretion for 2026 and how the repricing of adjustable-rate loans contributes to the core margin. He also inquired about specific niches and the number of planned hires for 2026, and the potential for further changes in the reserve for credit losses.

Answer

Tom Lyons (SVP and CFO) projected approximately $60 million in purchase accounting accretion for 2026, noting volatility based on prepayments. He clarified that adjustable-rate loan repricing is expected to add 4 basis points to the margin. Anthony Labozzetta (President and CEO) outlined hiring plans focused on middle market banking, treasury management, insurance, and wealth, expecting 3-5 additional complements, all within expense guidance. Tom Lyons explained that the reserve for credit losses is largely model-driven, consistent with strong credit metrics and low net charge-offs, suggesting it's at a base level.

Steve Moss inquired about Camden National's net interest margin expansion, specifically asking about deposit cost trends following Fed rate cuts and the outlook for further margin expansion. He also questioned the loan growth dynamics, including the impact of payoffs and the strength of the current pipeline, and sought clarity on the company's strategy for deploying its share repurchase authorization.

Answer

Mike Archer, Executive Vice President and Chief Financial Officer, indicated an expectation of a couple of basis points of core margin expansion for Q1 2026, with funding costs potentially improving by 7-10 basis points, offset by some yield compression. Simon Griffiths, President and Chief Executive Officer, noted a solid residential pipeline of over $83 million and a commercial pipeline of over $77 million, projecting flat to 2% loan growth for the quarter, with mid-single-digit growth expected later in the year, particularly in southern markets and New Hampshire. Mr. Archer added that the initial priority for capital deployment is organic growth and building capital, with opportunistic use of the repurchase program.

Steve Moss from Raymond James Financial inquired about the specific industry of the C&I loan that was placed on non-accrual and its impact on net interest income. He also asked about the drivers behind the improved loan pipeline and the outlook for net interest margin expansion.

Answer

EVP & CFO Michael Archer confirmed the non-accrual loan was a C&I syndication that impacted the net interest margin by approximately one basis point. President & CEO Simon Griffiths characterized the borrower as a service company and emphasized the overall health of the credit portfolio. Griffiths also noted a broad-based pickup in the loan pipeline, particularly in commercial and home equity, and projected continued NIM expansion of 5-10 basis points in the next quarter, contingent on Fed actions.

Steve Moss from Raymond James Financial inquired about the specific industry of the C&I borrower that filed for bankruptcy, the impact of the non-accrual on net interest income, the drivers behind the improved loan pipeline, and the outlook for net interest margin expansion.

Answer

CFO Michael Archer confirmed the loan was a C&I syndication and its non-accrual status impacted the quarterly net interest margin by approximately one basis point. President & CEO Simon Griffiths characterized the borrower as a service company and emphasized that this was an isolated issue, with overall credit metrics remaining strong. Griffiths also noted the loan pipeline's strength was broad-based, with significant momentum in commercial and home equity loans, and projected continued NIM expansion of plus or minus 5-10 basis points in the next quarter, contingent on Fed actions.

Steve Moss inquired about current loan pricing trends, the competitive landscape over the past 3-4 months, and the anticipated drivers of loan growth for Community Financial System in 2026. He also sought clarification on the non-interest income growth guidance and the expected trajectory, seasonality, and any one-time impacts on the Employee Benefit Services business.

Answer

CEO Dimitar Karaivanov noted that Q4 originations were in the low sixes, with a clear trend towards lower pricing in 2026, but highlighted the benefit from fixed asset repricing. CFO Marya Burgio Wlos confirmed the 4%-8% non-interest income growth guidance. Dimitar Karaivanov further explained that the Employee Benefit Services business saw high single-digit growth in retirement services in 2025, while institutional trust was flat. He anticipates mid-to-high single-digit growth for the overall segment in 2026, driven by higher asset values and new fund launches, with Q4 typically being the strongest quarter due to seasonality.

Steve Moss asked about current loan pricing trends, the competitive landscape, and the expected drivers of loan growth for 2026. He also inquired about the non-interest income growth guidance and the anticipated cadence of growth in the employee benefit services business, specifically regarding any one-time items or seasonality.

Answer

CEO Dimitar Karaivanov indicated that Q4 originations were in the low sixes, with a clear downward trend expected in 2026, but noted ongoing benefits from fixed asset repricing. CFO Marya Burgio Wlos confirmed the non-interest income growth guidance of 4%-8%. Dimitar Karaivanov further explained that the employee benefit services business saw high single-digit growth in retirement in 2025, while institutional trust was flat, projecting mid-to-high single-digit growth for the overall segment in 2026, with Q4 typically being the strongest quarter due to seasonality.

Steve Moss, an analyst at Raymond James, inquired about Community Financial System's loan growth pipeline and continued optimism amidst competition. He also sought clarification on the company's outlook for blended net interest margin, including the accretive impact of the Santander acquisition. Additionally, Moss asked about the anticipated quarter-over-quarter expense increase, excluding Santander, and any unique factors driving growth in employee benefit services non-interest income.

Answer

Dimitar Karaivanov, President and CEO, affirmed a "very constructive" outlook on loan growth, highlighting record commercial pipelines and stronger mortgage pipelines year-over-year, driven by market share gains. Marya Wlos, CFO, reiterated the 3%-5% margin guidance, expecting funding costs to remain low or decrease, with the Santander acquisition contributing positively to the margin. Ms. Wlos confirmed a $1 million Q4 expense increase, attributed to charitable contributions and compensation adjustments. Mr. Karaivanov noted increased seasonality in Q4 for employee benefit services due to recent acquisitions, expecting Q4 performance to surpass Q3.

Steve Moss asked for an update on loan growth pipelines and optimism given market competition, the company's outlook on blended net interest margin (NIM) including the impact of Santander deposits, details on the anticipated quarter-over-quarter expense increase, and insights into the growth drivers for employee benefit services.

Answer

Dimitar Karaivanov, President and CEO, expressed continued optimism for loan growth, highlighting record commercial pipelines and stronger mortgage pipelines year-over-year, projecting Q4 growth similar to Q3, driven by market share gains. Marya Wlos, CFO, affirmed the NIM guidance of 3-5 basis points, expecting stable to lower funding costs and positive margin impact from Santander deposits. Ms. Wlos clarified the $1 million expense increase for Q4 is due to charitable contribution prepayments and incentive compensation adjustments. Mr. Karaivanov noted increased seasonality in Q4 for employee benefit services due to recent acquisitions, expecting Q4 to outperform Q3.

Steve Moss of Raymond James inquired about the competitive dynamics and pricing in the lending market, the outlook for quarterly Net Interest Margin (NIM) expansion, and the company's strategy for deploying the approximately $600 million in deposits from the recent branch acquisition.

Answer

CEO Dimitar Karaivanov acknowledged a more competitive lending environment, noting that Community Financial is selectively shedding criticized credits while maintaining its market share strategy. He indicated new loan yields were around 6.75% but are trending lower. CFO Marya Burgio Wlos adjusted the NIM expansion guidance to a 3-to-5 basis point range per quarter. Dimitar Karaivanov added that the acquired deposits will fund future loan growth over several years.

Steve Moss of Raymond James, with Thomas asking on his behalf, inquired about the competitive landscape for lending, current loan pricing, and the outlook for Net Interest Margin (NIM) expansion. He also asked about the deployment strategy for the $600 million in acquired deposits.

Answer

CEO Dimitar Karaivanov acknowledged increased competition on both rate and credit, noting that Q2 originations were in the 6.75% range but are trending lower. CFO Marya Burgio Wlos projected quarterly NIM expansion to be in the 3 to 5 basis point range. Mr. Karaivanov added that the acquired deposits will fund loan growth over several years, initially held in short-term instruments.

Steve Moss of Raymond James, with Thomas asking on his behalf, inquired about the competitive lending landscape, current loan pricing, the outlook for net interest margin (NIM) expansion, and the deployment strategy for the recently acquired deposits.

Answer

CEO Dimitar Karaivanov described the lending environment as highly competitive on both rate and credit, with new loan originations yielding around 6.75% but trending lower. CFO Marya Burgio Wlos updated the quarterly NIM expansion guidance to a range of 3 to 5 basis points. Mr. Karaivanov added that the acquired deposits will fund organic loan growth over several years, initially being held in short-term instruments.

Speaking on behalf of Steve Moss, an analyst from Raymond James inquired about the competitive landscape for lending, current loan pricing trends, the sustainability of the previously guided 2-7 basis points of quarterly NIM expansion, and the strategic deployment of the $600 million in deposits from the recent branch acquisition.

Answer

CEO Dimitar Karaivanov acknowledged that the lending market is more competitive on both rate and credit, with new loan originations yielding around 6.75% and trending lower. CFO Marya Burgio Wlos adjusted the quarterly NIM expansion guidance to a range of 3-5 basis points. Regarding the acquired deposits, Mr. Karaivanov stated they will be used to fund organic loan growth over the next several years, initially being held in short-term instruments.

Steve Moss questioned management's perspective on capital, noting the steady growth in capital ratios and asking if the company is considering strategies for greater return on capital to shareholders or reducing common equity Tier 1 ratios, similar to trends on the mainland.

Answer

Aurelio Alemán, President and CEO, outlined the priorities: organic growth, including expansion in Florida with a new branch in Boca Raton; non-organic opportunities if they meet accretion and strategic value criteria; and deploying capital to shareholders through share buybacks if other opportunities don't materialize. He emphasized having these three options and being opportunistic.

Steve Moss asked for updated insights into the auto loan market, particularly regarding the impact of tariffs and consumer demand. He also questioned the strategy for reinvesting securities cash flows, including assumed yields and types of investments. Additionally, he sought clarification on the telecom non-performing loan (NPL) and the company's approach to capital management, specifically regarding common equity tier one ratios and shareholder returns.

Answer

Aurelio Alemán, President and CEO, First BanCorp, noted a 10% overall market retail contraction in auto loans last year, with over 15% in the second half due to tariffs, expecting stabilization but no growth in the segment for the current year. Orlando Berges, EVP and CFO, First BanCorp, stated that securities cash flows would be reinvested in agency and CMO investments, expecting a 2-3 basis point pickup on maturing securities. Aurelio Alemán clarified that the telecom NPL is a small participation, with banks working towards resolution. He also outlined capital priorities: organic growth, non-organic opportunities, and returning capital to shareholders through buybacks, aiming for an opportunistic approach.

Steve Moss questioned the timing of securities portfolio cash flows impacting the margin and sought insight into the future trajectory of the loan loss reserve ratio, considering strong credit performance and stabilizing consumer charge-offs.

Answer

CFO Orlando Berges-González clarified that securities cash flows are not evenly spread, with November and December typically being the highest, and some Q3 benefits extending into Q4, though reinvestment yields are 50-100 basis points lower. Regarding the loan loss reserve, Mr. Berges-González expects residential reserves to continue decreasing due to improved loss history, consumer reserves to remain stable as older vintage charge-offs normalize, and commercial reserves to see minor changes, all influenced by macroeconomic forecasts like unemployment.

Steve Moss questioned the timing of cash flows from the securities portfolio and provided an outlook on the loan loss reserve ratio, considering qualitative adjustments, strong credit performance, and stabilizing consumer charge-offs.

Answer

Aurelio Alemán, CEO, and Orlando Berges-González, CFO, explained that securities cash flows are not equally spread, with November and December typically being the highest, and reinvestment rates are 50-100 basis points lower. They anticipate residential reserves to continue decreasing due to improved historical loss data and stable unemployment, while consumer reserves are expected to remain stable as charge-offs normalize, and commercial reserves are not foreseen to change significantly.

Asked about current new loan yields and the potential for further reduction in funding costs, including plans for FHLB advances.

Answer

New loan yields vary by portfolio: C&I yields came down slightly, consumer yields are stable but affected by mix, and mortgage yields are around 6.5%. There is some room to lower funding costs from broker deposits and time deposits, though high rates limit this. Maturing FHLB advances will be paid down if funding is not needed, with $30 million maturing in the next three months likely to be paid down.

Inquired about the securities portfolio cash flows beyond Q1 2025, the coupon on maturing securities, the pace of deposit repricing following Fed rate cuts, and the drivers of strong commercial loan origination.

Answer

The company expects $1.0-1.1 billion in securities cash flows for the full year 2025, with a yield on the maturing portion around 1.50-1.60%. Deposit repricing will have a lag, especially for retail deposits, which is why Q4 margin is expected to be flat. Strong commercial demand is broad-based, coming from construction, auto, C&I, and government sectors in both Puerto Rico and Florida.

Steve Moss asked about current loan pricing trends for C&I and CRE loans in the market. He also inquired about the strategy for deploying maturing cash flows from the securities portfolio and the company's plans for hiring additional commercial loan officers.

Answer

President and CEO Jeffrey Tengel noted competitive C&I spreads, sometimes under 200 basis points, but affirmed the company is securing deals at desired pricing (200+ basis points), with total loan yields in the mid-sixes in Q4. CFO Mark Ruggiero stated that the vast majority of maturing securities cash flows ($670 million, with $625 million yielding ~180 bps) would be reinvested into the securities book, expecting a nice yield lift. Jeffrey Tengel added that the company is in a good position regarding commercial loan officer staffing, expecting inherent C&I growth from recent hires.

Steve Moss asked about current market conditions for C&I and CRE loan pricing. He also inquired about the strategy for deploying maturing cash flows from the securities portfolio in 2026, specifically whether to reinvest in securities or aggressively price down CDs. Finally, he asked about the company's plans for hiring additional commercial loan officers to support organic growth initiatives.

Answer

Jeffrey Tengel, President and CEO, noted competitive C&I spreads but confirmed the company is securing deals at desired pricing, with total loan yields in the mid-sixes for Q4. Mark Ruggiero, CFO and Head of Consumer Lending, stated that the majority of maturing securities cash flows would be reinvested into the securities book, expecting securities to remain relatively flat. Jeffrey Tengel indicated that the company is in a good position regarding commercial loan officer staffing, with recent hires expected to drive inherent C&I growth.

Steve Moss inquired about the quantification of C&I loan growth amidst merger noise, the current loan pipeline health, prevailing loan pricing, and the outlook for office credit resolution, particularly for classified loans maturing next year. He also sought clarification on the potential for better loan growth in the coming year.

Answer

Jeff Tengel, President and CEO of Rockland Trust, explained that C&I growth is driven by strong performance in legacy markets, new middle market initiatives, and specialty businesses, with pipelines remaining healthy. Mark Ruggiero, CFO and EVP, noted loan pricing aims for over 200 basis points spread, typically around 6% for C&I. Tengel expressed improved sentiment on office credit resolution due to sponsor cooperation and positive outcomes for several larger problems. Tengel also indicated a potential for low to mid-single-digit loan growth next year, an improvement from historical low single digits.

Steve Moss asked about current loan pricing, deposit costs at quarter-end, and expectations for core margin expansion throughout the year. He also sought an updated full-year 2026 estimate for purchase accounting accretion and inquired about the progress and challenges of the North Carolina expansion.

Answer

CFO Rob Gorman stated loan pricing was around 6%-6.20% and deposit costs were approximately 1.96% at December end. He anticipated modest core margin expansion, projecting 2026 purchase accounting accretion between $150 million and $160 million. CEO John Asbury and Senior Executive Vice President Shawn O'Brien discussed good progress on North Carolina branch build-outs and hiring, while Wholesale Banking Executive David Ring highlighted the Sandy Spring franchise turning a corner and specialty businesses contributing to Q4 growth.

Steve Moss asked about current loan pricing and deposit costs at quarter-end. He also sought expectations for core margin expansion throughout the year and the cadence of that expansion. Additionally, he requested updated thoughts on the full-year purchase accounting accretion for 2026 and progress on the North Carolina expansion, including observed strengths and challenges.

Answer

John Asbury, President and CEO, indicated loan pricing was around 6%-6.20%. Rob Gorman, Executive Vice President and CFO, stated deposit costs were below 2% (approximately 1.96%) at the end of December. Rob Gorman also projected modest core margin expansion, driven by acquired loan book repricing and manageable Fed rate cuts, and modeled 2026 purchase accounting accretion between $150-$160 million. John Asbury and Shawn O'Brien, Head of Consumer and Business Banking, reported good progress on North Carolina expansion, with plans for 10 branches and successful hiring for commercial teams.

Steve Moss with Raymond James inquired about the potential contribution of the North Carolina expansion to loan growth next year. He also asked for the purchase accounting assumptions for accretion income in Q4 and 2026. Finally, he questioned the timing of a potential share buyback, considering capital accretion and CET1 targets.

Answer

EVP and CFO Rob Gorman, President and CEO John Asbury, and EVP and Wholesale Banking Group Executive David Ring highlighted North Carolina as a strong growth market with positive momentum and increasing banker presence, representing potential upside to overall loan growth expectations. Rob Gorman projected Q4 accretion income around $41 million, declining to a $35 million-$40 million quarterly run rate throughout 2026. John Asbury and Rob Gorman stated that capital will accrete at a good rate, with excess capital beyond a 10.5% CET1 target potentially available for buybacks in the second half of next year, pending board authorization.

Steve Moss from Raymond James asked for the expected purchase accounting accretion in the 2025 stand-alone guide, current loan pricing trends, recovery prospects for the large nonperforming loan, and confirmation of the Sandy Spring-related CRE sale and equity raise.

Answer

EVP and CFO Rob Gorman confirmed stand-alone accretion is stable at 20-22 basis points. Chief Credit Officer Douglas Woolley stated the specific reserve on the nonperforming loan reflects the currently anticipated loss. Gorman and President and CEO John Asbury reaffirmed their plans to execute the full $2 billion CRE sale and the associated forward equity issuance, stating they feel good about the original assumptions despite rate moves.

Steve Moss from Raymond James inquired about SmartFinancial's spot funding costs and liability outlook given Fed rate cuts, the potential impact of the Columbus team on 2026 expense growth, and the company's updated M&A strategy.

Answer

Ron Gorczynski, CFO of SmartFinancial, projected a 17-18 basis point decrease in Q1 2026 funding costs. Billy Carroll, President and CEO, stated that the Columbus expansion is not expected to materially impact expense run rates. Both executives emphasized that M&A would only be considered for "unique and special" opportunities, preferring organic growth.

Steve Moss asked for further details on the net interest margin, specifically regarding expected funding cost reductions given recent Fed rate cuts, spot funding costs at quarter-end, and the outlook for the liability side. He also questioned the potential team size and expense impact of the Columbus hiring, and sought updated thoughts on SmartFinancial's M&A strategy given its strong organic growth.

Answer

Ron Gorczynski, CFO, indicated an expected 17-18 basis point reduction in Q1 funding costs due to the full impact of Q4 rate cuts and brokered deposit paydowns, with slower reductions anticipated without further rate cuts. Billy Carroll, President and CEO, explained that the Columbus team size would depend on talent acquisition, and expense growth would be balanced with production, not materially impacting run rates. He reiterated that M&A would require a "unique and special" opportunity to pivot from the successful organic growth strategy, which generated $500 million on both sides of the balance sheet without issuing shares.

Steve Moss inquired about SmartFinancial's loan pipeline, asking if it's robust enough to sustain double-digit growth into 2026, and whether the company anticipates a step-up in hiring over the next 12 months due to market disruption. He also sought clarification on the loan loss reserve release, specifically if downstreamed capital impacting the CRE concentration ratio was a qualitative factor for the lower reserve.

Answer

Billy Carroll, President and CEO, guided towards high single-digit to around 10% loan growth, noting strong production offsets payoffs. He emphasized selective hiring, not expecting a dramatic pickup, but rather a continued diligent pace of adding quality bankers (similar to 12-15 net adds in 2025) who fit the culture, despite market disruption. Nathan Strall, Director of Investor Relations, reinforced the focus on quality over quantity in recruiting. Ron Gorczynski, CFO, confirmed that downstreaming $45 million in capital from the parent to the bank lowered the CRE concentration ratio from 301% to 271%, which was a key qualitative factor in the reduced provision expense. He expects a relatively stable to modest build on the reserve ratio going forward.

Steve Moss asked about the strength of SmartFinancial's loan pipeline and its ability to sustain double-digit growth into 2026. He also questioned the potential for increased hiring due to market disruption and sought clarification on the loan loss reserve release, specifically how downstreamed capital impacted the CRE concentration ratio and the future outlook for the reserve ratio.

Answer

President and CEO Billy Carroll expressed optimism about the loan pipeline, expecting high single-digit to around 10% growth, driven by strong production offsetting payoffs. Director of Investor Relations Nathan Strall noted positive market and team energy. Billy Carroll indicated that hiring would remain selective, maintaining a similar pace to 2025, focusing on quality and cultural fit. Ron Gorczynski confirmed that downstreaming $45 million in capital lowered the CRE concentration ratio from 301% to 271%, which was a key factor in the reserve release, and projected a relatively stable to modest build on the reserve ratio going forward.

Steve Moss from Raymond James probed whether the $50 million quarterly revenue target could be achieved before Q4, asked about the status of charge-offs in the Fountain portfolio, and inquired about the current appetite for M&A.

Answer

President and CEO William Carroll reiterated the Q4 2025 target for $50 million in revenue, acknowledging good trends but citing uncertainty in the second half of the year. Regarding credit, executive Rhett Jordan stated that while charge-offs from the Fountain portfolio have slowed significantly, a few 'stragglers' may remain. On M&A, Carroll and Jordan confirmed that the primary focus is on organic growth and talent acquisition, making a deal less likely given current market valuations.

Steve Moss asked about the deposit growth, specifically the deposit pipeline and current pricing strategies for new deposits. He also sought an update on the 100% rent-regulated multifamily loan book, its current size, and scheduled maturities for the next one to two years.

Answer

Avinash Reddy, COO and CFO, detailed that new customer deposits are priced in the high twos to low threes for money markets, with an all-in cost in the low twos, requiring 20-30% DDA. He clarified Q4's municipal deposit seasonality and expressed confidence in continued core deposit growth. Stuart Lubow, President and CEO, highlighted that new teams have generated $3 billion in balances with 38% DDA. Mr. Reddy also noted the 100% rent-regulated book was stable in Q4, with the pre-2019 portion at $350 million, and approximately $250 million in maturities/repricings for the entire rent-regulated multifamily book in 2026.

Steve Moss from Raymond James inquired about the current deposit pipeline, pricing strategies for new deposits, and the status of the 100% rent-regulated loan portfolio, including its current size and scheduled maturities for the upcoming years.

Answer

COO and CFO Avinash Reddy explained that new deposits are priced competitively, with an all-in cost in the low 2s due to DDA components, and the spot rate on deposits was $168 at year-end. President and CEO Stuart Lubow highlighted strong core deposit growth and continued new account openings from recently hired teams. Reddy further detailed that the 100% rent-regulated book remained relatively stable linked-quarter, with the pre-2019 segment at $350 million, and approximately $250 million in maturities and repricings expected across the entire rent-regulated portfolio in 2026.

Steve Moss inquired about the specifics of NPA formations and charge-offs in the third quarter, particularly the split between owner-occupied and non-owner-occupied commercial real estate, and the outlook for multifamily loan payoffs.

Answer

CFO Avi Reddy clarified that charge-offs were primarily non-owner-occupied CRE (80%) and owner-occupied CRE (20%), with no multifamily impact. He noted a decrease in criticized loans and 30-89 day past dues, expecting $15M-$17M in legacy NPA resolutions in Q4. President and CEO Stuart Lubow added that while multifamily paydowns will continue, the third quarter's pace was unusually high, and future paydowns are expected to normalize.

Steve Moss of Raymond James inquired about the nature of NPA formations and charge-offs, specifically asking if they were linked to new non-performing loans, and their distribution between owner-occupied and non-owner-occupied commercial real estate (CRE), including any multifamily exposure. He also asked about the accelerated pace of multifamily loan payoffs and expectations for this trend into Q4 and 2026.

Answer

Avi Reddy, CFO, clarified that charge-offs were not multifamily related, with a split of approximately 20% owner-occupied and 80% non-owner-occupied CRE. He noted that criticized loans decreased by $30 million linked quarter, and 30-89 day past due loans improved by 33%. He expects resolution of $15-$17 million in legacy NPAs in Q4 and anticipates NPAs to remain around 50 basis points of total assets. Stuart Lubow, President and CEO, stated that while multifamily paydowns will continue, the Q3 level was "outsized" and not expected to persist at the same pace, with a high percentage of maturing loans refinancing out.

Steve Moss from Raymond James inquired about NBT Bancorp's expense outlook, specifically regarding the expected scale of talent recruitment and the number of de novo branches planned over the next 12 months. He also asked about the company's interest in additional M&A deals, particularly for fill-in strategies within its existing footprint. Furthermore, Mr. Moss sought updated thoughts on purchase accounting accretion and the potential for incremental core margin expansion, and clarified the percentage of NBT Bancorp's loans that are variable rate.

Answer

CEO and President, Scott Kingsley, estimated four to six de novo branches per year to improve market concentration, citing Rochester, NY, as an example. He noted productive talent recruitment in Western New York, allowing for more assertive growth. CFO, Annette Burns, added that branch optimization and technology investments would help offset growth initiatives, keeping overall expense growth within historical NBT Bancorp levels. Mr. Kingsley stated that fill-in M&A strategies within the current franchise are primary, but they would also consider expanding 50 miles west, south, or east, hoping to partner with like-minded community banks. Ms. Burns indicated that purchase accounting accretion is fairly stabilized for the next four quarters without material change. She projected potential short-term margin pressure in Q4 due to immediate asset repricing versus deposit management, but possible improvement in 2026 with a steeper yield curve. Mr. Kingsley clarified that approximately $3 billion of earning assets are variable rate, with loans accounting for $2.5-$2.6 billion (over 20% of the loan book), plus variable investment securities and Fed funds sold.

Steve Moss from Raymond James Financial asked for an outlook on the loan pipeline and business activity for the second half of the year. He also inquired about current loan pricing, where competition is most intense, and whether larger banks are becoming more competitive in NBT's markets.

Answer

President & CEO Scott Kingsley described the loan pipeline as being at its highest level ever, partly due to the Evans acquisition. However, he noted that 'uncertainty does not inspire action,' causing hesitation and a slowdown in the speed to completion for new projects. He expects the growth rate to be similar to the first half. Kingsley identified the indirect auto space as highly competitive, forcing NBT to focus on replacing cash flows rather than aggressive growth. He stated that competition is not radically different, with no significant new pressure from larger banks, but some defensive pricing from smaller competitors.

Steve Moss from Raymond James inquired about current loan pricing, the likelihood of elevated loan payoffs continuing into 2026, the progress of Bankwell's core deposit initiative, and the anticipated deposit beta for non-maturity deposits in response to future rate cuts.

Answer

Courtney Sacchetti (SVP and CFO) stated that year-to-date loan originations averaged 7.86% on $500 million. Chris Gruseke (CEO) noted strong loan demand but high payoff velocity, expecting flat loan growth for the year, with Matt McNeill (President and Chief Banking Officer) adding that future demand can be controlled with pricing. Regarding the core deposit initiative, Chris Gruseke explained that teams hired in April and subsequently are starting to produce, with full impact expected in 2026, focusing on non-interest-bearing general accounts. Courtney Sacchetti detailed that for the recent rate cut, Bankwell achieved an effective 50% beta on $1 billion of non-maturity deposits, with approximately $250 million indexed to Fed funds and another $250 million repriced at 100% beta.

Steve Moss from Raymond James Financial asked for an estimate of the potential deposit inflows from the five newly hired teams over the next 12-24 months, the expected timeline for resolving the two largest non-performing loans, and the sensitivity of the net interest margin to a hypothetical 25 basis point Fed rate cut.

Answer

President & CBO Matthew McNeill and CEO Christopher Gruseke explained that while the new teams managed hundreds of millions in deposits at prior firms, it is too early to provide a specific forecast, emphasizing the bank's focus on proper onboarding. McNeill projected one large non-performing loan could be resolved in the next several months, while the other may take longer. CFO Courtney Sacchetti estimated that even without a rate cut, the NIM could expand by another 5-10 basis points, with a Fed cut potentially adding another 10 basis points on top of that.

Steve Moss asked for an estimate of the potential book of business from the five newly hired deposit teams, the expected resolution timeline for the two largest non-performing loans, and the anticipated impact of a 25 basis point Fed rate cut on the net interest margin.

Answer

President & Chief Banking Officer Matthew McNeill and CEO Christopher Gruseke explained that while the new teams managed hundreds of millions in prior roles, it's too early to quantify the potential deposit inflows. McNeill detailed that one large non-performing loan could be refinanced in the next several months, while the other, a multi-bank participation, will likely take longer to resolve. CFO Courtney Sacchetti projected that even without a Fed cut, the NIM could expand by another 5-10 basis points due to CD repricing, with a rate cut potentially adding another 10 basis points on top of that.

Steve Moss from Raymond James Financial asked for an estimate of the potential deposit business from the five newly hired teams, the resolution timeline for two large nonperforming loans, and the margin impact of a potential 25 basis point Fed rate cut.

Answer

President Matthew McNeill and CEO Christopher Gruseke explained that while the new teams managed hundreds of millions in prior roles, it's too early to quantify the impact, but they expect significant results. McNeill anticipates one large nonperforming loan may resolve in the next few months, while the other will take longer. CFO Courtney Sacchetti projected that a Fed rate cut could add approximately 10 basis points to the NIM, on top of the 5-10 basis points of expansion expected from current repricing opportunities.

Steve Moss asked for an estimate of the potential deposit business from the five newly hired teams, the expected timeline for resolving the two largest non-performing loans, and the sensitivity of the net interest margin (NIM) to a potential 25 basis point Fed rate cut.

Answer

President & CBO Matthew McNeill and CEO Christopher Gruseke explained that while the new teams previously managed hundreds of millions in deposits, it is too early to provide a specific forecast, but they expect significant contributions. On credit, McNeill anticipates one large non-performing loan could be resolved in the next several months, while the other will take longer. CFO Courtney Sacchetti projected that even without a rate cut, the NIM could expand by another 5-10 basis points, with a Fed cut potentially adding another 10 basis points on top of that.

Steve Moss from Raymond James asked for an estimate of the potential deposit business from the five newly hired teams, the expected timeline for resolving the two largest non-performing loans, and the sensitivity of the net interest margin (NIM) to a potential 25 basis point Fed rate cut.

Answer

President & CBO Matthew McNeill stated that while the new teams previously managed hundreds of millions in deposits, it is too early to quantify the expected inflows. CEO Christopher Gruseke added that one of the large non-performing loans could be resolved in the next few months, while the other will likely take longer. Regarding the NIM, CFO Courtney Sacchetti projected a 5-10 basis point expansion even without a rate cut, with a potential Fed cut adding another 10 basis points of improvement.

Steve Moss inquired about the dynamics that led to a borrower's non-performing status, the loan-to-value and loan-to-cost on those specific loans, the expected cadence of margin expansion, current loan yields, and the areas driving loan pipeline growth and demand.

Answer

President and CEO Tom Broughton explained that the borrower, a long-term customer, was moved to non-accrual after an expected large payment did not materialize, despite confidence in their ability to sell properties. Chief Credit Officer Jim Harper added that additional collateral was obtained to shore up the position, with loan-to-value now below one-to-one. EVP and CFO David Sparacio confirmed expectations for 7-10 basis points of margin improvement per quarter, noting a normalized September spot rate of 3.28% and current loan yields at 6.87%. Tom Broughton stated loan demand is 'okay' and growth is 'all over the board' by region, with Atlanta, Memphis, Auburn, and the Piedmont region showing strength.

Thomas R, on behalf of Steve Moss from Raymond James Financial, asked about current trends in commercial credit demand, the potential for sustained low double-digit loan growth, and the specifics of fixed-rate loans set to reprice in the coming year.

Answer

Chairman, President & CEO Thomas Broughton described commercial loan demand as broad-based across markets, not concentrated in one area, and stated that low double-digit growth is achievable, though it can be lumpy due to payoff headwinds. EVP & CFO David Sparacio specified that approximately $1.5 billion in fixed-rate loans with a weighted average yield of 4.87% are scheduled to reprice over the next twelve months.

Steve Moss of Raymond James Financial sought details on the extended holding period for SBA 7(a) loans, confirmed the full-year SBA origination target, asked for the expense outlook for the second half of the year, and requested clarification on the valuation of securitization residuals, including the 14% discount rate.

Answer

President, Chairman & CEO Barry Sloane projected a 60-75 day holding period for certain 7(a) loans to benefit net interest income and confirmed the $1 billion origination target. He expects expenses to be 'flattish.' Sloane also explained the 14% yield on residuals is calculated after assuming a 3% lifetime charge-off rate, derived from a 15% default frequency and 20% severity.

An associate on behalf of Steve Moss asked about the current pricing environment for new loans and requested more information on a delayed Mass Housing loan takeout mentioned in the presentation.

Answer

Chairman & CEO Paul Perrault described the loan pricing environment as competitive but holding up, with strong rates in equipment finance. Co-President and CFO Carl Carlson specified that Q2 loan originations totaled $445 million at a weighted average coupon of 6.94%. Regarding the Mass Housing loan, Carlson clarified it is technically past due on maturity but is current on payments, fully leased, and simply awaiting final paperwork for the takeout, which is expected in Q3.

Stephen Moss followed up on loan pricing, asking for the current yield on new loan originations. He also inquired whether the bank was considering any balance sheet hedging strategies, such as swaps, to alter its interest rate sensitivity.

Answer

CFO Michael Mettee stated that new loans are currently being originated at yields between 7.00% and 7.10% on average. Regarding hedging, Mettee confirmed they constantly evaluate options but have found the cost to outweigh the benefit historically. He said the bank prefers to manage its position through disciplined loan and deposit pricing and is not currently putting on any hedges.

Steve Moss sought clarification on the large C&I charge-off, asking if the Q4 provision was related to it, and inquired about the balance sheet's current sensitivity to potential Federal Reserve rate cuts.

Answer

Executive Travis Edmondson and Executive Christopher Holmes clarified that the specific reserve for the large charge-off was established in prior quarters, mainly Q2. Executive Michael Mettee added that the Q4 provision was driven by loan growth and economic forecast updates. Mettee also described the balance sheet as slightly asset sensitive, and Holmes noted that the mortgage business provides a lever that would ramp up if rates were to fall significantly.

Asked about the average life of CRE loans being sold versus retained, clarification on the loan sale mark, new loan origination rates, potential hedging strategies for the loan sale, and deposit cost trends following recent Fed cuts.

Answer

The average life of the CRE loans to be sold is slightly shorter than the total portfolio's 4-year duration. The sale mark is included in the total mark calculations. New loans are originating in the 7.00-7.05% range. Hedging the loan sale is being evaluated but is currently considered expensive. They are aggressively lowering deposit rates post-Fed cut, modeling a mid-40s deposit beta for the down cycle.