Timothy Coffey

Timothy Coffey, Managing Director at Janney, asked about Avidbank Holdings, Inc.'s anticipated loan-to-deposit ratio going forward, specifically if it would stabilize in the mid-90% range. He also inquired about a good expense run rate for the next quarter, excluding one-time items. Mr. Coffey then questioned whether customer outflows from the former First Republic franchise were still ongoing and if these opportunities were explicitly factored into Avidbank's growth outlook. Finally, he asked if there were any aspects of Comerica's venture banking operations that Avidbank found appealing, given Comerica's impending changes.

Answer

CEO and Chairman Mark Mordell indicated a preference to lower the loan-to-deposit ratio to around 90% but deemed 95% acceptable for current growth plans, expecting only a slight decrease. He confirmed that, excluding $300,000 in one-time IPO expenses, a run rate in the low $13 million range is a reasonable estimate for next quarter's expenses. Mr. Mordell affirmed that customer outflows from First Republic are continuing, creating opportunities for Avidbank, which are considered part of the overall mix of growth prospects rather than a segmented factor. He stated that Avidbank does not find anything specific about Comerica's venture banking appealing, viewing Comerica's market changes as an opportunistic situation for client and talent acquisition.

Timothy Coffey asked about Avidbank Holdings Inc.'s future expectations for its loan-to-deposit (LTD) ratio, the anticipated expense run rate for the next quarter, and whether customer outflows from the former First Republic franchise were still occurring and impacting the market. He also sought clarification on whether these opportunities were considered a 'bonus' to growth outlooks or already integrated, and if there was anything specific Avidbank liked or found opportunistic on the venture banking side from Comerica.

Answer

CEO Mark Mordell stated his personal preference to drive the LTD ratio down to a stabilized 90% plus or minus, but acknowledged that a ratio around 95% is likely acceptable for the time being. He suggested that excluding one-time IPO-related expenses of $300,000, a run rate in the low $13 million range would be a good estimate for the next quarter. Mordell confirmed that outflows from First Republic were still occurring, creating opportunities that are part of the overall mix, not segmented as a separate bonus. He stated that Avidbank doesn't find anything special in Comerica's venture banking approach, viewing Comerica's situation as an opportunity due to one less strong player in the market, potentially leading to client and talent movement.

Timothy Coffey asked if Western Alliance Bancorporation's loan-to-deposit ratio, currently in the mid-to-low 70% range, is at an optimal level. He also inquired if the rental income from OREO properties should be considered a recurring revenue line item.

Answer

President and CEO Ken Vecchione stated the loan-to-deposit ratio is "a little too low" and they aim for it to be higher, with ample liquidity for good loans. He explained that OREO properties generate marginal net profitability ($1 million to $2 million annually) from rents and operating expenses, with the goal to lease up and sell them. CFO Dale Gibbons added that current appraisals show a significant disparity between as-is and as-stabilized values, indicating potential for value migration as properties stabilize.

Timothy Coffey inquired if Western Alliance Bancorporation's loan-to-deposit ratio, currently in the mid-to-low 70% range, is at an optimal level.

Answer

President and CEO Ken Vecchione stated that the loan-to-deposit ratio is considered "a little too low," and the bank aims for a higher ratio, having ample liquidity for good, safe loans. In a follow-up on OREO properties generating rental income, Ken Vecchione explained that the net benefit to pre-provision net revenue (PP&R) is marginal ($1-2 million annually). The goal is to lease up and sell these properties to maximize value, with no specific timeline but hopes for sales next year. CFO Dale Gibbons added that current appraisals show a significant disparity between as-is and as-stabilized values, indicating potential for value improvement as properties stabilize.

Timothy Coffey of Janney Montgomery Scott asked about Glacier Bancorp's processes and checks in place to ensure borrower compliance and maintain strong credit quality, particularly in light of recent industry missteps.

Answer

Chief Credit Administrator Tom Dolan highlighted Glacier's approach of knowing its customers, maintaining direct control over relationships (avoiding syndicated or indirect lending), and having credit administration functions proximate to customers in each division. He detailed regular borrower meetings (minimum quarterly for larger borrowers), deliberate covenant structures in originations, and ongoing annual reviews of both division banks and the overall portfolio.

Timothy Coffey of Janney Montgomery Scott asked about changes to underwriting processes in the current economic environment and whether management shares the growing optimism for M&A activity.

Answer

Chief Credit Administrator Tom Dolan stated that their 'through-the-cycle' underwriting philosophy has not changed, though they are ensuring more conservatism is built into borrower projections. Executive Randall Chesler expressed that while M&A activity is picking up, it remains somewhat muted by market uncertainty, but reiterated that Glacier has demonstrated its ability to complete deals regardless of the broader environment.

Timothy Coffey asked Chief Credit Officer Jill Rice about Banner Corporation's ongoing monitoring processes for maintaining credit quality, specifically how the company incorporates personal guarantees, collateral appraisal considerations, covenant testing, and financial statement reporting. He also inquired about the company's stance on its loan-to-deposit ratio, asking if there was a desire to take it higher, potentially above 90%. For CFO Rob Butterfield, he asked about the deposit pipeline, specifically if there were changes in the sales cycle or increased client movement in the western region. Finally, he asked CEO Mark Grescovich about the possibility of a special dividend in the future, considering anticipated capital growth and existing capital priorities.

Answer

Chief Credit Officer Jill Rice explained that while properties are not annually reappraised, Banner Corporation considers environmental changes and stresses cap rates and income using original appraisals and current operating income. She emphasized that over 95% of loans have personal or corporate guarantees with significant secondary repayment sources. She also highlighted ongoing covenant testing, financial statement reporting, and annual site inspections. Regarding the loan-to-deposit ratio, Jill Rice stated that while it has been higher in the past, approaching 95% would be acceptable, but not exceeding it. CFO Rob Butterfield noted that Banner Corporation's client base is loyal and sticky, with no significant change in client movement or sales cycle, attributing deposit growth to hard work and focus on small businesses. CEO Mark Grescovich stated that while special dividends have been done, they are less likely going forward as they are a 'blunt force reduction' of capital, with the core dividend, share repurchases, and M&A being higher priorities.

Timothy Coffey of Janney asked for management's economic outlook, the potential impact of defense spending in their footprint, the possibility of a special dividend, and whether recent C&I or retail CRE trends indicated a slowdown.

Answer

President & CEO Mark J. Grescovich expressed a pessimistic view on the economy due to tariff uncertainty but saw it as an opportunity to gain market share. Both he and EVP & Chief Credit Officer Jill Rice agreed that defense spending would bolster local economies like Puget Sound. EVP & CFO Robert Butterfield noted a special dividend is a tool they could use but is a lower priority currently. Jill Rice stated that she is not seeing broad, year-over-year changes in borrower financials that indicate a slowdown.

Timothy Coffey asked if there is pent-up loan demand from customers, inquired about the strategy behind creating the new Chief Banking Officer role, and questioned if placing the position in Sacramento signals a greater focus on California.

Answer

EVP, Commercial Banking Jill Rice confirmed she believes there is pent-up loan demand that could be released post-election and with more rate certainty. President and CEO Mark J. Grescovich explained the new CBO role is part of a long-term succession and operational streamlining strategy. He affirmed that placing the role in Sacramento is strategic, calling California a 'fantastic market opportunity' for the bank.

Timothy Coffey from Janney Montgomery Scott LLC asked if increased loan payoffs were driven by competition on price or structure. He also sought clarification on loan repricing volumes for the next two quarters, inquired about seasonality in the expense outlook, and questioned what loan-to-deposit ratio management is comfortable with.

Answer

President & CEO Donavon Ternes attributed the payoffs to both price and structure, but emphasized that Provident's tighter underwriting structure is a key factor. He confirmed loan repricing figures for the next two quarters, detailed the seasonality of expenses (higher in the March quarter due to payroll taxes), and explained that the company's mortgage-focused business model allows it to comfortably operate with a higher loan-to-deposit ratio than peers, though they have been gradually reducing it.

Timothy Coffey asked for the outlook on loan prepayment activity over the next year and what conditions might trigger a provision expense due to a lengthening portfolio life. He also questioned the company's capital allocation strategy, specifically if the stock buyback program would be enhanced amid market volatility. Lastly, he inquired about changes in competitor behavior and pricing in the loan market.

Answer

President and CEO Donavon Ternes responded that prepayment activity is difficult to forecast and highly sensitive to mortgage rate volatility, noting that slower prepayments lengthen the portfolio's average life and can require a provision. Regarding capital, Ternes stated the buyback plan is set annually and would not significantly change, though a lower stock price would result in more shares being repurchased with the allocated capital. On competition, he acknowledged some aggressive pricing in multifamily loans but affirmed Provident's discipline, stating they would pivot to other products like single-family loans rather than originate at unsustainable yields.

Timothy Coffey asked if the strategy to adjust pricing for growth was specific to multifamily and commercial real estate, questioned the degree to which rising mortgage rates since quarter-end could be a headwind, and inquired about the future trajectory of deposit pricing.

Answer

Donavon Ternes, President and CEO, clarified that the pricing strategy to drive volume applies to all major loan categories, including single-family, multifamily, and commercial real estate. He acknowledged that recent rate increases are a headwind but emphasized that rates remain more favorable than a year ago, still driving refinance demand. On liability pricing, Mr. Ternes noted little opportunity to lower retail deposit rates but highlighted a significant opportunity to reprice maturing FHLB advances and brokered CDs downward, citing a recent 120 basis point reduction on a brokered CD replacement.

Timothy Coffey of Janney Montgomery Scott asked for more details on the recent strategic hires of market leaders and inquired how this, along with other factors, would impact the expense outlook for the second half of 2025.

Answer

CEO Tim Myers highlighted new hires in key areas like San Francisco and Sacramento, noting that the Sacramento market is currently the bank's most active. He stated the cost of these hires is largely already reflected in the current expense run rate or has been offset. CFO Dave Bonaccorso confirmed the expense outlook, stating that the second half of 2025 is expected to look 'quite a bit like the first half,' with the forecast already embedding the impact of new hires and a lower-than-usual employee vacancy rate.

Timothy Coffey of Janney Montgomery Scott asked for more color on the recent strategic hires, particularly new market leaders, and how these additions would impact the bank's expense outlook for the remainder of the year.

Answer

Director, President & CEO Tim Myers confirmed new hires including a manager in San Francisco and additions in the highly active Sacramento market, noting their costs are largely reflected in the current run rate or have offsets. EVP & CFO Dave Bonaccorso reiterated the expense guidance, stating that the second half of 2025 is expected to look very similar to the first half. This outlook already embeds the costs associated with new hires and a lower-than-usual employee vacancy rate.

Inquired about the wine industry exposure, the trend of client acquisition from larger competitors, and the target size for the investment portfolio.

Answer

Wine industry exposure is small and well-managed with no major issues. The trend of acquiring clients from larger banks continues, driven by new hires. The bank would prefer a smaller securities portfolio to fund more loans and has ample cash flow from it to support growth.

Timothy Coffey of Janney Montgomery Scott asked for an update on the bank's exposure to the wine industry and any related concerns. He also inquired if the trend of winning clients from larger, recently acquired banks was continuing, and asked about the optimal size of the investment portfolio.

Answer

Chief Credit Officer Misako Stewart clarified that wine industry exposure is small, at about 3% of total loans, and is primarily secured by low LTV real estate, with no major issues observed. CEO Tim Myers confirmed that the trend of winning clients from larger institutions continues, often driven by new bankers bringing over their former relationships. CFO Dave Bonaccorso stated that while they would prefer to shrink the securities portfolio to fund more loans, the current mix of cash and securities is appropriate to meet liquidity needs and fund expected loan growth.

Timothy Coffey from Janney Montgomery Scott asked about the bank's exposure and outlook for the wine industry, whether the trend of clients moving from larger acquired banks is continuing, and the optimal size of the investment portfolio.

Answer

CCO Misako Stewart clarified that wine exposure is minimal at <3% of the portfolio, is underwritten to cash flow, and is not showing major issues. CEO Tim Myers confirmed that the trend of clients moving from larger banks continues, driven by new hires. CFO Dave Bonaccorso stated that while they'd prefer a smaller securities portfolio to fund more loans, the current liquidity mix is appropriate, with ample cash flow from securities to fund expected loan growth.

Timothy Coffey of Janney Montgomery Scott inquired about the business conditions for legacy Hope Bancorp commercial and retail borrowers during the second quarter. He also asked about the company's target for its deposit mix and future levels of brokered deposits.

Answer

COO Peter Koh responded that while uncertainty remains, the consumer base has been resilient, and the bank has not seen a significant negative impact on its customer base. CFO Julianna Balicka stated that the bank's medium-term target loan-to-deposit ratio is up to 95% and that the current brokered deposit level of 5% of total deposits is a good position from which to focus on growth.

Timothy Coffey of Janney Montgomery Scott LLC asked for commentary on the performance of legacy commercial and retail borrowers during the second quarter. He also inquired about the bank's strategy for its deposit portfolio mix and its target level for brokered deposits.

Answer

SEVP & COO Peter Koh responded that the consumer base has remained resilient and the bank has not yet seen a significant negative impact on its customer base. EVP & CFO Julianna Balicka stated that the current deposit mix is well-balanced and that the reduction of brokered deposits to 5% of total deposits is a 'pretty good place' to be, with a medium-term target loan-to-deposit ratio of up to 95%.

Timothy Coffey of Janney Montgomery Scott asked for commentary on the performance of legacy commercial and retail-related borrowers during the second quarter. He also inquired about the bank's perspective on its current deposit mix and its target level for brokered deposits going forward.

Answer

SEVP & COO Peter Koh noted that the consumer base has remained resilient and the bank has not yet seen a significant negative impact on its customer base. EVP & CFO Juliana Balicka stated that the bank has a good balance in its deposit mix and that brokered deposits are down to a comfortable 5% of total deposits. She reiterated the medium-term target loan-to-deposit ratio of up to 95%.

Timothy Coffey of Janney Montgomery Scott asked for commentary on the performance of legacy commercial and retail borrowers during the second quarter and inquired about the company's strategy for its deposit portfolio mix and brokered deposit levels.

Answer

COO Peter Koh responded that while uncertainty was high at the start of the quarter, the consumer base has remained resilient with no significant negative impact seen on the customer base yet. CFO Julianna Balicka stated that the company has a good balance between consumer and commercial deposits, with brokered deposits reduced to a comfortable 5% of total deposits. She also reiterated a medium-term target loan-to-deposit ratio of up to 95%.

Timothy Coffey asked for commentary on the performance of legacy commercial and retail borrowers during the second quarter and inquired about the company's strategy for its deposit mix, including the target level for brokered deposits.

Answer

SEVP & COO Peter Koh stated that while uncertainty exists, the consumer base has remained resilient, and the bank has not yet seen a significant negative impact on its customer base. EVP & CFO Julianna Balicka noted the current deposit mix is well-balanced and that brokered deposits, now at 5% of total deposits, are at a good level. She also reiterated the medium-term target loan-to-deposit ratio of up to 95%.

Timothy Coffey from Janney Montgomery Scott LLC asked for color on the percentage of the construction loan book that is expected to complete and enter the lease-up phase within the next 12 months. He also asked CEO Jim Reuter what he considers the 'right number' for average deposits per branch, given the current interest rate environment.

Answer

CEO James Reuter and Deputy CFO David Della Camera did not provide a specific percentage for construction loans moving to lease-up, but noted that the process is standard and they are proactively managing the portfolio with nothing unusual to report. Regarding branch size, Reuter stated that while their current average of $76 million is below peers, he does not have a single target number as it depends on the trade area. He emphasized that optimizing the branch network will be a focus, with the goal of increasing the average size over time, though it will likely remain below peers due to their rural footprint.

Timothy Coffey of Janney Montgomery Scott LLC asked for clarification on the expected decline in earning assets, the status of the three remaining large metro office loans, and whether recent credit problems would deter future lending in those markets.

Answer

CFO Marcy Mutch confirmed a modest decline in average earning assets is expected due to loan runoff late in Q3. Chief Credit Officer David Redmon directed him to the investor presentation, noting the remaining loans are largely leased up or recently completed. CEO Kevin Riley added one has an investment-grade lessor. Mutch affirmed that these issues would not prevent future business in those markets.

Timothy Coffey of Janney Montgomery Scott inquired about several key operational areas, including the outlook for SEC uplift costs, Q2 credit card transaction volume, plans for enhanced card offerings, the timing of deposits from the new slot program, and the current strength of the SBA loan pipeline and sale premiums.

Answer

Executive T. Sullivan and Executive Edward Nigro addressed the questions. They anticipate further SEC-related costs in Q2 but potentially less than the $1 million budgeted. Nigro projected that credit card transaction volumes would likely remain flat in Q2 due to a planned marketing pause for system enhancements. He also confirmed plans for a secured card and other product improvements targeting a Q3 launch. Nigro expects the slot program to launch in Q2, with deposit growth beginning in Q3. Sullivan confirmed the SBA and commercial loan pipeline exceeds $300 million and noted that while demand is strong, gain-on-sale premiums remain soft.

Timothy Coffey of Janney Montgomery Scott LLC asked if noninterest expenses would normalize to levels seen in the second half of last year and questioned the potential expense impact from recent new hires in lending.

Answer

Lynn Hopkins confirmed that a return to second-half 2024 expense levels was a reasonable expectation, targeting an OpEx ratio around 1.80% of average assets. She clarified that new hires would not be a direct addition to costs due to expense rationalization elsewhere, and guided to an operating expense run rate between $17.5 million and $18 million.

Timothy Coffey asked about the drivers behind the significant drop in deposit costs, the expected pace of loan growth throughout 2025, and the strategies being used to mitigate loan payoffs.

Answer

EVP & CFO Lynn Hopkins attributed lower deposit costs to the bank's liability-sensitive CD portfolio repricing in a lower rate environment. President & CEO Johnny Lee expects loan growth to be slower in Q1 and ramp up in Q2 and Q3. He also noted that the bank proactively engages with borrowers to retain loans but some payoffs are due to borrowers using excess cash or strategic decisions by the bank.

Timothy Coffey asked which CRE property types are seeing the most demand, the general sentiment of non-CRE customers, how the bank underwrites construction loans given rising costs, and its appetite for growing its multifamily portfolio.

Answer

President and CEO David Brager responded that CRE demand is broad-based across all asset classes, with a continued focus on owner-occupied properties. He described general customer sentiment as 'relatively positive.' On construction lending, he acknowledged cost pressures but emphasized disciplined underwriting and sees opportunity. For multifamily, Mr. Brager confirmed the bank's appetite is unchanged and it remains 'open for business for the right borrowers.'

Timothy Coffey of Janney Montgomery Scott questioned the expected balance sheet impact from the recent wildfires, particularly the deployment of incoming insurance and rebuilding funds. He also asked about the bank's capacity and willingness to increase construction lending for community rebuilding.

Answer

President and CEO David Brager explained the direct impact is limited, with only $7.4 million in loans on destroyed properties, all of which were insured. He noted that insurance proceeds are held in bank-controlled accounts for rebuilding. Brager sees more potential upside than downside risk from rebuilding efforts. He confirmed the bank is willing and has ample capacity to increase construction lending, and is even considering slightly relaxing its typically stringent loan-to-cost requirements for wildfire relief projects.

Timothy Coffey of Janney Montgomery Scott LLC inquired about the bank's liquidity strategy, particularly the preference for short-term liquidity over expanding the securities portfolio, and asked for the target level for the allowance for credit losses ratio.

Answer

CFO Edward Czajka disclosed a recent strategic shift, noting the purchase of approximately $60 million in 10-year treasuries to capitalize on favorable rates, though he indicated this was not an ongoing program. Regarding the allowance, Executive Nick Pi projected the ratio could gradually decrease to a 1.15% to 1.25% range. Executive Li Yu added that the bank's philosophy is to reserve aggressively, which has historically kept their ratio above peer levels.

Timothy Coffey asked how the bank is being positioned for the current economic cycle, whether underwriting standards have changed, and about any material time deposit rollovers in the upcoming quarter.

Answer

Chairman and CEO Li Yu described a cautious positioning, emphasizing diligent monitoring of customers affected by tariffs and tightening underwriting on segments like industrial property. Executive Edward Czajka reported that $1.1 billion in time deposits with an average rate of 4.28% are set to mature in Q2, while current offering rates are in the mid- to high-3% range.

Asked about the impact of the loan sale on servicing income, the company's appetite for originate-to-sell business, and the potential for further noninterest expense reductions.

Answer

The loan sale did not impact servicing income as they were portfolio loans, and no servicing asset was recognized due to uncertainty. The appetite for originate-to-sell is large but currently limited by market conditions. Further significant expense cuts are unlikely as FTE levels are already very low, though minor savings may come from lower FDIC fees and expiring leases.

Timothy Coffey of Janney Montgomery Scott LLC questioned the impact of the loan sale on mortgage servicing income, the company's appetite for originate-to-sell business, and the potential for further noninterest expense reductions.

Answer

CEO Mark K. Mason clarified that the sale involved portfolio loans, so it did not impact the servicing fee line item, and no mortgage servicing asset was recognized due to the temporary nature of the arrangement. He affirmed a large appetite for originate-to-sell business, though it is tempered by market conditions. On expenses, Mason noted they are near the limit for FTE reductions, while CFO John Michel added that minor savings could come from lower FDIC fees and managing occupancy costs.

Timothy Coffey of Janney Montgomery Scott inquired if the merger agreement could be extended, the progress on marketing the potential $800 million loan sale, and whether this sale would be separate from a previously discussed $300 million transaction. He also asked if other assets, like the DUS license, would be considered for sale, and requested data on CD maturities for Q4 and Q1.

Answer

Executive Mark K. Mason confirmed the parties could agree to extend the merger agreement. He clarified that while an $800 million pool has not been marketed, they have substantially negotiated a sale for a different, ~$300 million pool, providing significant market insight. He explained the two potential sales have different goals and would involve different loan pools. Mason stated they are unlikely to sell other assets like the DUS license. CFO John Michel did not have CD maturity data available but offered to follow up.

Asked for the substandard loan balance, an update on a specific Q2 nonaccrual loan, details on loan prepayment efforts, and the expected cadence of expense reductions.

Answer

The substandard loan balance has not changed materially. The nonaccrual loan was restructured with sufficient reserves and collateral. Efforts to restructure loans have yielded about $100 million but are slow as many loans are not yet near repricing. The expense reduction trend is expected to continue in Q4, with a seasonal increase in Q1 before resuming.

Timothy Coffey of Janney Montgomery Scott LLC asked for details on the balance sheet optimization opportunities mentioned in the investor deck and whether they could lead to a smaller asset base. He also questioned if the current mix of earning assets (70% loans, 15% securities) is the desired long-term structure.

Answer

CEO Jared Wolff clarified that they are not looking to shrink the asset base. Instead, balance sheet optimization refers to managing the capital stack, such as evaluating preferreds and sub debt, once the bank achieves excess capital (CET1 near 11%) and stable earnings. Both Wolff and CFO Joe Kauder indicated that a securities portfolio of 12-15% of earning assets is an appropriate long-term mix.

Timothy Coffey of Janney Montgomery Scott LLC asked for management's assessment of the legacy PacWest loan pipeline dynamics and their current view on the credit quality of the legacy PacWest portfolio after six months of integration.

Answer

CEO Jared Wolff explained that they are developing a better understanding of the loan pipeline, noting it has been about four months of active building since the post-merger reorganization. He described the credit quality of the legacy PacWest portfolio as "terrific," stating that the primary area of focus, office loans, has performed as anticipated. Wolff emphasized the bank's strong economic reserve coverage of 1.8% and their proactive approach to managing potential credit risks.

Timothy Coffey of Janney Montgomery Scott asked for the bank's perspective on its tangible common equity position in relation to expected balance sheet growth and the forward rate curve. He also sought more specific guidance on Q4 compensation expense and a forecast for wealth management fees.

Answer

CEO and President Mike Roffler expressed that the bank is in a "really good place" with its capital and tangible book value, feeling well-positioned to support 2023 growth. He confirmed that the sequential increase in Q4 compensation expense would be lower than the typical 5-10% range. President of Private Wealth Management Bob Thornton projected Q4 investment management fees to be between $135 million and $140 million.

Timothy Coffey asked if First Republic has tightened its underwriting standards for office commercial real estate, particularly in weaker markets like the San Francisco Bay Area. He also inquired about the type of collateral accepted for stock-secured lending.

Answer

Chief Banking Officer Mike Selfridge stated that the bank has always been selective and has become even more cautious, focusing on smaller CRE deals with low LTVs and experienced operators, thereby avoiding the troubled large high-rise segment. CEO Mike Roffler confirmed that collateral for stock-secured loans is restricted to only highly liquid stocks.