Woody Lay

Woody Lay with Keefe, Bruyette & Woods inquired about Mechanics Bancorp's net interest margin (NIM) outlook, specifically asking for expectations on Q1 NIM expansion and the full-year target, considering the spot cost of deposits. He also sought clarification on the non-interest expense run rate, particularly regarding the inclusion of CDI amortization, and questioned the comfort level with a dividend payout ratio exceeding 100% in 2026 compared to the long-term 80% target.

Answer

C.J. Johnson, President and CEO, responded that Mechanics Bancorp anticipates a NIM increase of approximately 10-15 basis points in the first quarter, aiming for a 3.75% NIM by year-end, contingent on interest rate movements and two assumed rate cuts. Regarding expenses, Mr. Johnson clarified that the previously stated $450 million run rate included CDI, while the new focus is on a core cash non-interest expense of $430 million, excluding CDI amortization, which was about $7 million this past quarter. On dividends, Mr. Johnson explained that the projected payout ratio over 100% in 2026 is primarily due to the DUS business line sale, which will free up an additional $70 million in tangible capital for a Q2 dividend, despite the gain being recognized in Q4. He also noted that the bank's shrinking balance sheet from high-cost CD and auto loan runoff contributes to freeing up leverage capital, with an expected $0.39 per share dividend in Q1, and the payout ratio is expected to normalize to around 80% in the latter half of the year.

Woody Lay with KBW inquired about Mechanics Bancorp's net interest margin (NIM) outlook, specifically the expected Q1 starting point and full-year expansion. He also sought clarification on the non-interest expense run rate, asking if the previously stated $450 million included CDI amortization. Finally, Lay questioned the company's dividend targets, particularly the comfort level with a payout ratio exceeding 100% in 2026 compared to the long-term 80% target.

Answer

C.J. Johnson, President and CEO of Mechanics Bancorp, projected a NIM increase of 10-15 basis points in Q1, reaching approximately 3.75% by year-end, contingent on interest rate movements and two assumed rate cuts. Johnson confirmed that the prior $450 million expense run rate included CDI, and the new focus is on a core cash non-interest expense of $430 million, excluding CDI amortization. Regarding dividends, Johnson explained that the payout ratio exceeding 100% in 2026 is a temporary effect of the DUS business line sale, which recognized a gain in Q4 but will free up capital in Q2, alongside balance sheet shrinkage. He anticipates a $0.39 per share dividend in Q1, with a significantly higher Q2 dividend, and expects the payout ratio to normalize to around 80% in the latter half of the year.

Woody Lay from KBW asked about Seacoast Banking Corporation's strategy for balancing portfolioing versus selling mortgage production from The Villages unit and its implications for near-term fee income expectations. He also inquired about any early signs of revenue synergies emerging from The Villages acquisition.

Answer

Michael Young, EVP and Chief Strategy Officer, explained that Seacoast retained more mortgage production in Q4 due to its high quality and balance sheet management utility, indicating this flexibility might shift revenue between NII and fee income while meeting total revenue guidance. Charles Shaffer, Chairman, President, and CEO, added that mortgage banking income is expected to be higher due to the acquired servicing portfolio. Mr. Shaffer also highlighted early revenue synergies, particularly in wealth management and the strong performance of the mortgage business, with future potential in insurance offerings.

Woody Lay asked for details on the expected deposit beta for future interest rate cuts, questioned if there were offsets to the strong deposit performance that kept the core NIM guidance at 3.35%, and inquired about the balance between reinvesting in the franchise and improving profitability.

Answer

EVP, Treasurer & Director - IR Michael Young stated that after an aggressive initial phase of lowering deposit costs, future deposit betas would likely normalize to the low-30s range. He clarified that the core NIM guidance is maintained because the timing of Fed cuts has shifted, and the bank is leaning more towards balance sheet growth versus pure margin optimization in the second half of the year. Chairman, President & CEO Charles Shaffer addressed the investment question by stating his primary focus is delivering on the profitability targets outlined in the Villages acquisition deck, though the company will remain open to unique strategic opportunities.

Woody Lay questioned Hilltop Holdings about its loan pipeline entering 2026, the current loan pricing competition in its markets, and the outlook for mortgage gain on sale margins over the coming year.

Answer

Jeremy B. Ford, CEO, reported a strong loan pipeline of approximately $2.6 billion entering 2026, indicating robust organic loan growth. He noted a 35 basis point decline in going-in loan yields due to the changing rate environment. William B. Furr, CFO, and Jeremy B. Ford, CEO, projected stable total mortgage revenue (gain on sale and origination fees) around 350-360 basis points, anticipating a steady, gradual improvement in the overall mortgage market.

Woody Lay asked about Hilltop Holdings' loan pipeline entering 2026 and the current loan pricing competition in their markets. He also sought insights into the expected gain on sale margins for the mortgage business over the coming year.

Answer

Jeremy B. Ford (CEO, Hilltop Holdings Inc.) reported a strong loan pipeline of approximately $2.6 billion entering 2026, indicating robust organic loan growth. He noted that going-on yields decreased by about 35 basis points in the quarter due to the prevailing rate environment. William B. Furr (CFO, Hilltop Holdings Inc.) stated that total mortgage revenue, encompassing both gain on sale margins and origination fees, is expected to remain stable around 350-360 basis points, anticipating a steady, rather than rapid, improvement in the overall mortgage market.

Woody Lay inquired about the broker-dealer's lower efficiency ratio in Q3, asking if any expenses were pushed to Q4 or if it was driven by lower efficiency businesses contributing to fee growth.

Answer

William Furr, CFO, stated that the pre-tax margin was 18.3% in Q3, up from 13.7% in the prior year, largely due to business mix. He expects a reversion back to low teens (12%-13%) pre-tax margins as a more normal operating level. Jeremy Ford, CEO, reiterated that the efficiency gain was primarily from higher revenue with relatively flat non-compensation expenses.

Woody Lay followed up on Hilltop Holdings' auto portfolio, specifically inquiring about subprime auto exposure within the two non-accrual relationships. He then asked about the broker-dealer's strong third-quarter fee income, the implied step-back in guidance, and the drivers of Q3 strength, including any one-quarter benefits. Lay also questioned if the lower efficiency ratio in the broker-dealer was due to expenses being pushed to Q4 or lower efficiency businesses driving fee growth.

Answer

CFO William Furr confirmed the presence of some subprime exposure within the auto portfolio, assuring that it is appropriately reserved and actively managed. Regarding the broker-dealer, Furr explained the solid activity in public finance, structured finance, and wealth management, noting a mix of recurring and episodic items, and anticipated a decline in sweep revenues due to rate reductions. He highlighted the third quarter's exceptional performance across all broker-dealer segments. For the improved efficiency ratio, Furr attributed it to a mix of factors and higher revenue, expecting a reversion to low-teens pre-tax margins. CEO Jeremy Ford added that non-compensation expenses were relatively flat and expressed confidence in the public finance business's strong year in municipal advisory and underwriting, as well as the improved wealth management business driven by advisory fees.

Woody Lay of Keefe, Bruyette & Woods (KBW) inquired about the elevated efficiency ratio in the broker-dealer segment, the drivers for the upward revision in non-variable expense guidance, and the factors that enabled the strong 72% interest-bearing deposit beta.

Answer

CFO William Furr explained the broker-dealer efficiency was impacted by a revenue mix shift toward public finance and away from structured finance. CEO Jeremy Ford added that $1 million in severance costs also pressured the margin. Regarding expenses, Furr cited inflation in personnel costs and software contract escalators. On the deposit beta, Furr credited improved analytics, customer sensitivity analysis, and a more rational competitive market.

Woody Lay asked for more details on the 7% expense growth budgeted for 2026, specifically inquiring about the allocation between software projects and the company's hiring strategy.

Answer

President and CEO Keith Donahoe explained that software spend includes moving the core system to OutLink and building a data platform for efficiency. He also noted personnel changes and staff additions in loan origination due to high volume. CFO Julie Shamburger added that FTEs are down 6% since December 2023, with an additional $2.3-$2.4 million budgeted for software and data processing, and that the Q1 2026 expense forecast does not reflect the full 7% increase as it will be phased in. Woody Lay also inquired about the company's M&A strategy in Texas, to which Keith Donahoe responded that M&A remains part of the strategy, focusing on strategic acquisitions to fill geographies or expand in key markets like Dallas, Houston, and Austin, rather than acquiring just for the sake of it.

Woody Lay with KBW inquired about the detailed breakdown of the 7% budgeted expense growth for 2026, specifically the allocation towards software projects and the company's hiring strategy. He also asked about Southside's M&A strategy in the current Texas market, especially given recent deal activity.

Answer

President and CEO Keith Donoho explained that software expenses are driven by a core system migration to OutLink and building a new data platform for efficiency and insights. CFO Julie Shamburger added that approximately $2.3-$2.4 million is budgeted for software and data processing, and that FTEs have been down 6% since December 2023, necessitating some staff additions in loan origination. Keith Donoho further elaborated on M&A, stating the company is open to strategic discussions to fill out geographies like Dallas, Houston, or Austin, and is opening a new retail location in The Woodlands.

Woody Lay from KBW asked about the impact of market disruption on loan competition, specifically whether it remains intense or has eased. He also inquired about the feasibility of further lowering deposit rates with incremental Fed cuts and how factors like loan growth might influence the net interest margin's position within its projected range.

Answer

Lance Hall (President and CEO, Origin Bank) described loan competition as 'highly competitive but not irrational,' noting tighter margins on SOFR quotes in urban markets. He highlighted the strong performance of Louisiana's rural deposit base in lowering overall deposit costs. Wally Wallace (Chief Financial Officer) confirmed that while historical beta assumptions are used, Origin hopes to exceed expectations on deposit betas. Lance Hall also explained that stronger loan growth could push NIM towards the lower end of the range if competitive pressures on loan spreads intensify, but the current bias is towards the higher end.

Woody Lay from KBW inquired about the impact of market disruption on loan competition, whether it's becoming more difficult to lower deposit rates with further Fed cuts, and how factors like loan growth might influence the net interest margin (NIM) within its projected range.

Answer

Lance Hall, President and CEO of Origin Bank, described loan competition as highly competitive but not irrational, noting tighter margins on SOFR quotes in urban markets. Drake Mills, Chairman, President and CEO, emphasized a disciplined approach to profitable growth, focusing on total relationships and ROA hurdles. Jim Crotwell, Chief Risk Officer, highlighted the continued opportunity to lower deposit costs, particularly benefiting from the rural deposit base in Louisiana, which saw 14% deposit growth at the lowest price point. Wally Wallace, Chief Financial Officer, confirmed that historical beta assumptions are still used for modeling, but the bank aims to exceed expectations on deposit betas. Regarding NIM, Lance Hall stated that stronger loan growth could push NIM towards the lower end of the range if promotional activity from acquiring banks intensifies, but the current bias is towards the higher end.

Woody Lay from Keefe, Bruyette & Woods (KBW) questioned the timing and rationale for the Q2 securities portfolio restructure and asked about the potential for future restructures. He also inquired if there was an opportunity to increase the ownership stake in Argent Financial and sought an update on the timing of further expense savings.

Answer

CFO Wally Wallace explained that the securities restructure was planned for Q1 but delayed due to market volatility; he clarified that no further large-scale loss trades are anticipated. President and CEO of Origin Bank, Lance Hall, stated that the company plans to maintain its Argent ownership stake in the 20-25% range. Regarding expenses, Chairman, President & CEO Drake Mills highlighted that 'Optimize Origin' focuses on both revenue enhancement and efficiency, while CFO Wally Wallace added that the expense run rate is expected to remain flat in the second half of the year compared to Q2.

Woody Lay asked about FirstSun Capital Bancorp's deposit costs, the re-acceleration of deposit betas, and the deposit pricing strategy for the quarter, seeking insight into future beta expectations.

Answer

Rob Cafera, Chief Financial Officer, noted favorable movement in interest-bearing costs and explained that while rates move with macro trends, deposit competition is tightening. He expects betas to track lighter than historical 40%+ due to competition, with a continued focus on operating and money market account growth. Lay also inquired about the standalone expense guide, specifically regarding investments in the West Coast and incremental expense needs post-merger. Neal Arnold, CEO and President, indicated that sales force additions would be across the footprint, including Texas and Southern California, with much of the infrastructure built pre-merger. Rob Cafera added that cost-save synergies already account for combined company infrastructure. Finally, Lay asked about the driver behind the increase in special mentions. Rob Cafera attributed it to macro interest rate pressure and a general net downgrade trend, while Jennifer Norris, Chief Credit Officer, confirmed no pervasive themes, highlighting one particular name.

Woody Lay inquired about FirstSun Capital Bancorp's deposit pricing strategy, the re-acceleration of deposit betas in the quarter, and expectations for future beta trends. He also asked about the allocation of standalone expense guidance towards West Coast investments and the anticipated incremental expense post-First Foundation merger. Finally, he sought color on the increase in special mentions.

Answer

Rob Cafera (CFO, FirstSun Capital Bancorp) noted favorable movement in interest-bearing deposit costs, declining by 21 basis points, and explained the bank's focus on operating and money market account growth rather than aggressive CD pricing. He anticipates future deposit betas to track lighter than historical 40%+ due to competition. Neal Arnold (CEO and President, FirstSun Capital Bancorp) clarified that sales force additions are across the footprint, including Texas and Southern California, with much of the infrastructure built ahead of the merger. Rob Cafera added that cost-save synergy disclosures already account for combined company infrastructure needs. Jennifer Norris (Chief Credit Officer, FirstSun Capital Bancorp) and Rob Cafera attributed the special mention increase to general pressure from macro interest rates and a lumpy component with one particular name, expecting some abatement as rates stabilize.

Woody Lay inquired about the assumptions behind the EPS accretion, comparing internal projections to street estimates and potential upside. He also asked about the confidence in regulatory approval, given a similar terminated transaction a year prior, and sought color on FirstSun's third-quarter credit performance and future charge-off expectations.

Answer

Rob Cafera, Senior EVP and CFO of FirstSun Capital Bancorp, and Neal Arnold, President and CEO of FirstSun Capital Bancorp, detailed the bottom-up P&L build for First Foundation, projecting NII improvement driven by funding costs and expense reduction from customer service costs. They anticipate fee income improvement, especially in wealth management, and emphasized the deal's risk reduction for organic growth. Neal Arnold expressed high confidence in regulatory approval, citing extensive conversations with the OCC and Fed, and lessons learned leading to a 'bigger, faster, clearer' balance sheet restructuring. Rob Cafera and Neal Arnold explained FirstSun's Q3 credit provision of $10 million, driven by loan growth and a specific CNI loan reserve, with $9 million in charge-offs (55 bps ratio) that were fully reserved. They expect charge-offs in the low 40s for 2025, acknowledging lumpy CNI credit and market deterioration.

Woody Lay of KBW asked about the assumptions driving FirstSun Capital Bancorp's EPS accretion projections, the company's confidence in regulatory approval given past transaction terminations, and details on legacy FirstSun's third-quarter credit performance and future charge-off expectations.

Answer

Rob Cafera, Senior EVP and CFO, detailed First Foundation's projected NII and expense improvements, driving significant EPS accretion by 2027, emphasizing a bottom-up P&L build. Neal Arnold, President and CEO, expressed high confidence in regulatory approval, citing extensive discussions and a clearer, faster risk reduction strategy. Mr. Cafera also explained FirstSun's Q3 credit provision, including specific C&I loan reserves and charge-offs, while Mr. Arnold noted the lumpy nature of C&I credit and healthy client balance sheets despite higher debt costs.

Asked about the specifics of the second quarter charge-offs, the outlook for reserve levels given potential future credit events, and the rationale for maintaining deposit growth guidance despite strong first-half performance.

Answer

The company clarified that Q2 charge-offs were concentrated in two C&I credits that were partially written down, not fully. They believe current reserve levels are adequate for future events, as the credit with a potential triggering event already has specific reserves. The deposit guidance is somewhat conservative, acknowledging some large, temporary client deposits in H1, but they still anticipate growth in the second half.

Woody Lay of Keefe, Bruyette & Woods (KBW) inquired about the specifics of the quarter's credit charge-offs, the outlook for reserve levels, and the rationale for maintaining conservative deposit growth guidance despite strong first-half performance.

Answer

CFO Robert Cafera explained that the charge-offs were driven by two C&I credits, which were only partially charged down to their expected recovery value. He stated that the current allowance for credit losses (ACL) is at a normalized level, as specific reserves had already been built for these credits. Regarding deposit guidance, Cafera acknowledged potential conservatism but pointed to some large, temporary client liquidity events that could moderate future growth. CEO Neal Arnold added that forecast confidence increases as the year progresses.

Woody Lay of Keefe, Bruyette & Woods inquired about the specifics of the second-quarter charge-offs, the outlook for reserve levels, and the rationale behind maintaining mid-single-digit deposit growth guidance despite strong first-half performance.

Answer

CFO Robert Cafera clarified that Q2 charge-offs were driven by two C&I credits, which were written down to their net realizable value, not fully charged off. He stated that the allowance for credit losses is expected to normalize around the 1.20s range, as previous builds were for specific reserves. Regarding deposit guidance, Mr. Cafera acknowledged potential conservatism but noted that some temporary client liquidity events could create headwinds and that new growth comes at a higher cost. CEO Neal Arnold added that the CFO's confidence in forecasts increases as the year progresses.

Woody Lay asked about the NIM outlook, specifically if it can remain stable despite expected strong loan growth in 2026, or if higher growth might lead to compression. He also inquired about deposit growth expectations for the year, considering the BOH acquisition and its jumbo CDs, and if legacy markets could be leveraged. Finally, he asked about South Plains Financial's M&A strategy, including preference for Houston scale versus broader footprint, and comfort with announcing another deal while BOH is pending.

Answer

Steve Crockett (CFO and Treasurer) stated that while loan growth is helpful, many factors are at play, acknowledging potential NIM compression due to competition and deposit repricing. Cory Newsom (President) agreed there's exposure to compression and the need to manage deposit costs effectively. Curtis Griffith (Chairman and CEO) noted that BOH has good NIM, and they believe they can reduce BOH's deposit costs over time. Cory Newsom (President) emphasized a thoughtful, methodical approach to M&A, not being a 'serial acquirer,' and confirmed they wouldn't be afraid to announce another deal with BOH pending, but they are deliberate. Brent Bates (Chief Credit Officer) added that they have proven they don't 'shoot from the hip.'

Woody Lay asked about the net interest margin (NIM) outlook for 2026, specifically whether strong loan growth would lead to stability or compression due to lower spreads. He also inquired about deposit growth strategies, considering the Bank of Houston acquisition and potential for reducing BOH's deposit costs. Finally, Lay questioned South Plains Financial's M&A preferences, asking if they would prioritize further scale in Houston or look across their entire footprint, and if they would be comfortable announcing another deal while the BOH acquisition is pending.

Answer

Steve Crockett, CFO and Treasurer, indicated that while loan growth is helpful, many factors make NIM expansion challenging, with potential for some compression due to deposit competition. Cory Newsom, President, concurred, emphasizing the need to effectively manage deposit costs. Curtis Griffith, Chairman and CEO, noted the belief that BOH's deposit costs could be reduced over time, potentially offsetting NIM pressures. Newsom clarified that South Plains Financial is not a serial acquirer, taking a thoughtful and methodical approach to M&A. While Houston is a strong market, they are not exclusively tied to it, and deals must make strategic sense. They would not be afraid to announce another deal if it aligns with their careful process.

Woody Lay followed up on South Plains Financial's hiring initiative, asking about past experiences with aggressive hiring in 2021 and how those lessons are applied to the current market, including the break-even model for new hires. He also inquired about the expected expense growth rate given that the company is halfway to its hiring target. Furthermore, Lay sought clarification on the company's M&A strategy, specifically the checklist for identifying a suitable acquisition target.

Answer

President Cory Newsom explained that the 2021 hiring initiative also addressed upcoming retirements, unlike the current focus on expansion. He noted that new hires are modeled to break even in six months or less and emphasized a rigorous hiring process for culture fit. CFO Steve Crockett indicated that non-interest expense would modestly increase, spread out over time. Chairman and CEO Curtis Griffith highlighted that a significant part of compensation for new hires is in ICP packages, paid out later. Regarding M&A, Cory Newsom and Curtis Griffith stressed the importance of culture fit, successful banks with customer loyalty, and employees committed for the long haul. Curtis Griffith added that the numbers must work, and targets should view joining as a long-term investment.

Woody Lay from KBW followed up on South Plains Financial's aggressive hiring initiative, asking about past experiences with similar strategies in 2021 and how those lessons are being applied now. He also questioned the expected expense growth rate given the additional hires and sought more detail on the company's stringent M&A checklist, particularly regarding culture fit and financial criteria.

Answer

President Cory Newsom explained that the 2021 hiring initiative also addressed upcoming retirements, which is not the primary driver now. He noted that new hires are modeled to break even in six months or less and emphasized a rigorous process for cultural and credit fit. CFO Steve Crockett indicated that non-interest expense would modestly increase, spread out over time. Chairman and CEO Curtis Griffith and Cory Newsom stressed that culture fit is paramount for M&A, alongside financial success, customer loyalty, and long-term employee mindset, noting that current market conditions require careful consideration of multiples and investor alignment.

Woody Lay from Keefe, Bruyette & Woods (KBW) questioned the drivers of the strong loan yield expansion, the strategies behind the growth in non-interest-bearing deposits, and the scope and expense impact of the company's lender hiring initiative.

Answer

President Cory Newsom stated new loans are being originated in the low-7% to high-6% range, while Chairman & CEO Curtis Griffith noted that many paid-off loans were lower-priced. Newsom attributed the growth in non-interest-bearing deposits to the continued maturation of their treasury management solutions. He also confirmed the hiring strategy will increase short-term expenses but is viewed as a crucial investment for growth, with new hires expected to break even quickly.

Woody Lay sought clarity on Bank of Marin's expense run rate outlook, taking into account fourth-quarter adjustments and anticipated first-quarter seasonality. He also questioned the bank's perspective on current capital levels, which are lower than historical but deemed adequate, and any plans for potential excess capital deployment.

Answer

Dave Bonaccorso, CFO, explained that Q4 saw personnel-related benefits, with a reversion and increased charitable contributions expected in Q1. He projected expense growth for 2026 to be around 4.5% (similar to 2025) plus additional investments in people, initiatives, and systems to generate revenue and improve fee income. Timothy Myers, President and CEO, stated that capital levels, while lower historically, are adequate for the balance sheet's risk profile, especially with ongoing credit quality improvements. He mentioned a board authorization for share repurchases and that an improving stock price makes M&A more feasible, keeping all options open without current specific plans.

Woody Lay inquired about Bank of Marin's expense run rate, considering seasonality and future investments, and the management's perspective on current capital levels and potential excess capital deployment strategies.

Answer

CFO Dave Bonaccorso explained that Q1 expenses would be elevated due to seasonal salary and benefit accrual resets and annual charitable giving. He anticipated expense growth similar to 2025 (4.5%), plus additional investments in people, initiatives, and systems to generate future revenue. President and CEO Timothy Myers and CFO Dave Bonaccorso affirmed that current capital levels, while lower than historical, are adequate given the improved risk profile of the balance sheet. They noted the existing share repurchase authorization and the potential for M&A as stock valuation improves, keeping all capital deployment options open.

Woody Lay (KBW) asked if the positive macro momentum and headlines from the Bay Area, including AI tailwinds, are translating into increased loan demand for Bank of Marin Bancorp. He also inquired about the competitive landscape for loans, specifically pricing and structural aspects, and the outlook for continued positive operating leverage.

Answer

President and CEO Tim Myers confirmed increased loan activity, particularly in investor CRE and Sacramento, driven by diverse opportunities and construction financing interest in San Francisco. He acknowledged aggressive pricing competition for high-quality deals and the return of non-recourse loans. Both Tim Myers and CFO Dave Bonaccorso expressed confidence in continued positive operating leverage, citing NIM expansion, a robust loan pipeline, strategic new hires, and efficient expense management with only a 90 basis point year-to-date increase.

Woody Lay inquired whether the positive macro headlines and optimism surrounding the Bay Area, including AI tailwinds, were translating into increased loan demand for Bank of Marin Bancorp. He also asked about the current competitive landscape for loans, specifically regarding pricing aggression and the return of non-recourse loan structures, and sought insights into the potential for continued positive operating leverage given tailwinds to net interest margin (NIM), loan growth, and expense management.

Answer

President and CEO Tim Myers confirmed increased activity and loan demand, noting a higher proportion of investor CRE and construction projects in San Francisco and Sacramento, with diversified property types. He acknowledged aggressive pricing competition for high-quality deals and the return of non-recourse loan structures, which the bank largely avoids. Tim Myers and Chief Financial Officer Dave Bonaccorso expressed confidence in continued positive operating leverage, citing NIM expansion built into the balance sheet, a strong loan pipeline, new hires, and the ability to scale operations with minimal expense growth, as evidenced by a 90 basis point year-to-date expense increase.

Asked about the drivers and stickiness of deposit growth, the potential for further deposit cost reductions, and the outlook for loan production amidst macro uncertainty.

Answer

Deposit growth was from a mix of new accounts and existing client inflows, though some is seasonal/episodic. There is some limited room to cut deposit costs even without Fed action. Loan production is strong and sustainable, driven by new hires, and the pipeline is healthy; paydowns are not from core commercial activity.

Woody Lay from KBW inquired about the nature of the quarter's strong deposit growth, asking if it was seasonal or sticky and what drove it. He also asked if there was room to further lower deposit costs and questioned the trend in loan production versus payoffs.

Answer

CEO Tim Myers stated that the deposit growth was a combination of new account openings and inflows from existing commercial, small business, and consumer clients, but acknowledged that forecasting is difficult due to episodic flows from large DDA customers. CFO Dave Bonaccorso confirmed there is some flexibility on deposit costs, noting a small rate cut was implemented in April independent of Fed actions. Tim Myers added that strong loan production was driven by new banker hires rather than broad market demand, and payoffs were largely from non-core areas like consumer loans.

Woody Lay from KBW inquired about the drivers and sustainability of the quarter's strong deposit growth, the potential for further reductions in deposit costs, and current loan production trends amid macroeconomic uncertainty.

Answer

CEO Tim Myers attributed deposit growth to new account openings and inflows from existing clients but cautioned that forecasting is difficult due to fluctuations from large DDA customers. CFO Dave Bonaccorso confirmed there is room to lower deposit costs, citing a rate cut on $260 million in balances in April independent of Fed actions. Myers added that strong loan production was driven by new hires and a healthy pipeline, not an increase in market-wide demand, and he is not seeing deal delays.

Woody Lay questioned the expected non-interest expense growth rate for 2026, considering the flat core run rate in Q4 2025 (excluding the OREO adjustment) and the company's intent to invest in the business amid M&A disruption. He also asked about the profitability improvement potential for 2026, specifically if there's a target Return on Assets (ROA) range by year-end. Finally, he inquired about the strategy for matching a strong loan pipeline with core deposit growth, given past lumpiness and anticipated deposit competition.

Answer

Scott C. Wylie, Chairman and CEO, stated the internal goal is to keep expenses below $20 million per quarter, aiming for efficiency while selectively investing in opportunities for revenue growth. He projected an operating run rate of approximately $2 per share annually, targeting a 1% ROA in the near term, acknowledging it's a 'stretchy' but achievable goal for 2026. David L. Weber, Chief Financial Officer, emphasized the team's focus on strong loan and deposit pipelines, noting historical success in attracting deposits when needed, which helps manage NIM.

Woody Lay asked about First Western Financial's expense growth rate outlook for 2026, adjusting for the OREO write-down, and the potential for profitability improvement, including any target ROA range. He also questioned how the strong loan pipeline would be matched with core deposits and the outlook for deposit competition.

Answer

Scott Wylie, Chairman and CEO, and David Weber, CFO, stated their internal goal to keep expenses below $20 million per quarter, while also investing in opportunities for revenue growth. They expressed an objective to reach a 1% ROA, acknowledging it would be a stretch for 2026 but achievable. Scott Wylie, Chairman and CEO, highlighted the team's focus on strong loan and deposit pipelines, noting that market disruption is driving new deposit business, and historically, they have been able to attract deposits when needed.

Woody Lay from Keefe, Bruyette & Woods (KBW) asked for a follow-up on the net interest margin (NIM) outlook, its sensitivity to potential rate cuts, the company's approach to balancing investments with profitability, and strategies for growing trust fees.

Answer

CFO David Weber confirmed that a 25 basis point rate cut would impact NII by slightly less than the previously guided $1 million. CEO Scott Wylie elaborated that the company focuses on maximizing value from its current expense base, highlighting recent strategic hires. He also detailed plans to revitalize the PTIM (Planning, Trust, and Investment Management) business through new leadership and a new B2B initiative, with results expected in future quarters.

Woody Lay asked for a follow-up on the net interest margin (NIM) outlook, its sensitivity to potential rate cuts, the balance between investment and profitability, and the strategy for growing trust fees.

Answer

CFO David Weber confirmed that a 25 basis point rate cut would impact NII by slightly less than the previously guided $1 million. CEO Scott Wylie discussed strategy, emphasizing leveraging the current expense base with new talent to drive revenue. He also detailed plans to grow PTIM (Planning, Trust, and Investment Management) fees through new leadership and a new B2B initiative, noting results are expected in future quarters.

Woody Lay from Keefe, Bruyette & Woods (KBW) asked for details on the net interest margin's sensitivity to potential rate cuts, the strategy for balancing investments with profitability, and plans to grow trust and investment management (PTIM) fees.

Answer

CFO David Weber stated that a 25 basis point rate cut would have a roughly $1 million impact on NII, consistent with prior guidance. CEO Scott Wylie addressed the investment strategy, highlighting that recent hires are driving revenue growth on a stable expense base, creating operating leverage. Wylie also detailed plans to revitalize PTIM fees by installing new leadership with a growth focus, emphasizing financial planning, and launching a new B2B distribution channel.

Woody Lay from Keefe, Bruyette & Woods (KBW) asked about the sensitivity of the Net Interest Margin (NIM) outlook to potential rate cuts, the strategy for balancing investments against profitability, and plans to increase trust and investment management (PTIM) fees.

Answer

CFO & Treasurer David Weber confirmed that the previously guided NII sensitivity to a 25 basis point rate cut remains largely accurate. Chairman & CEO Scott Wylie elaborated on the growth strategy, stating that recent hires are expected to drive revenue and operating leverage on the existing expense base. He also detailed plans to revitalize PTIM fees by installing new leadership with a growth focus, launching a new B2B initiative, and emphasizing financial planning services.

Woody Lay asked for color on what drove the record-setting risk management and insurance fees in the quarter. He also questioned if the slow mortgage market would impact plans for hiring mortgage loan officers (MLOs) in 2025 and requested guidance on the expense run rate for the first quarter of 2025.

Answer

Executive Scott Wylie explained the record insurance fees were the result of a strategic effort to strengthen the PTIM (planning, trust, and investment management) business, which had a very strong fourth quarter. Regarding mortgages, he noted that despite a tough market, the company successfully hired MLOs in 2024 and is seeing 'signs of life' in January. For expenses, he guided to a quarterly run rate of approximately $20 million for 2025, acknowledging inflationary pressures but continued focus on efficiency.

Woody Lay followed up on Amerant Bancorp's strategy for elevated brokerage deposits, asking if the intention is to continue remixing them in 2026 and if any elevated restructuring charges are expected in 2026 after the Q4 2025 actions.

Answer

Interim CEO Carlos Iafigliola clarified that brokerage deposits would be used opportunistically as an ALM tool for hedging, not for balance sheet growth, indicating expectations for low levels going forward. Regarding restructuring charges, he stated that all efforts in Q4 2025 were aimed at having a clean 2026, moving away from excessive non-GAAP metrics and focusing on GAAP-traceable performance.

Woody Lay from Keefe, Bruyette & Woods questioned Amerant Bancorp about the intentional runoff of core deposits in Q4 2025, the strategy for managing deposits now that total assets are below $10 billion, and the future use of brokerage deposits. He also asked if any elevated restructuring charges are expected in 2026, following the Q4 2025 charges.

Answer

Carlos Iafigliola, Senior EVP and Interim CEO, stated that the reduction in deposits was intentional to optimize the balance sheet and avoid carrying the burden of being a $10 billion institution without organic drivers. He clarified that brokerage deposits would be used opportunistically as an ALM tool, not for balance sheet growth, expecting low levels going forward. Regarding restructuring charges, Carlos Iafigliola indicated that efforts in Q4 2025 were aimed at having a clean 2026, with internal discussions focused on reducing reliance on non-GAAP metrics and tracking GAAP performance.

Woody Lay inquired about the various moving parts impacting expenses in the fourth quarter, specifically the $1.5 million in sign-on and severance costs, and sought clarification on actions taken. He also asked about the company's hiring strategy post-acquisition and whether the projected loan growth range of $75-$100 million per quarter would increase after the Keystone merger.

Answer

John McWhorter, CFO, explained that legal and professional expenses included $1 million in merger-related costs, with an additional $5 million anticipated in subsequent quarters. Salary and employee benefits had non-recurring expenses (severance, signing bonuses) largely offset by a tax tailwind, with operating earnings around $107 million. Bart Caraway, CEO, emphasized the company's role as a 'talent magnet,' indicating ongoing, selective hiring in areas like loan operations, IT, and treasury to support growth. John McWhorter confirmed that the $75-$100 million per quarter loan growth target remains appropriate for the pro forma company, expecting 2026 to be a more favorable year for loan production.

Woody Lay asked about the various moving parts impacting expenses in the fourth quarter, including sign-on, severance, and merger-related costs. He also inquired about the company's hiring plans post-acquisition and whether the projected loan growth range of $75 million-$100 million per quarter would increase after the Keystone merger closes.

Answer

Bart Caraway, Founder, Chairman, President, and CEO, explained that legal and professional expenses included about $1 million in merger-related costs, with another $5 million expected in the next couple of quarters. Salary and employee benefits had non-recurring expenses in the hundreds of thousands, partially offset by a tax tailwind. He noted that hiring would continue as the company remains a 'talent magnet,' especially in support areas during periods of high growth. Bart confirmed that the $75 million-$100 million per quarter loan growth target remains the right range even after the Keystone acquisition, citing a good pipeline and a more favorable production year in 2026.

Woody Lay inquired whether the expected EPS accretion from the Keystone deal was based on consensus estimates or internal projections, asked about the near-term securitization strategy given the upcoming integration, and questioned potential expense investments as the company approaches the $10 billion asset threshold.

Answer

John McWhorter, Chief Financial Officer, confirmed the EPS accretion was based on consensus but noted internal expectations for higher accretion due to unincluded synergies. Bart Caraway, Founder, Chairman, President and Chief Executive Officer, elaborated on potential synergies like branch consolidation, derivative income, and treasury management tools. John McWhorter also stated that a third securitization is likely in Q1 next year. Bart Caraway indicated that expense investments for growth towards $10 billion are already 'baked in,' focusing on systems and controls rather than just adding personnel, and not expecting a significant P&L impact.

Woody Lay asked whether the expected EPS accretion from the Keystone deal was based on consensus or internal projections, and how potential synergies might impact this. He also questioned the near-term securitization strategy and if a larger balance sheet would offer more flexibility, as well as anticipated expense investments as the bank approaches the $10 billion asset threshold.

Answer

John McWhorter, CFO, confirmed that EPS accretion was based on consensus, with Bart Caraway, CEO, adding that significant synergies (e.g., branch overlap, derivative income, treasury tools) were not yet factored in, suggesting higher actual accretion. Mr. McWhorter indicated a third securitization is likely in Q1 2026. Mr. Caraway stated that $10 billion threshold expenses are incrementally baked in, focusing on systems and controls rather than just adding staff, without expecting a material P&L impact.

Woody Lay of Keefe, Bruyette & Woods (KBW) sought clarification on the forward NIM guidance, the strategic evaluation of securitizations versus loan growth, and whether the Q2 expense level is a good run rate.

Answer

CFO R. John McWhorter confirmed the 3.90%-3.95% NIM guidance includes recurring capitalized fees. He and CEO Bart Caraway detailed that securitizations are evaluated for capital management, earnings, concentration risk, and customer accommodation. McWhorter also affirmed that the Q2 expense run rate of approximately $28 million is a reasonable expectation for the rest of the year.

Woody Lay inquired about the go-forward deposit strategy, particularly the reason for the increase in time deposits during the quarter, and also sought to confirm if the loan pipeline's composition is consistent with historical levels.

Answer

Executive John McWhorter explained that the uptick in time deposits, specifically brokered CDs, was a short-term measure to manage a significant, unexpected surge in loan growth in September and keep the loan-to-deposit ratio from exceeding 100%. Executive Bart Caraway confirmed that the current loan pipeline mix is a continuation of trends seen in the last three quarters.

Woody Lay inquired about the investment banking and trading outlook, specifically the 2026 pipeline and fee pacing, and later asked about capital allocation, Q4 buyback activity, and future buyback strategy given the reiterated CET1 guide.

Answer

Chairman, President, and CEO Rob Holmes detailed 2025 debt arrangements, Q4 transaction volume growth, and healthy pipelines across M&A and equity, highlighting public finance growth and investment bank synergies. CFO Matt Scurlock added that fee income from treasury, wealth, and investment banking topped $50 million for the second consecutive quarter, with a full-year non-interest income guide of $265-$290 million. Regarding capital, Matt Scurlock noted the 75 basis point increase in CET1 to 12.13%, significant loan growth, and 5% share buyback at 114% of prior month tangible, emphasizing financial resilience and sector-leading tangible common equity. Rob Holmes further explained structural improvements like the SBE structure in mortgage finance, which reduces risk weighting and releases capital.

Woody Lay from KBW inquired about the investment banking and trading outlook, specifically the pipeline entering 2026, and the expected pacing of investment banking fees, considering 2025 deals were pushed to year-end due to tariff volatility.

Answer

Chairman, President, and CEO Rob Holmes highlighted impressive 2025 debt arrangement ($49 billion), broad new client penetration, and leadership in the segment, with Q4 transaction volume up 40%. He noted a healthy, more granular fee stream and strong synergies across the investment bank, commercial, and corporate banking. CFO Matt Scurlock added that fee income from treasury, wealth, and investment banking topped $50 million for the second consecutive quarter, with the full-year non-interest income guide increasing to $265 million-$290 million, underpinned by investment banking fees of $160 million-$175 million. He also provided Q1 outlook for stable performance.

Woody Lay inquired about the firm's ability to continue growing Net Interest Income (NII) given the backdrop of expected short-term rate cuts, especially after a 125 basis point reduction year-to-date. He also asked for insights into the credit transformation since 2021, noting that the market might unfairly penalize the firm based on legacy credit issues.

Answer

CFO Matt Scurlock stated that the firm's experience suggests NII performance is more about timing than absolute rate levels. He projected Q4 NII of $255-$260 million and a Net Interest Margin (NIM) around 3.3%, noting that variable loan portfolios reprice before deposits. He also highlighted a cycle-to-date deposit beta of 70% and an expected 60% beta for the next two cuts. CEO Rob Holmes emphasized that the firm's differentiated services allow them to command more than just price. Regarding credit, Rob Holmes highlighted a 41% year-over-year reduction in criticized loans, attributing it to aggressive client solutioning, a conservative risk posture, and strong client selection. Matt Scurlock added that current credit metrics are the strongest in over a decade, with remaining criticized loans being idiosyncratic.

Woody Lay asked for details on the restructuring charges, what factors would determine the low versus high end of the expense growth guidance, and how the regulatory environment impacts the bank's capital targets.

Answer

MD & CFO Matt Scurlock explained that restructuring charges reflect ongoing structural efficiencies, reallocating expenses to support fee income growth, and stated he anticipates full-year expense growth around 6%. Chairman, President & CEO Rob Holmes asserted that the regulatory tone does not affect their capital strategy, viewing their strong capital levels as a strategic advantage for client acquisition.

Woody Lay asked about the drivers behind the strong fourth-quarter non-interest-bearing deposit growth, especially given the seasonal slowdown in the title business, and inquired about the loan and deposit beta assumptions embedded in the Net Interest Income (NII) guidance. Lay also questioned the strategy for balancing price sensitivity with capital level targets for share buybacks.

Answer

Chairman, President, and CEO Raj Singh and COO Tom Cornish explained that NIDDA growth was broad-based across all business lines, with two-thirds from new relationships and one-third from expanded wallets, emphasizing average NIDDA as the key metric. Raj Singh stated deposit beta assumptions remain at 80% for two rate cuts, with loan betas varying by floating/fixed mix, noting the balance sheet is modestly asset-sensitive. Raj Singh also clarified that buybacks would be opportunistic, leveraging market volatility to achieve a mid-11s CET1 ratio, aligning with peer averages.

Woody Lay (KBW) inquired about the drivers behind the remarkable fourth-quarter non-interest-bearing deposit (NIDDA) growth, particularly given the expected seasonal slowdown in the title business. He also asked about the loan and deposit beta assumptions embedded in the net interest income (NII) guidance and the bank's strategy for balancing share buyback price sensitivity with the goal of achieving peer-like capital ratios.

Answer

Raj Singh (Chairman, President, and CEO) explained that NIDDA growth was broad-based across all business lines, with no specific outliers, and emphasized looking at average NIDDA for a clearer picture. Tom Cornish (COO) added that roughly two-thirds of the growth came from new client relationships. Raj Singh further clarified that deposit beta assumptions remain at 80% for two rate cuts, while loan betas vary based on fixed vs. floating rates. Regarding buybacks, Raj Singh stated the bank would remain opportunistic, taking advantage of market volatility to achieve a target CET1 ratio of around 11.5%.

Woody Lay from Keefe, Bruyette & Woods (KBW) asked about the drivers behind the better-than-expected deposit growth, the specific triggering events for office loan migration to non-accrual, and the strategic process for expanding into new markets like New Jersey and Charlotte.

Answer

CFO Leslie Lunak and COO Thomas Cornish attributed the strong deposit growth to the successful onboarding of new client relationships across all business lines and investments in new producers. Lunak clarified that office loan migration is primarily triggered by cash flow issues, such as occupancy problems. CEO Rajinder Singh described the new market expansion as both opportunistic and methodical, focusing on growth, business friendliness, and talent.

Woody Lay asked whether Simmons First National Corporation's recent high loan production reflected a more aggressive growth stance post-balance sheet restructure, increased customer optimism, or a combination of both. He also inquired if the company's longer-term net interest margin (NIM) target range had shifted upwards given current performance and loan repricing tailwinds. Lastly, he questioned the company's capital position, the trajectory of Return on Tangible Common Equity (ROTC), and opportunities for deploying excess capital.

Answer

President and CEO James Brogdon attributed the strong loan production primarily to robust market opportunities and improving pipeline quality, with indirect support from enhanced balance sheet flexibility. CFO Daniel Hobbs clarified that the top end of the NIM target range (previously 350-375) has likely shifted upwards due to higher rates and asset sensitivity. Brogdon outlined capital deployment priorities: organic growth and business investment, followed by the dividend, with share buybacks considered opportunistically based on growth environment and stock valuation.

Woody Lay at KBW asked whether Simmons First National Corporation's Q4 loan production, noted as the highest in years, was primarily a reflection of the company being more aggressive post-balance sheet restructure, increased customer optimism, or a combination of both. He also inquired if the longer-term Net Interest Margin (NIM) target range of 350-375 basis points has shifted upwards given current performance and the ongoing loan repricing tailwind. Finally, Lay questioned the company's capital position, the extent of excess capital, and the strategic opportunities for its deployment.

Answer

President and CEO James Brogdon described the strong Q4 loan production as a combination of factors, leaning more towards robust market opportunities and improving pipeline quality throughout 2025, rather than aggressive rate changes. He acknowledged that the balance sheet repositioning indirectly enhanced flexibility for loan growth. CFO Daniel Hobbs clarified that while the 350-375 bps NIM range aimed for stability across interest rate environments, the top end of that range has likely shifted upwards due to current higher rates and the company's asset-sensitive position. Brogdon concurred, noting that a 'higher for longer' rate environment is beneficial and provides an upward bias to the NIM range. Regarding capital deployment, Brogdon reiterated that organic growth and business investment remain the clear priority one, followed by the long-standing dividend (priority two). He stated that share buybacks are not currently budgeted but will be considered opportunistically throughout the year based on growth environment and stock valuation.

Woody Lay from KBW asked about the trend in Simmons First National Corporation's deposit betas following the September rate cut and expectations for future incremental cuts. He also sought insights into the forward expense growth rate, balancing ongoing efficiency gains with investments in talent acquisition, and the company's overall credit outlook amidst recent industry events.

Answer

CFO Daniel Hobbs reported a cumulative deposit beta of 65% through the rate cycle, expecting it to moderate due to the reduction of 100% beta brokered deposits and competitive pressures. President Jay Brogdon added that consumer accounts are growing but with lower average balances, while commercial accounts and fee income are seeing good growth from investments. Regarding expenses, Brogdon indicated the Q3 non-interest expense run rate might be slightly above Q4 but a reasonable launch point for the next year. He emphasized continued opportunities for efficiency ('middle innings') alongside strategic investments in talent and tools for organic growth. On credit, Brogdon described Q3 as a 'benign quarter' for NPLs, past dues, and charge-offs, expressing optimism for resolving two specific loans from Q1 in the fourth quarter. He also noted proactive efforts to move lower-quality loans, which impacted loan growth.

Woody Lay of Keefe, Bruyette & Woods (KBW) inquired about the 2025 outlook, the potential for further Net Interest Margin (NIM) expansion after surpassing 3%, and the future trend of loan payoffs.

Answer

President Jay Brogdon stated that performance trends are exceeding expectations, driven by asset repricing, though deposit cost improvements are slowing. CFO Daniel Hobbs provided detail on the continued positive repricing of the fixed-rate loan portfolio and a shift to variable-rate production, which supports the NIM. Brogdon also noted that loan payoffs are expected to remain consistent or slightly lower.

Woody Lay with Keefe, Bruyette & Woods inquired about the specific amount and timing of consumer yacht loan payoffs during the quarter, and whether the strong loan production observed in September indicates sustained momentum for the fourth quarter or was an isolated event. He also asked about the competitive landscape for loan pricing and its impact on new production yields.

Answer

CFO Rob Anderson clarified that yacht loan payoffs totaled slightly over $10 million and occurred in August, impacting loan yields and net interest margin for that month. Chairman, CEO, and President Luis Aguilera confirmed that September's strong loan production is indicative of sustained momentum, citing historical seasonal dips in Q3 and a robust go-forward pipeline. Luis Aguilera also noted the highly competitive market, emphasizing that pricing is relationship-based, not transactional, and Rob Anderson added that new loan production yields, while slightly down, remain above the portfolio average.

Woody Lay highlighted BOK Financial's remarkable average net charge-off rate of 6 basis points over the past three years and asked Stacy Kymes if a more normalized environment is expected in the year ahead, or if it remains too unpredictable.

Answer

Stacy Kymes, President and CEO, acknowledged the abnormally strong credit numbers, noting that BOK Financial's long-term average charge-off rate over 20 years (including the Great Financial Crisis) is around 26 basis points, with a through-the-cycle expectation of 20-25 basis points. He stated that while a reversion to the mean is expected eventually, it's hard to foresee it happening quickly based on current conditions, as no specific deterioration patterns are evident.

Woody Lay asked about the expected mix shift of BOK Financial's trading income between fees and net interest income (NII) in the context of a steepening yield curve. He also inquired about the slight increase in criticized assets, requesting the dollar amount and any contributing factors. Finally, he questioned the sustainability of the remarkably low net charge-off rate and whether a more normalized credit environment is anticipated in the year ahead.

Answer

CFO Marty Grunst stated that a steeper yield curve would likely result in more trading revenue being categorized as NII and less as fees, emphasizing that the total revenue from the business is the key metric. President and CEO Stacy Kymes reported that criticized assets increased by approximately $50 million, noting that such small movements can be influenced by one or two loans given the overall low levels. Kymes stressed that current credit numbers are 'abnormally strong' and a reversion to the mean (historically 20-25 basis points average charge-offs) is expected eventually, but no meaningful deterioration is foreseen in the near term, with no specific patterns or concentrations raising concerns.

Woody Lay asked about the opportunity and expected ramp-up of the new mortgage finance business and the outlook for deposit cost betas if the Fed cuts rates.

Answer

EVP & CFO Martin Grunst projected the mortgage finance business could reach $500 million in commitments by year-end with about 50% utilization. CEO Stacy Kymes added that 2025 is focused on operational stability before accelerating growth in 2026. Regarding deposit costs, Grunst stated that the cumulative liability beta of 76% should hold or potentially improve with further rate cuts.

Woody Lay asked if the new mortgage finance business was newly added to the loan growth guidance and inquired about its long-term size. He also questioned the company's stance on share buybacks given its strong capital position and recent stock pullback.

Answer

CFO Martin Grunst confirmed the mortgage finance vertical was not in the prior quarter's guidance and was added this quarter. CEO Stacy Kymes described the business as a long-term diversifier that he expects to become a 'meaningful number' by the end of 2026. Regarding capital, Martin Grunst stated that given their strong capital position, they 'expect to be active share repurchasers in the second quarter.'

Woody Lay from KBW asked about the drivers behind the strong Q4 deposit growth and its impact on 2025 strategy. He also questioned if a more favorable regulatory environment would alter the bank's approach to deploying excess capital.

Answer

CFO Martin Grunst attributed the deposit growth to broad-based success across all business lines and stated the strategy remains unchanged. Regarding capital, Grunst noted that while a favorable regulatory backdrop is helpful, it doesn't fundamentally change their patient approach. CEO Stacy Kymes added that the bank's strong risk management gives them the latitude to act in shareholders' best interests regardless of the regulatory environment.

Woody Lay of KBW inquired about the repricing dynamics of the time deposit portfolio in the fourth quarter. He also asked for color on the competitive landscape for Commercial Real Estate (CRE) lending, given BOKF's available capacity.

Answer

CFO Marty Grunst explained that the time deposit book is a granular consumer portfolio with a long tail, so the portion repricing in any single quarter is not large enough to have a major impact. On CRE, CEO Stacy Kymes noted that while there is less competition, deal flow is also slower. However, he affirmed BOKF has a competitive advantage and expressed confidence they will 'refill that bucket' over the next 12-18 months as they have in the past.

Woody Lay asked about the net interest margin (NIM) trajectory, noting the strong Q3 performance but lower quarter-end margin due to a September rate cut, and how future rate cuts might impact it. He also questioned the drivers behind the recent increase in loan fee income and its potential stickiness. Finally, Lay sought clarification on the decision to increase credit reserves despite strong credit trends and whether further reserve builds are anticipated.

Answer

Kelly Harris, CFO, reported a core NIM of 4.55% for Q3, anticipating slight compression to 4.50% with the first Q4 rate cut and potentially 4.47% with additional cuts, assuming liability cost management. Jason Estes, Chief Credit Officer, attributed higher loan fee income to successful sales and a robust deal market, expecting it to normalize after recent outperformance. Tom Travis, President and CEO, explained the reserve increase was a prudent measure due to portfolio growth and increased macro volatility, indicating they are 'pretty set' for now unless conditions or growth change.

Woody Lay of Keefe, Bruyette & Woods (KBW) questioned Bank7's loan growth outlook for the second half of 2025, the impact of funding this growth on the Net Interest Margin (NIM), and the company's current M&A strategy.

Answer

President & Chief Credit Officer Jason Estes confirmed a solid loan pipeline but noted unpredictability from large paydowns. He stated that while deposit costs may rise to fund growth, he expects the NIM to remain within its historical range. CEO Thomas Travis added that the bank remains disciplined on M&A, having explored several deals that did not close, and continues to evaluate opportunities.

Woody Lay from Keefe, Bruyette & Woods (KBW) asked for guidance on the expense run rate for Q3 2025 with the new Walnut Creek office, questioned the sustainability of the strong non-interest-bearing deposit growth, and sought details on which commercial real estate (CRE) sub-verticals are driving growth.

Answer

EVP and CFO Heather Luck projected a quarterly expense increase of $500,000 to $750,000 for Q3 to account for the Walnut Creek office. President and CEO James Beckwith affirmed that the non-interest-bearing deposit growth is sustainable and driven by fundamental new account acquisition. Regarding CRE, Beckwith identified mobile home/RV parks, storage, and student housing as key growth areas. He also noted selective financing of office buildings where new equity has significantly reset the asset basis, viewing these as safe, well-leveraged loans amid a San Francisco market turnaround.

Woody Lay questioned what would catalyze a loan growth pickup in 2025, specifically asking if one rate cut would be sufficient. He also inquired about the bank's appetite for construction and development loans and whether the Q2 expense level is a good run rate.

Answer

Executive Tyson Abston stated that two or three rate cuts, along with reduced uncertainty after the election, would likely be needed to stimulate loan growth, rather than just a single cut. He noted the bank's appetite for construction loans is currently more constrained with stricter underwriting. Executive Shalene Jacobson confirmed that the second quarter's expense level is a good run rate for the future.