Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Alberto, could you provide an update on the SBA portfolio's credit quality and any initiatives to de-risk it? A: We continue to see consistent trends in the SBA portfolio. Since the end of the COVID pandemic, we've been actively monitoring this portfolio, especially as borrowers transitioned from government support. We've seen gradual deterioration, which we anticipated and managed proactively. The unguaranteed portion of our SBA book has decreased from 15% in 2016 to about 6.1% today, reflecting our efforts to de-risk the portfolio.
Q: How do you foresee the net interest income (NII) and margin trends if the Fed remains on pause this year? A: If the Fed remains on pause, we expect NII to be flat to slightly up, subject to balance sheet changes. We are asset-sensitive, so fewer rate cuts could lead to increased NII. We also reduced our interest rate sensitivity this quarter, which could help manage risks better.
Q: Can you discuss the repricing gap within the CD portfolio and potential funding cost leverage? A: Our average CDs yield about 4.39%, with new CDs repricing at around 3.60%. On the asset side, we have about $900 million in loans that will reset higher, and our securities portfolio will also see a yield increase. The normalized yield curve is making liquid accounts more attractive than CDs, which could provide some upside in liability repricing.
Q: What are your expectations for loan growth and payoff activity in 2025? A: We expect mid-single-digit loan growth in 2025. Payoff activity, particularly from noncore portfolios like the inland transaction, was around $100 million last quarter. We anticipate this will slow down, allowing us to redeploy cash into customer relationships. Our diversified business lines, including commercial banking and leasing, are well-positioned for growth.
Q: Could you clarify the expense guidance for 2025 and whether it includes the First Security transaction? A: Our expense guidance for 2025 is $55 million to $57 million per quarter, which is on a standalone basis and does not include the First Security transaction. We will provide updated guidance after the transaction closes and we have a quarter of results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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