Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: What's holding you back from being more optimistic about margin and NII, given the loan growth and securities tailwind?
A: Christopher J. Del Moral-Niles, CFO, explained that while NII guidance has been raised, deposit mix migration in a higher-for-longer rate environment and higher deposit costs are expected. Additionally, refinancing BTFP with higher-cost CD campaign balances introduces inherent drag.
Q: How should we think about the upper limits of capital and the role of buybacks?
A: Christopher J. Del Moral-Niles, CFO, mentioned focusing on maintaining TCE and not warehousing additional capital. Buybacks are considered a last choice but provide flexibility to optimize capital when appropriate.
Q: Can you discuss the expected negative mix shift on the funding side and its impact?
A: Christopher J. Del Moral-Niles, CFO, noted that while DDA mix has decreased to 25%, it is expected to bottom in the mid-20s. The ongoing deposit migration depends on the Fed's rate decisions.
Q: Given the migration trends in credit quality, why maintain a benign loss guide?
A: Irene H. Oh, Chief Risk Officer, expressed confidence in the granular, loan-by-loan analysis and the current reserving strategy, which is weighted towards a downside scenario, providing a comfortable buffer for potential losses.
Q: What are the drivers for loan growth, and how does the expected economic softening in the second half of the year factor into your projections?
A: Christopher J. Del Moral-Niles, CFO, attributed confidence in loan growth to active customer interactions and a strong pipeline, especially in C&I and residential sectors. The softening economy expected in H2 is aligned with the Fed's projections for a managed economic slowdown.
Q: How are you managing the potential risks in the CRE book given the interest derivative contracts and the higher-for-longer rate scenario?
A: Christopher J. Del Moral-Niles, CFO, reassured that most customers have hedged their interest rate exposure to the maturity of their loans, minimizing inter-maturity rate rollover risks. The bank's strategy includes growing the fixed-rate portfolio and using swaps to hedge against future rate declines.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
