Oct 20, 2026 earnings call — Citizens merger and Capital Bank acquisition
Adjusted diluted EPS of $1.04 for the third quarter exceeded consensus analyst estimates of 93¢.
Revenue $0.1B (est $0.1B) · EPS $1.04 (est $0.93)
Key quotes
"We are working to close the Citizens merger at the end of this month."
"Our provision for credit losses declined to $3.6 million, a 24% reduction compared to the second quarter."
"Some of our highlights for the third quarter include improvements in our net interest income, which was up 1%, expansion in our net interest margin of 8 basis points, growth in our fee based income of 5%."
Analyst Q&A 8
Citizens deal timing and security sale details
Q (Ryan Payne · D. A. Davidson): Analyst asked when the Citizens deal will close and for details on a security sale: timing, yield, and impact on NIM. He also asked to confirm the Durbin fee impact figure.
A: Management said the Citizens close is expected around the very end of first quarter or beginning of second quarter. They said the security sale happened in August, the yield on the sold amount was about 1.5%, and they expect a slight margin increase of a few basis points. They confirmed the Durbin impact remains $11 million beginning July 2028 and noted minimal impact to Durbin and interchange income.
"Our expectation is sometime very end of first quarter, beginning of second quarter." — Tyler J. Wilcox (CEO)
Loan growth drivers, deposit betas, credit
Q (Tim D'Alessio · Raymond James): Analyst asked why loan growth was modest, how commercial pipelines look, and whether payoff headwinds ease in 2027. He also asked what deposit betas are assumed in the 2027 margin guide and about broader credit trends.
A: Management said commercial demand is strong and this was the third highest quarter of commercial production, with a favorable shift into C&I. They noted expected payoffs (about $480 million this year with $460 million seen through three quarters) and about $150 to $180 million of forecasted payoffs remaining; timing of those payoffs affects growth. They said noninterest or nonmaturity beta including noninterest bearing is about 30%, and overall commercial credit remains very strong with only slight concerns in the indirect consumer portfolio delinquency.
"This was actually our third highest quarter ever of commercial production, and I really like the mix shift into C&I that we have seen throughout the year." — Tyler J. Wilcox (CEO)
Capital deal transition and leasing growth
Q (Adam Kroll · Piper Sandler): Analyst asked if there will be a transition period after the capital deal closes that could slow growth, and whether small-ticket leasing will grow in 2027 and if it is in the NIM forecast. He also asked about provisioning for 2027.
A: Management does not expect a trough and emphasized ongoing engagement with the capital team to maintain continuity for bankers and clients, expecting to perpetuate the acquired franchise's higher growth. They said small-ticket leasing growth is included in the forecast, growing more in the second half of 2027 from a about $100 million base. On provisioning, management expects provisions to be elevated from recent quarters with allowance to total loans around 1.11% now and possibly moving toward 1.2% over time, and that Citizens will not materially change that ratio while the capital deal will help stabilize it.
"I would say as to capital, 1 of the most exciting things to me is the level of mutual engagement that we have with the capital team and the capital leadership particularly." — Tyler J. Wilcox (CEO)
Security sales and Q4 NIM impact
Q (Brendan Nosal · Hovde Group): Analyst asked if more securities need selling to stay under $10 billion and for the expected NIM change next quarter given portfolio and accretion movements.
A: Management said they will sell a majority of Citizens' portfolio at or near close and any further sales of their own portfolio will depend on year-end asset size; they might take another $2 to $3 million loss in the fourth quarter. They projected an 8 to 10 basis point NIM lift next quarter from adding Citizens, driven by the securities restructuring and the deposit franchise.
"Well, as we articulated, with the Citizens acquisition closing here later this month, we will sell a majority of their portfolio at close or very near to close." — Tyler J. Wilcox (CEO)
Commercial and leasing growth, NIM with capital
Q (Matthew Breese · Stephens): Analyst asked what the 2027 loan growth guide implies for commercial real estate and leasing growth, and whether the NIM target of 5% with the capital deal still holds.
A: Management said overall commercial growth is about 5% and leasing growth is about 6% to 7%, with more weight to C&I than CRE but still positive CRE growth. They said the full-year 2027 guide will not reach 5% NIM if capital closes early in the second quarter (because it won't benefit Q1), but once capital is in quarterly numbers they expect to be at or around 5% and slightly above in subsequent periods. They also said cash on the balance sheet will likely decrease over time as they manage to stay below $10 billion.
"Yes, I think overall commercial growth is about 5% or so, 1 of the main drivers." — Tyler J. Wilcox (CEO)
Exit margin, deposit rates, cost saves timing
Q (Emily · KBW): Analyst asked what the exit margin was in Q3, how deposit rates looked at quarter end, and when the capital cost saves fully realize.
A: Management said the exit margin in September was a little higher than the reported full-quarter margin and accretion impact was similar for the month, giving about a 5 to 8 basis point benefit on exit. They said deposit competition is increasing and they will actively manage pricing, likely via CD products. They confirmed full cost saves for the capital deal will not be realized in 2027 and will be fully realized in 2028.
"So the full cost saves for capital will not be realized in 2027." — Kathryn Bailey (CFO)
Why expenses rise into Q1 2027
Q (Brendan Nosal · Hovde Group): Analyst asked how core expenses of $73 million this quarter bridge to a higher first-quarter run rate in the $80 million to $82 million range given Citizens' costs around $4.5 million.
A: Management said Q3 was a bit lighter than expected due to timing, which will increase fourth-quarter costs, and starting from $73 million is somewhat light. They also highlighted annual increases in salaries and benefits and meaningful increases in benefit cost expectations for 2027 versus 2026 as drivers of higher expenses.
"I think some of that was just the timing that we will see move into the fourth quarter." — Kathryn Bailey (CFO)
Why fee income guide falls
Q (Adam Kroll · Piper Sandler): Analyst asked why the fee income midpoint steps down for Q4 even with Citizens contribution, and whether lower lease income is the reason.
A: Management said the step down is mainly due to lease income volatility and that end-of-term lease transactions can create quarter-to-quarter gains. They noted Q3 lease income was elevated by about $1 million to $1.5 million versus trend, which explains the variance in the fee income run rate.
"So I think that run rate was a little elevated versus the trend in Q3." — Kathryn Bailey (CFO)