Hilltop Holdings (HTH) 2026 年第三季財報電話會議：淨利息收入成長 9%

重點摘要

• Hilltop Holdings 呈報 2026 年第三季歸屬於普通股股東的淨利為 2,490 萬美元，或每股稀釋盈餘 0.44 美元。平均資產報酬率為 0.67%，平均股東權益報酬率則為 4.7%。
• 淨利息收入年增 9% 至 1.22 億美元。在商業貸款成長、存款成本穩定以及貸款收益率提高的支撐下，綜合淨利差較第二季上升 12 個基點至 3.33%。
• PlainsCapital Bank 創造了 4,400 萬美元的稅前利潤。期末供投資的持有貸款季增 1.34 億美元，年增 5.8 億美元或 7%。
• PrimeLending 錄得 1,080 萬美元的稅前虧損，主因房貸利率上升抑制了購屋活動、對申貸管道中的貸款估值造成壓力，並導致鎖定利率金額下降 18% 至 22 億美元。
• 利率波動導致房貸與經紀交易商業務部門出現約 1,600 萬美元的稅前按市值計價虧損。Hilltop 的其他綜合損益累計額 (AOCI) 也受到約 2,100 萬美元的負面影響。
• 管理層預計淨利息收入將溫和成長，主要受貸款成長驅動；但也表示隨著存款成本上升，淨利差可能會趨平或略降至 3.33% 以下。

核心財務數據

業務與營運表現

PlainsCapital Bank

PlainsCapital Bank 實現了 4,400 萬美元的稅前利潤，平均資產報酬率為 1.06%。在穩定的存款成本與貸款向上重定價支撐獲利下，其淨利差達到 3.49%，年增超過 25 個基點。

該季度存款餘額增加 5 億美元，其中包括從 HilltopSecurities 掃入的存款增加 1 億美元。商業不動產占年增貸款約 3 億美元，其餘主要來自工商貸款。

該銀行提列了 1,010 萬美元的信用損失準備。儘管如此，管理層表示不預計整個投資組合存在重大系統性風險，同時指出信用狀況仍受經濟、通膨和利率不確定性的影響。

PrimeLending

PrimeLending 錄得 1,080 萬美元的稅前虧損。房貸利率急遽上升，包括 9 月份 30 年期平均房貸利率上升近 70 個基點，削弱了購屋活動並降低了申貸管道中貸款的公允價值。

鎖定利率金額年減 18% 至 22 億美元。出售給第三方之貸款的出售利得利差下降 26 個基點至 200 個基點。管理層表示，接近 7% 的房貸利率以及更廣泛負擔能力壓力可能會在 2027 年之前持續壓抑房貸銷售活動。

HilltopSecurities

HilltopSecurities 在 1.17 億美元的淨收入中創造了 700 萬美元的稅前利潤，稅前利潤率為 5.9%。公共融資服務產生了 3,700 萬美元的淨收入，與 2025 年第三季持平，而財富管理收入則超越去年同期。

結構型融資與固定收益服務受到長天期債券波動及避險有效性降低的壓力。自營交易、佣金與手續費包含與房貸交易管道相關的 660 萬美元稅前按市值計價虧損。

管理層展望

• Hilltop 的內部利率展望假設 2026 年將再升息 25 個基點。
• 在該情境下，管理層預計淨利息收入將溫和成長，這主要是由於銀行業務部門的貸款成長。
• 管理層預計，隨著計息存款成本上升，綜合淨利差將趨平或可能略降至 3.33% 以下。
• 扣除房貸倉儲貸款及保留的 PrimeLending 房貸後，預計 2026 全年平均銀行貸款將比 2025 年成長 7% 至 8%。
• PlainsCapital Bank 預計第四季存款將出現季節性成長，同時管理層看好 2027 年之前的存款成長軌跡。
• 在持續推進生產力與流程效率計畫下，扣除可變薪酬後的費用預計將保持在當前水準附近相對穩定。
• 由於季節性疲軟、長期利率偏高以及負擔能力限制，PrimeLending 在第四季預估仍將面臨挑戰。

風險與關注事項

利率波動仍是近期的主要風險。該季度包含約 1,600 萬美元的稅前按市值計價虧損，以及扣除避險後因備供出售證券投資組合變動所產生的約 2,100 萬美元 AOCI 負面影響。

在存款收益率達到管理層所稱的週期性低點後，存款競爭可能會提高資金成本。該公司還提到房貸負擔能力、壓縮的出售利得利差、鎖定利率活動減少、通膨、地緣政治衝突以及更廣泛的經濟不確定性為令人關切之領域。

信用品質總體保持穩定，但信用損失準備增加了 900 萬美元。管理層繼續監控負向信用遷移與借款人特定事件。

分析師問答重點

• 房貸業務獲利能力：管理層表示 PrimeLending 將繼續根據市場狀況調整費用，同時有選擇性地招聘具高生產力的放款專員。該公司仍專注於邁向獲利，但預期房貸發放環境將維持艱困。
• 利差展望：貸款成長應能支撐淨利息收入，但較高的短期利率預計將加劇存款競爭。如果資產負債表的成長能增加總淨利息收入，管理層願意接受利差略為下降。
• 貸款動能：在銀行家招聘與市場變動的助攻下，商業申貸管道依然強勁。管理層表示，其第四季展望假設貸款償還量處於正常水準，而非異常高位。
• 資本回報：Hilltop 在第三季買回了 2,000 萬美元的股票，低於前兩個季度各 5,000 萬美元的水準，反映出股價偏高以及利率上升帶來的潛在 AOCI 壓力。該公司在授權買回額度中仍剩餘 8,500 萬美元，但不預計會在一個季度內全額完成。
• 存款成長：Hilltop 仍專注於低成本、分散的核心存款與資金管理服務，同時也承認來自市場新進入者所提供的促銷與吸引性利率競爭。

法說會逐字稿全文

完整財報電話會議逐字稿

管理層陳述

Operator

Hello, everyone. Thank you for joining us, and welcome to Hilltop Holdings Second (sic) [ Third ] Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference call over to Matt Dunn. Matt, please go ahead.

Matthew Dunn

Thank you. Before we get started, please note that certain statements during today's presentation that are not statements of historical facts, including statements concerning such items as our outlook, business strategy, future plans, financial condition, credit risks and trends in credit, allowance for credit losses, liquidity and sources of funding, funding costs, dividends, stock repurchases, subsequent events and impacts of interest rate changes as well as such other items referenced in the preface of our presentation are forward-looking statements. These statements are based on management's current expectations concerning future events that, by their nature, are subject to risks and uncertainties.

Our actual results, capital, liquidity and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in the preface of our presentation and those included in our most recent annual and quarterly reports filed with the SEC.

Please note that certain information presented is preliminary and based upon data available at this time. Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.

Additionally, this presentation includes certain non-GAAP measures, including tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest GAAP measure may be found in the appendix to this presentation, which is posted on our website at ir.hilltop.com.

I'll now turn the presentation over to Jeremy Ford.

Jeremy Ford

Thank you, Matt, and good morning. For the third quarter, Hilltop reported net income of $24.9 million or $0.44 per diluted share. Return on average assets for the period was 0.67% and return on average equity was 4.7%. To summarize the lines of business, PlainsCapital Bank further realized growth in core loans and deposits while expanding net interest margin to deliver $44 million in pretax income.

PrimeLending reported a pretax loss of $11 million as the mortgage market worked through a drastic intra-quarter increase in mortgage rates. And HilltopSecurities delivered $7 million of pretax income as material interest rate volatility in the quarter pressured the trading business lines at the firm.

At PlainsCapital Bank, strong growth across our markets in both core loans and deposits drove an increase in net interest income and a resulting increase in pre-provision net revenue on a quarter-over-quarter and year-over-year basis. Offsetting this increase in pre-provision earnings was a $10.1 million provision for credit loss, which brought the bank's return on average assets to 1.06% for the quarter. The continued growth in core loans at the bank was accompanied by a healthy expansion in the loan pipeline during the third quarter as our markets continue to execute on banker recruiting and focused growth initiatives.

Net interest margin also expanded, increasing over 25 basis points on a year-over-year basis to 3.49%, driven by stable deposit costs and upward repricing of our loan portfolio. September's increase in the effective Fed funds rate did have an immediate impact on the yield generated on cash, but only marginally impacted the bank's results in the quarter. We expect there to be upward pressure on deposit costs going forward, which Will is going to speak to later in this presentation.

During the quarter, PlainsCapital Bank saw an increase in deposit balances of $500 million as both large balance customers and new granular depositors provided net growth. In the fourth quarter, we anticipate deposit balance to continue to seasonally expand. Notably, PlainsCapital Bank increased deposits swept over from HilltopSecurities during the third quarter by $100 million.

While the bank did realize a $10.1 million provision expense during the quarter, we remain positively inclined on the overall health of the loan portfolio. Will is going to provide further commentary on credit in his prepared remarks. The Texas economy continues to expand and provides a great operating environment for our bank. We believe our long-standing relationship-based approach to commercial banking will continue to allow us to drive long-term growth while maintaining strong credit standards.

Moving to PrimeLending, where the company reported a pretax loss of $10.8 million during the third quarter. The dramatic increase in interest rates, specifically during the month of September when 30-year average mortgage rates increased by nearly 70 basis points, put downward pressure on purchase activity across the market. Further, the sudden increase in rates negatively impacted the fair market value of loans within PrimeLending's existing pipeline.

While we actively manage a hedge book against this pipeline, the effectiveness of those hedges deteriorates when the size and velocity of an interest rate move mirrors that which occurred in the third quarter. Additionally, the affordability headwinds faced by homebuyers, such as homeowners insurance, property taxes and entry-priced inventory, continue to stress volumes. We remain focused on the controllable aspects of PrimeLending's business, namely achieving operating, recruiting and productivity goals as we work diligently to rightsize the business to best fit this persistently difficult market. We do expect the fourth quarter to remain challenged given the combination of the typically seasonally slow period and elevated long-term rates.

During the quarter, HilltopSecurities generated pretax income of $7 million on net revenue of $117 million for a pretax margin of 5.9%. Speaking to the business lines at HilltopSecurities, Public Finance Services realized another strong quarter of top-line results with $37 million of net revenue, which is in line with the third quarter of 2025. As we articulated during last quarter's call, we continue to see a robust municipal issuance market.

As a market leader within the public entity advisory world, we will continue to look for ways to expand our product offerings and function as a full-service solution provider to our valued clients. Both structured finance and fixed income services faced a very challenging market due to elevated volatility, specifically in September, in long-duration bonds. The size and speed of this move reduced the effectiveness of our hedging programs. And within structured finance, demand for prepayment-protected collateral weakened as the market's rate expectations shifted.

Finally, Wealth Management showed continued strength across the Retail and Clearing segments as top-line revenue was ahead of prior year third quarter. Given the expectation for higher Fed funds rate, we anticipate results will remain robust through the end of the year. The volatile interest rate market that HilltopSecurities faced during the third quarter pressured both top-line and bottom-line results and weighed on the firm's pretax margin. We do expect to see continued strength in the coming quarters from Public Finance and Wealth Management as customer activity within those segments remains healthy. As we finish the year, the more interest rate-sensitive segments of structured finance and fixed income services will continue to execute with prudence.

Moving to Page 4. Hilltop maintains strong capital levels with a common equity Tier 1 capital ratio of 18.3%. Additionally, our tangible book value per share realized a modest quarter-over-quarter decline to $32.20. During the quarter, we returned $33 million to stockholders, consisting of $12.6 million in dividends and $20 million in share repurchases.

Thank you. I'll now turn the presentation over to Will to discuss our financials in more detail.

William Furr

Thank you, Jeremy. I'll start on Page 5. As Jeremy noted, for the third quarter of 2026, Hilltop reported consolidated income attributable to common stockholders of $24.9 million, equating to $0.44 per diluted share. The quarter's results reflect both the impacts of the turbulent interest rate market and the resilience of Hilltop's diversified operating model. As it relates to interest rates, the directional shift in market perspective from potential declining short-term interest rates to a market decidedly pointing towards higher short-term interest rates occurred during July.

This shift, combined with the rise in 10-year yields to multiyear highs in September, created a confluence of events that yielded substantial valuation adjustments during the third quarter period. In both the broker-dealer and mortgage segments, we realized valuation marks related largely to the mortgage pipelines and other trading assets. In total, the mark-to-market losses capturing both rate and volume impacts that are reflected in the third quarter equated to approximately $16 million on a pretax basis.

In addition, Hilltop's reported negative AOCI impact equated to approximately $21 million, which reflects the impact of mark-to-market adjustments in the AFS securities portfolio net of hedges. The quarter also included net valuation gains of $4.6 million related to Hilltop's merchant banking portfolio investments. Through the volatility in the markets, Hilltop's diversified model continued to produce solid foundational results, highlighted with growth in net interest income of $10 million or 9% versus the prior year period. This was driven by commercial loan and deposit growth at the bank.

Lastly, the quarter was impacted by higher provision for credit loss expense, led by a build in the allowance, which I'll discuss as we turn to Page 6. Hilltop's allowance for credit losses increased during the quarter by $9 million to $94 million, resulting in a coverage ratio of ACL to loans HFI of 1.07%. As is noted in the graph, collective reserves related to the portfolio changes increased by $8 million.

This increase in the ACL reflected both the impact of net loan growth of $3.6 million and approximately $4.4 million related to the net impact of risk rating adjustments in the period. In addition to the ACL build, the allowance for unfunded reserves also increased in the period by $1.5 million. The expense for this change is reported in other noninterest expense.

While we recognize there continues to be volatility in the interest rate markets and ongoing conflict in the Middle East, midterm elections and other issues that could contribute to credit risk, we continue to monitor the portfolio closely, focusing on areas that we believe may pose future risk to the bank. While at any point we could have an idiosyncratic event with an existing client, we do not anticipate any significant systemic risk across the portfolio at this time.

Lastly, and as we've stated over time, the allowance for credit losses estimate can be volatile as the computations and assessment include, but are not limited to, the following: assumptions related to economic activity, inflation, interest rates, employment levels and specific credit activities within our portfolio, all of which can be volatile from period to period.

I'm turning to Page 7. Net interest income in the third quarter equated to $122 million, including approximately $830,000 of purchase accounting accretion. Versus the prior year third quarter, net interest income increased by $10 million or 9%, driven by improving deposit costs, coupled with growth in commercial loans. During the third quarter, net interest margin increased versus the second quarter of 2026 by 12 basis points to 333 basis points. The increase in NIM was largely driven by relatively stable deposit costs from period to period and improving loan yields, reflecting the positive impact of new business booked throughout the first 3 quarters of 2026.

Our current internal rate outlook anticipates one additional 25 basis point rate increase in 2026. Under this rate scenario, we expect that NII levels will continue to move modestly higher, largely driven by expected loan growth within our Banking segment. Additionally, we anticipate that interest-bearing deposit betas, which averaged approximately 74% through the most recent rate reduction cycle, will revert to our modeled betas of 55% to 60% during any prolonged rate increase cycle.

Turning to Page 8. Third quarter average total deposits are approximately $10.7 billion, reflecting growth in customer deposits across both interest-bearing and noninterest-bearing deposits. In addition, we're very pleased with the retention of our noninterest-bearing deposits over the last year and the work that our treasury services team continues to do to serve our clients and support the growth in our commercial deposit base each day.

Related to deposit rates, both interest-bearing deposit costs and the cost of total deposits remained relatively stable versus the second quarter of 2026 levels. As noted previously, given our current interest rate outlook, we do expect that interest-bearing deposit yields have reached their trough levels for the cycle and will likely trend higher with short-term market interest rates over time.

Turning to Page 9. Total noninterest income for the third quarter of 2026 equated to $187 million. Versus the same period in the prior year, mortgage revenues declined by $9 million, which includes the impact of mark-to-market losses on the pipeline during the quarter. These market valuation impacts were driven by higher market rates, causing hedge ineffectiveness and lower rate lock volumes, which declined 18% to $2.2 billion from the prior year period.

In addition, gain on sale margins for loans sold to third parties declined 26 basis points to 200 basis points as softness in demand has led to continued margin compression. With mortgage rates remaining near 7%, overall home affordability remains a challenge across the country, and we believe that these issues will negatively impact mortgage sales activity into 2027.

With that market perspective as the backdrop, the leadership team at PrimeLending is focused on continuing to optimize cost and productivity across the middle- and back-office functions, selectively expanding our client-facing sales team across the country and optimizing our pricing to support sustainable, profitable growth in the future. Principal transactions, commissions and fees declined from lower overall trading activity in municipals, derivatives and MBS during the quarter and includes $6.6 million in pretax mark-to-market valuation losses for the third quarter related to our mortgage trading pipeline.

While the trading market was volatile and generated significant swings in value throughout the quarter, the hedging program operated within our risk management framework. And if market conditions improve, we remain well positioned to benefit in future periods.

Turning to Page 10. Noninterest expenses declined from the same period in the prior year by $7.8 million to $264 million. The decline in expenses versus the prior year third quarter was driven by decreases in variable compensation, largely related to lower noninterest revenue production at the broker-dealer and in the mortgage origination segment. Looking forward, we expect that expenses other than variable compensation will remain relatively stable at current levels as we remain diligently focused on prudent growth of revenue producers while continuing to gain efficiencies across our middle and back-office functions.

I'm turning to Page 11. Third quarter average HFI loans equated to $8.7 billion. On a period-ending basis, HFI loans increased versus the second quarter of 2026 by $134 million, driven largely by new origination volume and the funding of prior commitments in commercial real estate. On an ending balance basis, loans have grown versus third quarter 2025 by $580 million or 7%. While commercial loans have maintained a positive growth trend, the market for funded loans remains intense with competitive pressures coming from both pricing and structure.

Based on performance year-to-date, our current pipeline levels and giving consideration to expected payoffs during the fourth quarter, we expect full year average total bank loans to increase by 7% to 8% from 2025 levels, excluding mortgage warehouse lending and any retained mortgages from PrimeLending.

Turning to Page 12. Starting in the upper right chart, NPA levels have declined from the second quarter of 2026 by $2 million to $60 million and continues to reflect generally positive trends in our held-for-investment loan portfolio.

Moving to the bottom left chart, net charge-offs for the quarter equated to $1.2 million or 6 basis points of the overall loan portfolio. As I remarked earlier, we do not anticipate any systemic exposure across our portfolio, but we remain vigilant in our assessment of risk and negative credit migration and are focused on early detection and aggressive workout when necessary.

As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended the third quarter at 1.11%, including mortgage warehouse lending.

Turning to Page 13. As we enter the fourth quarter of 2026, there continues to be a lot of uncertainty in the market regarding interest rates, inflation and the overall health of the economy. Given these uncertainties, our teams remain focused on controlling what we can with a focus on producing quality outcomes for our clients, associates and the communities we serve.

As is noted in the table, our outlook for 2026 reflects our current assessment of the economy and the markets where we participate. Further, as the market changes and we adjust our business to respond, we will provide updates to our outlook on our future quarterly calls.

Operator, that concludes our prepared comments, and we'll turn the call back to you for the Q&A section of the call.

Operator

[Operator Instructions] Your first question comes from the line of Hannah Wynn with KBW.

分析師問答

Hannah Wynn

I wanted to start on mortgage. I know you talked a lot in your prepared remarks about the weaker activity and pipelines that you saw this quarter related to the rate environment and that you expect this business to be under pressure through 2027. Just curious how we should think about the puts and takes for this business?

And if you could give a little more color on how you are seeing the pipelines from here? And then also on the expense side, if we should expect to see continued losses or if there's room to lower that expense base and move closer to a breakeven?

William Furr

Hannah, I think as we -- we'll address the last part there first from an interest -- noninterest expense perspective, we remain focused on productivity and adjusting the business to the current market environment. So while we do expect the origination market to remain challenged given where rates are and where affordability stands across the country, objectively, we're going to focus on kind of managing expenses to a level appropriate given where we believe the market conditions are headed.

On the pipeline side, again, we've seen as rates moved higher, we saw a pretty marked pullback in overall activity, as I noted in my comments around lock volume there, specifically in the later part of the third quarter. And we expect -- as we noted, we expect that to continue. That said, the team at Prime continues to be focused on recruiting top-performing LOs across the country. We are looking to kind of grow the business very, very thoughtfully in a profitable way as we go forward. But again, it's a challenging environment. And again, we're going to do everything in our power to drive toward profitability, but also support our LOs across the country to help them generate as much volume as they can.

Hannah Wynn

Great. That's very helpful. And then on the margin side, we saw the margin take a nice step up this quarter, which was great to see. Can you just talk about how much runway you still see from loan repricing and where you expect the margin to trend with here? I know you mentioned there was increased deposit competition and you expect those to go up. So just curious where you expect the overall NIM to go.

William Furr

Yes. So I think it's -- it will be a story of kind of 2 different metrics. I think from a net interest income perspective, we are seeing and we expect to continue to see kind of positive trajectory in overall revenue there. We moved to $122 million in the quarter, given where our loan growth trends has been as well as where our pipeline for commercial activity currently sits. We do continue to feel comfortable and confident in kind of the trajectory of NII, but the growth will be driven largely on the asset side as we think about kind of overall loan growth.

I did note that deposit costs likely have reached their trough period -- trough for this point in the cycle. We believe that to be true. And as short-term rates start to move higher, we do expect there'll be intense competition for deposits, and that will drive overall interest-bearing deposit costs likely higher.

And again, right now, currently from a competitive perspective, I think largely seeing rational activity, notwithstanding some new entrants in the market that have got some special offer rates. We're competing with that kind of every day. But overall, from a NIM perspective, we would expect to see NIM level out and potentially travel a little lower from these levels from the 3.33% level. But again, we would -- we will trade net interest income for modestly lower NIM as we go forward.

Operator

Your next question comes from the line of Matt Olney with Stephens.

Matt Olney

I wanted to ask more about the loan growth trends that we saw at the bank look really strong. Any more color on the drivers of that loan growth? I know there's lots of disruption in your markets. I'm curious if this is benefiting some of your volumes. And I think I heard Will mention expectations of some higher payoffs in the fourth quarter. Any more color there? I'm just curious if this momentum that we're seeing this year can continue into 2027.

William Furr

Thanks for the question. Yes, we've seen a positive trajectory in our commercial loans. As we noted, we've seen about 7% overall growth. That's largely driven by our regions across the state of Texas and the good work the teams are doing there. We have seen a lot of our growth, so about $300 million of growth come from our CRE portfolio and the balance from C&I.

And so as we look forward, again, the pipelines remain robust. The activity the team is generating is robust. We do feel like we're benefiting from some of the transitional activity in the market given some of the transactions that have executed. The team is actively and aggressively recruiting new bankers to the platform, and we've been successful in that endeavor. And so we're very positive on kind of where the bank is in terms of recruiting producers as well as the activity that our bankers have been able to produce.

On the payoff side, just to clean that up, well, the outlook considers what we would call a standard level of payoffs in the quarter. So nothing outsized expected in the fourth quarter. But nonetheless, we always try to consider that in our outlook. So again, solid momentum, a lot of good activity, pipelines are -- pipelines remain very strong. Recruiting has been a positive lift as well as the productivity of our bankers across the footprint. So on the loan and deposit side of the bank, we're pretty confident about where the trends are pointing.

Matt Olney

Okay. And then I guess, shifting over towards capital. We saw the repurchase activity this quarter, a little bit slower. Is this valuation driven, longer blackouts? Any color you can speak to as far as the buyback that we saw in the third quarter? And I think you still have quite a bit remaining in the authorization before it expires in January. What's the appetite to complete this authorization before expiration?

Jeremy Ford

Yes. I think that the third quarter, I think, shows good prudence and execution by us in that, the stock price was elevated. And also, we saw rates climbing and knew that they have an implication on AOCI. So that's why we only did $20 million in the quarter versus $50 million in the 2 prior quarters. And so we're going to go back and look at this quarter as well. We've got $85 million of authorization left. I don't think we'd be able to achieve that in 1 quarter, but we will be available to transact when the window opens.

Operator

Your next question comes from the line of Evan Yee with Raymond James.

Evan Yee

Just real quick, I know you touched on expenses a little bit, but could you shed some more color on what drove the improvement in the nonvariable expense outlook for the year and how we should think about that headed into next year? Just trying to appreciate the puts and takes there.

William Furr

Yes. So again, as we've looked at expenses, and we've said this for a series of quarters, I mean, our priorities are these. We're looking to continue to grow our productive sales resources across all of our businesses, and that's the broker-dealer, the mortgage business as well as the bank. And I think each team and the leadership team there is focused on doing that. But in that, we're also focused on driving productivity, both from enhanced leverage of some of the technology that's available to us, but also process improvement. And I think the team has been very good and prudent in managing that over the last couple of years.

And so we're very pleased we've been able to keep our expenses other than variable compensation stable now for a series of quarters. And again, where we are is we've made -- we continue to make progress on some initiatives that we've got across the organization, again, not named initiatives, but just the work the team is doing every day, and we believe expenses will be a little lower. So that is really what drove the change in the guidance. But again, it's -- it's kind of a foundational effort every day here to drive expenses and productivity while continuing to invest in productive resources for the organization.

Evan Yee

Okay. Great. And then switching over to the balance sheet. You had solid deposit growth this quarter. I appreciate that you reiterated your outlook for 2026, but could you provide any color on how we should think about that growth going into 2027?

William Furr

Yes. I think from a deposit growth perspective, we continue to be focused on growing low-cost and core granular deposits across our business. We are principally a commercially oriented bank. And so that starts with the treasury team and what I noted in my comments around their efforts to kind of further provide quality services to our customers, therefore, driving largely commercial deposits as well as being competitive from an interest rate perspective.

We've got a number of initiatives across the footprint to grow and engage more customers and grow our customer base from a deposit perspective. But again, I think that will remain competitive and has been probably the place we've seen as much competition as anything for the new entrants as it relates to kind of some of the M&A transactions that have occurred from offer rates and teaser rates and the like. So we see a positive trajectory in deposits, I think, going into 2027. But again, we'll update that guidance as we roll into the January meeting.

Operator

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.