2026 Third Quarter Earnings Conference Call and Webcast - HERITAGE SOUTHEAST BANCORPORATION INC

Explicit Guidance:

• FY2027 EPS & M&A Impact: Anticipate the Commercial Bank and Trust merger to be approximately 4% accretive to EPS with an estimated earnback period of just under two years; full expense savings to be realized in 2028, delivering ~70 bps accretion to Return on Tangible Common Equity (ROTCE), 5 bps to Net Interest Margin (NIM), and 5 bps to Return on Assets (ROA) upon full phasing.
• Q4 2026 Financial Metrics: Project expenses to see a slight increase in Q4, driven primarily by new hires and merger-related transaction costs; anticipate modest softness in non-interest income (fees) for Q4, specifically driven by mortgage banking, with a year-over-year modest decline in total non-interest income; expect total accretable yield (including accelerated bond discount) to be approximately $10 million in Q4, with ~$1.5 million in accelerated accretion.
• Capital & Reserve Outlook: Expect the Common Equity Tier 1 (CET1) ratio to settle at approximately 11% post-merger close; anticipate further reduction in Allowance for Credit Losses (ACL) as criticized assets and NPLs continue to decline, moving toward a model-based lower reserve level; aim to operate with zero balances for FHLB advances and broker deposits in the near term.
• Balance Sheet Growth: Maintain a mid-single-digit annualized growth target for the balance sheet for the foreseeable future (2027 outlook), contingent upon maintaining competitive spreads and credit standards; no guidance to push beyond mid-single digits until macro clarity improves.
• Dividends & Buybacks: Board has reauthorized a $175 million share repurchase program; buybacks will remain active in the coming 12 months but likely at a tempered pace compared to prior periods due to the cash component of the merger deal.

Business-Segment Outlook:

• Loan Growth Drivers: Record loan production is attributed to recent talent additions and market disruption; 11 new revenue producers added in Q3 will further contribute to market share gains not yet fully reflected in the balance sheet; growth is expected to remain balanced across consumer, commercial, small business, and large corporate channels.
• Deposit Mix & Strategy: Core deposit growth is expected to accelerate as public fund seasonality reverses in late 2026/early 2027; current focus is on "remixing" funding to reduce reliance on higher-cost public funds, with core deposits growing at ~8% annualized in Q3, 60% of which came from new-to-bank customers; deposit cost management remains a priority to align with peers.
• Wealth Management Synergies: Acquisition of Commercial Bank and Trust adds ~$1 billion in Assets Under Management (AUM) in trust/wealth; opportunity exists to enhance trust capabilities, leverage their faster growth rate, and cross-sell new wealth clients across the Renaissance footprint.
• Credit Quality: Trend of declining criticized assets and non-performing assets (NPLs) for 4+ quarters; a specific single credit in the CNI space was fully charged down in Q3 to realizable value, viewed as a one-off event; expect reserve levels to continue declining commensurate with improving asset quality.

Market and Competitive Outlook:

• Pricing & Competition: Competitive environment remains intense regarding loan yields and deposit funding; spreads are expected to remain tight, limiting the ability to aggressively price for volume; deposit competition is viewed as particularly pronounced with pricing pressures persisting.
• Pipeline Health: Loan pipeline remains "healthy" despite a slight pullback in Q3; expects continued dialogue with customers and a solid Q4, though seasonal holiday slowing may occur.
• M&A Thresholds: M&A activity requires a higher hurdle rate given Renaissance's improved ROTCE (15-16%) relative to peers; deals must not distract from organic growth, must be isolated geographically (as the Memphis deal is), and must demonstrate clear cost synergies and strategic fit (core deposits/wealth).

Macro / Industry Outlook:

• Interest Rate Assumptions: Modeling assumes two Federal Reserve rate hikes in 2027; this outlook provides a base for potential modest upside in core NIM.
• Macro Uncertainty: Hesitancy to accelerate balance sheet growth beyond mid-single digits is driven by broader macroeconomic uncertainty; management will wait for clearer macro signals before attempting to increase growth targets.
• Deposit Beta: Assumed interest-bearing deposit beta is modeled at upper-40s to low-50s in the near term, graduating to the mid-50s thereafter.

Strategic Initiatives:

• Merger with Commercial Bank and Trust: Deal valued at ~$140 million (75% stock, 25% cash); expected to close in Q1 2027; will strengthen presence in Memphis, providing long-tenured deposit and wealth management relationships; no revenue synergies modeled, but cost synergies and cross-selling opportunities anticipated.
• Organic Growth via M&A (Hiring): Continued investment in talent acquisition (revenue producers, wealth management, treasury management, and core bankers) to capture market share; view of industry consolidation as a continued opportunity to "remix" funding and upgrade talent pools.
• Integration Plans: Focus on successful conversion and integration of Commercial Bank employees and customers into Renaissance operations, specifically managing overlap in the Memphis market while expanding balance sheet capacity for larger relationships.

Risks and Headwinds to Outlook:

• Funding Costs & Deposit Flows: Continued reliance on higher-cost public funds and competition for funding could impede deposit growth and keep costs elevated relative to peers; public fund seasonality remains a variable in deposit mix.
• Credit Provisioning: Single credit charge-off in Q3 highlighted the risk of specific asset valuations; future provisions remain tied to asset quality models and economic conditions.
• Merger Execution: Potential for distraction to organic growth momentum; integration risks associated with combining cultures and systems in the overlapping Memphis market.
• Market Conditions: High rates impacting mortgage banking volume and capital markets activity; potential for accelerated payoffs in a higher-rate environment reducing accretable yield.

Management Tone on the Future:

• Confidence: High confidence in the mid-single-digit growth trajectory and the ability to maintain stable-to-expanding margins while growing the balance sheet.
• Cautious Optimism: Optimistic about organic growth and talent utilization but cautious regarding macro clarity before adjusting growth targets upward; "mid-innings" view on industry talent displacement and consolidation opportunities.
• Discipline: Explicit commitment to not sacrificing credit standards or yield for growth; willing to "wait and see" on volume targets if market pricing becomes too aggressive.
• Strategic Focus: Strong emphasis on deposit quality and cost reduction as primary levers; M&A is viewed as a complementary tactic to organic growth rather than a primary growth engine, given the higher strategic bar.