Q1 2024 Guaranty Bancshares Inc Earnings Call

Nona Branch: Good morning. Welcome to the Guaranty Bancshares first quarter 2024 earnings call. My name is Nona Branch, and I will be your operator for today's call. I would like to remind everyone that today's call is being recorded. After the prepared remarks, there will be a Q&A session. Our host for today's call will be Ty Abston, Chairman and Chief Executive Officer. Shalene Jacobson, Executive Vice President and Chief Financial Officer. To begin our call, I will now turn it over to our CEO, Ty Abston.

Good morning, welcome to the guarantee Bancshares first quarter 2024 earnings call. My name is known a branch and I will be your operator for today's call I would like to remind everyone that today's call is being recorded.

Tyson Todd Abston: After the prepared remarks, there will be a Q&A session. Our hosts for todays call will be tie oxygen chairman and Chief Executive Officer.

Tyson Todd Abston: Schilling Jacobson executive Vice President and Chief Financial Officer to begin our call I will now turn it over to our CEO Tae Ashton.

Tyson Todd Abston: Thank you, Nona. Good morning, everyone.

Unknown Executive: Thank you Nora good morning, everyone welcome to guarantee Bancshares first quarter 2024 earnings call as you read in our press release, we just issued we did have a good quarter.

Tyson Todd Abston: Welcome to Guaranty Bancshares' first quarter 2024 earnings call. As you read in our press release we just issued, we did have a good quarter. I'm very proud not only of the quarter but our entire team. Our team remains focused on developing strong banking relationships in all of our markets across the state of Texas. Our asset quality remains strong, our net interest margin continues to build, and our local economies appear to continue to remain stable across the board.

Unknown Executive: I am very proud not only of the quarter, but our entire team.

Unknown Executive: Our team remains focused on developing strong banking relationships in all of our markets Cross state of Texas, our asset quality remains strong our net interest margin continues to build and our local economies appear to be continuing to remain stable.

Unknown Executive: Across the board.

Tyson Todd Abston: We did release quite a bit of detail in our press release. However, we do have a presentation on some highlights that I'm going to turn it over to Shalene to go through. And then after that, we'll answer any questions.

Unknown Executive: We did we released quite a bit of detail in our press release. However, we do have a presentation on some highlights and I will turn it over to Shelly to go through and then after that we will enter any questions you have Chile.

Shalene A. Jacobson: All right, thanks, Ty. I'm going to start off with the balance sheet. Total assets decreased by about $57.4 million, and total liabilities decreased $59.4 million during the quarter. We've continued with our strategic decision that began really back in early 2023 to shrink the balance sheet rather than grow at this time because we've got a core earning stream that allows us to really continue to have good profits without taking on the added risk from various economic uncertainties and other headwinds that we believe are still in place today. The year-over-year decrease in assets during the quarter consisted of lower cash balances of about $16 million, lower securities balances of about $8 million, net of some repurchases that I'll talk about here in a second, and a decrease in net loans of $57 million during the quarter.

Shelly: Alright, Thanks Ty.

Shelly: To start off with the balance sheet total assets decreased by about 57.4 million and total liabilities decreased 15 9.4 million during the quarter.

Shelly: We continued with our strategic decision that began really back in early 2023 to shrink the balance sheet rather than grow at this time, because we've got it core earnings stream that allows us to really continue to have good profits without taking on the added risk from various economic uncertainties and other headwinds that we believe are still in place today.

Shelly: <unk>.

Shelly: The year over year decrease in assets during the quarter consisted of lower cash balances of about $16 million lower securities balances of about 8 million net of some repurchases that I'll talk about here in a second and a decrease in net loans and 57 million during the.

Shelly: Warner.

Shalene A. Jacobson: These asset decreases were used on the liability side of the balance sheet to pay down federal home loan bank advances by $65 million and also to repay $25 million in matured brokered CDs that we obtained back in 2023 to test as a source of liquidity, and we did not renew those when they matured in February. Total deposits decreased $5.4 million during the first quarter, but excluding those $25 million in brokered CDs, they were up slightly by $19.6 million.

Shelly: These offset decreases were used on the liability side of the balance sheet to pay down federal home loan bank advances by 65 million and also to repay 25 million in matured brokerage Cds that we obtained back in 2023 to test as a source of liquidity and we did not renew that was renamed mature.

Shelly: And in February.

Shelly: Total deposits decreased 5.4 million during the first quarter that excluding this $25 million and brokered Cds were up slightly by $19 6 million.

Shalene A. Jacobson: We also have $30 million in short-term treasuries that we invested in back when we had lots of cash after COVID that matured during the quarter. And we reinvested those treasuries, along with some additional cash, into new securities available for sale. We purchased just over $39 million during the quarter at a weighted average yield to maturity of 5.23%. We've got, With respect to those treasuries, short-term treasuries, we've got about 40 million of those remaining, and they will mature between now and June of 2025. Our total equity increased $2.1 million during the quarter as a result of $6.7 million in net earnings and was offset by dividends paid of $2.8 million, or $0.24 per share, which is an increase from $0.23 per share that was paid in dividends during each quarter in 2023. We also repurchased 11,651 shares of guaranteed stock at a weighted price of $28.76 per share.

Shelly: We also have 30 million in short term treasuries that we invested in <unk>. When we have lots of cash after COVID-19 that matured during the quarter.

Shelly: And we reinvested most treasuries along with some additional cash into new available for sale Securities. We purchased just over $39 million during the quarter at a weighted average yield to maturity of 5.23%.

Shelly: We've got.

Shelly: With respect those treasury short term treasuries, we've got about $40 million of those remaining and they will mature between now and June of 2025.

Our total equity increased 2.1 million during the quarter as a result of $6 7 million in net earnings and was offset by dividends paid of $2 8 million or 24 cents per share, which is an increase from 23 cents per share that was paid in dividends during each quarter in <unk>.

Shelly: 2023.

Shelly: We also repurchased 11651 shares of guaranteed stock at a weighted price of $28.76 per share.

Shalene A. Jacobson: On the income statement side, the bank earned $6.7 million in net income in the first quarter, which equates to $0.58 per basic share, which is up from $0.51 per basic share in Q4 and down a bit from $0.69 in the first quarter of 2023. Our return on average assets was 0.85% for the quarter compared to 0.73% last quarter. Our return on average equity was 8.93% in the first quarter compared to 7.93% in the fourth quarter. Net interest margin was 3.16%, which is an increase from 3.11% in the prior quarter. That increase resulted from an 11 basis point improvement in our interest earning asset yield, which was offset by only a six basis point increase in our interest bearing liability cost.

Shelly: On the income statement side, the bank earned $6 7 million and net income in the first quarter, which equates to 58 cents per basic share, which is up from 51 cents per basic share in Q4 and down a bit from 69 cents in the first quarter of 'twenty three.

Shelly: Our return on average assets was <unk> eight 5% for the quarter compared to the 0.73% last quarter.

Shelly: Our return on average equity was 8.93% in the first quarter compared to 7.93% in the fourth quarter.

Shelly: Net interest margin was 3.16%, which is an increase from 3.11% in the prior quarter that increase resulted from an 11 basis point increase meant in our interest earning asset yields.

Shelly: Which was offset by only a six basis point increase in our interest bearing liability costs.

Shalene A. Jacobson: Our NIM was helped by new and repricing loans during the quarter, lower federal home loan bank advances, and primarily by a slowdown in the repricing of our interest-bearing deposits, as rates have remained constant. Non-interest income increased by $462,000 during the quarter, which resulted primarily from the recovery of just under $500,000 of SBA guarantee accounts receivable that had been partially charged off back in 2022 due to uncertainty at that time about the full collectability of those guarantees from the SBA. However, as the SBA has reviewed them over the last year and a half, and after their final review, the full amount of the guarantee was actually received.

Our NIM was helped by new and repricing loans during the quarter for sure lower Federal home loan bank advances and primarily by a slowdown in the repricing of our interest bearing deposits those races have remained constant.

Shelly: Yes.

Shelly: Noninterest income increased by 462000 during the quarter, which resulted primarily from the recovery of just under 500000 of SBA guaranteed accounts receivable that had been partially charged off back in 2020 to tier two.

Shelly: Uncertainty at that time about the full collectability of those guarantees from the SBA.

Shelly: However, as the SBA has reviewed those over the last year and a half and after their final review of the full amount of the guarantee was actually received.

Shalene A. Jacobson: And so we were able to recover the full amount and recover those amounts that had been previously charged off back in 2022. We also had two SBA loan sales during the quarter, which helped us increase our gain on sales of loans during the quarter by about 76,000 quarter over quarter. Non-interest expense was $700,000 lower in the first quarter, primarily due to the retirement accrual of $600,000 that we booked back in the fourth quarter of last year that we did not have again this quarter. We also had some lower general and administrative expenses in the first quarter. As I've mentioned on some calls in the past, we continue to anticipate that non-interest expense will be about 2.5% of total assets, which is a threshold that we really try hard to stick with. I think that's a good measure for us.

Shelly: And so we were able to recover the full amount and recover those amounts that had been previously charged off back in 2022.

We also had few SBA loan sales during the quarter, which helped us increase our gain on sales of loans during the quarter by about.

Shelly: 76000 quarter over quarter.

Shelly: Noninterest expense was $700000 lower than the first quarter, primarily due to the retirement accrual of $600000 that we booked back in the fourth quarter of last year that we did not have again this quarter.

Shelly: We also had some lower general and administrative expenses in the first quarter.

Shelly: And as I've mentioned on some calls in the past we continue to anticipate that noninterest expense will be about two 5% of total assets.

Shelly: Which is the threshold that we.

Shelly: Really try hard to stick with <unk> think that's a good measure for us.

Shalene A. Jacobson: All right, on to the loan portfolio and credit quality. Gross loans, as I mentioned, decreased $57.3 million in the first quarter, primarily in our C&I, C&D, and CRE buckets. With respect to the CRE bucket, we did have $14.9 million move out of that CRE category into the REO category when we foreclosed on a property in Austin, Texas, back in February, which I'll talk more about here in a moment. We did originate $62.9 million in new loans during the first quarter of 24 at an average yield of 8.39%.

Shelly: Alright onto the loan portfolio and credit quality.

Shelly: Gross loans as I mentioned decreased $57 3 million in the first quarter, primarily in our C&I C. N D N CRE buckets.

Shelly: With respect to the CRE bucket, we did have 14, quaint 9 million move out of that CRE category into rel, when we foreclosed on a property in Austin, Texas back in February, which I'll talk more about here in a moment.

Shelly: We did originate 62.9 million in new loans during the first quarter of 24 at an average yield of eight quake three 9% so new loan yields do remain strong.

Shalene A. Jacobson: So new loan yields do remain strong. Our non-performing assets really continue to remain at historically low levels, at 0.68% of total assets for the quarter, compared to 0.18% in the prior quarter. Charge-offs are also low.

Shelly: Our nonperforming asset really continued to remain at historically low levels at 0.68% of total assets for the quarter compared to 0.18% in the prior quarter.

Our Doctor also arm are low we only had 110000 during the quarter and our net charge off to average loans ratio was quaint zero to 2%.

Shalene A. Jacobson: We only had $110,000 during the quarter, and our net charge-off to average loans ratio was 0.02%. Back to the non-performing assets, that figure includes both REO and non-accrual loans, and it, of course, increased in the first quarter primarily due to that $14.9 million that we reported in REO from the foreclosure of the property in South Austin. We mentioned that property in prior calls as it has been on our substandard list in the past as we can as we tried to work that loan out, but we did, like I said, foreclose on it in February of 2024. The property is in a very hot, vibrant area in South Austin and had a pre-foreclosure LTV of 68.5% based on an appraisal from early 2023. It is an operating property, and we do expect to start recording non-interest income and expense related to that property in the second quarter of 2024 until it's sold. And there has been quite a bit of interest in it, so I'll let Ty talk about that during Q&A once our remarks are finished here.

Shelly: And back to the nonperforming asset.

Shelly: That figure includes both Oreo and non accrual loans and and of course increased in the first quarter, primarily due to about $14 9 million that we recorded in Oreo from the foreclosure of the the property in South Boston.

Shelly: We mentioned that property in prior calls as it has been on our sub standard list in the past as we can as we try to.

Shelly: Workout that low now, but we did like I said for close on it in February of 2024.

Shelly: The property is in a very hot vibrant area in south Austin, and how to pre foreclosure LTV of 68.5% based on an appraisal from early 2023 and it is an operating property and when do you expect to start recording noninterest income and <unk>.

Shelly: Expense related.

Shelly: Related to that property in the second quarter of 2024 until it's sold and there has been quite a bit of interest in it so I'll let <unk>.

Shelly: <unk> talked about that during Q&A once our remarks are finished here.

Shalene A. Jacobson: Commercial real estate and office-related loans continue to be a hot topic. However, we manage them very well, we have a diverse portfolio, and really don't have any significant concerns in those areas. Commercial real estate represents about 40% of our total loan portfolio. But of that 40%, only 4.6% is office-related, and those loans have an average loan balance of only 516,000. So it's primarily mom and pop offices.

Shelly: Commercial real estate and office related loans continue to be a hot topic, and however, we manage them very well we have a diverse portfolio and really don't have any significant concerns in those areas.

Shelly: Commercial real estate represents about 40% of our total loan portfolio, but of that 40% only 4.6% is office related and those loans have an average loan balance of only 516000, So it's primarily mom and pop office.

Shelly: Real estate.

Shalene A. Jacobson: Non-accrual loans also remain low, but they did increase slightly during the first quarter. We're continuing to work through the problem loans, but most of them are well collateralized, and we don't expect any significant losses at this time. Finally, our substandard loans were $17.5 million at quarter-end, which is down about $4.6 million from year-end. The decrease resulted from the $14.9 million move to REO, but was offset partially by an increase in smaller dollar loans. And we do have the substandard loans are, you know, pretty granular. We've got 141 of them with a low average balance of about $109,000.

Shelly: Nonaccrual.

Shelly: <unk> also remained low but did increase slightly during the first quarter and we're continuing to work through the problem loans that most of them are well collateralized and we don't expect any significant losses at this time.

Shelly: Finally, our substandard loans were $17 5 million at quarter end, which is down about 4.6 million from year end.

Shelly: The decrease resulted from the 14th week 9 million dollar moved to Oreo that was offset partially by an increase in smaller dollar lines and we do have the substandard loans are and you know pretty granular. We've got 141 of them with a low average balance of about $109000.

Shalene A. Jacobson: We did have a reverse provision for credit losses of $250,000 during the quarter. That resulted primarily from lower loan balances and really just an overall stable credit trend. And we did adjust for economic conditions back in 2023 in our Q factors. We feel like those are still applicable today.

Shelly: We did have a reverse provision for credit losses of $250000. During the quarter not resulted primarily from lower loan balances and really just overall stable credit trends and we did adjust for economic conditions back in 2023, and our key factors, we feel like those are still applicable to.

Today, So we didn't make any further adjustments to the key factors during this quarter.

Shalene A. Jacobson: So we didn't make any further adjustments to the Q factors during this quarter. Our quarter-end ACL coverage is 1.35% of total loans, slightly higher than the 1.33% that we had at year end. And then, on to deposits, liquidity, and capital. Our deposits decreased by $5.4 million during the quarter, which was again primarily due to the maturity of the $25 million in brokered CDs that were not renewed. We also had some continuing shifts from non-interest bearing to interest-bearing deposits during the quarter. Non-interest-bearing deposits decreased $27.1 million, while savings and money market accounts increased by $30.8 million, and certificates of deposit excluding the brokered CDs increased $15.9 million. Despite those shifts, however, our non-interest-bearing deposits still represent 31.5% of total deposits at quarter end. But we do expect that ratio to be closer to our historical average of mid to high 20s as we continue moving later into 2024 and early 2025. With respect to overall deposit risk, Guaranty has a very granular and historical stable core deposit base.

Shelly: Our quarter end ACL coverage is 1.35% of total loans to slightly higher than the 1.33% that we had at year end.

Shelly: And then finally onto deposits liquidity and capital.

Shelly: Our deposits decreased by 5.4 million during the quarter.

Shelly: Which again was primarily due to the maturity of the $25 million in brokered Cds that were not renewed.

We also had some continuing shift from noninterest bearing to interest bearing deposits during the quarter.

Shelly: Noninterest bearing deposits decreased $27 1 million, while savings and money market accounts increased by $30 8 million.

Shelly: And certificates of deposit excluding the broker Cds increased $15 9 million.

And despite those shifts however, our noninterest bearing deposits still represent 31, 5% of total deposits.

At quarter end, and we didn't expect that ratio to be closer to our historical average of mid to high Twenty's as we continue moving later into 2024 and early 2025.

Shelly: With respect to overall deposit risks guarantee has a very granular and historical stable core deposit base at quarter end, we had over 88000 deposit accounts with an average account balance of $29696.

Shalene A. Jacobson: At quarter end, we had over 88,000 deposit accounts with an average account balance of $29,696, and our uninsured deposits also remain relatively low. Excluding public funds which are collateralized by investments and guarantee-owned accounts, our uninsured deposits were 25.43% of total deposits at quarter end. Our liquidity remains good. We ended the quarter with a liquidity ratio of 10.6%, and we used some of that liquidity during the quarter's cash flows for matured securities to pay down federal home loan bank advances of $65 million this quarter. We've paid down our advances by $265 million over the past 12 months. Our FHLB advances are down to $75 million at quarter end. We continue to have total contingent liquidity of about $1.3 billion available to us through various sources, including the Federal Home Loan Bank, the Federal Reserve Bank, and some correspondent Fed Funds lines and a revolving line of credit.

Shelly: And our uninsured deposits also remain relatively lab exclude.

Shelly: Excluding public funds mature collateralized by investments and guarantee under counts are uninsured deposits were 25.43%.

Shelly: Of total deposits at quarter end.

Shelly: Our liquidity remains good we ended the quarter with a liquidity ratio of 10, 6% and we used some of that liquidity during the quarter cash flows from matured securities pay down Federal home loan bank advances and $65 million. This quarter, we've paid down our advances by $265 million over the past 12.

Shelly: Months.

Shelly: R. M. R. S. H L. D advances are down to 75 million at quarter end.

Shelly: We continue to have total contingent liquidity of about $1.3 billion available to us through various sources, including the federal home loan Bank Federal Reserve Bank and some correspondent fed funds lines and on a revolving line of credit.

Shalene A. Jacobson: Our total net unrealized losses on investment securities remain reasonable at $53.6 million, of which $21.1 million is attributable to our available for sale portfolio and included within other comprehensive income. Finally, capital is also strong. We used some of our excess capital in the first quarter to repurchase shares of guaranteed stock and continue to add intrinsic value for our shareholders. We repurchased 11,651 shares at an average price of $28.76 per share. And also, as I mentioned previously, the board also increased the dividend paid during the quarter to 24 cents a share from 23 cents a share previously. So that concludes our prepared remarks for today. I'll turn it back over to Nona for Q&A.

Shelly: Our total net unrealized losses on investment securities remains reasonable at $53 6 million.

Shelly: In which 21.1 million is attributable to you our available for sale portfolio and included within other comprehensive income.

Shelly: Finally capital is also strong we used some of our excess capital in the first quarter to repurchase shares with guaranteed Socgen continued in our intrinsic value for our shareholders, we repurchased 11651 shares at an average prices $28 and $76 per share.

Shelly: And also as I mentioned previously the board also increased the dividend paid during the quarter to 24 cents a share from 23 cents a share previously.

Speaker Change: So that concludes our prepared remarks for today I'll turn it back over to known us for Q&A.

Nona Branch: Thank you, Shalene. It's now time for our Q&A. Our first question will be from Woody Lay with KBW. (inaudible) Woody, can you unmute your line?

Ham: Thank you Shalane, it's now hamper our Q&A. Our first question will be from Woody lay with K B W.

Woody Lay: We get my mouth there.

Woody Lay: Okay.

Shalane: What he can you on mute your line.

Woody Lay: Hey, good morning, guys. Sorry about that.

Woody Lay: Hey, good morning, guys, sorry about that.

Tyson Todd Abston: Good morning, Woody.

Woody Lay: Good morning Woody.

Woody Lay: Wanted to just touch on that.

Woody Lay: Wanted to just touch on that 30 million in treasuries that matured in the first quarter that you mentioned in the opening statement. Any color on when those matured and the rate that those treasuries had?

Speaker Change: $30 million of treasuries that matured in the first quarter that that you mentioned in the opening statement.

Speaker Change: Any color on Windows matured and the rate that goes and those treasuries Ed.

Shalene A. Jacobson: 15 million renewed at the end of Feb, I'm sorry, matured at the end of February, and the other 15 million at the end of March. And I don't know exactly, but I believe they were in the middle 1%, so 1.5, 1.6% yield.

Speaker Change: 15 million, where do you.

Speaker Change: Renewed at the end of that I'm, sorry matured at the end of February and the other $15 million at the end of March and I don't know exactly but I believe they were in the middle 1%, So 1.51, 0.6% yield.

Woody Lay: Got it. So with that in mind, I think last call you sort of said internal expectations were for the margin to improve two to three basis points a month. Does that still seem like a realistic target going forward?

Speaker Change: Got it so with that with that amount I think last call you sort of.

Speaker Change: That internal expectations were for the margin to improve two to three basis points a month does that still seem like a realistic target going forward.

Tyson Todd Abston: Woody, this is Ty. I think so, yes, if we can, you know, are able to continue to hold our cost of funds relatively stable as far as increases are concerned.

Speaker Change: What are the tie I think so yes. If we are working you know we're able to continue to.

Speaker Change: Solar cost of bonds relatively stable as far as increase rental rate increases, which we've been able there for several months then we're repricing the loan book.

Woody Lay: Rate increases, which we've been able to do for several months, then we're repricing the loan book, you know, you know, every day. So I still think, you know, two to three basis points a month is a good run rate, and that's our goal as far as continuing to increase our margin.

Speaker Change: Every day, so I still think two to three basis points a month of good run rate is and that's our goal as far as the extreme continued to increase our margin.

Woody Lay: Yeah, and then the 350 longer-term sort of internal target. I mean, is that a 2025 target? And is there any, you know, do you think we need rate cuts to see you hit the 350 level?

Speaker Change: Yeah, and then the the 350 longer term sort of internal target I mean, Nevada.

Speaker Change: At at 2025 target and is there any do you think we need rate cuts to C. C. I'll hit the $3 50 level.

Tyson Todd Abston: I don't think we need rate cuts. We need time. That probably is 2025 to get to that level, but we're certainly – that's our target, and we're heading that direction. I mean, I think that's still a target. It's gonna be probably 25 before we can get there, whether we have rate cuts or not, because again, we're repricing. We still have a pretty short-duration loan portfolio, and we're repricing that, you know, and that's catching up with the significant increase in rates on the deposit side.

Speaker Change: I don't think when a rate cut when a time that probably in the 2025 to get to that level.

Speaker Change: But we're certainly that's our target and we're heading that direction.

Speaker Change: Yeah.

Speaker Change: I think thats still a target it's going to be probably in 'twenty, Bob or we can get there, whether we have rate cuts or not because the gambler.

Speaker Change: Were repriced and we sell it or frame.

Speaker Change: Short duration loan portfolio and were repriced in that.

Speaker Change: And that's that that's catching up with the with the significant increase in rates on the deposit side.

Woody Lay: Yeah. All right. That's all for me. I'll hop back in the queue. Thanks for taking my question. Thanks, Woody.

Speaker Change: Yeah.

Speaker Change: That's all for me and I'll hop back in the queue. Thanks for taking my questions.

Nona Branch: Thank you. Our next question will be from Matt Olney with Stevens.

Speaker Change: Thanks, Woody thank you.

Speaker Change: Our next question will be from Matt Olney with Stephens.

Matthew Covington Olney: Hey, thanks. Good morning, guys. Good morning, Matt.

Hey, Thanks, Good morning, guys. Good morning, Matt running at what asked about that Awesome project that you mentioned in the press release any more color you can give us I think you said it was a operating property.

Tyson Todd Abston: Morning. I wanted to ask about that Austin project that you mentioned in the press release. Any more color you can give us?

Tyson Todd Abston: I think you said it was an operating property. What kind of property is it, and what's the occupancy of that property, and what does that translate to in terms of, maybe, a more recent debt service coverage ratio? So Matt, the property is it's kind of a mixed use. The part that we own now is retail on the first floor. Then there are condos above it, and there's a large parking garage where we own the property. This was part of a larger company that had multiple projects, and most of them under construction had problems internally and externally.

Matthew Covington Olney: What kind of property is at and.

Matthew Covington Olney: What's the occupancy of that property and what that translates to in terms of Ah.

Matthew Covington Olney: Maybe a more recent debt service coverage ratio.

Matthew Covington Olney: So Matt the property is it's kind of a mixed use at the park that we own now is retail in the first floor the nurse than theirs condos above it and there's a large parking garage that we own.

Matthew Covington Olney: The property. This was part of a larger company that had multiple projects most of them under construction had problems internally and externally apparently our property was was stabilized at least up actually were making the payments through year end at just the oil free they start liquidating the company the trustees did worry.

Tyson Todd Abston: Apparently, our property was stabilized, and leased up. They actually were making the payments through year end. It just, ultimately, they started liquidating the company. The trustees did.

Tyson Todd Abston: We're yielding, you know, the loan was at four percent. We're actually yielding around four and a half percent now on the net. You know, on the property, we have two vacancies. We have a lease that's about to expire. We did hire a really good property manager there at Austin's Management for us. And we do have this in a real estate subsidiary of our bank that we're holding it in. We do have two vacancies, one lease that they should have signed any day now that will bring the yield up to about five percent, a little over five percent, maybe six percent. And then there is the second location, the second space.

Matthew Covington Olney: Building a meal that loan was at 4%, we're actually yielding around board, 5% now on a net NOI on the property. We have two vacancies we have a lease that's about the execution.

Matthew Covington Olney: <unk> are a really good property manager there and office management forests, and we do have this in our real estate subsidiary of our bank that where the homeless and we do have two bankruptcies one lease that they're there. They should have banned any day now that will bring the yield up about 5% a little over 5%, maybe 6% and then the <unk>.

Matthew Covington Olney: That location the second space.

Tyson Todd Abston: We're in discussions with one group and going back and forth on the LOI; if we get that closed, then it'll be 100% occupied. It'll be yielding six and a half, between six and seven percent. And our plan is to market the property and sell it. We do think there's, you know, we have it marked appropriately based on the praise value we have. And we're going to mark the property above where we're carrying it, and we're very pleased with the yield we're achieving on the property while we're marking the property. And like Shalene said, it's in a really great part of South Austin. So that's kind of the status of it. Okay, thanks for the color there.

Matthew Covington Olney: We're in discussions with one group been going back and forth on dental labs. It we'll get that closed and it'll be it'll be it'll be a harps and ox bad it'll be yielding six and a half between six 7% and our.

Matthew Covington Olney: Our plan is to market the property and sell it we do think there's there's.

Matthew Covington Olney: We have it marked appropriately based on the.

Matthew Covington Olney: Praise value, we have and we're going to Mark the property you bayo above where we were keratin and we're doing where we're where we're very pleased with the yield rate achievement on the property. While we are marketing the properties and like Shlaim said, it's been a really great part of South Boston, So that's kind of the status of it.

Matthew Covington Olney: Okay.

Okay. Thanks for the color there and then I guess it sounds like given what we've taken ownership of this sounds like there could be some noise in some of the results over the next few quarters until it's fully disposed of is that is that a is that fair no. I don't think so I mean, we're we're yielding actually more on it one in there.

Matthew Covington Olney: And then I guess given we've taken ownership of this, sounds like there could be some noise and some results in the next few quarters until it's fully disposed of. Is that is that fair? No, I don't think so. I mean, we're actually yielding more on it, owning the property than we were on the loan. And they're all triple net leases. I mean, you know, the only noise would be if we sold it for less and we're carrying it, and based on the, you know, just the valuation that we back into based on the NOI and the phrase value and comps, we think we've got it marked, you know, below market fair market value. So shouldn't have anything in there really, even from an earnings standpoint, just based on the yield on the property.

Matthew Covington Olney: A property they were world Malone and and so they're all triple net leases.

Matthew Covington Olney: You know the only noise would be.

Matthew Covington Olney: If we are able if we sold it for less in recurrent it and based on them.

Matthew Covington Olney: The valuation that we back into based on the NOI and appraise value and comps.

Matthew Covington Olney: We think we've got it mark would be well below market fair market value. So shouldnt have anything and there's really even from an earnings standpoint, just based on the yield on the property.

Shalene A. Jacobson: Matt, we will be recording the earnings, the rental earnings, in non-interest income and any related expenses and non-interest expense. So if those are material numbers, we'll certainly point that out in our next earnings release.

Speaker Change: Matt we will be recording the the earnings that are rental earnings in non interest income and any related expenses in noninterest expense. So it does or material numbers will certainly point that out in our next earnings release, yeah that that piece would actually not be an interest income and be a noninterest income yes. So we will have a component there.

Matthew Covington Olney: Yeah, that that piece would actually not be an interest income and be a non-interest income. Yes. So we'll have a component there that's moved from one account to the other. We'll, we will highlight it for sure.

Speaker Change: There that's moved from one account to the other will we will highlight for sure.

Tyson Todd Abston: Okay, and then as far as that appraisal, I think you mentioned you got that appraisal before you took possession of the property. Is that right? And when would you be required to take a new appraisal on that property? I mean, the appraisal we have, we feel like it's good. We'll talk to the examiners about it, but just given where we're carrying the property and the appraised value we have in it for the time period in it, and the return on the property itself, it's a performing property. I don't anticipate they're going to ask us to update it, but we certainly can. Okay, that's helpful, Ty. Thanks for that!

Speaker Change: Okay.

Speaker Change: And then as far as the appraisal.

Speaker Change: I think you mentioned you've got that appraisal before you took.

Speaker Change: Possession of the properties is that right and when would you be required to take a new appraisal on that property.

I mean, well the appraisal we have we felt we felt like as good will talk the examiners about it but just given where we're carrying the property and the praise value we have and again the time period in it and the Gander and the return on the property itself as a performing property.

Speaker Change: Anticipating a basket updated but we certainly can.

Speaker Change: Okay. That's helpful. Todd Thanks for that and then I guess sticking with credit, but moving beyond. This this credit. This single Austin credits I think you mentioned there were some inflows into substandard list. This.

Tyson Todd Abston: And then I guess, sticking with credit, but moving beyond this, this credit, this single Austin credit, I think you mentioned there were some inflows into the substandard list this quarter. Any color on some of the larger additions to that list? So we have a $7 million credit in the Dallas market that has a 40% SBA junior lien in front of us. So it has a very low LTV; just there's stress in the cash flows.

Todd: This quarter any color on some of the larger additions into that list.

Todd: We have a $7 million credit and debt in the Dallas market that has a 40% SBA Junior Lane.

Todd: In front of us. So it has a very low LTV, but just there is stress in the cash flows. We went ahead and sub stand alone. We have a couple of loans around 1 million between a million a million for that that.

Tyson Todd Abston: We went ahead and substantiated the loan. We have a couple of loans around a million, between a million and a million, and four that have low LTVs. The remaining loans are below a million, so those three credits represent a significant portion of the substandard loans we have. And again, we're comfortable where we are with those, with our position in them, and we think they'll actually work themselves out. We did foreclose on a single-family residence that I don't think is in Q3. Actually, it's in April.

Todd: Have low ltvs the remaining remaining loans are below a million so other than those those those three credits represent a significant portion of the.

Todd: The the substandard loans, we have and again, we're comfortable where we are with those wins with.

Todd: Our position in them in and we think they will actually work themselves out we did foreclose on a on a single family residence.

Todd: That.

Todd: That did not that.

Todd: I don't think is in the Q3 axes in April.

Tyson Todd Abston: It's a million-dollar single-family residence, with a million dollar appraisal. We'll get the house sold, I anticipate, probably before the end of this quarter. And that's pretty much the larger credits that we have. But like I mentioned probably a year ago, I mean, I anticipate one-off credits with the, you know, rate increases we've seen. I don't see anything systemic in the portfolio, but I do continue to expect to see one-off credits that come up for various reasons. And we'll deal with those one at a time, clearing them out, and just address them as they come up. Okay, perfect. And then on loan growth this year, I think the goal for the beginning of the year was to keep loan balances flat for the year. And obviously, there was some shrinkage here in the first quarter. What's the updated view on loan balances?

Todd: It's a million dollar single time residents manganate appraisal well will get the house. So I anticipate probably before end of this quarter and that's pretty much the larger credits that we have like I mentioned.

Todd: Probably a year ago, I mean, I anticipate one off credits with the.

Todd: The rate increases we've seen I don't see anything systemic in the portfolio, but baidu.

Todd: I do continue to expect to see one off credits that come up for various reasons and we'll deal with those one at a time and clear them out and just.

Todd: Address them as they come up.

Speaker Change: Okay, perfect and then on the loan growth. This year I think the Gulf or is the game here was to keep loan balances flat for the year and obviously there was some shrinkage here in the first quarter, but what's the updated view on loan balances. We should we hold those flat next few quarters or would there be additional <unk>.

Tyson Todd Abston: Should we hold those flat for the next few quarters? Or could there be additional contraction? There can be additional contraction. I mean, obviously, we're continuing to lend, but the reality is, with current rates, I mean, you know, the demand is softer. And opportunities just don't make sense at the current rates as they did at lower rates. And so there could be, you know, we could continue to shrink the portfolio; we could see a 5% shrinkage in the portfolio. It's just not something that we're not focused on growing a portfolio, but we certainly will as we see opportunities that make sense. Okay, guys, thanks for taking my questions.

Speaker Change: And traction.

Speaker Change: There can be additional contraction I mean, we're we're obviously, we're continuing to land and but the reality is with current rates I mean, the demand is softer and opportunities should don't make it makes sense at current rates that like they did it with lower rates and so there.

Speaker Change: There could be.

Speaker Change: We could continue to shrink the portfolio, we can see a 5% shrinkage in the portfolio. It's just not something that we're not focused on growing our portfolio, but we certainly will as we see opportunities that make sense to us.

Speaker Change: Okay guys. Thanks for taking my questions are back in the queue alright.

Matthew Covington Olney: I'll be back in the queue. All right. Thanks, man.

Speaker Change: Alright, Thanks, Matt Thanks, Matt.

Nona Branch: Thanks Matt. Our next question is from Michael Rose with Raymond James.

Speaker Change: Our next question is from Michael Rose with Raymond James.

Michael Edward Rose: Hey everyone, can you hear me? Sure. Yep. Good morning. I hope everything's going well.

Michael Edward Rose: Hey, Good morning can you hear me.

Michael Edward Rose: Sure Yes.

Michael Edward Rose: Great. Good morning, hope everything is going well.

Michael Edward Rose: Just following up on Matt's last question, there's just the size of the balance sheet. I certainly understand that loans could be under, you know, some pressure. But as we think about, you know, maybe the liability side, I know you guys have, you know, paid down some of the borrowings, you've paid down, and essentially all the brokered deposits. How much more is there on the FHLB side that you'd wanna kind of bring down and not renew? And could we see a balance sheet inflection, hopefully, in the back half of the year? Is that the way we should be thinking about it?

Michael Edward Rose: Just just following up on Matt's last question Theres summit on the size of the balance sheet, certainly understand that loans could be under some.

Speaker Change: Some pressure, but as we think about.

Speaker Change: Maybe the liability side I know you guys have.

Speaker Change: You know pay down.

Some of the borrowings you paid down.

Speaker Change: Essentially all of the brokered.

Speaker Change: Deposits how much more is there on the <unk> side that you'd want to kind of bring down and not renew.

Speaker Change: And.

Speaker Change: Could we see a balance sheet inflection you know hopefully in the back half of the year is that the way we should be thinking about it.

Tyson Todd Abston: Michael, I think that's fair. We have the federal home loan balance pretty low now. Obviously, we have excess funds, and we're not deploying them, you know, in the bond portfolio or the loan book. Then we'll pay that down further.

Speaker Change: Michael I think that's fair I mean, where we had the federal home Omega balanced pretty low now.

Speaker Change: Obviously, we have excess funds and we're not deploying them in the bond portfolio or the loan book, then we'll pay that down further.

Tyson Todd Abston: We continue and always have and, you know, today and every cycle and every part of our history focused on core deposit relationships, retail banking, and commercial banking, and treasury management. So our team remains focused on building core relationships. And that's, you know, that's, that, that, the focus has not been more intense this year or last year versus five years ago. Put it that way. I mean, we've always felt like core deposits were the key to franchise value in a bank, and we're continuing to focus on that.

Speaker Change: We continue and always have in smeal today in every cycle and every.

Speaker Change: Part of our history focused on core roulette deposit relationships and retail banking and commercial banking Treasury management. So our team remains focused on building core relationships and that's real that's that that that focus has not been more intense on this year or last year versus five years ago, but that.

Speaker Change: I mean, we we've always felt like core deposits.

Speaker Change: Were the key to franchise value in a bank and we're continuing to focus on there.

Michael Edward Rose: Very helpful. Then maybe just going back to the margin question at the beginning of the Q&A, I know you guys are liability sensitive. You have pulled some levers and reduced some costs, as we kind of discussed, but the new loan production yield was lower. Q1Q growth is, the balance is probably going to kind of shrink here. So maybe you can certainly, I'm just kind of looking for, what are the puts and the takes on that kind of two to three basis points a month in NII upward progression if we are in a higher for longer type environment? And then how does it kind of reconcile with the thought process that non-insuring deposits could continue to decline? I think you guys had talked about a more normalized range somewhere in the mid to high 20%, just trying to get a sense of what the puts and takes are, where you could do better, and maybe where you could do a bit worse. Thanks.

Speaker Change: Very helpful. And then maybe just going back to the margin question at the beginning of the Q&A. Just just I know you guys are liability sensitive you have pulled some levers and reduce some some costs as you know it was kind of discussed but the new loan production yield was was lower Q on Q growth is.

Speaker Change: The balance is probably going to kind of shrink here. So maybe you can certainly.

Speaker Change: I'm just kind of looking for what are the puts and the takes to that kind of two to three basis point, a month and NII upward progression. If we are in are higher for longer type environment and then how is that kind of reconcile with the thought process that you.

Speaker Change: Noninterest bearing deposits could continue to decline I think you guys have talked about a more normalized range somewhere in the mid to high 20% just trying to get a sense of what the what the puts and takes are where where you could where you could do better than maybe where you can do about worse. Thanks.

Tyson Todd Abston: Yes, Michael. So, the main part of that is just repricing the loan portfolio. You know, we're repricing a significant portion of the portfolio each month, and as those loans reprice, and we're not having to move deposit rates as aggressively, and we really haven't moved those up in the last three months by any significant amount, then we're just able to reprice that side faster than the loan, the deposit side and liability side is repricing. So, that's where we're seeing the increase We're also, with our excess liquidity, able to buy bonds and increase the portfolio, you know, the yield in the bond portfolio. So, between the two, those that we've had a net increase in our margin, and we're mulling out being able to continue to do that just by simply repricing the asset side faster than the liability side.

Speaker Change: Yes, Michael So the main part of that is just repricing the loan portfolio.

Speaker Change: We're repricing the significant portion of the portfolio each month and as those loans reprice and we're not having to move deposit rates as aggressively and we really haven't moved those up in the last three months beneath.

Speaker Change: Binnie significance, then we're just able to reprice assets add faster than the loan and deposit side liability side is repricing. So that's where we're seeing the inquiries were also with our excess liquidity, we were able to buy bonds and increase the portfolio yield in the bond portfolio. So between the two doses we've had a net <unk> been able to net increase our <unk>.

Speaker Change: Margin and we're modeling out.

Speaker Change: Being able to continue to do that just can just by simply repricing the asset side faster than the liability side.

Michael Edward Rose: Very helpful. And just to put a finer point on everything you just said, Ty, do you guys actually think that you have a chance to grow NII year over year, just given some of the challenges, you know, most of which are conservative, to your point, which I think is great, just given how low, you know, credit quality is, how great credit quality is, but I mean, do you actually think you can grow NII this year?

Speaker Change: Very helpful. And then just to put a product a finer point on everything is just as high.

Speaker Change: Guys I actually think that you have a chance to grow NII year over year, just given some of the challenges.

Speaker Change: Most of which are our conservative to you.

Speaker Change: Point, which I think is great.

Just given how low credit quality, great credit quality is but I mean do you actually think you can grow NII this year.

Tyson Todd Abston: I don't, I don't, I'd have to, I'd have to look at that and think about that a little bit from the NII standpoint. Our margin, yes.

Speaker Change: I know that I don't know I'd have to say I'll have to look at that and think about that a little bit I mean, I ask standpoint.

Speaker Change: Them our margin, yes, our actual.

Tyson Todd Abston: Our actual NII, I'm not sure, and that's the piece that we're still kind of getting a sense of based on where we see the balance sheet going for the year. But again, we're just letting some of that kind of happen organically, and we're not forcing growth, but we're certainly not passing on growth opportunities. We're just keeping ourselves pretty flexible with the environment we're in just as we see how things kind of unfold. So I don't have a lot of clarity specifically on the balance sheet on where we're going. You know, this year, we're more than likely going to see more contraction, which would obviously hurt the NII.

Speaker Change: I'm not sure and that's the pace that we're still kind of getting a sense based on where we where we see the balance sheet growth going for the year.

Speaker Change: But again, we're just we're letting some of that kind of happen organically and we're not forcing broke but we're certainly not passing on growth opportunities. We're just we're kind of keeping ourselves pretty flexible with the environment that we're in just as we see kind of how things kind of unfold. So it's it's I don't have a lot of clarity specifically on.

Speaker Change: On the balance sheet on where we're growing.

Speaker Change: P O this year.

Speaker Change: More than likely going to see more contraction, which would obviously contract <unk>. So.

Michael Edward Rose: I certainly can appreciate how challenging the environment is. So thanks for the call. Or maybe just one more for me. I know you guys, intracorporate, increased or announced a new buyback program that's a little bit bigger than the prior one. You haven't been that active.

Speaker Change: Certainly can appreciate how challenging the environment is so thanks for the color maybe just one more for me I know you guys intra quarter increased or are announcing a new buyback program, there's a little bit bigger than the prior one you haven't been that active I think.

Michael Edward Rose: I think, you know, maybe the earn back was a little bit higher. But, you know, can you just talk about the desire to buy back shares? And then, separately, would you take a portion of your excess capital and, you know, look to do at least a partial balance sheet restructuring, maybe to, you know, improve the NIM and NII trajectory? Thanks.

Speaker Change: Maybe the earn back was a little bit higher but.

Speaker Change: Can you just talk about the.

Speaker Change: The desire to buy back shares and then just separately would you take a portion of your excess capital and look to do at least a partial balance sheet restructuring maybe too.

Speaker Change: Just improve the NIM and NII trajectory. Thanks.

Tyson Todd Abston: So the buyback, yes, we are, you know, very interested in buying back shares once it hits our valuation metric, and our share price has been up this quarter versus last. So we'd fall back on fewer shares. But whenever it gets down below that, it's a priority for us to buy shares, and if it goes further below that, we're it's a larger priority. So we accelerate our interest as the price drip, you know, drops below kind of our threshold. As far as the restructured bond portfolio, I just don't, I'm not really looking to do that. Because I don't think of two things.

Speaker Change: So the buyback yes, we may we are you know.

Speaker Change: Very interested in buying back shares once it hits, our valuation metric and of our share price has been up this quarter versus last so we bought back less shares but whenever it gets down below that it's a priority for us to buy shares and if it goes further below that where it's a larger priority. So we accelerate our interests as depressed that drip.

Drops below kind of our threshold.

Speaker Change: As far as restricted bond portfolio I, just don't I'm, not really looking to do that because I don't think two things. One is we're able to we're actually adding bonds to our portfolio and I don't know that everybody's doing that we don't have a significant aoc app cow and that portfolio continues to you know we continue to increase yield the portfolio.

Tyson Todd Abston: One is that we're actually adding bonds to our portfolio. And I don't know that everybody's doing that. We don't have a significant AOCI count, and that portfolio continues to, you know, we continue to increase the yield of the portfolio. I just don't know if that makes sense. Because as sure as we do that, and rates are down next year, and, you know, some of those projections are out the window. So that's not something I'm looking at. I think as long as we continue to reprice the loan portfolio, we continue to add additional new securities to the bond portfolio at higher yields, and the fact that our AOCIs are really a nominal amount of our total capital, then the plan is at this point just to continue like we're doing and let time kind of cure a lot of that.

Speaker Change: I just don't know.

Speaker Change: That makes sense.

Speaker Change: Because matures, we do that then reprice or down next year.

Speaker Change: As you know some of those projections are out the window. So that's not that I'm looking at I think as long as we continue to reprice those loan portfolio. We continue to add Additionally, our new securities the bond portfolio at higher yields and the fact that our Aoc azzam really a nominal amount of our total capital then the plan is at this point just to <unk>.

Speaker Change: And you're like work, we're doing and let lead time kind of cure a lot of them.

Michael Edward Rose: All right, great. Thanks for taking all my questions. I appreciate it. Thanks, Michael.

Speaker Change: Alright, great. Thanks for taking all my questions I appreciate it thanks Michael.

Nona Branch: Thanks, Michael.

Speaker Change: Our next call is <unk>.

Nona Branch: Our next call is Graham Dick with Piper Sadler.

Speaker Change: Graham <expletive> with Piper Sandler.

Graham Conrad Dick: Hey, good morning, guys. Good morning, Graham.

Graham: Hey, good morning, guys. Good morning, Graham Vernon.

Graham Conrad Dick: Morning. Hi.

Graham Conrad Dick: Um, most of my stuff's been asked and answered, but I just wanted to fall back on the new loan yield that was down a little bit this quarter. Is that more of a reflection of the production mix, maybe being more weighted toward one to four families, or is our overall market rate starting to come in a little bit? Um, I guess this year.

Graham Conrad Dick: Most of my stuffs been Manasseh answered, but I just wanted to fall back up on the on the new loan yield that was down a little bit. This quarter is that more of a reflection in production mix, maybe being more weighted towards towards one to four family ours, our overall market rates starting to come in a little bit.

Graham Conrad Dick: I guess this year so far.

Shalene A. Jacobson: That's going to be more related to the production mix, Graham. We are, we're seeing some more in-house single family opportunities that we're doing, but And then we've also had some, you know, really high quality credits that we've booked in the sevens that probably averaged that down in the high sevens, mid to high sevens. So that's going to be just a question of the mix, probably for the quarter.

Graham Conrad Dick: That kind of be more related to production mix Graham, where we're seeing some more in house single family opportunities there.

Graham Conrad Dick: That though that we're doing that.

Graham Conrad Dick: And then we've also had some really.

Graham Conrad Dick: It really high quality credits that we booked in the sevens, probably average that down in the high Sevens mid to high Sevens. So that's going to be just a question of the mix probably for the quarter.

Graham Conrad Dick: Okay, would you assume that it maybe starts to expand a little bit more, I guess, through the balance of the year from here, assuming no major changes in the Fed?

Speaker Change: Okay would you assume that it may be starts to expand a little bit more I guess through the balance of year from here, assuming no major changes in the fed path.

Shalene A. Jacobson: Say that one more time, Graham. Sorry, I'm not sure I caught the question.

Speaker Change: Say that one more time Graham sorry, Adam I'm not sure I caught the question, yes, or do you think they will be able to see that new loan yield maybe expand.

Graham Conrad Dick: Yeah, sorry. Do you think that we'll be able to see that new loan yield maybe expand, maybe back to where it was in 4Q over the next couple of quarters? Or do you think it'll kind of sit around this level?

Speaker Change: Maybe back to where it was in <unk> over the next couple of quarters or do you think it all kind of sit around this level.

Shalene A. Jacobson: That's hard to project. I would say it's probably going to stay around this level, but that's hard to project, truly.

Adam: That's hard to that's hard project I would say, it's probably going to stay around this level.

Adam: But that's hard to project truly.

Graham Conrad Dick: Okay, understood. And then lastly, I just wanted to I know you talked about capital with the buyback, but I'm just wanting to know if M&A conversations are starting to pick up at all in your all markets, maybe with some of the smaller banks, you know, looking ahead to maybe rate cuts aren't really coming. Are they are they starting to look more to the market as maybe, you know, some of these smaller bank sellers out there?

Adam: Okay.

Speaker Change: Understood and then lastly, I just wanted to I know you talked about the capital with the buyback, but just wanted to know if an M&A conversations are starting to pick up at all in your all's markets, maybe with some of the smaller banks.

Speaker Change: Add many rate cuts aren't really coming.

Speaker Change: They are they are they starting to look more to the market is smaller.

Speaker Change: Smaller bank sellers out there.

Tyson Todd Abston: So I'm hearing a lot of conversations for sure, and that may be something that gets more active in 25.

Speaker Change: So I'm hearing a lot of conversations for sure and that May be something that's gets becomes more active in 25, I mean from our standpoint, where we're certainly having conversations.

Tyson Todd Abston: I mean, from our standpoint, we're certainly having conversations. We're interested in anything that we think would make strategic sense for our company and make financial sense for our company. I mean, but currently, like a lot of banks for our stock prices setting, we'd rather buy our own stock versus buy someone else at a higher multiple. We just think that makes more sense without the execution risk. So there are conversations, but right now, our primary focus is buying our own stock back when we have the opportunity to, but we continue to have conversations because those may develop into something more meaningful down the road.

Speaker Change: We're interested in in anything that we think would make strategic sense for our company and it makes financial sense for our company I mean, but.

Speaker Change: Currently lack a lot of banks for our stock price is setting, we'd rather buy our own stock versus by someone else at a higher multiple but just think that makes more sense without the execution risk. So there are conversations but rodney.

Speaker Change: Right now our primary focus is bad or own stock back when we have the opportunity to earn but continue to have conversations because those may develop into something more meaningful down the road.

Graham Conrad Dick: Okay, I understand. Thanks.

Speaker Change: Okay understood. Thanks, guys.

Nona Branch: Thank you. Thank you, Graham. Okay, we have another question for Matt Olney with Stevens.

Speaker Change: Thanks Graham.

Speaker Change: Okay. We have another question from Matt Olney with Stephens.

Matthew Covington Olney: Hey, yeah, thanks for taking the follow up. Sure.

Matthew Covington Olney: Hi, Yeah, thanks for taking the follow up sure.

Matthew Covington Olney: Going back to the deposit cost commentary, I think we said before that the first quarter was a pretty big quarter for repricing the time deposit. I'm just curious, if you have that, what the average time deposit cost was in the first quarter, and you could help us out thinking about how much more incremental pressure you can see there. I don't know if you have any idea what your promotional CD rate is or any commentary from that perspective. I'm going to get back to it.

Matthew Covington Olney: Going back to as a positive cost commentary.

Matthew Covington Olney: I think we said before that the first quarter was a pretty big quarter for repricing of the time deposits.

Matthew Covington Olney: Just curious if you have that are with the average.

Matthew Covington Olney: Time deposit costs wasn't in the first quarter and how you could help us out thinking about how much more incremental pressure you can see there how do you have kind of what your promotional CD rate is or any commentary from that perspective.

Speaker Change: And they'll give Ed Shalane Jago at Chile.

Shalene A. Jacobson: Yeah, Matt. I'm not sure where we said first quarter because, actually, you know, they reprice pretty evenly throughout the year. We started our CD specials back in late 22, early 23, and those at the time were nine and 13 months old, I believe so. So a lot of those who bought CDs back in that time period have, you know, started to mature and are repricing. As far as our current rate specials, if it's a jumbo CD, I believe the highest rate we have is a 13 month at 5% for the jumbo CDs, and other specials that we have are lower than that. I think 4.7 for a nine month non-jumbo.

Speaker Change: Yeah, Matt.

Speaker Change: I'm not sure.

Speaker Change: Where are we said first quarter, because we actually you know they reprice pretty evenly throughout the year.

Speaker Change: And we started our CD specials back in late 'twenty two early 'twenty three and those at the time were nine and 13 month I believe says so a lot of that is.

He'd bought Cds back in that time period, and you know and it's starting to mature and inner repricing.

And as far as our current rate specials, if it's in jumbo CD and believe the the highest when we have is a.

Speaker Change: 13 months at 5% for the Jumbo Cds.

Speaker Change: And other specials that we have are or lower than that I think $4 seven for a nine month non jumbo.

Speaker Change:

Shalene A. Jacobson: Does that answer your question, Matt?

Speaker Change: Does that answer your question, Matt Yeah, that's perfect. Thanks for that showing and then I guess kind of related topic on the non interest bearing deposits.

Matthew Covington Olney: Yeah, that's perfect. Thanks for that, Shalene. And then, I guess, kind of a related topic on the non-interest bearing deposits. Thank you. Mentioned in prepared remarks, some more pressure in the first quarter. Anything, any more commentary on that?

Speaker Change: You mentioned in prepared remarks, some more more pressure in the first quarter.

Matthew Covington Olney: Ethane any more commentary on that I think you said in the prepared remarks that we could land in the mid to high 20% range later on this year even.

Tyson Todd Abston: I think you said in the prepared remarks that we could land in the mid to high 20 percent range later this year or even even next year. Just trying to appreciate kind of what your perspective is on that and what you're seeing maybe so far early in the second quarter. Matt, I'll take that.

Matthew Covington Olney: Even even next year just trying to appreciate kind of what your perspective is on that.

Matthew Covington Olney: And kind of what you're seeing maybe so far early in the second quarter.

Matt I'll take that I mean, so obviously like every bank, we've had historic and on noninterest bearing deposit balances last last three years, I mean, but 20 years ago and really for the last 20 years, we've averaged around 25%. So I continue to bleed old label will kind of revert back to more of that.

Tyson Todd Abston: I mean, obviously, like every bank, we've had historic non-interest-bearing deposit balances for the last three years. I mean, but 20 years ago, and really for the last 20 years, we've averaged around 25%. So I continue to believe that, ultimately, we'll kind of revert back to more of that average that we had historically. And that makes sense that we would.

Average that we've had historically and Theres explained but worse in that makes sense that we would so we think we will continue to as there's more yield opportunities and money markets and other products of the bank as people move more money over to see that come down.

Tyson Todd Abston: So we think we'll continue to, as there are more yield opportunities and money markets and other products in the bank, as people move more money over to see that come down. But I don't see it going below 25. Because, like I said, it's been 25 for a long time. But it just makes sense that it's going to continue to migrate down.

Matthew Covington Olney: But I don't see it going below 25, because like I said, it's been 25 for a long time, but but it just makes sense that it's going to continue to migrate down.

Matthew Covington Olney: Okay, that's helpful, guys. Thank you. Thanks Matt. You're welcome.

Speaker Change: Okay. That's helpful guys. Thank you.

Nona Branch: Welcome. Thank you for your questions. I would like to remind everyone that the recording will be available by 1 pm today on our investor relations page at gnty.com. We appreciate you attending today, and this concludes our call.

Speaker Change: Thanks, Matt.

Speaker Change: Okay.

Speaker Change: Thank you for your questions I would like to remind everyone that the recording will be available Bob one P. M. Today at our Investor Relations page at G. M. T. One dot com. We appreciate your attending today and this concludes our call.

Speaker Change: Goodbye.