Q1 2025 Equity Bancshares Inc Earnings Call
Hello, everyone and thank you for your patient today's call will begin shortly.
[music].
Operator: Hello everyone and welcome to Equity Bancshares first quarter earnings call. My name's Lydia and I'll be your operator today. After the prepared remarks, there will be an opportunity to ask questions.
Speaker Change: Hello, everyone and welcome to equity Bancshares first quarter earnings call My.
Video: My name is video and they'll be your operator today.
Operator: If you'd like to participate in the Q&A, you can do so by pressing star followed by 1 on your telephone keypad.
Video: After the prepared remarks, there'll be an opportunity to ask question, if you'd like to participate in the Q&A you can do so by pressing star Philip I Wonder when you're typing keypad.
Brian Katzfey: I'll now hand you over to Brian Katzfey, Director of Corporate Development and Investor Relations. Please go ahead.
Speaker Change: I'll now hand, you over to Brian Cassidy director of corporate development and Investor Relations. Please go ahead.
Brian Katzfey: Good morning. Thank you for joining us today for Equity Bancshares' first quarter earnings call. Before we begin, let me remind you that today's call is being recorded and is available via webcast at investor.equitybank.com, along with our earnings release and presentation materials.
Brian Cassidy: Good morning, Thank you for joining us today for equity Bancshares first quarter earnings call before we begin let me remind you that today's call is being recorded and is available via webcast at Investor Day equity Bank Dot com, along with our earnings release and presentation materials in today's presentation.
Brian Katzfey: Today's presentation contains forward-looking statements which are subject to certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed.
Brian Cassidy: Mentation contains forward looking statements, which are subject to certain risks uncertainties and other factors that could cause actual results to differ materially from those discussed following the.
Brian Katzfey: Following the presentation, we will allow time for questions and further discussion. Thank you all for joining us.
Brad Elliott: With that, I'd like to turn the call over to our Chairman and CEO, Brad Elliott. Good morning. Thank you for joining Equity Bancshares earnings call. Joining me today are Rick Sems, our Bank CEO, Chris Navratil, our CFO, and Krzysztof Slupkowski, our Chief Credit Officer. We are excited to share our company's strong beginning to 2025. In the first quarter, we achieved strong earnings, margin expansion. and built up our reserves to strengthen our balance sheet for whatever comes next. During the quarter, we were excited to announce the merger with NBC Corp. expanding our presence and our market share in Oklahoma as we continue to grow in this strategic area.
Jason: Jason we will allow time for questions and further discussion.
Jason: Thank you all for joining us with that I'd like to turn the call over to our chairman and CEO Brad Elliott.
Speaker Change: Good morning, Thank you for joining equity Bancshares earnings call joining.
Jason: Joining me today are Rick Sims.
Speaker Change: Our bank.
Speaker Change: Chris <unk>, our CFO and Christophe Bukovsky, our chief Credit Officer.
Speaker Change: We are excited to share our company's strong beginning the 2025.
Speaker Change: In the first quarter, we achieved strong earnings.
Speaker Change: Margin expansion.
Speaker Change: And built up our reserves the strengthen our balance sheet for whatever comes next.
Speaker Change: During the quarter, we were excited to announce the merger.
Speaker Change: D C Corp.
Expanding our presence and our market share in Oklahoma as we continue to grow in this strategic area.
Brad Elliott: as we announced on the call a few weeks ago. This will be impactful to equity banks in many positive ways. It gets us into a market we have been working on for several years. And this will give us access to a new metro market to help us continue to build out our organic production in lending, treasury management, and all other commercial products. We can't express how excited we are to bring the current management teams of NBC Oklahoma, including H.K. Hatcher, Glenn Foreska, Scott Bixler Dennis Thomer, and Jeff Greenlee to our team.
Speaker Change: As we announced on the call a few weeks ago.
Speaker Change: This will be impactful to equity bank in many positive ways.
Speaker Change: It gets us into a market we have been working on for several years.
Speaker Change: And this will give us access to a new metro market to help us continue to build out our organic production and lending Treasury management and all other commercial products.
Speaker Change: We can't express how excited we are to bring the current management team's of NBC, Oklahoma, including HK Agger Glenn for Heska.
Speaker Change: Scott Fixler.
Speaker Change: Yes.
Brad Elliott: As we wrapped up 2024 and looked ahead to 2025, we brought in additional capital with plans to grow both through mergers and acquisitions and organic production. In the first quarter, we executed on both reps. Loans increased by $131 million. An annualized growth rate of 15.5%. While the MBC merger is expected to add approximately $900 million to assets to our pro forma income. Following the completion of the MVC merger. We retain approximately $67 million in capital from our common stock raise in December. In addition to capital built through earnings ready to deploy for strategic growth. While banks are typically sold rather than bought, we are seeing active conversations at a level we haven't experienced in recent years.
Speaker Change: And Jeff Greenlee to our teams.
Speaker Change: As we wrapped up 2024 and looked ahead to 2025.
Speaker Change: We brought in additional capital with plans to grow both through mergers and acquisitions and organic production.
Speaker Change: In the first quarter, we executed on both brands.
Speaker Change: Loans increased by $131 million.
Speaker Change: The annualized growth rate of 15, 5%.
Speaker Change: While the MPC merger is expected to add approximately $900 million.
Speaker Change: The asset to our pro forma entity.
Speaker Change: Following the completion of the MPC merger.
Speaker Change: We retained approximately 67 million in capital from our common stock raise in December in addition, the capital built through earnings.
Speaker Change: Ready to deploy for strategic growth.
Speaker Change: While banks are typically sold rather than five we are seeing active conversations at a level, we haven't experienced in recent years.
Brad Elliott: We have numerous opportunities that could yet be announced this year. We close the quarter with a TCE ratio of 10.13% and a tangible book value per share of $31.07. Compared to quarter one 2024, our TCE ratio is up 36% and our tangible book value per share is up 24%. Providing top-notch products and services through exceptional bankers continues to be our guiding principle as we aim to grow equity banks. I can't be more excited about what's ahead for our company. We started the year with a strong balance sheet, motivated bankers, and a solid capital stack to execute our dual strategy of organic growth and strategic M&A.
Speaker Change: We have numerous opportunities that could yet be announced this year.
Speaker Change: Yes.
Speaker Change: We closed the quarter with a TCE ratio of 10, 1% and a tangible book value per share.
Speaker Change: $31 seven.
Speaker Change: Compared to quarter, one 2024, our TCE ratio is up 36% and our tangible book value per share is up 24%.
Speaker Change: Providing top notch products and services through exceptional bankers continues to be our guiding principle as we aim to grow equity bank.
Speaker Change: I can't be more excited about what's ahead for our company.
Speaker Change: We started the year with a strong balance sheet motivated bankers and our solid capital stack to execute our dual strategy of organic growth and strategic M&A.
Brad Elliott: We began to see the results in Q1 and look forward to maintaining this momentum throughout the year.
Chris Navratil: I will now ask Chris to walk us through our financial results. Thank you, Brad. Last night, we reported net income of $15.0 million or $0.85 per diluted share, excluding amortization of intangible costs, earnings impacting tangible common equity or $16.0 million or $0.90 per diluted share. Net interest income improved from $49.5 million to $50.3 million in a quarter, driving net interest margin to 4.27% from 4.17% linked quarter. While there were tailwinds in both quarters pushing up margins, we continue to be optimistic about our opportunities to maintain spread and improve earnings through repositioning of earning assets into 2025.
Speaker Change: We began to see the result in Q1 and look forward to maintaining this momentum throughout the year.
Chris: I will now ask Chris to walk us through our financial results.
Chris: Thank you Brad.
Chris: Last night, we reported net income of $15 1 million or <unk> 85 per diluted share excluding amortization of intangible costs earnings impacting tangible common equity was $16 1 million or <unk> 90 per diluted share net.
Chris: Net interest income improved from $49 5 million.
Chris: The $53 million quarter, driving net interest margin to 427% from $4, one 7% linked quarter.
Chris: They were tailwind in both quarters pushing up margins, we continue to be optimistic about our opportunities to maintain spread and improve earnings through repositioning of earning assets into 2045 more.
Chris Navratil: More to come on margin dynamics later in this call. Non-interest income for the quarter was $10.3 million, up $1.5 million from Q4. The increase was driven by a comparative improvement in earnings on bank-owned life insurance of $1.7 million, as we realized the death benefit on an insured. Excluding this benefit, linked results were flat and in line with outlook. Non-interest expenses for the quarter were $39.0 million, up $1.2 million from Q4. The increase was driven by normal beginning-of-the-year dynamics in payroll, as well as additional accrual to account for strong first quarter results. As indicated in our Outlook slide for Q2, we expect non-interest income to normalize in future quarters.
Chris: More to come on margin dynamics later in this call.
Chris: Noninterest income for the quarter was $10 3 billion up $1 5 million from Q4 <unk>.
Chris: The increase was driven by a comparative improvement in earnings on bank owned life insurance of $1 7 million as we realize the death benefit on an insurance. Excluding this benefit linked results were flat and in line with outlook.
Chris: Non interest expenses for the quarter were 39.0 million up $1 2 million from Q4.
Chris: The increase was driven by normal beginning of the year dynamics in payroll as well as additional accruals to account for a strong first quarter results.
Chris Navratil: Our GAAP net income included a provision for credit loss of $2.7 million. The provision is the result of increasing loan balances for the quarter coupled with increased uncertainty related to the current economic environment due to the recent trade policy announcement. We continue to hold reserve for economic challenges that might arise. To date, we have not seen concerns in our operating markets. The ending coverage of ACL to loans is 1.26%. As Brad mentioned, our TCE ratio for the quarter moved above 10%, closing at 10.13%. The funds from the capital raise in Q4 continue to be maintained at the holding company with no current intentions of pushing into the bank.
Chris: As indicated in our outlook slide for Q2, we expect noninterest income to normalize in future quarters.
Chris: Our GAAP net income included a provision for credit loss of $2 7 million.
Chris: The provision is the result of increasing loan balances for the quarter, coupled with increased uncertainty related to the current economic environment due to the recent trade policy announcements.
Chris: We continue to hold reserves for economic challenges that might arise to date, we have not seen concerns that are operating market. The.
Chris: <unk> coverage of ACL to loans is 136%.
Chris: As Brad mentioned, our TCE ratio for the quarter moved above 10% closing at 10, 3%.
Chris Navratil: At the bank level, the TCE ratio closed at 9.87%, benefited both by earnings and improvement in the unrealized loss position on the securities portfolio.
Chris: The funds from the capital raised in Q4 continued to be maintained at the holding company with no current intention to pushing into the bank.
Chris: At the bank level, the TCE ratio closed at 987% benefited both by earnings and improvement in the unrealized loss position unsecured portfolio.
Krzysztof Slupkowski: I'll stop here for a moment and let Krzysztof talk through our asset quality for the quarter. Thank you, Chris. During the quarter, nonaccrual loans decreased by 10.3% to 24.2 million, while nonperforming assets declined by 19.6% to 27.9 million. The declines during the quarter are due to specific assets moving out without replacement. Non-performing assets remain at historical lows. Total classified assets declined during the quarter to $63.9 million or $10.24 of total bank regulatory capital. The decline in classified assets is primarily the result of the resolution of the Main Street Lending Program loan moved to OREO in Q4.
Chris: I'll stop here for a moment and let Christophe talked through our asset quality for the quarter.
Christophe: Thank you Chris during the quarter nonaccrual loans decreased by 10, 3% to $24 2 million, while nonperforming assets declined by 19, 6% to $27 9 million declined during the quarter are due to specific assets moving out without replacement.
Christophe: Warming assets remain at historical lows.
Christophe: Classified assets declined during the quarter to $63 9 million or 10, two four of total bank regulatory capital.
Christophe: Decline in classified assets is primarily the result of the resolution of the main Street lending program alone moved to Oreo in Q4.
Krzysztof Slupkowski: Year-over-year classified assets continue to show an increase. The trend is primarily due to one QSR-related customer, which we have discussed in previous calls. We do not currently expect any losses on this credit, but consider the downgrade appropriate based on recent trends and operating results. Delinquency in excess of 30 days moved up during quarter to $18.2 million but remained low at approximately 50 basis points of total loans. The increase was temporary. A few loans added causing this increase at quarter end have been resolved as of today's call. This was administrative in nature and has been corrected and is not expected to repeat in future quarters.
Christophe: Year over year classified assets continued to show an increase the trend is primarily due to <unk> related customer, which we have discussed in previous calls.
Christophe: We do not currently expect any losses on this credit was considered the downgrade appropriately based on recent trends and operating results.
Christophe: Linked Quincy in excess of 30 days moved up during the quarter to $18 2 million.
Christophe: Remained low at approximately 60 basis points of total loans.
Christophe: The increase was temporary.
Christophe: Loans added, causing this increase that quarter Ed has been result as of today's call. This was about administrative in nature and has been corrected and is not expected to repeat in future quarters.
Krzysztof Slupkowski: Net charge of annualized were two basis points for the quarter, compared to four basis points in Q4 and 11 basis points full year 2024. As realized losses continue to be muted. Recognized charge-offs continue to reflect specific circumstances on individual credits and do not indicate broader concerns across our footprint. Our credit outlook for 2025 remains positive as problem trends remain at levels below historic norms and are trending down through the first quarter. While rhetoric in the economy would indicate the potential for increased risk, we continue to leverage our portfolio monitoring tools to identify potential problems and remain prudent in our credit underwriting while maintaining healthy levels of capital and reserves to face any future economic challenges.
Christophe: Net charge offs annualized were two basis points for the quarter compared to four basis points in Q4, and 11 basis points full year 2024.
Christophe: As realized losses continued to be muted.
Christophe: Recognize charge offs continued to reflect specific circumstances on individual credits and do not indicate broader concerns across our footprint.
Christophe: Our credit outlook for 2025 remains positive problem trends remain at levels below historic norms and are trending down through the first quarter.
Christophe: While rhetoric in the economy would indicate the potential for increased risk we continue to leverage our portfolio monitoring tools to identify potential problems and remain prudent in our credit underwriting, while maintaining healthy levels of capital and reserves and face any future economic challenges. We believe this approach will continue.
Krzysztof Slupkowski: We believe this approach will continue to yield positive outcomes while acknowledging risks remains as reflected in our allowance level.
Krzysztof Slupkowski: Thanks Krzysztof. During the final four months of 2024, the FOMP reduced their target rate 100 basis the impact of which was materially realized through the end of the first quarter 2025. During the quarter, cost of funds declines of 8 basis points outpaced the decline in coupon yields on assets of 4 basis points. The positive net trend in coupon results was further buoyed by $2.3 million in benefits on non-accrual assets, adding another 19 basis points to the stated margin result of 4.27%. In addition to realize liability sensitivity following the cuts, we also realized expansion of average interest earning assets and a decline in average interest bearing liabilities as a percentage of average interest earning assets.
Christophe: To your positive outcomes, while acknowledging risks remains as reflected in our normalized levels.
Christoph: Thanks Christoph.
Christoph: During the final four months of 2024, the <unk> reduced their target rate 100 basis points, the impact of which was materially realized through the end of first quarter 2025.
Christoph: During the quarter cost of funds declines of eight basis points outpaced the decline in coupon yields on assets of four basis points.
Christoph: The positive net trend in coupon results was further.
Christoph: By $2 $3 million in benefits on nonaccrual assets, adding another 19 basis points to the stated margin result of four 7%.
Christoph: In addition to realized liability sensitivity following the cuts. We also realized expansion of average interest, earning assets and a decline in average interest bearing liabilities as a percentage of average interest earning assets all positive trends linked quarter.
Krzysztof Slupkowski: All positive trends linked. Average loans increased during the quarter at an annualized rate of 5.7%, while total interest earning assets increased 4.8%. Ending loan balances are $54 million above average balances for the quarter. The increase in margin and earning assets led to net interest income growth of $1.8 million, which was partially offset by the reduced pay count in the period, yielding total periodic growth of $822,000. As we look to the remainder of the year, we are optimistic about margin maintenance as we see loan balance growth and continued lag repricing on our asset portfolio.
Christoph: Average loans increased during the quarter at an annualized rate of five 7%, while total interest earning assets increased four 8% ending.
Christoph: Ending loan balances of $54 million above average balances for the quarter.
Christoph: The increase in margin and earning assets led to net interest income growth of $1 8 million.
Christoph: Which was partially offset by the reduced day count in the period, yielding total periodic growth of $822000.
Christoph: As we look to the remainder of the year, we are optimistic about margin basis, as we see loan balance growth and continued lagged repricing on our asset portfolio.
Krzysztof Slupkowski: Our outlook slide includes the forecast for the second quarter as well as full year 2025. As indicated, we anticipate margin between 4% and 410 in the second quarter on average earning assets between $4.8 and $4.9 million. We do not include future rate changes, though our forecast continues to include the effects of lagging repricing in both our loan and deposit portfolios. Our provision is forecasted to be 12 basis points to average loans on an annualized basis. Our production teams had an excellent start to the year as we realized loan growth of more than $130 million in the first quarter, while also maintaining deposit balances exclusive of anticipated municipality outflows.
Christoph: Our outlook slide includes the forecast for the second quarter as well as full year 2025.
Christoph: As indicated we anticipate margin between 4% and <unk> in.
Christoph: In the second quarter on average, earning assets between four eight and $4 9 billion.
Christoph: We do not include future rate changes, though our forecast continues to include the effects of lagging repricing in both our loan and deposit portfolios.
Christoph: Our provision was forecasted to be 12 basis points to average loans on an annualized basis.
Christoph: Okay.
Christoph: Our production teams had an excellent start to the year as we realized loan growth of more than $130 million in the first quarter, while also maintaining deposit balances exclusive of anticipated municipality outflows.
Krzysztof Slupkowski: Tulsa and Kansas City were significant contributors to the quarter's results and I look forward to enhanced contributions from the remainder of the footprint in 2025 as pipelines are strong and our teams are motivated to drive our organization forward. Organic originations in the quarter totaled $197 million, up 64% compared to the previous quarter. Total production was $254 million, which included $57 million of fully guaranteed government loans purchased at a discount. yield on organic originations was 7.41% for the quarter, up five basis points from the previous period. Considering the downward trend in the rate environment over the represented 180 days, realizing maintenance of production rates is a credit to our team's emphasis on providing value to our customers above and beyond facilitating a transaction.
Christoph: In Kansas City were significant contributors to the quarter's results and I look forward to enhanced contributions from the remainder of the footprint in 2025 and pipelines are strong and our teams are motivated to drive our organization forward.
Christoph: Organic originations in the quarter totaled $197 million up 64% compared to the previous quarter. Total production was 254 million, which included $57 million of fully guaranteed government loans purchased at a discount.
Christoph: Yield on organic originations was 741% for the quarter up five basis points from the previous period.
Christoph: Considering the downward trend in the rate environment over the represented 180 days, realizing maintenance of production rate as a credit to our team's emphasis on providing value to our customers above and beyond facilitating the transaction.
Krzysztof Slupkowski: Under the leadership of Jonathan Rupp, our retail teams have entered the year with a line direction and a framework designed to drive success throughout our footprint. The first quarter showed positive trends in gross and net production levels, though we have a long way to go to meet the aggressive goals we have set.
Christoph: Under the leadership of Jonathan Route.
Christoph: Our retail teams have entered the year with aligned direction and a framework designed to drive success throughout our footprint.
Krzysztof Slupkowski: I look forward to assisting this group in realizing success throughout 2025 and beyond. Deposit balances, excluding brokered funds, declined in the quarter. The trend was attributable to seasonality in municipal and commercial funds versus customer outflow. I anticipate those funds will flow back in as tax revenues are realized for those entities throughout 2025.
Christoph: In the first quarter showed positive trends in gross and net production levels, but we have a long way to go to meet the aggressive goals. We have set I look forward to assisting this group and realizing success throughout 2025 and beyond.
Christoph: Deposit balances excluding brokerage funds declined in the quarter. The trend was attributable to seasonality municipal and commercial funds versus customer outflow I anticipate those funds will flow back in as tax revenues are realized those entities throughout 2025.
Krzysztof Slupkowski: As we look forward to the combination of Equity Bank and NBC, I am excited to announce that Greg Kossover will be moving into a senior regional CEO role with oversight for the Equity Bank geography in Oklahoma and Northwest Arkansas. As we look to integrate the NBC footprint and onboard their team while also continuing to grow our legacy presence in both Oklahoma and Northwest Arkansas, Greg's leadership and equity bank experience will be integral to success.
Christoph: As we look forward to the combination of equity bank and NBC I'm excited to announce the great cost will.
We will be moving into a senior regional CEO role with oversight for.
Christoph: <unk> for the equity bank geography.
Christoph: Oklahoma and northwest Arkansas.
Speaker Change: As we look to integrate the NBC footprint and onboard their team while also continuing to grow our legacy presence in both Oklahoma and northwest, Arkansas, Greg's leadership and equity bank experience will be integral to success.
Krzysztof Slupkowski: Greg built a home in Tulsa six years ago, so this allows him to be in the middle of his footprint and finally enjoy his new home during the work week.
Krzysztof Slupkowski: As we discussed in our announcement call, I could not be more excited about the markets we are entering and the team members we are adding through our partnership with NBC. As Chris mentioned previously, C-Income was effectively flat for the quarter and in line with Outlook. We continue to see a lot of opportunity to grow the line items comprising the total. Our in-branch mortgage, treasury, trust, wealth management, and insurance offerings differentiate us from our primary competitors in the majority of our communities.
Speaker Change: <unk> built a home in Tulsa six years ago. So this allows them to be in the middle of his footprint and finally enjoys new home during the work week.
Speaker Change: As we discussed in our announcement call I cannot be more excited about the markets. We are entering and the team members were added through our partnership with NBC.
Speaker Change: As Chris mentioned previously fee income was effectively flat for the quarter and in line with outlook. We continue to see a lot of opportunity to grow the line items comprising the total are in branch mortgage Treasury Trust wealth management and insurance offerings differentiate us from our primary competitors in the Ms.
Krzysztof Slupkowski: It is a very exciting time to be associated with our company. We're in a great position in our marketplace with our organic sales team. Our operating and risk teams, led by Julie Huber, are well positioned for growth. Our management team is ready for the challenge, and more importantly, the opportunity that is ahead of us. Our board has done a great job driving a strategic path that allows us to be ready to grow both organically and through M&A. As mentioned earlier, M&A conversations continue at a higher rate than I have ever seen them in my time as a banker.
Speaker Change: 40 of our communities Brad.
Speaker Change: It is a very exciting time to be associated with our company.
Speaker Change: We're in a great position.
Speaker Change: Marketplace, where organic sales team.
Speaker Change: Our operating and risk teams led by Julie Huber are well positioned for growth.
Speaker Change: Our management team is ready for the challenge and more importantly, the opportunity ahead of us.
Speaker Change: Our board has done a great job driving a strategic path that allows us to be ready to grow both organically and through M&A.
Krzysztof Slupkowski: Equity will remain disciplined in our approach to assessing these opportunities. emphasizing value while controlling dilution and the earn back timeline.
Speaker Change: As mentioned earlier M&A conversations continue.
Speaker Change: At a higher rate than I have ever seen them as my time as a banker.
Speaker Change: Equity will remain disciplined in our approach to assessing these opportunities.
Krzysztof Slupkowski: We appreciate all the continued support from our employee base that is always ready to take on new opportunities and our investor base that has remained committed and steadfast as we execute on our strategy. I look forward to the rest of the year and beyond.
Speaker Change: Emphasizing value, while controlling dilution and earn back timeline.
Speaker Change: We appreciate all the continued support from our employee base that is always ready to take on new opportunities and our investor base that has remained committed and steadfast as we execute on our strategy.
Krzysztof Slupkowski: Thank you for joining the call, and we are happy to take any questions at this time. Thank you.
Operator: Please press star followed by the number one if you'd like to ask a question and ensure your devices are muted locally when it's your turn to speak.
Speaker Change: I look forward to the rest of the year and beyond Thank you for joining the call and we're happy to take any questions at this time.
Terence McEvoy: Our first question comes from Terry McEvoy with Stephen. Your line's open, please go ahead. Hi, thanks. Good morning, everyone.
Speaker Change: Thank you. Please press star followed by the number one maybe you'd like to ask a question and Im sure all your devices, Amit you'd likely range for attention.
Brad Elliott: Maybe question for Brad or Krzysztof. I know it's early, but could you just talk about what you're hearing from your commercial customers in terms of how the tariffs could impact their business? And then maybe what actions are you taking to minimize the risk to the bank if the economy does deteriorate from here? Yeah, good question, Terry. As everyone else in America, it's really hard to figure out what these actually mean for everyone. Many of our customers, as we've talked this during Trump's last.
Speaker Change: Our first question comes from Terry Mcevoy with Stephens.
Speaker Change: Your line is open. Please go ahead.
Terry Mcevoy: Hi, Thanks, Good morning, everyone, maybe a question for Brad or Christoph I know, it's early but could you just talk about what youre hearing from your commercial customers in terms of how the tariffs.
Terry Mcevoy: Could impact their business and then what actions you're taking to minimize the risk to the bank if the economy does deteriorate from here.
Speaker Change: Yes, good question Terry.
Speaker Change: As everyone else in America, it's really hard to figure out what these actually mean for everyone.
Unknown Executive: I forget, he did a terrible job. So they have actually put a lot of things into their contracts to be able to pass it on if their contract. or suppliers, so they're able to pass on a lot of this. or I don't think.
Speaker Change: Many of our customers as we've talked with them went through this three trups last election people tend to forget the tariff.
Speaker Change: Deal during his last election and so.
<unk> gives us a lot of things into their contracts to be able to pass on if they're if they're if they're contractors.
Speaker Change: Or suppliers. So they are able to pass on a lot of this expense.
Unknown Executive: Unknown Speaker Question really is The Overall Economy. We don't think we can completely figure it out. We did add some into low-loss reserve this quarter for those types. We're not. Thanks for that. Yeah, no, appreciate appreciate the honesty very much.
Speaker Change: To their to their end user.
Speaker Change: So I don't think youre going to be squeezed, particularly the question really is what's it do to the overall economy.
Speaker Change: We don't think we completely figured out yet.
Speaker Change: Did add some into loan loss reserve this quarter.
Speaker Change: For those types of things, but we're not seeing any indications of slowdown at this point.
Rick Sems: And then maybe follow up for Rick, could you just talk about an update on the sales initiatives that you've helped put in place? We, we definitely saw that this quarter in terms of loans, you know, maybe a baseball analogy, what what in your inner ending are we in, where you're seeing the success, and then you did highlight the products you have, when you expect to see an acceleration of, of some of the fee income that's connected to those products. Yeah, so well, so Terry, you obviously know my back.
Andrew: Andrew Thanks for that.
Speaker Change: Yes, no I appreciate I appreciate the honesty.
Speaker Change: Very much and then maybe a follow up for Rick could you just talk about an update on the sales initiatives that.
Speaker Change: You've helped put in place we definitely saw that this quarter in terms of loans, maybe a baseball analogy what inning.
Speaker Change: Inning are we and where you're seeing the success and then you did highlight the products you have when do you expect to see an acceleration of some of the fee income that's connected to those products.
Rick Sems: I'll use a baseball analogy, I mean, we're still early. I think we're moving into the middle innings here, though, from the standpoint of getting it done. We saw a tremendous amount of calling in the fourth quarter, and I think that's leading us. I think that's leading us. So it's really just a matter of. So we had good calling metrics. And a lot of it on calling, it's not about sales. It's about just making sure that you're in front of your customer and you're able to provide them solutions. So we're seeing more and more of that so that we're earlier on, as far as if there's a problem.
Speaker Change: Yeah, so well so Terry you, obviously know my background. So I'll use the baseball analogy I mean, we're still early I think we're moving into the middle innings here, though from the standpoint of getting it done we saw a tremendous amount of calling in the fourth quarter and I think thats, leading to some of this and so.
Speaker Change: It's really just a matter of continuing that consistency. So we had good calling metrics and a lot of it I'm, calling it is not about sales into about just making sure that you're in front of your customer and they are able to provide them solutions. So we're seeing more and more of that so that were earlier on as far as if there's a problem being able to identify it and do something with it as far as the <unk>.
Rick Sems: As far as the product side of it goes, that is still in an early stage. We've got... the policy, calling, are really starting. do have that fee income side of it. So I think we're still early on, but I do expect that you're going to see a little bit more of a bounce back on the fee income as we get into the fall. It does.
Speaker Change: Product side of it goes.
Speaker Change: That is still in an early stage, we've got opportunities on the TM side that we're starting to see actually coming through this quarter. There is a couple of really nice team wins.
Speaker Change: Out of our Tulsa market.
Speaker Change: It is interesting is that the markets that are really really calling.
Speaker Change: Are really starting to see results from that so Kansas City, and Tulsa are driving both loans, but then as a result of that they're getting into the C&I businesses, which do have that fee income side of it. So I think we're still early on but I do expect that youre going to see a little bit more of a bounce back on the fee income as we get into the second half of the year.
Unknown Executive: Thanks for taking my question.
Jeffrey Rulis: Our next question comes from Jeff Rulis with D.A. Davidson. Please go ahead. Thanks. Good morning. Question on the on the loan purchases. Do you expect to see more and is that embedded in your guide going forward? No, we're not. We're not.
Speaker Change: So hopefully that helps.
Speaker Change: It does thanks for taking my questions.
Speaker Change: Our next question comes from Jeffrey <unk> with D. A Davidson.
Speaker Change: Please go ahead.
Speaker Change: Thanks, Good morning.
Speaker Change: Question on the on the loan purchases.
Brad Elliott: Jeff, that one specifically was a one-time deal that came across our desk that the economics made a lot of sense on. Okay, got it. And maybe just to follow on kind of the last question on, you know, the growth optimism sounds great and sounds like a lot of in-house work has been a driver of that. More on the customer end and in those community markets, it seems like activity seems to have increased some despite the the environment. I guess what's sort of triggering that is, is it some of the work you've done in house or is maybe more on the demand side?
Speaker Change: Do you expect to see more than that.
Speaker Change: That embedded into your guide going forward.
Speaker Change: No. We're not we're not just Jeff Alan specifically, what was a one time deal that came across our desk economics made a lot of sense. So we pursued it.
Speaker Change: We are actively trying to do it consistently.
Speaker Change: Okay got it.
Speaker Change: Yes.
Speaker Change: And maybe just a follow on kind of the last question on.
Speaker Change: The growth optimism sounds sounds great and it sounds like a lot of in house work has been a driver of that more on the customer.
Speaker Change: And in those community markets it seems like activity.
Speaker Change: Seems to have have increased some.
Rick Sems: Anything you're seeing forming particularly x the metro markets. Yeah, I think on the community side, the community side is not clicking to where it can be clicking.
Speaker Change: Despite the sort of.
Speaker Change: The environment I guess, what's sort of triggering that is it some of the work you've done in house or maybe more on the demand side.
Rick Sems: So I think that still, when I look at where we can be towards the end of the year, I still see a lot of opportunity in that. And in each community, when you really get into it, there's so on and so forth now.
Speaker Change: Youre seeing forming particularly.
Speaker Change: Ex the Metro markets.
Speaker Change: Yes, I think on the community side.
Speaker Change: The community side is not clicking to where it can be like and so I think thats what.
Speaker Change: I look at where we can be towards the end of the year I still see a lot of opportunity in that.
Rick Sems: Legal Affairs Rick Bender, Dan Gandabra, Craig Dunn, and Anthony Cardoso PSAC Chief, the activity we're seeing is more calling on those identification of those names, which I think in the past it was such and such a bank had those so we're not going to call. We're changing that sort of mindset in the bank. At this point, we're not really getting those deals in yet. I think that. Okay. All right. Thank you.
Each community when you really get into it there's three or four great companies in all of these communities and Theres a business there.
Speaker Change: And then there is there is ancillary business that run off of those companies within those communities. So that's really where we have to get to and what we're seeing the activity. We're seeing is more calling on those identification of those names, which I think in the past it was.
Speaker Change: Such and such a bank had those so we're not going to call and I think we're just we're changing sort.
Brad Elliott: Brad, to circle back, I appreciate the comments on pretty good optimism on the M&A side, despite the market volatility.
Speaker Change: Sort of mindset in the bank and so at.
Speaker Change: At this point, we're not really getting those deals in yet I think that is still to come.
Brad Elliott: I guess trying to dig into the mindset of those sellers or the folks that you're engaged with, is there some comfort level that, despite the volatility, if we're trading stock for stock, we're looking for a partnership? I guess reasons for why maybe some sellers haven't shook loose here and your confidence on still getting deals secured.
Speaker Change: Okay Alright.
Speaker Change: Alright, thank you.
Speaker Change: Brad the circle back I appreciate the comments on.
Speaker Change: They are pretty pretty good optimism on the M&A side despite that.
Speaker Change: Market volatility I guess trying to dig into the mindset of those sellers are the folks that you're engaged with is that.
Speaker Change: Is there some comfort level that he does.
Speaker Change: Despite the volatility.
Brad Elliott: It'd be helpful to just some of the background. Thanks. Yeah, I think it's still driven by age of ownership and age of management. And so the companies that we've been talking I think the time that you really got to, if you're actually an architect, you've got to got more upsided.
Speaker Change: We're trading stock for stock.
Speaker Change: Looking for a partnership.
Speaker Change: Yes.
Speaker Change: As for why maybe some sellers haven't.
Speaker Change: <unk> here and your confidence on still getting deal secured.
Speaker Change: That would be helpful to just some of the background.
Speaker Change: Yes, I think it's still driven by each of ownership in nature of management.
Speaker Change: And so the companies that we've been talking to still have those.
Speaker Change: <unk> is at the forefront.
Brad Elliott: You do have a story to tell there, Jeff. And then there's also some deals that are out there that are... So, I think between... and the drivers of those opportunities, I still think there's plenty of room for improvement.
Speaker Change: I think at the time that you really I think if you actually are taking other people's stock a great time to take it is not at the high of the market.
Speaker Change: Got more upside in it. So I think we do have a story to tell there Jeff and then Theres also some deals that are out there that are interested in cash so I think between the different opportunities and the drivers of those opportunities I still think there is.
Unknown Executive: Okay, and then one is the housekeeping item.
Unknown Executive: The expected deal accretion on NBC, is there a dollar figure that you've shared or maybe for the full year, 25 or the second half of the year? I'll post on that. Yeah, I'll pull up the exact numbers, Jeff, but Year 2, so 2026, expected it's about $0.50.
Speaker Change: Plenty of room, the rest of this year.
Speaker Change: Some deals announced.
Speaker Change: Okay.
Speaker Change: And then one just a housekeeping item.
Speaker Change: Hi.
Speaker Change: Expected deal accretion on an NBC is there a dollar figure.
Speaker Change: Sure.
Speaker Change: Maybe for the full year, 25% in the second half of the year.
Unknown Executive: I'm going to say 18 cents, but I'll get you a specific number for the back half of 2025. Thank you.
Speaker Change: Any.
Speaker Change: Milepost on that.
Speaker Change: Yes.
Speaker Change: The exact numbers, Jeff but year, two so 2026 expected it's about 50.
Brett Rabatin: Our next question comes from Brett Rabatin with Hooft Group. Please go ahead. Hey guys, good morning. I wanted to start off on deposits and just what you're seeing in your markets and, you know, any thoughts on the cost of funds from here and your ability to lower your deposit costs. You know, you obviously are somewhat below a lot of peers, partially given the markets, but just was hoping for some color on what you're seeing competitive-wise in your key markets. Yeah, I definitely think it's... You know, obviously the upward trend is abated, and I think it's given us, we've had a little bit of ability to move those down.
Speaker Change: I'm going to say 18, but I'll get you a specific number for the back half of 2025.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from.
Speaker Change: Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hey, guys good morning.
Speaker Change: Wanted to start off on the on deposits and just what youre seeing in your market.
Speaker Change: Yes.
Speaker Change: Any thoughts on the cost of funds from here and your ability to.
Speaker Change: The lower your deposit costs.
Speaker Change: You, obviously are somewhat below a lot of peers.
Speaker Change: Partially given the markets.
Speaker Change: And for some for some color on what Youre seeing competitive wise in key markets.
Brad Elliott: We're seeing a little bit more rational. competition in that.
Brad Elliott: That said, I don't really have a great answer for you as far as. What we're going to do going forward, I think we're going to mirror. moves that the Fed makes. So we've been pretty good. all that in. Last year, where when there was a move, we were we were all over it and getting, you know, every day. So we're still hand fighting. We make exceptions where we need to make exceptions to keep relationships, but we're just really continue to be very thoughtful.
Speaker Change: Yes, I definitely think it's.
Speaker Change: Obviously, the upward trend dissipated and I think it's given us we've had a little bit ability to move those down we're seeing a little bit more rational.
Speaker Change: Competition in that.
That said I don't really have a great answer for you as far as.
Speaker Change: What we're going to do going forward I think we're going to we're going to mirror.
Speaker Change: Moves that the fed makes so we've been pretty good and you.
Speaker Change: Saw that in the second half of last year.
Speaker Change: When there was a move we were we were all over it and getting every day's worth of that so we're still hand fighting on individual deals, we make exceptions, where we need to make exceptions to keep relationships, but we're just really continue to be very thoughtful in trying to keep those down so.
Chris Navratil: Chris has got a different idea. I don't know where we're projecting that out, but I think we're just...
Chris: The amount of Chris has got a different idea.
Chris: Where were projecting that out but I think we're just going to continue to see I'll say ride the wave a little bit.
Brad Elliott: Great and then just wanted to follow up on the the NBC deal and you know just kind of see if you guys have dug in more on that transaction pre-closing you know and anything that comes to mind in terms of product sets or things that you think you can roll out on on their platform that that could be added to relative to what you announced. I don't know from a product perspective. We really like the team though. I mean, when you get into these markets, they're doing a lot of regularly. They're really, really ingrained with their communities, really understand the players in that market as we've gotten out into that.
Chris: Try to be right at the forefront of that wave.
Chris: Great.
Chris: Okay.
Chris: Great and then just wanted to follow up on the NBC deal.
Chris: Just kind of see if you guys have dug in more on that transaction.
Chris: <unk>.
Chris: Thing that.
Chris: Comes to mind in terms of product sets or things that you think you can rollout on on their platform that there could be attitude relative to what you announced.
Chris: I don't know from a product perspective, we really like the team though.
Brad Elliott: And, you know, Greg Kossover is spending every day out there in the markets, and then we've been down there as well with It's a really good team with good experience and really good relationships. So I look at it and think a lot of our product capabilities, a lot of our digital products that we have. It's going to bode really well as we bring those on. Yeah, and I would say that, you know, they've got a great treasury sales team, but I think our third treasury team is excited about the platform that we have. and I think that's going to be an enhancement to their customer base.
Chris: When you get into these markets.
Chris: They're doing a lot of stuff that I think we want to see regularly happened in our markets, they're really really ingrained and with their communities really understand the players in that market as we've got now.
Chris: Into that.
Speaker Change: Greg cost over spend in everyday.
Chris: In the markets and then we've been down there as well with the team. It's a it's a really good team.
Chris: With good experience and really good relationships. So I look at it and think a lot of our product capabilities out of our digital products that we have.
Chris: It's going to bode really well as we bring those online.
Brad Elliott: as well. But they do a great job with the relationships that they have with their customers, and I think everything we have is going to be added to it. On the retail side, I think we're going to be able to add to that. to our retail strategy. of Research, Panasonic, Virgin Magazine, The New York Times, and other journals. other product that's actually really good already." Okay.
Chris: Yes.
Chris: They've got a great treasury sales team.
Speaker Change: I think their treasury teams excited about the platform that we have with Q2.
Speaker Change: And I think thats going to be an enhancement to their customer base and their customer experience as well.
Speaker Change: But they do a great job with the relationships that they have with their customers I think everything we have is going to be added on the retail side I think we're going be able to add some marketing.
Brad Elliott: And then maybe just one last one, you know, assuming the Fed does cut two or three times this year, would that boost the margin expectations you guys have towards the higher end of the range for guidance? Right now, I don't think so. To me, we still continue to screen, especially as we move closer to what we'll call a liability floor as a fairly neutral organization. So I would say that as the Fed continues to move down to the will continue to realize. Okay, great. Appreciate all the color.
Speaker Change: And.
Speaker Change: And so our retail strategy I think we're feeling really well with them, they're great organization, which is what we were attracted to sell their product that's actually really good already.
Okay.
Speaker Change: And then maybe just one last one assuming the fed does cut two or three times this year.
Speaker Change: Would that boost the margin expectations you guys have towards the higher end of the range for guidance.
Speaker Change: No I don't think so to me, we still continue to screen and especially as we move closer to what we'll call a liability floors.
Speaker Change: Fairly neutral organization, so I would say that as the fed continues to move down the extended 123 kind of cuts in a rational fashion, we will continue to realize.
Unknown Executive: Thank you.
Andrew Liesch: Our next question comes from Andrew Liesch with Piper Sandler. Your line's open. Hey, good morning, everyone for taking the questions. You know, just on the on the full year loan guidance, I'm hearing some good optimism. We saw some good, good results in the first quarter, but no change to the full year.
Speaker Change: Sustaining the margin position.
Speaker Change: As depicted in the outlook.
Speaker Change: Okay, Great appreciate all the color.
Operator: Thank you. Our next question comes from Andrew Liesch with Piper Sandler your.
I'm just curious why, why loan growth shouldn't be stronger than what you're already guiding for. Yeah, the full year outlook in there, Andrew, is consistent with where we started the year.
Speaker Change: Your line is open.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, everyone for taking the questions.
Speaker Change: Just on the on a full year loan guidance I'm hearing some good optimism.
Speaker Change: We've got some good good results here in the first quarter, but no change to the full year.
Ringing in NBC as we close out Q2, expectations that outlook changes meeting place though for the purposes of the presentation Q2 is where we focus I'm going to give you a little bit of background on the NBC. We've been in the business for a long time in terms of production and then retained full a year as we look to bring in NBC. Probably change that guy.
Speaker Change: Just curious why why loan growth shouldnt be stronger than that than what you're already guiding for.
Speaker Change: Yes, the full year outlook in there Andrew is consistent with where we started the year.
Speaker Change: Bringing in NBC as we close out Q2 expectations that outlet changes meaningfully so for the purposes of the presentation in Q2 as well.
Speaker Change: Where we focused.
Speaker Change: Our time in terms of production and then retain full year as we look to bring in MPC at the end of Q2.
Speaker Change: We will probably change that guidance.
Speaker Change: Okay.
Speaker Change: Okay.