Q2 2025 QCR Holdings Inc Earnings Call
Operator: Second Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
Good morning and welcome to the qcr Holdings Inc. Second quarter, 2025 Financial results conference call.
All participants will be in listen-only mode.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded.
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After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on a touchtone phone,
Todd Gipple: I would now like to turn the conference over to Todd Gipple, CEO. Please go ahead. Thank you, operator. Good morning, everyone. Thanks for joining our call today.
To withdraw your question please press star then 2 please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Todd gipple CEO. Please go ahead.
Todd Gipple: I want to begin with an overview of our second quarter performance and then spend some time talking more deeply about the business.
Thank you, operator. Good morning everyone. Thanks for joining our call today.
Todd Gipple: Nick will then provide additional details on our financial results. We delivered strong second quarter earnings, driving in an EPS improvement of 13% over the first quarter. These results were highlighted by a significant increase in net interest income driven by both net interest margin expansion and strong loan growth, improved capital markets revenue, and disciplined non-interest expense management. We were pleased to deliver margin expansion during the quarter as we continue to drive our cost of funds lower while maintaining stable loan yields in a persistently challenging inverted yield curve environment. Our loan growth also rebounded, reaching an annualized rate of 8% when adding back the impact from the planned runoff of M2 equipment, finance loans, and leases.
Speaker Change: I want to begin with an overview of our second quarter performance, and then spend some time talking more deeply about the business. Nick will then provide additional details on our financial results.
Speaker Change: We delivered strong, second quarter, earnings driving in an EPS Improvement of 13% over the first quarter.
Speaker Change: These results were highlighted by a significant increase in net. Interest income driven by both net, interest, margin expansion and strong loan growth.
Speaker Change: Capital markets revenue and discipline non-interest expense management.
Speaker Change: We were pleased to deliver margin expansion during the quarter as we continue to drive our cost of funds lower while maintaining stable loan yields in a persistently challenging inverted, yield curve environment.
Speaker Change: Our loan growth, also rebounded, reaching an annualized rate of 8%. When adding back the impact from the plan runoff of M2 equipment, finance, loans, and leases
Todd Gipple: This growth was driven by strong new loan production for the quarter. We continue to be optimistic about solid loan growth for the remainder of the year and are guiding to gross loan growth in a range of 8 to 10 percent in the second half of the year. While capital markets revenue from our LIHTC business came in below our historical run rate, it improved significantly from the first quarter and was up more than 50% on a link quarter basis as we move closer to more normalized level. Our LIHTC pipeline is as strong as it has been for some time.
Speaker Change: This growth was driven by strong new Loan Production for the quarter. We continue to be optimistic about solid loan growth for the remainder of the year and our guiding to gross loan growth, in a range of 8 to 10% in the second half of the year.
Speaker Change: While Capital markets revenue from our litec business came in below, our historical run rate. It improved significantly from the first quarter and was up more than 50% on a link quarter basis. As we move closer to more normalized levels,
Todd Gipple: This remains a highly sustainable and durable business for us, having successfully navigated challenges such as the pandemic, supply chain disruption, significant interest rate volatility, and more recently, the heightened level of economic and political uncertainty in Washington, D.C. We've emerged from this latest challenge with an even deeper network of developer relationships and a stronger LIHTC lending business. We believe that our capital markets revenue will continue to normalize over the next four quarters. Second quarter capital markets revenue ramped up close to historical levels as we expected and previously guided on our Q1 earnings call. Second quarter production was on pace for even stronger results, but notably, two significant transactions that were expected to close late in Q2 shifted into early July.
Speaker Change: Our litec pipeline is as strong as it has been for some time.
Speaker Change: This remains a highly sustainable and durable business for us having successfully navigated challenges such as the pandemic.
Speaker Change: supply chain, disruption significant interest rate volatility and more recently, the heightened level of Economic and political uncertainty in Washington DC,
Speaker Change: We've emerged from this latest challenge with an even deeper network of developer relationships and a stronger litec lending business.
Speaker Change: We believe that our Capital markets Revenue will continue to normalize over the next 4 quarters.
Speaker Change: Second quarter, Capital, markets, Revenue, ramped up close to historical levels as we expected and previously got it on our q1 earnings call.
Todd Gipple: And as a result, we are off to a strong start here in Q3. Given the strength in pipeline, we are reaffirming our guidance for capital markets revenue to be in a range of $50 to $60 million over the next four quarters. In addition, we are also providing guidance over a shorter horizon and expect capital markets revenue for the third quarter to be fully back to a more normalized level and in a range of $13 to $16 million for the quarter. Our LIHTC production team has never worked harder to deepen relationships with existing clients and forge new partnerships with top-tier LIHTC developers across the country.
Speaker Change: Second quarter production was on Pace for even stronger results, but notably 2 significant transactions that were expected to close late in Q2 shifted into early July.
Speaker Change: And as a result, we are off to a strong start here in Q3.
Speaker Change: Even the strength and pipeline. We are reaffirming our guidance for Capital markets Revenue to be in a range of 50 to 60 million over the next 4 quarters.
Speaker Change: In addition, we are also providing guidance over a shorter Horizon and expect Capital markets revenue for the third quarter to be fully backed to a more normalized level and in a range of 13 to 16 million for the quarter,
Todd Gipple: As a result, we remain very optimistic about the long-term durability and profitability of this business. Our non-interest expenses were, again, well-controlled in the second quarter, supporting an adjusted ROAA of 1.29% and contributing to the substantial increase in our earnings per share on a link quarter basis. Asset quality remains excellent. While net charge-offs increased from Q1, they were tied to previously identified and fully reserved credit. Our provision for credit loss was essentially static from the prior quarter. We had a strong second quarter, and our teams performed at a high level. We are a company built on relationships, and these relationships matter most during times of uncertainty.
Speaker Change: Our litech production team has never worked harder to deepen relationships with existing clients and Forge. New Partnerships with top, tier litec developers across the country.
Speaker Change: As a result, we remain very optimistic about the long-term durability and profitability of this business.
Speaker Change: Our non-interest expenses were again. Well-controlled, in the second quarter supporting an adjusted. Roaa of 1.29% and contributing to the substantial increase in our earnings per share and a link quarter basis.
Speaker Change: Asset quality remains excellent. While net charge offs increase from q1, they were tied to previously identified and fully reserved credits.
Speaker Change: Our provision for credit loss, was essentially static from the prior quarter.
Speaker Change: We had a strong second quarter and our teams performed at a high level. We are a company built on relationships and these relationships matter, most during times of uncertainty
Todd Gipple: I am grateful for our 1,000 employees that take great care of our clients, our communities, and each other every day.
Speaker Change: I am grateful for our 1,000 employees that. Take great care of our clients, our communities and each other every day.
Todd Gipple: Before I turn it over to Nick to provide more detail on our second quarter performance, I'd like to take a few minutes to share a broader perspective on our company and how I view our business today and the opportunities that lie ahead. I see our company as operating through three primary lines of business, traditional banking, wealth management, and our LIHTC lending platform, which creates high-quality assets and drives meaningful capital markets revenue. When I step back and view these three lines of business, I see tremendous opportunities in each. Our traditional banking model is built around separate, independent, autonomous community banks that attract top-tier talent and the best clients in our market.
Speaker Change: Before I turn it over to Nick to provide more detail on our second quarter performance. I'd like to take a few minutes to share a broader perspective on our company and how I view our business today and the opportunities that lie ahead
Nick: I see our company is operating through 3, primary lines of business, traditional banking wealth management, and our litech lending platform which creates high-quality assets and drives meaningful Capital markets Revenue.
Speaker Change: When I step back and view these 3 lines of business, I see tremendous opportunities in each.
Speaker Change: Our traditional banking model is built around separate independent, autonomous Community Banks, that attract top tier talent and the best clients in our markets.
Todd Gipple: We hold number one market share in both the Quad Cities and Cedar Rapids, Iowa markets, and number two market share in our Southwest Missouri market. In our largest MSA, Des Moines, Iowa, we are currently ranked 6th, with plenty of opportunity for growth as we compete quite favorably with the larger banks in that market. Built upon our multi-charter business model that maintains the heart of community banking at the local level and the resulting strength of our local banking teams, combined with the significant resources of our $9 billion company, I expect continued strong organic growth in both loans and deposits across all of our markets.
We hold number 1 market share in both the Quad Cities and Cedar Rapids, Iowa markets, and number 2 market share in our Southwest Missouri Market.
Speaker Change: In our largest MSA De Moine Iowa, we are currently ranked 6th with plenty of opportunity for growth as we compete, quite favorably with the larger banks in that market.
Speaker Change: Combined, with the significant resources of our 9 billion dollar company.
Speaker Change: I expect continued strong organic growth in both loans and deposits across all of our markets.
Todd Gipple: We have two significant opportunities to further enhance our operating leverage and financial performance in our traditional banking space. We are nearly halfway through our digital transformation journey as we create our bank of the future for our clients and our employees. We successfully transitioned all of our consumer clients to an improved online banking platform and are now preparing for the core conversion of our four banks into a unified, more efficient operating system. This new platform will improve performance at a lower cost and will help both our bankers and our shared services support teams work more efficiently and effectively.
Speaker Change: We have 2 significant opportunities to further enhance our operating leverage and financial performance in our traditional banking space. We are nearly halfway through our digital transformation Journey, as we create our bank of the future for our clients and our employees
Speaker Change: we successfully transitioned all of our consumer clients to an improved online, banking platform, and are now preparing for the core conversion of our 4 Banks into a unified more efficient, operating system,
Todd Gipple: We expect to have this work completed and fully implemented in the first half of 2027, positioning us for improved operating leverage in 2027 and beyond. The second significant opportunity in our traditional banking business is to improve the right side of our balance sheet. It will require sustained focus and effort over several years, but it's our top strategic initiative across our company. I can tell you that every one of our 1,000 employees here at QCRH understands that our number one focus is growing and strengthening our core deposit base. And I'm confident our people come to work each day focused on doing that.
Speaker Change: This new platform will improve performance at a lower cost and will help both our bankers and our shared services, support teams work, more efficiently and effectively.
Speaker Change: We expect to have this work completed and fully implemented. In the first half of 2027 positioning us for improved operating leverage in 2027 and Beyond.
Speaker Change: The second significant opportunity in our traditional banking business is to improve the right side of our balance sheet.
Speaker Change: It will require sustained focus and effort over several years, but it's our top strategic initiative across our company.
Speaker Change: I can tell you that every 1 of our 1000 employees here at QC. Understands that our number 1, focus is growing and strengthening our core deposit base.
Speaker Change: And I'm confident are people come to work each day focused on doing that.
Todd Gipple: As a result, I expect an improved funding mix to further enhance our profitability in our traditional banking business. Over the past five years, we've significantly expanded our wealth management business, growing both AUM and revenue by a compound annual growth rate of 10%. Remarkable results by our team. Wealth management is the ultimate relationship business, and we excel at that. Our relationships in the traditional banking space and with key professionals in each of our markets are uniquely personal and deep. These relationships provide us with an excellent pipeline of wealth management opportunities to fuel our continued success in this business.
Speaker Change: As a result, I expect an improved funding mix to further, enhance our profitability, in our traditional banking business,
Speaker Change: Over the past 5 years, we significantly expanded our wealth management business growing both AUM and revenue by compound annual growth rate of 10% remarkable results by our team.
Speaker Change: Wealth management is the ultimate relationship business and we excel at this.
Speaker Change: Our relationships in the traditional banking space. And with key Professionals in each of our markets are uniquely personal and deep. These relationships provide us with an excellent pipeline of wealth management opportunities, to fuel our continued success in this business
Todd Gipple: We also benefit from a competitive landscape in wealth management where larger institutions often fall short on service and relationships, allowing us to consistently gain market share. Wealth management is highly accretive to ROA, as the AUM is, of course, off balance sheet. We like to say that this business is the ultimate ROA business, as it has no A. We plan to continue investing in this business, and I expect it to play an increasingly important role in driving top quartile returns. Our LIHTC lending business has proven remarkably durable through the pandemic, supply chain disruptions, significant interest rate volatility, and the recent political and macroeconomic uncertainty.
Speaker Change: we also benefit from a competitive landscape and wealth management where larger institutions often fall short on service and relationships allowing us to consistently gain market share
Speaker Change: Wealth management is highly accretive to Roa as the A1 is, of course, off-balance sheet.
Speaker Change: We like to say that this business is the ultimate Roa business as it has no a
Speaker Change: We plan to continue investing in this business and I expect it to play an increasingly important role in driving top cortile returns.
Todd Gipple: We are devoting significant resources to this business and are building third-party relationships that will allow us to expand our level of production of LIHTC PERM financing and the capital markets revenue this business generates. We continue to grow our network of LIHTC developer relationships, which we believe, over time, will lead to larger pipelines and more robust production volumes. The need for affordable housing in our country remains significant and the newly enacted legislation has expanded the availability of affordable housing tax credit. The combination of this relentless long-term demand for affordable housing, coupled with our deep relationships with many of the best LIHTC developers in the country, is why we are optimistic about growing this business and further enhancing our already strong financial performance.
Speaker Change: Our litec lending business has proven remarkably durable through the pandemic supply chain. Disruptions significant interest rate volatility, and the recent political and macroeconomic uncertainty.
We are devoting significant resources to this business and are building third-party relationships that will allow us to expand our level of production of litec, perm, financing, and the capital markets Revenue. This business generates
Speaker Change: We continue to grow our network of litec developer relationships which we believe over time will lead to larger pipelines and more robust production volumes.
The need for affordable housing in our country. Remains significant and the newly enacted, legislation has expanded, the availability of affordable housing, tax credits,
Speaker Change: The combination of this Relentless long-term demand for affordable housing.
Speaker Change: Coupled with our deep relationships, with many of the best light tech developers in the country.
Is why we are optimistic about growing this business and further enhancing our already strong financial performance.
Todd Gipple: In summary, I see it like this, we are focused on building something here that is materially different and significantly better than others who operate in these spaces in which we compete. Our ability to continue to leverage our many unique capabilities and competencies here at QCRH is why we have such great confidence in our ability to maintain and extend our competitive position. Executing on these opportunities across all three of our core lines of business positions us to sustain our top-tier financial performance and reward our shareholders.
Speaker Change: In summary. I see it like this. We are focused on building something here. That is materially different and significantly better and others who operate in these spaces in which we compete.
Speaker Change: Our ability to continue to leverage our, many unique capabilities and competencies here at QC.
Speaker Change: Is why we have such great confidence in our ability to maintain and extend our competitive position.
Nick: I will now turn the call over to Nick to provide further details regarding our second quarter results. Thank you, Todd. Good morning, everyone.
Speaker Change: Executing on these opportunities across all 3 of our core lines of business positions us to sustain our top, tier financial performance and reward our shareholders.
Nick: I will now turn the call over to Nick to provide further details regarding our second quarter results.
Nick: Before I begin, I would like to thank the Board of Directors and Todd for the opportunity to serve as Chief Financial Officer of QCR Holdings. I also want to express my appreciation for the warm reception I received from the investment community. I'm honored to take on the CFO role of our company after a 20-year career here at QCRH alongside a highly experienced and talented team. I'm excited to continue serving all our stakeholders as we build on QCRH's strong momentum and drive future success.
Nick: Thank you, Todd. Good morning, everyone.
Speaker Change: Sir of qcr Holdings.
Speaker Change: I also want to express my appreciation for the warm reception. I received from the investment community.
Speaker Change: I'm honored to take on the CFO role of our company.
Speaker Change: After a 20-year career here, at qcr alongside a highly experienced and talented team.
Speaker Change: I'm excited to continue serving all our stakeholders as we build on Q's strong, momentum and drive future success.
Nick: Now, moving to the financial results for the second quarter. We delivered adjusted net income of $29 million, or $1.73 per diluted share. Net interest income for the quarter was $62 million, a $2 million increase from the first quarter driven by strong earning asset growth combined with margin expansion. Our NIM on a tax equivalent yield basis increased by four basis points from the first quarter and was at the high end of our guidance range. The increase in our NIM was driven by strong growth in both loans and investments, along with higher yields on those assets. We also continue to benefit from lower deposit costs, which we've been able to steadily reduce as the Federal Reserve began cutting interest rates last year.
Speaker Change: Now, moving to the financial results for the second quarter.
We delivered adjusted net income of 29 million or 1.73 per diluted share.
Speaker Change: That interesting come for the quarter was 62 million, a 2 million dollar increase from the first quarter driven by strong earning asset growth combined with margin expansion.
Speaker Change: Our Nim on a tax equivalent yield basis increased by 4 basis points from the first quarter.
Speaker Change: And was at the high end of our guidance range.
Speaker Change: The increase in our Nim was driven by strong growth in both loans and Investments along with higher yields on those assets.
Nick: Our liability-sensitive balance sheet and our progress in lowering deposit rates have resulted in strong deposit betas, enabling us to capitalize on the declining rate environment. we are also well positioned to benefit from any potential future interest rate cut. Our NIMTEY has now expanded by 21 basis points over the past five quarters. We expect our NIMTEY for the third quarter to be in the range of static to an increase of four basis points, assuming no further Federal Reserve rate cuts during the quarter.
Speaker Change: We also continue to benefit from lower deposit costs which we've been able to steadily reduce as the Federal Reserve began, cutting interest rates. Last year, our liability sensitive balance sheet and our progress in lowering deposit rates, have resulted in strong deposit, datos enabling us to capitalize on the declining rate.
Speaker Change: We are also well positioned to benefit from any potential future interest rate cuts.
Speaker Change: Our Nim t. E y has now expanded by 21 basis points over the past, 5 quarters.
Speaker Change: We expect our Nim Ty for the third quarter to be in the range of static to an increase of 4 basis points. Assuming no further, Federal Reserve rate Cuts during the quarter,
Nick: Non-interest income totaled $22 million for the second quarter, driven in part by $10 million in capital markets revenue. During the quarter, we saw improved LIHTC activity compared to the first quarter, resulting in a $3 million, or 51%, increase in capital markets revenue. Our pipeline continues to improve as clients adjust to evolving market conditions. We believe the long-term demand and our growing backlog for new deals will continue to provide robust support for our LIHTC lending program. Our wealth management business generated $5 million in revenue for the second quarter, consistent with the first quarter. As compared to the like period in 2024, wealth management revenue has grown by 8%, reflecting the strength and momentum of this business.
Not interest income total 22 million for the second quarter.
Speaker Change: Driven in part by 10 million, in capital markets Revenue.
Speaker Change: During the quarter, we saw improved litec activity compared to the first quarter. Resulting in a 3 million or 51% increase in capital markets Revenue.
Our pipeline continues to improve as clients adjust to evolving market conditions.
Speaker Change: We believe the long-term demand and our growing backlog for New Deals will continue to provide robust support for our litech lending program.
Speaker Change: Our wealth management business generated 5 million in revenue for the second quarter consistent with the first quarter.
Speaker Change: As compared to the, like period in 2024 wealth management Revenue has grown by 8% reflecting the strength and momentum of this business.
Nick: Our continued investment in wealth management is paying off. reinforcing our position as a trusted local partner to our clients. Notably, the strategic expansions we announced on previous calls in Central Iowa and Southwest Missouri are attracting new client relationships. Our consistent AUM growth in our markets not only strengthens our foundation but also helps temper revenue pressure during periods of broader market volatility.
Speaker Change: Our continued investment and wealth management is paying off.
Speaker Change: Reinforcing our position as a trusted, local partner to our clients.
Speaker Change: Notably the Strategic expansions, we announced on previous calls in central, Iowa, and Southwest. Missouri are attracting new client relationships.
Speaker Change: Our consistent AUM growth in our markets, not only strengthens our foundation but also helps temper Revenue pressure during periods of broader Market volatility.
Nick: Now turning to our expense. Non-interest expense for the second quarter was $49.6 million, an increase of $3 million, coming in just below the lower end of our guidance range of $50 to $53 million. This increase was primarily driven by higher capital markets revenue and strong loan growth resulting in an improved ROAA, which drove higher variable compensation. Professional and data processing expenses also increased and were related to our digital transformation. compared to the first half of 2024, non-interest expenses remain well controlled and are down 9% on an annualized basis. Our highly incentivized variable compensation structure is designed to enhance operating leverage and provide expense flexibility across changing revenue cycles, rewarding our employees only after value has been delivered to our shareholders.
Speaker Change: Now, turning to our expenses.
Non-interest expense for the second quarter was 49.6 Million, an increase of 3 million.
Speaker Change: Coming in just below the lower end of our guidance range of 50 to 53 million.
This increase was primarily driven by higher Capital, markets, revenue and strong loan growth resulting in an improved roaa, which drove higher variable compensation.
Professional and data processing expenses, also increase and were related to our digital transformation.
Speaker Change: Compared to the first half of 2024 not interest expenses. Remain well controlled and are down 9% on an annualized basis.
Our highly incentivized, variable. Compensation structure is designed to enhance operating leverage and provide expense flexibility across changing Revenue Cycles, rewarding our employees. Only after value has been delivered to our shareholders.
Nick: We remain disciplined in managing core operating expenses while continuing to invest strategically in technology and automation to further support our high-performing operations team. These investments are essential to strengthening our operating leverage and supporting our multi-charter community banking model. As Todd noted, we are making progress on our comprehensive, multi-year digital transformation initiative that encompasses several strategic projects. We will continue to manage expenses with discipline. Our updated non-interest expense guidance is projected to be in the range of $52 to $55 million for the third quarter. This updated guidance captures costs associated with our digital transformation and assumes both capital markets revenue and loan growth are within our expected guidance ranges.
Speaker Change: We remain disciplined and managing core operating expenses while continuing to invest strategically in technology and automation to further support our high-performing operations team.
Speaker Change: These Investments are essential to strengthening our operating leverage and supporting our
Speaker Change: as Todd noted, we are making progress on our comprehensive multi-year digital transformation initiative that encompasses several strategic projects
Speaker Change: The third quarter.
Nick: Moving to our balance sheet. During the quarter, total loans grew by $137 million, or 8% annualized, when adding back the impact from the planned runoff of M2 equipment, finance, loans, and leases. Our loan growth was driven both by our LIHTC and traditional lending businesses. Since 2023, loan securitizations have played a key role in supporting the continued success of our LIHTC business, which remains a significant driver of capital markets revenue. As our LIHTC Permanent Loan Pipeline continues to build, we expect our next securitization to close in early 2026. Following the robust deposit growth of $276 million or 16% annualized in the first quarter, we retained the majority of those balances throughout the second quarter.
This updated guidance captures costs associated with our digital transformation and assumes both Capital, markets revenue and Loan growth are within our expected, guidance, ranges.
Speaker Change: Moving to our balance sheet.
Speaker Change: During the quarter total loans, grew by 137 million, or 8% annualized. When adding back the impact from the planned runoff of M2 equipment, finance, loans, and leases
Speaker Change: Our loan growth was driven, both by our light tech and traditional lending businesses.
Speaker Change: Since 2023 loan securitizations have played a key role in supporting the continued success of our litec business which remains a significant driver of capital markets Revenue.
Speaker Change: as our litec permanent loan pipeline continues to build, we expect our next securitization to close in early 2026
Following the robust deposit growth of 276 million or 16% annualized in the first quarter.
Nick: total deposits declined slightly by 19 million or 1% on an annualized basis during the second quarter, while average deposit balances rose by 72 million compared to the first quarter. Year-to-date, core deposits have increased by 311 million or 9% annualized.
Speaker Change: We retain the majority of those balances throughout the second quarter.
Speaker Change: Total deposits declined slightly by 19 million or 1% on an annualized basis. During the second quarter, while average deposit balance is Rose by 72 million compared to the first quarter.
Year to date core deposits have increased by 311 million or 9% annualized.
Nick: Turning to our asset quality, which remains excellent. Total non-performing assets declined 5.5 million or 11% during the second quarter. Our total NPAs to total assets ratio also improved to 46 basis points, which is approximately half of our 20-year historical average. Total criticized loans increased 9 million or 10 basis points to 2.16% of total loans and leases. Net charge-offs increased by $2 million, primarily driven by the charge-off of loans that had been previously fully reserved. Additionally, over half of our total remaining NPAs are comprised of just five relationships. Total provision for credit losses of $4 million was down slightly from the previous quarter.
turning to our asset quality, which remains excellent
Total non-performing assets declined, 5.5 million, or 11% during the second quarter.
Speaker Change: Our total npas to total assets ratio also improved to 46 basis points which is approximately half of our 20-year historical average.
Speaker Change: total criticized loans, increased 9 million or 10, basis points to 2.16% of total loans, and leases
Speaker Change: Net charge offs increased by 2 million primarily driven by the charge off of loans that had been previously fully reserved.
Speaker Change: Additionally over half of our total remaining npas are comprised of just 5 relationships.
Nick: The allowance for credit losses to total loans held for investment was 1.28%. We continue to closely monitor asset quality across all business lines as part of our historically strong credit culture. Our Tangible Common Equity to Tangible Assets ratio increased by 22 basis points to 9.92% at quarter end. This increase was driven by strong earnings as AOCI remained consistent during the quarter. Our Common Equity Tier 1 ratio increased 16 basis points to 10.43%. And our total risk-based capital ratio increased 8 basis points to 14.26%. The improvement in our regulatory capital ratios was also driven by our strong earnings.
Speaker Change: Total provision for credit losses, of 4 million was down slightly from the previous quarter.
Speaker Change: The allowance for credit losses. Total loans held for investment was 1.28%.
Speaker Change: We continue to closely monitor asset quality across all business lines as part of our historically strong credit culture.
Speaker Change: Our tangible common Equity to tangible assets ratio increased by 22 basis points to 9.92% at quarter end.
Speaker Change: This increase was driven by strong earnings as aoci remained consistent during the quarter.
Speaker Change: Our common Equity Tier 1 ratio increased 16 basis points to 10.43%?
Speaker Change: And our total risk based Capital ratio increased 8 basis points to 14.26%.
Speaker Change: The improvement in our regulatory Capital ratios was also driven by our strong earnings.
Nick: We remain committed to growing our regulatory capital, and we consistently evaluate our capital mix to support both our business model and growth objectives while benchmarking against peers. Additionally, we plan to call and replace our $70 million of subordinated debt in September. This will maintain our current Tier 2 total risk-based capital levels, and we expect to do so at a favorable fixed rate. We delivered another strong increase in tangible book value per share, which rose by $1.64, reflecting 13% annualized growth for the quarter. Over the past five years, TBV has grown at a compound annual rate of 12%.
Speaker Change: We remain committed to Growing our regulatory capital and we consistently evaluate our Capital mix to support both our business model and growth objectives. While benchmarking against peers.
Speaker Change: Additionally, we plan to call and replace our 70 million of subordinated debt in September.
This will maintain our current tier 2, total, risc-based Capital levels, and we expect to do so, at a favorable fix rate.
We delivered, another strong increase in tangible book value per share which rose by 1.64 reflecting, 13%, annualized growth for the quarter.
Nick: highlighting our solid financial performance and long-term focus on creating shareholder value.
Speaker Change: Over the past 5 years, tbv has grown at a compound annual rate of 12%.
Speaker Change: Highlighting, our solid financial performance and long-term focus on creating shareholder value.
Nick: Finally, our effective tax rate for the quarter was 5%, up from 1% in the prior quarter. The linked quarter increase is primarily due to higher pre-tax income from higher capital markets revenue. These factors increase the mix of our taxable income relative to our tax exempt income. Our tax-exempt loan and bond portfolios have consistently supported a low tax liability. Given a more normalized mix of revenue, in line with our guidance, we expect our effective tax rate to be in the range of 6-8% for the third quarter of 2025.
Speaker Change: Finally, our effective tax rate for the quarter was 5% up from 1% in the prior quarter.
Speaker Change: the length quarter increase is primarily due to higher pre-tax, income, from higher Capital, markets Revenue,
Speaker Change: These factors increase the mix of our taxable income relative to our tax exempt income.
Speaker Change: Our tax, exempt loan and bond portfolios. Have consistently supported a low tax liability.
Given a more normalized. Mix of Revenue in line with our guidance. We expect our effective tax rate to be in the range of 6 to 8% for the third quarter of 2025
Operator: With that added context on our second quarter results, let's open the call for your questions. Operator, we are ready for our first question. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2.
With that added context on our second quarter results. Let's open the call for your questions. Operator, we are ready for our first question.
Damon Delmonte: Our first question will come from Damon DelMonte with KVW. Please go ahead. Hey, good morning, guys. Thanks for taking my questions and congrats on a nice quarter. I guess the first question, just related to the margin and the outlook, I think the guide was for flats up to four basis points here in the third quarter. Can you just talk about some of the dynamics behind that, that give you confidence that that can continue to kind of grind higher? Yeah, good morning, Damon. Thank you for the question. We are guiding static to up four basis points, and this assumes no Fed rate cuts.
Speaker Change: Our first question will come from Damon Deonte with kvew. Please go ahead.
Hey, good morning guys. Uh, thanks for taking my questions and congrats on a, on a nice quarter. Um, I guess, the first question, uh, just related to the margin and the Outlook. Um, I think the guide was for, you know, Flats up, 4 basis points here in in the third quarter. Um, could you just talk about some of the Dynamics uh, behind that, that give you confidence that that can continue to kind of grind higher?
Damon Deonte: Yeah, good morning, Damon. Thank you for the question. Um,
Nick: So as you think about Q2 and our performance there, our peak NIM month in the second quarter was June, and that was a 349. and that compared to 346 for the quarter. So that gives us confidence on some further expansion here in Q3. We have about $350 million of loans scheduled to mature in Q3. About $110 million of that is fixed at a $605 million. Now, with payoffs and paydowns, that $110 million fixed generally would grow to about $300 million. So we expect to be able to pick up about 50 basis points on that fixed portfolio.
Damon Deonte: We uh we are guiding static top 4, basis points, and this is assumes no Fed rate Cuts. So as you think about Q2 and our performance there, uh, our Peak Nim month in the second quarter was June. And that was a 349.
Damon Deonte: And that compared to 346 for the quarter so that gives us confidence.
Damon Deonte: on some further expansion here in Q3, um,
Nick: The floating portfolio, what is scheduled to mature, we believe we can replace at similar rates, so not a big change there. So, when you take into account also on the funding side, I think we're going to continue to manage our interest-bearing non-maturity deposits. The team is doing a great job of fighting for every basis point there. I think the biggest impact we'll see in that space here in Q3 is more related to our CD portfolio that's scheduled to mature. We've got about 350 million of CDs maturing in the third quarter. That's a weighted average rate of about 430, and we think we can shave about 30 basis points off of that.
we have about 350 million of loans. Scheduled to mature in Q3 about 110 million of that is fixed at a 605 now with payoffs and, and pay Downs that 110 fixed. Generally would grow to about 300 million. So we expect to be able to pick up about 50 basis points. Uh, on that fixed portfolio. The floating portfolio. Um, what? What is scheduled to
Damon Deonte: Mature, uh, we believe, we can replace a similar rates. So, so not a big change there. So, um, when you take into account also, um, on the funding side,
Uh, pretty. Uh, you know, I think we're going to continue to manage our interest bearing, uh, non maturity deposits. Uh, the team is doing a great job of uh, fighting for every basis point there. I think the biggest, uh, impact we'll see in that space here in Q3 is more related to our CD portfolio. That's scheduled to mature. We've got about 350 million of CDs, maturing in the third quarter.
Damon Delmonte: So a similar amount in Q4, you know, scheduled on the CD portfolio to roll off. Not quite a 30 basis point delta on those, but closer to 10 basis points. So we think we can continue to move the needle here, especially as we look at Q3. Great, appreciate that color.
Damon Deonte: That's, uh, weighted average rate of about 430. And we think we can, um, shave about 30 basis points off of that. So, a similar amount in Q4, you know, scheduled on the CD portfolio to roll off, uh, not quite a 30 basis point Delta on those, but, uh, closer to 10 basis points. So we think we can continue to move the needle here. Um, especially as we look at Q3
Nick: And if we do have a couple of rate cuts in the back half of the year, given the liability sensitive position, is it fair to assume a little bit bigger lift on the margin? Yeah, no, that's fair. And, Damon, I think as we've talked on other earnings calls, we are and continue to be, have more rate sensitive liabilities here today. So when we think about 25 basis point potential Fed cut, we think that's about two to three basis points of margin, about 1.2 to 2 million of NII dollars. So if the yield curve steepens a bit, we'd expect to be at the high end of that range and maybe some upside, you know, if we kind of maintain yield curve where we're at today, probably closer to the lower end of that range.
Speaker Change: Great, appreciate that caller. And if we do have a couple of rate cuts, um, in the the back half of the year, um, given the liability sensitive position, is it fair to assume a little bit bigger lifts on the margin?
Yeah, no, that that's fair. And Damon, I think, as we've talked on other earnings calls, we are, uh, and continue to be, uh, have more rate sensitive liabilities here today. So, when we think about 25 basis point potential fed cut, uh, we think that's about 2 to 3 basis points of margin. Um, about 1.2 to 2 million of nii dollars. So, if the yield curve steepens a bit, um, we'd expect to be at the high end of that range and maybe some upside, um, you know, if, if we kind of maintain yield curve where we're at today, um, probably closer to the lower end of that range.
Damon Delmonte: I think in the comments, you guys noted that your next securitization is expected to be in early 2026. Are you at a point yet where you can kind of talk about the sizing of that? Sure, Damon. Yeah, we expect that to close in the first quarter of next year. And one of the reasons we pushed that back into the first part of 26 is we want that to be a very sizable securitization. Right now we're targeting $350 million as kind of the floor there. That's probably around where we will land. The main reason we want that to be larger is we've discovered that we get much better economic execution with a larger securitization.
Speaker Change: Got it. Okay great. Um and then I think in the the comments you guys noted that uh your next secured isation is expected to be in early 2026. Um, are you at a point yet where you can kind of talk about the sizing of that?
Nick: And we intend to sell the B piece in that securitization. So better economics on the A give us more room and more confidence that we're going to be able to sell the B piece. and in doing both, that 350 million notional will free up about 40 basis points of CET1. So for all those reasons, we're pushing it back a little bit to accumulate a bigger pool.
Speaker Change: Sure, Damon. Uh, yeah, we expect that to close in the first quarter of next year and 1 of the reasons we pushed that back into the first part of the 26, is we want that to be a very sizable securitization right now. We're targeting 350 million as kind of the floor there, that's probably around where, where we will land. Uh, the main reason we want that to be larger, is we've discovered that we get much better economic execution with a larger security and we intend to sell.
Speaker Change: All the B piece.
Speaker Change: And that securitization. So better economics on the a give us more room and more confidence that we're going to be able to sell the BPS.
And in doing both, that will, that 350 million notional will free up about 40 basis points of cet1. So for all those reasons, we're pushing it back a little bit to accumulate a bigger pool.
Damon Delmonte: Got it. Okay, great. And then just a sneak in one more question on, you know, the wealth management, it sounds like things are continuing to progress well there. You know, is it fair to kind of assume near double digit growth rate kind of going forward in this area? Damon, we're very pleased with the performance of wealth management over the last five years. I think I mentioned in our opening comments that it's been a 10% K or over five. Yes, our expectation is that will continue to grow double digits 10% ish or more. We actually added 234 new relationships and a half a billion in new a AUM in the first half of the year.
Um, in in this area.
Speaker Change: Damon, we are very pleased with the performance of wealth management over the last 5 years. I think I mentioned in our opening comments that it's been a 10% kegger over 5. Um, yes. So our expectation is that we'll continue to grow double digits, 10 percentage or more.
Damon Delmonte: So really on pace with the growth from 24. I will tell you, of course, the law of large numbers makes that a bit tougher each year. We're at 6.7 billion in AUM, so that hurdle of 10 gets higher and higher all the time, but we've invested a lot in this space. We're really good at it. We have great teams. I think I mentioned in the opening comments that the competitive landscape really favors us as well. The larger bank competitors in the space just are not keeping up service levels. So 10%-ish is our expectation. Great. Okay.
Speaker Change: We actually added 234 new relationships and a half a billion in new, a AUM, in the first half of the year.
So uh really on Pace with the growth from uh 24. Um I will tell you of course the law of large numbers makes that a bit tougher each year. Um we're at 6.7 billion in AUM so that hurdle of 10 gets higher and higher all the time, but
Speaker Change: We've invested a lot in this space. We're really good at it. We have great teams. I think I mentioned in the opening comments that the competitive landscape, uh, really favors us as well. The larger Bank competitors in the space just are
Speaker Change: Are not, uh, keeping up service levels. So, uh, 10%, uh, is is our expectation,
Damon Delmonte: Well, thank you very much for all the color. I appreciate it. Thanks, Damon.
Speaker Change: Great. Um, okay. Well thank you very much for all the caller. I appreciate it.
Thanks Damon. Thanks Damon.
Nathan Race: Our next question will come from Nathan Race with Piper Sandler. Please go ahead. Hey, guys. Good morning. Thanks for taking the questions. Morning, Nate. Morning.
Speaker Change: Our next question will come from Nathan race? With Piper Sandler. Please go ahead.
Nathan Race: Hey guys, good morning. Thanks for taking the questions.
Nathan Race: Curious just on kind of the appetite for buybacks going forward. Obviously, you guys are building capital, and you know, have a securization teed up early next year. So just curious in terms of maybe the appetite to get in the market to buy back the stock, maybe provide some downside support during certain periods of volatility that we've seen here today. Sure. Thanks for the great question, Nate. So TCE is at 992, CET1 at 1043. Both of those are up around 40 bps since the end of last year. So we are building capital at a fast clip with solid earnings and our low dividend payout.
Nathan Race: Morning.
Curious, just on, kind of the appetite for BuyBacks going forward. Um, obviously you guys are building Capital, um, and you know, have a uh, Securities and teed up early next year. So, uh, just curious in terms of maybe, uh, the appetite to get in the market to buy back the stock, maybe buy some downside support, during certain periods of volatility that we've seen here today.
Nick: So we are accumulating capital nicely. Really the issue for us while we've been on the sidelines a bit here is TCE and CET1 decoupled a bit as we were securitizing. We weren't selling the bps on our four prior securitization. So we were getting gap capital relief, which is why TCE has grown so significantly. But we weren't getting regulatory capital relief and that was holding CET1 down. We do expect to sell that B piece in the next securitization. I already mentioned we'd get a pretty big lift in CET1 at that point. So we see a path to where those are getting back more in alignment.
Speaker Change: Sure. Thanks for the great question Nate. So um tce is at 9.92 C1 at 10:43. Both of those are up around 40 bucks since the end of last year. So we are building Capital at a fast clip with solid earnings and our low dividend payout. So we are accumulating Capital nicely really. The issue for us uh while we've been on the sidelines, a bit. Here is uh tce and cet1 decoupled, a bit as we were securitizing. We weren't selling the B piece on our 4, priority Gap Capital relief.
Which is why tce has grown uh so significantly, uh, but we weren't getting regulatory Capital relief and that was holding cet1 down. Um,
Nick: The gap capital and CET1 red cap. So we do see some optionality with capital coming back into the picture for us. I don't think that we necessarily have to actually achieve it in the first part of next year, but we can now see it and have a clear path to getting there. So we are going to be evaluating this here in the back half of the year in terms of deployment of capital. We know our TCE is going to creep up over 10%. That's a good thing. We are clearly able to take care of our organic growth.
Speaker Change: We do expect to sell that b piece. And the next securitization I already mentioned, we'd get a, pretty big lift in C1 at that point. So, um, we see a path to where those are getting back more in alignment, the Gap, capital, and C1 redcap,
So we do see uh some optionality with capital coming back into the picture for us. I don't think that we necessarily have to actually achieve it uh in the first part of next year, but we can now see it. Um and have a clear path to getting there. So we are going to be evaluating this here in the back half of the year. In terms of deployment of capital. We know our tce is going to creep up over 10%. That's a good thing. Um
Nathan Race: We don't really have M&A on the short-term horizon, so then it comes to dividends and buybacks, and we're gonna be evaluating that here back half of the year. Okay, that's really helpful, caller. I appreciate that.
Speaker Change: We are clearly able to take care of our organic growth.
Speaker Change: We don't really have m&a on the short term Horizon. Uh so then it comes to dividends and BuyBacks and we're going to be evaluating that here back half of the year.
Todd Gipple: And then, Todd, you mentioned this in your prepared comments around, you know, the implications from the latest legislation in terms of what that implies for, you know, affordable housing developments going forward. Just curious if you've seen any of that come through in your pipeline, more recently, or maybe what you think that could suggest in terms of maybe driving, you know, higher volumes and just overall capital markets revenue, perhaps longer term. Sure, Nate, thanks for asking about that. I will tell you, we don't anticipate that impacting us here yet this year, maybe not even for quite some time, might be a year or more out.
Speaker Change: Okay, that's really helpful caller. Um, I appreciate that. Um, and then Todd, you mentioned this in your prepared comments around, you know, the implications from the latest legislation in terms of what that implies for. You know, affordable housing developments going forward. Just curious, if you're seeing any of that come through in your pipeline, um, more recently, or maybe what you think that could suggest in terms of maybe driving, you know, higher volumes and just overall Capital markets Revenue, perhaps longer term
Todd Gipple: But the implications are very significant long term. And it's one of the reasons we have confidence that we're going to be able to start growing this business. The OBBB really did two things. It increased the 9% credits in LIHTC by 12%. And it reduced the threshold for qualification for the 4% credit, really made it easier for more projects to comply with the requirements. And a recent study by Novogratic, who really follows this industry, they think that long term, and so again, I would say this is probably end of 26 into 27. But long term, they think this will grow LIHTC allocations from $29 billion, which is really where they've been here for a while, to as much as $37 billion, a potential 20% increase in LIHTC credit.
Sure Nate thanks for asking about that. Um, I will tell you we don't anticipate that impacting us here yet this year. Um maybe not even uh for quite some time might be a year or more out but the implications are very significant long term and it's 1 of the reasons. We have confidence that we're going to be able to
Speaker Change: start growing this business. Um,
Speaker Change: The obb really did um 2 things, it increased the 9% credits in litec by 12%.
Speaker Change: To 4% credit really made it easier for more projects to uh comply with the requirements.
Speaker Change: And uh, recent study by Nova gratic who really follows this industry. Uh they think that long term. And so again I would say this is probably
Speaker Change: End of 26 into 27, but long term they think this will grow. Um,
Todd Gipple: So it was a very good outcome, both from the perspective of what got in the bill. I think even more so optically, it was great to see that there was unified support for affordable housing in D.C. That that was a great thing.
Speaker Change: Litech allocations from 29 billion which is really where they've been here for a while to as much as 37 billion a potential 20% increase in litech credit. So, um, it was a very good outcome. Um, both from the perspective of what got in the bill.
I think even more so optically, it was great to see that, uh,
Speaker Change: there was unified support for affordable housing uh in DC that that was a great thing to see.
Operator: Hi, Nathan, this is the operator. Just confirming, do you have any other further questions? I'm all set. Thank you. All right. Thank you so much.
Speaker Change: Hi Nathan. This is the operator just confirming. Do you have any other further questions?
Brian Martin: Our next question will come from Brian Martin with Janney Montgomery. Please go ahead. Hey, good morning, guys. Good morning, Brian.
Speaker Change: Uh, I'm all set. Thank you. All right, thank you so much.
Speaker Change: Our next question will come from Brian Martin with Janie Montgomery? Please go ahead.
Brian Martin: Hey, good morning, guys.
Brian Martin: Welcome, Nick and congratulations. You know, just one one for me was just on the just on the margin kind of as you look out either Nick or Todd, I guess. If you look at the L quarters with maybe less rate cuts than people were expecting, if you can just talk about the path of the margin or trajectory as you go out into 26, how we should be thinking about that if the cuts don't materialize. Yeah, thanks Brian. When we think about, you know, maybe Q4 and then to 26. and assuming again that yield curve kind of stays where it is today, you know, I think it is becoming more challenging to continue to expand NIM into those areas without a future Fed rate cut.
Speaker Change: Good morning, Brian.
Brian Martin: And welcome Nick and congratulations. Uh, you know, just 1 1 for me was just on the uh just on the margin kind of as you look out either Nick or Todd, I guess if you look out at the out quarters with maybe less rate less less rate Cuts than kind of people were expecting if you can just talk about just the path of the margin or trajectory kind of as you go out into 26, how we should be thinking about that if the cuts don't materialize.
Yeah, thanks Brian. Um,
when we think about, you know, maybe Q4 and in the 26,
Nick: But again, we do continue to focus on every basis point on our funding side. And so yeah, I think that is how we're viewing it right now. And I guess time will tell here shortly if we see some Fed action and how we'll think about that. Okay. Yeah.
Speaker Change: Uh, and assuming again that yield curve um kind of stays where it is today. Uh, you know, I think it is becoming more challenging to continue to expand, um, Nim into those into those areas without a future Fed rate cut. Um, but again, uh, we do continue to focus on every basis point on our funding side. And uh so yeah I I think that is um how we're viewing it right now and and I guess time will tell here shortly if uh we see some fed action and and how we'll think about that,
Nick: And then just maybe the, you mentioned the subject, just kind of the timing of that. And then I think the securitization, I guess, can you quantify any, you know, if you get economically, you know, the benefit of that you know, how we should think about that. I think part of that will play into the margin as well, but just how we should think about that in the beginning of next year. Sure, yeah, Brian, the securitization of that 350, in terms of the transaction itself, we would anticipate with Very good economics on the A piece and being able to sell the B piece, we think at a minimum, we should be able to break even on that transaction.
Speaker Change: Okay. Yeah, and then just maybe the you mentioned the subject just kind of the timing of that and then I think the securitization, I guess. Um can you quantify any, you know, if you get economically, you know, the benefit of that. Um
You know, how we should think about that. I think part of that will play into the margin as well, but just how we should think about that in uh, in the beginning of next year.
Sure. Yeah, Brian, uh, the securitization of of that 350, uh, in terms of the transaction itself, uh, we would anticipate with, uh,
Nick: But again, being able to fully sell the B piece would be a great outcome for us. I would tell you, I don't know that we would expect that single transaction to. notably impact NIM percentage. Certainly we'll pull back earning assets for a bit, but what we're very happy about is with the new pipelines we're seeing in LIHTC, we anticipate filling that up pretty quickly. So I think we're gonna get back to the point where we're using securitizations to simply make room for more production. So while you'll see a little bit of a pullback in earning assets, we think that hole gets filled in pretty quick with the ramp up of existing construction debt that we put in place.
Speaker Change: Very good economics, on the apiece and, um, being able to sell the B piece. Uh, we think at a minimum we should be able to break even on that transaction. But again, uh, being able to fully sell the B piece uh would be a great outcome for us. Um, I would tell you, I don't know that we would expect that single transaction to
Notably impact, uh, Nim percentage. Uh, certainly we'll pull back, uh, earning assets for a bit.
Speaker Change: But what we're very happy about is with the new pipelines, we're seeing, um, in litech. Uh, we anticipate filling that up pretty quickly, so I think we're going to get back to the point where we're using securitizations to Simply make room for more production. So, while you'll see a little bit of a pullback in, uh, earning assets, uh, we think that hole gets filled in pretty quick with the ring.
Nick: So we're very pleased to be lining up this one big securitization. When we started doing this, we talked about after a couple, we'd have it all figured out. This will be our fifth one. I think we are really starting to get it figured out. We thought it might be efficient to just simply do a smaller one each quarter a couple times a year, but we're likely going to continue to do larger ones less frequently. So that's going to provide us with a better outcome.
Speaker Change: Ramp up of, uh, existing, uh, construction debt that we put in place. So, we're very pleased to be lining up this, uh, 1 big securitization.
Speaker Change: When we started doing this, um, you know, we talked about after a couple, we'd have it all figured out. This will be our fifth 1. I think we are really starting to get it figured out.
We thought it might be uh efficient to just simply do a smaller 1, each quarter or a couple times a year, but we're likely going to continue to do larger ones less frequently. So that's going to provide us with a better outcome.
Nick: And Brian, I'll chime in on the on the subdebt question you had there. So we have $70 million that becomes callable in September, $50 million of that on September 15th, and $20 million of that on September 30th. We do intend to call the entire 70 million and replace. Right now, I think we're targeting September 15th for that replacement of the full amount. We think based on some market deals that have closed so far here more recently, we're targeting something in the low sevens, and that's about 200 basis points less than if we those sub-debt tranches to convert to floating here and also allows us to retain some of that tier two capital for our total risk base.
Speaker Change: That question you had there. So we have 70 million, uh, that becomes callable, uh, in September, uh, 50 million of that on September 15th and 20 million of that on September 30th.
Brian Martin: So that's kind of how we're viewing the landscape and the timing there for sub-debt. Gotcha. Nope, that's helpful.
We do intend to call the entire 70 million, and replace. Um, right now, I think we're targeting September 15th, uh, for that replacement of the full amount. Uh, we think based on some Market, uh, deals that have closed so far here, more recently, we're targeting something in the low 7s, uh, and that's about 200 basis points. Less than if we allowed those, uh, subnet tranches to convert to to floating here. And also allows us to retain some of that tier 2 capital for our total risk space. So that's kind of how we're viewing the landscape and the timing there for subset.
Nick: And then just the last one for me was just on the loan growth, just the outlook. I mean, the, you know, I guess the breakdown of the growth this quarter, LIHTC versus kind of traditional kind of, how did that look? And then just the, you know, the outlook going forward, just, you know, how do you expect the growth to be, you know, driven, you know, in terms of is the bulk of it still going to continue to be the LIHTC or that, you know, you're seeing a pickup in the traditional side? Sure. Thanks, Brian, for that question.
Speaker Change: Gotcha. Nope, that's helpful. And then just the last 1 for me, it was just on the loan growth. Uh, just the Outlook. I mean, the the, you know, I guess the breakdown of the growth, this quarter live Tech versus kind of traditional kind of how did that look. And then, um, just the, you know, the Outlook going forward just you know, how do you expect the growth to be you know, uh driven, you know in terms of is the bulk that's still going to continue to be the life Tech or that, you know, are you seeing a pickup in the traditional side?
Nick: We did have solid growth of 8% in the most recent quarter when you carve out the impact of the M2 equipment runoff. And again, that's going as scheduled and as planned. The growth was in CRE, both Traditional Banking and LIHTC. CNI backed up a bit. We still had some very nice new production in CNI with new and some existing clients, but we continued to see strong payoffs in CNI. I'll just give you a little bit of color. I was at one of our sub-bank board meetings just yesterday. A comment from the team was they had three great clients with really strong balance sheets, very strong performance.
Nick: They simply decided to pay us off when their loans were up for renewal. Their rate was going from a high 3 or 4 handle to a high 6 or a low 7 rate. They had the cash available. They just simply paid us off. Told us they'd be back when they do something new or have another need or if rates come down They might re-lever the balance sheet again, but I think that's why loan growth is a bit soft across the industry right now is For the most part clients are doing really well. They have strong balance sheets a lot of cash and some of them are just opting into Taking some leverage out when the new rate Gets in front of them.
Speaker Change: Thanks, Brian for that question. Um, we did have solid growth of 8% in the most recent quarter when you carve out the impact of the M2 equipment, runoff, uh, and again that's going as scheduled and as planned, um, the growth was in CRA, uh, both traditional Banking and litech. Uh, cni backed up a bit. Uh, we still had some very nice new production in cni, uh, with new and some existing clients, but we continue to see strong payoffs in cni. I just give you a little bit of color. Uh, I was at 1 of our sub Bank board meetings, just yesterday, uh, comment from the team was, they had 3. Great clients with really strong balance, sheets very strong performance. They simply decide to pay us off when their loans are up for Renewal their, their rate was going from a high 3 or 4 hand,
Speaker Change: To a high 6 or a low 7 rate, they had the cash available they just simply paid us off.
Brian Martin: So I do think we'll continue to see some Strong new production in CNI, in CRE, in traditional banking But yes, certainly the LIHTC ramp up will continue to help us with that eight to ten percent rate And I do think it's fair that a big chunk of that eight to ten percent gross loan grade growth would come from LIHTC and Honestly, that's been the case here for for a while now Yeah, okay, and I'll that's it. Just one if I can sneak it in Todd I think you already answered it, but your comment about the capital deployment sounds like even despite it an environment That's picking up in terms of your potential M&A You're still kind of in the camp that it's not a priority and not really a near-term Likelihood given given kind of the dynamics in front of you currently is that accurate based on your earlier comments?
Speaker Change: Uh, told us they'd be back when they do something new or have another need or a Freight's come down. They might relever the balance sheet again but I think that's why loan growth is a bit soft um across the industry right now is um for the most part clients are doing really well. They have strong balance, sheets a lot of cash and uh some of them are just opting into um, taking some leverage out when the new rate, uh, gets in front of them. So I I do think we'll
Speaker Change: Continue to see some strong new production in cni in CRA uh in traditional banking. Uh, but yes, certainly the litc uh, ramp up will continue to help us with that 8 to 10% rate. And I do think it's fair that uh a big chunk of that 8 to 10% gross loan rate. Um, growth would come from litech and honestly that's been the case here for for a while now. Yeah, okay. And I'll uh that's it. I just want if I can sneak it in time and I think you already answered it, but your comment about the capital deployment. Sounds like if it despite it in the environment that's picking up in terms of you know potential m&a you're still kind of in the camp that it's not a priority and not really a near-term likelihood given given kind of the the Dynamics in front of you currently, is that accurate based on your earlier comments?
Todd Gipple: Yeah, Brian, I think that's fair. I'd say it this way. We're open to M&A certainly and can can only conversations are ramping up around the industry. I think everyone's seeing that in the in the announced deals. But our strike zone is very tight for something that works for us. We have great momentum and a lot of organic opportunities to grow EPS and TVV per share, so it's going to really have to be a strong opportunity for us to consider it. Our interest would be in Central Iowa, certainly, or a fifth new market, similar in size and opportunity to our existing markets, but it's going to have to be a very strong fit strategically, culturally, financially.
Speaker Change: Yeah, Brian, I think that's fair. Um I I just say it this way. We're open to m&a certainly and and
Speaker Change: Can can only conversations are ramping up around the industry. I think everyone's seen that in the in the announced deals, um, but our strike zone is very tight for something that works for us.
Speaker Change: Uh we have great momentum and a lot of organic opportunities to grow, Epps and tbv per share. So it's going to really have to be a strong opportunity for us to consider it.
Brian Martin: We do not want it to distract us from building and growing EPS and TVV, so we're open to it. Narrow strike zone, since we don't have anything really on front burner or even back burner at this point, that then tips us over to be thinking about spending some of the capital versus using it for M&A. Got you. Thanks for taking all the questions, guys. Thanks, Brian.
Speaker Change: Our, our interest would be in central Iowa, uh, certainly or a fifth New Market similar in size and opportunity to our existing markets, but it's going to have to be a very strong fit strategically culturally financially. Uh, we do not want to to distract us from building and growing Epps and TBB. So, uh, we're open to it.
Speaker Change: Narrow Strike Zone since we don't have anything really on uh front burner or even back burner at this point that then tips us over to be thinking about spending uh some of the capital versus uh using it for m&a.
Speaker Change: Thanks, Brian. Thanks Brian.
Daniel Tamayo: Our next question will come from Daniel Tamayo with Raymond James. Please go ahead. Thank you. Good morning, guys. Morning, David. Morning.
Our next question will come from Daniel to Mayo with Raymond James, please go ahead.
Daniel Mayo: Thank you. Good morning, guys.
Speaker Change: Um morning, Danny morning.
Daniel Tamayo: So you guys actually have, uh, you know, you got in front of this, this first question, which, uh, in part, which, you know, you talked about all the opportunities from the, the tax bill, um, and changes on the, uh, related to the light tech industry. There was also, there's been some, you know, Rumors or you know, there's a Wall Street Journal article about potential budget cuts to HUD. I'm curious if you have any thoughts on what that could mean for the for the industry, if that might be an offset or if it could have some impact on either There were some thoughts that could impact credit of those multifamily loans.
So you guys actually have uh you know, you got in front of this, this first question which uh in part which you know, you talked about all the opportunities from the the tax bill um and changes on the uh related to the life tech industry there. There was also, there's been some, you know
Speaker Change: Rumors. Or, you know, there's a Wall Street Journal article about potential budget cuts to, to HUD, um, curious. If you have any thoughts on what that could mean for the for the industry, if that might be an offset, or if it could have some impact on on either.
Todd Gipple: Not that that's a big part of what you guys are holding, but some of the LIHTC loans are on the balance sheet, obviously. Just curious if you have any thoughts on that side of changes to the industry. Sure, Danny, I'm really glad you asked that, actually. Because I, I know in April with first quarter, we talked about HUD being a bit of a headwind for us. That has gotten better. What I will tell you is only about a third of our transactions involve HUD. There is something related to the capital stack or the requirements of that specific transaction where we need a, we need a HUD sign off For more information visit www.FEMA.gov clear to close.
Speaker Change: You know, the there, there were some thoughts that could Impact Credit of of those multi family loans, not that that's a big part of what you guys are are holding. But there, you know, some of the litec loans are on the, on the balance sheet. Obviously, um, just curious, if you, uh, if you have any thoughts on on that side of of, you know, changes to the industry.
Sure, Danny. I'm really glad you asked that actually. Um, because I I know in April with first quarter we talked about HUD being a bit of a headwind for us. Um, that has gotten better.
Speaker Change: um, what I will tell you is only about a third of our transactions involve Hut there is something uh related to the capital stack or the requirements of of that specific transaction, where we need a, we need a HUD sign off for
Todd Gipple: And that was holding us up in the first quarter. That's gotten better or responsive. But realistically, if there's more disruption at HUD, it's just going to take longer to get some of those deals cleared to close. We we don't really anticipate or honestly fear anything in terms of government disruption related specifically to LIHTC. And again, when I answered that question about the new bill, I mentioned optics. And I think it was clear to me that that was one of the big wins, that the optics around that were that both sides of the aisle really believe that affordable housing continues to be important.
Clear to close. And that was holding us up in the first quarter of that that's gotten better, or responsive. Um,
But realistically, if there's more disruption at HUD, it's just going to take longer to get some of those deals, clear to close.
Speaker Change: um, we we don't really anticipate or honestly fear anything uh, in terms of government disruption related specifically to litec
Speaker Change: And again, uh, when I answered that question about the new bill, uh, I mentioned the Optics.
and I think it was clear to me that that was 1 of the big wins that the the Optics around that were that both
Todd Gipple: The LIHTC program is the best way to provide it. They've freed up some more credits. So there could be some disruption if HUD goes through some of those things. Honestly, I think it's probably going to be more. specifically impact Section 8 housing and some workforce housing that we don't really play in. fairly optimistic about that. But with what's going on in D.C., we will continue to be vigilant, keep our ears to the ground a bit. But I'm glad you asked, Danny, because I view it as a big win coming out of this new legislation that both sides of the aisle agree this was a very important thing for the entire country.
Speaker Change: Uh, sides of the aisle, really believe that affordable housing continues to be important. Uh, the litec program is the best way to Pro provide it. They've, uh,
Speaker Change: Freed up some more credits. Um so there could be some disruption if HUD goes through some of those things. Honestly I think it's probably going to more
Speaker Change: specifically impact, um, Section 8 Housing, and some Workforce housing that we don't really play in
Speaker Change: um, I think I'm
Speaker Change: fairly optimistic about that. Um, but with what's going on in DC, we will continue to be vigilant and keep our ears to the ground a bit. But I'm glad you asked Danny because um,
Speaker Change: I view it as a big win coming out of, uh, this new legislation that, uh, both sides of the aisle agree. This was a very important, um, thing for the entire country.
Daniel Tamayo: That's helpful. Appreciate your thoughts there.
Nick: You've also talked quite a bit today about the B pieces and how you're planning to sell those portions when you're in the process of the securitizations. Just curious what you still have on your balance sheet from prior securitizations in terms of B pieces, and if there's plans to sell those, and if they do, where you think that would impact in terms of financials from the sale of those B pieces. Yeah, Danny, I'll start and Todd will add some comments here, but we've done four securitizations since 2023, and there's about $650 million of loans that we pushed off the balance sheet.
Speaker Change: That's uh, that's helpful. Appreciate your thoughts there. Um,
Speaker Change: You know, you've also talked, uh, quite a bit today about the, the B pieces and how you're planning to, uh, to sell the Those portions when you're, you know, in the process of the, the securitizations. Um, just curious what you still have on your balance sheet from prior, uh, securitizations in terms of BP's. And if there is plans to sell those and if you know, if they do, you know where you think that would um, you know, the impact in terms of uh, financials from from the sales, those be pieces.
Nick: We're retaining on the B piece about just over $80 million that we hold as a trading security in our investment portfolio. those yield about 9% on a TEY basis. So we're getting paid nicely for those to hold those, but the capital associated with that really reverts back to that $650 million of loans, almost as if they're still on our books. So that's, you know, the decoupling that Todd mentioned from our TCE and our CET1 ratio. It's really directly because of that. So selling off some on a future securitization and maybe some existing certainly can help that decoupling minimize a bit here.
Daniel Mayo: Yeah, Danny I'll start title. I had some comments here, but, uh, we've done 4, Secours, 2023. And there's about 650 million of loans that we pushed off the balance sheet. Um, we're retaining on the B piece about 8, just over 80 million, um, that we hold as a trading Security in our Investment Portfolio.
Nick: Yeah. So Danny, you asked about our interest in perhaps selling some of these. They are... very good yield. Because we're in the business, we understand the risk and even though those are the first loss tranches, hence the B piece, feel really good about the asset quality there. We have talked about perhaps selling some of the existing B pieces. To be transparent, if we did that, we would take a modest loss. to do that because of those being the personal astronomers. I think what it's gonna come down to is. I think we're going to fix that with the sale of the B piece in the future securitization and likely not feel compelled to sell one of the existing B tranches.
A bit here. Yeah. So Danny. You asked you asked about our interest in perhaps selling some of these. Uh they they are very good yield um, because we're in the business, we understand the risk and even though those are the, uh, first loss tranches, hence, the B piece feel really good about the asset quality there. Um, we have talked about perhaps selling some of the existing B pieces, um, to be transparent if we did that, we would take a modest loss.
To do that because of those being the First lost Ranch. Uh I think what it's going to come down to is, um,
Daniel Mayo: I think we're going to fix that with the sale of the B piece in the future securitization and likely not feel.
Nick: Having said that, if we feel like we get some good economics and we have an investor, or honestly, sometimes it's a developer that wants to come back in and buy the B piece, if they have some deals in that B piece tranche, they have more confidence to buy it. So we may consider it. I'm sorry to not give you a straight up answer on that. It is something we could consider doing. But we think sale of the large BPs and the large securitization in the first quarter is really our main focus. Got it. Okay, so may continue with with what's on the balance sheet, but going forward, trying to sell off the full piece A and B.
Daniel Mayo: Compelled to sell 1 of the existing branches. Um, having said that, if we feel like we get some good economics and we have, um, an investor or honestly, sometimes it's a developer that wants to come back in and buy the B piece. If they have some deals in that, uh, BP stranch they, they have more confidence to buy it.
Daniel Mayo: So we may consider it, I'm sorry to not give you a straight up, answer on that. Um, it is something we could consider doing, um, but we think sale of the large BPS and the large securitization. In the first quarter is really our main focus.
Got it. Okay, so may continue with with what's on the balance sheet. But going forward trying to sell off the
Nick: In future, yes, Danny, in future securitizations, I think you can count on that. Okay, great.
Speaker Change: The full piece A and B in future. Yes. Danny and future security. So I think you can count on that from us.
Daniel Mayo: Okay, great.
Daniel Tamayo: And then lastly the You're crossing, I guess you'll be close to $9.5 billion, you're pushing up on $10 billion. You've talked about this in the past, but just curious where you guys are now in terms of derivative impact and anything else on the expense side as you cross $10 billion. Sure. Thanks, Danny. We believe it may be 27, more likely 28 when we cross. Regulatory requirements and the Durbin impact are really the following year, so it's out a ways for us. Right now, we continue to feel like that would be around three million of Durbin impact on interchange revenue.
Daniel Mayo: um, and then lastly, the um,
Daniel Mayo: you know, you're Crossing, I mean, if you, I guess you'll be close to 9 and a half billion you, you pushing up on 10 billion, you've talked about this in the past, but, um, just curious where you guys are now in terms of Durban impact, and anything else on the, uh, on the expense side as you, um, cross 10 billion,
Speaker Change: Sure. Thanks Danny. Uh, we believe that maybe 27.
Daniel Mayo: more likely 28, when we cross, um,
Todd Gipple: I think the good news for us is that's roughly two good-sized light tech deals to make up that $3 million. So we feel like we've got other forms of non-interest income to help mitigate that impact. But it would certainly lower our interchange revenue, and again, that estimate would be about $3 million. We expect to have the expense fully loaded by then. We've already been doing that. We've done that. over the last two years already. We're staying within the guardrails on non-interest expense growth, so the buildup of these capabilities we need isn't really noticeable, and that is our plan.
Daniel Mayo: Regulatory requirements in the Durban. Impact are really the following year, so it's out of ways for us. Uh, right now, we continue to feel like that would be around 3 million of Durban impact on interchange Revenue. Um,
Daniel Mayo: I think the good news for us is that's roughly 2 good-sized litech deals uh to make up that 3 million dollars. So we feel like we've got other forms of non-interest income to uh, to help mitigate that impact, but it would uh certainly um, lower our interchange revenue. And again, that estimate would be about 3 million.
Todd Gipple: So we've already been making the investment in talent, continue to ramp this up. We'll be fully ready when we need to be. We have a great relationship with the Chicago Fed, both the they have worked with our banks in Iowa for our entire history. We're not overly concerned about crossing $10 billion, we're not going to... We're not going to feel like we've got outside non-interest expense growth leading up to that. We think we're going to be fully baked in when it happens. Danny, I would just add here as part of our digital transformation, we had the opportunity to renegotiate our debit card contract.
Daniel Mayo: We expect to have the expense, uh, fully loaded by them. We've already been doing that, we've done that, um, over the last 2 years already, uh, we're staying within the guard rails, on non-interest expense growth. So, the buildup of these capabilities, we need isn't really noticeable and that is our plan. Um, so we've already been making the investment in Talent, continue to ramp this up, will be fully ready when we need to be. Um, we have a great relationship with the Chicago fed, uh, both the Chicago staff, and, and we're blessed to have a De Moine, Iowa Office of the Chicago fed as well. And they have worked with our banks in Iowa for our entire history. So,
Daniel Mayo: we're we're not overly concerned about Crossing 10 billion, we're not going to
We're not going to feel like we've got, uh, outside, uh, non-interest expense growth, leading up to that. We think we're going to be fully baked in when it happens.
Daniel Tamayo: So we'll see some upside from that when it comes to crossing over $10 billion here as well. So some of the impact could be muted a little bit as a result of stronger fee income from that. Got it. Okay. Very helpful. Thanks, guys. Appreciate it. That's all from me. Thanks, Danny. Thank you.
Daniel Mayo: Danny. I I would just add here as part of our digital transformation, we had the opportunity to renegotiate our debit card contract. So uh we'll see some upside from that. Um, when it comes to crossing over 10 billion here as well. So some of the impact could be muted a little bit uh, as a result of stronger, uh, fee income from that.
Speaker Change: Got it. Okay, very helpful. Thanks guys. Appreciate it. That's all from me.
Thanks Danny. Thank you.
Operator: Again, if you have a question, please press star, then 1.
Jeff Rulis: Our next question will come from Jeff Rulis with DA Davidson. Please go ahead. Thanks. Good morning. A question on the credit side. I wanted to see if there was correlation on the non-performing loan decline and the net charge-offs. And maybe... if so or if not, the makeup of the charge-offs from a segment, basically. Sure. Thanks, Jeff. Yeah, very high degree of correlation there. We essentially got a little more aggressive with charging off some of the M2 Equipment Finance NPAs that were already fully reserved. So, NPAs came down, our ACL percentage came down because they were fully reserved and baked in.
Speaker Change: again, if you have a question, please press star then 1
Speaker Change: Our next question will come from Jeff rules with da Davidson. Please go ahead.
Speaker Change: Basis.
Sure, thanks Jeff. Um, yeah, very high degree of correlation there, we essentially.
Nick: We didn't need to reprovide, so provision expense was static even with charge-offs up. Really just trying to Clean up the pool of those loans. I would tell you for the most part, those charge-offs were that M2 Equipment Finance segment of our portfolio, not really other charge-offs to speak of. And I would tell you, glad you asked about him too, Our projections were always that the back half of this year we were going to start to see those NPAs and those charge-offs start to slow. And our projections right now are lining up with that. Instead of charge-offs in that segment to be more like $3 or $4 million a quarter, we're anticipating that those are going to roll down to more like $2 or $3 million per quarter.
Speaker Change: Uh, got a little more aggressive with charging off some of the M2 equipment finance npas that were already fully reserved. So, uh, npas came down our ACL percentage came down because they were fully reserved, uh, and baked in, uh, we didn't need to be provide so provision expense, uh, was static, even with charge offs up, um, really just trying to
Clean up, uh, the pool of those loans. Uh, I would tell you for the most part, those charge offs were that M2 equipment Finance, uh,
Speaker Change: Segment of our portfolio. Not really other charge offs, uh, to speak of and I I would tell you glad you asked about M2. Um,
Nick: That is starting to soften up. And that was part of the reason we wanted to be aggressive in charging off some of the ones fully reserved. The NPAs coming in new are slowing. So the velocity of that is getting better. And we'll be down to about $190 million in that portfolio at the end of the calendar year. So about 46% of that's run off. We're happy about that. got it.
Speaker Change: Our projections, uh, were always that the back half of this year. We were going to start to see, uh, those npas and those charge offs, uh, start to slow, and our projections right now are lining up with that, um, instead of charge offs in that segment to be more like 3 or 4 million a quarter. Uh, we're anticipating that those are going to roll down to more like 2 or 3 million per quarter, uh, that is starting to soften up. Um,
And that was part of the reason we wanted to be aggressive in charging off. Some of the ones fully reserved, uh, the NP npa's coming in new or slowing
Speaker Change: So, the velocity of that is getting better.
Speaker Change: And um we'll be down to about 190 million in that portfolio at the end of the calendar year. So about 46% of that is run off and we're happy about that.
Nick: Maybe I'll want to stay on credit, but I want to circle back to the M2 piece. But the criticized increase, the makeup of those loans that came in is What were those? Sure, yeah, sure. And actually that's an easy question because it was really just one credit that consisted of that increase. So, Criticize went up $13 million, one large deal, getting downgraded to special mention. It's well collateralized at 1.4 times the loan amount on a very recent appraisal, and we're just going to nudge that client out of the bank. We've already had that conversation. They are looking for other financing.
Got it. I I maybe I'll want to stay on credit but I want to Circle back to the M2 piece. But uh um the criticized increase the the makeup of of those loans that came in is, um,
Speaker Change: What were those? Sure.
Speaker Change: Yeah, sure. And actually that's, uh, easy question because it was really just 1 Credit that uh,
Consisted of that increase. Um,
Speaker Change: So criticized went up 13 million 1 large deal getting downgraded to special mention. Um, it's well collateralized at 1.4 times the loan amount on a very recent appraisal.
Nick: We think with the amount of collateral that they have, somebody else will end up taking this deal. We do not expect any provision for it, any loss from it, but based on the performance of that credit, it did get downgraded, and we're working pretty hard to nudge it out by the end of the year. a CRE or what was the... Yeah, actually we don't do much of this, but it was an ag-related loan in Missouri. Had not been a problem for a long, long time. We weren't real happy with the performance we were seeing, and so we've asked that credit to activate.
Speaker Change: Uh, and we're just going to nudge that client out of the bank. We've already had that conversation. Um, they are looking for other financing. We think with the amount of collateral that they have, uh, somebody else, uh, will end up taking this, uh, deal. Uh, we do not expect, um, any provision for it, any loss from that? Uh, but based on the performance,
Speaker Change: To that credit. It did get downgraded and uh,
Speaker Change: we're working pretty hard to nudge it out by the end of the year.
A CRA or what was the.
Nick: And again, based on the strength of the underlying collateral and its land and land value, we think it's going to be pretty easy to get that moved. And the borrower is communicating well with us on that. Got you. Thanks.
Speaker Change: Yeah, actually, uh, we don't do much of this. But, uh, it was an a related loan, uh, in, in Missouri, uh, had not been a problem for a long, long time. Um, um, we weren't real happy with the performance we were seeing. And so we've asked that credit, to, to exit and again, uh, based on the strength of the underlying collateral. And it's, it's land and land value. Um, we think it's going to be pretty easy. To get that moved. And the borrower is
Speaker Change: Communicating well with us on that.
Nick: And over to the M2 and growth question, Todd, you mentioned a gross 8 to 10% growth rate for the second half of this year. I guess that's, is the net, the M2 runoff, is there anything else that would drive kind of against the 8 to 10, or is that the piece that we're largely talking about? Yeah, Jeff, great, great question on that. So it can be more clear, it would really be the runoff of M2 that would net that down. Certainly, until we get to securitization offtake. So that runoff for Q3 is projected to be a little over $30 million.
Speaker Change: Got you uh thanks and and over to the M2 and growth question and Todd, you mentioned a gross 8 to 10% uh growth rate for the second half of this year. Um,
I guess that's is the net. Uh, the M2 runoff, is there anything else that would drive, uh, kind of against the 8 to 10? Uh, or is that the piece that we're largely talking about?
Jeff Rulis: is the bogey there and roughly the fourth quarter would be a little more modest than that 28. So it is rolling downhill. So the impact on the net loan growth is more modest now. So if you're modeling that number, it'd be, let's say, $32 million in Q3 and $28 million in Q4. Great. Thanks, Todd. Thanks, Joe. With no further questions, this will conclude our question and answer session.
Todd Gipple: Yeah, Jeff great. Great question on that. So he can be more clear, it would really be the runoff of them too that when that that down, uh, certainly, um, until we get to, uh, securitization offtake. So, that runoff, uh, for Q3 is projected to be a little over 30 million dollars.
is the the bogey there and roughly the
Todd Gipple: fourth quarter would be a little more.
Than that 28. So it is rolling downhill. So the impact on the net loan growth is more modest. Now, so if you're modeling that number, it'd be, let's say 32 million in Q3 and 28 million in Q4.
Todd Gipple: Great. Uh, thanks Todd.
Speaker Change: Thanks Jeff.
Todd Gipple: I would like to turn the conference back over to Todd Gipple for any closing remarks. Thank you for joining our call. We appreciate your interest in our company. Have a great day, and we look forward to connecting with you very soon. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Thanks Jeff with no further questions. This will conclude our question and answer session. I would like to turn the conference back over to Todd gibel for any closing remarks.
Speaker Change: Thank you for joining our call. Uh, we appreciate your interest in our company, have a great day and we look forward to connecting with you very soon. Thanks.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect