Q1 2026 QCR Holdings Inc Earnings Call

April 23, 2026

Speaker #1: The market yesterday, the company issued its earnings press release for the first quarter. If anyone joining us today has not yet received a copy, it is available on the company's website www.qcrh.com.

Speaker #1: With us today from management are Todd Gipple, President and CEO, and Nick Anderson, CFO. Management will provide a summary of the financial results and then we will open the call to questions from analysts.

Operator 2: Good morning, and thank you for joining us today for QCR Holdings, Inc.'s Q1 2026 Earnings Conference Call. Following the close of the market yesterday, the company issued its earnings press release for Q1 2026. If anyone joining us today has not yet received a copy, it is available on the company's website, www.qcrh.com. With us today from management are Todd Gipple, President and CEO, and Nick Anderson, CFO. Management will provide a summary of the financial results, and then we will open the call to questions from analysts. Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission.

Operator: Good morning, and thank you for joining us today for QCR Holdings, Inc.'s Q1 2026 Earnings Conference Call. Following the close of the market yesterday, the company issued its earnings press release for Q1 2026. If anyone joining us today has not yet received a copy, it is available on the company's website, www.qcrh.com. With us today from management are Todd Gipple, President and CEO, and Nick Anderson, CFO. Management will provide a summary of the financial results, and then we will open the call to questions from analysts. Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission.

Speaker #1: Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission.

Speaker #1: Good morning , and thank you for joining us today for Qcr . S first Quarter 2020 earnings conference call . Following the close of the market yesterday , the company issued its earnings press release for the first quarter .

Speaker #1: As part of these guidelines, any statements made during this call concerning the company's hopes, beliefs, expectations, and predictions of the future are forward-looking statements.

Speaker #1: If anyone joining us today has not yet received a copy , it is available on the company's website . W WW Dot com With us today from management are Todd Gipple president and CEO and Nick Anderson , CFO management will provide a summary of the financial results , and then we will open the call to questions from analysts Before we begin , I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward looking statements , as defined by the Securities and Exchange Commission As part of these guidelines , any statements made during this call concerning the company's hopes , beliefs , expectations and predictions of the future are forward looking statements and actual results could differ materially from those projected Additional information on these factors is included in the company's SEC filings , which are available on the company's website Additionally , management may refer to non-GAAP measures , which are intended to supplement but not substitute for the most directly comparable GAAP measures .

Speaker #1: And actual results could differ materially from those projected. Additional information on these factors is included in the company's SEC filings which are available on the company's website.

Speaker #1: Additionally, management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today.

Operator 2: As part of these guidelines, any statements made during this call concerning the company's hopes, beliefs, expectations, and predictions of the future are forward-looking statements, and actual results could differ materially from those projected. Additional information on these factors is included in the company's SEC filings, which are available on the company's website. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute, for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference call is being recorded and will be available for replay through 30 April 2026, starting this afternoon, approximately one hour after the completion of this call. It will also be accessible on the company's website.

Operator: As part of these guidelines, any statements made during this call concerning the company's hopes, beliefs, expectations, and predictions of the future are forward-looking statements, and actual results could differ materially from those projected. Additional information on these factors is included in the company's SEC filings, which are available on the company's website. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute, for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference call is being recorded and will be available for replay through 30 April 2026, starting this afternoon, approximately one hour after the completion of this call. It will also be accessible on the company's website.

Speaker #1: As well as reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference call is being recorded and will be available for replay through April 30, 2026 starting this afternoon approximately one hour after the completion of this call.

Speaker #1: It will also be accessible on the company's website. I will now turn the call over to Mr. Todd Gipple at QCR HOLDINGS. Please go ahead.

Speaker #2: Good morning, everyone. Thank you for joining our call today. I'd like to start with an overview of our first quarter performance and then Nick will walk us through the financial results in more detail.

Speaker #1: The press release available on the website contains the financial and other quantitative information to be discussed today , as well as reconciliation of GAAP to non-GAAP measures .

Speaker #2: We are pleased to deliver the most profitable first quarter in our company's history. This performance was driven by healthy loan and deposit growth, significantly lower non-interest expense, and modest margin expansion.

Speaker #1: As a reminder , this conference call is being recorded and will be available for replay through April 30th , 2026 . Starting this afternoon , approximately one hour after the completion of this call .

Speaker #2: We maintained excellent asset quality and generated meaningful growth in tangible book value per share while returning capital to our shareholders through opportunistic share repurchases.

Speaker #1: It will also be accessible on the company's website . I will now turn the call over to Mr. Todd Gipple at Qcr Holdings .

Operator 2: I will now turn the call over to Mr. Todd Gipple at QCR Holdings. Please go ahead.

Operator: I will now turn the call over to Mr. Todd Gipple at QCR Holdings. Please go ahead.

Todd Gipple: Good morning, everyone. Thank you for joining our call today. I'd like to start with an overview of our Q1 performance, and then Nick will walk us through the financial results in more detail. We are pleased to deliver the most profitable Q1 in our company's history. This performance was driven by healthy loan and deposit growth, significantly lower noninterest expense, and modest margin expansion. We maintained excellent asset quality and generated meaningful growth in tangible book value per share while returning capital to our shareholders through opportunistic share repurchases. We also continue to make further investments in our digital transformation as we build a more modern, scalable bank for our clients and employees. Strong performance in our traditional banking and wealth management businesses partially offset the linked-quarter reduction in our capital markets revenue.

Speaker #2: We also continue to make further investments in our digital transformation as we build a more modern, scalable bank for our clients and employees. Strong performance in our traditional banking and wealth management businesses partially offset the late quarter reduction in our capital markets revenue.

Speaker #1: Please go ahead .

Speaker #2: Good morning everyone . Thank you for joining our call today . I'd like to start with an overview of our first quarter performance .

Speaker #2: And then Nick will walk us through the financial results in more detail We are pleased to deliver the most profitable first quarter in our company's history .

Speaker #2: Capital markets results were in line with our expectations given typical first quarter seasonality and were equal to our five-year average for Q1 production. As a result, we delivered a very strong return on average assets of 1.40% and earnings per share growth of 31% compared to the same period last year.

Speaker #2: This performance was driven by healthy loan and deposit growth, significantly lower non-interest expense, and modest margin expansion. We maintained excellent asset quality and generated meaningful growth in tangible book value per share.

Speaker #2: While returning capital to our shareholders through opportunistic share repurchases . We also continue to make further investments in our digital transformation as we build a more modern , scalable bank for our clients and employees .

Speaker #2: Highlighting the strong earnings potential of our diverse business model. Our traditional banking business continues to deliver solid organic growth supported by healthy commercial and industrial activity across our markets.

Speaker #2: Performance in our traditional banking and wealth management businesses was partially offset by the quarter reduction in our capital markets. Capital markets revenue results were in line with our expectations.

Todd Gipple: Capital markets results were in line with our expectations, given typical Q1 seasonality, and were equal to our five-year average for Q1 production. As a result, we delivered a very strong return on average assets of 1.40% and earnings per share growth of 31% compared to the same period last year, highlighting the strong earnings potential of our diverse business model. Our traditional banking business continues to deliver solid organic growth, supported by healthy commercial and industrial activity across our markets. Our multi-charter model enables us to consistently gain market share with locally led community banks that build deep relationships with high-value clients in communities where they live and work. Our digital transformation remains on track with the successful completion of the second of four core system conversions in early April.

Speaker #2: Our multi-charter model enables us to consistently gain market share with locally led community banks that build deep relationships with high-value clients and communities where they live and work.

Speaker #2: Given typical first quarter seasonality and were equal to our five year average per Q1 production . As a result , we delivered a very strong return on average assets of 1.40% and earnings per share growth of 31% compared to the same period last year , highlighting the strong earnings potential of our diverse business model .

Speaker #2: Our digital transformation remains on track with the successful completion of the second of four core system conversions in early April. Modernizing our technology stack will deliver meaningful benefits for both our clients and employees expanding our service capabilities enhancing the client experience and driving operating leverage.

Speaker #2: Our traditional banking business continues to deliver solid organic growth , supported by healthy commercial and industrial activity across our markets . Our multi charter model enables us to consistently gain market share with locally led community banks that build deep relationships with high value clients and communities where they live and work Our digital transformation remains on track with this successful completion of the second of four core system conversions in early April .

Speaker #2: Our wealth management business also delivered very strong results with annualized revenue growth of 14%. Our success in this business continues to be driven by the experience of our team and the power of our relationship-driven model which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisors across our markets.

Todd Gipple: Modernizing our technology stack will deliver meaningful benefits for both our clients and employees, expanding our service capabilities, enhancing the client experience, and driving operating leverage. Our wealth management business also delivered very strong results with annualized revenue growth of 14%. Our success in this business continues to be driven by the experience of our team and the power of our relationship-driven model, which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisors across our markets. We are deepening client engagement and reinforcing wealth management as a key driver of our sustained top-tier financial performance. Our LIHTC lending business also continues to perform as the demand for affordable housing remains robust, driven by a lack of supply and ongoing affordability challenges nationwide.

Speaker #2: We are deepening client engagement and reinforcing wealth management as a key driver of our sustained top-tier financial performance. Our LIHTC lending business also continues to perform as the demand for affordable housing remains robust driven by a lack of supply and ongoing affordability challenges nationwide.

Speaker #2: Modernizing our technology stack will deliver meaningful benefits for both our clients and employees Expanding our service capabilities . Enhancing the client experience , and driving operating leverage .

Speaker #2: Our wealth management business also delivered very strong results with annualized revenue growth of 14% . Our success in this business continues to be driven by the experience of our team and the power of our relationship driven model , which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisors across our markets We are deepening client engagement and reinforcing wealth management as a key driver of our sustained top tier financial performance .

Speaker #2: We view LIHTC lending as a highly profitable annually consistent and differentiated line of business for QCRH. Anchored by our deep network of developer relationships and the historically high-quality assets our platform delivers.

Speaker #2: Our LIHTC business has consistently delivered strong results demonstrating our success in navigating various interest rate cycles and dynamic market conditions. Our strong relationships with industry-leading LIHTC developers combined with market demand position us well to grow this business and further strengthen our financial performance.

Speaker #2: Our Lighttech lending business also continues to perform as the demand for affordable housing remains robust , driven by a lack of supply and ongoing affordability challenges nationwide We view tech lending as a highly profitable annually consistent and differentiated line of business for Sheikh.r , anchored by our deep network of developer relationships and the historically high quality assets our platform delivers Our Lighttech business has consistently delivered strong results , demonstrating our success in navigating various interest rate cycles and dynamic market conditions Our strong relationships with industry leading Lighttech developers , combined with market demand , position us well to grow this business and further strengthen our financial performance .

Todd Gipple: We view LIHTC lending as a highly profitable, annually consistent, and differentiated line of business for QCRH, anchored by our deep network of developer relationships and the historically high-quality assets our platform delivers. Our LIHTC business has consistently delivered strong results, demonstrating our success in navigating various interest rate cycles and dynamic market conditions. Our strong relationships with industry-leading LIHTC developers, combined with market demand, position us well to grow this business and further strengthen our financial performance. Given the strength of our pipeline in our traditional and LIHTC lending platforms, we are reaffirming our guidance for gross annualized loan growth of 10% to 15% over the final three quarters of 2026. We are also increasing the lower end of our capital markets revenue guidance by $5 million, now targeting a range of $60 million to $70 million for the next four quarters.

Speaker #2: Given the strength of our pipeline and our traditional and LIHTC lending platforms we are reaffirming our guidance for gross annualized loan growth of 10 to 15% over the final three quarters of 2026.

Speaker #2: We are also increasing the lower end of our capital markets revenue guidance by 5 million now targeting a range of 60 million to 70 million for the next four quarters.

Speaker #2: In combination with our LIHTC permanent loan securitizations launched in 2023 we have also begun partnering with private investors in LIHTC construction loan sale transactions.

Speaker #2: These transactions enable us to expand our permanent LIHTC lending capacity which will drive increased capital markets revenue. The ability to sell off these LIHTC construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects in addition to the permanent financing that generates our capital markets revenue.

Speaker #2: Given the strength of our pipeline and our traditional and lighttech lending platforms . We are reaffirming our guidance for gross annualized loan growth of 10 to 15% over the final three quarters of 2026 .

Speaker #2: We are also increasing the lower end of our capital markets revenue guidance by 5 million . Now targeting a range of 60 million to 70 million for the next four quarters .

Speaker #2: This has allowed us to grow our market share in the affordable housing space. During the quarter we identified a total of 523 million in LIHTC loans both construction and permanent for securitization and sale.

Todd Gipple: In combination with our LIHTC permanent loan securitizations launched in 2023, we have also begun partnering with private investors in LIHTC construction loan sale transactions. These transactions enable us to expand our permanent LIHTC lending capacity, which will drive increased capital markets revenue. The ability to sell off these LIHTC construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects, in addition to the permanent financing that generates our capital markets revenue. This is allowing us to grow our market share in the affordable housing space. During the quarter, we identified a total of $523 million in LIHTC loans, both construction and permanent, for securitization and sale. The transactions are planned to close during Q2 and will mark our fifth permanent loan securitization and our second construction loan sale. This is our LIHTC flywheel in action.

Speaker #2: In combination with our Lighttech permanent loan securitizations launched in 2023 . We have also begun partnering with private investors in Lighttech construction loan sale transactions .

Speaker #2: The transactions are planned to close during the second quarter and will mark our fifth permanent loan securitization and our second construction loan sale. This is our LIHTC flywheel in action.

Speaker #2: These transactions enable us to expand our permanent Lighttech lending capacity , which will drive increased capital markets revenue The ability to sell off these tech construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects .

Speaker #2: Strong demand for affordable housing reinforced by the federal government's commitment to increased LIHTC tax credits combined with our deep developer relationships and our exceptional client service positions us to capture market share from the larger competitors in this space.

Speaker #2: In addition to the permanent financing that generates our capital markets revenue, this is allowing us to grow our market share in the affordable housing space.

Speaker #2: During the quarter , we identified a total of 523 million in Lighttech loans , both construction and permanent for securitization and sale . The transactions are planned to close during the second quarter and will mark our fifth permanent loan securitization and our second construction loan sale .

Speaker #2: LIHTC industry's proven long-term performance drives investor demand for these assets. Enabling us to execute LIHTC loan securitizations and sales. These transactions allow us to proactively manage concentration risk balance sheet growth liquidity and capital levels while generating increased capital markets revenue.

Speaker #2: This is our tech flywheel in action . Strong demand for affordable housing , reinforced by the federal government's commitment to increase Lighttech tax credits .

Todd Gipple: Strong demand for affordable housing, reinforced by the federal government's commitment to increase LIHTC tax credits, combined with our deep developer relationships and our exceptional client service, positions us to capture market share from the larger competitors in this space. LIHTC industry's proven long-term performance drives investor demand for these assets, enabling us to execute LIHTC loan securitizations and sales. These transactions allow us to proactively manage concentration risk, balance sheet growth, liquidity, and capital levels while generating increased capital markets revenue. We are building an asset-light, capital-efficient, and revenue-heavy business in affordable housing. While securitizations and LIHTC construction loan sales temper near-term on-balance sheet growth, they enhance long-term profitability by creating more capacity.

Speaker #2: We are building an asset light capital efficient and revenue-heavy business in affordable housing. While securitizations and LIHTC construction loan sales temper near-term unbalanced sheet growth they enhance long-term profitability by creating more capacity.

Speaker #2: Combined with our deep developer relationships and our exceptional client service , positions us to capture market share from the larger competitors in this space .

Speaker #2: By tech industry's proven long term performance drives investor demand for these assets , enabling us to execute Lighttech loan securitizations and sales These transactions allow us to proactively manage concentration risk , balance sheet growth , liquidity and capital levels while generating increased capital markets revenue .

Speaker #2: The balance sheet capacity created by these transactions is then rapidly redeployed into new originations allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the foregone interest income over time.

Speaker #2: These loan sales and securitizations are also allowing us to strategically manage our total assets under the 10 billion asset threshold this year. We anticipate growing beyond 10 billion sometime in 2027 and we plan to be fully prepared for the associated organizational impacts by mid-2028.

Speaker #2: We are building an asset light capital efficient and revenue heavy business in affordable housing . While securitizations and light tech construction , loan sales temper near-term on balance sheet growth .

Speaker #2: They enhance long term profitability by creating more capacity The balance sheet capacity created by these transactions is in rapidly redeployed into new originations , allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the forgone interest income over time These loan sales and securitizations are also allowing us to strategically manage our total assets under the 10 billion asset threshold this year .

Todd Gipple: The balance sheet capacity created by these transactions is then rapidly redeployed into new originations, allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the foregone interest income over time. These loan sales and securitizations are also allowing us to strategically manage our total assets under the $10 billion asset threshold this year. We anticipate growing beyond $10 billion sometime in 2027, and we plan to be fully prepared for the associated organizational impacts by mid-2028, building on the planning efforts we began in 2023. Our company is executing at a high level across all three of our core lines of business. Our team has driven a five-year earnings per share CAGR of 14% and a five-year tangible book value per share CAGR of 12.5%.

Speaker #2: Building on the planning efforts we began in 2023. Our company is executing at a high level across all three of our core lines of business.

Speaker #2: Our team has driven a five-year earnings per share CAGR of 14% and a five-year tangible book value per share CAGR of 12.5%. Our continued investments in talent technology and strategic growth combined with discipline expense management position us to sustain this top-tier financial performance.

Speaker #2: We anticipate growing beyond 10 billion sometime in 2027 , and we plan to be fully prepared for the associated organizational impacts by mid 2028 .

Speaker #2: I am grateful for our 1,000 teammates that take exceptional care of our clients our communities and each other as they deliver long-term value for our shareholders.

Speaker #2: Building on the planning efforts we began in 2023, our company is executing at a high level across all three of our core lines of business.

Speaker #2: I will now turn the call over to Nick to provide further details regarding our first quarter results.

Speaker #2: Our team has driven a five year earnings per share of 14% , and a five year tangible book value per share . Of 12.5% .

Speaker #1: Thank you, Todd. And good morning, everyone. We delivered net income of 33 million or $1.99 per diluted share for the quarter. Net interest income was 67 million and increased slightly on a link quarter basis when adjusted for fewer days in the first quarter.

Todd Gipple: Our continued investments in talent, technology, and strategic growth, combined with disciplined expense management, position us to sustain this top-tier financial performance. I am grateful for our 1,000 teammates that take exceptional care of our clients, our communities, and each other as they deliver long-term value for our shareholders. I will now turn the call over to Nick to provide further details regarding our Q1 results.

Speaker #2: Our continued investments in talent , technology and strategic growth , combined with disciplined expense management , position us to sustain this top tier financial performance .

Speaker #1: Our NIM TEY increased one basis point from the fourth quarter of 2025. Which was below the low end of our guidance range. Our robust deposit growth came early in the quarter from our correspondent business which carries higher pricing and when combined with loan growth occurring very late in the quarter margin expansion was muted.

Speaker #2: I am grateful for our 1000 teammates that take exceptional care of our clients , our communities , and each other as they deliver long term value for our shareholders .

Speaker #2: I will now turn the call over to Nik to provide further details regarding our first quarter results Thank you , Todd , and good morning , everyone .

Nick Anderson: Thank you, Todd, and good morning, everyone. We delivered net income of $33 million or $1.99 per diluted share for the quarter. Net interest income was $67 million and increased slightly on a linked-quarter basis when adjusted for fewer days in Q1. Our NIM TEY increased 1 basis point from Q4 2025, which was below the low end of our guidance range. Our robust deposit growth came early in the quarter from our correspondent business, which carries higher pricing, and when combined with loan growth occurring very late in the quarter, margin expansion was muted. The increase in our margin was driven by significant improvements in the cost of funds, partially offset by a reduction in our earning asset yields. We continue to have a disciplined approach to deposit pricing.

Speaker #1: The increase in our margin was driven by significant improvements in the cost of funds partially offset by a reduction in our earning asset yields.

Speaker #2: We delivered net income of $33 million , or $1.99 per diluted share for the quarter Net interest income was $67 million and increased slightly on a linked quarter basis .

Speaker #1: We continue to have a disciplined approach to deposit pricing and combined with a liability-sensitive balance sheet our cost of funds betas are more than one and a half times those of our earning assets during the current rate-cutting cycle.

Speaker #2: When adjusted for fewer days in the first quarter . Our Nim T increased one basis point from the fourth quarter of 2025 , which was below the low end of our guidance range .

Speaker #1: Since the Fed began cutting rates in 2024 our cost of funds have declined by 79 basis points. Compared to only a 47 basis point decline in earning asset yields.

Speaker #2: Our robust deposit growth came early in the quarter from our correspondent business , which carries higher pricing . And when combined with loan growth occurring very late in the quarter Margin expansion was muted .

Speaker #1: While we continue to benefit from repricing lower yielding loans into higher market rates the opportunity is naturally moderating as the rate-cutting cycle matures. During the quarter new loan origination yields exceeded those on loan payoffs by 22 basis points.

Speaker #2: The increase in our margin was driven by significant improvements in the cost of funds , partially offset by a reduction in our earning asset yields .

Speaker #2: We continue to have a disciplined approach to deposit pricing and combined with a liability sensitive balance sheet , our cost of funds , betas are more than one and a half times those of our earning assets .

Nick Anderson: Combined with a liability-sensitive balance sheet, our cost of funds betas are more than 1.5 times those of our earning assets during the current rate-cutting cycle. Since the Fed began cutting rates in 2024, our cost of funds have declined by 79 basis points compared to only a 47 basis point decline in earning asset yields. While we continue to benefit from repricing lower-yielding loans into higher market rates, the opportunity is naturally moderating as the rate-cutting cycle matures. During the quarter, new loan origination yields exceeded those on loan payoffs by 22 basis points. However, loan growth arrived very late in the quarter, and average loan balances were down $109 million, contributing to the decline in the loan yield compared to the prior quarter.

Speaker #1: However loan growth arrived very late in the quarter and average loan balances were down 109 million contributing to the decline in the loan yield compared to the prior quarter.

Speaker #2: During the current rate cutting cycle since the fed began cutting rates in 2024 , our cost of funds have declined by 79 basis points , compared to only a 47 basis point decline in earning asset yields While we continue to benefit from repricing lower yielding loans and a higher market rates , the opportunity is naturally moderating as the rate cutting cycle matures During the quarter .

Speaker #1: While our balance sheet has moved closer to neutral since the rate-cutting cycle began we remain positioned to benefit from future rate reductions with rate-sensitive liabilities exceeding rate-sensitive assets by approximately 900 million providing upside to margin in a declining rate environment.

Speaker #1: For future cuts in the Fed funds rate we estimate one to two basis points of NIM accretion for every 25 basis point cut in rates.

Speaker #2: New loan origination yields exceeded those on loan payoffs by 22 basis points. However, loan growth arrived very late in the quarter, and average loan balances were down $109 million, contributing to the decline in the loan yield compared to the prior quarter.

Speaker #1: If the yield curve steepens we'd expect NIM expansion at the top end of that range. And if the yield curve remains relatively flat we would expect NIM expansion at the lower end of the range.

Nick Anderson: While our balance sheet has moved closer to neutral since the rate-cutting cycle began, we remain positioned to benefit from future rate reductions, with rate-sensitive liabilities exceeding rate-sensitive assets by approximately $900 million, providing upside to margin in a declining rate environment. For future cuts in the Fed funds rate, we estimate 1 to 2 basis points of NIM accretion for every 25 basis point cut in rates. If the yield curve steepens, we'd expect NIM expansion at the top end of that range. If the yield curve remains relatively flat, we would expect NIM expansion at the lower end of the range. Supported by our late Q1 loan growth, we are guiding Q2 NIM TEY ranging from static to an increase of 3 basis points, assuming no further Fed funds rate changes.

Speaker #2: While our balance sheet has moved closer to neutral since the rate cutting cycle began , we remain positioned to benefit from future rate reductions with rate sensitive liabilities exceeding rate sensitive assets by approximately 900 million , providing upside to margin in a declining rate environment .

Speaker #1: Supported by our late first quarter loan growth we are guiding second quarter NIM TEY ranging from static to an increase of three basis points.

Speaker #1: Assuming no further Fed funds rate changes. Upside in our second quarter NIM is supported by repricing opportunities on approximately 163 million in fixed rate loans currently yielding 6.2%.

Speaker #2: For future cuts in the Fed funds rate, we estimate 1 to 2 basis points of NIM accretion for every 25 basis point cut in rates. If the yield curve steepens, we expect NIM expansion at the top end of that range.

Speaker #1: Which we would project to reset nearly 25 to 30 basis points higher. We also anticipate continued CD repricing during the second quarter. With approximately 400 million of maturities.

Speaker #2: And if the yield curve remains relatively flat , we would expect Nim expansion at the lower end of the range , supported by our late first quarter loan growth .

Speaker #1: Currently costing 3.7% which we expect to retain and reprice nearly 25 to 30 basis points lower. We project investment yields to expand supported by a solid pipeline of new municipal bonds priced well above 7% on a tax equivalent basis.

Speaker #2: We are guiding second quarter Nim t y , ranging from static to an increase of three basis points . Assuming no further fed funds rate changes Upside in our second quarter , Nim is supported by repricing opportunities on approximately 163 million in fixed rate loans currently yielding 6.2% , which we would project to reset nearly 25 to 30 basis points higher .

Nick Anderson: Upside in our Q2 NIM is supported by repricing opportunities on approximately $163 million in fixed-rate loans currently yielding 6.2%, which we would project to reset nearly 25 to 30 basis points higher. We also anticipate continued CD repricing during Q2, with approximately $400 million of maturities currently costing 3.7%, which we expect to retain and reprice nearly 25 to 30 basis points lower. We project investment yields to expand, supported by a solid pipeline of new municipal bonds priced well above 7% on a tax-equivalent basis. Additionally, we are planning to offtake approximately $523 million of LIHTC loans through the securitization and loan sale in Q2, which should be moderately NIM accretive and is reflected in our NIM guidance. Noninterest income totaled $23 million in Q1, including $11 million from capital markets revenue and $5 million from wealth management.

Speaker #1: Additionally we are planning to offtake approximately 523 million of LIHTC loans through the securitization and loan sale in the second quarter. Which should be moderately NIM accretive and is reflected in our NIM guidance.

Speaker #2: We also anticipate continued CD repricing during the second quarter , with approximately 400 million of maturities currently costing 3.7% , which we expect to retain and reprice nearly 25 to 30 basis points lower We project investment yields to expand , supported by a solid pipeline of new municipal bonds priced well above 7% on a tax equivalent basis Additionally , we are planning to offtake approximately 523 million of Lighttech loans through the securitization and loan sale in the second quarter , which should be moderately Nim accretive and is reflected in our Nim guidance Non-interest income totaled 23 million in the first quarter , including 11 million from capital markets revenue and 5 million from wealth management .

Speaker #1: Non-interest income totaled 23 million in the first quarter including 11 million from capital markets revenue and 5 million from wealth management. Our LIHTC lending team closed 13 projects during the quarter.

Speaker #1: Including three with new developers as we continue to expand our LIHTC platform. Our wealth management team delivered strong results this quarter adding 80 new client relationships and 177 million in new assets under management.

Speaker #1: While market volatility pressured AUM levels new client growth largely offset that impact. Wealth management revenue was up 3% from the prior quarter. This business continues to provide stability recurring fee income and meaningful diversification to our overall revenue mix.

Nick Anderson: Our LIHTC lending team closed 13 projects during the quarter, including three with new developers as we continue to expand our LIHTC platform. Our wealth management team delivered strong results this quarter, adding 80 new client relationships and $177 million in new assets under management. While market volatility pressured AUM levels, new client growth largely offset that impact. Wealth management revenue was up 3% from the prior quarter. This business continues to provide stability, recurring fee income, and meaningful diversification to our overall revenue mix. Now turning to our expenses. Noninterest expense for Q1 was $52 million, compared to $63 million for Q4. The $11 million decrease was primarily driven by a $5.5 million reduction in salaries and benefits expenses associated with variable compensation related to earnings performance.

Speaker #1: Now turning to our expenses. Non-interest expense for the first quarter was $52 million compared to $63 million for the fourth quarter. The $11 million decrease was primarily driven by a 5.5 million reduction in salaries and benefits expenses associated with variable compensation related to earnings performance.

Speaker #2: Our Lighttech lending team closed 13 projects during the quarter, including three with new developers. As we continue to expand our Lighttech platform.

Speaker #2: Our wealth management team delivered strong results this quarter, adding 80 new client relationships and $177 million in new assets under management. While market volatility pressured AUM levels, new client growth largely offset that impact.

Speaker #1: In addition we experienced lower professional and data processing costs due to the timing of digital transformation activities and the impact of the debt extinguishment loss in the prior quarter.

Speaker #2: Wealth management revenue was up 3% from the prior quarter This business continues to provide stability , recurring fee income , and meaningful diversification to our overall revenue mix Now turning to our expenses .

Speaker #1: Our flexible cost structure particularly variable compensation tied to performance is designed to support operating leverage while preserving flexibility through various revenue cycles. As a result expenses were well below our guided range.

Speaker #2: Non-interest expense for the first quarter was 52 million , compared to 63 million for the fourth quarter . The $11 million decrease was primarily driven by a $5.5 million reduction in salaries and benefits expenses associated with variable compensation related to earnings performance in addition , we experienced lower professional and data processing costs due to the timing of digital transformation activities and the impact of the debt extinguishment loss in the prior quarter .

Speaker #1: Highlighting our expense flexibility. This structure closely aligns our underlying cost base with performance. Supporting a pay for performance culture and value creation for shareholders.

Nick Anderson: In addition, we experienced lower professional and data processing costs due to the timing of digital transformation activities and the impact of the debt extinguishment loss in the prior quarter. Our flexible cost structure, particularly variable compensation tied to performance, is designed to support operating leverage while preserving flexibility through various revenue cycles. As a result, expenses were well below our guided range, highlighting our expense flexibility. This structure closely aligns our underlying cost base with performance, supporting a pay-for-performance culture and value creation for shareholders. Our significantly lower noninterest expenses resulted in an Adjusted Core Efficiency Ratio of 57.7% for Q1. For Q2, we are guiding noninterest expenses to be in the range of $55 to 58 million, which assumes capital markets revenue and loan growth are within our guided ranges, while also continuing to invest in our digital transformation initiatives.

Speaker #1: Our significantly lower non-interest expenses resulted in an adjusted core efficiency ratio of 57.7% for the first quarter. For the second quarter we are guiding non-interest expenses to be in the range of 55 to 58 million which assumes capital markets revenue and loan growth are within our guided ranges.

Speaker #2: Our flexible cost structure , particularly variable compensation tied to performance , is designed to support operating leverage while preserving flexibility through various revenue cycles .

Speaker #1: While also continuing to invest in our digital transformation initiatives. This outlook reflects our disciplined approach to expense management aligned with our 965 strategic model.

Speaker #2: As a result , well below our guided range , highlighting our expense , flexibility This structure closely aligns our underlying cost base with performance , supporting a pay for performance , culture , and value creation for shareholders .

Speaker #1: Which targets non-interest expense growth of less than 5% annually while enhancing operating leverage and profitability. Moving to our balance sheet. Total loans grew 145 million for the quarter or 8% annualized.

Speaker #2: Our significantly lower non-interest expenses resulted in an adjusted core efficiency ratio of 57.7% for the first quarter . For the second quarter , we are guiding non-interest expenses to be in the range of 55 to 58 million , which assumes capital markets , revenue and loan growth are within our guided ranges , while also continuing to invest in our digital transformation initiatives This outlook reflects our disciplined approach to expense management aligned with our nine six , five strategic model , which targets non-interest expense growth of less than 5% annually .

Speaker #1: Excluding the planned runoff of the M2 equipment finance portfolio. There are 523 million of LIHTC loans identified for securitization and sale included in the held for sale category.

Speaker #1: These loans consist of a $207 million pool of LIHTC construction loans identified for sale to a new private investor. And a $316 million Freddie Mac LIHTC tax exempt permanent loan pool securitization.

Nick Anderson: This outlook reflects our disciplined approach to expense management aligned with our 9-6-5 strategic model, which targets non-interest expense growth of less than 5% annually while enhancing operating leverage and profitability. Moving to our balance sheet. Total loans grew $145 million for the quarter or 8% annualized, excluding the planned runoff of the m2 Equipment Finance portfolio. There are $523 million of LIHTC loans identified for securitization and sale included in the held-for-sale category. These loans consist of a $207 million pool of LIHTC construction loans identified for sale to a new private investor and a $316 million Freddie Mac LIHTC tax-exempt permanent loan pool securitization. Continued execution of our LIHTC offtake strategies has increased our confidence to supporting larger transactions and a broader range of developer opportunities. Complementing our loan growth, core deposit growth accelerated during the quarter, increasing $409 million or 23% on an annualized basis.

Speaker #1: Continued execution of our LIHTC offtake strategies has increased our confidence to supporting larger transactions and a broader range of developer opportunities. Complementing our loan growth core deposit growth accelerated during the quarter increasing 409 million or 23% on an annualized basis.

Speaker #2: While enhancing operating leverage and profitability Moving to our balance sheet , total loans grew 145 million for the quarter , or 8% annualized , excluding the planned runoff of the M2 equipment finance portfolio There are 523 million of Lighttech loans identified for securitization and sale included in the held for sale category These loans consist of a $207 million pool of Lighttech construction loans identified for sale to a new private investor , and a $316 million Freddie Mac Lighttech tax exempt permanent loan pool , securitization , continued execution of our Lighttech offtake strategies has increased our confidence to supporting larger transactions and a broader range of developer opportunities , complementing our loan growth , core deposit growth accelerated during the quarter , increasing 409 million , or 23% , on an annualized basis Average deposit balances only rose by 31 million , or 2% .

Speaker #1: Average deposit balances only rose by 31 million or 2% annualized compared to the fourth quarter as we actively managed our excess liquidity off balance sheet to optimize balance sheet efficiency.

Speaker #1: We remain highly focused on expanding core deposits and improving the deposit mix across our markets. Our deposit mix improved this quarter driven by higher non-interest bearing balances and a reduction in higher cost CD and brokered deposits.

Speaker #1: Further strengthening our funding profile. Asset quality remained excellent during the quarter. Non-performing assets totaled 43 million. A decrease of 439,000 from the prior quarter which resulted in the NPA to total asset ratio remaining static at 0.45%.

Nick Anderson: Average deposit balances only rose by $31 million or 2% annualized compared to Q4, as we actively managed our excess liquidity off balance sheet to optimize balance sheet efficiency. We remain highly focused on expanding core deposits and improving the deposit mix across our markets. Our deposit mix improved this quarter, driven by higher non-interest-bearing balances and a reduction in higher cost CD and broker deposits, further strengthening our funding profile. Asset quality remained excellent during the quarter. Non-performing assets totaled $43 million, a decrease of 439,000 from the prior quarter, which resulted in the NPA to total asset ratio remaining static at 0.45%. The ratio of criticized loans to total loans and leases was 2.01%, remaining well below the company's long-term historical average and near the five-year low of 1.94% established in the prior quarter.

Speaker #2: Annual annualized, compared to the fourth quarter. As we actively managed our excess liquidity off balance sheet to optimize balance sheet efficiency.

Speaker #1: The ratio of criticized loans to total loans and leases was 2.01%. Remaining well below the company's long-term historical average and near the five-year low of 1.94% established in the prior quarter.

Speaker #2: We remain highly focused on expanding core deposits and improving the deposit mix across our markets . Our deposit mix improved this quarter , driven by higher non-interest bearing balances and a reduction in higher cost CD and brokered deposits .

Speaker #1: The marginal increase in criticized loans was primarily driven by one large credit which is expected to be resolved favorably later this year. The company recorded total provision for credit losses of 2.5 million during the quarter.

Speaker #2: Further strengthening our funding profile, asset quality remained excellent during the quarter. Non-performing assets totaled $43 million, a decrease of $439,000 from the prior quarter, which resulted in the NPA to total asset ratio remaining static at 0.45%.

Speaker #1: Down from 5.5 million in the prior quarter. Primarily due to the reclassification of LIHTC construction loans to the held for sale category as these loans are expected to be sold at par.

Speaker #2: The ratio of criticized loans to total loans and leases was 2.01% , remaining , well below the company's long term historical average and near the five year low of 1.94% .

Speaker #1: Net charge-offs were 4 million during the first quarter of 2026. A decline of 300,000 from the prior quarter. Between the start of the first quarter and April 20th we returned almost 25 million of capital to shareholders with about 288,000 common shares were purchased at opportunistic valuations.

Nick Anderson: The marginal increase in criticized loans was primarily driven by one large credit, which is expected to be resolved favorably later this year. The company recorded total provision for credit losses of $2.5 million during Q1 2026, down from $5.5 million in the prior quarter, primarily due to the reclassification of LIHTC construction loans to the held-for-sale category, as these loans are expected to be sold at par. Net charge-offs were $4 million during Q1 2026, a decline of $300,000 from the prior quarter. Between the start of Q1 2026 and 20 April 2026, we returned almost $25 million of capital to shareholders with about 288,000 common shares repurchased at opportunistic valuations. Since we began repurchasing shares in August 2025, we have repurchased 566,000 common shares, returning a total of $46 million to our shareholders. These repurchases demonstrate our capital allocation flexibility.

Speaker #2: Established in the prior quarter . The marginal increase in criticized loans was primarily driven by one large credit , which is expected to be resolved favorably later this year The company recorded total provision for credit losses of 2.5 million during the quarter , down from 5.5 million in the prior quarter , primarily due to the reclassification of light tech construction loans to the held for sale category .

Speaker #1: Since we began repurchasing shares in August of last year we have repurchased 566,000 common shares returning a total of 46 million to our shareholders.

Speaker #1: These repurchases demonstrate our capital allocation flexibility enabling opportunistic repurchases when they create value and align with our strategic and financial priorities. We delivered another quarter of strong growth and tangible book value per share.

Speaker #2: As these loans are expected to be sold at par . Net charge offs were 4 million during the first quarter of 2026 , a decline of 300,000 from the prior quarter .

Speaker #1: Which rose $1.33 to over $59. Reflecting 9% annualized growth. Over the past five years tangible book value has grown at a compound annual rate of 12.5%.

Speaker #2: Between the start of the first quarter and April 20th . We returned almost 25 million of capital to shareholders , with about 288,000 .

Speaker #2: Common shares were purchased at opportunistic valuations . Since we began repurchasing shares in August of last year , we have repurchased 566,000 common shares , returning a total of 46 million to our shareholders .

Speaker #1: Highlighting our continued strong financial performance and long-term focus on creating shareholder value. Our tangible common equity to tangible assets ratio decreased two basis points to 10.31%.

Speaker #2: These repurchases demonstrate our capital allocation flexibility , enabling opportunistic repurchases when they create value and align with our strategic and financial priorities . We delivered another quarter of strong growth in tangible book value per share , which rose $1.33 to over $59 , reflecting 9% annualized growth over the past five years .

Nick Anderson: Enabling opportunistic repurchases when they create value and align with our strategic and financial priorities. We delivered another quarter of strong growth in tangible book value per share, which rose $1.33 to over $59, reflecting 9% annualized growth. Over the past five years, tangible book value has grown at a compound annual rate of 12.5%, highlighting our continued strong financial performance and long-term focus on creating shareholder value. Our tangible common equity to tangible assets ratio decreased two basis points to 10.31%. The Common Equity Tier 1 ratio increased two basis points to 10.54%, and our Total Risk-Based Capital Ratio decreased 19 basis points to 14%. These quarterly changes reflect the combined impact of strong earnings and share repurchases during the quarter. The Total Risk-Based Capital Ratio was also impacted by a reduction in subordinated debt capital treatment on our 2019 issuance and lower ACL balances.

Speaker #1: The common equity tier one ratio increased two basis points to 10.54%. And our total risk-based capital ratio decreased 19 basis points to 14%. These quarterly changes reflect the combined impact of strong earnings and share repurchases during the quarter.

Speaker #2: Tangible book value has grown at a compound annual rate of 12.5% , highlighting our continued strong financial performance and long term focus on creating shareholder value Our tangible common equity to tangible assets ratio decreased two basis points to 10.31% .

Speaker #1: The total risk-based capital ratio was also impacted by a reduction in subordinated debt capital treatment on our 2019 issuance and lower ACL balances. Finally our effective tax rate for the quarter was 7% down from 8% in the prior quarter reflecting lower pre-tax income and an increase in the mix of our tax-exempt income relative to our taxable income.

Speaker #2: The common equity tier one ratio increased to basis points to 10.54% , and our total risk based capital ratio decreased 19 basis points to 14% .

Speaker #1: Our tax-exempt loan and bond portfolios have continued to support a low effective tax rate. Assuming a revenue mix in line with our guidance ranges we estimate our effective tax rate to be in the range of 8% to 10% for the second quarter of 2026.

Speaker #2: These quarterly changes reflect the combined impact of strong earnings and share repurchases during the quarter . The total risk based capital ratio was also impacted by a reduction in subordinated debt capital treatment .

Speaker #1: With that added context on our first quarter results let's open the call for your questions. Operator we are ready for our first question.

Speaker #2: On our 2019 issuance and lower ACL balances Finally , our effective tax rate for the quarter was 7% , down from 8% in the prior quarter , reflecting lower pre-tax income and an increase in the mix of our tax exempt income .

Nick Anderson: Finally, our effective tax rate for Q1 was 7%, down from 8% in the prior quarter, reflecting lower pre-tax income and an increase in the mix of our tax-exempt income relative to our taxable income. Our tax-exempt loan and bond portfolios have continued to support a low effective tax rate. Assuming a revenue mix in line with our guidance ranges, we estimate our effective tax rate to be in the range of 8% to 10% for Q2 of 2026. With that added context on our Q1 results, let's open the call for your questions. Operator, we are ready for our first question.

Speaker #2: Thank you. And as a reminder ladies and gentlemen if you'd like to join the question queue please press star then one at this time.

Speaker #2: If you'd like to remove yourself from queue it's star then two. Once again that's star then one if you have a question. Today's first question comes from Daniel Tamayo with Raymond James.

Speaker #2: Relative to our taxable income . Our tax exempt loan and bond portfolios have continued to support a low effective tax rate . Assuming a revenue mix in line with our guidance ranges , we estimate our effective tax rate to be in the range of 8% to 10% for the second quarter of 2026 .

Speaker #2: Please go ahead.

Speaker #3: Thank you. Good morning guys.

Speaker #4: Good morning Danny.

Speaker #3: Yeah maybe first on the capital front. You've got the two securitizations planned for the second quarter. I apologize if I missed it but do you have a sense for how much capital that will add to the stack and then the follow-up is on the buyback side just do you plan to use that in buybacks or you're at I think 10.5% CET1 is that a good bogey for you guys to settle near going forward or do you want to keep growing?

Speaker #2: With that added context , on our first quarter results . Let's open the call for your questions . Operator , we are ready for our first question .

Operator 2: Thank you. As a reminder, ladies and gentlemen, if you'd like to join the question queue, please press star then one at this time. If you'd like to remove yourself from queue, it's star then two. Once again, that's star then one if you have a question. Today's first question comes from Daniel Tamayo with Raymond James. Please go ahead.

Operator: Thank you. As a reminder, ladies and gentlemen, if you'd like to join the question queue, please press star then one at this time. If you'd like to remove yourself from queue, it's star then two. Once again, that's star then one if you have a question. Today's first question comes from Daniel Tamayo with Raymond James. Please go ahead.

Speaker #1: Thank you . And as a reminder , ladies and gentlemen , if you'd like to join the question queue , please press star .

Speaker #1: Then one at this time . If you'd like to remove yourself from queue , it's star , then two . Once again , that's star , then one .

Speaker #1: If you have a question Today's first question comes from Daniel Tamayo with Raymond James . Please go ahead

Speaker #3: Thanks.

Daniel Tamayo: Thank you. Good morning, guys.

Speaker #4: Yeah thanks Danny. Appreciate the question. Actually through the perm loan securitization we don't really free up regulatory capital because we're retaining B pieces historically and that's okay but it does free up gap capital as you noted we're getting into the mid-10s in terms of total risk base and CET1.

Speaker #3: Thank you . Good morning guys . Danny . Yeah , maybe . Maybe first on the capital front , you've got the two securitizations planned for the second quarter .

Todd Gipple: Good morning, Danny.

Daniel Tamayo: Yeah, maybe first on the capital front. You've got the 2 securitizations planned for Q2. I apologize if I missed it, but do you have a sense for how much capital that will add to the stack? The follow-up is on the buyback side. Do you plan to use that in buybacks, or you're at, I think, 10.5% CET1? Is that a good bogey for you guys to settle near going forward, or you want to keep growing? Thanks.

Speaker #3: I apologize if I missed it , but do you have a sense for how much capital that will add to to the stack ?

Speaker #3: And then the follow up is is on the buyback side . Just , you know , do you plan to use that in buybacks or , you know , you're at , I think 10.5% Cet1 ?

Speaker #4: And so 25 basis points gets freed up from the construction loan participation and that will allow us to continue to be fairly opportunistic with respect to buybacks.

Speaker #3: Is that a good bogey for you guys to settle near going forward , or do you want to keep growing . Thanks .

Todd Gipple: Yeah, thanks, Daniel. Appreciate the question. Actually, through the term loan securitization, we don't really free up regulatory capital because we're retaining B-pieces historically, and that's okay. It does free up GAAP capital. As you noted, we're getting into the mid-10s in terms of total risk-based CET1. 25 basis points gets freed up from the construction loan participation, and that will allow us to continue to be fairly opportunistic with respect to buybacks. We're getting up to really above our long-term target in terms of capital ratios, and we would continue to be opportunistic. As you know, there's really four things to do with capital, retain it for organic growth, and that's a little less demand for us as we're going more asset light and capital efficient in the LIHTC business. M&A is not a current priority for us.

Todd Gipple: Yeah, thanks, Danny. Appreciate the question. Actually, through the term loan securitization, we don't really free up regulatory capital because we're retaining B-pieces historically, and that's okay. It does free up GAAP capital. As you noted, we're getting into the mid-10s in terms of total risk-based CET1. 25 basis points gets freed up from the construction loan participation, and that will allow us to continue to be fairly opportunistic with respect to buybacks. We're getting up to really above our long-term target in terms of capital ratios, and we would continue to be opportunistic. As you know, there's really four things to do with capital, retain it for organic growth, and that's a little less demand for us as we're going more asset light and capital efficient in the LIHTC business. M&A is not a current priority for us.

Speaker #4: So we're getting up to really above our long-term target in terms of capital ratios and so we would continue to be opportunistic as you know there's really four things to do with capital.

Speaker #4: Yeah . Thanks , Danny . Appreciate the question . Actually , through the term loan securitization , we don't really free up regulatory capital because we're retaining B pieces historically .

Speaker #4: And that's okay . But it does free up gap capital , as you noted , we're getting into the mid tens in terms of total risk space .

Speaker #4: Retain it for organic growth and that's a little less demand for us as we're going more asset light and capital efficient in the LIHTC business.

Speaker #4: And Cet1 . And so 25 basis points gets freed up from the construction loan participation . And that will allow us to continue to be fairly opportunistic with respect to buybacks .

Speaker #4: M&A is not a current priority for us so then you get to returning capital we did raise our dividend modestly and it remains a modest dividend because we believe at current valuations the stock repurchases buybacks are really the best use of capital.

Speaker #4: So we're getting up to really above our long term target in terms of capital ratios . And so we would continue to be optimistic as you know , there's really four things to do with capital retain it for organic growth .

Speaker #4: And so we're very pleased to have accomplished what we have already and really the answer is we would continue to be opportunistic when it comes to buybacks at current valuation levels it makes sense and we tend to not just look at where we're at on a current price to tangible book or price to earnings.

Speaker #4: And that's a little less demand for us as we're going more asset light and capital efficient in the tech business . M&A is not a current priority for us .

Speaker #4: We really look at where earnings and TBV are headed and considering we're growing those at a more than 10% CAGR gives us even more confidence to be buying shares.

Todd Gipple: You get to returning capital. We did raise our dividend modestly, and it remains a modest dividend because we believe at current valuations, the stock repurchases, buybacks are really the best use of capital. We're very pleased to have accomplished what we have already, and really, the answer is we would continue to be opportunistic when it comes to buybacks. At current valuation levels, it makes sense. We tend to not just look at where we're at on a current price to tangible book or price to earnings. We really look at where earnings and TBV are headed. Considering we're growing those at a more than 10% CAGR gives us even more confidence to be buying shares. Long answer to your short question, but frees up about 25 bps, and we would continue to be opportunistic in share buybacks.

Speaker #4: So then you get to returning capital . We did raise our dividend modestly and it remains a modest dividend because we believe at current valuations , the stock repurchases , buybacks are really the best use of capital .

Speaker #4: So kind of long answer to your short question but frees up about 25 bips and we would continue to be opportunistic in share buybacks.

Speaker #4: And so we're very pleased to have accomplished what we have already . And really the answer is we would continue to be opportunistic when it comes to buybacks .

Speaker #3: Nah that's great Todd. Appreciate all the code there. And then maybe one on the margin. So we've got the guidance for the second quarter.

Speaker #4: At current valuation levels . It makes sense . And we tend to not just look at where we're at on a current price to tangible book or price to earnings .

Speaker #3: Feels like maybe we're approaching stability. Curious for your thoughts on that. And then longer term did the securitizations continue to be kind of modestly accretive every time you do them or is there a point where they are break even or don't impact the margin as much as we look forward for future securitizations?

Speaker #4: We really look at where earnings and TBV are headed, and considering we're growing those at a more than 10% CAGR gives us even more confidence to be buying shares.

Speaker #4: So, kind of a long answer to your short question, but it frees up about 25 bps. And we would continue to be opportunistic in share buybacks.

Speaker #4: Yeah thanks Danny. I'll answer several data points here maybe for that question and when you think about our Q1 average earning assets we're about 8.6 billion.

Daniel Tamayo: No, that's great, Todd. Appreciate all the color there. Maybe one on the margin. We've got the guidance for Q2. Feels like maybe we're approaching stability. Curious for your thoughts on that. Longer term, do the securitizations continue to be kind of modestly accretive every time you do them? Is there a point where they are break even or don't impact the margin as much as we look forward for future securitizations?

Speaker #3: No , that's great . Todd , appreciate all the color there . And then maybe one on the margin . So we've got the guidance for the second quarter .

Speaker #3: It feels like maybe we're approaching stability . Curious for your thoughts on that . And then , you know , longer term , do the securitizations continue to be kind of modestly accretive every time you do them ?

Speaker #4: Considering the Q1 loan growth being back end loaded and then assuming we hit the midpoint of our loan growth call it 12.5% here for the rest of the year assume roughly middle of the quarter for offtakes we expect Q2 average earning assets would be down about 200 million.

Speaker #3: Or is there a point where they are , you know , break or , you know , don't impact the margin as much as as we look forward for future securitizations ?

Speaker #4: So I'm going to translate that then into NII and NIM our core margin we continue to expect to grind higher by a couple basis points with loan and CD repricing plus and then to your other question the offtakes here in Q2 they are expected to be slightly accretive and I'm going to call that about a basis point here for Q2.

Todd Gipple: Yeah. Thanks, Danny. I'll answer several data points here maybe for that question. When you think about our Q1 average earning assets, we were about $8.6 billion. Considering the Q1 loan growth being back-end loaded, and then assuming we hit the midpoint of our loan growth, call it 12.5% here for the rest of the year. Assume roughly middle of the quarter for off-takes. We expect Q2 average earning assets would be down about $200 million. I'm going to translate that then into NII and NIM. Our core margin, we continue to expect to grind higher by a couple basis points with loan and CD repricing plus. Then to your other question, the off-takes here in Q2, they are expected to be slightly accretive, and I'm going to call that about a basis point here for Q2.

Nick Anderson: Yeah. Thanks, Danny. I'll answer several data points here maybe for that question. When you think about our Q1 average earning assets, we were about $8.6 billion. Considering the Q1 loan growth being back-end loaded, and then assuming we hit the midpoint of our loan growth, call it 12.5% here for the rest of the year. Assume roughly middle of the quarter for off-takes. We expect Q2 average earning assets would be down about $200 million. I'm going to translate that then into NII and NIM. Our core margin, we continue to expect to grind higher by a couple basis points with loan and CD repricing plus. Then to your other question, the off-takes here in Q2, they are expected to be slightly accretive, and I'm going to call that about a basis point here for Q2.

Speaker #2: Yeah . Thanks , Danny . I'll answer several data points here , maybe for that question . And when you think about our Q1 average earning assets , we were about 8.6 billion .

Speaker #2: Considering , you know , the Q1 loan growth being back end loaded . And then assuming we hit the midpoint of our loan growth , call it 12.5% here for the rest of the year , assume roughly middle of the quarter for Offtakes .

Speaker #4: In addition when it comes back to full circle to NII we've got an extra day in Q2 and all of that leads us I think we're going to feel pretty confident about holding Q2 NII static when you think on the go forward picture on future offtakes I don't think we're going to anchor every transaction to being perfectly neutral quarter to quarter.

Speaker #2: We expect Q2 average earning assets would be down about 200 million . So I'm going to translate that . Then into NII and Nim .

Speaker #2: Our core margin , we continue to expect to grind higher by a couple basis points with loan and CD repricing plus . And then to your other question , the offtakes here in Q2 , they are expected to be slightly accretive .

Speaker #4: Future LIHTC rotations likely to be less dilutive than it was in Q4. Q4 was we had a fair amount of well-priced assets that were part of that package transaction.

Speaker #2: And I'm going to call that about a basis point here for Q2 . In addition , when it comes back to full circle to NII , we've got an extra day in Q2 and all that leads us , I think we're going to feel pretty confident about holding Q2 , NII , static .

Todd Gipple: In addition, when it comes back to full circle to NII, we've got an extra day in Q2 and all that leads us. I think we're going to feel pretty confident about holding Q2 NII static. When you think on the go forward picture on future off-takes, I don't think we're going to anchor every transaction to being perfectly neutral quarter to quarter. Future LIHTC rotations likely to be less dilutive than it was in Q4. Q4 was. We had a fair amount of well-priced assets that were part of that package transaction. Some of the transactions here in Q2 are at lower yields, and so we also are combining that with our securitization. We get a little bit of upside between the two transactions. I think, anytime we're taking decent assets off the books, if we can hold neutral, great.

Nick Anderson: In addition, when it comes back to full circle to NII, we've got an extra day in Q2 and all that leads us. I think we're going to feel pretty confident about holding Q2 NII static. When you think on the go forward picture on future off-takes, I don't think we're going to anchor every transaction to being perfectly neutral quarter to quarter. Future LIHTC rotations likely to be less dilutive than it was in Q4. Q4 was. We had a fair amount of well-priced assets that were part of that package transaction. Some of the transactions here in Q2 are at lower yields, and so we also are combining that with our securitization. We get a little bit of upside between the two transactions. I think, anytime we're taking decent assets off the books, if we can hold neutral, great.

Speaker #4: Some of the transactions here in Q2 are at lower yields and so we also are combining that with our securitization. So we get a little bit of upside between the two transactions.

Speaker #2: When you think on the go forward picture on future Offtakes , I don't think we're going to anchor every transaction to being perfectly neutral quarter to quarter future tech rotations likely to be less dilutive than it was in Q4 .

Speaker #4: So I think any time we're taking decent assets off the books if we can hold neutral great I think our expectations might be a little dilutive but certainly not to what we experienced during Q1 with the impact from the Q4 transaction.

Speaker #2: Q4 was we had a fair amount of well-priced assets that were part of that package transaction . Some of the transactions here in Q2 are at lower yields .

Speaker #3: Okay very helpful Nick. Thank you. All right. I will step back. Thanks for the answers.

Speaker #4: Thanks Danny.

Speaker #5: And our next question today comes from Damon DelMonte at KBW. Please go ahead.

Speaker #2: And so we also are combining that with our securitization . So we get a little bit of upside between the two transactions . So I think , you know , anytime we're taking decent assets off the books , you know , if we can hold neutral , great .

Speaker #6: Hey guys this is Matt Rank filling in for Damon. Hope everybody's doing well today. My first question thanks for the comments on the digital transformation.

Speaker #6: But just curious if any of that modernization includes anything with artificial intelligence and maybe if you guys have identified any use cases like could that technology speed up the LIHTC flywheel so to speak or help with wealth management anything like that?

Todd Gipple: I think our expectations might be a little dilutive, but certainly not to what we experienced during Q1 with the impact from the Q4 transaction so.

Nick Anderson: I think our expectations might be a little dilutive, but certainly not to what we experienced during Q1 with the impact from the Q4 transaction so.

Speaker #2: I think our expectations might be a little dilutive , but certainly not not to what we experienced . You know , during Q1 with the impact from the Q4 transaction .

Daniel Tamayo: Okay. Very helpful, Nick. Thank you. All right, I will step back. Thanks for the answers.

Speaker #2: So .

Speaker #4: Sure. Matt thanks for joining. Give our best to Damon. We are really excited about the digital transformation that we're undergoing here and I'll give you a little background to get to your AI answer but we're halfway done.

Speaker #3: Okay , very helpful . Nik . Thank you . All right . I will step back . Thanks for the answers .

Todd Gipple: Thanks, Danny.

Operator 2: Our next question today comes from Damon DelMonte at KBW. Please go ahead.

Operator: Our next question today comes from Damon DelMonte at KBW. Please go ahead.

Speaker #4: Thanks , Danny .

Speaker #1: And our next question today comes from Damien Del Monte at KBW. Please go ahead.

Matt Rank: Hey, guys, this is Matt Rank filling in for Damon. Hope everybody's doing well today. My first question, thanks for the comments on the digital transformation, but just curious if any of that modernization includes anything with artificial intelligence. Maybe if you guys have identified any use cases, like could that technology speed up the LIHTC flywheel, so to speak, or help with wealth management, anything like that?

Speaker #5: Hey guys , this is Matt filling in for Damien . Hope everybody's doing well today . My first question , thanks for the comments on the digital transformation .

Speaker #4: The first core conversion was candidly our most simple and that was last October when we went from a Jack Henry product to another Jack Henry product where we've landed at Jack Henry Silverlake the one we accomplished just after the end of the quarter first weekend in April is candidly our most rigorous one.

Speaker #5: But just curious if any of that modernization includes anything with artificial intelligence . And maybe if you guys have identified any use cases , like could that technology speed up the tech flywheel , so to speak , or help with wealth management , anything like that ?

Todd Gipple: Sure. Matt, thanks for joining. Give our best to Damon. We are really excited about the digital transformation that we're undergoing here, and I'll give you a little background to get to your AI answer, but we're halfway done. The first core conversion was candidly our most simple, and that was last October when we went from a Jack Henry product to another Jack Henry product where we've landed at Jack Henry SilverLake. The one we accomplished just after the end of the quarter, first weekend in April, is candidly our most rigorous one. It was the first one going from Fiserv Signature to Jack Henry SilverLake. It went really, really well and we really wanted to accomplish that first one and have it go well. Of course, we've got another one coming up in October and April.

Speaker #4: It was the first one going from Pfizer Signature to Jack Henry Silverlake it went really really well and we really wanted to accomplish that first one and have it go well of course.

Speaker #4: Sure . Matt , thanks for joining . Give our best to Damon . We are really excited about the digital transformation that we're undergoing here .

Speaker #4: And I'll give you a little background to get to your AI answer . But we're halfway done . The first core conversion was , candidly , our most simple .

Speaker #4: We've got another one coming up in October and April. So in April of 27 we expect to be all done and the answer to your AI automation question is really about the decision we made a couple years ago to partner with Jack Henry for our new core.

Speaker #4: And that was last October when we went from a Jack Henry product to another Jack Henry product where we've landed at Jack Henry Silver Lake .

Speaker #4: We believe them to be the furthest along with respect to AI with respect to automation opportunities the open architecture that they have has allowed us to integrate it with roughly 30 other a little over 30 other products that link to well.

Speaker #4: The one we accomplished just after the end of the quarter first weekend in April , is candidly our most rigorous one . It was the first one going from Pfizer signature to Jack Henry , Silver Lake .

Speaker #4: It went really, really well, and we really wanted to accomplish that first one and have it go well. Of course, we've got another one coming up in October.

Speaker #4: It's been a lot of hard work. But they are we believe furthest along in terms of giving us and their other bank clients a lot of capabilities when it comes to AI.

Todd Gipple: In April of 2027, we expect to be all done. The answer to your AI automation question is really about the decision we made a couple of years ago to partner with Jack Henry for our new core. We believe them to be the furthest along with respect to AI, with respect to automation opportunities. The open architecture that they have has allowed us to integrate it with a little over 30 other products that link to our core. That's gone really well. It's been a lot of hard work. They are, we believe, furthest along in terms of giving us and their other bank clients a lot of capabilities when it comes to AI. That will come from our large third-party vendors. We're not going to be standing that up ourselves, but they are well down the path.

Speaker #4: In April . So in April of 27 , we expect to be all done . And the answer to your AI automation question is really about the decision .

Speaker #4: That will come from our large third party vendors we're not going to be standing that up ourselves but they are a well down the path with respect to how that impacts us in the future.

Speaker #4: We made a couple years ago to partner with Jack Henry for our new core . We believe them to be the furthest , along with respect to AI , with respect to automation opportunities , the open architecture that they have has allowed us to integrate it with roughly 30 other a little over 30 other products that link to our core .

Speaker #4: I think it's going to be more about our retail and commercial banking I do think there will be some artificial intelligence certainly that'll help us in the wealth management space.

Speaker #4: When it comes to LIHTC assets there are some conversations more around blockchain with respect to tracking those assets and the securitization and sale of those assets being more efficient with blockchain.

Speaker #4: That's gone really well . It's been a lot of hard work , but they are , we believe , furthest along in terms of giving us and their other bank clients , a lot of capabilities when it comes to AI , that will come from our large third party vendors .

Speaker #4: So it's more about blockchain when it comes to LIHTC. So thanks for the great question. We are really excited about our digital future and we're about halfway done a little over halfway done with the core conversions.

Speaker #4: We're not going to be standing that up ourselves , but they are well down the path with respect to how that impacts us in the future .

Todd Gipple: With respect to how that impacts us in the future, I think it's going to be more about our retail and commercial banking. I do think there will be some artificial intelligence, certainly, that'll help us in the wealth management space. When it comes to LIHTC assets, there are some conversations more around blockchain with respect to tracking those assets and the securitization and sale of those assets being more efficient with blockchain. It's more about blockchain when it comes to LIHTC. Thanks for the great question. We are really excited about our digital future, and we're about halfway done, a little over halfway done with the core conversions.

Speaker #4: I think it's going to be more about our retail and commercial banking . I do think there will be some artificial intelligence . Certainly , that will help us in the wealth management space .

Speaker #6: Okay great. Thank you. Thank you for all that caller. And then just one more question for me. The loan loss reserve came down this quarter so just wanted to get your thoughts on how we should think about that level going forward.

Speaker #4: When it comes to Lighttech assets , there are some conversations more around blockchain with respect to tracking those assets and the and sale of those assets being more efficient with blockchain .

Speaker #4: Sure. So Matt while provision was down that was really due to the reclassification of the LIHTC loans to help for sale. So we used some of the provision in or the ACL in that regard but we did and we believed it was important we did hold our coverage ratio static at 1.26%.

Speaker #4: So it's more about blockchain when it comes to to lighttech . So thanks for the great question . We are really excited about our digital future and we're about halfway done a little over halfway done with the core conversions .

Matt Rank: Okay, great. Thank you for all that color. Just one more question for me. The loan loss reserve came down this quarter. Just wanted to get your thoughts on how we should think about that level going forward.

Speaker #4: So while our provision was down we maintained the same level of reserves that we had previously. So just I appreciate the question because it will help be clear that we didn't soften reserves we didn't lighten reserve levels we kept those static the reduction in provision was about reclassifying a fair amount of loans to help for sale.

Speaker #5: Okay , great . Thank you . Thank you for all that color . And then just one more question for me . The the loan loss reserve came down this quarter .

Speaker #5: So just wanted to get your thoughts on how we should think about that level going forward .

Todd Gipple: Sure. Matt, while provision was down, that was really due to the reclassification of the LIHTC loans to held for sale. We used some of the provision or the ACL in that regard. We did, and we believed it was important, we did hold our coverage ratio static at 1.26%. While our provision was down, we maintained the same level of reserves that we had previously. Just I appreciate the question because it will help be clear that we didn't soften reserves. We didn't lighten reserve levels. We kept those static. The reduction in provision was about reclassifying a fair amount of loans to held for sale.

Speaker #4: Sure . So , Matt , while provision was down , that was really due to the reclassification of the Lighttech loans to help for sale .

Speaker #4: So, we used some of the provision in the ACL in that regard, but we did. And we believed it was important.

Speaker #6: Gotcha. Okay. Thank you for that. I'll step back.

Speaker #4: Thanks Matt.

Speaker #5: Thank you. And as a reminder if you'd like to ask a question please press star than one on your telephone keypad. Our next question today comes from Nathan Race at Piper Sandler.

Speaker #4: We did hold our coverage ratio static at 1.26% . So while our provision was down , we maintained the same level of reserves that we had previously .

Speaker #5: Please go ahead. All right. It appears that we're not receiving any audio from Mr. Race's line here so we're going to move on to our next questioner.

Speaker #4: So just I appreciate the question because it will help be clear that we didn't soften reserves . We didn't lighten reserve levels . We kept those static .

Speaker #5: Which is Brian Martin at Janie Montgomery. Please go ahead.

Speaker #4: The reduction in provision was about reclassifying fair amount of loans to held for sale .

Speaker #7: Hey guys. Good morning. Good morning. See Nick can you just maybe I missed what you were saying there in terms of just I think I got the big picture on the being kind of neutral but just kind of where the earning assets land the next couple quarters as you kind of roll through the growth and the offtake.

Matt Rank: Gotcha. Okay. Thank you for that. I'll step back.

Speaker #5: Gotcha . Okay . Thank you for that . I'll step back .

Todd Gipple: Thanks, Matt.

Operator 2: Thank you. As a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. Our next question today comes from Nathan Race at Piper Sandler. Please go ahead. Hello, Nathan. Is your line on mute perhaps? All right. It appears that we're not receiving any audio from Mr. Race's line here, so we're going to move on to our next questioner, which is Brian Martin at Janney Montgomery Scott. Please go ahead.

Operator: Thank you. As a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. Our next question today comes from Nathan Race at Piper Sandler. Please go ahead. Hello, Nathan. Is your line on mute perhaps? All right. It appears that we're not receiving any audio from Mr. Race's line here, so we're going to move on to our next questioner, which is Brian Martin at Janney Montgomery. Please go ahead.

Speaker #4: Thanks , ma'am .

Speaker #1: Thank you . And as a reminder , if you'd like to ask a question , please press star . Then one on your telephone keypad .

Speaker #1: Our next question today comes from Nathan Rice at Piper Sandler . Please go ahead Hello , Nathan , is your line on mute perhaps All right .

Speaker #7: In terms of it sounded like it might be down 200 or so next quarter in the second quarter given what happens and then thereafter it's stable to growing with the balance of the portfolio or just second and third quarter just as you if it happens mid quarter just kind of try to think about those next two quarters from an earning assets the average earning assets standpoint.

Speaker #7: Yeah. Thanks Brian. Certainly a lot of noise here in Q2 as you think about the transaction and trying to model some of that out.

Speaker #1: It appears that we're not receiving any audio from Mr. Race's line here . So we're going to move on to our next questioner , which is Brian Martin at Janney Montgomery .

Brian Martin: Hey, guys. Good morning.

Speaker #1: Please go ahead .

Todd Gipple: Good morning, Brian.

Speaker #7: But yeah you are correct. When you think about Q2 average earning assets we're thinking about that being down about 200 million. But that assumes we're hitting a pretty strong loan growth for the quarter.

Speaker #6: Hey, guys. Good morning.

Brian Martin: Morning. Hey, Nick, can you just, maybe I missed what you were saying there in terms of just, I think I get the big picture on it being kind of neutral. But just kind of where the earning assets land the next couple of quarters as you kind of roll through the growth and the offtake in terms of, it sounded like it might be down $200 or so next quarter in Q2, given what happens. Then thereafter, it's stable to growing with the balance of the portfolio. Or just Q2 and Q3, if it happens mid-quarter, just kind of how to think about those next two quarters from an average earning assets standpoint.

Speaker #4: Good morning Brian . Good

Speaker #2: Morning

Speaker #6: Nick , can you just maybe I missed what you were saying there in terms of just I think I got the big picture on the , you know , being kind of neutral , but just kind of where the earning assets land the next couple quarters as you kind of roll through the growth and , and the off in terms of it sounded like it might be down 200 or so next quarter in the second quarter , given what happens .

Speaker #7: And then we also then have the offtake kind of pegged up for mid quarter of Q2. Now when you get to Q3 when we think about some of the noise that temporary noise associated with the transaction you'd start to see that to stabilize and to see some growth from there.

Speaker #6: And then thereafter , it's , it's stable to growing with , with the , with the balance with the portfolio or just , you know , second and third quarter , just as if it happens .

Speaker #7: Gotcha. Okay. And just the margin obviously you gave some comments about next quarter's margin but just the longer term I think the maybe the question earlier just about it before in a period of stability here the bias would be trending upward.

Speaker #6: Mid-quarter just kind of how to think about those next two quarters from an earning assets to average earning asset standpoint .

Nick Anderson: Yeah. Thanks, Brian. Certainly a lot of noise here in Q2 as you think about the transaction and trying to model some of that out. Yeah, you are correct. When you think about Q2 average earning assets, we're thinking about that being down about $200 million. That assumes we're hitting a pretty strong loan growth for the quarter. Then we also then have the offtake kind of pegged up for mid-quarter of Q2. Now, when you get to Q3, when we think about some of the noise, that temporary noise associated with the transaction, you'd start to see that to stabilize and to see some growth from there.

Speaker #2: Yeah, thanks, Brian. Certainly a lot of noise here in Q2 as you think about the transaction and trying to model some of that out.

Speaker #7: I mean you had some nice improvement on the funding side this quarter with the deposits. Yeah I don't know that just the timing of the loan growth coming on and I guess any additional improvement on that funding side but it feels like the margins kind of flat to up rather than down.

Speaker #2: But yeah , you are correct . When you think about Q2 average earning assets , we're thinking about that being down about 200 million , but that assumes we're hitting a pretty strong loan growth for the quarter .

Speaker #7: Is that as you kind of look in the out quarters without putting words in your mouth is that seem like how we should be thinking about it?

Speaker #2: And then we also then have the offtake kind of pegged up for mid-quarter of Q2 . Now , when you get to Q3 , you know , when we think about some of the noise that temporary noise associated with the transaction , you know , you'd start to see that to stabilize and to see some growth from there .

Speaker #7: Yeah Brian. That is how we're thinking about it. And we continue to grind out every basis point from our core margin and as you mentioned a lot of that is coming from our loan and deposit repricing.

Brian Martin: Got you. Okay. Just the margin, obviously, you gave some comments about next quarter's margin. Just the longer term, I think maybe the question earlier just about if we're in a period of stability here, the bias would be trending upward. I mean, you had some nice improvement on the funding side this quarter with the deposits. Yeah, I don't know that just the timing of the loan growth coming on and I guess any additional improvement on that funding side. It feels like the margins kind of flat to up rather than down. As you kind of look in the out quarters without putting words in your mouth, does that seem like how we should be thinking about it?

Speaker #7: We continue to drip loans or sorry drip deposit pricing on our non-indexed deposits drip lower here as we can. But yeah our expectation is that we can continue to grind out every basis point here even into Q2 with all the activity going on but beyond that into Q3.

Speaker #6: Gotcha . Okay . And just the margin , obviously , you gave some comments about next quarter's margin , but just the longer term , I think the maybe the question earlier , just about if we're in a period of stability here , the bias would be trending upward .

Speaker #6: I mean , you had some nice improvement on the funding side this quarter with the deposits . I don't know that just the timing of the loan growth coming on .

Speaker #6: And , you know , I guess any additional improvement on that funding side . But it feels like the the margins , you know , kind of flat to up rather than than down is that as you kind of look in the out quarters without putting words in your mouth , is that seem like how we should be thinking about it ?

Speaker #7: I think something else that will contribute to that is our expectation on the stronger loan growth as well. Gotcha. And the loan and deposit ratio I guess as you kind of move through all the noise here I guess what are you expect that to kind of settle out over the next couple quarters given the dynamics here there's still a lot of moving parts in there.

Nick Anderson: Yeah, Brian. That is how we're thinking about it. We continue to grind out every basis point from our core margin. As you mentioned, a lot of that is coming from our loan and deposit repricing. We continue to drip deposit pricing on our non-index deposits, drip lower here as we can. Yeah, our expectation is that we can continue to grind out every basis point here even into Q2 with all the activity going on, but beyond that into Q3. I think something else that will contribute to that is our expectation on the stronger loan growth as well.

Speaker #2: Yeah . Brian , that is how we're thinking about it . And we continue to grind out every basis point from our core margin .

Speaker #7: Yeah. So we did drop quite a bit to 87% this quarter. Certainly that's below our historical. When you think about Q2 we're expecting that to fall more into a range between 90 and 95 percent.

Speaker #2: And as you mentioned , a lot of that is coming from our loan and deposit repricing . We continue to drip loans or , sorry , drip deposit pricing on our non-indexed deposits , drip lower here as we can .

Speaker #7: I'd probably land at 92 and a half percent longer term here. Gotcha. Okay. And then last two just I know you talked about the buybacks being the most opportune biggest opportunity short term but as you kind of roll through the modernization of the technology and your more asset light or I guess does M&A become a bit more important or more interesting I guess or more likely as you kind of look out into 27?

Speaker #2: But yeah , our expectation is that we can continue to grind out , you know , every basis point here , even into Q2 with with all the activity going on .

Speaker #2: But , but beyond that , into Q3 , I think something else that will contribute to that is , is our expectation on , on the stronger loan growth as well .

Brian Martin: Got you. The loan-to-deposit ratio, I guess as you kind of move through all the noise here, I guess, where do you expect that to kind of settle out over the next couple of quarters given the dynamics here? There's just a lot of moving parts in there.

Speaker #6: Gotcha . And the loan to deposit ratio , I guess , as you kind of move through all the noise here , I guess , where do you expect that to kind of settle out over the next couple of quarters given the dynamics here ?

Speaker #7: I mean you manage below 10 billion this year but going over I know it doesn't have a big cost negative to you guys given the planning you've done but just in terms of going over with more size is that something you would think about as you go into 27?

Speaker #6: There's just a lot a lot of moving parts in there .

Nick Anderson: Yeah. We did drop quite a bit to 87% this quarter.

Speaker #2: Yeah . So we did drop quite a bit to 87% this quarter . Certainly that's below our historical . When you think about Q2 , we're expecting that to fall more into a range between 9,095% .

Brian Martin: Yeah.

Nick Anderson: Certainly, that's below our historical. When you think about Q2, we're expecting that to fall more into a range between 90% and 95%. I'd probably land at 92.5% longer term here.

Speaker #4: Yeah Brian. That's a fair question. I appreciate you asking. Our interest in M&A will grow a bit after we get all the way through this digital transformation.

Speaker #2: I'd probably land at 92.5% longer term here .

Brian Martin: Got you. Okay. Then last two, just I know you talked about the buybacks being the most biggest opportunity short term. As you kind of roll through the modernization of the technology and your more asset light or I guess, does M&A become a bit more important or more interesting, I guess, or more likely as you kind of look out into 2027? I mean, you managed below $10 billion this year, but going over, I know it doesn't have a big cost negative to you guys given the planning you've done. Just in terms of going over with more size, is that something you would think about as you go into 2027?

Speaker #6: Gotcha . Okay . And then last two just I know you talked about the buybacks being the most , you know , opportune , biggest opportunity , short term , but as you kind of roll through the , the , the modernization of the technology and you're more asset light or , you know , I guess it does M&A become a bit more important or more interesting , I guess , or more , more likely as you kind of look out into 27 and you manage below 10 billion this year , but going over , I know it doesn't have a big cost negative to you guys given the planning you've done .

Speaker #4: I've been careful to say in the past we're not necessarily in blackout with respect to that because of the conversions we're doing. We would certainly have the ability to do something if it made a lot of sense.

Speaker #4: I would tell you our interest in M&A would be less about the gyrations of going over 10 billion. I continue to feel very good about that but as you know a lot of conversations are starting these days and there certainly is more chatter around M&A.

Speaker #6: But just in terms of going over with more size , is that something you would think about as you go into 27 ?

Speaker #4: We think we are a really great partner for the right potential partner. But I would just say activity around that is ramping up in terms of conversations but our strike zone remains very very small.

Todd Gipple: Yeah, Brian, that's a fair question. I appreciate you asking. Our interest in M&A will grow a bit after we get all the way through this digital transformation. I've been careful to say in the past, we're not necessarily in blackout with respect to that because of the conversions we're doing. We would certainly have the ability to do something if it made a lot of sense. I would tell you our interest in M&A would be less about the gyrations of going over 10 billion.

Speaker #4: Yeah . Brian , that's a fair question . I appreciate you asking our our interest in M&A will grow a bit after we get all the way through this digital transformation .

Speaker #4: There's a whole host of metrics with respect to a potential partner that we would have to hit probably the main one would be at the pace we are accreting TBV and earnings per share it's going to have to be a very good strategic and financial transaction because we do not want to go backward.

Speaker #4: I've been careful to say in the past , we're not necessarily in blackout with respect to that because of the conversions we're doing , we would certainly have the ability to do something if it made a lot of sense .

Speaker #4: I would tell you our interest in M&A would be less about the gyrations of going over $10 billion. I continue to feel very good about that, but you know, a lot of conversations are starting these days and there certainly is more chatter around M&A.

Brian Martin: Right.

Todd Gipple: I continue to feel very good about that. As you know, a lot of conversations are starting these days, and there certainly is more chatter around M&A. We think we are a really great partner for the right potential partner. I would just say activity around that is ramping up in terms of conversations. Our strike zone remains very, very small. There's a whole host of metrics with respect to a potential partner that we would have to hit. Probably the main one would be at the pace we are creating TBV and earnings per share, it's going to have to be a very good strategic and financial transaction because we do not want to go backward. That means it would have to be an excellent partner, and there are some out there.

Speaker #4: And so that means it would have to be an excellent partner and there are some out there. It'd have to be a really well done financial transaction because we have great momentum organically and we really don't want to take a step backward in M&A.

Speaker #4: We think we are a really great partner for the right potential partner . But I would just say activity around that is ramping up in terms of conversations .

Speaker #4: So probably the punch line there is open to it but very tight strike zone.

Speaker #7: Yeah. And then nothing near term more a little bit more in the out years or out quarters.

Speaker #4: But our strike zone remains very , very small . There's there's a whole host of metrics with respect to a potential partner that we would have to hit .

Speaker #4: Sure.

Speaker #7: Yeah. Okay. Cool. I think thanks for taking the questions guys. Thank you.

Speaker #1: And everyone has a final reminder to ask a question. Please press star than one. Our next question comes from Nathan Race at Piper Sandler.

Speaker #4: Probably the main one would be at the pace we are accreting TBV and earnings per share. It's going to have to be a very good strategic and financial transaction because we do not want to go backward, and so that means it would have to be an excellent partner.

Speaker #1: Please go ahead.

Speaker #8: Hey guys. Good morning. Sorry about the technical difficulties earlier.

Speaker #4: No worries.

Speaker #8: I apologize. I hopped on late but just in terms of kind of the cadence the capital markets revenue and just kind of some of the impacts you saw from a revenue perspective this quarter.

Todd Gipple: It'd have to be a really well-done financial transaction, because we have great momentum organically, and we really don't want to take a step backward in M&A. Probably the punchline there is open to it, but very tight strike zone.

Speaker #4: And there are some out there . It'd have to be a really well done financial transaction because we we have great momentum organically , and we really don't want to take a step backward in M&A .

Speaker #8: I mean how much did kind of the volatility and rates versus maybe some seasonality impact what you saw in terms of capital markets transactions closing?

Speaker #4: So . Probably the punch line there is open to it . But very tight strike zone .

Speaker #8: And then do you also expect as you look out over the next 12 months to have some seasonally kind of lighter volumes as well in the first quarter?

Brian Martin: Yeah. Nothing near term, a little bit more in the out years or out quarters.

Speaker #6: Yeah . And then nothing near term more a little bit more in the out years or out quarters .

Speaker #8: I guess I'm just trying to understand is the updated guidance going to be kind of more loaded over the next three quarters.

Todd Gipple: Sure.

Brian Martin: Yeah. Okay. Cool. Thanks for taking the questions, guys.

Speaker #4: Sure .

Speaker #6: Yeah . Okay . Cool . I think thanks for taking the questions guys .

Todd Gipple: Thank you, Brian.

Speaker #4: Sure. No. Nate, appreciate the ability to clarify some of that. So in Q1 we saw very typical seasonality for lightech and it really didn't have anything to do with rates.

Nick Anderson: Thank you.

Operator 2: Everyone, as a final reminder to ask a question, please press star then one. Our next question comes from Nathan Race at Piper Sandler. Please go ahead.

Operator: Everyone, as a final reminder to ask a question, please press star then one. Our next question comes from Nathan Race at Piper Sandler. Please go ahead.

Speaker #4: Thank you Brian .

Speaker #7: Thank you .

Speaker #1: And everyone . As a final reminder to ask a question , please press star . Then one , our next question comes from Nathan Rees at Piper Sandler .

Nathan Race: Hey, guys. Good morning. Sorry about the technical difficulties earlier.

Speaker #1: Please go ahead .

Speaker #8: Hey guys . Good morning . Sorry about the technical difficulties earlier .

Speaker #4: Or any macroeconomic headwinds or candidly even the war. It just the affordable industry tends to work really hard to close a lot of deals at year end.

Todd Gipple: No worries.

Nathan Race: I apologize that I hopped on late, but just in terms of kind of the cadence of capital markets revenue and just kind of some of the impacts you saw from a revenue perspective this quarter, I mean, how much did the volatility in rates versus maybe some seasonality impact what you saw in terms of capital markets transactions closing? Do you also expect, as you look out over the next 12 months, to have some seasonally kind of lighter volumes as well in Q1? I guess I'm just trying to understand, is the updated guidance going to be kind of more loaded over the next three quarters?

Speaker #4: No worries .

Speaker #8: I apologize . I hopped on late , but just in terms of kind of the cadence of capital markets , revenue and just kind of some of the impacts you saw from a revenue perspective this quarter , I mean , how much did the volatility in rates versus maybe some seasonality impact what you saw in terms of capital markets transactions closing , and then do you also expect , as you look out over the next 12 months to have some seasonally kind of lighter volumes as well in the first quarter ?

Speaker #4: And then we have a pretty slow start to the new year. And actually we did 13 projects right on top of historical Q1 average of 11 million.

Speaker #4: So landed about where we expected. We'll tell you that over the last couple quarters we've raised our guidance range and that's because of all that we're able to do with some of these transactions on perm securitizations and construction loan participations.

Speaker #8: I guess I'm just trying to understand, is the updated guidance going to be kind of more loaded over the next three quarters?

Todd Gipple: Sure. No, Nate, appreciate the ability to clarify some of that. In Q1, we saw very typical seasonality for LIHTC, and it really didn't have anything to do with rates, or any macroeconomic headwinds, or, candidly, even the war. Just the affordable industry tends to work really hard to close a lot of deals at year-end. Then we have a pretty slow start to the new year. Actually, we did 13 projects right on top of historical Q1 average of $11 million. Landed about where we expected. Will tell you that over the last couple of quarters, we've raised our guidance range, and that's because of all that we're able to do with some of these transactions on perm securitizations and construction loan participations. Back in Q3, we raised our guide from $50 million to $60 million up to $55 million to $65 million.

Speaker #4: Sure . No . Nate , appreciate the ability to clarify some of that . So in Q1 we saw very typical seasonality for light tech .

Speaker #4: So back in Q3 we raised our guide from 50 to 60 up to 55 to 65. In the Q4 call in January we raised the top end of the range to 70 and left the bottom.

Speaker #4: And it really didn't have anything to do with rates or any macroeconomic headwinds or candidly , even the war , just the affordable industry tends to work really hard to close a lot of deals at year end .

Speaker #4: Now this quarter we're moving that floor up as we've become more confident about future pipelines. I would just say I wouldn't get too focused on the precision of those guidance ranges.

Speaker #4: And then we have a pretty slow start to the new year And actually , we did 13 projects right on top of historical Q1 average of 11 million .

Speaker #4: It's more about the direction that they're going up. Nate, you know us really well. We have a very strong say do ratio and we want to keep it that way.

Speaker #4: So landed about where we expected . We'll tell you that over the last couple quarters , we've raised our guidance range , and that's because of all that we're able to do with some of these transactions on Perm securitizations .

Speaker #4: But again the gist of this is our pipeline is shaping up as strong as it's ever been. As we get further into the year so Q1 seasonality was really just about the industry seasonality.

Speaker #4: We're very optimistic about the pipeline we have. We're good at closing deals. These 13 projects we did in Q1 even though it was a slower quarter three of those projects were with first time new developers.

Speaker #4: And construction loan participations. So back in Q3, we raised our guide from 50 to 60 up to 55 to 65. In the Q4 call in January, we raised the top end of the range to 70 and left the bottom.

Todd Gipple: In the Q4 call in January, we raised the top end of the range to 70 and left the bottom. Now this quarter, we're moving that floor up as we've become more confident about future pipelines. I would just say I wouldn't get too focused on the precision of those guidance ranges. It's more about the direction that they're going up. Nate, you know us really well. We have a very strong say-do ratio, and we want to keep it that way. But again, the gist of this is our pipeline is shaping up as strong as it's ever been as we get further into the year. Q1 seasonality was really just about the industry seasonality. We're very optimistic about the pipeline we have. We're good at closing deals.

Speaker #4: So we continue to expand our roster too. So we're very excited about the future of lightech. Having construction offtake allows us to say yes more often to clients.

Speaker #4: Now, this quarter, we're moving that floor up as we've become more confident about future pipelines. I would just say I wouldn't get too focused on the precision of those guidance ranges.

Speaker #4: It's more about the direction that they're going up . Nate , you know us really well . We have a very strong say do ratio and we want to keep it that way .

Speaker #4: And to consider candidly slightly bigger deals. So we're very excited about the future of that. That's why we've gotten to the 60 to 70 million dollar guidance range.

Speaker #4: But again, the gist of this is our pipeline is shaping up as strong as it's ever been, as we get further into the year.

Speaker #8: Understood. That's really helpful. Thank you, Todd. And just going back to the margin outlook and just with the expectations for some additional construction lightech securitizations or sales curious what pricing is on that product.

Speaker #4: So Q1 seasonality was really just about the industry seasonality . We're very up optimistic about the pipeline . We have , we're good at closing deals .

Todd Gipple: These 13 projects we did in Q1, even though it was a slower quarter, three of those projects were with first-time new developers. We continue to expand our roster too. We're very excited about the future of LIHTC. Having construction offtake allows us to say yes more often to clients and to consider, candidly, slightly bigger deals. We're very excited about the future of that. That's why we've gotten to the $60 to 70 million dollar guidance range.

Speaker #8: I imagine it's higher than what you see on a perm basis or maybe even across some other commercial segments. So just trying to get a sense of with these additional securitizations how that's going to impact loan yields not only in the second quarter but as you perhaps do additional construction sales or securitizations in the future.

Speaker #4: These 13 projects we did in Q1 , even though it was a slower quarter , three of those projects were with first time new developers .

Speaker #4: So we continue to expand our roster too . So we're very excited about the future of , of light tech having construction . Off take allows us to say yes more often to clients and to consider candidly , slightly bigger deals .

Speaker #7: Yeah. Nate, when we look at the impact on margin for future loan sales I mean we continue to expect to overcome any dilution that might come from additional loan sales.

Speaker #4: So we're very excited about the future of that . That's why we've gotten to the 60 to $70 million guidance range .

Speaker #7: Certainly pricing on some of the loans that we sell are going to vary depending on tax or tax exempt. So yeah it's probably more deal dependent if you will.

Nathan Race: Understood. That's really helpful. Thank you, Todd. Just going back to the margin outlook and just with the expectations for some additional construction, LIHTC securitizations or sales, curious, what pricing is on that product. I imagine it's higher than what you see on a perm basis or maybe even across some other commercial segments. Just trying to get a sense of with these additional securitizations, how that's going to impact loan yields, not only in Q2, but as you perhaps do additional construction sales or securitizations in the future.

Speaker #8: Understood . That's really helpful . Thank you . Todd . And you know , just going back to the margin outlook and just with the expectations for some additional construction light tech securitizations or sales , you know , curious , you know , what pricing is on that product .

Speaker #7: And also when you think about the timing of some of these transactions these are both of the lightech construction transactions were with our first time partners.

Speaker #8: I imagine it's higher than what you see on a per basis or maybe even across some other commercial segments . So just trying to get a sense of , you know , with these additional securitizations , how that's going to impact loan yields , not only in second quarter , but as you perhaps do additional construction sales or securitizations in the future

Speaker #7: And so we are focused on getting deals done and not that we took the ball off the economics but we some of the deals that we are doing the offtake for have been in the portfolio for a minute.

Nick Anderson: Yeah, Nate, when we look at the impact on margin for future loan sales, I mean, we continue to expect to overcome any dilution that might come from additional loan sales. Certainly, pricing on some of the loans that we sell are going to vary depending on tax or tax-exempt. Yeah, it's probably more deal dependent, if you will. Also, when you think about the timing of some of these transactions, both of the LIHTC construction transactions were with first-time partners. We were focused on getting deals done. Not that we took the ball off the economics, but some of the deals that we are doing the offtake for have been in the portfolio for a minute. Those come with prices that were higher as they were originated in a higher rate environment.

Speaker #7: So those come with prices that we're higher as they were originated in a higher rate environment. Now our speed to execution in the future is likely to be much shorter and so I would expect the disconnect between the portfolio that we are offtaking to current rates would be smaller.

Speaker #2: Yeah . Nate , when we look at the impact on margin for future loan sales , I mean , we continue to expect to overcome any dilution that might come from additional loan sales .

Speaker #2: Certainly, pricing on some of the loans that we sell is going to vary depending on whether they are tax or tax-exempt. So, yeah, it's probably more deal-dependent, if you will.

Speaker #4: And Nate I guess I just tag on here and say the upshot of both transactions that will close here in Q2 is just a slightly improved margin.

Speaker #2: And also when you think about the timing of some of these transactions , these are both both of the light tech construction transactions were with our first with first time partners .

Speaker #4: Maybe a basis will fluctuate from time to time. There will be times where depending again on the mix of the other side of the balance sheet we could see a little bit of margin accretion.

Speaker #2: And so , you know , we're focused on getting deals done and not that we took the ball off the economics , but we , you know , some of the deals that we are doing , the offtake for have been in the portfolio for a minute .

Speaker #4: We could see a little bit of margin contraction. But it's all going to be really tight to static. We do not anticipate having to take significant margin pressure when we're taking these off the balance sheet.

Speaker #2: So, those—those come with prices that were higher, as they were originated in a higher rate environment. Now, our speed of execution in the future is likely to be much shorter.

Nick Anderson: Now, our speed to execution in the future is likely to be much shorter, and so I would expect the disconnect between the portfolio that we are off-taking to current rates would be smaller.

Speaker #4: So yeah I really appreciate the question just to be able to be clear about that. That we don't expect significant impact on margin when we're doing this.

Speaker #2: And so, I would expect the disconnect between the portfolio that we are off-taking to current rates would be smaller.

Todd Gipple: Nate, I guess I'd just tag on here and say the upshot of both transactions that will close here in Q2 is just a slightly improved margin, maybe a basis point. That will fluctuate from time to time. There will be times where, depending again on the mix of the other side of the balance sheet, we could see a little bit of margin accretion, we could see a little bit of margin contraction, but it's all going to be really tight to static. We do not anticipate having to take significant margin pressure when we're taking these off the balance sheet. Yeah, I really appreciate the question just to be able to be clear about that we don't expect significant impact on margin when we're doing this.

Speaker #8: Got it. That makes sense. And just as these securitizations play out and just given the loan growth outlook curious if we can expect some additional reserve releases going forward similar to what we saw this quarter or kind of how you guys are thinking about kind of just the reserve trajectory even a dollar basis just as some of these loans are offloaded.

Speaker #4: And Nate, I guess I'd just tag on here and say the upshot of both transactions that will close here in Q2 is just a slightly improved margin.

Speaker #4: Maybe , maybe , maybe a basis point . And that will fluctuate from time to time . There will be times where depending , again , on the on the mix of the other side of the balance sheet , we could see a little bit of margin accretion .

Speaker #4: Sure. So I guess what I would say is there may be another construction loan participation at the end of the year that's really going to be based on where we land on gross loan growth.

Speaker #4: We could see a little bit of margin contraction , but it's all going to be really tight to , to static . We do not anticipate having to take a significant margin pressure when we're taking these off the balance sheet .

Speaker #4: If we're more in the lower end of our guide at 10 we probably don't need it. If loan growth is more robust and we're closer to the 15 in the guide we're likely to do another construction offtake later in the year.

Speaker #4: So yeah , I really appreciate the question . Just to be able to be clear about that , that we don't expect significant impact on margin when we're doing this .

Speaker #4: And if we did that there would be another bit of lightening of provision when we have that happen absent that provision would really come down to something a lot more consistent with what we've done over the last six eight quarters.

Nathan Race: Got it. That makes sense. Just as these securitizations play out and just given the loan growth outlook, curious if we can expect some additional reserve releases going forward, similar to what we saw this quarter, or kind of how you guys are thinking about?

Speaker #8: Got it . That makes sense . And you know , just as these securitizations play out and just given the loan growth outlook , you know , curious if we can expect some additional reserve releases going forward , going forward , some of what we saw this quarter or kind of how you guys are thinking about kind of just the reserve trajectory , maybe on a dollar basis , just some of these loans are offloaded .

Speaker #4: We're in that four or five million range and I would tell you my expectation on provision would be what would vary there would just be the pace of loan growth.

Speaker #4: Sure. So, I guess what I would say is there may be another construction loan participation at the end of the year. That's really going to be based on where we land on gross loan growth.

Speaker #4: We really aren't seeing any challenges in terms of the portfolio. So any modification in that kind of steady rate of provisioning would really be more about the level of loan growth.

Speaker #4: If we're more in the lower end of our guide at ten , we probably don't need it . If loan growth is more robust and we're closer to the 15 in the guide , we're likely to do another construction offtake later in the year .

Speaker #8: Got it. Okay. I appreciate all the color. Thanks guys.

Speaker #4: Thanks Nate.

Speaker #7: Thanks Nate.

Speaker #9: Thank you. And that concludes our question and answer session. I'd like to turn the conference back over to Todd Gipple for any closing remarks.

Speaker #4: And if we did that , there would be another bit of lightning of provision . When we have that happen . Absent that provision would really come down to something lot more consistent with what we've done over the last six , eight quarters or in that 4 or 5 million range .

Speaker #4: Thank you all for joining us today. We really appreciate your interest in our company and we look forward to connecting with you sometime soon.

Speaker #4: Have a great rest of your day.

Speaker #9: Thank you sir. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Speaker #4: And I , I would tell you , my expectation on provision would be what would vary . There would just be the pace of loan growth .

Speaker #4: We really aren't seeing any challenges in terms of the portfolio . So any , any modification in that kind of steady rate of provisioning would really be more about the level of loan growth

Speaker #8: Got it . Okay . I appreciate all the color . Thanks , guys .

Speaker #4: Thanks , Nate .

Speaker #7: Nate .

Speaker #1: Thank you . And that concludes our question and answer session . I'd like to turn the conference back over to Todd Gipple for any closing remarks

Speaker #4: Thank you all for joining us today. We really appreciate your interest in our company, and we look forward to connecting with you sometime soon.

Speaker #4: Have a great rest of your day .

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