Q1 2026 Business First Bancshares Inc Earnings Call

April 27, 2026

Operator 2: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Business First Bancshares, Inc. Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. I would now like to turn the conference over to Matt Sealy, Director of Corporate Strategy. Please go ahead.

Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Business First Bancshares, Inc. Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. I would now like to turn the conference over to Matt Sealy, Director of Corporate Strategy. Please go ahead.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Speaker #2: I would now like to turn the conference over to Matt Sealy, Director of Corporate Strategy. Please go ahead. Thank you. Good morning, and thank you all for joining.

Matt Sealy: Thank you. Good morning, and thank you all for joining. Earlier today, we issued our Q1 2026 earnings press release, a copy of which is available on our website, along with the slide presentation that we'll reference during today's call. Please refer to slide 3 of our presentation, which includes our safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures. For those of you joining by phone, please know the slide presentation is available on our website at www.b1bank.com. Please also note our safe harbor statements are available on page 6 of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to those safe harbor statements in our slide presentation and earnings release.

Speaker #2: Earlier today, we issued our first quarter 2026 earnings press release, a copy of which is available on our website. Along with the slide presentation that we'll reference during today's call, please refer to slide 3 of our presentation, which includes our Safe Harbor statements regarding forward-looking statements and the use of non-GAAP financial measures.

Speaker #2: For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our Safe Harbor statements are available on page 6 of our earnings press release that was filed with the SEC today.

Speaker #2: All comments made during today's call are subject to those Safe Harbor statements in our slide presentation and earnings release. I'm joined this morning by Business First Bancshares CEO and Chairman Jude Melville, Chief Financial Officer Greg Robertson, Chief Banking Officer Philip Jordan, and President of B1 Bank, Jerry Vaskiu.

Matt Sealy: I'm joined this morning by Business First Bancshares' CEO and Chairman, Jude Melville, Chief Financial Officer, Greg Robertson, Chief Banking Officer, Philip Jordan, and President of b1BANK, Jerry Vascocu. After the presentation, we'll be happy to address any questions you may have. With that, I'll turn the call over to you, Jude.

Speaker #2: After the presentation, we'll be happy to address any questions you may have. And with that, I'll turn the call over to you, Jude.

Speaker #3: Okay, thanks, Matt. Good morning, and thank you for joining us today. We know there are plenty of things y'all could be doing on a Monday morning in a world environment as complex as the one in which we find ourselves.

Jude Melville: Okay, thanks, Matt. Good morning, and thank you for joining us today. We know there are plenty of things y'all could be doing on a Monday morning in a world environment as complex as the one in which we find ourselves, and we appreciate you choosing to spend this time with us. This was one of, if not the best, Q1s that we have had as a company. We continue to improve earnings, strengthen capital levels, and improve quality of our liquidity posture while consummating our second material acquisition in the past three years and making a number of non-acquisitive investments that will pay off over the course of the next few years. A highlight for the quarter was the addition of a substantial number of new teammates. As I just mentioned, we closed the Progressive transaction on 1 January 2024.

Speaker #3: And we appreciate you choosing to spend this time with us. This was one of, if not the best, first quarters that we have had as a company.

Speaker #3: We continue to improve earnings, strengthen capital levels, and improve the quality of our liquidity posture, while consummating our second material acquisition in the past three years and making a number of non-acquisitive investments that will pay off over the course of the next few years.

Speaker #3: A highlight for the quarter was the addition of a substantial number of new teammates. As I just mentioned, we closed the Progressive transaction on January 1st.

Speaker #3: In balance sheet terms, the acquisition adds over $700 million in assets and nine branches across North Louisiana, deepening our footprint in an area in which we were already a market leader.

Jude Melville: In balance sheet terms, the acquisition adds over $700 million in assets and 9 branches across North Louisiana, deepening our footprint in an area in which we were already a market leader. Asset quality of the acquired portfolio is stellar, as is the makeup of the expanded client base. On a very promising note since we announced the acquisition, construction on the Meta Data Center project in Northeast Louisiana has accelerated and been expanded, and we expect tens of billions of dollars of private investment in a region in which we are as well situated to capture the benefits as any financial institution, large or small.

Speaker #3: Asset quality and acquired portfolio is stellar, as is the makeup of the expanded client base. On a very promising note, since we announced the acquisition, construction on the metadata center project at Northeast Louisiana has accelerated and been expanded.

Speaker #3: And we expect tens of billions of dollars of private investment in a region in which we are as well situated to capture the benefits as any financial institution, large or small.

Speaker #3: The morale among our former Progressive teammates is high, and the working partnership is off to as smooth a start as any acquisition that we've had the honor to participate in.

Jude Melville: The morale among our former Progressive teammates is high, and the working partnership is off to as smooth a start as any acquisition that we've had the honor to participate in, which bodes well for our ability to operate as one team over the course of this year, even before conversion is executed. We also added a material number of bankers organically. In our last call, I mentioned the addition of John Heine, our new market president in Houston, former market president from Veritex Bank. To date, John has attracted an additional 11 teammates, including seven production officers, the majority of which are also former Veritex bankers. Also in Houston, we are honored to add Ben Marmande to lead our corporate banking activities in Texas.

Speaker #3: Which bodes well for our ability to operate as one team over the course of this year, even before conversion is executed. We also added a material number of bankers organically in our last call.

Speaker #3: I mentioned the addition of John Hiney, our new market president in Houston, former market president from Vertex Bank. To date, John has attracted an additional 11 teammates, including 7 production officers.

Speaker #3: The majority of which are also former Vertex bankers. Also, in Houston, we are honored to add Ben Marmon to lead our corporate banking activities in Texas.

Speaker #3: Ben was a longtime banker for Iberia and then First Horizons, serving in leadership capacities across South Louisiana and, for the past five years, as president of the FHN Financials Houston market.

Jude Melville: Ben was a longtime banker for IberiaBank and then First Horizon, serving in leadership capacities across South Louisiana and for the past 5 years as president of FHN Financial's Houston market. These new partners have already begun building a pipeline of opportunities, and we anticipate them contributing meaningfully to our growth in H2 of the year as we seek to take advantage of M&A-led disruption in the Houston market. We announced that we've begun a partnership with Covecta, a provider of agentic AI capabilities. I include this in my discussion on new teammates because over time, we anticipate this partnership leading to both our more efficiently leveraging the talent we have on board and to our minimizing hiring as we continue to grow.

Speaker #3: These new partners have already begun building a pipeline of opportunities, and we anticipate them contributing meaningfully to our growth in the second half of the year as we seek to take advantage of M&A-led disruption in the Houston market.

Speaker #3: We announced and have begun a partnership with Covecta, a provider of agentic AI capabilities. I include this in my discussion on new teammates because, over time, we anticipate this partnership leading to both our more efficiently leveraging the talent we have on board, and to our minimizing hiring as we continue to grow.

Speaker #3: We are beginning this effort focused on our consumer workflows, in which we have already identified over 300 policy rules for potential automation. We anticipate expanding utilization of the partnership across broader use cases throughout the bank, including deposits and credit.

Jude Melville: We are beginning this effort focused on our consumer workflows, in which we have already identified over 300 policy rules for potential automation and anticipate expanding utilization of the partnership across broader use cases throughout the bank, including deposits and credit. This effort will take time to unfold, but we are more confident with each day that the potential is actionable and will prove to be meaningful. It's important to note that as we explore the potential of agentic AI, we remain focused on governance, validation, and human oversight, so that as models, policies, and industry requirements change, we retain our ability to manage that evolution in a disciplined and controlled way. A very positive note for the quarter is that even as we grow the team, we remain focused on cost control, with non-interest expenses for the quarter lower than anticipated.

Speaker #3: This effort will take time to unfold, but we are more confident with each day that the potential is actionable and will prove to be meaningful.

Speaker #3: It's important to note that as we explore the potential of agentic AI, we remain focused on governance, validation, and human oversight, so that as models, policies, and industry requirements change, we retain our ability to manage that evolution in a disciplined and controlled way.

Speaker #3: A very positive note for the quarter is that, even as we grow the team, we remain focused on cost control, with monetary expenses for the quarter lower than anticipated.

Speaker #3: After accounting for the increased costs associated with the progressive current run rate, our core expenses were essentially flat quarter over quarter, as well as in comparison to last year's first quarter.

Jude Melville: After accounting for the increased costs associated with the Progressive current run rate, our core expenses were essentially flat quarter over quarter, as well as in comparison to last year's Q1. We do anticipate the cost of the new hires adding incrementally to our expense rate over the Q2, but note that the super majority of the hires were production-oriented, which should lead to further operating leverage improvements. As a key component of our positive earnings results, we are pleased to note the contribution of our non-interest income, primarily through the financial services group, and in particular, their work providing interest rate swaps and SBA loan gains on sale.

Speaker #3: We do anticipate the cost of the new hires adding incrementally to our expense rate over the second quarter, but note that the supermajority of the hires were production-oriented, which should lead to further operating leverage improvements.

Speaker #3: As a key component of our positive earning results, we are pleased to note the contribution of our non-interest income, primarily through the Financial Services Group, and in particular their work providing interest rate swaps and SBA loan gains on sale.

Speaker #3: As you know, we've been working the past three years on diversifying our revenue streams with investments in this arena, so that we might be able to continue to produce consistent earnings, even in quarters in which our spread income was not as strong as we hoped.

Jude Melville: As you know, we've been working the past three years on diversifying our revenue streams with investments in this arena, in part so that we might be able to continue to produce consistent earnings, even in quarters in which our spread income was not as strong as we hoped. The potential of this effect was put to test in Q1 as loan volumes were lower than anticipated, due primarily to heightened loan payoffs and paydowns. In addition to the contribution to current earnings, we utilized the financial services group to successfully complete a fully self-managed private placement of subordinated debt, just after quarter end, raising $85 million within our cohort of correspondent banking relationships. Of the $85 million raised, we utilized $67 million to redeem existing sub-debt, some of which had crossed the five-year mark and had already lost about $10 million in capital treatment.

Speaker #3: The potential of this effect was put to the test in the first quarter, as loan volumes were lower than anticipated, due primarily to heightened loan payoffs and paydowns.

Speaker #3: In addition to the contribution to current earnings, we utilized the Financial Services Group to successfully complete a fully self-managed private placement of subordinated debt just after quarter-end, raising $85 million within our cohort of correspondent banking relationships.

Speaker #3: Of the $85 million raised, we utilized $67 million to redeem existing sub-debt, some of which had crossed the 5-year mark and had already lost about $10 million in capital treatment.

Speaker #3: The successful debt raise is important in and of itself, but I'm most excited about the way in which we accomplished it—both utilizing and contributing to our growing network of community bank partners.

Jude Melville: The successful debt raise is important in and of itself, but I'm most excited about the way in which we accomplished it, both utilizing and contributing to our growing network of community bank partners. In closing, we feel very positive about Q1 on a number of fronts and anticipate it to be the start of a solid full year. We reiterate full-year loan guidance on loan growth based on our sooner-than-expected hiring of production officers, and we continue to forecast a 1.25 ROA end-of-year run rate. One of our guiding principles is belief in the compounding power of incremental improvement, and we see that principle in action in our Q1 results. Thank you again for being with us, and with that, I'll turn it over to Greg.

Speaker #3: In closing, we feel very positive about the first quarter on a number of fronts and anticipate it to be the start of a solid full year.

Speaker #3: We reiterate full-year guidance on loan growth based on our sooner-than-expected hiring of production officers. And we continue to forecast a $1.25 ROA end-of-year run rate.

Speaker #3: One of our guiding principles is belief in the compounding power of incremental improvement, and we see that principle in action in our first quarter results.

Speaker #3: Thank you again for being with us. And with that, I'll turn it over to Greg.

Speaker #2: Thank you, Jude. And good morning, everyone. As always, I'll spend a few minutes reviewing our results, and we'll discuss our updated outlook before we open up the Q&A.

Greg Robertson: Thank you, Jude, and good morning, everyone. As always, I'll spend a few minutes reviewing our results, and we'll discuss our updated outlook before we open up to Q&A. Q1 GAAP net income and EPS available to common shareholders was $22.2 million and $0.68, and included $2.2 million merger-related expenses, $28,000 gain on former bank premises, and $80,000 gain on sale of securities. Excluding the non-core items, non-GAAP core net income and EPS available to common holders was $24 million and $0.73 per share. From our perspective, Q1 results marked another quarter of strong financial performance, generating a 1.10 core ROAA and a core efficiency ratio of 62% for the quarter.

Speaker #2: First quarter GAAP net income and EPS available to common shareholders was $22.2 million, and $0.68, and included $2.2 million in merger-related expenses, a $28,000 gain on former bank premises, and an $80,000 gain on sale of securities.

Speaker #2: Excluding the non-core items, non-GAAP core net income and EPS available to common holders was $24 million and $0.73 per share. From my perspective, first quarter results marked another quarter of strong financial performance, generating a 1.10% core ROAA and a core efficiency ratio of 62% for the quarter.

Speaker #2: Our first quarter earnings results were highlighted by continued discipline on the expense side and a meaningful contribution from our Financial Services Correspondent Banking group, as Jude mentioned.

Greg Robertson: Our Q1 earnings results were highlighted by continued discipline on the expense side and a meaningful contribution from our financial services correspondent banking group that Jude mentioned. During the quarter, we completed the acquisition of North Louisiana-based Progressive Bank, which closed on 1 January this year and added $774 million in total assets and nine new locations. From the balance sheet perspective, total loans held for investment increased $494.8 million or 32% annualized on a linked-quarter basis. Excluding the acquired Progressive loans, total loans held for investment declined $102.7 million or -6.2% annualized. Excluding acquired Progressive loans, organic commercial and commercial real estate loans decreased $58.6 million and $23 million respectively compared to the linked quarter.

Speaker #2: Also, during the quarter, we completed the acquisition of North Louisiana-based Progressive Bank, which closed on January 1st of this year and added $774 million in total locations.

Speaker #2: From the balance sheet perspective, total loans held for investment increased $494.8 million, or 32% annualized on a link-quarter basis. Excluding the acquired Progressive loans, total loans held for investment declined $102.7 million, or 66.2% annualized.

Speaker #2: Excluding acquired Progressive loans, organic commercial and commercial real estate loans decreased $58.6 million and $23 million, respectively, compared to the linked quarter. Texas-based loans ended the first quarter at 35% of total loans.

Greg Robertson: Texas-based loans ended Q1 at 35% of total loans. This was anticipated due to the closing of the Progressive Bank transaction in early January. The lower-than-expected loan growth was driven primarily by an overall increase in loan paydowns and payoffs. Specifically, total paydowns and payoffs during Q1 totaled $579 million, which compares to the total new and renewed loan production of $476 million during the quarter. If you recall, in the previous quarter, we experienced slightly higher new and renewed loan production at $500 million, while paydowns and payoffs during the quarter were lower at just $332 million.

Speaker #2: This was anticipated due to the closing of the Progressive Bank transaction in early January. The lower-than-expected loan growth was driven primarily by an overall increase in loan paydowns and payoffs.

Speaker #2: Specifically, total paydowns and payoffs during the first quarter totaled $579 million, which compares to the total new and renewed loan production of $476 million during the quarter.

Speaker #2: If you recall, in the previous quarter we experienced slightly higher new and renewed loan production at $500 million, while paydowns and payoffs during the quarter were lower at just $332 million.

Speaker #2: Total deposits increased $766.4 million due to increases in interest-bearing deposits and non-interest-bearing deposits of $513.3 million and $253 million, respectively. The increase in interest-bearing deposits was largely driven by approximately $325 million in commercial money market accounts.

Greg Robertson: Total deposits increased $766.4 million due to increases in interest-bearing deposits and non-interest-bearing deposits of $513.3 million and $253 million, respectively. The increase in interest-bearing deposits was largely driven by approximately $325 million in commercial money market accounts and $185 million in personal money market accounts. Excluding acquired Progressive deposits, organic deposit growth was $81.5 million or 4.4% annualized on a linked quarter basis. Lastly, on the funding side of the balance sheet, we took advantage of the improved liquidity position from softer overall net loan growth and repaid FHLB balances and broker deposits. Total FHLB borrowings decreased $170.4 million, and broker deposits were reduced by $112.5 million from the linked quarter.

Speaker #2: And $185 million in personal money market accounts. Excluding acquired Progressive deposits, organic deposit growth was $81.5 million, or 4.4% annualized on a linked-quarter basis.

Speaker #2: Lastly, on the funding side of the balance sheet, we took advantage of the improved liquidity position from solid overall net loan growth and repaid FHLB balances and brokered deposits.

Speaker #2: Total FHLB borrowings decreased $170.4 million, and brokered deposits were reduced by $112.5 million from the linked quarter. Moving on to the margin, our GAAP-reported first quarter net interest margin decreased 6 basis points from the linked quarter to 3.65%, while the non-GAAP core net interest margin, excluding purchase accounting accretion, decreased 4 basis points from 3.64% to 3.60% for the quarter ended March 31st.

Greg Robertson: Moving on to the margin. Our GAAP reported Q1 net interest margin decreased 6 basis points linked quarter to 3.65%, while the non-GAAP core net interest margin, excluding purchase accounting accretion, decreased 4 basis points from 3.64% to 3.60% for the quarter ended March 31. A driver to the lower than expected margin performance during the quarter was loan discount accretion falling lower than expected at $1.1 million, which was primarily caused by the lower actual rate marks from the Progressive acquisition. We would expect quarterly loan discount accretion to be in the low $1 million range for the balance of 2026. On a linked quarter basis, cost of deposits decreased 18 basis points, while total loan yields decreased 27 basis points.

Speaker #2: A driver to the lower-than-expected margin performance during the quarter was loan discount accretion following lower-than-expected at $1.1 million, which was primarily caused by the lower actual rate marks from the Progressive acquisition.

Speaker #2: We would expect quarterly loan discount accretion to be in the low $1 million range for the balance of 2026. On a linked-quarter basis, cost of deposits decreased 18 basis points.

Speaker #2: While total loan yields decreased 27 basis points, core loan yields excluding loan discount accretion for the first quarter were 6.54%, down 24 basis points from the prior quarter.

Greg Robertson: Core loan yields excluding loan discount accretion for the first quarter were 6.54%, down 24 basis points from the prior quarter. Total cost of deposits for the month end in March was 2.33%, which compared to the weighted average for the first quarter was 2.34%. We are pleased with our ability to hold the line in new loan yields during the quarter with a weighted average new and renewed loan yield of 7.20% for the quarter. I would like to make a note of a few takeaways on slide 19 in our investor presentation. We continue to see 45% to 55% overall deposit betas as achievable regarding any future rate cuts. I would also like to point out overall core CD balance retention rate was 81% during Q1.

Speaker #2: Total cost of deposits for the month ended March was 2.33%, which compared to the weighted average of the first quarter was 2.34%. We are pleased with our ability to hold the line in new loan yields during the quarter, with a weighted average new and renewed loan yield of 7.20% for the quarter.

Speaker #2: I'd like to make a note of a few takeaways on slide 19 in our Investor Presentation. We continue to see 45% to 55% overall deposit beta as achievable regarding any future rate cuts.

Speaker #2: I would also like to point out that the overall core CD balance retention rate was 81% during Q1. This impressive statistic reflects our team's continued focus on maintaining core deposit relationships.

Greg Robertson: This impressive statistic reflects on our team's continued focus on maintaining core deposit relationships. Our baseline assumption is that we do not receive any further rate cuts in 2026. We have worked hard to manage our balance sheet in a relatively neutral position and believe we can achieve modest margin improvement in a slightly down or up rate environment. Moving on to the income statement, GAAP non-interest expense was $57.5 million and included $2.2 million in acquisition-related expense. Core non-interest expense for Q1 was $55.2 million, up $5 million from the prior quarter, and included a full quarter impact of the Progressive expense base mentioned earlier.

Speaker #2: Our baseline assumption is that we do not receive any further rate cuts in 2026. We have worked hard to manage our balance sheet in a relatively neutral position and believe we can achieve modest margin improvement in a slightly down or up rate environment.

Speaker #2: Moving on to the income statement, GAAP non-interest expense was $57.5 million and included $2.2 million in acquisition-related expense. Core non-interest expense for the first quarter was $55.2 million, up $5 million from the prior quarter, and included a full quarter impact of the Progressive expense base mentioned earlier.

Speaker #2: Core expenses for the first quarter did come in lower than we expected, mostly due to the timing of certain investments and marketing spend not hitting in the quarter, which we do expect to recognize going forward.

Greg Robertson: Core expenses for Q1 did come in lower than we expected, mostly due to the timing of certain investments and marketing spend not hitting in the quarter, which we do expect to recognize going forward. We also did recognize a small amount of Progressive cost saves during the quarter. As a reminder, we should recognize remaining potential cost saves post-conversion, which is scheduled for late Q3 this year. Q1 GAAP and core non-interest income was $14.1 million and $13.9 million, respectively. GAAP results did include $80,000 gain on sale of securities and a $28,000 gain on former bank premises. Core non-interest income results for Q1 were slightly better than we expected, primarily due to continued strong swap fee revenue and gain on sale from SBA activity.

Speaker #2: We also did recognize a small amount of the Progressive cost saved during the quarter. As a reminder, we should recognize remaining potential cost saves post-conversion, which is scheduled for late third quarter this year.

Speaker #2: First quarter GAP and core non-interest income was $14.1 million and $13.9 million, respectively. GAP results did include an $80,000 gain on sale of securities, and a $28,000 gain on former bank premises.

Speaker #2: Core non-interest income results for the first quarter were slightly better than we expected, primarily due to continued strong swap fee revenue and gain on sale from SBA activity.

Speaker #2: Lastly, I'd like to provide some context to the credit migration during the first quarter. Total loans past due 30 days or more, excluding non-accruals, as a percentage of total loans held for investment, decreased from 0.64% to 0.42% as of March 31.

Greg Robertson: Lastly, I'd like to provide some context to the credit migration during Q1. Total loans past due 30 days or more, excluding non-accruals as a percentage of total loans held for investment decreased from 0.64% to 0.42% at 31 March. The ratio of non-performing loans compared to loans held for investment increased 29 basis points to 1.53% at the end of Q1, while the ratio of non-performing assets compared to total assets increased 29 basis points to 1.38% compared to the linked quarter. That concludes my prepared remarks. I'll hand the call back over to you, Matt, and we'll open it up for questions.

Speaker #2: The ratio of non-performing loans compared to loans held for investment increased 29 basis points to 1.53% at the end of the first quarter. Meanwhile, the ratio of non-performing assets compared to total assets increased 29 basis points to 1.38% compared to the linked quarter.

Speaker #2: That concludes my prepared remarks. I'll hand the call back over to you, Matt, and we'll open it up for questions.

Matt Sealy: Yes. Yeah, thanks, guys. I think we'll go ahead and open up to Q&A now.

Speaker #3: Yeah, thanks, guys. I think we will go ahead and open up to Q&A now.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone that in order to ask a question, please press star followed by the number one on your telephone keypad.

Operator 2: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. We kindly ask everyone to limit themselves to one question and one follow-up. Thank you. Our first question comes from the line of Feddie Strickland with Hovde Group. Please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. We kindly ask everyone to limit themselves to one question and one follow-up. Thank you. Our first question comes from the line of Feddie Strickland with Hovde Group. Please go ahead.

Speaker #1: We kindly ask everyone to limit themselves to one question and one follow-up. Thank you. Our first question comes from the line of Fede Strickland with the Hovde Group.

Speaker #1: Please go ahead.

Speaker #4: Hey, good morning, everybody. Just wanted to start on credit. Just wanted to ask—you mentioned in the release you expect the migration we saw this quarter to be resolved over the next couple of quarters, and can you just help us understand kind of the full opportunities that may be here, of how much we could maybe see in PAs come down by year-end, assuming no further migration?

Feddie Strickland: Hey, good morning, everybody. Just wanted to start on credit. Just wanted to ask, you mentioned in the release you expect the migration we saw this quarter to be resolved over the next couple quarters. Can you just help us understand kind of the full opportunity set maybe here of how much we could maybe see NPAs come down by year-end, assuming no further migration? Yeah. Thanks, Patty. Good question. We think in the near term, let's talk about just specifically what we think will happen in Q2 and then more so during the later parts of the year.

Speaker #5: Yeah, thanks, Fede. Good question. So, we think in the near term—let's talk about just specifically what we think will happen in Q2, and then more so during the later parts of the year.

Greg Robertson: Yeah. Thanks, Patty. Good question. We think in the near term, let's talk about just specifically what we think will happen in Q2 and then more so during the later parts of the year.

Greg Robertson: I'll caveat all that by saying, you know, we've kind of been talking about some of these credits for almost a year now. The process through moving them to resolution is sometimes precarious and moves at different speeds. Q2, we think about 30% of the current NPA list will go through to a resolution. As we move past that, we would see it kind of breaking up into thirds as we go through the rest of the year. I think another pretty decent amount of it in the Q3 and hopefully some resolution with maybe only a few pieces hanging over past year-end.

Speaker #5: I'll caveat all that by saying we've kind of been talking about some of these credits for almost a year now, and the process of moving them to resolution is sometimes precarious and moves at different speeds.

Speaker #5: So, Q2, we think about 30% of the current NPA list will go through to a resolution. So, as we move past that, we would see it kind of breaking up into thirds as we go through the rest of the year.

Speaker #5: So I think another pretty decent amount of it in the third quarter, and hopefully some resolution with maybe only a few pieces hanging over past year-end.

Speaker #4: Got it. And then the increase this quarter—I apologize, I cut out for a second when you were mentioning this in your opening comments—but was that the Houston Medical Facility, or which credits contributed to the higher NPAs this quarter?

Feddie Strickland: Got it. The increase this quarter, I apologize, it cut out for a second when you were mentioning this in your opening comments. Was that the Houston medical facility or which credits contributed to the higher NPAs this quarter?

Greg Robertson: No. We had about $25 million increase this quarter, which were mostly attributable to we have a relationship with one client. It's about $16 million in exposure. Those are varying types of collateral and the timing of that resolution on that, some of it could be imminent, some of it could last, you know, 2, 3 quarters to resolve it. That was the majority of the increase this quarter. The previously mentioned medical facility was already in the list.

Speaker #5: No, we had about a $25 million increase this quarter, which was mostly attributable to—we have a relationship with one client. It's about $16 million in exposure.

Speaker #5: Those are varying types of collateral, and the timing of that resolution—some of it could be imminent, some of it could last two to three quarters to resolve.

Speaker #5: So that was the majority of the increase this quarter. The previously mentioned medical facility was already in the list.

Speaker #4: Got it. And just one quick follow-up on the margin—I saw you paid down the FHLB and the broker this quarter, but you also issued the sub debt.

Feddie Strickland: Got it. Just one quick follow-up on the margin. Yeah, saw you pay down the FHLB and the brokered this quarter, but you also issued the sub-debt. You know, should we expect the margin to, I guess, the GAAP margin to still directionally move higher in Q2, or is it more flat, your expectation?

Speaker #4: Should we expect the margin to—the gap margin—to still directionally move higher in the second quarter, or is more flat your expectation?

Greg Robertson: No. We think low to mid single-digit margin expansion as we move forward. You know, part of that will be reliant on moving some of those NPAs back into accruing assets as well, but that's a little trickier to forecast. We do think that just the core margin should tick up into low to mid single digits. If you look at the spread we had during the quarters, spread was relatively flat quarter over quarter. We think with the increase in loan volume, we should get a little bit of pickup.

Speaker #5: No, we think we're going to see mid to low- to mid-single digit margin expansion as we move forward. Part of that will be reliant on moving some of those NPAs back into accruing assets as well.

Speaker #5: But that's a little trickier to forecast, but we do think that just the core margin should tick up to the low to mid-single digits.

Speaker #5: If you look at the spread we had during the quarters, spread was relatively flat quarter over quarter, and we think with the increase in loan volume, we should get a little bit of pickup.

Speaker #4: Great. Thanks, Ilsefak.

Feddie Strickland: Great. Thanks, Josefat.

Speaker #5: Thank you.

Greg Robertson: Thank you.

Speaker #1: Our next question comes from the line of Matt, only with Stevens. Please go ahead.

Operator: Our next question comes from the line of Matt Olney with Stephens. Please go ahead.

Speaker #6: Hey, thanks. Good morning. Just want to follow up on the credit discussion. I think, Greg, you mentioned expectations of some resolutions over the next few quarters.

Matt Olney: Hey, thanks. Good morning. Just want to follow up on the credit discussion. I think, Greg, you mentioned expectations of some resolutions over the next few quarters. That's great to hear. Any thoughts as far as loss recognition? You know, what kind of allowances do you have on some of these credits? Just trying to anticipate if we should anticipate the charge-offs being a little bit higher than near-term. Thanks.

Speaker #6: That's great to hear. Any thoughts as far as loss recognition—what kind of allowances do you have on some of these credits? Just trying to anticipate if we should expect charge-offs being a little bit higher in the near term.

Speaker #6: Thanks.

Greg Robertson: Yeah. So far, Matt, it's a good question. So far, we are seeing reserves versus loss recognition going forward to remain pretty consistent with what the street has forecast for us from a loss standpoint. All of that is kind of incremental as we move along. But so far what we're seeing, we feel like we'll be in line. If you look at the main driver that gives us a little comfort with that is moving past dues back down below 50 basis points. We feel like the stuff that we've been talking about is just kind of in the list and we'll just move forward with hopefully no change from that.

Speaker #5: Yeah, so far, Matt, it's a good question. So far, we are seeing reserves versus loss recognition going forward remain pretty consistent with what the Street has forecast for us from a loss standpoint.

Speaker #5: All of that is kind of incremental as we move along. But so far, what we're seeing we feel like will be in line. If you look at the main driver that gives us a little comfort with that, it's moving past dues back down below 50 basis points.

Speaker #5: We feel like the stuff that we've been talking about is kind of in the list, and we'll just move forward with hopefully no change from that.

Speaker #4: Okay, thank you for clarifying that. And then going back to the loan balances—Greg, I think you mentioned some higher paydowns this quarter. Any more color on those paydowns, whether by loan type or by market, or just any color as far as what you're hearing from your customers, given some of the volatility in the market right now?

Matt Olney: Okay. Thank you for clarifying that. Going back to the loan balances, Greg, I think you mentioned some higher paydowns this quarter. Any more color on those paydowns, whether by loan type or by market, or just any color as far as what you're hearing from your customers, given some of the volatility in the market right now?

Speaker #5: Yeah, I think it was the majority of our paydowns were in the Texas franchise, and I think that’s—you could really draw a line back to some of our larger growth years, the '22, '23 years—'22, '23.

Greg Robertson: Yeah. I think it was the majority of our paydowns were in the Texas franchise, and I think that's, you could really draw a line back to some of our larger growth years, the 2022, 2023 years. Some of those projects came to end. Some of them, we just made the decision whether to raise or credit to move away from a relationship. It's kind of a mixed bag. I think that's the general guidance is it's more commercial stuff probably in the Dallas-Fort Worth, then the Houston markets.

Speaker #5: Some of those projects came to an end. Some of them, we just made the decision—whether it's rate or credit—to move away from a relationship.

Speaker #5: So it's kind of a mixed bag. But I think that's the general guidance—it's more commercial stuff, probably in the Dallas first, than the Houston markets.

Speaker #6: Yeah, I think it's not a small thing that we've really dramatically downshifted our exposure to construction. And so, we don't have the same large-sized construction projects funding up as we— as some of these older construction projects come off the books.

Jude Melville: Yeah. I think it's not a small thing that we've really dramatically downshifted our exposure to construction. We don't have the same large dollar construction projects coming up as some of these older construction projects come off the books. No other kind of replacement there for that particular type of credit, which we feel comfortable with. Wanna have a diversified portfolio and minimize our concentrations. I would also say that, you know, Greg mentioned our loan yields staying pretty flat quarter over quarter, which, you know, we certainly are prioritizing the need to get paid for what we do over just loan growth. I would echo his thoughts about that was part of the rationale there.

Speaker #6: And so, not a replacement there for that particular type of credit, which we feel comfortable with. We want to have a diversified portfolio and minimize our concentrations. And then I would also say that Greg mentioned our loan yields staying pretty flat quarter over quarter, which we certainly are prioritizing—the need to get paid for what we do over just loan growth.

Speaker #6: And so, I would echo his thoughts about—that was part of the rationale there, but just from a competitive standpoint, using—being disciplined on pricing, which I think is the right choice to make.

Jude Melville: Just from a competitive standpoint, we seem to be disciplined on pricing, which I think is the right choice to make.

Speaker #4: Yep. Okay. Well, I appreciate the color. That's all from me.

Matt Olney: Yep. Okay. Well, I appreciate the color. That's all from me.

Speaker #5: Thank you.

Greg Robertson: Thanks, Matt.

Speaker #6: Thanks, Matt.

Jude Melville: Thanks, Matt.

Speaker #4: Our next question comes from the line of Michael Rose with Raymond James. Please go ahead.

Operator: Our next question comes from the line of Michael Rose with Raymond James. Please go ahead.

Speaker #7: Hey, good morning, guys. Thanks for taking my questions. Just wanted to kind of dig back into the expenses as we move from here. So, on the one hand, obviously, this quarter on a core basis, good expense control, but I think, Jude, in the press release you talked about some additional hires by the end of the quarter, and then in your prepared comments, I think you mentioned even a few more.

Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Just wanted to kind of dig back into the expenses as we move from here. On the one hand, obviously, this quarter on a core basis, you know, good expense control. You know, I think, Jude, in the press release, you talked about some additional hires by the end of the quarter. In your prepared comments, I think you mentioned even a few more. I assume you're continuing to hire. You know, how should we expect those expenses to, you know, from a timing and magnitude perspective, to layer in?

Speaker #7: I assume you're continuing to hire. So how should we expect those expenses to, from a timing and magnitude perspective, layer in? And then as we kind of think about the layering in of the cost saves from Progressive, understanding that the system's conversion will happen late in the quarter, just trying to frame out the expense outlook over the next few quarters.

Michael Rose: As you kind of think about the layering in of the cost base from Progressive, understanding that the systems conversion will happen late in the quarter, just trying to frame out the expense, you know, outlook over the next few quarters. Thanks.

Speaker #7: Thanks.

Speaker #5: Yep. Thanks, Michael. I think in the near term, Q2, we would expect the mid to upper 50s and then migrating slightly from there. I think the cost saves—if we continue to have success hiring teammates, some of the cost saves will be offset by the hiring.

Greg Robertson: Yeah. Thanks, Michael. I think in the near term, Q2, we would expect the mid to upper fifties, and then migrating slightly from there. I think the cost savings, if we continue to have success hiring teammates, you know, some of the cost savings will be offset by the hiring. But I think we would see that trickle up into the upper fifties as we move through the end of the year.

Speaker #5: But I think we would see that trickle up into the upper 50s as we move through the end of the year.

Jude Melville: We

Speaker #6: But we still remain confident. We still remain confident in our projections on the cost saves around the Progressive acquisition, achieving most of them in the fourth quarter.

Michael Rose: Okay.

Jude Melville: We still remain confident in our projections on the cost saves around the Progressive acquisition, achieving most of them in Q4. Greg, I think out of the $21 million Progressive run rate, we expect to achieve about $11 million.

Speaker #6: Greg, I think out of the $21 million Progressive run rate, we expect to achieve about $11 million.

Greg Robertson: That's right.

Speaker #5: That's right.

Jude Melville: on an annualized basis on costs. Certainly still anticipating recognizing the benefits of that, those efficiencies, primarily in Q4.

Speaker #6: Annualized basis, on cost. So certainly, we still anticipate recognizing the benefits of those efficiencies, primarily in the fourth quarter.

Michael Rose: Perfect. Thanks for that, Jude. And then maybe just following up on some of the initial, you know, the initial and the final marks on the portfolio. It looks like the accretion is gonna be less, you know, kind of as we move forward. Can you just walk us through maybe some of the purchase accounting adjustments from, you know, from initial to when it actually closed? Thanks.

Speaker #7: Perfect, thanks for that, Jude. And then maybe just following up on some of the initial and the final marks on the portfolio, it looks like the accretion is going to be less as we move forward.

Speaker #7: So, can you just walk us through maybe some of the purchase accounting adjustments from initial to when it actually closed? Thanks.

Speaker #5: Yeah, I think it was just mainly that, when we announced, the yield curve was a lot different by the time we closed. So the interest rate mark piece of it was less.

Greg Robertson: Yeah. I think it was just mainly that when we announced, the yield curve was a lot different by the time we closed. The interest rate mark piece of it was less, credit still the same. We felt like, you know, from a total diluted standpoint, for us, I think, just a little bit different, but I think it's all relative. We had forecasted about 44 basis points of tangible book value dilution, or 44 cents, and it ended up being ex-AOCI about 4 cents. We feel really good about the way everything kind of shook out in that.

Speaker #5: Credit is still the same. So we felt like, from a total diluted standpoint for us, this is a little bit different, but I think it's all relative.

Speaker #5: We had forecasted about 44 basis points of tangible book value dilution—44 cents—and it ended up being, XAOCI, about 4 cents. So we feel really good about the way everything kind of shook out on that.

Speaker #6: Yeah, so it will be less accretion going forward, but the trade-off is that we had less dilution than we modeled. So it's a good thing.

Jude Melville: Yeah. It will be less increasing going forward because the trade-off is that we had less dilution than we modeled. You know, just a good thing. Yeah. I'm proud of the fact that-

Speaker #6: Yeah, I'm proud of the fact that.

Michael Rose: Yeah. Totally.

Speaker #7: Totally.

Jude Melville: Yeah. So I did wanna mention real quick, since we're talking about tangible book value, you know, we last raised capital in October 2022. Beginning with the end of 2022, you know, running to now, we've grown tangible book value at about 16% annualized rate. You know, we remain focused on growing tangible book value, and we've done so during that period. We've consummated two acquisitions and grown assets by about $2 billion. The news on the accretion front versus tangible book value dilution on the Progressive deal is good. Then we look forward to continuing to grow tangible book value of ours. We're pleased with that result.

Speaker #6: We last year. So I did want to mention real quick, since we're talking about tangible book value, we last raised capital in October of '22.

Greg Robertson: Yeah. So I did wanna mention real quick, since we're talking about tangible book value, you know, we last raised capital in October 2022. Beginning with the end of 2022, you know, running to now, we've grown tangible book value at about 16% annualized rate. You know, we remain focused on growing tangible book value, and we've done so during that period. We've consummated two acquisitions and grown assets by about $2 billion. The news on the accretion front versus tangible book value dilution on the Progressive deal is good. Then we look forward to continuing to grow tangible book value of ours. We're pleased with that result.

Speaker #6: And beginning with the end of '22, running to now, we've grown tangible book value at about a 16% annualized rate. So, we remain focused on growing tangible book value, and we've done so during that period.

Speaker #6: We've consummated two acquisitions and grown assets by about $2 billion. And so the news on the accretion front versus tangible book value dilution on the Progressive deal is good.

Speaker #6: And then we look forward to continuing in the future quarters to grow tangible book of ours. And so we're pleased with that result.

Greg Robertson: Michael, we'll be about $1 million going forward for accretion per quarter.

Speaker #5: Michael, we'll be about a million dollars going forward for accretion per quarter.

Speaker #4: Yep, heard that. And maybe if I could just sneak one last in, just as it relates to the tangible book value growth and the focus there.

Michael Rose: Yep. Heard that. Maybe if I could just sneak one last in on the just as it relates to the tangible book value growth and the focus there. The buybacks this quarter were, you know, a little bit higher than I think I was looking for. You know, how should we balance that now with, you know, a little bit higher starting, you know, capital, just from the change in marks from the deal? Could we expect you guys to continue to be active with repurchases, or is now a time to, you know, kind of recoup and build tangible book value and capital? Thanks.

Speaker #4: The buybacks this quarter were a little bit higher than I think I was looking for. How should we balance that now with a little bit higher starting capital just from the change in marks from the deal?

Speaker #4: Could we expect you guys to continue to be active with repurchases, or is now a time to kind of recoup and build tangible book value and capital?

Speaker #4: Thanks.

Speaker #6: Yeah, I think it's a balance between the two. If we feel the market's undervaluing our worth, then we do have the—we've now built our capital levels and our tangible book value to a level that we can take advantage of that perceived discrepancy. And so we felt like in the first quarter, we had probably a little more opportunity there than we might have guessed at the beginning of the quarter.

Jude Melville: Yeah. I think it's a balance between the two. If the market, if we feel the market's undervaluing our worth, then we do have we've now built our capital levels and our tangible book value to a level that we can take advantage of that perceived discrepancy. We felt like in Q1, we had probably a little more opportunity there than we might have guessed at the beginning of the quarter. I think our average TBV multiple of the buybacks was about 1.19. We felt like that was certainly an undervaluation relative to the worth of the franchise, and we'll continue to look for opportunities there. We're not gonna.

Greg Robertson: Yeah. I think it's a balance between the two. If the market, if we feel the market's undervaluing our worth, then we do have we've now built our capital levels and our tangible book value to a level that we can take advantage of that perceived discrepancy. We felt like in Q1, we had probably a little more opportunity there than we might have guessed at the beginning of the quarter. I think our average TBV multiple of the buybacks was about 1.19. We felt like that was certainly an undervaluation relative to the worth of the franchise, and we'll continue to look for opportunities there. We're not gonna.

Speaker #6: And so I think our average TBV multiple of the buybacks was about 1.19. And so we felt like that was certainly an undervaluation relative to the worth of the franchise, and we'll continue to look for opportunities there.

Speaker #6: We're not going to—we don't have mandatory buybacks and we're not going to do it just for the sake of doing it, but when we do see opportunities in that kind of sub-120 level, we do believe we're in a position to take advantage of it.

Jude Melville: We don't have mandatory buybacks and not gonna do it just for the sake of doing it. But when we do see opportunities in that kind of sub-120 level, we do believe we're in a position to take advantage of it. That will be a higher priority than seeking out M&A opportunities in the near term.

Greg Robertson: We don't have mandatory buybacks and not gonna do it just for the sake of doing it. But when we do see opportunities in that kind of sub-120 level, we do believe we're in a position to take advantage of it. That will be a higher priority than seeking out M&A opportunities in the near term.

Speaker #6: And that will be a higher priority than seeking out M&A opportunities, in the near term.

Speaker #4: All right. Perfect. I'll step back. Thanks for taking my questions.

Michael Rose: All right. Perfect. I'll step back. Thanks for taking my questions.

Speaker #6: Thank you.

Jude Melville: Thank you.

Greg Robertson: Thank you.

Speaker #5: Thank you.

Greg Robertson: Thank you.

Jude Melville: Thank you.

Speaker #4: Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Gary Tenner with A. Davidson.

Operator 2: Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Gary Tenner with D.A. Davidson. Please go ahead.

Operator: Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Gary Tenner with D.A. Davidson. Please go ahead.

Speaker #4: Please go ahead.

Speaker #8: Thanks. Good morning. Just wanted to ask about your—hey, I just want to ask about your commentary around loan growth. I think you were kind of sticking to the mid-single-digit growth outlook at this point.

Gary Tenner: Thanks. Good morning.

Greg Robertson: Good morning.

Gary Tenner: I just want to ask about your commentary around loan growth. I think you're kind of sticking to the mid-single-digit growth outlook at this point. I'm just wondering how much of that is, you know, kind of what's the balance between that projection from the production versus payoff perspective. Do you have a lot more visibility into kind of a reduction of payoffs just as construction projects are, you know, maturing? Or, you know, maybe just walk us through kind of how you're looking at the next couple of quarters from a net growth perspective.

Speaker #8: And I'm just wondering how much of that is kind of what's the balance between that projection on the production versus payoff? Perspective. Do you have a lot more visibility into kind of a reduction of payoffs just as construction projects are maturing?

Speaker #8: Or maybe just walk us through kind of how you're looking at the next couple of quarters from a net growth perspective.

Speaker #5: Yeah, I think from a net growth perspective, as we get further away from the impacts of bringing on '22 and '23 deals in those years, as we move through the year, we should see payoffs slightly reduce.

Greg Robertson: Yeah, I think from a net growth perspective, as we get further away from kind of the impacts of bringing on 2022 and 2023 deals in those years, as we move through the year, we should see payoffs slightly reduce. I think the way we're thinking about net loan growth as we go forward, with the addition of the new teammates, we're thinking about high single digits to 10% maybe in the Q2 and Q3, which would end up offsetting kind of the slow Q1 with the mid single digits, 6% to 8% or 5% to 6% range loan growth on an annualized basis.

Speaker #5: I think the way we're thinking about net loan growth as we go forward with the addition of the new teammates, we're thinking about high single digits to 10%, maybe in the second and third quarter, which would end up offsetting kind of the slow first quarter with the mid single digits—6% to 8% or 5% to 6% range loan growth on an annualized basis.

Speaker #6: Yeah. I'll just add this is things aren't always smooth lines and you'll remember in the third quarter of last year, if I remember correctly, that we had elevated pay downs and lower growth in the third quarter, but then we had I don't want to say a record fourth quarter loan growth, but it was a strong quarter.

Jude Melville: You know, I'll just add you, this is, you know, things aren't always smooth lines. You'll remember in Q3 of last year, if I remember correctly, that we had elevated pay downs and lower growth in Q3. Then we had, I don't want to say a record Q4 loan growth, but it was a strong quarter, Q4. If you balanced the two, it ended up being kind of at this about 6% range. We had more pay downs in Q3 than we did Q4. I would anticipate that same effect helping us from a net loan growth over the remainder of the year.

Speaker #6: Fourth quarter. And if you balance the two, it ended up being kind of at about the 6% range. And we had more paydowns in the third quarter than we did the fourth quarter.

Speaker #6: And I would anticipate that same effect helping us from a net loan growth over the remainder of the year. Greg's right. There will be a point at which those larger-dollar construction projects aren't material in terms of their continued impact on the portfolio.

Jude Melville: Greg's right that there will be a point at which those larger dollar construction projects are material in terms of their continued impact on the portfolio. Then, you know, again, we've hired, I think to date about 11 new producers and more production-oriented staff, and we'll continue to look for talent as we see the opportunity. None of their pipelines obviously have been manifested in terms of actual loan growth yet. We anticipate seeing some of that in Q2, but really Q3 and Q4 being reflective of that additional strength.

Speaker #6: And then again, we've hired, I think to date, about 11 new producers and more production-oriented staff. And we'll continue to look for talent as we see the opportunity.

Speaker #6: So, none of their pipelines, obviously, have been manifested in terms of actual loan growth yet. And so, we anticipate seeing some of that in the second quarter, but really the third and fourth quarters being reflective of that additional strength.

Speaker #8: Got it. Appreciate that. And just on the construction segment topic, just for another second, where do you see that segment kind of bottoming out or stabilizing as a percentage of the overall portfolio?

Gary Tenner: Got it. Appreciate that. Just on the construction segment topic, just for another second, where do you see that segment kind of bottoming out or stabilizing as a percentage of the overall portfolio? You're right over 10% right now. Where do you see that trending? Like, you know, where's your appetite and comfort level with that?

Speaker #8: You're right, over 10% right now. Where do you see that trending? Where's your appetite and comfort level with that?

Speaker #5: Yeah, I think we're getting close to the bottom now. I think you can see it bouncing in the high single digits to 10% range, kind of as I want to go forward basis.

Greg Robertson: Yeah, I think we're getting close to the bottom now. I think you can see it bouncing the high single digits to 10% range kind of as on a go-forward basis would be kind of the comfort spot for me.

Speaker #5: We’d be kind of the comfort spot.

Speaker #8: Got it. Thank you.

Gary Tenner: Got it. Thank you.

Speaker #5: Thank you.

Greg Robertson: Thank you.

Speaker #4: Our next question comes from the line of Matt Olney with Stephens. Please go ahead.

Operator: Our next question comes from the line of Matt Olney with Stephens. Please go ahead.

Speaker #9: Hey, thanks for taking the follow-up, guys. Just want to go back to the net interest margin, and I'm trying to appreciate if there's any more noise in that margin in this quarter.

Matt Olney: Hey, thanks for taking the follow-up, guys. Just want to go back to the net interest margin. I'm trying to appreciate if there's any more noise in that margin in this quarter. I went back to my notes last quarter, and it looked like there was that interest reversal that impacted the margin by about $1 million in the Q4 from that Houston loan that we discussed. Was there any kind of interest reversal again this quarter with the uptick of non-accruals? Yeah, I'll just leave it there.

Speaker #9: I went back to my notes last quarter, and it looked like there was that interest reversal that impacted the margin by about a million dollars in the fourth quarter.

Speaker #9: From that Houston loan that we discussed, was there any kind of interest reversal again this quarter with the uptick of non-accruals? Yeah, I'll just leave it there.

Greg Robertson: Yeah. Yeah, you're right. There was some noise. I think when you think about the relative to the non-accruals, there was about $1.2 million in interest reversal. That was probably attributable to six or seven basis points impact on the margin. That was due to the movement of about $25 million in loans to NPL during the quarter and the reversal. You know, kind of as we go forward, I think we'll start inching back toward reclaiming some of that as an earning asset.

Speaker #5: Yep. Yeah. Yeah, you're right. There was some noise. I think when you think about it relative to the non-accruals, there was about $1.2 million in interest reversal that was probably attributable to six or seven basis points impact on the margin.

Speaker #5: That was due to the movement of about $25 million in loans to MPL during the quarter. And the reversal, kind of as we go forward, I think we'll start inching back toward reclaiming some of that as an earning asset.

Speaker #5: But as I mentioned, I think, earlier, the timing of how that comes back to an earning—or converts back to an earning—asset is a little bit tricky because we're still having to resolve these in real time, and the twists and turns, sometimes, of conflict resolution with some of these credits.

Greg Robertson: As I mentioned, I think earlier, the timing of how that comes back to an earning or converts back to an earning asset is a little bit tricky because we're still having to resolve these in real time and the twists and turns sometimes of conflict resolution with some of these credits. It's a little bit unpredictable, but we see some opportunity on the horizon with that for sure.

Speaker #5: It's a little bit unpredictable, but we see some opportunity on the horizon with that, for sure.

Speaker #9: Okay. Okay. That's all from me. Thank you.

Matt Olney: Okay. That's all for me. Thank you.

Speaker #5: Thanks, man.

Greg Robertson: Thanks, Matt.

Speaker #4: Thank you. And at this time, we have no further questions. That concludes our Q&A session. I will now turn the call back over to Jude Melville for closing remarks.

Operator: Thank you. At this time, we have no further questions. That concludes our Q&A session. I will now turn the call back over to Jude Melville for closing remarks.

Speaker #8: Okay. Well, again, I appreciate everybody being with us, and the questions, and the attention and energy that you're giving to our cause. We, again, feel very positive about the first quarter, and not only the performance in the first quarter, but also some of the investments and additions that we've made in the first quarter, which will lead to even more positive results in the future.

Jude Melville: Okay. Well, again, I appreciate everybody being with us and the questions and the attention and energy that you're giving to our cause. You know, we again feel very positive about Q1 and not only the performance in Q1 but also some of the investments and additions that we've made in Q1, which will lead to even more positive results in the future. We like our footprint. We like our people and just look forward to turning the wheels over the course of the year and showing some of that incremental progress which will lead to increased ROA and ultimately tangible book value. We just keep doing what we do. Appreciate our team for all their effort. Again, appreciate your attention this morning.

Speaker #8: We like our footprint. We like our people. And I just look forward to turning the wheels over the course of the year and showing some of that incremental progress, which will lead to increased ROA and ultimately tangible book value.

Speaker #8: We just keep doing what we do. So, I appreciate our team for all their effort. And again, appreciate your attention this morning. Feel free to reach out if you want to talk in any more detail about anything.

Jude Melville: Feel free to reach out if you wanna talk any more detail about anything. Thank you all. Have a good week.

Speaker #8: Thank you all. Have a good week.

Operator: This concludes today's conference call. You may now disconnect your lines at this time. Thank you for your participation, and have a pleasant day.

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