Q1 2026 Trustmark Corp Earnings Call

April 29, 2026

Operator 2: Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark. Please go ahead.

Operator: Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark. Please go ahead.

Speaker #2: Following the presentation this morning, there will be a question-and-answer session. To ask a question, you may press star, then one on a touchtone phone.

Speaker #2: To withdraw your question, please press star, then two. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark.

Speaker #2: Please go ahead. Good morning. I'd like to remind everyone that our first quarter earnings release and the presentation that we'll be discussing on our call this morning are available on the investor relations section of our website at trustmark.com.

Joey Rein: Good morning. I'd like to remind everyone that our Q1 earnings release and the presentation that will be discussed on our call this morning are available on the investor relations section of our website at trustmark.com. During our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties which are outlined in our earnings release and our other filings with the Securities and Exchange Commission. At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark.

Speaker #2: During our call, management may make forward-looking statements within the meaning of the private securities litigation reform act of 1995, and we would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the securities and exchange commission.

Speaker #2: At this time, I’d like to introduce Duane Dewey, President and CEO of Trustmark.

Speaker #3: Thank you, Joey, and good morning, everyone. Thank you for joining us this morning. With me are Tom Owens, our Chief Financial Officer, and Barry Harvey, our Chief Credit and Operations Officer.

Duane Dewey: Thank you, Joey Rein, and good morning, everyone. Thank you for joining us this morning. With me are Thomas Owens, our Chief Financial Officer, and Barry Harvey, our Chief Credit and Operations Officer. We continue to build upon a strong momentum from our earnings in 2025 and are pleased with our strong performance in Q1 2026. Our results reflect continued loan growth, stable credit quality, and an attractive core deposit base. In addition, we experienced continued growth in Non-Interest Income, while Non-Interest Expense remained unchanged, reflecting our continued focus on expense management. In our presentation this morning, I will provide a summary of our performance and discuss forward guidance before moving to your questions. Now turning to slide 3, financial highlights. Our first quarter results reflect continued significant progress across the organization.

Duane Dewey: Thank you, Joey Rein, and good morning, everyone. Thank you for joining us this morning. With me are Thomas Owens, our Chief Financial Officer, and Barry Harvey, our Chief Credit and Operations Officer. We continue to build upon a strong momentum from our earnings in 2025 and are pleased with our strong performance in Q1 2026. Our results reflect continued loan growth, stable credit quality, and an attractive core deposit base. In addition, we experienced continued growth in Non-Interest Income, while Non-Interest Expense remained unchanged, reflecting our continued focus on expense management. In our presentation this morning, I will provide a summary of our performance and discuss forward guidance before moving to your questions. Now turning to slide 3, financial highlights. Our Q1 results reflect continued significant progress across the organization.

Speaker #3: We continue to build upon a strong momentum from our earnings in 2025 and are pleased with our strong performance in the first quarter of 2026.

Speaker #3: Our results reflect continued loan growth, stable credit quality, and an attractive core deposit base. In addition, we experience continued growth in non-interest income while non-interest expense remained unchanged reflecting our continued focus on expense management.

Speaker #3: In our presentation this morning, I will provide a summary of our performance and discuss forward guidance before moving to your questions. Now, turning to slide three, financial highlights.

Speaker #3: Our first quarter results reflect continued significant progress across the organization. Net income totaled $56.1 million representing diluted EPS of 95 cents a share. This level of earnings resulted in a return on average assets of 1.2% and a return on average tangible equity of 12.58%.

Duane Dewey: Net income totaled $56.1 million, representing diluted EPS of $0.95 a share. This level of earnings resulted in a return on average assets of 1.2% and a return on average tangible equity of 12.58%. From a balance sheet perspective, loans held for investment increased $203.7 million, or 1.5% linked quarter, and $636.5 million, or 4.8% year over year. Our loan portfolio remains well diversified by loan type and geography. Our deposit base expanded $212.7 million, or 1.4% linked quarter, driven by seasonal increases in public deposits. Year over year deposits increased $631.8 million, or 4.2%, driven by growth in personal and commercial deposits.

Speaker #3: From the balance sheet perspective, loans held for investment increased $203.7 million, or 1.5%, linked quarter, and $636.5 million, or 4.8%, year over year. Our loan portfolio remains well-diversified by loan type and geography.

Speaker #3: Our deposit base expanded $212.7 million or 1.4% linked quarter, driven by seasonal increases in public deposits. Year over year, deposits increased $631.8 million or 4.2%, driven by growth in personal and commercial deposits.

Speaker #3: The cost of our total deposits in the first quarter was $1.63%, a decrease of 9 basis points from the prior quarter. Our strong cost-effective core deposit basis is a continuing strength of Trustmark.

Duane Dewey: The cost of our total deposits in Q1 was 1.63%, a decrease of 9 basis points from the prior quarter. Our strong cost-effective core deposit base is a continuing strength of Trustmark's. During Q1, we repurchased $19.8 million, or approximately 477,000 shares of stock, which represent 0.8% of shares outstanding at year-end 2025. As previously announced, we have authorization to repurchase up to $100 million of Trustmark common shares during 2026. This program continues to be subject to market conditions and management discretion. Revenue in Q1 totaled $203 million, a seasonal decrease of 0.6% from the prior quarter, and an increase of 4.2% from the same quarter in the prior year.

Speaker #3: During the first quarter, we repurchased $19.8 million, or approximately 477,000 shares of stock, which represent 0.8% of shares outstanding at year-end 2025. As previously announced, we have authorization to repurchase up to $100 million of Trustmark common shares during 2026.

Speaker #3: This program continues to be subject to market conditions and management discretion. Revenue in the first quarter totaled $203 million—a seasonal decrease of 0.6% from the prior quarter, and an increase of 4.2% from the same quarter in the prior year.

Speaker #3: Net interest income fully tax equivalent in the first quarter totaled $163.5 million which produced a net interest margin of 3.81%, which is unchanged from the prior quarter.

Duane Dewey: Net Interest Income, fully tax equivalent in Q1 totaled $163.5 million, which produced a Net Interest Margin of 3.81%, which is unchanged from the prior quarter. Non-Interest Income in Q1 totaled $42.3 million, up 2.7% from the prior quarter, and represents 20.9% of total revenue. Non-Interest Expense in Q1 totaled $132.2 million, unchanged from the prior quarter and up $8.1 million year over year. Diligent expense management continues to be a focus for the organization. From a credit perspective, net charge-offs in Q1 were $1.3 million, representing 4 basis points of average loans in Q1.

Speaker #3: Non-interest income in the first quarter totaled $42.3 million, up 2.7% from the prior quarter, and represents 20.9% of total revenue. Non-interest expense in the first quarter totaled $132.2 million, unchanged from the prior quarter and up $8.1 million year over year.

Speaker #3: Diligent expense management continues to be a focus for the organization. From a credit perspective, net charge-offs in the first quarter were $1.3 million representing 4 basis points of average loans in the first quarter.

Speaker #3: The net provision for credit losses in the first quarter totaled $2.7 million. At the end of the first quarter, the allowance for credit losses represented $1.16% of loans held for investment.

Duane Dewey: The net provision for credit losses in Q1 totaled $2.7 million. At the end of Q1, the allowance for credit losses represented 1.16% of loans held for investment. Again, very solid credit performance. We have maintained our strong capital position as reflected by our CET1 ratio of 11.7% and our total risk-based capital ratio of 14.37% at 31 March 2026. The board declared a regular quarterly dividend of $0.25 per share payable 15 June 2026 to shareholders of record on 1 June. Let's focus on our forward guidance, which is on page 15 of the deck. In January, we provided full year guidance for 2026 as well as 2025 benchmarks upon which the guidance is based. This morning, we are affirming the guidance previously provided.

Speaker #3: Again, very solid credit performance. We have maintained our strong capital position as reflected by our CET1 ratio of 11.7% and our total risk-based capital ratio of 14.37%.

Speaker #3: At March 31, 2026, the board declared a regular quarterly dividend of $25 per share payable June 15, 2026 to shareholders of record on June 1st.

Speaker #3: Now, let's focus on our forwarding guidance, which is on page 15 of the deck. In January, we provided full-year guidance for 2026 as well as 2025 benchmarks upon which the guidance is based.

Speaker #3: This morning, we are affirming the guidance previously provided. We expect loans held for investment to increase single digits for the full year 2026 and deposits excluding broker deposits to increase mid-single digits as well.

Duane Dewey: We expect loans held for investment to increase single digits for the full year 2026 and deposits, excluding broker deposits, to increase mid-single digits as well. Security balances are expected to remain stable as we continue to reinvest cash flows. We anticipate the net interest margin to be in the range of 380 to 385 for the full year, while we expect net interest income to increase mid-single digits. From a credit perspective, the total provision for credit losses, including off-balance sheet credit exposure, is expected to normalize. While non-interest income for the full year 2026 is expected to increase mid-single digits as is non-interest expense. We will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A, or other general corporate purposes depending on market conditions. At this time, I will open the floor up for questions.

Speaker #3: Security balances are expected to remain stable as we continue to reinvest cash flows. We anticipate the net interest margin to be in the range of 380 to 385 for the full year, while we expect net interest income to increase mid-single digits.

Speaker #3: From a credit perspective, the total provision for credit losses, including off-balance sheet credit exposure, is expected to normalize. While non-interest income for the full year 2026 is expected to increase mid-single digits as is non-interest expense.

Speaker #3: We will continue our disciplined approach to capital deployment with a preference for or organic loan growth, potential market expansion, M&A or other general corporate purposes depending on market conditions.

Speaker #3: At this time, now we'll open the floor up for questions.

Speaker #2: We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator 2: The first question comes from Catherine Mealor with KBW. Please go ahead.

Speaker #2: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Operator: We will now begin the question and answer session. To ask a question, you make press star then one on your touchtonewould like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Catherine Mealor with KBW. Please go ahead.

Speaker #2: The first question comes from Katherine Miller with KBW. Please go ahead.

Speaker #4: Thanks. Good morning.

Catherine Mealor: Thanks. Good morning.

Speaker #5: Hey, good morning, Katherine.

Thomas Owens: Hey, good morning, Catherine.

Speaker #4: It was nice to see the guidance was generally unchanged and just thinking about the margin, we're taking rate cuts out of our estimates generally across the board, and it feels like you're NIM guide is still for that to remain pretty steady in this 380 to 385 range.

Catherine Mealor: It was, you know, nice to see the guidance was generally unchanged. Just thinking about the margin, we're taking rate cuts out of our estimates generally across the board. It feels like your NIM guide is still for that to remain pretty steady in the 3.80% to 3.85% range. Can you just talk about some puts and takes within the margin, you know, without rate cuts, maybe where you're seeing new loan yields and where you're seeing new deposit costs coming in? Just help us model that going forward. Thank you.

Speaker #4: Can you just talk about some puts and takes within the margin without rate cuts, maybe where you're seeing new loan yields and where you're seeing new deposit costs coming in?

Speaker #4: Just help us model that going forward. Thank you.

Speaker #5: Well, good morning, Katherine. This is Tom Owens. I'll start.

Thomas Owens: Well, good morning, Catherine. This is Tom. Oh, why don't the South start?

Speaker #4: Hey, Tom.

Speaker #5: Good morning. So yes, as you know, based on our guidance on market implied forwards, which now effectively have removed any further Fed rate cuts this year.

Catherine Mealor: Hey, Tom.

Thomas Owens: Good morning. Yes, we, as you know, base our guidance on market implied forwards, which now effectively have removed any further Fed rate cuts this year. I think the most simple way to think about it to start is, you know, you look at our guidance on deposit costs. We're anticipating a few basis points of decline here in Q2 on a linked quarter basis. We're also anticipating a similar magnitude of decline in loan yields. In the background, you've got securities yields, which will continue to grind a little bit higher from the ongoing repricing of HTM securities.

Speaker #5: And so I think the most simple way to think about it to start is you look at our guidance on deposit cost. We're anticipating a few basis points of decline here in the second quarter on a linked quarter basis.

Speaker #5: We're also anticipating a similar magnitude of decline in loan yields. And then in the background, you've got securities yields, which will continue to grind a little bit higher from the ongoing repricing of HTM Securities.

Speaker #5: And so I think when you net that all out, you're probably looking at a basis point or so of accretion on a linked quarter basis each quarter this year, is what we're currently modeling.

Thomas Owens: You know, I think when you net that all out, you're probably looking at a basis point or so of accretion on a linked quarter basis each quarter this year is what we're currently modeling, where 381 in Q1. That gets you to the middle of the range, 383 or so. As far as puts and takes, I mean, it's, you know, when you look at the industry data, loan growth continues to outpace deposit growth. It's really remained a competitive environment for deposits. When you look at what will be driving most of the linked quarter decline in deposit costs, we do have a bit more benefit we'll get there from CD repricing.

Speaker #5: We're at 381 in the first quarter. And so that gets you to the middle of the range, 383 or so. As far as puts and takes, I mean, it's when you look at the industry data, loan growth continues to outpace deposit growth.

Speaker #5: And so it's really remained a competitive environment for deposits. When you look at what will be driving most of the linked quarter decline in deposit costs, we do have a bit more benefit we'll get there from CD repricing.

Speaker #5: But then, in the background, you’ve got sort of a countervailing migration for exception pricing on money market accounts, for example. So I think when you add all that up, we’re talking fractions of a basis point, probably, in terms of which way we break on deposit cost, which way we break on loan yield, which way we break on net interest margin.

Thomas Owens: In the background, you've got sort of a countervailing, you know, migration for exception pricing on money market accounts, for example. You know, I think when you add all that up, we're talking fractions of a basis point probably in terms of, you know, which way we break on deposit cost, which way we break on loan yield, which way we break on Net Interest Margin.

Speaker #4: Great. I mean, it's just a bigger picture question. You had really great improvement in profitability throughout '25. It feels like looking at your guidance for maybe more steady in '26, but just on a bigger balance sheet.

Catherine Mealor: Great. It's just a bigger picture question. You had really great improvement in profitability throughout 2025. It feels like looking at your guidance or maybe more steady in 2026, but just on a bigger balance sheet as growth is improving. Is that the way to think about it? Or are there levers, you know, that you see where we can actually get the ROA and ROE moving higher this year?

Speaker #4: As growth is improving, is that the way to think about it, or are there levers that you see where we can actually get the ROA and ROE moving higher this year?

Speaker #5: Well, when you think about pre-provision, that this is Tom continuing on here. When you think about pre-provision, that revenue as we've guided in the past, mid-single digit balance sheet growth with a stable to slightly expanding net interest margin should get a solid mid-single digit PP&R growth.

Thomas Owens: Well, you know, when you think about pre-provision net revenue, as we've guided in the past, you know, mid-single digit balance sheet growth with a stable to slightly expanding Net Interest Margin should get a solid, mid-single digit PPNR growth. I know when you look at the headline in terms of what we've published Q1 2026 actual versus Q1 2025 actual, for example, PPNR looks pretty flat. You know, there's always puts and takes, you know, in things like Non-Interest Income. I'll tell you that if you adjust for some lumpy items we had in the year ago quarter and lumpy items this quarter, you end up closer to 3% growth year over year than down slightly.

Speaker #5: I know when you look at the headline, in terms of what we've published, first quarter of '26 actual versus first quarter of '25 actual, for example, PP&R looks pretty flat.

Speaker #5: But there's always puts and takes and things like non-interest income. I'll tell you that if you adjust for some lumpy items we had in a year ago, quarter, and lumpy items this quarter, you end up closer than closer to 3% growth year over year than down slightly.

Speaker #5: And when you include that, you wind up at more like a 5% growth in revenue. I'd say the same thing on the expense side.

Thomas Owens: When you include that, winds up at more like a 5% growth in revenue. I'd say the same thing on the expense side. We're probably doing better on the expense side than what you see looking at the numbers. You know, we've made strategic investments in revenue producers, particularly in growth markets. I think if you adjust it out for that, you'd probably end up being in more in the neighborhood of 5.5% in terms of expense growth, you know, year over year, Q1. That gets you closer to neutral in terms of operating leverage. Of course, we're trying to drive positive operating leverage, and that's part of those investments that we're making in revenue producers, particularly in our growth market. I think that's the lever ultimately that can drive greater profitability.

Speaker #5: We're probably doing better on the expense side than what you see looking at the numbers. We've made strategic investments in revenue producers, particularly in gross markets.

Speaker #5: I think if you adjust it out for that, you'd probably be more in the neighborhood of 5.5% in terms of expense growth. Year over year, first quarter, so that gets you closer to neutral in terms of operating leverage.

Speaker #5: Of course, we're trying to drive positive operating leverage, and that's part of those investments that we're making. In revenue producers, particularly in our gross market.

Speaker #5: So I think that's the lever ultimately that can drive greater profitability.

Speaker #4: Great. Katherine, the one that Katherine, I'm sorry, just quickly, one other somewhat of a wild card in that mix is the mortgage business. The where we've had pretty negative net hedge ineffectiveness over an extended period of time here is as the market adjusts, as rates adjust, etc., is that is a wild card in the mix.

Catherine Mealor: Great.

Thomas Owens: Katherine, the one.

Catherine Mealor: Thank you.

Thomas Owens: Katherine, I'm sorry, just quickly.

Catherine Mealor: No.

Thomas Owens: One other somewhat of a wildcard in that mix is the mortgage business. You know, where we've had pretty negative net hedge ineffectiveness over an extended period of time here as the market adjusts, as rates adjust, et cetera. That is a wildcard in the mix. We can't forecast it necessarily. It's difficult to pinpoint. You know, if the mortgage business turns around and/or the net-negative hedge ineffectiveness,

Speaker #4: We can't forecast it necessarily. It's difficult to pinpoint, but if the mortgage business turns around and/or the negative hedge ineffectiveness is different than it has been in the past, that can make a fairly significant swing in non-interest income, which then, as you know, affects your question.

Duane Dewey: Is different than it has been in the past. That can make a fairly significant swing in non-interest income, which then, as you know, affects your question. I just add that as a wild card in the mix a bit.

Thomas Owens: Is different than it has been in the past. That can make a fairly significant swing in non-interest income, which then, as you know, affects your question. I just add that as a wild card in the mix a bit.

Speaker #4: So I just add that as a wild card in the mix a bit. Great. Yep. That's thank you for that reminder. And congrats on your new role, Tom.

Catherine Mealor: Great. Yep. That's good. Thank you for that reminder. Congrats on your new role, Tom. We'll miss NIM guidance from you going forward.

Speaker #4: We'll miss NIM guidance from you going forward.

Speaker #5: Thank you, Katherine. Really greatly appreciate that. Really excited about this next phase.

Thomas Owens: Thank you, Catherine. Really, I greatly appreciate that. Really excited about this next phase.

Speaker #4: The next question comes from Febi Strickland. With Hovod Group, please go ahead.

Operator 2: The next question comes from Feddie Strickland with Hovde Group. Please go ahead.

Operator: The next question comes from Feddie Strickland with Hovde Group. Please go ahead.

Speaker #6: Hey, good morning. Just wanted to stick with the non-interest income discussion, specifically on the wealth side. I know equity markets were a little bit more of a challenge through quarter end, but can you provide any sort of update on what you're seeing so far just in terms of AUM and maybe an outlook for that line in the second quarter?

Feddie Strickland: Hey, good morning. Just wanted to stick with the Non-Interest Income discussion, specifically in the wealth side. I know equity markets were a little bit more of a challenge through quarter end. Can you provide any sort of update on what you're seeing so far just in terms of AUM and maybe an outlook for that line in Q2?

Duane Dewey: I'll kick in there, Feddie. Good morning. You know, it is dependent upon market appreciation and so on, which dramatically affects revenue in both the true wealth trust business as well as the brokerage side. Those are factors that are somewhat out of our control. You also add in new business development and the like, which is actually fairly solid. As we talk about our growth market initiatives that we've mentioned here in the last several calls is that includes the wealth management business, which includes adding new production talent in high growth potential markets. We're optimistic there. We've seen improved production out of that side of the equation. The second part I'd add is that we made a platform change last year in our brokerage business.

Speaker #5: I'll kick in there, Febi. Good morning. It is dependent upon market appreciation. And so on, which dramatically affects revenue in both the true wealth trust business as well as the brokerage side.

Speaker #5: So those are factors that are somewhat out of our control. in new business development and the like, which is actually fairly solid. We as we talk about our growth market initiatives that we've mentioned here in the last several calls, that includes the wealth management business, which includes adding new production talent in high-growth potential markets.

Speaker #5: We're optimistic there. We've seen improved production out of that side of the equation. The second part I'd add is that we made a platform change last year in our brokerage business.

Speaker #5: We went from an LPL platform to a Raymond James platform. We in the latter half of 2025 spent a lot of time focused on that transition and are now fully stabilized there.

Duane Dewey: We went from an LPL platform to a Raymond James platform. We, in the latter half of 2025, spent a lot of time focused on that transition and are now fully stabilized there and have fairly solid expectations for improved performance out of our brokerage division. A good chunk of that is managed assets. That is a bit dependent on the market as well, but still, we are expecting continued progress and stabilization on that side of the equation. We're comfortable with the mid-single digits guide but see some potential there.

Speaker #5: And have fairly solid expectations for improved performance out of our brokerage division. And a good chunk of that is managed assets. So that is a bit dependent on the market as well, but still, we are expecting continued progress and stabilization on that side of the equation.

Speaker #5: So we're comfortable with the mid-single digits guide, but see some potential there.

Speaker #6: Appreciate that. That's helpful. And just switching gears to capital—I guess specifically on the share repurchase side—I think last quarter you talked about maybe looking at $60 to $70 million worth of repurchases this year.

Feddie Strickland: Appreciate that. That's helpful. Just switching gears to capital, you know, I guess specifically in the share repurchase side. I think last quarter you talked about maybe looking at $60, $70 million worth of repurchases this year. We've done, I think, about $20 million so far. Should we expect any sort of change in the cadence of repurchases throughout the next couple of quarters?

Speaker #6: We've done, I think, about 20 million so far. Should we expect any sort of change in the cadence of repurchases throughout the next couple of quarters?

Thomas Owens: Feddie, this is Thomas Owens. Yeah, we're really pleased with our ability to deploy nearly $20 million via share repurchase in Q1 while supporting over $200 million of loans held for investment growth while maintaining our capital ratios essentially. Very little change in our capital ratios on a linked-quarter basis. I would say that, you know, we kind of leaned into it, so to speak, in Q1, given the opportunity, the downdraft in bank stock prices. We liked the price. We feel good about that. You know, I think it also demonstrates our ability to deploy that amount of capital via share repurchase and support robust loan growth.

Speaker #5: So, Febi, this is Tom Owens. So yeah, we were really pleased with our ability to deploy nearly $20 million via share repurchase in the first quarter, while supporting over $200 million of loans held for investment growth, while maintaining our capital ratios—essentially very little change in our capital ratios on a linked-quarter basis.

Speaker #5: I would say that we kind of leaned into it, so to speak, in the first quarter, given the opportunity with the downdraft in bank stock prices.

Speaker #5: We liked the price. We feel good about that. I think it also demonstrates our ability to deploy that amount of capital. Via share repurchase.

Speaker #5: And support robust loan growth. So I think if you think in terms of 20 million per quarter or 80 million for the year, that's probably the high end, assuming that we do continue to generate the same level of consistent loan growth.

Thomas Owens: I think, if you think in terms of $20 million per quarter or $80 million for the year, that's probably the high end, assuming that we do continue to generate the same level of consistent loan growth. On the low end, I'd probably mark that up a little bit. I think we're probably thinking $70 to 80 million of deployment for the full year.

Speaker #5: And on the low end, I would probably mark that up a little bit. I think we're probably thinking 70 to 80 million dollars deployment for the full year.

Speaker #6: All right. Great. Thanks so much. I'll step back.

Feddie Strickland: All right, great. Thanks so much. I'll step back.

Speaker #5: Thank you.

Thomas Owens: Thank you.

Speaker #4: The next question is from Michael Rose with Raymond James. Please go ahead.

Operator 2: The next question is from Michael Rose with Raymond James. Please go ahead.

Operator: The next question is from Michael Rose with Raymond James. Please go ahead.

Speaker #1: Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on loan growth. Looks like you guys had a really good quarter of CNI loan growth.

Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on loan growth. Looks like you guys had a really good quarter of C&I loan growth, obviously some pay downs in some other places. If I annualize this quarter, it's about 6%. That'd be the kind of the top end of the mid-single digit range. I guess what I'm trying to figure out is, you know, the effects of competition and/or pay downs, you know, expected to maybe potentially slow the growth from here. I'm just trying to understand maybe why, you know, in a seasonally slower, you know, Q1, you know, why we wouldn't see that guide raise and if we could just, you know, get a sense from you guys for, you know, production and pay downs as we move forward. Thanks.

Speaker #1: Obviously, some paydowns and some other places. If I annualize this quarter, it's about 6%. That'd be kind of the top end of the mid-single digit range.

Speaker #1: So I guess what I'm trying to figure out is the effects of competition and/or paydowns expected to maybe potentially slow the growth from here.

Speaker #1: I'm just trying to understand, maybe, why in a seasonally slower first quarter we wouldn't see that guide raised. And if we could just get a sense from you guys for production and paydowns as we move forward.

Speaker #1: Thanks.

Speaker #5: And Michael, this is Barry. Yeah, as you can tell, we did have nice growth, especially on the CNI side. And it was very diversified in terms of the different growth industries that we saw.

Duane Dewey: Michael, this is Barry. Yeah, you know, as you can tell, we did have nice growth, especially in the C&I side, and it was very diversified in terms of the different growth industries that we saw, as well as the fact that on the CRE side, we were up $41 million. You know, really to the heart of your question, you know, we did have a meaningful amount of maturities on our CRE book scheduled for the Q1. A large majority of those did not occur, and they migrated either later into 2026 or out to 2027, 2028. We still have headwinds that we're going to have to deal with over time. That's the key for us, is to the more spread out

Barry Harvey: Michael, this is Barry. Yeah, you know, as you can tell, we did have nice growth, especially in the C&I side, and it was very diversified in terms of the different growth industries that we saw, as well as the fact that on the CRE side, we were up $41 million. You know, really to the heart of your question, you know, we did have a meaningful amount of maturities on our CRE book scheduled for the Q1. A large majority of those did not occur, and they migrated either later into 2026 or out to 2027, 2028. We still have headwinds that we're going to have to deal with over time. That's the key for us, is to the more spread out

Speaker #5: As well as the fact that, on the CRE side, we were up $41 million. Really, to the heart of your question, we did have a meaningful amount of maturities on our CRE books scheduled for the first quarter.

Speaker #5: A large majority of those did not occur. And they migrated either later in the '26 or out to '27, '28. So we do still have headwinds that we're going to have to deal with over time.

Speaker #5: But that's the key for us is to the more spread out that we can see those payoffs coming, the better we're able to deal with them in terms of new production, new fundings, etc.

Barry Harvey: That we can see those payoffs coming, the better we're able to deal with them in terms of new production, new fundings, et cetera, throughout the year. I think we're fully expecting without any type of catalyst that would bring about a large increase in payoffs, that what we saw in the first quarter will continue throughout the year. You'll continue to see projects who need more time to fully stabilize to get the best price when they go to market to sell the project, take that time. Then what you always see, Michael, is a lot of projects on the CRE side start off out of the gate with delays during the permitting construction, they hit rock, whatever the case may be.

Barry Harvey: That we can see those payoffs coming, the better we're able to deal with them in terms of new production, new fundings, et cetera, throughout the year. I think we're fully expecting without any type of catalyst that would bring about a large increase in payoffs, that what we saw in the Q1 will continue throughout the year. You'll continue to see projects who need more time to fully stabilize to get the best price when they go to market to sell the project, take that time. Then what you always see, Michael, is a lot of projects on the CRE side start off out of the gate with delays during the permitting construction, they hit rock, whatever the case may be.

Speaker #5: Throughout the year. So I think we're fully expecting, without any type of catalyst that would bring about a large increase in payoffs, that what we saw in the first quarter will continue throughout the year.

Speaker #5: And you'll continue to see projects who need more time to fully stabilize to get the best price when they go to market to sell the project.

Speaker #5: Take that time. And then what you always see, Michael, is a lot of projects on the CRE side start off out of the gate with delays during the permitting, construction—they hit rock, whatever the case may be.

Speaker #5: And so there is a need for some additional time beyond just the scheduled maturity at least the initial scheduled maturity for them to fully stabilize.

Barry Harvey: There is a need for some additional time beyond just the scheduled maturity, at least the initial scheduled maturity for them to fully stabilize. We're seeing that today. We're hopeful that the payoffs which will eventually come from our CRE book will be a little bit spread out as they were during the Q1 and push on into other quarters, whether it be 2026 or into 2027, 2028.

Speaker #5: And we're seeing that today. So we're hopeful that the payoffs, which will eventually come from our CNI CRE book, will be a little bit spread out, as they were during the first quarter.

Speaker #5: And push on into other quarters, whether it be 2026 or into 2027, 2028.

Speaker #6: Michael, meanwhile, as you noted—and Barry noted—CNI production pipelines are strong. We continue to see opportunities across the full portfolio. CNI has been good.

Duane Dewey: Michael, meanwhile, as you noted, Barry noted, C&I production pipelines are strong. We continue to see opportunities across the full portfolio. C&I's been good. As we've talked in the last couple quarters, we continue to be focused on adding new production talent across the franchise. It's a little bit slower in Q1 in terms of new talent. We continue to focus in that area in high growth markets. We're, as Barry suggested, with good solid pipelines, good solid new production, continued production on the CRE space to offset some of these, some of the headwind from paydowns is what we're focused on achieving.

Speaker #6: And then as we've talked in the last couple of quarters, we continue to be focused on adding new production talent across the franchise. It's a little bit slower in the first quarter in terms of new talent, but we continue to focus in that area in high-growth markets.

Speaker #6: And so we're, as Barry suggested, with good solid pipelines, good solid new production, continued production on the CRE space to offset some of these some of the headwind from paydowns is what we're focused on achieving.

Speaker #1: Okay. That's a great color. Very helpful. Thanks for that. Maybe if I can just ask separately on credit, you did have a little bit of tick up in MPLs.

Michael Rose: Okay. That's a great color. Very helpful. Thanks for that. Maybe if I can just ask separately on credit. You know, you did have a little bit of tick up in NPLs. I think it was related to one loan. Just looking to get some color there. Looks like the reserve came down, though, a little bit, so just was looking for, you know, any sort of updates in kind of past dues or criticized classifieds that might have driven that allowance reduction. Thanks.

Speaker #1: I think it was related to one loan. Just looking to get some color there. Looks like the reserve came down, though, a little bit.

Speaker #1: So just was looking for any sort of updates and kind of past dues or criticized classifieds that might have driven that allowance reduction. Thanks.

Speaker #5: Yeah. The our coverage moved up from 115 to 116 as far as the reserve is concerned. And we have done that provision, of course, as you know, is 2.74 million.

Barry Harvey: Our coverage, you know, moved up from 1.15 to 1.16 as far as the reserve is concerned. The net provision, of course, as you know, is $2.74 million. On the funded side, we were, you know, $4.7 million. Well, as it relates specifically to the one credit, it's a CRE project, and it's the majority of the increase that we experienced in non-accruals and of the change that we saw of the $12.3 million. You know, the credit itself, it was substandard already. It just moved into non-accrual.

Speaker #5: And then on the funded side, we were 4.7. So as it relates specifically to the one credit, it's a CRE project and it's the majority of the increase that we experienced in non-accruals.

Speaker #5: And of the change that we saw of the $12.3 million, the credit itself was—it was substandard already; it just moved into non-accrual. The situation is one of those where the borrower just does not see a value in there from their perspective to continue to make payments.

Barry Harvey: The situation is one of those where the borrower just does not see a value from their perspective to continue to make payments based on the appraisal. There's a lot of equity in the project. We do have it impaired and reserved appropriately based upon that analysis of the valuation. In that particular case, there is an LOI in place. They have an LOI in place, has not been converted to a PSA at this point. There's always the chance that they're able to move the project out, and we'll continue to work with the customer and to determine what the best options are for the bank and for them.

Speaker #5: Based on the appraisal, there's a lot of equity in the project. We do have it impaired and reserved appropriately. Based upon that analysis of the valuation.

Speaker #5: So in that particular case, there is an LOI in place. They have an LOI in place. Has not been converted to a PSA at this point.

Speaker #5: So there's always a chance that they're able to move the project out. And we'll continue to work with the customer and to determine what the best options are for the bank and for them, but it was not something that was surprising to us, just given their set of circumstances.

Barry Harvey: You know, it was not something that was surprising to us, just given their set of circumstances, but it was very specific to their set of circumstances. Along the lines of CRE, Michael, while they didn't come to fruition during the first quarter, we are very encouraged by the fact that a lot of the potential paydowns that we anticipated may be happening in the first quarter on some substandard credits, we're encouraged that they will possibly come to fruition later in the year. From that standpoint, we see more positive news from the standpoint of more either upgrades or payoffs coming out of the CRE book than we do deterioration.

Barry Harvey: You know, it was not something that was surprising to us, just given their set of circumstances, but it was very specific to their set of circumstances. Along the lines of CRE, Michael, while they didn't come to fruition during the Q1, we are very encouraged by the fact that a lot of the potential paydowns that we anticipated may be happening in the Q1 on some substandard credits, we're encouraged that they will possibly come to fruition later in the year. From that standpoint, we see more positive news from the standpoint of more either upgrades or payoffs coming out of the CRE book than we do deterioration.

Speaker #5: But it was very specific to their set of circumstances. Along the lines of CRE, Michael, while they didn't come to fruition during the first quarter, we are very encouraged by the fact that a lot of the potential paydowns that we anticipated maybe happening in the first quarter on some substandard credits were encouraged that they will possibly come to fruition later in the year.

Speaker #5: So from that standpoint, we see more positive news from the standpoint of more either upgrades or payoffs coming out of the CRE book than we do deterioration.

Speaker #1: Thanks for that, Barry. And then maybe if I can just flip in one more just following up on Fedi's question on capital return. I know last quarter you guys talked about kind of organic growth and buybacks as being kind of the preferred avenue for deployment.

Michael Rose: Thanks for that, Barry. Maybe if I can just slip in one more, just following up on Feddie's question on capital return. You know, I know last quarter you guys talked about, you know, kind of organic growth and buybacks just being kind of the preferred avenue for deployment. Any sort of updated or changed thoughts on M&A versus the prior 90 days? Thanks.

Speaker #1: But any sort of updated or changed thoughts on M&A versus the prior 90 days? Thanks.

Duane Dewey: No, no changes, Michael, really. I mean, we're still interested as part of our strategic plan, to consider M&A for expansion purposes in key markets. I would say, start of the year, very active, lots of discussions up, down, and sideways. That said, I think with the war and related economic issues, et cetera

Speaker #6: No changes, Michael, really. I mean, we're still interested. It's part of our strategic plan to consider M&A for expansion purposes and key markets. I would say start of the year, very active lots of discussions up, down, and sideways.

Speaker #6: That said, I think with the war and related economic issues etc., high gas prices etc., it seems like a lot of the there's been a lot of just tempering of those discussions pending the outcome or pending some stabilization of things.

Duane Dewey: High gas prices, et cetera. It seems like a lot of there's been a lot of just tempering of those discussions pending the outcome or pending some stabilization of things. We continue to focus on the organic strategy and continue to build relations out there and would be very interested in that process. As I said, it's part of our strategic plan, no real change in that thought process.

Speaker #6: And so we continue to focus on the organic strategy and continue to build relations out there and would be very interested in that process.

Speaker #6: As I said, it's part of our strategic plan. But no real change in that thought process.

Speaker #1: All right. Thanks for taking my questions, guys.

Michael Rose: All right. Thanks for taking my questions, guys.

Speaker #3: The next question is from Gary Tenner with DA Davidson. Please go ahead.

Operator 2: The next question is from Gary Tenner with D.A. Davidson. Please go ahead.

Operator: The next question is from Gary Tenner with D.A. Davidson. Please go ahead.

Speaker #5: Thanks. Good morning.

Gary Tenner: Thanks. Good morning.

Speaker #6: Hey, Gary. How do hey, I had a follow-up on Katherine's NIM question. Tom, your comments about expecting loan yields to continue to drift a little bit lower here a little bit surprising to me.

Thomas Owens: Hi, Gary.

Gary Tenner: Hey, I had a follow-up on Catherine's NIM question. Tom, your comments about expecting loan yields to continue to drift a little bit lower here, a little bit surprising to me. I'm just curious what the driver of that is. Is it, do you have some higher yielding loans maturing? I'm, you know, I'm also curious kind of what the new production yields look like in Q1.

Speaker #6: So I'm just curious, what the driver of that is? Is it do you have some higher-yielding loans maturing? And I'm also curious kind of what the new production yields look like in the first quarter.

Speaker #5: And I'll start. This is Barry, and then let Tom weigh in. Just from the standpoint of what we see every day, and it's more specific to the CRE side than it is the C&I side.

Barry Harvey: I'll start, this is Barry, and then let Tom weigh in. Just from the standpoint of what we see every day, and it's more specific to the CRE side than it is the C&I side. We are seeing, you know, those are all gonna be for us. Those are all gonna be 30-day SOFR plus a spread. We do see a little lower spread today than we have at some points in the past as it relates to the CRE projects, regardless of which type you're talking about. It is, of course, Chris, very competitive in terms of that marketplace.

Speaker #5: But we are seeing those are all going to be for us those are all going to be 30-day sofa plus a spread. And we do see a little lower spread today than we have at some points in the past as it relates to the CRE projects, regardless of which type you're talking about.

Speaker #5: It is, of course, Chris, very competitive in terms of that marketplace. So, when you think about stuff rolling off for us that was 48 to 60 months ago, those spreads to that 30-day SOFR were better than they are today.

Barry Harvey: When you think about stuff rolling off, for us, that was 48 to 60 months ago, those spreads to that 30-day SOFR were better then than they are today of what's going on in funding in the near term. Then a lot of times, Chris, in order to, you know, when we do have payoffs scheduled on the CRE side, like everyone does, we do pursue those opportunities to refinance existing debt that we think it makes sense and fits our parameters. When you do refinance existing debt to replace outstanding balances with outstanding balances, those are gonna be priced a little less than your construction mini-perm was that you made 4 or 5 years ago, where you had construction risk, you had stabilization risk.

Barry Harvey: When you think about stuff rolling off, for us, that was 48 to 60 months ago, those spreads to that 30-day SOFR were better then than they are today of what's going on in funding in the near term. Then a lot of times, Chris, in order to, you know, when we do have payoffs scheduled on the CRE side, like everyone does, we do pursue those opportunities to refinance existing debt that we think it makes sense and fits our parameters. When you do refinance existing debt to replace outstanding balances with outstanding balances, those are gonna be priced a little less than your construction mini-perm was that you made four or five years ago, where you had construction risk, you had stabilization risk.

Speaker #5: Of what's going on in funding in the near term. And then a lot of times, Chris, in order to when we do have payoffs scheduled on the CRE side, like everyone does, we do pursue those opportunities to refinance existing debt that we think it makes sense and fits our parameters.

Speaker #5: And when you do refinance existing debt to replace outstanding balances with outstanding balances, those are going to be priced a little less than your construction mini-perm was that you made four or five years ago.

Speaker #5: Where you had construction risk. You had stabilization risk. You're replacing that with something that doesn't have construction risk, doesn't have stabilization risk. And when it's fully funded and for that reason, it's priced accordingly.

Barry Harvey: You're replacing that with something that doesn't have construction risk, doesn't have stabilization risk when it's fully funded. For that reason, it's priced accordingly. You may be replacing something that was construction mini-perm risk embedded in it. Your spread is a little bit higher on those deals than the ones you might replace it with if you're able to refinance a deal, a fully funded deal away from somebody else that's fully stabilized, if that makes sense.

Speaker #5: So you may be replacing something that was construction many firm risk embedded in it. Your spread is a little bit higher on those deals than the ones you might replace it with if you're able to refinance a deal a fully funded deal away from somebody else that's fully stabilized, if that makes sense.

Speaker #6: Yeah. And Gary, I would add just again, it depends on the mix of the lumpiness or not of maturities within a quarter and then the mix of the maturities floating rate versus fixed rate.

Thomas Owens: Yeah, Gary, I would add, it just again, it depends on the mix of, you know, the lumpiness or not of maturities within a quarter and then the mix of the maturities floating rate versus fixed rate. Of course, you still have a bit of a tailwind on the fixed rate loan side of those repricing higher. It's very much mix dependent. As I said in my comments earlier, you know, we're getting down to, you know, dust settling here, so to speak, in terms of the aftermath of the last Fed rate cut.

Duane Dewey: Yeah, Gary, I would add, it just again, it depends on the mix of, you know, the lumpiness or not of maturities within a quarter and then the mix of the maturities floating rate versus fixed rate. Of course, you still have a bit of a tailwind on the fixed rate loan side of those repricing higher. It's very much mix dependent. As I said in my comments earlier, you know, we're getting down to, you know, dust settling here, so to speak, in terms of the aftermath of the last Fed rate cut.

Speaker #6: Of course, you still have a bit of a tailwind on the fixed rate loan side of those repricing higher. So it's very much mixed dependent.

Speaker #6: And as I said in my comments earlier, we're getting down to the dust settling here, so to speak, in terms of the aftermath of the last Fed rate cut.

Thomas Owens: You know, you look at some, I'll call it normalization or steeping of the yield curve is certainly helpful, where we're trading now in terms of where, you know, fixed rate loans coming on the books versus fixed rate loans, paying off. You know, there's a lot at play there. We're not talking about, you know, big, big, you know, very substantial linked quarter changes in loan yields or deposit cost. As I said, a simple way to think about it is once we get past this quarter, relative stability here over the remainder of the year with a very gradual grind higher in terms of NIM.

Duane Dewey: You know, you look at some, I'll call it normalization or steeping of the yield curve is certainly helpful, where we're trading now in terms of where, you know, fixed rate loans coming on the books versus fixed rate loans, paying off. You know, there's a lot at play there. We're not talking about, you know, big, big, you know, very substantial linked quarter changes in loan yields or deposit cost. As I said, a simple way to think about it is once we get past this quarter, relative stability here over the remainder of the year with a very gradual grind higher in terms of NIM.

Speaker #6: You look at some—I'll call it normalization or steepening of the yield curve—is certainly helpful where we're trading now in terms of where fixed-rate loans coming on the books versus fixed-rate loans paying off.

Speaker #6: So there's a lot at play there. But we're not talking about big very substantial linked quarter changes in loan yields or deposit cost. And as I said, a simple way to think about it is once we get past this quarter relative stability here over the remainder of the year, with a very gradual grind higher in terms of NIM.

Speaker #5: Yeah. Appreciate that. That's great color from both of you. And then just you mentioned a couple of times kind of leaning into hiring and the growth markets and, of course, this is not the first time you mentioned it.

Gary Tenner: Yeah, appreciate that. That's great. Great color from both of you. Then just, you mentioned a couple of times, you know, kind of leaning into hiring in the growth markets. Of course, this is not the first time you've mentioned it, but I'm just curious if you could kind of put some numbers around what you accomplished there in Q1 and any kind of targets or expectations for the rest of the year.

Speaker #5: But I'm just curious if you could kind of put some numbers around what you accomplished there in the first quarter, and any kind of targets or expectations for the rest of the year.

Thomas Owens: I can put it in context of new bodies added. I don't know if we can break it down that specifically in terms of production at this point, but I think I messaged to the street in Q3, it was in the 21 new production talent across our franchise. Q4 was more like 13-ish new hires. Q1 of 2026, it was in the range of 7 new hires. That Q1 is a tough hire quarter because bonuses are paid and so on. We will be refocusing our efforts in that the rest of the year. I don't believe we can really break it down. I mean, they're all still getting their feet in the ground and building their pipelines and so on.

Speaker #6: I can put it in context of new bodies added I don't know if we can break it down that specifically in terms of production at this point.

Duane Dewey: I can put it in context of new bodies added. I don't know if we can break it down that specifically in terms of production at this point, but I think I messaged to the street in Q3, it was in the 21 new production talent across our franchise. Q4 was more like 13-ish new hires. Q1 of 2026, it was in the range of seven new hires. That Q1 is a tough hire quarter because bonuses are paid and so on. We will be refocusing our efforts in that the rest of the year. I don't believe we can really break it down. I mean, they're all still getting their feet in the ground and building their pipelines and so on.

Speaker #6: But I think we messaged to the street in the third quarter. It was in the '21 new production talent across our franchise. Fourth quarter was more like 13-ish new hires.

Speaker #6: And then the first quarter of '20, '26, it was in the range of seven new hires. So the first quarter is a tough hire quarter because bonuses are paid and so on.

Speaker #6: So we will be refocusing our efforts in the rest of the year. But I don't believe we can really break it down. I mean, they're all still getting their feet in the ground.

Speaker #6: And building their pipelines and so on, like I was saying earlier, we are seeing a very solid build of pipeline here into the year.

Thomas Owens: Like I was saying earlier, we are seeing a very solid build of pipeline here into the year. are seeing some positive shoots from those efforts.

Duane Dewey: Like I was saying earlier, we are seeing a very solid build of pipeline here into the year. are seeing some positive shoots from those efforts.

Speaker #6: So are seeing some positive shoots from those efforts.

Speaker #5: Thank you.

Thomas Owens: Thank you.

Gary Tenner: Thank you.

Speaker #6: Yeah. You nut that all out, Gary. And it's not meaningfully impactful here for the full year in 2026 in terms of dropping to the bottom line.

Thomas Owens: Yeah, you net that all out, Gary. You know, it's not meaningfully impactful here for the full year in 2026 in terms of dropping to the bottom line. The, you know, the intent obviously is to be making the investment to bring the producers on board here, in 2026 and then the return on that ramping up in future years.

Duane Dewey: Yeah, you net that all out, Gary. You know, it's not meaningfully impactful here for the full year in 2026 in terms of dropping to the bottom line. The, you know, the intent obviously is to be making the investment to bring the producers on board here, in 2026 and then the return on that ramping up in future years.

Speaker #6: But the intent, obviously, is to be making the investment to bring the producers on board here. In 2026. And then the return on that ramping up in future years.

Speaker #5: Yeah. Thanks again.

Gary Tenner: Yeah. Thanks again.

Speaker #6: Yep.

Thomas Owens: Yep.

Speaker #7: Again, if you have a question, you may press star then one. The next question comes from Christopher Marinek with Breen Capital Research. Please go ahead.

Operator 2: Again, if you have a question, you may press star then one. The next question comes from Christopher Marinac with Janney Montgomery Scott. Please go ahead.

Operator: Again, if you have a question, you may press star then one. The next question comes from Christopher Marinac with Janney Montgomery Scott. Please go ahead.

Speaker #5: Hey. Good morning. Thanks for hosting us. Tom, I wanted to follow up on kind of net new deposit accounts, particularly in the commercial channel as we see success with CNI.

Christopher Marinac: Hey, good morning. Thanks for hosting us. Tom, I wanted to follow up on kind of net new deposit accounts, particularly in the commercial channel as we see success with C&I. Should we see, you know, more deposit flows from that area over time?

Speaker #5: Should we see more deposit flows from that area over time?

Speaker #6: Yes, Chris. So I do not have those numbers in front of me. But yes, we would certainly anticipate accelerated growth in commercial deposit accounts and nearby accelerated growth in commercial production or balances I think I have a report here that I could look at pretty quickly.

Thomas Owens: Yes, Chris. I do not have those numbers in front of me, but yes, we would certainly anticipate accelerated growth in commercial deposit accounts and nearby accelerated growth in commercial production for balances. I think I have a report here that I could look at pretty quickly. I mean, we have seen, Chris, acceleration. If you know, if you think in terms of year-over-year growth in average balances, we have seen really good acceleration in commercial deposit balances. You know, if we were having this exact conversation 1 year ago, it would have looked something like a 1% to 1.5% decline in year-over-year Q1 commercial balances. Over time, that has steadily migrated more positive. 3 quarters ago, that was closer to break even. 2 quarters ago, it was +2%.

Thomas Owens: Yes, Chris. I do not have those numbers in front of me, but yes, we would certainly anticipate accelerated growth in commercial deposit accounts and nearby accelerated growth in commercial production for balances. I think I have a report here that I could look at pretty quickly. I mean, we have seen, Chris, acceleration. If you know, if you think in terms of year-over-year growth in average balances, we have seen really good acceleration in commercial deposit balances. You know, if we were having this exact conversation one year ago, it would have looked something like a 1% to 1.5% decline in year-over-year Q1 commercial balances. Over time, that has steadily migrated more positive. 3 quarters ago, that was closer to break even. 2 quarters ago, it was +2%.

Speaker #6: I mean, we have seen Chris acceleration. If you think in terms of year-over-year growth in average balances, we have seen really good acceleration in commercial deposit balances.

Speaker #6: If we were having this exact conversation one year ago, it would have looked something like a 1 to 1 and a half percent decline in year-over-year first quarter commercial balances.

Speaker #6: Over time, that has steadily migrated more positive. Three quarters ago, that was closer to break even; two quarters ago, it was plus 2%. And now in the fourth quarter and into the first quarter here, we're on the high side of 4%.

Thomas Owens: Now in Q4 and into Q1 here, we're on the high side of 4%. We've had steady acceleration of growth in commercial average commercial deposit balances outstanding on a year-over-year basis. It's absolutely our focus to continue that trend going forward.

Speaker #6: So we've had steady acceleration of growth in commercial average commercial deposit balances outstanding on a year-over-year basis. And it's absolutely our focus to continue that trend going forward.

Speaker #5: Great. Thank you for sharing that. And then just a quick question on expense, operating leverage in general. Should we see further progress into next year?

Christopher Marinac: Great. Thank you for sharing that. Just a quick question on expense, operating leverage in general. Should we see further progress into next year? Just kind of curious how we translate this recent efforts into the future quarters.

Speaker #5: Just kind of curious how we translate this recent efforts into the future quarters.

Speaker #6: Yeah. Our mindset coming into this year was particularly considering two things. Considering the investments we're making in revenue producers and the investments we're making in technology, our mindset coming in was if we could have a break-even year in terms of operating leverage, that would be doing a pretty darn good job.

Thomas Owens: Yeah, you know, our mindset coming into this year was particularly considering two things, considering the investments we're making in revenue producers and the investments we're making in technology. Our mindset coming in was if we could have a break-even year in terms of operating leverage, that would be doing a pretty darn good job. Both of those things coming in are clearly headwinds to us achieving positive operating leverage here in 2026. Again, the idea on both of those, whether it's investment in producers or investment in technology, is to generate returns on those investments and drive operating positive operating leverage going forward.

Speaker #6: So both of those things coming in are clearly headwinds to us achieving positive operating leverage here in 2026. But again, the idea on both of those, whether it's investment in producers or investment in technology, is to generate returns on those investments and drive operating positive operating leverage going forward.

Speaker #5: Great. Thank you again.

Christopher Marinac: Great. Thank you again.

Thomas Owens: Mm-hmm. Thank you.

Speaker #6: Thank you.

Speaker #7: The next question is from Steven Scouten with Piper Sandler. Please go ahead.

Operator 2: The next question is from Stephen Scouten with Piper Sandler. Please go ahead.

Operator: The next question is from Stephen Scouten with Piper Sandler. Please go ahead.

Speaker #5: Yeah. Thanks, everyone. Most of my questions have been asked and answered. I just maybe had one follow-up around deposit costs. The quarter-over-quarter improvement that you're projecting in the slide deck, is that more indicative of incremental reductions, you think, from the CD repricings?

Stephen Scouten: Yeah, thanks, everyone. Most of my questions have been asked and answered. I just maybe have one follow-up around deposit costs. The quarter-over-quarter improvement that you're projecting in the slide deck, is that more indicative of incremental reductions, you think, from the CD repricings? Or was that more about kind of where you exited the quarter and the progression of deposit costs throughout the quarter?

Speaker #5: Or was that more about kind of where you exited the quarter, and the progression of deposit costs throughout the quarter?

Speaker #6: So Steven, this is Tom. Good question. As I said, I believe earlier, the majority of the benefits, the tailwind to NIM accretion from the ongoing CD book repricing is now diminishing.

Thomas Owens: Stephen, this is Tom. Good question. As I said, I believe earlier, you know, the majority of the benefits, the tailwind to NIM accretion from the ongoing CD book repricing is now diminishing. That 160 guide that you see for the Q2, that's basically where we are running currently. In fact, I think month to date here in April, we're probably running at about 159. We've had some favorable mix here in April. We're probably running at 159. The 160 reflects a couple of things. As I also mentioned earlier, you've got some ongoing repricing of exception money market accounts as we accommodate customers, where warranted by the nature of the relationship and the profitability of the relationship, accommodating their request for higher rates.

Speaker #6: And so that 160 guide that you see for the second quarter that's basically where we are running currently. In fact, I think month to date, here in April, we're probably running at about 159.

Speaker #6: We've had some favorable mix here in April. We're probably running at 159. So the 160 reflects a couple of things. As I also mentioned earlier, you've got some ongoing repricing of exception money market accounts as we accommodate customers where warranted by the nature of the relationship and the profitability of the relationship, accommodating their requests for higher rates.

Speaker #6: And then, it's been our practice as we get further into the second quarter and into the summer months, we generally engage in promotional deposit campaign activity.

Thomas Owens: It's been our practice as we get further into Q2 and into the summer months, we generally engage in promotional deposit campaign activity, which would put some upward pressure on deposit cost, that which sort of counterbalances what's left there in terms of ongoing downward CD repricing. That's why, you know, from my perspective, I think the right way to think about it is as we're coming into Q2, a bit lower loan yields, a bit lower deposit cost, and essentially relative stability from that point forward and a slow gradual grind higher in Net Interest Margin. You know, with the dust settling, we're talking a basis point or 2. We're talking about, you know, fractions of a basis point of which way they round.

Speaker #6: Which would put some upward pressure on deposit costs that counter which sort of counterbalances what's left there in terms of ongoing downward CD repricing.

Speaker #6: So again, that's why from my perspective, I think the right way to think about it is as we're coming into the second quarter, a bit lower loan yields, a bit lower deposit cost, and essentially relative stability from that point forward and a slow gradual grind higher in net interest margin.

Speaker #6: And again, with the dust settling, we're talking a basis point or two. We're talking about fractions of a basis point of which way they round.

Thomas Owens: You know, do deposit cost and loan yield both, you know, round in a favorable way or unfavorable way? I think we're getting down to, you know, more relative stability in that regard. We came into the year with a very tight guidance range in terms of Net Interest Margin, 3.80% to 3.85%, and we're maintaining that range. We continue to feel good about being for the full year somewhere right in the middle of that range.

Speaker #6: Does deposit cost and loan yield both round in a favorable way or unfavorable way? So I think we're getting down to more relative ative stability in that regard.

Speaker #6: We came into the year with a very tight guidance range in terms of net interest margin, 380 to 385. And we're maintaining that range.

Speaker #6: We continue to feel good about being for the full year, somewhere right in the middle of that range.

Speaker #5: Got it. That's extremely helpful color, Tom. Appreciate all the time, guys. Congrats.

Stephen Scouten: Got it. That's extremely helpful color, Tom. Appreciate all the time, guys. Congrats.

Speaker #6: Okay. Thank you.

Thomas Owens: Okay. Thank you.

Speaker #7: Next, we have a follow-up question from Study Strickland with Hovodi Group. Please go ahead.

Operator 2: Next, we have a follow-up question from Feddie Strickland with Hovde Group. Please go ahead.

Operator: Next, we have a follow-up question from Feddie Strickland with Hovde Group. Please go ahead.

Speaker #8: Hey, just real quick, I had a quick follow-up on the M&A comment. I think you said up, down, and sideways was that just a figure's feature?

Feddie Strickland: Hey, just real quick, I have a quick follow-up on the M&A comment. I think you said up, down, sideways. Was that just a figure of speech, or should I take that to mean you consider like an MOE-type transaction or even an upstream partner?

Speaker #8: Should I take that to continue to consider an MOE-type transaction or even an upstream partner?

Thomas Owens: I'm not gonna commit one way or the other there, Feddie. I mean, I, you know, they're all, as you've seen in the marketplace, there are all sorts of combinations happening and, you know, from larger banks to smaller banks. So it's, it's pretty wide open field. That's not our focus, but, you know, it is, the discussions out there are pretty significant across the board.

Speaker #6: I'm not going to commit one way or the other there, Fede. I mean, they're all, as you've seen in the marketplace, there are all sorts of combinations happening, from larger banks to smaller banks.

Speaker #6: And so it's pretty wide open field that's not our focus. But it is the discussions out there are pretty significant across the board.

Speaker #5: All right. Great. Thanks for taking my follow-up.

Feddie Strickland: All right, great. Thanks for taking my follow-up.

Speaker #6: Thank you.

Thomas Owens: Thank you.

Speaker #7: This concludes our question-and-answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks.

Operator 2: This concludes our question-and-answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks.

Speaker #6: Thank you again for joining us this morning. We look forward to catching back up at the end of the second quarter. And we'll talk then.

Duane Dewey: Thank you again for joining us this morning. We look forward to catching back up at the end of Q2. We'll talk then. Thank you.

Speaker #6: Thank you.

Operator 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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