ENTERPRISE FINANCIAL SERVICES CORP — Call Transcript 2026

Good day everyone, and welcome to Enterprise Financial Services Corp Q1 2026 Earnings Conference Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star and then one on your telephone keypad. Thank you. I'd now like to hand the call over to Jim Lally, President and CEO. Please go ahead. Thank you all very much for joining us this morning, and welcome to our 2026 Q1 Earnings Call. Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank & Trust. Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. The presentation and earnings release were filed on SEC Form 8-K yesterday. Please refer to slide two of the presentation titled Forward-Looking Statements and our most recent 10-K for reasons why actual results may vary from any forward-looking statements that we make today. Our financial scorecard begins on slide three. The solid financial performance that we've generated over the past several years continued into the Q1 of 2026. For the quarter, we earned $1.30 per diluted share compared to a seasonally strong $1.45 in the linked quarter and $1.31 in the Q1 of 2025. This level of performance produced a return on assets of 1.16% and a pre-provision ROAA of 1.65%. I would characterize our performance in the quarter as solid and on plan. Net interest income was relatively stable when compared to the linked quarter at $166 million, while net interest margin expanded two basis points to 4.28%. This reflects both better seasonal performance in our deposit balances and net interest margin expansion resulting from our relationship-oriented business model, where our clients receive value-added service from our teams in return for a few extra basis points when it comes to loan and deposit pricing. Our well-positioned balance sheet continues to be the strength of our company as it provides for great flexibility with respect to capital planning. Capital levels at quarter end remain stable and strong, with total stockholders' equity at $2 billion and a tangible common equity to tangible assets ratio of 9%. At this level of TCE, we were able to produce a return on tangible common equity of 12.53%. Our strong return profile allowed our tangible book value per share to remain level at $41.38, despite the fact that we utilized approximately $27 million of capital to repurchase 483,000 shares at an average price of $56.13. In addition to this, given the strength of our earnings and our confidence in our continued execution, we increased the dividend by $0.01 per share for the Q2 of 2026 to $0.34 per share. Turning to slide four, you will see that loans dipped slightly in the quarter. Three things led to the slight decrease. The first is that several significant closings that we expected to see in Q1 have slid into the Q2 and have closed or will close in the coming weeks. The second reason for this decline was a $100 million paydown in our Low-Income Housing Tax Credit portfolio. These paydowns happen annually and are the proceeds from successful sales that occurred in the Q4 of 2025. Another positive from these payoffs is the fact that the majority of these loans were made in 2021 and 2022, and the fixed rates earned on these loans are lower than what we can earn on this cash in our investment portfolio today. The final contributor was the sale of $25 million of SBA loans in the quarter, which produced a gain of $1.4 million. Doug will provide much more color on the performance of our markets and businesses in his comments. Our diversified deposit base continues to be a differentiator for us. We did experience a typical Q1 deposit outflows due to our heavy concentration of commercial-oriented accounts. We've worked extremely hard to blunt this trend through growth of our national deposit verticals, as well as through market and business diversification within both the commercial bank and our more granular business banking and consumer relationships. The composition of deposits also remained stable as our percentage of DDA to total deposits remained at 33%. These trends were aided by a continued reduction in the overall cost of deposits to 1.52%, a 12 basis points drop in the quarter and 31 basis points when compared to the Q1 of 2025. It was on our 2025 Q1 Earnings Call that we first spoke of the seven Southern California loans that ultimately landed in OREO. Our contention a year ago was that we would favorably work through these loans without a loss. Today, I'm pleased to report that we continue to make progress on this and currently have four of these properties under contract, representing total OREO balances of $46 million, with great progress on the other three properties being made. I would expect to report positive further progress in the remaining quarters of 2026. Additionally, the remainder of the portfolio continues to perform as expected. Keene will make additional comments about asset quality and provision expense in his comments. Turning to slide five, you will see our priorities for 2026. We made significant strides in asset quality improvement during the quarter, and I'm confident that this will continue throughout 2026, highlighted by the expected sale of the seven Southern California properties that are currently in OREO. I'm still bullish on overall mid-single-digit balance sheet growth for the year. Our ability to produce well-priced, diversified deposits has been proven over the last several years, and I have a great degree of confidence that this will continue throughout 2026. However, the longer that uncertainty is the byproduct of the conflict in Iran, borrower sentiments may be cautious, which could impact future loan growth. Over the last few weeks, I've had the opportunity to visit with many clients representing a diverse array of businesses and industries. They continue to perform well, but their confidence to make large investments in capital expenditures or to think about any type of strategic hires or M&A is truly day-to-day. Like I've stated on previous calls, entrepreneurs need to be able to see 90 to 120 days into the future to confidently make these strategic decisions, and the recent volatility in the current environment could have an impact. Obviously, a quick resolution or stabilization of the current state changes this immediately. Finally, like many of our clients, we too are focused on efficiency gains through automation and expansion of our existing technology framework. This is a daily opportunity for our company, and we are excited about the progress we are making. Overall, I'm very pleased with our results for the Q1 of 2026. We are positioned extremely well for just about any environment. We have wonderful markets, a growing diversified deposit base, and an extremely strong balance sheet. We have used these tools to grow tangible book value per share over 10% annually for the last 14 years and are in great shape to accomplish this again in 2026. With that, I would like to turn the call over to Doug Bauche. Doug? Thank you, Jim, and good morning, everyone. Turning to slide six, you'll see the breakdown of our loan portfolio by asset class. Successful attraction and onboarding of new clients across our footprint drove $97 million in Q1 loan growth in our core C&I and owner-occupied real estate portfolios and $21 million in loan growth from our life insurance premium finance division. Those advancements, however, were largely offset by the anticipated $101 million reduction in our Low-Income Housing Tax Credit portfolio via the successful completion of affordable housing projects and sale of state tax credits. The weighted average fixed coupon on the $101 million in tax credit loans paid off in the quarter was 3.29%, providing us the opportunity for redeployment of that capital at higher earning yields in the current environment. Furthermore, as Jim mentioned, we executed on the sale of $25 million of SBA guaranteed loans in the quarter. The sponsor finance portfolio declined $33 million in the quarter as payoffs from the sale of sponsor-owned portfolio companies exceeded new originations. Overall, I'm pleased with the mix and breadth of our loan funding pipeline, and I remain cautiously optimistic about our ability to achieve our loan growth objectives for the year. The elevated geopolitical risks, Iran conflict, and market complexities may, however, result in our organic growth being more uneven over the next couple of quarters. Slide seven demonstrates the continued strong diversity of our loan portfolio across our geographic markets and specialty business lines. The specialty lending portfolio at just over $4 billion, inclusive of Tax Credit Lending, Sponsor Finance, SBA, and Life Insurance Premium Finance, has remained relatively flat year-over-year. However, our core geographic markets in the Midwest and Southwest have delivered 6% and 25% year-over-year growth rates respectively, which includes loans acquired in the branch acquisition that closed in the Q4. In the West region, our investments in new talent in 2025 in Southern California are showing positive momentum. Leveraging market disruption, we are experiencing a growing pipeline of quality CRE and C&I holistic relationship opportunities that will translate to solid organic growth during the year. Turning to deposits on slides eight and nine, reductions in the quarter within the core geographic portfolio reflect anticipated seasonal outflows and client balances of $272 million, mainly associated with distributions, bonuses, and tax payments. A material portion of this reduction was offset by continued growth within the national deposit verticals, which grew by $187 million or roughly 20% annualized in Q1. On a year-over-year basis, total client deposits excluding brokered funds are up 10%. The national deposit verticals profiled on slide 10 continue to provide differentiated and attractive sources of funding while also diversifying our overall deposit base and somewhat softening the seasonality of our other channels. With over $4 billion in deposits across our property management, community association, and legal and escrow businesses, the average earnings credit is an attractive 2.59% considering no incremental expenses in branches or branch personnel. Lastly, slide 11 profiles the mix of our core deposit base, which continues to be well diversified and highly relationship oriented. With just over 33% of these accounts being non-interest bearing and 80% of them using some form of treasury management or online banking, they offer operational stability and a solid base from which to expand other fee-generating revenue streams, including card and merchant services. Now, I'll turn the call over to Keene Turner for his comments. Thanks, Doug, and good morning, everyone. Turning to slide 12, we reported earnings per share of $1.30 in the Q1 on net income of $49 million. Excluding certain non-recurring items, earnings per share on an adjusted basis was $1.31 compared to adjusted earnings per share of $1.36 in the linked quarter. Pre-provision earnings were $70 million, a decline of $4 million from the linked quarter. The $0.05 decrease in adjusted earnings per share and the $4 million decrease in pre-provision earnings was primarily due to lower tax credit income and the impact of two fewer days on net interest income. The decline in tax credit income was expected as it is typically highest in the Q4 of the year. The provision for credit losses decreased from the linked quarter due to the decline in both net charge-off and total loans. The primary driver of the provision this quarter was a qualitative factor that was added to recognize the potential impact on credit losses from the conflict in Iran. The increase in noninterest expense in the period was mainly due to typical seasonal increase in compensation and benefits, and to a lesser extent, the first full quarter of run-rate expenses from the branch acquisition that closed last October. These increases were partially offset by a decline in one-time acquisition costs related to the acquisition. Turning to slide 13, and with more details to follow on slide 14, net interest income for the Q1 was $166 million, a decrease of $2 million from the Q4, which was largely attributable to fewer days in the Q1. Interest income declined $7 million from the prior period. The largest contributor was an $8 million decrease in loan interest as our yield fell 13 basis points on variable rate resets amid Fed easing, along with a $17 million decline in average loan balances. This was partially offset by $1.9 million of additional earnings in the investment portfolio, with average balances higher by $159 million and an 11 basis point improvement in the securities yield. The rate on loans booked in the quarter was 6.58%, and the average tax equivalent purchase yield on investments was 4.51%, both of which are additive to their respective portfolios. Interest expense declined $5 million compared to the linked quarter as a result of lower funding costs. Interest expense on deposits decreased by $5.5 million as average interest-bearing balances declined $89 million, and the rate on interest-bearing deposits moved 15 basis points lower. This was partially offset by higher interest expense on customer repo accounts due to seasonally higher balances. Our net interest margin for the Q1 was 4.28%, an increase of two basis points in the quarter. Our cost of interest-bearing liabilities declined 15 basis points, led by lower rates on non-maturity deposits and borrowings, which more than offset the nine basis point reduction in yield on earning assets. Net interest income remained slightly asset sensitive, primarily in parallel interest rate simulation, with each quarter point cut in rates reducing net interest income $1 million-$2 million per quarter or a couple of basis points of net interest margin. Including deposit-related non-interest expense in this analysis, we modeled that we are effectively neutral to modestly liability sensitive as we continue to have success growing the related deposit balances. We anticipate the recent steepening of the yield curve will favorably impact pricing on fixed-rate loans and the reinvestment of cash flows in the investment portfolio. With the Fed seemingly on hold, we expect our net interest margin to remain in the low to mid 4.2%. As we execute on our growth plans for 2026 and remain committed to disciplined pricing on both loans and deposits, we look for net interest margin to be stable in this range with consistent growth in net interest income over the next few quarters. Slide 15 reflects our credit trends. Net charge-offs totaled $4.4 million in the Q1, compared to $20.7 million in the linked quarter. We made progress in the quarter reducing non-performing assets with the full repayment of two loans and total principal repayments of $21 million on non-accrual loans. We also foreclosed on the last property related to our largest non-performing relationship and are actively working out these properties. As Jim noted, four of the seven properties in this relationship are under contract, and we expect contracts for the other three properties in the near future. Net charge-offs totaled 15 basis points of average loans compared to 21 basis points for 2025. The provision for credit losses was $7.2 million in the period compared to $9.2 million in the linked quarter. The provision in the quarter was mainly due to net charge-offs and a qualitative adjustment to the allowance for potential impact of the Iran conflict. While we have not seen a direct impact on credit quality from the conflict that started at the end of February, we have recognized the impact that oil prices and market uncertainty can have on economic factors used to forecast losses in the loan portfolio. Slide 16 shows the allowance for credit losses. The ratio of allowance to total loans increased to 1.21%, compared to 1.19% at the end of 2025. When adjusting for government-guaranteed loans, the ratio increases to 1.32% of total loans, which shows the strength of our reserve coverage. On slide 17, Q1 non-interest income was $19.1 million. This was a $6.3 million reduction compared to the linked quarter. The decrease was primarily due to other real estate owned gains and seasonally strong tax credit income during the Q4 of 2025. The Q1 included two mitigants from higher income from private equity fund distributions and a gain on the sale of guaranteed SBA loans. Turning to slide 18, Q1 non-interest expense of $115 million was relatively comparable to the linked quarter, as it included a full quarter of operating expenses related to the branch acquisition that closed in the Q4. Non-interest expense in the Q4 included $2.5 million of one-time branch acquisition costs and a reversal of accrued FDIC special assessments. Excluding the impact of these non-recurring items, non-interest expenses were $2.5 million higher than the linked quarter, which includes the first full quarter run rate of expenses from the acquisition. Q1 non-interest expense included seasonal impacts in compensation and benefits. Deposit costs were lower than the linked quarter by $1.5 million, which was largely driven by the expiration of certain allowances that were not utilized. Other expenses decreased from the linked quarter, primarily due to a recovery of a credit card loss event that was incurred in the Q4. The core efficiency ratio was 60.2% for the quarter, compared to 58.3% in the linked quarter. Our capital metrics are shown on slide 19. Tangible book value per share of $41.38 was relatively stable with the linked quarter. Strong Q1 earnings effectively offset the fair value reduction from the impact of higher interest rates on our available-for-sale securities portfolio. We continue to proactively manage excess capital, repurchasing 483,000 shares of common stock for approximately $27 million. At an average price of $56.13 per share, this was an attractive multiple of tangible book value. Our tangible common equity ratio was 9%, stable with the linked quarter. The quarterly dividend was increased by $0.01 to $0.34 per share for the Q2 of 2026, continuing our record of increasing the dividend nine consecutive quarters. This was a strong start to the year with a 1.2% return on average assets and a 13% return on average tangible common equity. We're well-positioned with a strong earnings profile, balance sheet, and capital position to support further organic growth across our markets. I appreciate your attention today and will now open the line for questions. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Our first question comes from the line of Jeff Rulis of D.A. Davidson. Your line is now open. Thanks. Good morning. Morning, Jeff. Look, I'll tread lightly on the credit side. I know it's been an exercise in patience, but just to kind of go over the four properties that are under contract. I guess if you could touch on potential timing for sale and then, as we recall, I think those were pretty attractive. The real estate was really never questioned on the valuation. It's just a fight to get to them. I guess, so the question, the second piece is any anticipated gains with those sales? Yeah. I'll take that one, Jeff. Jeff, so three of the four should transact yet here in the Q2, and the fourth one later this year. As it relates to the contracts we have in hand, they support how we've identified them in our financial statements. Okay. Gains or losses, a little early to kind of It is early, but we feel confident about how we recognize things in the Q4 of last year and how things should settle out. On the other three properties, sounded optimistic on those as well. Yes. Absolutely. Any sort of differences in those or it's just, again, it's timing of the contracts and potential sales? There's nothing, I guess, different from the four versus the three still to maybe be dealt with? It's timing. You're right. It's timing. You remember one we had to wait a little while to get our hands on, which we have now. Identified several different potential buyers, so now it's a bit of a let them fight it out to get the best outcome we can. Got it. Thank you. Then hopping over to the margin, Keene, I think our prior conversations were more of a margin to step down toward to 4.20%, I think, as the rate environment has altered. It sounds like you've got some pretty good earning asset repricing opportunities within the book, but you pointed to the yield curve as well. Just want to check on the low-to-mid 4.20%. What's the timeline of that? Is that just through the end of the year? I don't know if you've talked about your positioning thereafter. Any additional color on the margin? Yeah. Jeff, margin in March was a little bit of a step down from what we reported here in the Q1. Our guide is, I would say, today's run rate, and I think we see it holding stable through the end of the year. I think we had a little bit of balance sheet contraction here in the Q1, and then with the shorter days, you get a little bit of a false positive in terms of margin popping. We feel good about day count in our favor now, really how the shape of the curve and where intermediate term rates are for reinvestment, both on the loan and securities portfolio. I think any amount of growth from a loan perspective that we can get an overall balance sheet growth, which we anticipate will happen here starting in the Q2. I think we feel really good and optimistic, and I think we see margin being reasonably stable for that time frame. We're positioned to defend it if necessary. We've been able to reprice deposits extremely well when the short end of the curve has come down. I think we continue to feel good about that if that's the case. Right now it's status quo, and what I would say is historically, status quo is good for us because it allows us to just go play offense, bring clients on, expand the balance sheet, and not have to worry about doing as much repricing activity when that arises. It's business as usual from a growth perspective. Got it. Yeah. I heard your message of a stable margin, but consistent NII growth is probably more important. Appreciate it. I'll step back. Thanks, Jeff. Your next question comes from the line of Damon DelMonte of KBW. Your line is now open. Hey, good morning, guys. Hope everybody's doing well. Keene, just looking for a little commentary around the outlook for expenses over the coming quarters here in 2026. Do you expect much growth off of Q1's level? Just any insight in there would be great. Yeah. I think the Q1 is always seasonally heavy on compensation. We do expect that to alleviate slightly, albeit we will have a full run rate in the Q2 of merits that occurred in March. Day count also moves against us there a little bit. I think there's a little relief there sequentially on the comp piece. Then, we did have a benefit on the deposit expense line item that we expect to step up back to more that $27 million level. The way I'm thinking about it is that, from a pre-pre perspective with day count and that reversal, we're sort of on the same run rate here to start the Q2. Whatever growth and other items we can get will accrue to our benefit. I think the sequential change in expenses will be paid for in net interest income, and then maybe some other items. That's how I'm thinking about the expenses here moving into the 2Q and beyond. Got it. Okay. A step up from this quarter's $115.1 million, but then that's kind of offset by NII growth? Yeah. That's essentially how I'm thinking about it. I think of this as like a very base kind of earnings quarter where we can have mostly positive progress here for second, third, Q4 as we get more days, more growth. Maybe some more contribution from some of the episodic fee items, things like that. Got it. Okay, great. Could you help us think a little bit about the provision going forward? Nice to see the NPLs come down this quarter. I'm assuming you're still making progress on the remaining ones and you're going to have some loan growth. Is the provision kind of going to be driven by similar level of net charge-offs of this quarter and kind of maintaining the loan loss reserve in that north of 120 basis points? Yeah, I think charge-off wise, charge-offs are sort of on par from a basis point perspective, what we'd think about on a recurring basis. We took the opportunity with some of the uncertainty that's around the economic forecast, but really wasn't in the base yet to provide some additional reserves for that uncertainty. I think, again, back to my comments, I think that positions us well, both with some of the progress we're making on credit, as well as just having some of the economic data, whether it was in the underlying forecast or whether we put it on top, just absorbed into what we're thinking here. To the extent that we have growth and charge-offs, that'll drive provisioning. I think it can abate a little bit just given we took some of the bad news here in the Q1 and put it in a spot where it's there for reserves if we have businesses that are stressed by oil prices or whatever other items are caused by what's going on. Got it. Okay, great. I guess just one more quick one on capital. In your view on capital management, things are going well. Strong capital levels. Bought back some stock this quarter. Can we assume that you guys will remain active in the market given the current levels of stock price? Yeah, Damon, this is Jim. Absolutely, we'll continue evaluating the merits of further repurchases and our other levers with respect to dividends. We'll continue to evaluate, but really it's about growth. As it relates to M&A, still remains a low priority for us. You're looking at repurchases and growth as the priorities for capital. Got it. Great. Thanks for all the color and commentary. Thank you. Your next question comes from the line of Nathan Race at Piper Sandler. Your line is now open. Hey, guys. Good morning. Thanks for taking the questions. Maybe for Jim or Doug, I'm curious if you can just comment on what you're seeing from a pricing perspective on new loan production. On a blended basis and if you're seeing new loan production and incremental deposit growth being margin accretive and relative to the overall loan portfolio yield as well? Yeah, Nathan, good morning. It's Doug here. Thanks for the question. Listen, we are clearly seeing competitive pressures kind of squeezing spreads and credit across all of the footprints today. We look at loan yields, I think at the end of Q1, yields were 6.2%-6.3%, somewhere in that range. Given the current environment, we think we can continue to originate credit in that low- to mid 6% range. As we talked about, just some redeployment of capital from payoffs in the LIHTC portfolio. That provides us some real advantage there of really 200-300 basis points of additional margin on that $100 million portfolio that paid off. It's tough out there. Our team does a good job to price both to win and yet to work to protect our margin with every basis point that we can. Okay. Got it. That's helpful. Just the expectation that loan growth in that mid-single digit range for this year is going to be funded by deposit gathering, or maybe, Keene, you just comment on excess liquidity that you have coming off the bond portfolio and just other sources of funds to loan growth. Yeah, I think we expect to keep the securities portfolio at a similar proportion. I think our expectation is that we'll continue to grow it over the course of the year. That means that we're going to out fund loan growth with deposit growth, both in the commercial bank and the specialty and consumer bank. That's our plan. I think that's the thing we're probably most confident about is our ability to grow deposits. We like the environment for deployment, whether that's into securities or loans. I think you heard from Doug, we'll continue to be disciplined on the loan side, both on credit and pricing. I think we think that sets up for a good performance in 2026 and beyond. That's the playbook we've been running for the last few years, and I think that's the playbook for 2026. Okay, great. Maybe one last one for Jim. Just curious if you can comment on any M&A appetite these days. Obviously, you guys have a nice organic trajectory in front of you and a nice earnings tailwinds over the balance of this year. Just curious if there's any opportunities on the M&A front that are interesting for you guys these days, or is just kind of the focus on organic growth, buying back the stock, just given where the currency is today? Yeah, Nate, we're laser focused on just executing the plan. We've got some work to do relative to growth and certainly we have to execute on the plans relative to sales of these assets that we have and what have you. It's a low priority. We just got to keep focused on making sure that the plan we put forth is executed perfectly, and that's where our 4,000 associates are focused on today and tomorrow and into the future. Okay, sounds good. I appreciate all the color. Thanks, guys. Thank you. We will pause for a brief moment to wait for the questions to come in. We don't have any further questions in the conference line. I would now like to hand the call back to Jim Lally, President and CEO, for closing remarks. Thank you, Ellie, and thank you all for joining us this morning and for your continued interest in our company. We look forward to talking to you at the end of the Q2, if not sooner. Have a great day. Thank you for attending today's call. You may now disconnect. Goodbye.

Speaker 7: Good day everyone, and welcome to Enterprise Financial Services Corp Q1 2026 Earnings Conference Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star and then one on your telephone keypad. Thank you. I'd now like to hand the call over to Jim Lally, President and CEO. Please go ahead. Good day everyone, and welcome to Enterprise Financial Services Corp Q1 2026 Earnings Conference Call. good day everyone and welcome to enterprise financial services corp q1 2026 earnings conference call Please note that this call is being recorded. please note that this call is being recorded After the speaker's prepared remarks, there will be a question and answer session. after the speaker's prepared remarks there will be a question and answer session If you would like to ask a question during that time, please press star and then one on your telephone keypad. if you would like to ask a question during that time please press star and then one on your telephone keypad Thank you. thank you I'd now like to hand the call over to Jim Lally, President and CEO. i'd now like to hand the call over to jim lally president and ceo Please go ahead. please go ahead

Speaker 3: Thank you all very much for joining us this morning, and welcome to our 2026 Q1 Earnings Call. Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank & Trust. Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. The presentation and earnings release were filed on SEC Form 8-K yesterday. Please refer to slide two of the presentation titled Forward-Looking Statements and our most recent 10-K for reasons why actual results may vary from any forward-looking statements that we make today. Our financial scorecard begins on slide three. The solid financial performance that we've generated over the past several years continued into the Q1 of 2026. Thank you all very much for joining us this morning, and welcome to our 2026 Q1 Earnings Call. thank you all very much for joining us this morning and welcome to our 2026 q1 earnings call Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank & Trust. joining me this morning is keene turner efsc's chief financial officer and chief operating officer and doug bauche chief banking officer of enterprise bank & trust Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. before we begin i would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website The presentation and earnings release were filed on SEC Form 8-K yesterday. the presentation and earnings release were filed on sec form 8-k yesterday Please refer to slide two of the presentation titled Forward-Looking Statements and our most recent 10-K for reasons why actual results may vary from any forward-looking statements that we make today. please refer to slide two of the presentation titled forward-looking statements and our most recent 10-k for reasons why actual results may vary from any forward-looking statements that we make today Our financial scorecard begins on slide three. our financial scorecard begins on slide three The solid financial performance that we've generated over the past several years continued into the Q1 of 2026. the solid financial performance that we've generated over the past several years continued into the q1 of 2026 For the quarter, we earned $1.30 per diluted share compared to a seasonally strong $1.45 in the linked quarter and $1.31 in the Q1 of 2025. This level of performance produced a return on assets of 1.16% and a pre-provision ROAA of 1.65%. I would characterize our performance in the quarter as solid and on plan. Net interest income was relatively stable when compared to the linked quarter at $166 million, while net interest margin expanded two basis points to 4.28%. This reflects both better seasonal performance in our deposit balances and net interest margin expansion resulting from our relationship-oriented business model, where our clients receive value-added service from our teams in return for a few extra basis points when it comes to loan and deposit pricing. For the quarter, we earned $1.30 per diluted share compared to a seasonally strong $1.45 in the linked quarter and $1.31 in the Q1 of 2025. for the quarter we earned $1.30 per diluted share compared to a seasonally strong $1.45 in the linked quarter and $1.31 in the q1 of 2025 This level of performance produced a return on assets of 1.16% and a pre-provision ROAA of 1.65%. this level of performance produced a return on assets of 1.16% and a pre-provision roaa of 1.65% I would characterize our performance in the quarter as solid and on plan. i would characterize our performance in the quarter as solid and on plan Net interest income was relatively stable when compared to the linked quarter at $166 million, while net interest margin expanded two basis points to 4.28%. net interest income was relatively stable when compared to the linked quarter at $166 million while net interest margin expanded two basis points to 4.28% This reflects both better seasonal performance in our deposit balances and net interest margin expansion resulting from our relationship-oriented business model, where our clients receive value-added service from our teams in return for a few extra basis points when it comes to loan and deposit pricing. this reflects both better seasonal performance in our deposit balances and net interest margin expansion resulting from our relationship-oriented business model where our clients receive value-added service from our teams in return for a few extra basis points when it comes to loan and deposit pricing Our well-positioned balance sheet continues to be the strength of our company as it provides for great flexibility with respect to capital planning. Capital levels at quarter end remain stable and strong, with total stockholders' equity at $2 billion and a tangible common equity to tangible assets ratio of 9%. At this level of TCE, we were able to produce a return on tangible common equity of 12.53%. Our strong return profile allowed our tangible book value per share to remain level at $41.38, despite the fact that we utilized approximately $27 million of capital to repurchase 483,000 shares at an average price of $56.13. In addition to this, given the strength of our earnings and our confidence in our continued execution, we increased the dividend by $0.01 per share for the Q2 of 2026 to $0.34 per share. Our well-positioned balance sheet continues to be the strength of our company as it provides for great flexibility with respect to capital planning. our well-positioned balance sheet continues to be the strength of our company as it provides for great flexibility with respect to capital planning Capital levels at quarter end remain stable and strong, with total stockholders' equity at $2 billion and a tangible common equity to tangible assets ratio of 9%. capital levels at quarter end remain stable and strong with total stockholders' equity at $2 billion and a tangible common equity to tangible assets ratio of 9% At this level of TCE, we were able to produce a return on tangible common equity of 12.53%. at this level of tce we were able to produce a return on tangible common equity of 12.53% Our strong return profile allowed our tangible book value per share to remain level at $41.38, despite the fact that we utilized approximately $27 million of capital to repurchase 483,000 shares at an average price of $56.13. our strong return profile allowed our tangible book value per share to remain level at $41.38 despite the fact that we utilized approximately $27 million of capital to repurchase 483,000 shares at an average price of $56.13 In addition to this, given the strength of our earnings and our confidence in our continued execution, we increased the dividend by $0.01 per share for the Q2 of 2026 to $0.34 per share. in addition to this given the strength of our earnings and our confidence in our continued execution we increased the dividend by $0.01 per share for the q2 of 2026 to $0.34 per share Turning to slide four, you will see that loans dipped slightly in the quarter. Three things led to the slight decrease. The first is that several significant closings that we expected to see in Q1 have slid into the Q2 and have closed or will close in the coming weeks. The second reason for this decline was a $100 million paydown in our Low-Income Housing Tax Credit portfolio. These paydowns happen annually and are the proceeds from successful sales that occurred in the Q4 of 2025. Another positive from these payoffs is the fact that the majority of these loans were made in 2021 and 2022, and the fixed rates earned on these loans are lower than what we can earn on this cash in our investment portfolio today. Turning to slide four, you will see that loans dipped slightly in the quarter. turning to slide four you will see that loans dipped slightly in the quarter Three things led to the slight decrease. three things led to the slight decrease The first is that several significant closings that we expected to see in Q1 have slid into the Q2 and have closed or will close in the coming weeks. the first is that several significant closings that we expected to see in q1 have slid into the q2 and have closed or will close in the coming weeks The second reason for this decline was a $100 million paydown in our Low-Income Housing Tax Credit portfolio. the second reason for this decline was a $100 million paydown in our low-income housing tax credit portfolio These paydowns happen annually and are the proceeds from successful sales that occurred in the Q4 of 2025. these paydowns happen annually and are the proceeds from successful sales that occurred in the q4 of 2025 Another positive from these payoffs is the fact that the majority of these loans were made in 2021 and 2022, and the fixed rates earned on these loans are lower than what we can earn on this cash in our investment portfolio today. another positive from these payoffs is the fact that the majority of these loans were made in 2021 and 2022 and the fixed rates earned on these loans are lower than what we can earn on this cash in our investment portfolio today The final contributor was the sale of $25 million of SBA loans in the quarter, which produced a gain of $1.4 million. Doug will provide much more color on the performance of our markets and businesses in his comments. Our diversified deposit base continues to be a differentiator for us. We did experience a typical Q1 deposit outflows due to our heavy concentration of commercial-oriented accounts. We've worked extremely hard to blunt this trend through growth of our national deposit verticals, as well as through market and business diversification within both the commercial bank and our more granular business banking and consumer relationships. The composition of deposits also remained stable as our percentage of DDA to total deposits remained at 33%. The final contributor was the sale of $25 million of SBA loans in the quarter, which produced a gain of $1.4 million. the final contributor was the sale of $25 million of sba loans in the quarter which produced a gain of $1.4 million Doug will provide much more color on the performance of our markets and businesses in his comments. doug will provide much more color on the performance of our markets and businesses in his comments Our diversified deposit base continues to be a differentiator for us. our diversified deposit base continues to be a differentiator for us We did experience a typical Q1 deposit outflows due to our heavy concentration of commercial-oriented accounts. we did experience a typical q1 deposit outflows due to our heavy concentration of commercial-oriented accounts We've worked extremely hard to blunt this trend through growth of our national deposit verticals, as well as through market and business diversification within both the commercial bank and our more granular business banking and consumer relationships. we've worked extremely hard to blunt this trend through growth of our national deposit verticals as well as through market and business diversification within both the commercial bank and our more granular business banking and consumer relationships The composition of deposits also remained stable as our percentage of DDA to total deposits remained at 33%. the composition of deposits also remained stable as our percentage of dda to total deposits remained at 33% These trends were aided by a continued reduction in the overall cost of deposits to 1.52%, a 12 basis points drop in the quarter and 31 basis points when compared to the Q1 of 2025. It was on our 2025 Q1 Earnings Call that we first spoke of the seven Southern California loans that ultimately landed in OREO. Our contention a year ago was that we would favorably work through these loans without a loss. Today, I'm pleased to report that we continue to make progress on this and currently have four of these properties under contract, representing total OREO balances of $46 million, with great progress on the other three properties being made. I would expect to report positive further progress in the remaining quarters of 2026. Additionally, the remainder of the portfolio continues to perform as expected. These trends were aided by a continued reduction in the overall cost of deposits to 1.52%, a 12 basis points drop in the quarter and 31 basis points when compared to the Q1 of 2025. these trends were aided by a continued reduction in the overall cost of deposits to 1.52% a 12 basis points drop in the quarter and 31 basis points when compared to the q1 of 2025 It was on our 2025 Q1 Earnings Call that we first spoke of the seven Southern California loans that ultimately landed in OREO. it was on our 2025 q1 earnings call that we first spoke of the seven southern california loans that ultimately landed in oreo Our contention a year ago was that we would favorably work through these loans without a loss. our contention a year ago was that we would favorably work through these loans without a loss Today, I'm pleased to report that we continue to make progress on this and currently have four of these properties under contract, representing total OREO balances of $46 million, with great progress on the other three properties being made. today i'm pleased to report that we continue to make progress on this and currently have four of these properties under contract representing total oreo balances of $46 million with great progress on the other three properties being made I would expect to report positive further progress in the remaining quarters of 2026. i would expect to report positive further progress in the remaining quarters of 2026 Additionally, the remainder of the portfolio continues to perform as expected. additionally the remainder of the portfolio continues to perform as expected Keene will make additional comments about asset quality and provision expense in his comments. Turning to slide five, you will see our priorities for 2026. We made significant strides in asset quality improvement during the quarter, and I'm confident that this will continue throughout 2026, highlighted by the expected sale of the seven Southern California properties that are currently in OREO. I'm still bullish on overall mid-single-digit balance sheet growth for the year. Our ability to produce well-priced, diversified deposits has been proven over the last several years, and I have a great degree of confidence that this will continue throughout 2026. However, the longer that uncertainty is the byproduct of the conflict in Iran, borrower sentiments may be cautious, which could impact future loan growth. Over the last few weeks, I've had the opportunity to visit with many clients representing a diverse array of businesses and industries. Keene will make additional comments about asset quality and provision expense in his comments. keene will make additional comments about asset quality and provision expense in his comments Turning to slide five, you will see our priorities for 2026. turning to slide five you will see our priorities for 2026 We made significant strides in asset quality improvement during the quarter, and I'm confident that this will continue throughout 2026, highlighted by the expected sale of the seven Southern California properties that are currently in OREO. we made significant strides in asset quality improvement during the quarter and i'm confident that this will continue throughout 2026 highlighted by the expected sale of the seven southern california properties that are currently in oreo I'm still bullish on overall mid-single-digit balance sheet growth for the year. i'm still bullish on overall mid-single-digit balance sheet growth for the year Our ability to produce well-priced, diversified deposits has been proven over the last several years, and I have a great degree of confidence that this will continue throughout 2026. However, the longer that uncertainty is the byproduct of the conflict in Iran, borrower sentiments may be cautious, which could impact future loan growth. our ability to produce well-priced diversified deposits has been proven over the last several years and i have a great degree of confidence that this will continue throughout 2026. however the longer that uncertainty is the byproduct of the conflict in iran borrower sentiments may be cautious which could impact future loan growth Over the last few weeks, I've had the opportunity to visit with many clients representing a diverse array of businesses and industries. over the last few weeks i've had the opportunity to visit with many clients representing a diverse array of businesses and industries They continue to perform well, but their confidence to make large investments in capital expenditures or to think about any type of strategic hires or M&A is truly day-to-day. Like I've stated on previous calls, entrepreneurs need to be able to see 90 to 120 days into the future to confidently make these strategic decisions, and the recent volatility in the current environment could have an impact. Obviously, a quick resolution or stabilization of the current state changes this immediately. Finally, like many of our clients, we too are focused on efficiency gains through automation and expansion of our existing technology framework. This is a daily opportunity for our company, and we are excited about the progress we are making. Overall, I'm very pleased with our results for the Q1 of 2026. We are positioned extremely well for just about any environment. They continue to perform well, but their confidence to make large investments in capital expenditures or to think about any type of strategic hires or M&A is truly day- to- day. they continue to perform well but their confidence to make large investments in capital expenditures or to think about any type of strategic hires or m&a is truly day- to- day Like I've stated on previous calls, entrepreneurs need to be able to see 90 to 120 days into the future to confidently make these strategic decisions, and the recent volatility in the current environment could have an impact. like i've stated on previous calls entrepreneurs need to be able to see 90 to 120 days into the future to confidently make these strategic decisions and the recent volatility in the current environment could have an impact Obviously, a quick resolution or stabilization of the current state changes this immediately. obviously a quick resolution or stabilization of the current state changes this immediately Finally, like many of our clients, we too are focused on efficiency gains through automation and expansion of our existing technology framework. finally like many of our clients we too are focused on efficiency gains through automation and expansion of our existing technology framework This is a daily opportunity for our company, and we are excited about the progress we are making. this is a daily opportunity for our company and we are excited about the progress we are making Overall, I'm very pleased with our results for the Q1 of 2026. overall i'm very pleased with our results for the q1 of 2026 We are positioned extremely well for just about any environment. we are positioned extremely well for just about any environment We have wonderful markets, a growing diversified deposit base, and an extremely strong balance sheet. We have used these tools to grow tangible book value per share over 10% annually for the last 14 years and are in great shape to accomplish this again in 2026. With that, I would like to turn the call over to Doug Bauche. Doug? We have wonderful markets, a growing diversified deposit base, and an extremely strong balance sheet. we have wonderful markets a growing diversified deposit base and an extremely strong balance sheet We have used these tools to grow tangible book value per share over 10% annually for the last 14 years and are in great shape to accomplish this again in 2026. we have used these tools to grow tangible book value per share over 10% annually for the last 14 years and are in great shape to accomplish this again in 2026 With that, I would like to turn the call over to Doug Bauche. with that i would like to turn the call over to doug bauche Doug? doug

Speaker 2: Thank you, Jim, and good morning, everyone. Turning to slide six, you'll see the breakdown of our loan portfolio by asset class. Successful attraction and onboarding of new clients across our footprint drove $97 million in Q1 loan growth in our core C&I and owner-occupied real estate portfolios and $21 million in loan growth from our life insurance premium finance division. Those advancements, however, were largely offset by the anticipated $101 million reduction in our Low-Income Housing Tax Credit portfolio via the successful completion of affordable housing projects and sale of state tax credits. The weighted average fixed coupon on the $101 million in tax credit loans paid off in the quarter was 3.29%, providing us the opportunity for redeployment of that capital at higher earning yields in the current environment. Furthermore, as Jim mentioned, we executed on the sale of $25 million of SBA guaranteed loans in the quarter. Thank you, Jim, and good morning, everyone. thank you jim and good morning everyone Turning to slide six, you'll see the breakdown of our loan portfolio by asset class. turning to slide six you'll see the breakdown of our loan portfolio by asset class Successful attraction and onboarding of new clients across our footprint drove $97 million in Q1 loan growth in our core C&I and owner-occupied real estate portfolios and $21 million in loan growth from our life insurance premium finance division. successful attraction and onboarding of new clients across our footprint drove $97 million in q1 loan growth in our core c&i and owner-occupied real estate portfolios and $21 million in loan growth from our life insurance premium finance division Those advancements, however, were largely offset by the anticipated $101 million reduction in our Low-Income Housing Tax Credit portfolio via the successful completion of affordable housing projects and sale of state tax credits. those advancements however were largely offset by the anticipated $101 million reduction in our low-income housing tax credit portfolio via the successful completion of affordable housing projects and sale of state tax credits The weighted average fixed coupon on the $101 million in tax credit loans paid off in the quarter was 3.29%, providing us the opportunity for redeployment of that capital at higher earning yields in the current environment. the weighted average fixed coupon on the $101 million in tax credit loans paid off in the quarter was 3.29% providing us the opportunity for redeployment of that capital at higher earning yields in the current environment Furthermore, as Jim mentioned, we executed on the sale of $25 million of SBA guaranteed loans in the quarter. furthermore as jim mentioned we executed on the sale of $25 million of sba guaranteed loans in the quarter The sponsor finance portfolio declined $33 million in the quarter as payoffs from the sale of sponsor-owned portfolio companies exceeded new originations. Overall, I'm pleased with the mix and breadth of our loan funding pipeline, and I remain cautiously optimistic about our ability to achieve our loan growth objectives for the year. The elevated geopolitical risks, Iran conflict, and market complexities may, however, result in our organic growth being more uneven over the next couple of quarters. Slide seven demonstrates the continued strong diversity of our loan portfolio across our geographic markets and specialty business lines. The specialty lending portfolio at just over $4 billion, inclusive of Tax Credit Lending, Sponsor Finance, SBA, and Life Insurance Premium Finance, has remained relatively flat year-over-year. The sponsor finance portfolio declined $33 million in the quarter as payoffs from the sale of sponsor-owned portfolio companies exceeded new originations. the sponsor finance portfolio declined $33 million in the quarter as payoffs from the sale of sponsor-owned portfolio companies exceeded new originations Overall, I'm pleased with the mix and breadth of our loan funding pipeline, and I remain cautiously optimistic about our ability to achieve our loan growth objectives for the year. overall i'm pleased with the mix and breadth of our loan funding pipeline and i remain cautiously optimistic about our ability to achieve our loan growth objectives for the year The elevated geopolitical risks, Iran conflict, and market complexities may, however, result in our organic growth being more uneven over the next couple of quarters. the elevated geopolitical risks iran conflict and market complexities may however result in our organic growth being more uneven over the next couple of quarters Slide seven demonstrates the continued strong diversity of our loan portfolio across our geographic markets and specialty business lines. slide seven demonstrates the continued strong diversity of our loan portfolio across our geographic markets and specialty business lines The specialty lending portfolio at just over $4 billion, inclusive of Tax Credit Lending, Sponsor Finance, SBA, and Life Insurance Premium Finance, has remained relatively flat year-over-year. the specialty lending portfolio at just over $4 billion inclusive of tax credit lending sponsor finance sba and life insurance premium finance has remained relatively flat year-over-year However, our core geographic markets in the Midwest and Southwest have delivered 6% and 25% year-over-year growth rates respectively, which includes loans acquired in the branch acquisition that closed in the Q4. In the West region, our investments in new talent in 2025 in Southern California are showing positive momentum. Leveraging market disruption, we are experiencing a growing pipeline of quality CRE and C&I holistic relationship opportunities that will translate to solid organic growth during the year. Turning to deposits on slides eight and nine, reductions in the quarter within the core geographic portfolio reflect anticipated seasonal outflows and client balances of $272 million, mainly associated with distributions, bonuses, and tax payments. A material portion of this reduction was offset by continued growth within the national deposit verticals, which grew by $187 million or roughly 20% annualized in Q1. However, our core geographic markets in the Midwest and Southwest have delivered 6% and 25% year-over-year growth rates respectively, which includes loans acquired in the branch acquisition that closed in the Q4. however our core geographic markets in the midwest and southwest have delivered 6% and 25% year-over-year growth rates respectively which includes loans acquired in the branch acquisition that closed in the q4 In the West region, our investments in new talent in 2025 in Southern California are showing positive momentum. in the west region our investments in new talent in 2025 in southern california are showing positive momentum Leveraging market disruption, we are experiencing a growing pipeline of quality CRE and C&I holistic relationship opportunities that will translate to solid organic growth during the year. leveraging market disruption we are experiencing a growing pipeline of quality cre and c&i holistic relationship opportunities that will translate to solid organic growth during the year Turning to deposits on slides eight and nine , reductions in the quarter within the core geographic portfolio reflect anticipated seasonal outflows and client balances of $272 million, mainly associated with distributions, bonuses, and tax payments. turning to deposits on slides eight and nine reductions in the quarter within the core geographic portfolio reflect anticipated seasonal outflows and client balances of $272 million mainly associated with distributions bonuses and tax payments A material portion of this reduction was offset by continued growth within the national deposit verticals, which grew by $187 million or roughly 20% annualized in Q1. a material portion of this reduction was offset by continued growth within the national deposit verticals which grew by $187 million or roughly 20% annualized in q1 On a year-over-year basis, total client deposits excluding brokered funds are up 10%. The national deposit verticals profiled on slide 10 continue to provide differentiated and attractive sources of funding while also diversifying our overall deposit base and somewhat softening the seasonality of our other channels. With over $4 billion in deposits across our property management, community association, and legal and escrow businesses, the average earnings credit is an attractive 2.59% considering no incremental expenses in branches or branch personnel. Lastly, slide 11 profiles the mix of our core deposit base, which continues to be well diversified and highly relationship oriented. With just over 33% of these accounts being non-interest bearing and 80% of them using some form of treasury management or online banking, they offer operational stability and a solid base from which to expand other fee-generating revenue streams, including card and merchant services. On a year-over-year basis, total client deposits excluding brokered funds are up 10%. on a year-over-year basis total client deposits excluding brokered funds are up 10% The national deposit verticals profiled on slide 10 continue to provide differentiated and attractive sources of funding while also diversifying our overall deposit base and somewhat softening the seasonality of our other channels. the national deposit verticals profiled on slide 10 continue to provide differentiated and attractive sources of funding while also diversifying our overall deposit base and somewhat softening the seasonality of our other channels With over $4 billion in deposits across our property management, community association, and legal and escrow businesses, the average earnings credit is an attractive 2.59% considering no incremental expenses in branches or branch personnel. with over $4 billion in deposits across our property management community association and legal and escrow businesses the average earnings credit is an attractive 2.59% considering no incremental expenses in branches or branch personnel Lastly, slide 11 profiles the mix of our core deposit base, which continues to be well diversified and highly relationship oriented. lastly slide 11 profiles the mix of our core deposit base which continues to be well diversified and highly relationship oriented With just over 33% of these accounts being non-interest bearing and 80% of them using some form of treasury management or online banking, they offer operational stability and a solid base from which to expand other fee-generating revenue streams, including card and merchant services. with just over 33% of these accounts being non-interest bearing and 80% of them using some form of treasury management or online banking they offer operational stability and a solid base from which to expand other fee-generating revenue streams including card and merchant services Now, I'll turn the call over to Keene Turner for his comments. Now, I'll turn the call over to Keene Turner for his comments. now i'll turn the call over to keene turner for his comments

Speaker 5: Thanks, Doug, and good morning, everyone. Thanks, Doug, and good morning, everyone. thanks doug and good morning everyone Turning to slide 12, we reported earnings per share of $1.30 in the Q1 on net income of $49 million. Excluding certain non-recurring items, earnings per share on an adjusted basis was $1.31 compared to adjusted earnings per share of $1.36 in the linked quarter. Pre-provision earnings were $70 million, a decline of $4 million from the linked quarter. The $0.05 decrease in adjusted earnings per share and the $4 million decrease in pre-provision earnings was primarily due to lower tax credit income and the impact of two fewer days on net interest income. The decline in tax credit income was expected as it is typically highest in the Q4 of the year. The provision for credit losses decreased from the linked quarter due to the decline in both net charge-off and total loans. Turning to slide 12, we reported earnings per share of $1.30 in the Q1 on net income of $49 million. turning to slide 12 we reported earnings per share of $1.30 in the q1 on net income of $49 million Excluding certain non-recurring items, earnings per share on an adjusted basis was $1.31 compared to adjusted earnings per share of $1.36 in the linked quarter. excluding certain non-recurring items earnings per share on an adjusted basis was $1.31 compared to adjusted earnings per share of $1.36 in the linked quarter Pre-provision earnings were $70 million, a decline of $4 million from the linked quarter. pre-provision earnings were $70 million a decline of $4 million from the linked quarter The $0.05 decrease in adjusted earnings per share and the $4 million decrease in pre-provision earnings was primarily due to lower tax credit income and the impact of two fewer days on net interest income. the $0.05 decrease in adjusted earnings per share and the $4 million decrease in pre-provision earnings was primarily due to lower tax credit income and the impact of two fewer days on net interest income The decline in tax credit income was expected as it is typically highest in the Q4 of the year. the decline in tax credit income was expected as it is typically highest in the q4 of the year The provision for credit losses decreased from the linked quarter due to the decline in both net charge-off and total loans. the provision for credit losses decreased from the linked quarter due to the decline in both net charge-off and total loans The primary driver of the provision this quarter was a qualitative factor that was added to recognize the potential impact on credit losses from the conflict in Iran. The increase in noninterest expense in the period was mainly due to typical seasonal increase in compensation and benefits, and to a lesser extent, the first full quarter of run-rate expenses from the branch acquisition that closed last October. These increases were partially offset by a decline in one-time acquisition costs related to the acquisition. Turning to slide 13, and with more details to follow on slide 14, net interest income for the Q1 was $166 million, a decrease of $2 million from the Q4, which was largely attributable to fewer days in the Q1. Interest income declined $7 million from the prior period. The primary driver of the provision this quarter was a qualitative factor that was added to recognize the potential impact on credit losses from the conflict in Iran. the primary driver of the provision this quarter was a qualitative factor that was added to recognize the potential impact on credit losses from the conflict in iran The increase in noninterest expense in the period was mainly due to typical seasonal increase in compensation and benefits, and to a lesser extent, the first full quarter of run-rate expenses from the branch acquisition that closed last October. the increase in noninterest expense in the period was mainly due to typical seasonal increase in compensation and benefits and to a lesser extent the first full quarter of run-rate expenses from the branch acquisition that closed last october These increases were partially offset by a decline in one-time acquisition costs related to the acquisition. these increases were partially offset by a decline in one-time acquisition costs related to the acquisition Turning to slide 13, and with more details to follow on slide 14, net interest income for the Q1 was $166 million, a decrease of $2 million from the Q4, which was largely attributable to fewer days in the Q1. turning to slide 13 and with more details to follow on slide 14 net interest income for the q1 was $166 million a decrease of $2 million from the q4 which was largely attributable to fewer days in the q1 Interest income declined $7 million from the prior period. interest income declined $7 million from the prior period The largest contributor was an $8 million decrease in loan interest as our yield fell 13 basis points on variable rate resets amid Fed easing, along with a $17 million decline in average loan balances. This was partially offset by $1.9 million of additional earnings in the investment portfolio, with average balances higher by $159 million and an 11 basis point improvement in the securities yield. The rate on loans booked in the quarter was 6.58%, and the average tax equivalent purchase yield on investments was 4.51%, both of which are additive to their respective portfolios. Interest expense declined $5 million compared to the linked quarter as a result of lower funding costs. Interest expense on deposits decreased by $5.5 million as average interest-bearing balances declined $89 million, and the rate on interest-bearing deposits moved 15 basis points lower. The largest contributor was an $8 million decrease in loan interest as our yield fell 13 basis points on variable rate resets amid Fed easing, along with a $17 million decline in average loan balances. the largest contributor was an $8 million decrease in loan interest as our yield fell 13 basis points on variable rate resets amid fed easing along with a $17 million decline in average loan balances This was partially offset by $1.9 million of additional earnings in the investment portfolio, with average balances higher by $159 million and an 11 basis point improvement in the securities yield. this was partially offset by $1.9 million of additional earnings in the investment portfolio with average balances higher by $159 million and an 11 basis point improvement in the securities yield The rate on loans booked in the quarter was 6.58%, and the average tax equivalent purchase yield on investments was 4.51%, both of which are additive to their respective portfolios. the rate on loans booked in the quarter was 6.58% and the average tax equivalent purchase yield on investments was 4.51% both of which are additive to their respective portfolios Interest expense declined $5 million compared to the linked quarter as a result of lower funding costs. interest expense declined $5 million compared to the linked quarter as a result of lower funding costs Interest expense on deposits decreased by $5.5 million as average interest-bearing balances declined $89 million, and the rate on interest-bearing deposits moved 15 basis points lower. interest expense on deposits decreased by $5.5 million as average interest-bearing balances declined $89 million and the rate on interest-bearing deposits moved 15 basis points lower This was partially offset by higher interest expense on customer repo accounts due to seasonally higher balances. Our net interest margin for the Q1 was 4.28%, an increase of two basis points in the quarter. Our cost of interest-bearing liabilities declined 15 basis points, led by lower rates on non-maturity deposits and borrowings, which more than offset the nine basis point reduction in yield on earning assets. Net interest income remained slightly asset sensitive, primarily in parallel interest rate simulation, with each quarter point cut in rates reducing net interest income $1 million-$2 million per quarter or a couple of basis points of net interest margin. Including deposit-related non-interest expense in this analysis, we modeled that we are effectively neutral to modestly liability sensitive as we continue to have success growing the related deposit balances. This was partially offset by higher interest expense on customer repo accounts due to seasonally higher balances. this was partially offset by higher interest expense on customer repo accounts due to seasonally higher balances Our net interest margin for the Q1 was 4.28%, an increase of two basis points in the quarter. our net interest margin for the q1 was 4.28% an increase of two basis points in the quarter Our cost of interest-bearing liabilities declined 15 basis points, led by lower rates on non-maturity deposits and borrowings, which more than offset the nine basis point reduction in yield on earning assets. our cost of interest-bearing liabilities declined 15 basis points led by lower rates on non-maturity deposits and borrowings which more than offset the nine basis point reduction in yield on earning assets Net interest income remained slightly asset sensitive, primarily in parallel interest rate simulation, with each quarter point cut in rates reducing net interest income $1 million-$2 million per quarter or a couple of basis points of net interest margin. net interest income remained slightly asset sensitive primarily in parallel interest rate simulation with each quarter point cut in rates reducing net interest income $1 million-$2 million per quarter or a couple of basis points of net interest margin Including deposit-related non-interest expense in this analysis, we modeled that we are effectively neutral to modestly liability sensitive as we continue to have success growing the related deposit balances. including deposit-related non-interest expense in this analysis we modeled that we are effectively neutral to modestly liability sensitive as we continue to have success growing the related deposit balances We anticipate the recent steepening of the yield curve will favorably impact pricing on fixed-rate loans and the reinvestment of cash flows in the investment portfolio. With the Fed seemingly on hold, we expect our net interest margin to remain in the low to mid 4.2%. As we execute on our growth plans for 2026 and remain committed to disciplined pricing on both loans and deposits, we look for net interest margin to be stable in this range with consistent growth in net interest income over the next few quarters. Slide 15 reflects our credit trends. Net charge-offs totaled $4.4 million in the Q1, compared to $20.7 million in the linked quarter. We made progress in the quarter reducing non-performing assets with the full repayment of two loans and total principal repayments of $21 million on non-accrual loans. We anticipate the recent steepening of the yield curve will favorably impact pricing on fixed-rate loans and the reinvestment of cash flows in the investment portfolio. we anticipate the recent steepening of the yield curve will favorably impact pricing on fixed-rate loans and the reinvestment of cash flows in the investment portfolio With the Fed seemingly on hold, we expect our net interest margin to remain in the low to mid 4.2%. with the fed seemingly on hold we expect our net interest margin to remain in the low to mid 4.2% As we execute on our growth plans for 2026 and remain committed to disciplined pricing on both loans and deposits, we look for net interest margin to be stable in this range with consistent growth in net interest income over the next few quarters. as we execute on our growth plans for 2026 and remain committed to disciplined pricing on both loans and deposits we look for net interest margin to be stable in this range with consistent growth in net interest income over the next few quarters Slide 15 reflects our credit trends. slide 15 reflects our credit trends Net charge-offs totaled $4.4 million in the Q1, compared to $20.7 million in the linked quarter. net charge-offs totaled $4.4 million in the q1 compared to $20.7 million in the linked quarter We made progress in the quarter reducing non-performing assets with the full repayment of two loans and total principal repayments of $21 million on non-accrual loans. we made progress in the quarter reducing non-performing assets with the full repayment of two loans and total principal repayments of $21 million on non-accrual loans We also foreclosed on the last property related to our largest non-performing relationship and are actively working out these properties. As Jim noted, four of the seven properties in this relationship are under contract, and we expect contracts for the other three properties in the near future. Net charge-offs totaled 15 basis points of average loans compared to 21 basis points for 2025. The provision for credit losses was $7.2 million in the period compared to $9.2 million in the linked quarter. The provision in the quarter was mainly due to net charge-offs and a qualitative adjustment to the allowance for potential impact of the Iran conflict. We also foreclosed on the last property related to our largest non-performing relationship and are actively working out these properties. we also foreclosed on the last property related to our largest non-performing relationship and are actively working out these properties As Jim noted, four of the seven properties in this relationship are under contract, and we expect contracts for the other three properties in the near future. as jim noted four of the seven properties in this relationship are under contract and we expect contracts for the other three properties in the near future Net charge-offs totaled 15 basis points of average loans compared to 21 basis points for 2025. net charge-offs totaled 15 basis points of average loans compared to 21 basis points for 2025 The provision for credit losses was $7.2 million in the period compared to $9.2 million in the linked quarter. the provision for credit losses was $7.2 million in the period compared to $9.2 million in the linked quarter The provision in the quarter was mainly due to net charge-offs and a qualitative adjustment to the allowance for potential impact of the Iran conflict. the provision in the quarter was mainly due to net charge-offs and a qualitative adjustment to the allowance for potential impact of the iran conflict While we have not seen a direct impact on credit quality from the conflict that started at the end of February, we have recognized the impact that oil prices and market uncertainty can have on economic factors used to forecast losses in the loan portfolio. Slide 16 shows the allowance for credit losses. The ratio of allowance to total loans increased to 1.21%, compared to 1.19% at the end of 2025. When adjusting for government-guaranteed loans, the ratio increases to 1.32% of total loans, which shows the strength of our reserve coverage. On slide 17, Q1 non-interest income was $19.1 million. This was a $6.3 million reduction compared to the linked quarter. While we have not seen a direct impact on credit quality from the conflict that started at the end of February, we have recognized the impact that oil prices and market uncertainty can have on economic factors used to forecast losses in the loan portfolio. while we have not seen a direct impact on credit quality from the conflict that started at the end of february we have recognized the impact that oil prices and market uncertainty can have on economic factors used to forecast losses in the loan portfolio Slide 16 shows the allowance for credit losses. slide 16 shows the allowance for credit losses The ratio of allowance to total loans increased to 1.21%, compared to 1.19% at the end of 2025. the ratio of allowance to total loans increased to 1.21% compared to 1.19% at the end of 2025 When adjusting for government-guaranteed loans, the ratio increases to 1.32% of total loans, which shows the strength of our reserve coverage. when adjusting for government-guaranteed loans the ratio increases to 1.32% of total loans which shows the strength of our reserve coverage On slide 17, Q1 non-interest income was $19.1 million. on slide 17 q1 non-interest income was $19.1 million This was a $6.3 million reduction compared to the linked quarter. this was a $6.3 million reduction compared to the linked quarter The decrease was primarily due to other real estate owned gains and seasonally strong tax credit income during the Q4 of 2025. The Q1 included two mitigants from higher income from private equity fund distributions and a gain on the sale of guaranteed SBA loans. Turning to slide 18, Q1 non-interest expense of $115 million was relatively comparable to the linked quarter, as it included a full quarter of operating expenses related to the branch acquisition that closed in the Q4. Non-interest expense in the Q4 included $2.5 million of one-time branch acquisition costs and a reversal of accrued FDIC special assessments. Excluding the impact of these non-recurring items, non-interest expenses were $2.5 million higher than the linked quarter, which includes the first full quarter run rate of expenses from the acquisition. Q1 non-interest expense included seasonal impacts in compensation and benefits. The decrease was primarily due to other real estate owned gains and seasonally strong tax credit income during the Q4 of 2025. The Q1 included two mitigants from higher income from private equity fund distributions and a gain on the sale of guaranteed SBA loans. the decrease was primarily due to other real estate owned gains and seasonally strong tax credit income during the q4 of 2025. the q1 included two mitigants from higher income from private equity fund distributions and a gain on the sale of guaranteed sba loans Turning to slide 18, Q1 non-interest expense of $115 million was relatively comparable to the linked quarter, as it included a full quarter of operating expenses related to the branch acquisition that closed in the Q4. turning to slide 18 q1 non-interest expense of $115 million was relatively comparable to the linked quarter as it included a full quarter of operating expenses related to the branch acquisition that closed in the q4 Non-interest expense in the Q4 included $2.5 million of one-time branch acquisition costs and a reversal of accrued FDIC special assessments. non-interest expense in the q4 included $2.5 million of one-time branch acquisition costs and a reversal of accrued fdic special assessments Excluding the impact of these non-recurring items, non-interest expenses were $2.5 million higher than the linked quarter, which includes the first full quarter run rate of expenses from the acquisition. excluding the impact of these non-recurring items non-interest expenses were $2.5 million higher than the linked quarter which includes the first full quarter run rate of expenses from the acquisition Q1 non-interest expense included seasonal impacts in compensation and benefits. q1 non-interest expense included seasonal impacts in compensation and benefits Deposit costs were lower than the linked quarter by $1.5 million, which was largely driven by the expiration of certain allowances that were not utilized. Other expenses decreased from the linked quarter, primarily due to a recovery of a credit card loss event that was incurred in the Q4. The core efficiency ratio was 60.2% for the quarter, compared to 58.3% in the linked quarter. Our capital metrics are shown on slide 19. Tangible book value per share of $41.38 was relatively stable with the linked quarter. Strong Q1 earnings effectively offset the fair value reduction from the impact of higher interest rates on our available-for-sale securities portfolio. We continue to proactively manage excess capital, repurchasing 483,000 shares of common stock for approximately $27 million. At an average price of $56.13 per share, this was an attractive multiple of tangible book value. Deposit costs were lower than the linked quarter by $1.5 million, which was largely driven by the expiration of certain allowances that were not utilized. deposit costs were lower than the linked quarter by $1.5 million which was largely driven by the expiration of certain allowances that were not utilized Other expenses decreased from the linked quarter, primarily due to a recovery of a credit card loss event that was incurred in the Q4. other expenses decreased from the linked quarter primarily due to a recovery of a credit card loss event that was incurred in the q4 The core efficiency ratio was 60.2% for the quarter, compared to 58.3% in the linked quarter. the core efficiency ratio was 60.2% for the quarter compared to 58.3% in the linked quarter Our capital metrics are shown on slide 19. our capital metrics are shown on slide 19 Tangible book value per share of $41.38 was relatively stable with the linked quarter. tangible book value per share of $41.38 was relatively stable with the linked quarter Strong Q1 earnings effectively offset the fair value reduction from the impact of higher interest rates on our available-for-sale securities portfolio. strong q1 earnings effectively offset the fair value reduction from the impact of higher interest rates on our available-for-sale securities portfolio We continue to proactively manage excess capital, repurchasing 483,000 shares of common stock for approximately $27 million. we continue to proactively manage excess capital repurchasing 483,000 shares of common stock for approximately $27 million At an average price of $56.13 per share, this was an attractive multiple of tangible book value. at an average price of $56.13 per share this was an attractive multiple of tangible book value Our tangible common equity ratio was 9%, stable with the linked quarter. The quarterly dividend was increased by $0.01 to $0.34 per share for the Q2 of 2026, continuing our record of increasing the dividend nine consecutive quarters. This was a strong start to the year with a 1.2% return on average assets and a 13% return on average tangible common equity. We're well-positioned with a strong earnings profile, balance sheet, and capital position to support further organic growth across our markets. I appreciate your attention today and will now open the line for questions. Our tangible common equity ratio was 9%, stable with the linked quarter. our tangible common equity ratio was 9% stable with the linked quarter The quarterly dividend was increased by $0.01 to $0.34 per share for the Q2 of 2026, continuing our record of increasing the dividend nine consecutive quarters. the quarterly dividend was increased by $0.01 to $0.34 per share for the q2 of 2026 continuing our record of increasing the dividend nine consecutive quarters This was a strong start to the year with a 1.2% return on average assets and a 13% return on average tangible common equity. this was a strong start to the year with a 1.2% return on average assets and a 13% return on average tangible common equity We're well-positioned with a strong earnings profile, balance sheet, and capital position to support further organic growth across our markets. we're well-positioned with a strong earnings profile balance sheet and capital position to support further organic growth across our markets I appreciate your attention today and will now open the line for questions. i appreciate your attention today and will now open the line for questions

Speaker 7: We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Our first question comes from the line of Jeff Rulis of D.A. Davidson. Your line is now open. We are now opening the floor for question and answer session. we are now opening the floor for question and answer session If you'd like to ask a question, please press star followed by one on your telephone keypad. if you'd like to ask a question please press star followed by one on your telephone keypad That's star followed by one on your telephone keypad. that's star followed by one on your telephone keypad Our first question comes from the line of Jeff Rulis of D.A. our first question comes from the line of jeff rulis of d.a Davidson. davidson Your line is now open. your line is now open

Speaker 4: Thanks. Good morning. Thanks. thanks Good morning. good morning

Speaker 3: Morning, Jeff. Morning, Jeff. morning jeff

Speaker 4: Look, I'll tread lightly on the credit side. I know it's been an exercise in patience, but just to kind of go over the four properties that are under contract. I guess if you could touch on potential timing for sale and then, as we recall, I think those were pretty attractive. The real estate was really never questioned on the valuation. It's just a fight to get to them. I guess, so the question, the second piece is any anticipated gains with those sales? Look, I'll tread lightly on the credit side. look i'll tread lightly on the credit side I know it's been an exercise in patience, but just to kind of go over the four properties that are under contract. i know it's been an exercise in patience but just to kind of go over the four properties that are under contract I guess if you could touch on potential timing for sale and then, as we recall, I think those were pretty attractive. i guess if you could touch on potential timing for sale and then as we recall i think those were pretty attractive The real estate was really never questioned on the valuation. the real estate was really never questioned on the valuation It's just a fight to get to them. it's just a fight to get to them I guess, so the question, the second piece is any anticipated gains with those sales? i guess so the question the second piece is any anticipated gains with those sales

Speaker 3: Yeah. I'll take that one, Jeff. Jeff, so three of the four should transact yet here in the Q2, and the fourth one later this year. As it relates to the contracts we have in hand, they support how we've identified them in our financial statements. Yeah. yeah I'll take that one, Jeff. i'll take that one jeff Jeff, so three of the four should transact yet here in the Q2, and the fourth one later this year. jeff so three of the four should transact yet here in the q2 and the fourth one later this year As it relates to the contracts we have in hand, they support how we've identified them in our financial statements. as it relates to the contracts we have in hand they support how we've identified them in our financial statements

Speaker 4: Okay. Gains or losses, a little early to kind of Okay. okay Gains or losses, a little early to kind of gains or losses, a little early to kind of

Speaker 3: It is early, but we feel confident about how we recognize things in the Q4 of last year and how things should settle out. It is early, but we feel confident about how we recognize things in the Q4 of last year and how things should settle out. it is early but we feel confident about how we recognize things in the q4 of last year and how things should settle out

Speaker 4: On the other three properties, sounded optimistic on those as well. On the other three properties, sounded optimistic on those as well. on the other three properties sounded optimistic on those as well

Speaker 3: Yes. Absolutely. Yes. yes Absolutely. absolutely

Speaker 4: Any sort of differences in those or it's just, again, it's timing of the contracts and potential sales? There's nothing, I guess, different from the four versus the three still to maybe be dealt with? Any sort of differences in those or it's just, again, it's timing of the contracts and potential sales? any sort of differences in those or it's just again it's timing of the contracts and potential sales There's nothing, I guess, different from the four versus the three still to maybe be dealt with? there's nothing i guess different from the four versus the three still to maybe be dealt with

Speaker 3: It's timing. You're right. It's timing. You remember one we had to wait a little while to get our hands on, which we have now. Identified several different potential buyers, so now it's a bit of a let them fight it out to get the best outcome we can. It's timing. it's timing You're right. you're right It's timing. it's timing You remember one we had to wait a little while to get our hands on, which we have now. you remember one we had to wait a little while to get our hands on which we have now Identified several different potential buyers, so now it's a bit of a let them fight it out to get the best outcome we can. identified several different potential buyers so now it's a bit of a let them fight it out to get the best outcome we can

Speaker 4: Got it. Thank you. Then hopping over to the margin, Keene, I think our prior conversations were more of a margin to step down toward to 4.20%, I think, as the rate environment has altered. It sounds like you've got some pretty good earning asset repricing opportunities within the book, but you pointed to the yield curve as well. Just want to check on the low-to-mid 4.20%. What's the timeline of that? Is that just through the end of the year? I don't know if you've talked about your positioning thereafter. Any additional color on the margin? Got it. got it Thank you. thank you Then hopping over to the margin, Keene, I think our prior conversations were more of a margin to step down toward to 4.20%, I think, as the rate environment has altered. then hopping over to the margin keene i think our prior conversations were more of a margin to step down toward to 4.20% i think as the rate environment has altered It sounds like you've got some pretty good earning asset repricing opportunities within the book, but you pointed to the yield curve as well. it sounds like you've got some pretty good earning asset repricing opportunities within the book but you pointed to the yield curve as well Just want to check on the low-to-mid 4.20%. just want to check on the low-to-mid 4.20% What's the timeline of that? what's the timeline of that Is that just through the end of the year? is that just through the end of the year I don't know if you've talked about your positioning thereafter. i don't know if you've talked about your positioning thereafter Any additional color on the margin? any additional color on the margin

Speaker 5: Yeah. Jeff, margin in March was a little bit of a step down from what we reported here in the Q1. Our guide is, I would say, today's run rate, and I think we see it holding stable through the end of the year. I think we had a little bit of balance sheet contraction here in the Q1, and then with the shorter days, you get a little bit of a false positive in terms of margin popping. We feel good about day count in our favor now, really how the shape of the curve and where intermediate term rates are for reinvestment, both on the loan and securities portfolio. I think any amount of growth from a loan perspective that we can get an overall balance sheet growth, which we anticipate will happen here starting in the Q2. Yeah. yeah Jeff, margin in March was a little bit of a step down from what we reported here in the Q1. jeff margin in march was a little bit of a step down from what we reported here in the q1 Our guide is, I would say, today's run rate, and I think we see it holding stable through the end of the year. I think we had a little bit of balance sheet contraction here in the Q1, and then with the shorter days, you get a little bit of a false positive in terms of margin popping. our guide is i would say today's run rate and i think we see it holding stable through the end of the year. i think we had a little bit of balance sheet contraction here in the q1 and then with the shorter days you get a little bit of a false positive in terms of margin popping We feel good about day count in our favor now, really how the shape of the curve and where intermediate term rates are for reinvestment, both on the loan and securities portfolio. we feel good about day count in our favor now really how the shape of the curve and where intermediate term rates are for reinvestment both on the loan and securities portfolio I think any amount of growth from a loan perspective that we can get an overall balance sheet growth, which we anticipate will happen here starting in the Q2. i think any amount of growth from a loan perspective that we can get an overall balance sheet growth which we anticipate will happen here starting in the q2 I think we feel really good and optimistic, and I think we see margin being reasonably stable for that time frame. We're positioned to defend it if necessary. We've been able to reprice deposits extremely well when the short end of the curve has come down. I think we continue to feel good about that if that's the case. Right now it's status quo, and what I would say is historically, status quo is good for us because it allows us to just go play offense, bring clients on, expand the balance sheet, and not have to worry about doing as much repricing activity when that arises. It's business as usual from a growth perspective. I think we feel really good and optimistic, and I think we see margin being reasonably stable for that time frame. i think we feel really good and optimistic and i think we see margin being reasonably stable for that time frame We're positioned to defend it if necessary. we're positioned to defend it if necessary We've been able to reprice deposits extremely well when the short end of the curve has come down. we've been able to reprice deposits extremely well when the short end of the curve has come down I think we continue to feel good about that if that's the case. i think we continue to feel good about that if that's the case Right now it's status quo, and what I would say is historically, status quo is good for us because it allows us to just go play offense, bring clients on, expand the balance sheet, and not have to worry about doing as much repricing activity when that arises. right now it's status quo and what i would say is historically status quo is good for us because it allows us to just go play offense bring clients on expand the balance sheet and not have to worry about doing as much repricing activity when that arises It's business as usual from a growth perspective. it's business as usual from a growth perspective

Speaker 4: Got it. Yeah. I heard your message of a stable margin, but consistent NII growth is probably more important. Appreciate it. I'll step back. Got it. got it Yeah. yeah I heard your message of a stable margin, but consistent NII growth is probably more important. i heard your message of a stable margin but consistent nii growth is probably more important Appreciate it. appreciate it I'll step back. i'll step back

Speaker 5: Thanks, Jeff. Thanks, Jeff. thanks jeff

Speaker 7: Your next question comes from the line of Damon DelMonte of KBW. Your line is now open. Your next question comes from the line of Damon DelMonte of KBW. your next question comes from the line of damon delmonte of kbw Your line is now open. your line is now open

Speaker 1: Hey, good morning, guys. Hope everybody's doing well. Keene, just looking for a little commentary around the outlook for expenses over the coming quarters here in 2026. Do you expect much growth off of Q1's level? Just any insight in there would be great. Hey, good morning, guys. hey good morning guys Hope everybody's doing well. hope everybody's doing well Keene, just looking for a little commentary around the outlook for expenses over the coming quarters here in 2026. keene just looking for a little commentary around the outlook for expenses over the coming quarters here in 2026 Do you expect much growth off of Q1's level? do you expect much growth off of q1's level Just any insight in there would be great. just any insight in there would be great

Speaker 5: Yeah. I think the Q1 is always seasonally heavy on compensation. We do expect that to alleviate slightly, albeit we will have a full run rate in the Q2 of merits that occurred in March. Day count also moves against us there a little bit. I think there's a little relief there sequentially on the comp piece. Then, we did have a benefit on the deposit expense line item that we expect to step up back to more that $27 million level. The way I'm thinking about it is that, from a pre-pre perspective with day count and that reversal, we're sort of on the same run rate here to start the Q2. Whatever growth and other items we can get will accrue to our benefit. Yeah. yeah I think the Q1 is always seasonally heavy on compensation. i think the q1 is always seasonally heavy on compensation We do expect that to alleviate slightly, albeit we will have a full run rate in the Q2 of merits that occurred in March. we do expect that to alleviate slightly albeit we will have a full run rate in the q2 of merits that occurred in march Day count also moves against us there a little bit. day count also moves against us there a little bit I think there's a little relief there sequentially on the comp piece. i think there's a little relief there sequentially on the comp piece Then, we did have a benefit on the deposit expense line item that we expect to step up back to more that $27 million level. then we did have a benefit on the deposit expense line item that we expect to step up back to more that $27 million level The way I'm thinking about it is that, from a pre-pre perspective with day count and that reversal, we're sort of on the same run rate here to start the Q2. the way i'm thinking about it is that from a pre-pre perspective with day count and that reversal we're sort of on the same run rate here to start the q2 Whatever growth and other items we can get will accrue to our benefit. whatever growth and other items we can get will accrue to our benefit I think the sequential change in expenses will be paid for in net interest income, and then maybe some other items. That's how I'm thinking about the expenses here moving into the 2Q and beyond. I think the sequential change in expenses will be paid for in net interest income, and then maybe some other items. i think the sequential change in expenses will be paid for in net interest income and then maybe some other items That's how I'm thinking about the expenses here moving into the 2Q and beyond. that's how i'm thinking about the expenses here moving into the 2q and beyond

Speaker 1: Got it. Okay. A step up from this quarter's $115.1 million, but then that's kind of offset by NII growth? Got it. got it Okay. okay A step up from this quarter's $115.1 million, but then that's kind of offset by NII growth? a step up from this quarter's $115.1 million but then that's kind of offset by nii growth

Speaker 5: Yeah. That's essentially how I'm thinking about it. I think of this as like a very base kind of earnings quarter where we can have mostly positive progress here for second, third, Q4 as we get more days, more growth. Maybe some more contribution from some of the episodic fee items, things like that. Yeah. yeah That's essentially how I'm thinking about it. that's essentially how i'm thinking about it I think of this as like a very base kind of earnings quarter where we can have mostly positive progress here for second, third, Q4 as we get more days, more growth. i think of this as like a very base kind of earnings quarter where we can have mostly positive progress here for second third q4 as we get more days more growth Maybe some more contribution from some of the episodic fee items, things like that. maybe some more contribution from some of the episodic fee items things like that

Speaker 1: Got it. Okay, great. Could you help us think a little bit about the provision going forward? Nice to see the NPLs come down this quarter. I'm assuming you're still making progress on the remaining ones and you're going to have some loan growth. Is the provision kind of going to be driven by similar level of net charge-offs of this quarter and kind of maintaining the loan loss reserve in that north of 120 basis points? Got it. got it Okay, great. okay great Could you help us think a little bit about the provision going forward? could you help us think a little bit about the provision going forward Nice to see the NPLs come down this quarter. nice to see the npls come down this quarter I'm assuming you're still making progress on the remaining ones and you're going to have some loan growth. i'm assuming you're still making progress on the remaining ones and you're going to have some loan growth Is the provision kind of going to be driven by similar level of net charge-offs of this quarter and kind of maintaining the loan loss reserve in that north of 120 basis points? is the provision kind of going to be driven by similar level of net charge-offs of this quarter and kind of maintaining the loan loss reserve in that north of 120 basis points

Speaker 5: Yeah, I think charge-off wise, charge-offs are sort of on par from a basis point perspective, what we'd think about on a recurring basis. We took the opportunity with some of the uncertainty that's around the economic forecast, but really wasn't in the base yet to provide some additional reserves for that uncertainty. I think, again, back to my comments, I think that positions us well, both with some of the progress we're making on credit, as well as just having some of the economic data, whether it was in the underlying forecast or whether we put it on top, just absorbed into what we're thinking here. To the extent that we have growth and charge-offs, that'll drive provisioning. Yeah, I think charge-off wise, charge-offs are sort of on par from a basis point perspective, what we'd think about on a recurring basis. yeah i think charge-off wise charge-offs are sort of on par from a basis point perspective what we'd think about on a recurring basis We took the opportunity with some of the uncertainty that's around the economic forecast, but really wasn't in the base yet to provide some additional reserves for that uncertainty. we took the opportunity with some of the uncertainty that's around the economic forecast but really wasn't in the base yet to provide some additional reserves for that uncertainty I think, again, back to my comments, I think that positions us well, both with some of the progress we're making on credit, as well as just having some of the economic data, whether it was in the underlying forecast or whether we put it on top, just absorbed into what we're thinking here. i think again back to my comments i think that positions us well both with some of the progress we're making on credit as well as just having some of the economic data whether it was in the underlying forecast or whether we put it on top just absorbed into what we're thinking here To the extent that we have growth and charge-offs, that'll drive provisioning. to the extent that we have growth and charge-offs that'll drive provisioning I think it can abate a little bit just given we took some of the bad news here in the Q1 and put it in a spot where it's there for reserves if we have businesses that are stressed by oil prices or whatever other items are caused by what's going on. I think it can abate a little bit just given we took some of the bad news here in the Q1 and put it in a spot where it's there for reserves if we have businesses that are stressed by oil prices or whatever other items are caused by what's going on. i think it can abate a little bit just given we took some of the bad news here in the q1 and put it in a spot where it's there for reserves if we have businesses that are stressed by oil prices or whatever other items are caused by what's going on

Speaker 1: Got it. Okay, great. I guess just one more quick one on capital. In your view on capital management, things are going well. Strong capital levels. Bought back some stock this quarter. Can we assume that you guys will remain active in the market given the current levels of stock price? Got it. got it Okay, great. okay great I guess just one more quick one on capital. i guess just one more quick one on capital In your view on capital management, things are going well. in your view on capital management things are going well Strong capital levels. strong capital levels Bought back some stock this quarter. bought back some stock this quarter Can we assume that you guys will remain active in the market given the current levels of stock price? can we assume that you guys will remain active in the market given the current levels of stock price

Speaker 3: Yeah, Damon, this is Jim. Absolutely, we'll continue evaluating the merits of further repurchases and our other levers with respect to dividends. We'll continue to evaluate, but really it's about growth. As it relates to M&A, still remains a low priority for us. You're looking at repurchases and growth as the priorities for capital. Yeah, Damon, this is Jim. yeah damon this is jim Absolutely, we'll continue evaluating the merits of further repurchases and our other levers with respect to dividends. absolutely we'll continue evaluating the merits of further repurchases and our other levers with respect to dividends We'll continue to evaluate, but really it's about growth. we'll continue to evaluate but really it's about growth As it relates to M&A, still remains a low priority for us. as it relates to m&a still remains a low priority for us You're looking at repurchases and growth as the priorities for capital. you're looking at repurchases and growth as the priorities for capital

Speaker 1: Got it. Great. Thanks for all the color and commentary. Got it. got it Great. great Thanks for all the color and commentary. thanks for all the color and commentary

Speaker 3: Thank you. Thank you. thank you

Speaker 7: Your next question comes from the line of Nathan Race at Piper Sandler. Your line is now open. Your next question comes from the line of Nathan Race at Piper Sandler. your next question comes from the line of nathan race at piper sandler Your line is now open. your line is now open

Speaker 6: Hey, guys. Good morning. Thanks for taking the questions. Maybe for Jim or Doug, I'm curious if you can just comment on what you're seeing from a pricing perspective on new loan production. On a blended basis and if you're seeing new loan production and incremental deposit growth being margin accretive and relative to the overall loan portfolio yield as well? Hey, guys. hey guys Good morning. good morning Thanks for taking the questions. thanks for taking the questions Maybe for Jim or Doug, I'm curious if you can just comment on what you're seeing from a pricing perspective on new loan production. On a blended basis and if you're seeing new loan production and incremental deposit growth being margin accretive and relative to the overall loan portfolio yield as well? maybe for jim or doug, i'm curious if you can just comment on what you're seeing from a pricing perspective on new loan production. on a blended basis and if you're seeing new loan production and incremental deposit growth being margin accretive and relative to the overall loan portfolio yield as well

Speaker 2: Yeah, Nathan, good morning. It's Doug here. Thanks for the question. Listen, we are clearly seeing competitive pressures kind of squeezing spreads and credit across all of the footprints today. We look at loan yields, I think at the end of Q1, yields were 6.2%-6.3%, somewhere in that range. Given the current environment, we think we can continue to originate credit in that low- to mid 6% range. As we talked about, just some redeployment of capital from payoffs in the LIHTC portfolio. That provides us some real advantage there of really 200-300 basis points of additional margin on that $100 million portfolio that paid off. It's tough out there. Yeah, Nathan, good morning. yeah nathan good morning It's Doug here. it's doug here Thanks for the question. thanks for the question Listen, we are clearly seeing competitive pressures kind of squeezing spreads and credit across all of the footprints today. listen we are clearly seeing competitive pressures kind of squeezing spreads and credit across all of the footprints today We look at loan yields, I think at the end of Q1, yields were 6.2%-6.3%, somewhere in that range. we look at loan yields i think at the end of q1 yields were 6.2%-6.3% somewhere in that range Given the current environment, we think we can continue to originate credit in that low- to mid 6% range. given the current environment we think we can continue to originate credit in that low- to mid 6% range As we talked about, just some redeployment of capital from payoffs in the LIHTC portfolio. as we talked about just some redeployment of capital from payoffs in the lihtc portfolio That provides us some real advantage there of really 200-300 basis points of additional margin on that $100 million portfolio that paid off. that provides us some real advantage there of really 200-300 basis points of additional margin on that $100 million portfolio that paid off It's tough out there. it's tough out there Our team does a good job to price both to win and yet to work to protect our margin with every basis point that we can. Our team does a good job to price both to win and yet to work to protect our margin with every basis point that we can. our team does a good job to price both to win and yet to work to protect our margin with every basis point that we can

Speaker 6: Okay. Got it. That's helpful. Just the expectation that loan growth in that mid-single digit range for this year is going to be funded by deposit gathering, or maybe, Keene, you just comment on excess liquidity that you have coming off the bond portfolio and just other sources of funds to loan growth. Okay. okay Got it. got it That's helpful. that's helpful Just the expectation that loan growth in that mid-single digit range for this year is going to be funded by deposit gathering, or maybe, Keene, you just comment on excess liquidity that you have coming off the bond portfolio and just other sources of funds to loan growth. just the expectation that loan growth in that mid-single digit range for this year is going to be funded by deposit gathering or maybe keene you just comment on excess liquidity that you have coming off the bond portfolio and just other sources of funds to loan growth

Speaker 5: Yeah, I think we expect to keep the securities portfolio at a similar proportion. I think our expectation is that we'll continue to grow it over the course of the year. That means that we're going to out fund loan growth with deposit growth, both in the commercial bank and the specialty and consumer bank. That's our plan. I think that's the thing we're probably most confident about is our ability to grow deposits. We like the environment for deployment, whether that's into securities or loans. I think you heard from Doug, we'll continue to be disciplined on the loan side, both on credit and pricing. I think we think that sets up for a good performance in 2026 and beyond. That's the playbook we've been running for the last few years, and I think that's the playbook for 2026. Yeah, I think we expect to keep the securities portfolio at a similar proportion. yeah i think we expect to keep the securities portfolio at a similar proportion I think our expectation is that we'll continue to grow it over the course of the year. i think our expectation is that we'll continue to grow it over the course of the year That means that we're going to out fund loan growth with deposit growth, both in the commercial bank and the specialty and consumer bank. that means that we're going to out fund loan growth with deposit growth both in the commercial bank and the specialty and consumer bank That's our plan. that's our plan I think that's the thing we're probably most confident about is our ability to grow deposits. i think that's the thing we're probably most confident about is our ability to grow deposits We like the environment for deployment, whether that's into securities or loans. we like the environment for deployment whether that's into securities or loans I think you heard from Doug, we'll continue to be disciplined on the loan side, both on credit and pricing. i think you heard from doug we'll continue to be disciplined on the loan side both on credit and pricing I think we think that sets up for a good performance in 2026 and beyond. i think we think that sets up for a good performance in 2026 and beyond That's the playbook we've been running for the last few years, and I think that's the playbook for 2026. that's the playbook we've been running for the last few years and i think that's the playbook for 2026

Speaker 6: Okay, great. Maybe one last one for Jim. Just curious if you can comment on any M&A appetite these days. Obviously, you guys have a nice organic trajectory in front of you and a nice earnings tailwinds over the balance of this year. Just curious if there's any opportunities on the M&A front that are interesting for you guys these days, or is just kind of the focus on organic growth, buying back the stock, just given where the currency is today? Okay, great. okay great Maybe one last one for Jim. maybe one last one for jim Just curious if you can comment on any M&A appetite these days. just curious if you can comment on any m&a appetite these days Obviously, you guys have a nice organic trajectory in front of you and a nice earnings tailwinds over the balance of this year. obviously you guys have a nice organic trajectory in front of you and a nice earnings tailwinds over the balance of this year Just curious if there's any opportunities on the M&A front that are interesting for you guys these days, or is just kind of the focus on organic growth, buying back the stock, just given where the currency is today? just curious if there's any opportunities on the m&a front that are interesting for you guys these days or is just kind of the focus on organic growth buying back the stock just given where the currency is today

Speaker 3: Yeah, Nate, we're laser focused on just executing the plan. We've got some work to do relative to growth and certainly we have to execute on the plans relative to sales of these assets that we have and what have you. It's a low priority. We just got to keep focused on making sure that the plan we put forth is executed perfectly, and that's where our 4,000 associates are focused on today and tomorrow and into the future. Yeah, Nate, we're laser focused on just executing the plan. yeah nate we're laser focused on just executing the plan We've got some work to do relative to growth and certainly we have to execute on the plans relative to sales of these assets that we have and what have you. we've got some work to do relative to growth and certainly we have to execute on the plans relative to sales of these assets that we have and what have you It's a low priority. it's a low priority We just got to keep focused on making sure that the plan we put forth is executed perfectly, and that's where our 4,000 associates are focused on today and tomorrow and into the future. we just got to keep focused on making sure that the plan we put forth is executed perfectly and that's where our 4,000 associates are focused on today and tomorrow and into the future

Speaker 6: Okay, sounds good. I appreciate all the color. Thanks, guys. Okay, sounds good. okay sounds good I appreciate all the color. i appreciate all the color Thanks, guys. thanks guys

Speaker 3: Thank you. Thank you. thank you

Speaker 7: We will pause for a brief moment to wait for the questions to come in. We don't have any further questions in the conference line. I would now like to hand the call back to Jim Lally, President and CEO, for closing remarks. We will pause for a brief moment to wait for the questions to come in. we will pause for a brief moment to wait for the questions to come in We don't have any further questions in the conference line. we don't have any further questions in the conference line I would now like to hand the call back to Jim Lally, President and CEO, for closing remarks. i would now like to hand the call back to jim lally president and ceo for closing remarks

Speaker 3: Thank you, Ellie, and thank you all for joining us this morning and for your continued interest in our company. We look forward to talking to you at the end of the Q2, if not sooner. Have a great day. Thank you, Ellie, and thank you all for joining us this morning and for your continued interest in our company. thank you ellie and thank you all for joining us this morning and for your continued interest in our company We look forward to talking to you at the end of the Q2, if not sooner. we look forward to talking to you at the end of the q2 if not sooner Have a great day. have a great day

Speaker 7: Thank you for attending today's call. You may now disconnect. Goodbye. Thank you for attending today's call. thank you for attending today's call You may now disconnect. you may now disconnect Goodbye. goodbye