Financial Data and Key Metrics Changes - The company reported a GAAP net income of $20.8 million for Q2 2025, which included a $3.36 million gain from the sale of a branch and various acquisition-related expenses [12][21] - The core net income, excluding non-core items, was $19.5 million, translating to an EPS of $0.66 [12][21] - The return on average assets (ROAA) was maintained at 1% and tangible book value increased by almost 15% annualized [6][12] Business Line Data and Key Metrics Changes - Total loans held for investment increased by 4.5% annualized, amounting to an increase of $66.7 million from Q1 [14] - New loan production was $432 million, primarily driven by commercial and industrial (C&I) loans and commercial real estate (CRE) [14] - Total deposits decreased by $38.5 million, mainly due to a net decrease in interest-bearing deposits [15] Market Data and Key Metrics Changes - The weighted average cost of deposits decreased to 2.62%, down six basis points from the previous quarter [18] - Non-interest bearing deposits increased by $102 million or 7.8% on a linked quarter basis [16] - The company expects to maintain elevated liquidity levels in the near term, assuming no rate cuts [17] Company Strategy and Development Direction - The company is focused on improving operational efficiency through a core processing system upgrade, which is expected to enhance both organic and inorganic growth [7][9] - A partnership with Progressive Bank is anticipated to provide meaningful earnings accretion starting in 2026 [9][10] - The company aims to maintain a balanced approach to growth while managing concentration risks, particularly in C&I and owner-occupied loans [46][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating through credit challenges, with expectations for resolution on non-performing loans in the upcoming quarters [10][34] - The sentiment among borrowers is improving, with increased activity noted in the market, contributing to a more optimistic outlook for loan growth [76] - The company is prepared to capitalize on opportunities for growth while maintaining a disciplined approach to risk management [86] Other Important Information - The company experienced a negative trend in asset quality metrics, with non-performing loans (NPLs) increasing to 0.97% [22] - The company is actively managing its funding sources, including an increase in FHLB borrowings to optimize its balance sheet [54] Q&A Session Summary Question: Excess liquidity related to core conversion - Management indicated that excess liquidity will be maintained until the core conversion with Oakwood is complete [28][29] Question: Credit migration and reserves - Management confirmed that the migration was from substandard to non-accrual, with adequate reserves in place for the affected credits [30][32] Question: Expense outlook for the next quarters - Management expects a modest increase in core expenses in Q3, with a run rate in the low $50 million range [40] Question: Loan growth expectations - Management anticipates mid-single-digit loan growth for the remainder of the year, with a positive sentiment among borrowers [72][76] Question: Loan yields and competition - Management noted that loan yields have softened due to competition, but they remain focused on maintaining a competitive stance [51] Question: Feedback on the new core processing system - Management stated it is too early for comprehensive feedback but remains optimistic about the long-term benefits of the new system [56][58] Question: Growth potential of Smith Sheldon Wilson - Management expressed confidence in the growth potential of Smith Sheldon Wilson, expecting to double its impact in the next 12-24 months [63][65]

Financial Data and Key Metrics Changes - The first quarter GAAP net income was $19.2 million, with EPS of $0.65, including several non-core items [12][21] - Core ROA exceeded 1%, with core net interest margin expanding by eight basis points from the previous quarter [6][12] - Total deposits decreased by $53.2 million, primarily due to net decreases in non-interest bearing deposits [13][14] Business Line Data and Key Metrics Changes - Total loans held for investment remained relatively flat, down just $480,000, with total paydowns and payoffs matching new loan production at approximately $500 million [13][14] - Non-interest revenue contributed significantly to profitability, driven by strong swap fees and SBA loan gains [7][21] - The company experienced modest negative credit migration, with NPAs increasing from 0.42% to 0.69% [22] Market Data and Key Metrics Changes - Texas-based loans remained flat at approximately 41% of the overall loan portfolio [13] - The weighted average cost of deposits for the first quarter was 2.69%, down 12 basis points from the previous quarter [18] Company Strategy and Development Direction - The company aims for continual incremental improvement and is focused on optimizing its branch network [8][11] - The integration of Oakwood Bank is proceeding as expected, with a conversion set for September [8] - The company is open to future acquisitions but prioritizes growth within its current footprint in Louisiana and Texas [62][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges and emphasized a strong start to the year, with better capitalized and diversified credit exposure [11][102] - The company expects loan growth in the low to mid-single digits for the upcoming quarters, despite macroeconomic uncertainties [27][86] - Management noted that deposit costs are expected to remain relatively flat in the near term, influenced by competitive pressures [17][82] Other Important Information - The company completed the sale of a branch in Kaplan, Louisiana, which included approximately $51 million in deposits at an 8% premium [9][15] - The company has a strong pipeline for loan growth and is focused on maintaining profitability without relying solely on loan growth [10][27] Q&A Session Summary Question: What are the internal expectations for loan growth for Q2 and the back half of the year? - Management expects loan growth in the low to mid-single digits quarter over quarter, potentially landing in the lower single digits by year-end due to a flat first quarter [27][86] Question: Can you provide updated thoughts on core margin progression throughout the year? - Management anticipates continued low single-digit basis point improvements in core margin, but does not expect to achieve the same level of expansion as in the first quarter due to interest rate uncertainties [29][30] Question: What are the expectations for deposit growth in the upcoming quarters? - Management indicated that the second quarter might be muted due to the recent branch sale, which started the quarter with a deposit deficit [44][48] Question: Are there any areas in the loan portfolio being deemphasized due to future credit expectations? - Management stated there are no specific areas being significantly downscoped, but they are monitoring C and D exposure to ensure it remains within comfortable bounds [59][60] Question: What are the current expectations for industry consolidation within the footprint? - Management believes M&A activity may slow temporarily due to current market uncertainties, but they remain prepared for future opportunities [101][102]

Financial Data and Key Metrics Changes - The first quarter GAAP net income was $19.2 million, with EPS of $0.65, including non-core items [13] - Core net income, excluding non-core items, was $19.3 million, also with EPS of $0.65 [13] - Core return on assets (ROA) exceeded 1%, with core net interest margin expanding by eight basis points [6][17] - Total deposits decreased by $53 million, primarily due to a reduction in non-interest bearing deposits [14][15] Business Line Data and Key Metrics Changes - Total loans held for investment remained flat, down $480,000, with total paydowns and payoffs matching new loan production at approximately $500 million [14] - Real estate construction loans decreased by $36.8 million, while real estate residential loans increased by $49.8 million [14] - Non-interest revenue was driven by strong swap fees and SBA loan gains, contributing significantly to profitability [7][22] Market Data and Key Metrics Changes - Texas-based loans remained flat at approximately 41% of the overall loan portfolio [14] - The weighted average total cost of deposits for the first quarter was 2.69%, down 12 basis points from the previous quarter [19] - The company generated approximately $380 million from new deposit account relationships despite the overall decline in deposits [15] Company Strategy and Development Direction - The company is focused on optimizing its branch network and managing expenses while investing in IT and infrastructure [8][21] - The acquisition of Oakwood Bank is progressing as planned, with integration set for September [8] - The company aims to maintain profitability without relying on loan growth, emphasizing net interest margin over volume [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain economic environment and highlighted a strong pipeline for the second quarter [11][28] - The company anticipates low to mid-single-digit loan growth for the upcoming quarters, with potential for higher growth in Q2 and Q3 [28][90] - Management noted that credit quality remains stable despite some negative migration in specific relationships [23] Other Important Information - The company completed the sale of a branch in Kaplan, Louisiana, which included approximately $51 million in deposits at an 8% premium [9][16] - The company has a contingent liquidity increase of approximately $600 million, enhancing its financial flexibility [17] Q&A Session Summary Question: Expectations for loan growth in Q2 and the second half of the year - Management expects loan growth in the low to mid-single digits, with a healthy pipeline for Q2 [28] Question: Updated thoughts on core margin progression - Management anticipates continued low single-digit basis point improvements in core margin, influenced by interest rate uncertainty [30] Question: Expectations for deposit growth and moving pieces on acquired balances - Management indicated that the recent branch sale would impact deposit growth, making Q2 potentially muted [46] Question: Areas of the loan portfolio under closer scrutiny - Management is not significantly downscoping any particular area but is focusing on maintaining a diversified portfolio [61] Question: Thoughts on capital return and potential buybacks - Management is considering capital return options but believes more capital build is needed before executing buybacks [53][55] Question: Current expectations for industry consolidation - Management noted a slowdown in M&A conversations due to recent market uncertainties but remains open to future opportunities [104]