Qcr (QCRH) Q1 2026 Earnings Call Transcript

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Date

Thursday, April 23, 2026 at 11 a.m. ET

Call participants

• President and Chief Executive Officer — Todd A. Gipple
• Chief Financial Officer — Nick W. Anderson

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Takeaways

• Net Income -- $33 million, or $1.99 per diluted share, reported for the quarter.
• EPS Growth -- 31% increase compared to the prior year, reflecting earnings strength.
• Net Interest Income -- $67 million, with a slight linked-quarter increase after adjusting for fewer days in the period.
• Net Interest Margin (NIM) TEY -- Increased 1 basis point from 2025 to 1.4%, below the low end of the company's prior guidance.
• Noninterest Income -- $23 million total, including $11 million from capital markets revenue and $5 million from wealth management activities.
• Noninterest Expense -- $52 million, a decrease of $11 million from the previous quarter—primarily due to lower variable compensation and costs associated with the digital transformation schedule.
• Core Efficiency Ratio -- Adjusted core efficiency ratio reached 57.7% during the quarter.
• Loan Growth -- Total loans grew by $145 million (8% annualized), excluding the planned M2 equipment finance runoff.
• Core Deposit Growth -- Increased by $409 million, or 23% annualized; average balances up $31 million (2% annualized) versus the fourth quarter.
• Asset Quality -- Nonperforming assets at $43 million, maintaining a stable NPA-to-assets ratio of 0.45%; criticized loans totaled 2.01% of loans and leases, slightly above the five-year low of 1.94%.
• Provision for Credit Losses -- $2.5 million, down from $5.5 million in the previous quarter, reflecting the reclassification of LITEK construction loans to held for sale.
• Net Charge-Offs -- $4 million for the quarter, a decline of $300 thousand sequentially.
• Capital Return -- $25 million returned to shareholders through the repurchase of 288 thousand common shares during the first quarter; cumulative repurchases since August total 566 thousand shares and $46 million.
• Tangible Book Value per Share -- Increased by $1.33 to over $59; represents 9% annualized growth.
• Tangible Common Equity Ratio -- Decreased 2 basis points to 10.31%.
• Common Equity Tier 1 Ratio -- Increased 2 basis points to 10.54%.
• Total Risk-Based Capital Ratio -- Decreased 19 basis points to 14%.
• Effective Tax Rate -- 7% in the first quarter, down from 8% in the prior quarter, driven by increased tax-exempt income.
• LITEK Loan Securitizations and Sales -- $523 million of LITEK loans identified for off-take transactions set to close in the second quarter, combining a $207 million pool of construction loans and a $316 million Freddie Mac tax-exempt permanent loan pool.
• Guidance — Loan Growth -- Full-year gross annualized loan growth reaffirmed at 10%-15%.
• Guidance — Capital Markets Revenue -- Range raised to $60 million-$70 million for the next four quarters, increasing the lower end by $5 million.
• Guidance — NIM TEY -- For the second quarter, NIM TEY expected to remain flat to up 3 basis points, barring further Fed funds rate changes; guidance includes benefit from loan and CD repricing, municipal bond investments, and LITEK loan transactions.
• Guidance — Noninterest Expense -- Second quarter outlook in the $55 million-$58 million range, reflecting ongoing digital investments and performance-linked compensation.
• Loan-to-Deposit Ratio -- Dropped to 87% during the quarter, with management expecting a range of 90%-95% in the second quarter and 92.5% longer term.
• LITEK Business Update -- Thirteen LITEK projects closed in the quarter; three were with new developers, supporting platform expansion.
• Wealth Management Results -- Added 80 new client relationships and $177 million in assets under management; revenue increased 3% sequentially.
• Digital Transformation Progress -- Completed the second of four core system conversions in early April, with full completion planned by April 2027.
• Artificial Intelligence and Blockchain -- Current AI and automation capabilities are leveraged via Jack Henry’s platform, while blockchain is being explored for asset tracking in LITEK securitizations and sales.
• Allowance Coverage Ratio -- Maintained at 1.26%, with reserves kept static despite lower provision due to LITEQ held-for-sale reclassification.
• Capital Strategy -- 25 basis points in regulatory capital to be freed up by construction loan participations; management plans to remain “opportunistic” regarding continued share buybacks.

Summary

QCR Holdings (NASDAQ:QCRH) delivered record profitability driven by double-digit earnings per share growth and stronger than expected expense control supported by disciplined management. The company announced enhancements to its capital markets revenue guidance, now targeting $60 million-$70 million over the next four quarters, facilitated by the execution of LITEK loan securitizations and construction loan sales. Loan and deposit growth remained robust, reflecting both organic originations and strategic repositioning of the balance sheet, while asset quality metrics continued to outperform historical levels despite a marginal uptick in criticized loans. Management confirmed ongoing progress in the digital transformation initiative and shared an outlook for stable to modestly rising net interest margin, with reinvestment opportunities flagged in tax-exempt municipal securities and key repricing levers in place as the rate environment evolves.

• The company returned nearly $25 million to shareholders in the quarter and has cumulatively repurchased $46 million in common equity since August.
• Operational flexibility in expense management resulted in noninterest expenses coming in below prior guidance, underscoring a cost structure closely tied to performance outcomes.
• Wealth management and LITEK lending both provided diversification and recurring fee income, partially offsetting capital markets seasonality and producing consistent revenue streams as evidenced by client and asset growth.
• Balance sheet positioning remains liability-sensitive, with management estimating 1-2 basis points of NIM accretion for every 25 basis point cut in the Fed funds rate; approximately $900 million more in rate-sensitive liabilities than rate-sensitive assets.
• AI integration is being advanced primarily through third-party vendor solutions, while blockchain innovation is concentrated in asset tracking applications linked to LITEK loan activity.

Industry glossary

• LITEK/LITEQ/LITEC: Refers to Low-Income Tax Credit (LIHTC) lending, construction, and securitization business, a specialized division focused on financing and securitizing affordable housing assets often supported by federal LIHTC incentives.
• NIM TEY: Net Interest Margin, Tax-Equivalent Yield; a measure of net interest income as a percentage of earning assets, adjusted for the tax-equivalent yield of municipal securities and loans.
• Criticized Loans: Loans designated as special mention, substandard, or doubtful based on regulatory asset quality classifications, signaling elevated credit risk relative to standard performing loans.

Full Conference Call Transcript

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

Strong performance in our traditional banking and wealth management businesses partially offset the linked-quarter reduction in our capital markets revenue. Capital markets results were in line with our expectations given typical first quarter seasonality and were equal to our five-year average for Q1 production. As a result, we delivered a very strong return on average assets of 1.4% and earnings per share growth of 31% compared to the same period last year, highlighting the strong earnings potential of our diverse business model. Our traditional banking business continues to deliver solid organic growth supported by healthy commercial and industrial activity across our markets.

Our multi-charter model enables us to consistently gain market share with locally led community banks to build deep relationships with high value clients and communities where they live and work. Our digital transformation remains on track with the successful completion of the second of four core system conversions in early April. Modernizing our technology stack will deliver meaningful benefits for both our clients and employees, expanding our service capabilities, enhancing the client experience, and driving operating leverage. Our wealth management business also delivered very strong results with annualized revenue growth of 14%.

Our success in this business continues to be driven by the experience of our team and the power of our relationship-driven model, which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisers across our markets. We are deepening client engagement and reinforcing wealth management as a key driver of our sustained top-tier financial performance. Our LITEQ lending business also continues to perform as the demand for affordable housing remains robust, driven by a lack of supply and ongoing affordability challenges nationwide. We view LITEC lending as a highly profitable, annually consistent, and differentiated line of business for QCR Holdings, Inc.

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

In combination with our LITEK permanent loan securitizations launched in 02/2023, we have also begun partnering with private investors in LITEK construction loan sale transactions. These transactions enable us to expand our permanent LITEK lending capacity, which will drive increased capital markets revenue. The ability to sell off these LITEC construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects in addition to the permanent financing that generates our capital markets revenue. This is allowing us to grow our market share in the affordable housing space. During the quarter, we identified a total of $123 million in LITEC loans, both construction and permanent, for securitization and sale.

The transactions are planned to close during the second quarter and will mark our fifth permanent loan securitization and our second construction loan sale. This is our LITEQ flywheel in action. Strong demand for affordable housing, reinforced by the federal government's commitment to increase LITEC tax credits combined with our deep developer relationships and our exceptional client service, positions us to capture market share from the larger competitors in this space. Biotech industry’s proven long-term performance drives investor demand for these assets, enabling us to execute LITEQ loan securitizations and sales. These transactions allow us to proactively manage concentration risk, balance sheet growth, liquidity, and capital levels while generating increased capital markets revenue.

We are building an asset-light, capital-efficient, and revenue-heavy business in affordable housing. While securitizations and LITEK construction loan sales temper near-term on-balance-sheet growth, they enhance long-term profitability by creating more capacity. The balance sheet capacity created by these transactions is then rapidly redeployed into new originations, allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the foregone interest income over time. These loan sales and securitizations are also allowing us to strategically manage our total assets under the $10 billion asset threshold this year.

We anticipate growing beyond $10 billion sometime in 2027, and we plan to be fully prepared for the associated organizational impacts by mid-2028, building on the planning efforts we began in 2023. Our company is executing at a high level across all three of our core lines of business. Our team has driven a five-year earnings per share CAGR of 14% and a five-year tangible book value per share CAGR of 12.5%. Our continued investments in talent, technology, and strategic growth, combined with disciplined expense management, position us to sustain this top-tier financial performance.

I am grateful for our 1 thousand teammates that take exceptional care of our clients, our communities, and each other as they deliver long-term value for our shareholders. I will now turn the call over to Nick to provide further details regarding our first quarter results.

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

We continue to have a disciplined approach to deposit pricing and, combined with a liability-sensitive balance sheet, our cost of funds betas are more than 1.5x those of our earning assets during the current rate-cutting cycle. Since the Fed began cutting rates in 2024, our cost of funds have declined by 79 basis points compared to only a 47 basis point decline in earning asset yields. While we continue to benefit from repricing lower-yielding loans into higher market rates, the opportunity is naturally moderating as the rate-cutting cycle matures. During the quarter, new loan origination yields exceeded those on loan payoffs by 22 basis points.

However, loan growth arrived very late in the quarter and average loan balances were down $109 million, contributing to the decline in the loan yield compared to the prior quarter. While our balance sheet has moved closer to neutral since the rate-cutting cycle began, we remain positioned to benefit from future rate reductions, with rate-sensitive liabilities exceeding rate-sensitive assets by approximately $900 million, providing upside to margin in a declining rate environment. For future cuts in the Fed funds rate, we estimate 1 to 2 basis points of NIM accretion for every 25 basis point cut in rates.

If the yield curve steepens, we would expect NIM expansion at the top end of that range, and if the yield curve remains relatively flat, we would expect NIM expansion at the lower end of the range. Supported by our late first quarter loan growth, we are guiding second quarter NIM TEY ranging from static to an increase of 3 basis points, assuming no further Fed funds rate changes. Upside in our second quarter NIM is supported by repricing opportunities on approximately $163 million in fixed-rate loans currently yielding 6.2%, which we would project to reset nearly 25 to 30 basis points higher.

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

Our LITEK lending team closed 13 projects during the quarter, including three with new developers as we continue to expand our LiTeX platform. Our wealth management team delivered strong results this quarter, adding 80 new client relationships and $177 million in new assets under management. While market volatility pressured AUM levels, new client growth largely offset that impact. Wealth management revenue was up 3% from the prior quarter. This business continues to provide stability, recurring fee income, and meaningful diversification to our overall revenue mix. Now turning to our expenses. Noninterest expense for the first quarter was $52 million compared to $63 million for the fourth quarter.

The $11 million decrease was primarily driven by a $5.5 million reduction in salaries and benefits expenses associated with variable compensation related to earnings performance. In addition, we experienced lower professional and data processing costs due to the timing of digital transformation activities and the impact of the debt extinguishment loss in the prior quarter. Our flexible cost structure, particularly variable compensation tied to performance, is designed to support operating leverage while preserving flexibility through various revenue cycles. As a result, expenses were well below our guided range, highlighting our expense flexibility. This structure closely aligns our underlying cost base with performance, supporting a pay-for-performance culture and value creation for shareholders.

Our significantly lower noninterest expenses resulted in an adjusted core efficiency ratio of 57.7% for the first quarter. For the second quarter, we are guiding noninterest expenses to be in the range of $55 million to $58 million, which assumes capital markets revenue and loan growth are within our guided ranges while also continuing to invest in our digital transformation initiatives. This outlook reflects our disciplined approach to expense management aligned with our 9-6-5 strategic model, which targets noninterest expense growth of less than 5% annually while enhancing operating leverage and profitability. Moving to our balance sheet. Total loans grew $145 million for the quarter, or 8% annualized, excluding the planned runoff of the M2 equipment finance portfolio.

There are $523 million of LITEC loans identified for securitization and sale included in the held for sale category. These loans consist of a $207 million pool of LITEK construction loans identified for sale to a new private investor and a $316 million Freddie Mac LITEQ tax-exempt permanent loan pool securitization. Continued execution of our LITEch off-take strategies has increased our confidence in supporting larger transactions and a broader range of developer opportunities. Complementing our loan growth, core deposit growth accelerated during the quarter, increasing $409 million, or 23% on an annualized basis.

Average deposit balances only rose by $31 million, or 2% annualized compared to the fourth quarter, as we actively managed our excess liquidity off balance sheet to optimize balance sheet efficiency. We remain highly focused on expanding core deposits and improving the deposit mix across our markets. Our deposit mix improved this quarter, driven by higher noninterest-bearing balances and a reduction in higher-cost CD and brokered deposits, further strengthening our funding profile. Asset quality remained excellent during the quarter. Nonperforming assets totaled $43 million, a decrease of $439 thousand from the prior quarter, which resulted in the NPA to total assets ratio remaining static at 0.45%.

The ratio of criticized loans to total loans and leases was 2.01%, remaining well below the company's long-term historical average and near the five-year low of 1.94% established in the prior quarter. The marginal increase in criticized loans was primarily driven by one large credit which is expected to be resolved favorably later this year. The company recorded total provision for credit losses of $2.5 million during the quarter, down from $5.5 million in the prior quarter, primarily due to the reclassification of LITEK construction loans to the held for sale category as these loans are expected to be sold at par. Net charge-offs were $4 million during 2026, a decline of $300 thousand from the prior quarter.

Between the start of the first quarter and April 20, we returned almost $25 million of capital to shareholders with about 288 thousand common shares repurchased at opportunistic valuations. Since we began repurchasing shares in August, we have repurchased 566 thousand common shares, returning a total of $46 million to our shareholders. These repurchases demonstrate our capital allocation flexibility, enabling opportunistic repurchases when they create value and align with our strategic and financial priorities. We delivered another quarter of strong growth in tangible book value per share, which rose $1.33 to over $59, reflecting 9% annualized growth.

Over the past five years, tangible book value has grown at a compound annual rate of 12.5%, highlighting our continued strong financial performance and long-term focus on creating shareholder value. Our tangible common equity to tangible assets ratio decreased 2 basis points to 10.31%. The common equity Tier 1 ratio increased 2 basis points to 10.54%. And our total risk-based capital ratio decreased 19 basis points to 14%. These quarterly changes reflect the combined impact of strong earnings and share repurchases during the quarter. The total risk-based capital ratio was also impacted by a reduction in debt capital treatment on our 2019 issuance and lower ACL balances.

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

Operator: Thank you. Today's first question comes from Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo: Thank you. Good morning, guys. Maybe first on the capital front. You have the two securitizations planned for the second quarter. Apologize if I missed it, but do you have a sense for how much capital that will add to the stack, and then the follow-up is on the buyback side. Do you plan to use that in buybacks? You are at, I think, 10.5% CET1. Is that a good bogey for you to settle near going forward, or do you want to keep growing?

Todd A. Gipple: Thanks, Danny. Appreciate the question. Actually, through the term loan securitization, we do not really free up regulatory capital because we are retaining B-pieces historically, and that is okay, but it does free up GAAP capital. As you noted, we are getting into the mid-tens in terms of total risk-based and CET1. About 25 basis points gets freed up from the construction loan participation, and that will allow us to continue to be fairly active with respect to buybacks. We are getting up to really above our long-term target in terms of capital ratios, and so we would continue to be opportunistic.

As you know, there are really four things to do with capital: retain it for organic growth, and that is a little less demand for us as we are going more asset-light and capital-efficient in the LiTech business; M&A is not a current priority for us; so then you get to returning capital. We did raise our dividend modestly, and it remains a modest dividend, because we believe at current valuations, the stock repurchases—buybacks—are really the best use of capital. We are very pleased to have accomplished what we have already, and really the answer is we would continue to be opportunistic when it comes to buybacks. At current valuation levels, that makes sense.

And we tend to not just look at where we are at on a current price-to-tangible book or price-to-earnings; we really look at where earnings and TBV are headed. Considering we are growing those at a more than 10% CAGR gives us even more confidence to be buying shares. So kind of a long answer to your short question, but it frees up about 25 bps, and we would continue to be opportunistic in share buybacks.

Daniel Tamayo: No, that is great, Todd. Appreciate all the color there. And then maybe one on the margin. We have the guidance for the second quarter. It feels like maybe we are approaching stability. Curious for your thoughts on that. And then longer term, do the securitizations continue to be kind of modestly accretive every time you do them, or is there a point where they are breakeven or do not impact the margin as much as we look forward for future securitizations?

Nick W. Anderson: Yes. Thanks, Danny. I will answer with several data points here for that question. If you think about our Q1 average earning assets, we were about $8.6 billion. Considering the Q1 loan growth being back-end loaded, and then assuming we hit the midpoint of our loan growth—call it 12.5%—for the rest of the year, and assuming roughly middle of the quarter for off-takes, we expect Q2 average earning assets would be down about $200 million. Translating that into NII and NIM, our core margin we continue to expect to grind higher by a couple basis points with loan and CD repricing.

To your other question, the off-takes here in Q2 are expected to be slightly accretive—about a basis point here for Q2. In addition, when it comes back full circle to NII, we have an extra day in Q2, and all that leads us to feel pretty confident about holding Q2 NII static. On the go-forward picture on future off-takes, I do not think we are going to anchor every transaction to being neutral quarter to quarter. Future LITEK rotations are likely to be less dilutive than in Q4. Q4 had a fair amount of well-priced assets that were part of that package transaction.

Some of the transactions here in Q2 are at lower yields, and we are also combining that with our securitization, so we get a little bit of upside between the two transactions. Anytime we are taking decent assets off the books, if we can hold neutral, great. Our expectations might be a little dilutive, but certainly not to what we experienced during Q1 with the impact from the Q4 transaction.

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

Todd A. Gipple: Thanks, Danny.

Operator: And our next question today comes from Damon Del Monte at KBW. Please go ahead.

Analyst: Hey, guys. This is Matt Rank filling in for Damon. Hope everybody is doing well today. My first question—thanks for the comments on the digital transformation—but just curious if any of that modernization includes anything with artificial intelligence, and maybe if you have identified any use cases, like that technology speeding up the LITEK flywheel, so to speak, or helping with wealth management—anything like that?

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

It went really, really well, and we really wanted to accomplish that first one and have it go well. Of course, we have another one coming up in October and April, so in April 2027 we expect to be all done. The answer to your AI automation question is really about the decision we made a couple years ago to partner with Jack Henry for our new core. We believe them to be the furthest along with respect to AI and automation opportunities. The open architecture that they have has allowed us to integrate with a little over 30 other products that link to our core. That has gone really well.

It has been a lot of hard work, but they are, we believe, furthest along in terms of giving us and their other bank clients a lot of capabilities when it comes to AI. That will come from our large third-party vendors; we are not going to be standing that up ourselves. They are well down the path. With respect to how that impacts us in the future, I think it is going to be more about our retail and commercial bank. I do think there will be some artificial intelligence that will help us in the wealth management space.

When it comes to LITEC assets, there are some conversations more around blockchain with respect to tracking those assets and the securitization and sale of those assets—being more efficient with blockchain. So it is more about blockchain when it comes to LITEK. Thanks for the great question. We are really excited about our digital future, and we are over halfway done with the core conversions.

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

Todd A. Gipple: Sure. So, Matt, while provision was down, that was really due to the reclassification of the LITEQ loans to held for sale. We used some of the provision in the ACL in that regard, but we did—and we believed it was important—hold our coverage ratio static at 1.26%. So while our provision was down, we maintained the same level of reserves that we had previously. I appreciate the question because it helps be clear that we did not soften reserves, we did not lighten reserve levels; we kept those static. The reduction in provision was about reclassifying a fair amount of loans to held for sale.

Analyst: Got you. Okay. Thank you for that. I will step back.

Todd A. Gipple: Thank you.

Operator: Our next question today comes from Nathan James Race at Piper Sandler. Please go ahead. Hello, Nathan. Is your line on mute perhaps? Alright. It appears that we are not receiving any audio from Mr. Race’s line here. So we are going to move on to our next questioner, which is Brian Joseph Martin at Janney Montgomery. Please go ahead.

Brian Joseph Martin: Hey, guys. Good morning. Hey, Nick, maybe I missed what you were saying there in terms of just—I think I get the big picture on being kind of neutral—but where the earning assets land the next couple of quarters as you roll through the growth and the off-take. It sounded like it might be down $200 million or so next quarter in the second quarter given what happens, and then thereafter it is stable to growing with the balance of the portfolio. Just second and third quarter—as it happens mid-quarter—how should we think about those next two quarters from an average earning asset standpoint?

Nick W. Anderson: Yes. Thanks, Brian. Certainly a lot of noise here in Q2 as you think about the transactions and trying to model some of that out in average earning assets. But you are correct. When you think about Q2, we are thinking about that being down about $200 million, but that assumes we are hitting a pretty strong loan growth number for the quarter, and then we also have the off-take pegged for Q2. When you get to Q3, as the temporary noise associated with the transaction fades, you would start to see that stabilize and then see some growth from there.

Brian Joseph Martin: Got it. Okay. And on the margin—you gave some comments about next quarter’s margin—but longer term, in a period of stability here, the bias would be trending upward. You had some nice improvement on the funding side this quarter with the deposits. Maybe it was just the timing of the loan growth coming on. Any additional improvement on that funding side? It feels like the margin is kind of flat to up rather than down as we look out. Is that how we should be thinking about it?

Nick W. Anderson: Yes, Brian, that is how we are thinking about it. We continue to grind out every basis point from our core margin, and a lot of that is coming from our loan and deposit repricing. We continue to drip deposit pricing on our non-index deposits lower as we can. Our expectation is that we can continue to grind out every basis point even into Q2 with all the activity going on, and beyond that into Q3. Something else that will contribute to that is our expectation for stronger loan growth as well.

Brian Joseph Martin: Got you. And the loan-to-deposit ratio, as you move through all the noise here, where do you expect that to settle out over the next couple of quarters given the dynamics? There are still a lot of moving parts.

Nick W. Anderson: We did drop quite a bit to 87% this quarter—certainly below our historical range. When you think about Q2, we are expecting that to fall more into a range between 90% and 95%. I would probably land at 92.5% longer term here.

Brian Joseph Martin: Got it. And last one. I know you talked about the buybacks being the most opportune near-term. As you roll through the modernization of the technology and you are more asset-light, does M&A become a bit more interesting or likely as you look out into 2027? You have managed below $10 billion this year, but going over—I know it does not have a big cost negative to you given the planning you have done—but in terms of going over with more size, is that something you would think about as you go into 2027?

Todd A. Gipple: Yes, Brian, that is a fair question. I appreciate you asking. Our interest in M&A will grow a bit after we get all the way through this digital transformation and core conversion schedule.

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