Equity (EQBK) Q2 2025 Earnings Call Transcript

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DATE

• Tuesday, July 15, 2025, at 10 a.m. EDT

CALL PARTICIPANTS

• Chairman & CEO — Brad Elliott
• Bank CEO — Rick Sems
• Chief Financial Officer — Chris Navratil
• Chief Credit Officer — Krzysztof Slupkowski

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TAKEAWAYS

• Net income: $15.3 million, or $0.86 per diluted share (GAAP) in Q2 2025; adjusted to $16.6 million, or $0.94 per diluted share, excluding M&A and debt extinguishment costs, in Q2 2025.
• Net interest income: $49.8 million in net interest income in Q2 2025, with a core net interest margin of 4.17%, representing a 10 basis point sequential improvement when compared to the core margin of 4.07% in the linked quarter.
• Noninterest income: $8.6 million in noninterest income in Q2 2025, rising $500,000 over the previous quarter after adjusting for a prior BOLI benefit of $2.2 million.
• Noninterest expense: $40 million (GAAP) in noninterest expenses in Q2 2025; excluding debt extinguishment and M&A charges, noninterest expenses were $38.3 million, down modestly and in line with outlook.
• Provision for credit loss: $19,000 (GAAP provision for credit loss) in Q2 2025, primarily reflecting realized charge-offs offset by a decline in ending loan balances.
• Tangible common equity (TCE) ratio: Ended the quarter at 10.63%, up 41% from the second quarter of 2024; bank-level TCE finished at 10.11%.
• Tangible book value per share: $32.17 tangible book value per share, up 25% from the second quarter of 2024.
• Loan growth: Year-to-date, loan balances increased $100 million through the first two quarters of 2025. Average loans increased at an annualized rate of 6.2% during the quarter.
• Loan pipeline: Loan pipeline measured at 75%, or $481 million, up $119 million, or 33%, from the first quarter.
• Loan production: $197 million in loan production in Q2 2025, matching prior period levels and doubling Q2 2024's volume.
• New loan yields: 7.17% yield for new loan production in Q2 2025, up from 6.73% in the prior quarter.
• Deposit trends: Excluding brokerage funds, balances declined by $43 million during the quarter, due to normal commercial outflows.
• Nonaccrual loans: $42.6 million at period end, up $18.3 million, almost entirely due to a single QSR relationship.
• Total classified assets: $71 million in total classified assets, or 11.4% of total bank regulatory capital, remaining below historical averages.
• Delinquency (over 30 days): Delinquency in excess of thirty days declined during the quarter to $16.8 million.
• Net charge-offs (annualized): Net charge-offs annualized were six basis points during the quarter. Year-to-date, net charge-offs annualized were four basis points through Q2 2025.
• Allowance for credit losses to loans: Coverage stood at 1.26%.
• MVC Bank acquisition: Closed July 2, 2025; acquired balance sheet arrives largely in cash after prior bond portfolio sale.
• Debt extinguishment: $1.4 million in charges incurred by redeeming subordinated debt during the quarter; refinancing expected within the month.

SUMMARY

Equity Bancshares (NYSE:EQBK) emphasized core margin expansion and adjusted earnings growth during the quarter. Management reiterated a disciplined M&A approach, citing a "high rate" of market conversations, expanding target size, and an ongoing focus on value realization without near-term regulatory hurdles being the main driver for sellers entering the market. This occurred even as nonaccrual loans rose notably due to a single large quick-service restaurant (QSR) relationship undergoing restructuring. The company highlighted a rising loan pipeline, sustained production, and improved new loan yields as signals of optimism for loan growth and net interest margin in the coming quarters, specifically referencing expectations for the remainder of 2025. Deposit migration was attributed to normal cyclical flows without underlying commercial account attrition.

• Chief Financial Officer Navratil noted, "the MVC management team actually effected the sale of their bond portfolio prior to our acquisition of the bank. So coming over to our balance sheet, effectively, those have been monetized into cash balances."
• The proportion of total assets based in Wichita is now less than 10% as of the Q2 2025 earnings call, with direct aerospace credit exposure reduced to under $5 million.
• This is reflecting ongoing earning asset remix.
• Management expects "core margin. It's kind of maintaining right where we realized it this quarter," with continued lagged loan repricing projected into 2026.
• Chief Credit Officer Slupkowski confirmed, regarding QSR sector risk, "outside of [the single large relationship], you know, we have a lot of granularity in this portfolio. ... this is definitely the largest concern."
• Retail deposit production generated net positive DDA account growth in the first half of 2025, as commercial deposits remained open and active despite balance reductions.

INDUSTRY GLOSSARY

• TCE ratio: Tangible common equity to tangible assets, a measure of core capital strength without goodwill or intangibles.
• BOLI: Bank-owned life insurance; investment vehicles banks use to offset employee benefit costs.
• QSR: Quick-service restaurant; refers to fast food and related restaurant operations within loan portfolios.
• Nonaccrual loans: Loans on which the bank has stopped accruing interest due to borrower payment delinquency or concern over ultimate repayment.
• Classified assets: Loans and securities deemed at risk by regulators or internal review, requiring heightened scrutiny.
• DDA: Demand deposit account; a checking account allowing withdrawals and transfers on demand.
• Loan pipeline [75%]: The committed or near-committed portion of potential loan originations, representing business expected to close within a near-term window.

Full Conference Call Transcript

Brad Elliott: Good morning, and thank you for joining Equity Bancshares' earnings call. Joining me today are Rick Sems, our Bank CEO, Chris Navratil, our CFO, and Krzysztof Slupkowski, our Chief Credit Officer. We are excited to share our company's sustained strong beginning to 2025. In the second quarter, we achieved strong earnings, core margin expansion, and successfully closed our merger with MVC Bank on July 2. Limiting time between announcement and closure of our transaction has been a core competency of equity. Our work to receive all required approvals on this transaction within sixty days of announcement provides confidence to a seller and value to our shareholders.

We are proud of our teams for putting us in a position to continue to excel in this space. We could not be more excited to welcome the leadership and team members of MVC Bank. HK Hatcher, Glenn Floresca, Jeff Greenleigh, Dennis Demer, and Scott Bixler. That team coupled with Ken Ferguson joining our board are excellent additions to the Equity Bank franchise. I look forward to all they can and will accomplish as we continue to expand our presence in the state of Oklahoma. While executing on our M&A strategy, our team has also remained hyper-focused on serving the communities in which we operate. I am very proud of all that Rick has accomplished.

As he and Jonathan Roop have worked to reset and retool our retail staff and philosophy. He has also made a lot of progress with our commercial teams. Originations are growing, as are our commercial product sales. Loan balances year to date are up $100 million while deposits, excluding seasonal public funds, have held their ground. Our teams are motivated and armed with tools to meet the needs of our communities. And we look forward to continued execution on our mission. We closed the quarter with a TCE ratio of 10.63% and a tangible book value per share of $32.17.

Compared to the second quarter of 2024, our TCE ratio is up 41% and our tangible book value per share is up 25%. Providing top-notch products and services through exceptional bankers continues to be our guiding principle as we aim to grow Equity Bank. We started the year with a strong balance sheet, motivated bankers, and a solid capital stack, to execute on our dual strategy of organic growth and strategic M&A. We have executed through the first half of the year and look forward to maintaining this momentum throughout the year. I will now hand it over to Chris to walk you through our financial results.

Chris Navratil: Thank you, Brad. Last night, we reported net income of $15.3 million or 86¢ per diluted share. Adjusting for costs incurred on M&A and the extinguishment of debt, earnings were $16.6 million or $0.94 per diluted share. Net interest income for the period was $49.8 million, up $1.8 million linked quarter when adjusting for $2.3 million in nonaccrual benefits realized in the prior period. Margin for the quarter was 4.17%, an improvement of 10 basis points when compared to the core margin of 4.07% linked quarter. We continue to be optimistic about our opportunities to maintain spread and improve earnings through repositioning of earning assets throughout 2025. More to come on margin dynamics later in this call.

Noninterest income for the quarter was $8.6 million, up $500,000 from Q1 when excluding the $2.2 million BOLI benefit realized in that quarter. The increase was driven by improvement in customer service charge line items including deposit services, treasuries, debit and credit card, mortgage, and trust and wealth. Noninterest expenses for the quarter were $40 million. Adjusted to exclude loss on static extinguishment, M&A charges, noninterest expenses were $38.3 million, down modestly in the quarter, and in line with outlook. Debt extinguishment charges of $1.4 million were realized during the quarter. As the company chose to redeem our outstanding subordinated debt issue following a first capital and interest rate reset period. The plan is to refinance within the month.

As we have discussed in past calls, we are in an opportunity-rich environment and maintaining this source of capital provides continued flexibility while resetting allows for capital maintenance and a better coupon. Our GAAP net income included a provision for credit loss of $19,000. The provision is the result of realized charge-offs partially offset by a moderate decline in ending loan balances. We continue to hold reserves for any economic challenges that could arise. To date, we have not seen concerns in our operating markets that would indicate these challenges are on the horizon. The ending coverage of ACL to loans is 1.26%. As Brad mentioned, our TCE ratio for the quarter remained above 10%, closing at 10.63%.

The funds from the capital raise in Q4 to be maintained at the holding company with no current intention of pushing into the bank. At the bank level, the TCE ratio closed at 10.11%, benefited both by earnings and improvement in the unrealized loss position on the securities portfolio. I will stop here for a moment and let Krzysztof talk through our asset quality for the quarter.

Krzysztof Slupkowski: Thanks, Chris. During the quarter, nonaccrual and nonperforming loans moved up, as we saw migration of the QSR relationship we have discussed on previous calls. Nonaccrual loans closed the quarter at $42.6 million, up $18.3 million from the previous quarter. The increase is almost entirely driven by that same QSR relationship. The customer has a good path to exiting the underperforming locations over the next several quarters. We remain engaged with the borrower in a collaborative effort to pursue a full resolution through multiple avenues. Until resolution of the challenged stores is realized, classification as a nonaccrual asset is an appropriate step. Total classified assets closed the quarter at $71 million or 11.4% of total bank regulatory capital.

Importantly, classified asset levels remain well below our historical averages and continue to be actively monitored and managed. Delinquency in excess of thirty days moved down during the quarter to $16.8 million. Net charge-offs annualized were six basis points for the quarter, while year-to-date charge-offs annualized were four basis points. Recognized charge-offs continue to reflect specific circumstances on individual credits and do not signal systemic issues within our markets. Looking ahead, we remain positive on the credit environment and the outlook for the remainder of 2025. Despite some uncertainty in the broader economy, credit quality trends across our portfolio remain stable and below historic levels.

Our disciplined underwriting, strong capital, and reserve levels position us well to navigate any potential headwinds. We believe this practice and a measured approach support continued sound credit performance while allowing us to respond quickly if conditions change.

Chris Navratil: Thanks, Krzysztof. As I previously mentioned, margin adjusted for one-time items in Q1 improved 10 basis points in the quarter. The improvement during the period was driven by remixing of the balance sheet. Loans comprised 76% of average earning assets as compared to 75% in the previous quarter. Yield expansion on the loan portfolio, driven by increasing coupon results, and a reduction in both the level and cost of interest-bearing liabilities. Average loans increased during the quarter at an annualized rate of 6.2%, while average interest-earning assets increased 1.7%. The increase in margin and earning assets coupled with an additional day in the period led to core net interest income growth of $1.8 million.

As we look to the remainder of the year, we are optimistic about margin maintenance on the legacy portfolio as we see loan balance growth and continued lagged repricing on our asset portfolios. In addition to our legacy portfolios, following the July 2 closing of MVC, we will begin to realize the benefits of that transaction. While we are continuing to work through fair valuation estimates, we expect to realize margin improvement from the addition of the underlying assets and liabilities. Refer to our outlook slide for additional detail on second-half earnings expectations reflecting current estimates of the impact of MVC.

As a reminder, we do not include future rate changes, though our forecast continues to include the effects of lagging repricing in full on our loan and deposit portfolios. Our provision is forecasted to be 12 basis points to average loans on an annualized basis.

Rick Sems: Our production teams have had an excellent start to the year, as we realized loan growth of more than $100 million through the first two quarters while also maintaining deposit balance exclusive of anticipated municipality outflows. As we look to layer in the MVC footprint, their exceptional leadership team, I am excited to see what the equity team can accomplish in the second half of 2025. Production in the quarter totaled $197 million, in line with prior period organic production and twice as much as Q2 2024. Rates on new production were 7.17%, compared to 6.73% in Q1. Continuing to provide accretive value compared to current yields.

While originations kept pace, decreasing line utilization and increasing level of payoffs during the period resulted in a decline in ending balance sheet as compared to prior quarter end. Higher payoffs resulted during the period were related to positive outcomes for borrowers, asset sales, or upstream takeouts. We anticipate additional opportunities to bank these borrowers in the future. As we close the quarter, our 75% pipeline is $481 million, up $119 million or 33% from quarter one. The team continues to focus on growing relationships, deepening wallet share, and pricing for the value provided, which will benefit Equity Bank in the future.

Our retail teams entered the year with aligned direction and a framework designed to drive success throughout our footprint. The first half of the year showed positive trends in gross and net production levels including net positive DDA account production. Though we have a long way to go to meet the aggressive goals we have set, I look forward to assisting this group in realizing success throughout 2025 and beyond. Deposit balance, excluding brokerage funds, declined $43 million. Lost balances were primarily in commercial accounts due to normal outflow activities. The accounts remain open and active. With the closing of MVC, Equity adds Oklahoma City, a growing metro market, with opportunities to leverage a larger balance sheet and franchise.

While the many Oklahoma communities added continue to align with the Equity Bank mission. With Greg Kossover and H. Hatcher and all of our market leaders driving our franchise forward, we can accomplish a lot.

Brad Elliott: It is a very exciting time for everyone associated with equity. Our employee base has opportunities to grow and learn, our board is incredibly engaged and focused on what creates long-term shareholder value. The communities we serve continue to get the scale of a larger company with a small-town feel. And our shareholders benefit by continued EPS growth, market and deposit base expansion, all leading to compounding tangible book value. We are in a great position in our markets, with our organic sales team. Our management team is ready for the challenge and relishes the opportunity ahead of us. Our board has done a great job navigating a strategic path that allows us to grow both organically and through M&A.

M&A conversations continue at a very high rate. Equity will remain disciplined in our approach to assessing these opportunities, emphasizing value while controlling dilution, in the earn-back timeline. I look forward to the rest of the year and beyond. Thank you for joining our call today. We are now happy to take any questions you might have.

Operator: Thank you. We will now begin the question and answer session. We will prepare when preparing to ask you a question, please ensure your device is unmuted locally. We will make a quick pause here for the questions to be registered. And our first question comes from Terry McEvoy with Stephens.

Terry McEvoy: Hi. Good morning, everybody. Maybe start with a question for Chris. Could you just, Chris, could you talk about plans for the MVC Bank bond portfolio at MVC Bank and just overall thoughts on managing the securities portfolio in the second half of the year?

Chris Navratil: Yes. Good question, Terry. Under the terms of the MVC agreement, the MVC management team actually effected the sale of their bond portfolio prior to our acquisition of the bank. So coming over to our balance sheet, effectively, those have been monetized into cash balances. There's a very small level of securities being brought over that have just been retained for the purposes of managing pledging positions. So that cash will come into our environment with the opportunity to deploy both for securities portfolio needs as well as funding loan growth and funding other alternatives on the balance sheet.

So no specific actions needing to be taken by us at this point as it relates to their bond portfolio just based on what's actually coming over to us. In terms of managing the rest of the way, you know, the bond portfolio for us is a mechanism by which to deploy cash with, you know, an improved return potentially. But, really, the balances fluctuate dependent on need on both liquidity and pledging as well as, you know, cash balances relative to deposits. So we saw in the quarter some average balance decline. We had some purchases into the end of the quarter, which is going to grow that balance for average balance purposes going in as we begin Q3.

But that it's it's a balancing function in that portfolio where we're maintaining to, you know, kind of best leverage our cash position while also having the liquidity and the pledging required for municipality deposits.

Brad Elliott: We've got Chris, look. And then yeah. We constantly are looking, Terry, at is there an opportunistic time to rebalance that portfolio also? So if there's a thought process that we'll we come up with to do a structured treasure rebalance that portfolio, we'll we'll move forward with that as well.

Terry McEvoy: And a question for Krzysztof. Are you seeing any stress within that QSR portfolio outside of the one relationship that we've talked about for the past couple of quarters?

Krzysztof Slupkowski: Yeah. So and I've discussed this on previous calls. We do have we do see softer, you know, softer operating numbers from in that sector from, our other borrowers. When it comes to classified numbers that we have, we have one small relationship in that space. Outside of this large one that we that I mentioned. But outside of that, you know, we have a lot of granularity in this portfolio. We have diversification between the different QSR concepts, different brands, We have diversification when it comes to geography. And borrowers. So there's a lot of granularity over there and you know, this is this is definitely the one we just downgraded is definitely the you know, the largest concern.

Terry McEvoy: And maybe just one last quick one. Back to Chris. That step down in the fourth quarter as it relates to noninterest expenses relative to the third quarter, is that all cost savings from the deal? Or is there anything else baked into that decline in 4Q?

Chris Navratil: Yes. It's predominantly the impact of MVC. I think we always have a little bit of a downward trend through the year in terms of NIE, primarily in the salaries and the employee benefit line items. But most of that reduction is at the MVC savings.

Terry McEvoy: Great. Thanks for taking my questions.

Operator: And the next question comes from Jeff Rulis with D.A. Davidson.

Jeff Rulis: Thanks. Good morning. Maybe a couple of questions on the larger QSR credit. The first, is what triggered the move to nonaccrual? Is it just sort of a time, suppose, is sort of the first part? And then the second piece is, Krzysztof, you mentioned the expectation for a path of exiting some of the better locations. And I guess if there's properties that are sold, would you anticipate that can, I guess, reduce the nonaccrual amount before you kind of fully resolve the whole relationship, in other words, can we see that balance trickle down as you have progress in some of those other locations? Thanks.

Krzysztof Slupkowski: Yeah. So your first question on the nonaccrual treatment, we just got to a point of time where it was appropriate from an accounting standpoint. The loans were past due from a payment perspective. When it comes to exiting the stores, I talked about exiting the unprofitable stores. They have a market that is unprofitable for them. All of the stores in the markets are underperforming, dragging their cash flow down. So, we're working on a plan in place that they are executing or we're going to exit these stores. And then the rest of the locations are performing very well. They're able to carry the debt load that we have.

So we're not exactly sure how long this process is going to take. We think it's going to be the next several quarters, at least three quarters. To execute on this plan and then stabilize cash flow. So the hope is that once that's executed and we're in a better cash flow situation, later in next year, you know, we could potentially talk about upgrading this to accrual status.

Jeff Rulis: Okay. I appreciate it. And Brad, it sounds fairly positive on the M&A front. I'm interested in the sellers, the conversation there as they view, you know, seeing regulatory approval for deals accelerating. Is that changing the tone or bringing more folks to the table, or has it just been a pretty steady state of the folks that you talked to in terms of partnerships? Wondering if that reg approval speed is changing the tone with sellers at all.

Brad Elliott: Yeah. Let me finish on the QSR restaurant. There's several paths to resolution there. One is that they closed down the eight restaurants that are underperforming, and then the other restaurants are currently cash flowing positive today. So they actually have a really good business of their other 33 stores. And so if they cannot execute on getting things done fast enough, we're going to ask them to sell the whole package and force them into that process. So there's several avenues to liquidation here from our standpoint. On the M&A front, I do not think it's driven by regulatory.

I think it's driven by, you know, we're on a tail end of a four-year or five-year period you couldn't sell your financial institution, because four years ago, you were in COVID. Two years ago, we had a really low interest rate environment, which has, you know, taken some time for people to realize what their new tangible book value really is. And so now that we have kind of passed those two windows, I think the age of ownership and age of management is driving those decisions. And so, you know, ownership teams have windows on when they want to have liquidity. A lot of them are past that window from two to five years.

And so that's really what's driving this. Or the management team is three to five years older than they wanted to be when they had talked to their owners about selling the institution. And so it's really age of ownership and age management that's driving every conversation that we have and that hasn't changed, and I do not think it will change. I think there's the reason why there's so much activity is I think there's been so much put off of timing from the past several years.

Jeff Rulis: Appreciate that. Thanks, Brad.

Operator: Thank you. And just as a reminder, it's star one to ask a question. The next question comes from Damon Del Monte with Keefe, Bruyette & Woods.

Damon Del Monte: Hey. Good morning, guys. Thanks for taking my question. First one, maybe for Rick on the outlook here in the second half of the year for loan growth. It seems like you clearly explained what led to the end of period decline this quarter. Could you just talk a little bit about kind of the optimism here in the back half of the year and kind of what's driving that both from a geographic standpoint and asset class?

Rick Sems: Sure. Yeah. We're definitely seeing continued pipelines building. I mean, our pipelines are at the highest levels they've been at. So that's a lot of where the optimism comes. It's, we're seeing more activity in the C&I side as well and our treasury side remained strong as well. So got a lot of deals coming in, and you get these waves of payoffs. And the reality is we know, you get typically one quarter you get a lot of it seems like you get a lot of payoffs. And so reality is in the last year, trailing four quarters, we've had two months with larger payoffs.

So I think there's some aspects of that slowing down as well with the production engine that we have in our the last four quarters of production has been really good. So if we just continue on that path, with a little bit less payoffs, you're going to see that growth. So that's really why we have the optimism for the second half of the year.

Damon Del Monte: Got it. And the lower line utilization this quarter, was that something that was kind of seasonally driven? Or is that maybe a shift in your customer operating approach?

Rick Sems: No. I think there's a couple there's, actually, a couple of specific things with, with a large it's it's actually a situation where a couple of our wealthy customers have some lines. They received some money up and had lines and paid them down. It's sort of a unique situation that happened. Those lines remain in place. We expect those to, you know, probably be drawn again on again as we get later in the year as well. So that had a sort of a disproportional amount. I think also some of it's in the in some of the ag lines as well. Those come back.

So, you know, we're again, we're optimistic this was just sort of a one-time thing. It actually affected our deposit balances and our loan balances because they were carrying them in different entities on the deposit side. They distributed those funds to several principals, and then those principals paid down their lines of credit. So we got hit twice from the same customer base, but that's actually a positive result from the standpoint. Customer's doing extremely well. And they'll draw those lines back up again.

Damon Del Monte: Got it. Appreciate that color. And then, just lastly, Chris, on the margin outlook, I think you mentioned that there's some repricing that's going to be occurring over the next few months for loans. Do you have some numbers around kind of what you expect total loans to be repricing in the back half of the year?

Chris Navratil: Yeah. We continue to have kind of, like, repricing in there, Damon, really on both sides. There's some up. There's some down. I would look at our core margin. It's kind of maintaining right where we realized it this quarter. So that lag repricing had the effect of maintaining around that 4.17 point as you consider both the liabilities and the loans. And then as we look forward into 2026, there continues to be some runway there. Of additional repricing again, on both sides of the balance sheet, some time-structured deposits and some longer-dated loans that will continue to see move up.

Damon Del Monte: Okay. Great. That's all that I had. Thank you very much.

Operator: Yeah. So just as another reminder, it's star one to ask a question. Our next question comes from Brett Rabatin with Hovde Group.

Brett Rabatin: Hey, guys. Good morning. Wanted to just start on Wichita and just with the, you know, with the environment of more defense spending and, you know, Wichita having a bit of an aviation and military backdrop. Just wanted to hear, you know, what was going on in Wichita and then, you know, you guys have gotten away from aircraft lending and that kind of thing, but just wanted to see if that might be an opportunity for you and get maybe, get a little bit of color on how Wichita is doing with the subtrend.

Brad Elliott: Yeah. So if you look at our portfolio, it's less than 10% of our company now is based in Wichita. So it's not a big factor for us on an overall basis, macro basis. On a micro basis, we, you know, we have less than $5 million, I think, outstanding to suppliers in the aircraft industry. From a direct exposure that's down from a $100 plus million, five years ago. So we've really we're not in that space any longer. It's not affecting our community what's going on with Boeing in particular very much because Cessna, Beechcraft, and Learjet are doing so well that there's so much demand for the jobs. And Spirit isn't laying people off.

Spirit and Boeing are not laying people off yet. And having them made any announcements that they're going to. So there's still a lot of demand for jobs here. And the workforce is very intact. You know, their biggest issue in that workforce is, I think, Cessna has somewhere between five hundred and seven hundred and fifty retirees annually out of their workforce. So making sure that they can replace them with skilled workers is important. Then I'm sure all the subcontractors are the same way. So the demand for talent here is still very, very high. And we're not seeing any effects of the Boeing Spirit relationship on the marketplace yet today.

I can look out my window and I can see 190 fuselages on the ground out there for Spirit on delivery.

Brett Rabatin: Okay. And then just a question for Chris. Back on the margin, you know, and it would seem like you're implying that you can't get much more out of the deposit betas or get deposit costs lower from here absent Fed cuts. Any thoughts on how you're modeling that and just what you guys think deposit growth takes at this point?

Chris Navratil: Yeah. So a couple things on that. In terms of the actual deposit betas as it applies to our base today, so call it a no-growth base position. There's a little bit of potential continued repricing as we have some time deposit maturities, but yeah, as you saw over the past few quarters, as rates started to come down, we, like the industry, took, you know, we're strategic in that. We moved forward quickly. We're able to get those costs out relatively quickly so the opportunity set for looking decline went down. That said, we continue to have some that are, what I'll call, at market today.

I think depending on how competition behaves, there's always going to be a little bit of continued opportunity there. Now the offset to that is this competition stays irrational or moves to a more irrational, it should go the other direction on the. So I think that's the risk. What I tell you is new deposits today, that they're interest-bearing. You know, the market competitive out there. So seeing numbers that are meaningfully accretive to where our current cost of deposit is on an interest-bearing basis. A challenge right now in a relative to cost of funds basis. So there's still some value there.

But where we can pursue commercial relationships, we grow the loan balances and with them drive commercial deposit relationships and we're, you know, John Roop and Rick Sems can find success in driving consumer relationships and DDA account. All those incrementally create value. So as we see traction there, there's opportunity for us. But on a, call it, static basis, Brett, the majority of those costs have come out of this point.

Brett Rabatin: Okay. And then maybe just one last one for me. You know, Brad, I think you're, you know, you're still optimistic about M&A and the possibilities. Is the size range for you guys from a target perspective increasing or any color on how you're thinking about, you know, the typical target from here?

Brad Elliott: Yeah. The opportunities have been increasing in size for us. But I think their size range, you know, the set that we have is one and a half billion and below. And so I think you could we're going to spend our energy on $150 million institutions to one and a half billion. In kind of anything in between there that fits our geographic footprint is kind of what we're focused on.

Operator: Okay.

Brett Rabatin: Great. Appreciate all the color, guys.

Operator: Thank you. So just as a final reminder, if you would like to ask a question, it's star one on your telephone keypad. And as we currently have no further questions in the queue,

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