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Net interest margin expanded 7 basis points to 3.55%, driven primarily by a strategic restructuring of the bond portfolio completed in January and lower deposit costs.
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Loan growth of $33 million was moderated by seasonal outflows of public funds and planned payments in CRE and healthcare, although production increased $365 million year over year.
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Management successfully onboarded 27 new net revenue producers in the first quarter, targeting a total of 50 for the year to accelerate market share gains in Texas and commercial banking.
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Efficiency remained a priority with a 55% efficiency ratio, as seasonal payroll tax increases were offset by disciplined expense management and strong commission income performance.
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Capital deployment was prioritized through the buyback of 1.4 million shares and an 11% dividend increase, supported by a strong CET1 ratio of 13.3%.
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Deposit mix remains a key strength: DDAs account for 36% of total deposits, despite seasonal fluctuations in public funds.
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The updated guidance now assumes no interest rate cuts through 2026, and management does not expect any significant negative impact on NII or NIM under this fixed rate scenario.
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Loan growth is projected to accelerate in the second half of the year toward mid-single-digit targets as new banker hires starting in 2024 and 2025 reach peak productivity.
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NIM expansion is expected to reach the upper end of the 12-15 basis point range by the fourth quarter of 2026, supported by approximately $1 billion in bond cash flows being reinvested at higher yields.
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Management intends to exhaust the remaining 4.1 million share repurchase authorization throughout the year, depending on market valuation and organic growth opportunities.
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Spending guidance is skewed toward the upper end of the above ranges due to the accelerated pace of hiring revenue-generating personnel earlier in the year.
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The January bond restructuring contributed 4 basis points to first quarter NIM, and a total quarterly impact is expected to reach 32 basis points in improving bond yields.
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CD renewal rates remain healthy at 85%, although the benefit of marking down maturing CDs is expected to diminish as the year progresses in a fixed rate environment.
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Credit quality remains stable and criticized commercial loans decline for the fifth consecutive quarter, although management expects a flattening of this trend rather than rapid, continued improvement.
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Net charge-offs are projected to remain within a range of 15 to 25 basis points for the full year, reflecting a disciplined credit stance despite macroeconomic uncertainty.