Business First Bancshares (NASDAQ:BFST) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Business First Bancshares Second Quarter twenty twenty six Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Mr. Matt Sealy, Senior Vice President, Director, Corporate Strategy and FP and A. You may begin. Good afternoon. Thank you all for joining. Earlier today, we issued our second quarter twenty twenty six earnings press release, a copy of which is available on our website along with the slide presentation that we will reference during today's call. Please refer to Slide three of our presentation, which includes our Safe Harbor statements regarding forward looking statements and the use of non GAAP financial measures. For those of you joining by phone, please note that the slide presentation is available on our website at www.v1bank.com.

1:04 Please also note our Safe Harbor statements are available on Page six of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the Safe Harbor statements in our slide presentation and earnings release. I'm joined this afternoon by Business First Bancshares' Chairman and CEO, Jude Melville Chief Financial Officer, Greg Robertson Chief Banking Officer, Philip Jordan and President of B1 Bank, Jerry Vasquez. After the presentation, we'll be happy to address any questions you may have. And with that, I'll turn the call over to you, Jude. Okay. Thanks, Matt. Good afternoon, and thank you all for joining us today. B1 Bank had an encouragingly solid second quarter, one that met or exceeded the progress we've been articulating for you over the past few quarters and one that positions us well for a strong second half of twenty twenty six.

1:51 As an example, we returned to our normalized rate of loan production, driving a healthy increase in net interest income. In addition to the production in the second quarter, which came in a relatively balanced way across our footprint, we've built a significant pipeline, particularly in the Houston area, that we expect will translate into sustained growth for the remainder of the year. Margin expanded by eight basis points during the quarter, driven partly by disciplined loan and deposit pricing. We also executed a relatively sizable loan sale that we believe will create additional margin opportunity as we redeploy those proceeds into higher earning assets over the next two quarters. Our team made meaningful progress on the credit front, reducing nonperforming loans by about 30%, in line with the progress we forecasted at the beginning of the quarter. And we anticipate continued improvement on that front over the remainder of the year.

2:39 Revenue from our Financial Services group is running roughly 20% ahead of last year's pace at the halfway mark of the year. Near the end of the quarter, we added a new partner and product, Jeff Fair with American Planning Corp, which provides CFO type consulting services to community banks within our footprint. I say new, but Jeff is actually a twenty year collaborator with us, which gives us great confidence in partnering to offer his services under the SSW umbrella, bringing the number of banks we serve through our Financial Services Group platform to over 200. If there was a headline disappointment in the quarterly numbers, it was in two areas. First, deposits. I'd point out that however, that a quarter of the decline was purposeful, reflecting our pay down of higher cost brokered deposits. Our non interest bearing accounts were positive for the quarter, leading to a slight decrease in overall deposit costs. And the movement was largely seasonal, something we see every second quarter, with deposits already beginning to move back in materially over the course of July.

3:37 Second, expenses ran a little higher than normal, but there's important detail beneath the headline worth exploring. The costs we expect to be recurring, including salaries and related expenses, were flat, with increase tied to upfront marketing spend and elevated legal fees connected to the resolution of a large non performing credit. Two costs that, while core, we don't expect to see again at this scale in the third quarter. I'm going add to the weeds now, as I'm sure we'll cover this in more detail during Greg's portion of the call, but I wanted you to know that all in all, the quarter was a positive step towards increased profitability through earning asset growth, expense control, and continued asset quality improvement over the course of the year. Finally, wrapping up my list of positive developments this quarter, we remain on track for a successful conversion of our Progressive Bank partnership on August 10.

4:26 On that subject, I'd like to mention something that I don't know that we've highlighted directly in this forum before. We tend to get more questions about, and therefore talk more about, our investments in Dallas and Houston, and they certainly warrant the attention. I'd like to point out that there are also significant and positive things happening in Louisiana right now, creating incredible tailwinds for that part of our footprint. The state has attracted roughly $150,000,000,000 in announced capital investments over the past eighteen months, anchored by Meta's data center project in Richland Parish, which the company expanded just last week to five gigawatts of capacity and more than $50,000,000,000 in total investment, up from its initial $28,000,000,000 commitment, making it one of the largest data center developments in the world. The expansion is expected to support roughly 7,500 construction jobs and about 1,000 permanent operations positions.

5:17 Meta also announced more than $1,000,000,000 in related infrastructure investment for roads, water, and wastewater systems, along with the new energy agreement with Entergy of Louisiana projected to save customers more than $2,000,000,000 over twenty years. The state is seeing a broader wave of activity in AI, data infrastructure, and advanced manufacturing that's driving construction activity, job creation, and demand for commercial banking services across our markets. We view this sustained investment as a meaningful long term positive for the communities we serve and for our growth opportunity as a bank. Particularly since the largest of these investments sits in the heart of Northeast Louisiana, we are combining the Progressive footprint with our legacy locations. We will have the largest branch network of any community bank in the area.

6:02 We will continue to invest in the region, including just this morning, concluding an agreement to serve as the official banking partner for the University of Louisiana Monroe's athletic department. Congratulations to our team for a solid quarter. We look forward to maximizing the investments we've made to continue building this franchise on behalf of our shareholders, our employees, our regulatory partners and the communities we serve. With that, I'll turn it over to Greg to walk through the financial results in more detail and look forward to your questions. Thank you, Jude, and good afternoon, everyone. As always, I'll spend a few minutes reviewing our results and discuss our updated outlook before we open up for Q and A. Second quarter GAAP net income and EPS available to common shareholders was 22,800,000 and included a $1,200,000 merger related expense, dollars 545,000 gain on extinguishment of debt and a $6,000 loss on the sale of securities.

6:58 Excluding these non core items, non GAAP core net income and EPS available to common shareholders was $23,300,000 and $0.71 per share. From our perspective, second quarter results marked another quarter of strong financial performance generating a 105% core ROAA and a core efficiency ratio of 63.9 for the quarter. Our second quarter earnings results were highlighted by better than expected margin expansion, improved credit metrics, the resolutions on previously identified troubled loans and building capital levels from disciplined balance sheet management. Also during the quarter, we completed the fully self managed private placement of $85,000,000 or 6.5% fixed to floatings rate subordinated debt notes due in 2036.

7:51 Total loans held for investment decreased $24,800,000 or 1.5% annualized on a linked quarter basis. Excluding the progressive loan sale mentioned as resolution of certain and resolution of certain non performing loans during Q2, total loans held for investment increased $96,400,000 or 5.8% annualized. Based on unpaid principal balances, Texas based loans were unchanged from the prior quarter at 35 percent. Total deposits decreased $229,400,000 as a 237,900,000 decrease in interest bearing deposits was slightly offset by $8,500,000 increase in non interest bearing deposits.

8:37 The decrease in interest bearing deposits was largely driven by approximately $72,000,000 in commercial money market accounts and $63,000,000 in brokered deposits. On the funding side of the balance sheet, the total FHLB borrowings increased to $181,700,000 from prior quarter in anticipation of upcoming loan fundings. Lastly, on April 2, we completed the issuance of the 85,000,000 previously mentioned subordinated debt with partial use of proceeds, utilization to redeem our $52,000,000 issuance that became callable. The net impact from the capital raise was 50 basis points to the Q2 twenty twenty six consolidated total risk based capital measure. Our GAAP reported second quarter net interest margin increased eight basis points linked quarter to 3.73%, while the non GAAP core net interest margin, excluding any purchase accounting accretion, increased eight basis points as well from 3.60% to 3.68% for the quarter ended June 30.

9:40 The margin performance during the second quarter was driven by improvement in loan yields and securities and continued reduction in deposit costs. It is worth mentioning that the second quarter GAAP and core margin did not experience any interest income reversal, which did weigh on the first quarter margin. Recall the prior quarter core and GAAP net interest margin included about a six basis points drag from the interest income reversal on increased NPLs. Loan discount accretion during the second quarter of one million dollars was relatively in line with expectations in a directionally what we can expect the next couple of quarters. On a linked quarter basis, cost of deposits decreased seven basis points, while total loan yields increased three basis points. Core loan yields excluding loan discount accretion for the second quarter was 6.58%, up four basis points from the prior quarter.

10:32 Total cost of deposits for the month ended June 2026 was 2.26%, which was consistent for the Q2 full quarter weighted average rate. We're pleased with our ability to hold the line on these loan yields during the quarter with a weighted average new and renewed loan yield of 7.21% for the second quarter. I'd like to make a note of a few takeaways to Slide 19, our investor presentation. We continue to see 45 to 55% overall deposit betas as achievable regarding any future rate cuts. I would also like to point out overall core CD deposit retention rate was 83% during Q2. This impressive statistic reflects our team's continued focus on maintaining and retaining core deposit relationships.

11:22 Our baseline assumption is that we don't receive any further interest rate cuts during 2026. We have worked hard to manage our balance sheet in a relatively neutral position and we believe we can achieve modest margin improvement in a slightly down or slightly up rate environment. Moving on to the income statement. GAAP non interest expense was $59,500,000 and included $1,200,000 in acquisition related expense. Core non interest expense for the second quarter was $58,400,000 up $3,100,000 from the prior quarter. This was slightly higher than our expectation for the quarter and mostly due to elevated marketing and advertising spend. Recall during the prior quarter, our marketing and advertising spend was lower than expected.

12:08 So when we consider the entire first half of the year, we could consider overall core marketing expenses to be in line with expectations. Going forward, we do expect expenses to be lower as we recognize cost saves in the fourth quarter from the Progressive acquisition. As a reminder, that core conversion for Progressive is scheduled for mid August. Second quarter GAAP and core non interest income was $14,000,000 and $13,400,000 respectively. GAAP results did include $6,000 loss on sale of securities and a $545,000 gain on extinguishment of debt. Core noninterest income results for the second quarter were relatively consistent with our expectation, primarily due to slower swap fee revenue.

12:53 As we have mentioned in the past, some of our noninterest revenue business can be lumpy from quarter to quarter, but overall, in the intermediate and long term, we do expect to steady build an overall contribution. Lastly, I'd like to highlight improvement in credit quality that we saw during the second quarter. The ratio of nonperforming loans compared to loans held for investment decreased 27 basis points to 1.26% at June 30, while ratio of nonperforming assets compared to total assets decreased 15 basis points to 1.23% for linked quarter. This was largely driven by a resolution of certain previously identified CRE commercial business relationships during the second quarter. We are pleased with the improvement in progress and credit resolution during the quarter and we expect as we expect to continue improvement over the next couple of quarters.

13:48 That concludes my prepared remarks and I'll hand the call back over to you, Ju, for anything you'd like to add before opening up for Q and A. Great. Thanks, Greg. I think we're ready to move to Q and A. Thank you. Thank you. We will now begin the question and answer please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone or your device, And And our first question comes from the line of Matt Olney with Stephens. Your line is open.

14:39 Hey, guys. Good afternoon. Good afternoon. Want to ask more about the balance sheet repositioning that you guys disclosed. It seems like this will give you some excess liquidity that you want to redeploy to the back half of the year. Just any more color on how you expect this to play out and what this means for margin and average earning assets and interest income the back half of the year? Thanks. Good question. Thanks, Matt. First of all, the transaction happened in just the last few days of the quarter. We had started at the closing of the Progressive transaction, started kind of running analytics on this and finally came to an agreement. So really no impact other than the assets being lower at the end of the quarter on a point in time basis.

15:38 But going forward, we expect to pick up about four basis points go forward impact to the margin in the quarter. And that's just at a very minimal just applying that liquidity to the borrowings or anything like that. So I think that's a reasonable expectation. And Greg, just to follow-up there, given the timing of loan sale, should we anticipate average earning assets would move lower in the near term, so a little bit drag on the NII? I don't think so. I think with our we should have had a replacement for that in Q3 with asset growth of the pipeline, loan pipeline. So I don't know that there would be a material impact to it. We continue to expect with the build in the pipeline a high single digit increase, annualized increase in both the third and fourth quarters. So we would anticipate that liquidity to work ballpark, you could say half in the third quarter and half in the fourth quarter.

16:54 No, we don't expect clearly, we ended the quarter with the loan growth being hidden somewhat by the sale. But we expect based on our pipeline to be able to put that to work pretty quickly. The other part of that math is and we have about a $21,000,000 reduction in non performing loans, but actually we resolved about $35,000,000 during the quarter. So $31 of that pay downs and about $4,000,000 of that ballpark move to OREO. So those two things combined should give us a little bit of margin expansion, but also we have the ability with the pipeline that we're seeing to put those to work pretty quickly. Okay.

17:41 And then I guess switching gears to the funding side, I think Jude mentioned part of the deposit decline in 2Q was strategic and part of it was seasonal. I just want to dig more into that. I would assume borrowings this quarter that went up just had a more favorable cost than some of the brokered deposits. Any more color there and expectations for the back half of the year on deposit? Yes, I'll touch on each of it. And I think it's they're kind of independent from each other. So the deposit outflow, $237,000,000 in interest bearing outflow, majority of that was from municipals and commercial money market accounts, 77,000,000 specifically the commercial money market accounts. Good news is we've seen a lot of that so far this quarter come back in. So we feel like that is pretty seasonal actually, Matt. We had a smaller balance sheet a year ago, but that same on a percentage basis, the same outflow year over year.

18:49 So the broker that we paid down looked slightly over $60,000,000 in brokered. That was weighted average above 4%. So we just we felt that was the right thing to do that and had the cash on balance sheet to do it. I think the borrowings is more forward looking in price relative to the pipeline build, think, and gives us a little bit optionality as we go forward. Okay, thanks for the color. I'll step back. Think Matt, a little more color on the excuse me one second, just a little more color on the seasonality. We do have we have historically been a business oriented bank, we just tend to have a lot more seasonality around tax payments. And then also we have a number of long, long term relationships with municipalities and governmental authorities, not only with B1, but some of our predecessor institutions that we've partnered with through acquisition and they tend to reach a low point in the second quarter as well, and then begin building back up. It's mainly due to the composition of some of our larger clients that seasonality occurs.

20:10 As Greg said, on a proportional basis, this year was essentially the same from an impact standpoint as last year and the year before that, and really the general movement that we've seen for a good ten years now. Thank you. Our next question comes from the line of Fetty Strickland with Hovde Group. Your line is open. Hey, good afternoon, gentlemen. Greg, I just wanted to go back to your comments on expenses. You understand the cost saves in the fourth quarter from the systems conversion was progressive. But in the third quarter, are you saying we'll see the advertising line and maybe some of these professional legal fees drop down maybe closer to what you had in the first quarter? Or how should I think about, I guess, the expense cadence going into the third quarter here?

21:04 Yes. I would say the directional way to see it is slightly down in the third quarter, closer to fifty eight third quarter and then closer to 57 in the fourth quarter is the way we think. Okay, got it. And just wanted to ask to switch into the capital side. Mean, looks like share repurchases picked up some this quarter. With Progressive behind you at this point, is that something we could see more of over the next couple of quarters or was that maybe a little bit more opportunistic? Yes, I think we've kind of we think at the price we're at as long as it stays above 120.

21:54 That's kind of where we started doing the math on the value based on our other capital opportunities. I think the other two capital opportunities we have, obviously one would be our organic growth opportunities with our Houston team that we recently hired and just the other loan pipeline opportunities we have would be the first, forest capital use primary. And then the second thing we have in the near term is the callable event of our preferred stock next year in September. So we have the ability to pay that down in part of next September. So I think that would be another useful opportunity for the capital. So those are kind of in the order we've been thinking about it right now.

22:52 Got it. We can can probably give you a little bit of a projection for where we expect to end the year capital ratio wise? Yes. Capital wise consolidated total risk base in just under 14%, around 13.9%. And on CET1, just under 10.6%, probably on a consolidated basis to end the year. TCE likely to reach about 9% and that's assuming mid eight ish percent annualized loan growth next couple of quarters, kind of steady balance sheet growth and like Greg mentioned earlier, continued margin expansion. We'll enter 2027 with as much capital optionality as we've had in a number of years, combined position of relative capital strength compared to hitting its low, I guess, in 2022 is probably when we hit our low. But so looking forward to reinvesting that primarily in organic growth, as Greg mentioned. But it would be nice to be able to have some savings projected through the refi of the preferred equity here at the end of the year as well.

24:01 So Fedy, we'll continue to have our plan in place to look and be opportunistic with repurchases. We did 176,000 shares about $4,800,000 in the second quarter. So if the opportunity arises, we'll be ready for that as well. Yes. Freddie, congratulations on your second baby by the way. It's number one, but I appreciate it. Oh, number one. Next question comes from the line of Gary Tenner with D. A. Davidson. Line is open. Thanks. Good morning or excuse me, good afternoon.

24:48 I just wanted to ask on the deposits. You talked about the seasonality and the outflows of some of the commercial money market that's come back in this quarter. With that money coming back in, which I assume is coming in a little bit higher than kind of the average cost was in the quarter, does that put any pressure on deposit costs? Or are there other levers to pull within the deposit portfolio to continue to push cost down? Gary, there's two components to that. So we were up in non interest bearing about $8,000,000 quarter over quarter and we continue to see that build. So we've had some early success in the quarter with that. So that gives us a little bit of pricing optionality as well. And then I think the second part that I've been surprised about is the inflows we've seen have been coming back in pretty much matching the average weighted rate for Q2. So hadn't really experienced any lift yet, but it's early. So we're optimistic about that.

25:55 Got it. I mean, just as it relates to the CD book weighted average rate three thirty in the quarter, is there room to push that down? Or are we now sort of at stasis the funding side without any Fed action? We've got some opportunities with both brokered and organic CDs in the third and the fourth quarter to re reprice those down. So we'll hopefully, if rates stay where they are, we be able to take advantage of that. Okay. And I may have missed it if you noted it in your prepared remarks, but in terms of the swap fees and the decline there quarter over quarter, could you just talk about the dynamics around that? Yes. I think we had a well, I think the dynamics about naturally was we had a really good second quarter in those fees, swap fees for the second quarter. So they were down, but probably closer to in line with the forecast for year. And I think we've already got some indications, some pretty good wins in the third quarter. So I think we'll see that come back up closer to Q2 levels.

27:04 Really good, really strong first quarter. Yes, strong first quarter. And they were down, but they really were in line with their expectations. I think also it's a relatively nascent business. These newer businesses are can be lumpy and just a couple happening or not happening quarter over quarter can make a difference to the top line, but it's still material. So as we mature it, as has happened with all of our lines of business over the years, we'll be able to de lumpify it. I'm not sure if that's a word, we'll be able to hopefully kind of smooth it out a little bit. But it's still young enough that just a couple deals do make a difference in a given quarter. Same with our SBA business and really our financial services group as a whole, which is still a fairly new entrepreneurial endeavor.

27:59 Thank you. Our next question comes from the line of Christopher Marinac with Breen Capital. Your line is open. Hey, good afternoon. Just want to dig a little bit further into criticized asset trends and what you were seeing there and maybe how that may look a few quarters out? Yes. Chris, we feel we're happy with the resolution we got in the third quarter that I mentioned and the second quarter that I mentioned. As we look out into Q3, I think seeing that we ended at $80,000,000 point for Q2. We're working toward possibly a 10% to 20% resolution again and we think that's achievable in Q3 in NPLs and then also reduction in OREO possibly 10% to 15% of that as well.

29:02 So we feel like that's achievable in Q3. We think that will continue to maybe slightly down from there in Q4, but we think that it's achievable to end the year closer to $50,000,000 or slightly below. And then that historically for us that has been an area that's been pretty normal, say 40,000,000 to $50,000,000 in NPLs. The good news from a credit front are two things I think that are kind of when you start pulling the curtain back a little more is past dues for Us quarter for the first quarter and the second quarter continue to be more in line with our historical expectations below 50 basis points or 1.5 to 1%.

29:49 I think the other thing is if you look at our the watch list, specifically what we call forty five and fifty credits, those are the ones that we start watching that haven't made it to non performer yet or classified. At the end of the year, was about $450,000,000 That's down to about $330,000,000 at the end of June. So those two things from a forward looking perspective along, we haven't seen any major build in NPLs give us kind of outlook on the future that we think we've kind of gotten past the little lumpy period that we had with those few problem credits we talked about probably for three or four quarters and then started resolving last quarter.

30:40 Great. That's really helpful, Greg. Thank you for that background. Does any of this give you relief on the allowance going forward or would you just assume kind of grow into what you have at this moment? I think our plan is to try to grow into what we have. We're pretty flat quarter over quarter. As the improvement with some of the classified criticized loans move out, I think it gives us the opportunity just to continue to bolster the good books within the pool and continue our plan to try to reserve 1.20 times all new loan growth because we feel like we'd like to continue to grow it. Great. Thanks again for hosting us today. Thanks. Thank you.

31:27 Next question comes from the line of Michael Rose with Raymond James. Your line is open. Hey, good afternoon, guys. Thanks for taking my questions. Most have been asked and answered. But Jude, you spent some time in the prepared remarks talking about the Meta investment in Louisiana in general. Can you size what that kind of means for you guys from an opportunity perspective? I assume you're not making loans to Meta or doing data center loans or things like that. But what does that really mean in the context of the ability to grow both loans and maybe some of the fee products? Would just love some color there. Thanks. Yes. No, you're right. In fact, we had a good discussion in our Board meeting today about that. We're certainly not camping out next door expecting to bank the data center itself, but when you have an entity that large, there are an awful lot of vendors, service providers that need to operate there on a regular basis, and so that would be our initial opportunity, bank small businesses that are doing work for the data center, and even after the construction period there will be maintenance, there will be materials needed, there will be transportation requirements, and things of that nature. And so what we're finding is that not only is there opportunity specifically in that geography, but the investment is

32:58 so large that they're needing to bring in vendors from continuous geographies. And so we've actually seen that some of our client base in Baton Rouge and Lafayette and Lake Charles and even Houston are actually generating work related directly to the data center development in the Rayville area. It's really ample, that's one thing I would say. The second thing I would say is that what we anticipate happening is the dollars that are being spent there will trickle throughout the community and will show up in a more dispersed way than just the company that's investing there and just the company that's doing business there. A good example is recently the Richland parish school system gave each of their teachers a $50,000 bonus for last year's work.

33:58 So the tax implications of the, and that was made possible because of taxes surrounding the data center investment. So there will be opportunities for reinvestment by the municipalities and other governmental entities in the region that will ultimately benefit a wider array of citizens. We now, And although we began with a very limited branch network focused primarily on small businesses over time, we've grown to be the largest Louisiana headquartered bank as measured by Louisiana assets. So number of clients in Louisiana and number of locations.

34:45 So as the positive economic impact trickles down to communities throughout Louisiana, we feel like we are as well placed as any entity to take advantage of that general economic positive turn. It's really not anything that's magic per se about banking the data center itself. And by the way, there are other data centers under work, underway in other parts of the state, including where we are, including Bossier Parish. But we don't anticipate all of a sudden doing major macro loan deals with the data centers themselves, but as the economic benefits trickle down, we believe again that we're well placed to do traditional community banking across our footprint. We'll be, as long as we put in the effort and put in the work and treat the clients right, then we should be in front of that people down the path.

35:48 Exciting. Really appreciate, oh, go ahead, sorry. Well, I was going say it's exciting not just for the data center itself, but for the wider potential effects that will take a little while to play out. That's not a third quarter thing, right? I mean there is activity there, there's work there. We are seeing some loan demand increase because of the businesses that we think are doing business there. But I think the longer term effects are what is really exciting about the opportunity both for us and for the citizens of Louisiana. Very helpful commentary. Maybe just one follow-up on top of that. Just as we kind of think about the second half of the year, you mentioned the loan growth pipeline, redeploying the loan sale proceeds.

36:36 You obviously talked about credit continuing to get better. You got the cost saves from Progressive coming. And then you just talked about Meta in Louisiana and all that stuff. What do you think investors are kind of under appreciating most about the story at this point? And maybe where do you see potential upside to where expectations currently are? I know it's a kind of a long, maybe tough question, but maybe just a couple of points would be I think helpful because it seems like there's a fair amount of tailwinds here. Thanks. Well, think a couple of things. One is that I think that historically investors and analysts have not appreciated, I shouldn't say appreciate it, and they haven't turned to Louisiana for growth.

37:25 Louisiana has historically been a stable place and had a couple of periods where we were too concentrated and showed up in couple of energy crises. But I think that over time, investors really haven't spent a lot of time looking at or thinking about Louisiana, particularly relative to the more exciting headline news from our neighbor to the West. And so if you just compare the two over the past ten, fifteen years, it's pretty clear why investors would spend more time thinking about Dallas and Houston, which is good for us as well. But it means that Louisiana, I think, just hadn't gotten a lot of attention. So I don't know that it's my first point would be, I don't know that it's they haven't, what are they missing, I think it's just that they are only now beginning to realize that they should look harder at Louisiana than they might have over the past ten, fifteen years when the news wasn't as growthy as it potentially is now. Then second of all, would say some of the news is recent. The increase in the investment in Meta that I just mentioned literally happened in the last ten days. I think Sunday night last was the pre announcement and they announced it on Monday. So it really isn't realistic to expect that investors would pick up on that quickly. Then I think some of the news, the data center in Bossier for example, and

38:58 the one near St. Francisville, which is north of Baton Rouge, I just think it's all a bit new, and I think as a country we're still figuring out exactly what data center development is going look like, right, and what the actual impact is going to be. One reason that I feel comfortable that it's going to be extremely positive here is that we haven't had those significant growth opportunities, so on a relative basis we have more room to grow than some other places do. And so whatever the development is, whether it's a quarter of what it sounds like it's going to be here, whether it's 50% or whether it's 100%, it's going to be significant. And I think unless you've already been paying attention here, it might be hard to kind of put that in the proper context. So I think it's moving quickly, I think that there are still some unknowns nationally about the economic flow transfer and the trickle down effect.

39:58 So we'll all have to kind of learn that together. But I do believe given our starting point in Louisiana that it's hard to imagine that it won't be a very positive outcome. I appreciate all the color. I'll step back. Thanks, guys. Okay. And our last question comes from the line of Matt Olney with Stephens. A few follow ups here. On the credit front, Greg, you mentioned some more resolutions the back half of the year. Any color as far as anticipated charge offs from these resolutions? Yes, I would say what we would expect of it's hard to say back to historical because our historical charge offs were very low, almost nothing. I think high single digits would be something we expect on an annualized basis in a normal quarter in these next two quarters possibly.

41:09 And then we kind of go from there. And if we have something that pops up and we have to take more of a loss, might look more like what this quarter did. We think we're working them close to where they're not going to be any significant losses. But we're in the risk business, so it's hard to say no losses, Understood. Understood. Thanks for the color. And then market disruption in your marketplace. I know we've talked a lot about this over the last year and you've had some nice wins, nice announcements from some new hires. Didn't know if there was any other announcements or updates to the any BIMWARE benefits from market disruption. We were able to add two or three members to the team in Houston in the second quarter.

42:02 And so we feel like for now we want to consider that our team and we want to begin producing and making sure that that's clicking the way that it should. But I do anticipate as we have success that there will be other opportunities to add to that team. I know our market leader there as regular is called upon regularly by folks that are interested in talking. Again I think we're kind of where we want to be for the short run, but I do think over the long run our biggest opportunity, and it's one of the biggest reasons that I mentioned earlier, and Greg mentioned the primary use for our capital in the upcoming quarters is likely to be organic because we do believe is continued opportunity around that disruption.

42:55 And I don't see that tailing off in the near term. So we're having a few conversations in Dallas. We're not quite as aggressive in Dallas as we are in Houston just because of the relative size of our franchise, and each we feel like Houston is we made that investment in Texas Citizens a few years ago, and we want to be sure that we invest properly in that market. But we do still need to be tempered in our salary expectations, and we've made commitments to view ourselves about our increased structural profitability, so we want to be sure that we follow through on those even while we're taking advantage of the opportunities. But we do see continued opportunities on the disruption front.

43:48 If you think about the banks that have our kind of range of size and capability, there aren't very many of us in Louisiana and Texas, and in particular in Dallas and Houston. So we see that not only disruption as a possibility in terms of employees coming over, but also in terms of types and sizes of businesses that are looking for a bank that is a community bank in attitude, but is a larger bank in terms of capabilities. So we're most excited about the potentials for our franchise, the potential for our franchise given that disruption, which we think will continue to be an opportunity. I started rambling a little bit. I think I answered your question. Did I answer your question, Matt?

44:36 Jude, you answered it and then some. So appreciate all the I color as answered your follow on question, Chris. Well, just one last one from me here. We've talked a lot about the ROA goal, the 125 exiting the year in the fourth quarter. And we'd love to hear any more commentary about that with respect to this quarter, especially the balance sheet repositioning. I would think that would be supportive of the ROA given the lower yielding nature of those loans that were sold. But anyway, just love any commentary from that. Thanks. Yeah, well, that's kind of what I generally was starting off with in my prepared remarks just about this being a good step along the plan that we've been articulating for you all over the past few quarters and our intention to increase our structural profitability even as we have growth and we feel like we are on plan.

45:37 And it doesn't mean that it's a slam dunk and doesn't mean that it's automatic that we'll be able to get to the 1.25% ROA. But we still believe if we perform and execute and things go our way that that is a credible opportunity for us to kind of reset our profitable our structural profitability. And that's the goal for the rest of the year. Even if we were to not quite get there, we still made material improvement and still plan to continue to have that focus next year as well. And we'll continue working on it. That's our primary goal. Yes, I think to get there, it is going to require that this pipeline comes to fruition to a certain extent. And I think it also requires some margin expansion, which to your point, the restructuring is a significant boost to those efforts, as well as the loan growth, and then it requires continued discipline on expenses.

46:44 We've had really flat salary cost over the past four quarters essentially, and anticipate that continuing over the next couple, certainly. Our team has been improving its ability to be productive. So we're significantly larger than we were a year and a half ago, two years ago, and have a very similar number of people at the bank, and I'm proud of that. It's certainly a part of our daily conversation, how can we help our employees be the most they can be, which helps us be the most we can be from a production and profitability standpoint. So yes, that's still our target and we do need to execute and things need to go our way, but we feel like that's a realistic path that we're focused on achieving. A little bit of a stretch when laid it out last year, but if you don't stretch yourself, then you don't get anywhere. So we're excited about that.

47:51 And I do think that it's time for us produce at that level of profitability as a franchise. We're twenty years old, we've had, if you go through the different list of things that we've accomplished, the list is pretty long and we've checked a lot of boxes in terms of our ability to grow, in terms of our ability to do M and A, in terms of our ability to see through asset quality challenges, our ability to see through loan concentrations that have evolved over the years. And then as with all banks that are our age, see through a number of macro crises that have occurred even while we've grown to $9,000,000,000 So we're very proud of all that. But that only really matters at the end of the day if we then end up providing the right return to shareholders.

48:40 That means turning these investments into consistent profitability, which is our goal and I think we're well on our way towards doing that. Okay, that's perfect. Thank you, Jude. Thank you. I want to mention just on the same subject, we did get a written in question about dividends and our intentions there, and so we did declare a dividend that we announced in the press release. We've now and it was a consistent dividend with where we were last quarter. We've now, I believe, seven years in a row, once we started paying a dividend, we have increased it seven years in a row. And we'd still like for that to be our goal. We feel like we have 50% of our shareholders are retail investors that have partnered with us and stuck with us through these acquisitions and the dividend is important to them as it is to us.

49:40 And so we'll continue the dividend path and the goal would be to incrementally increase on an annual basis, so not on a quarterly basis, but on an annual basis. And that's why I wanted to take an opportunity since we were talking about that. And we've historically kind of targeted about 20% of earnings. And so that's roughly where we are now. And as our earnings power appreciates, then there's no reason to think that to some degree our opportunity to reward shareholders with dividends would track that increased profitability, as has the ability to buy back shares, which again, we've only this year begun to strike opportunistically on that front, and that's the result of our earnings leading to increases in capital, which gives us that optionality. So we assume that that opportunity will continue, as well as we're focused on building tangible book value and again that structural earnings increase in our profile.

50:53 Thanks for letting me answer that other question with your question, Matt. That concludes the question and answer session. I would now like to turn the call back over to Jude Melville for closing remarks. Well, thank you. I appreciate again all of you all joining. I think I had a pretty good opportunity to articulate the things that are important to us and that we're working on, what we see as opportunities, all of which should turn into accumulating tangible book value and providing a good return on everybody's investment. I would like to take just a final thought or final moment to wish our team good luck in August. We'll do the conversion as both Greg and I mentioned. Although we have had experience now and have done it successfully a number of times, it's still a stressful and critical weekend preparing for that. And I want to thank and wish the best of luck to not only the former Progressive employees that are now B1 employees, but also our ops teams and everyone that's involved in that process.

52:04 First acquisition that we did a long time ago now, I guess about eleven years ago, we learned a lot of lessons. And so we worked hard to invest in that process. And I'm really proud of that side of the bank in terms of their ability to execute. And we anticipate, particularly based on the positivity with which the progressive teams have tackled the opportunity, probably as positive as any partners that we've had from that perspective. And we're confident that we'll succeed on the conversion weekend, and then be ready to go in terms of helping provide capital to the communities that we're honored to serve in North Louisiana and, of course, across our footprint.

52:51 So thank you all very much, and hope everybody has a good end of the week. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.