Brad: So it's kind of coming from western Kansas, Oklahoma, Nebraska. Kansas City is doing great. Wichita team is doing really well. So it's kind of across the entire footprint.
Damon: Got it. Okay. Great. And then I appreciate the guidance on the margin, Chris, and the outlook there. How would you characterize the positioning of the margin kind of given a higher for longer margin? Thank you for having me.
Collin: Yeah, Damon, what I'd point to in terms of a rising interest rate environment is really the last cycle we went through. The balance sheet hasn't changed meaningfully from a posturing perspective for rising interest rates. So I think we're positioned to do well in that world. You know, there's always the caveat of what happens in liability pricing and how everybody behaves through that environment. But in an upward rate scenario, I think we're well positioned to execute similarly to the last iteration.
Damon: Okay, great. That's all that I had. Thank you.
Operator: Your next question comes from the line of Brendan Nossel with Hubdy Group. Your line is open. Please go ahead.
Brendan Nossel: Hey, good morning, folks. Hope you're doing well. Let me just start off on... Hey, good morning. Just starting off here on expenses, you know, nice to see the run rate come down so much this quarter as well as the improved guide for the back half of the year. Just kind of curious, is there anything specific that's driving that improvement, whether it be some of the AI automation initiatives you spoke to or cost savings from Frontier, or is it more just kind of blocking and tackling as you work through 2026?
Collin: It's heavily the back two there, Brendan. So the first thing, and we emphasized it on the prepared comments, is it was really important to us to get Frontier closed and converted in Q1 so we could create some of this visibility to where expenses really should be. So a lot of the benefit is coming from getting through that conversion process, realizing the reduction in and their technological costs, the people costs associated with managing those systems, et cetera. So that's a lot of where you're seeing the benefits. There's obviously still focus internally on where we can find other opportunities to reduce costs over time. So you're seeing a little bit of that come through as you think about AI, Technology, Automation. As Brad mentioned, we're leaning into it. We're working hard on figuring out how it moves the needle for us over time, but there's not tangible benefit to it today where we'd say, as you look at expenses this quarter versus last, it's due to X artificial intelligence benefit.
Rick: So that's still too early stage, but we're excited about where it can go.
Brendan Nossel: Awesome. Okay, that's helpful, Collin. Maybe, you know, circling back to the margin for a moment, can you just talk about the puts and takes in that back cap margin outlook that would get you toward either the high end or the low end of the range as you look ahead?
Collin: Yeah, the high end execution to me really lives in the liability side of the balance sheet. So to the extent that we can maintain and decline liability costs over time, and we've talked about in the past the the frontier accounts that came on board, relatively high costs. So there is some tailwind there. If we could execute on declining that liability position, our opportunity on the asset side that we've talked about, you know, Rick talking about loans, we can hit the high end of that margin. On the low end, it's really the alternative, right? So if liability costs creep up, we've talked about yield curve kind of moving the other direction on us at the moment. That's the potential to deteriorate a little bit margin over time. So it's really that, Brandon.
Brendan Nossel: Thanks, Chris. I appreciate you taking my questions.
Operator: Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.
Nathan Race: Hey, guys. Good morning. Thanks for taking the questions. Curious, maybe, Rick, if you can kind of speak to kind of what you see in terms of pricing on New Loan Production relative to, you know, roughly the 650 kind of core loan portfolio yield. And, you know, curious if you're seeing, you know, any kind of degradation and new loan yield productions, just given that you guys seem to be going up market in terms of clients all these days to some degree.
Rick: Yeah, so I think on the loan pricing, we're continuing to see it stay fairly strong. We're really disciplined on that. So as a result, that is something that the team takes to heart and goes after. So I'd actually say that maybe we're seeing a little bit of stress there in certain markets. Every once in a while, you get an irrational flare. and in those markets we choose not to play at that level and kind of decide to go wider. So we're not really seeing a lot of downward movement in that I look at every exception that we have as we run it through the pricing model and those are not accelerating. So it tends to be that we're about the same as we've been over the last two years in those types of exceptions. I think pricing has continued for us to hold firm.
Nathan Race: Okay, great. That's really helpful. And then changing gears, I believe you guys have just over 100,000 shares left on the remaining buyback authorization. So just curious if you can kind of speak to the aptitude, just given the valuation relative to peers these days, which seems quite low to that end, and just considering You guys are building capital on pretty strong clips and even have existing access capital currently to maybe pursue some additional acquisition opportunities as well.
Brad: Yeah, so we always balance the use of capital between, you know, Share Buyback, making sure we have enough for M&A transactions. We are in conversations with people on the M&A side, so we always want to have enough there to be able to perform those transactions. And then we use a model very similar to what we use on the acquisition side for the buybacks. So when we're in range, to do buybacks. We think those are no-brainers. There's no integration risk, so we'll deploy the capital to do buybacks. And so, you know, it all just depends on, you know, what's the earn back on that and, you know, does that fit our model or we'll hold the capital looking for M&A opportunities. And we balance those three things at the board meeting We talk about it at every board meeting, set our target price, and so we'll always be active in the buyback when it makes sense, and we'll be out of it just like we are in the M&A side when it doesn't make sense. So I hope I answered that question. You can't really figure it out.
Nathan Race: Yeah, no, I appreciate the various dynamics there, Brad, but if I could just follow up. So it sounds like we shouldn't be surprised if there's an increased authorization at some point, maybe later this year.
Brad: Yeah, I think we already have an authorization.
Collin: The board's authorized and we're waiting on formal approval through the regulatory bodies, but we plan to maintain.
Brad: We always plan to maintain a buyback approval from the board. The board's actually already approved that and we're just waiting for standard regulatory approval to up that. We haven't been in a big rush for that because we still have shares. available to buy back.
Nathan Race: Okay, great. I appreciate all the color. Thanks, guys.
Operator: As a reminder, if you would like to ask a question, please press star 1 to raise your hand. Your next question comes from the line of Matt Olney with Stevens. Your line is open. Please go ahead.
Matt Olney: Hey, thanks, guys. Appreciate you taking the question. Want to circle back on the loan growth discussion and with the paydowns we've seen so far this year, it sounds like most of this is from the recent acquisitions. Any color you can provide as far as customer retention, employee retention from those deals and how that compared to your internal expectations?
Brad: Yeah, so I think when we look at both of these transactions, you know, the My expectation is it's exactly kind of what happened in Nebraska. It's actually better than what happened in Nebraska. Parman did a great job of pre-hiring for that market. We already had opened an LPO office there. So we already had boots on the ground, but also we had a lot of color on other people in the marketplace that we might want to talk to. And so I would say that the Nebraska market is in better shape than actually when we acquired it by quite a bit. The team that we have in Lincoln is very exciting. They mostly came from larger, they all came from larger institutions, and are excited to be back with a company like ours that's big enough to do the deals that they like to do without the complication of working for a $30 billion bank. And so we're really excited about the team in Omaha and Lincoln, Nebraska, and How that team is shaping out. We've kept a core group in Omaha with us and we've added to that. We probably started with 18 bankers on acquisition day and we are up to 22 bankers. So from an ability to produce, we actually have lots of ability to produce in that market, which is what attracted us to that market to begin with. And I think it's playing out exactly as we anticipated. Oklahoma City is kind of the same way. We're continuing to hire bankers in Oklahoma City. It gives us, you know, the reason to enter these markets, which is what I wanted to do with acquisitions, is it gives us a really core base to build off of. So there's core customers there we can expand. and it gives us a footprint then to go hire people into. People don't want to work for a loan production office because they don't know if you're truly committed to that market or not so it's hard to get people to work for you in those environments long term without having something to build around and man, we've got scale in both of those markets now, great reputations in both of those markets and so hiring people into those is an exciting venture so I'm as excited about our organic growth piece as as possible, even more so because of the legacy markets are, I don't know, 25, 30% better than they were a year ago. Today, and you add these new markets on top of it with the acquisitions is great. I'll turn it over to Richard.
Rick: Yeah, I was just going to add, Matt, on the customer side of it, one of the things you find in these is there's always these really good core blue chip customers. And what we're then able to do is really expand with them. And so that's, you know, you don't see that you know quarter one quarter two I mean but that happens over time so then you've got some really good customers we spend a lot of time with them those are the ones then that allow you to expand you know from a you know they've got stuff with numerous other banks those are the ones we really are able to go after and and you see that in in year two and year three as that expansion really comes into play and both of these banks both NBC and Frontier had some really good core customers that we're looking for significant expansion over time with. So the customer, the retention piece of that is on the core customers is really, really strong.
Matt Olney: Okay, great. I appreciate the color on that topic. And I guess switching back towards the margin outlook, Chris, you've already provided some great color for us for the back half of the year. Any more color on when you think those near-term headwinds are going to moderate? And as you think about the margin for 27, any puts and takes we should be mindful of for that?
Collin: Thanks. Near-term headwinds moderating, I think there's... I think there's puts and takes on both sides where I'd say we have both tailwinds and headwinds operating right now to where that range 425 to 435 is reasonable and I think you could hit either end. I'm more optimistic about the 435 side of it. But I don't know that there's a specific indicator of challenge today that I'm worried about alleviating. As we look into 2027, as we get this organic growth engine going, I think you're going to see, over time, maintenance of where we are on a larger earning asset base. And I'm optimistic we'll be able to accomplish that as we look out further into 2027, 2028, and beyond. OK.
Matt Olney: Thanks, guys.
Operator: Your next question comes from the line of Brett Verbatten with Stonex Group. Your line is open. Please go ahead. Hey, guys.
Brett Verbatten: Good morning. Wanted to ask on the fee income guidance. I know it's the Investor Day. You seem pretty excited about that, despite where rates are that mortgage banking could be A bigger contributor. Can we talk maybe about the low end of the high end of the fee income guide and just what drives it to the high end? Could that be mortgage? Would that be other things like trust, wealth? Any thoughts on that?
Collin: Yeah, good question, Brad. The high end of that is driven by continued growth in really all the business lines, right? So as we look to continue to integrate frontier customers, NBC customers, and looking to at the cost sales cycle on the commercial analysis side, looking at treasury opportunities, there's going to be means by which we continue to expand that particular line item. Mortgage banking I'm sorry, Frontier brought a good practice in that world. The interest rates are a challenge today, you know, as you noted with the rising yield curves becoming The challenge of that, the opportunity for us to expand versus stay is a little bit muted. But Trusted Wealth Management continues to grow and provide opportunities. Debit card and credit card income are expanding as we continue to deepen relationships with those customers. So the high end of that range is just continued trajectory of what we've been doing. And the low end is a function of It could be seasonality, it could be mortgage banking going down somewhat with the changing interest rate environment. Tell us what I would point to. I don't recommend anything else.
Rick: I think that's right. We've added the people, we've added the strategy on there. We're seeing on the TM side, for instance, there's just a lot more calls and a lot more opportunities for winning TM business and there's just a sort of change in attitude. We're looking at, you know, things like waivers and stuff like this. So it's just, it's, you know, I think that piece will be coming. And Chris is absolutely right on the mortgage side. We've got a bigger mortgage production team than we did before. But again, that's one obviously heavily rate-driven.
Brett Verbatten: Okay, that's helpful. And then Brad, you seem really excited about AI and deploying technology. And I'm looking at slide 16. Specifically, and wanted just to hear maybe what inning you think you're in and adopting AI in terms of what it can do. And then just aside from, I think there's obvious benefits on loan review, getting things done faster and credit review, maybe some of the other things that might be coming down the road in terms of efficiency from that perspective.
Brad: I think anybody that says we're not in the first inning or even at bat doesn't realize how much this is going to change the world. So I think anybody that says they're on second base probably doesn't realize what the power of this is. I look at this as, and I said in some of my prepared comments, I think it has a lot to do with when I started banking, the bank I started at, we had one PC in the whole institution. It had two floppy drives in it. And within four years, everyone had one on their desk. and they were all connected through Novell network and you could communicate with one another and share files and all of a sudden we dropped from you know eight or nine hundred thousand dollars per employee to a couple billion a couple million dollars per employee to within Five, six years it was $5 million per employee. Now we're at $10 million per employee. It's kind of the benchmark. So I think we're in a trend where we're going to be doing this same thing over the next three to five years. And so I think we're all in the beginning phases. And I think you're going to see costs coming out of all organizations because of this trend. And so as a growth company, it's very exciting to me because we've got great people that work for us. It allows us to continue to leverage their abilities as we continue to grow. It probably means we don't need to add as many people as we continue to grow as an organization and our efficiency ratio continues to get better and better as we continue to grow. I think we listed some things that we actually are using today because they're easy to use on the loan review side, M&A review, headhunter placements, Those types of things. But, you know, I think we're all in the very beginning phases.
Brett Verbatten: Okay, that's great cover. Thanks so much, guys.
Operator: Your next question comes from the line of Jeff Rulis with DA Davidson. Your line is open. Please go ahead. Thanks.
Jeff Rulis: Good morning. Wanted to ask about the added not accrual loans from Frontier. I guess just the question of why weren't those added at the jump in one queue and just kind of speaking to more of the migration. And Rick, I think you talked about the Nebraska optimization of loans there. Just trying to track anything that developed as when you closed and from then until now of just pointed to that migration piece.
Brad: What happens, Jeff, is there are credits that are paying as agreed. We tell the customer we're not going to renew under the current terms. And so there's a little battleground that starts with that. We use that as leverage to start working them out of the bank. Sometimes that flips them to non-accrual during that process of getting them out of the bank. We have them appropriately marked as part of the acquisition. But they come across as accrual because they are making payments and accruing. But when we don't renew them, then they're not current any longer. So it just is something that happens regularly as we work through portfolios and collecting. So it's a modest uptick. There's nothing systemic in it. There's a house under construction. that we don't think is going the right direction, and so we wanted to find another bank, find another opportunity, or we're going to work out a thing. So, I mean, there's a whole host of things through that process. There's a divorce on an ag deal that causes a problem, and, you know, there's a whole host of issues that happen in the lending business, and that's what we do.
Jeff Rulis: Yep. You kind of answered the follow-up. It's that those were marked, at least on the frontier side. So, appreciate it. And it sounds like the loss content in the forward guide on provisioning unimpacted. So, just a quick follow-up. So, it sounds like the opportunity on the frontier side decreased some of those deposit costs. Is there further there? Has that largely been worked through? Just wanted to get an update on how that's progressed.
Collin: Yeah, there will continue to be some opportunity there, Jeff, over time. So Frontier had a healthy level of maturing deposits that had laddered maturity. So we'll continue to see some of that over the next two, three, four quarters. So a lot of it has been worked through, but there is still some opportunity.
Operator: Okay, I appreciate it. Thanks. We have reached the end of the question and answer session. This concludes today's call. Thank you for attending. You may now disconnect.
