Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted earnings per share was $0.63, with a return on assets of 1.33% and a return on tangible common equity of 17.8%.
- Net interest margin remains strong at 3.88%, despite a slight decline from the previous quarter.
- Non-interest expenses declined by 3.3% due to a decrease in incentive compensation and lower fraud losses.
- Asset quality metrics improved, with net charge-offs declining and non-performing assets decreasing by 9.5%.
- Tangible book value per share increased by 5% from the linked quarter and 18% over the last year.
Negative Points
- Loan balances were stable, with first-quarter loan production seasonally lower, impacting loan growth.
- Average deposit balances decreased by $99 million due to a seasonal decline in public funds and lower broker deposit balances.
- Losses on the sale of securities negatively impacted non-interest income by $10 million.
- Elevated pre-payments in the ICRE portfolio are expected to continue, affecting loan growth.
- The company faces uncertainty regarding the impact of tariffs and remains cautious about potential economic turbulence.
Q & A Highlights
Q: Given the current interest rate environment, have you taken any steps to reduce the asset sensitivity on the balance sheet? What is the sensitivity to the net interest margin for each 25 basis point rate cut?
A: James Anderson, CFO, explained that the balance sheet remains asset sensitive, and they have built rate cuts into their forecast. A 25 basis point rate cut typically results in a 5 to 6 basis point drop in net interest margin. However, they believe they can mitigate this impact by adjusting deposit costs, potentially reducing the margin drop to about half.
Q: With the current tariff uncertainty, is there any change in your view towards capital deployment, particularly regarding M&A deals?
A: Archie Brown, CEO, noted that while there have been more M&A discussions recently, the current uncertainty may slow down these discussions. They are monitoring the situation and will see how things unfold over the next few months.
Q: Can you provide more details on the workout of several C&I credits and the increase in C&I charge-offs?
A: Archie Brown, CEO, mentioned that there were healthy workouts of classified loans and one large C&I credit that accounted for 70% of the charge-offs. William Harrod, Chief Credit Officer, added that the credit was in the flooring manufacturing industry and was impacted by upstream supply bankruptcies.
Q: What is the outlook for Summit, Oak Hill, and Agile businesses in a softer economy?
A: Archie Brown, CEO, stated that Agile is expected to ramp up seasonally, with good asset quality. Oak Street's asset quality remains solid, and Summit continues to have strong originations. They are monitoring small ticket items, but overall, they feel confident about these businesses.
Q: How do you view loan growth for the rest of the year, given the elevated payoffs?
A: Archie Brown, CEO, indicated that while they initially expected 6% to 7% growth for the year, they now anticipate 4% to 5% due to first-quarter softness and payoff pressures. However, strong pipelines and origination activity provide confidence in achieving loan growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
