Equity Bancshares, Inc. (EQBK) Q2 2026 Earnings Report, Transcript and Summary

Hello everyone. Thank you for joining us. And welcome to the Equity Bancshares Second Quarter 26 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1. To raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Brian Katzfey. Brian, please go ahead.

Welcome, everyone, and thank you for joining the Equity Bancshares Second Quarter Earnings Call. A quick note before we begin. Today's call is being recorded and is available via webcast at investor.equitybank.com along with our earnings release and presentation materials. Today's presentation contains forward looking statements. Which are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. After the presentation, we will open the floor up for questions and discussion. The conversation we look forward to. With that, let me turn the call over to our Chairman and CEO, Brad S. Elliott.

Good morning, everyone, and thank you for joining us. Today's results are what we have been working towards since we announced the NBC and Frontier transactions. We knew what the numbers would look like once the merger noise was muted. And we could see the earnings power of the combined companies with Equity Bank. Our teams worked hard to get the Frontier transaction closed on January 1 and merged in the first quarter. With a desire to keep as much of the M&A noise in the first quarter, to let everyone see a more normalized number this quarter. For the first time since closing, we are clearly showing investors what this franchise earns without the noise of merger charges. Day 2 provisions and integration costs overshadowing the combined earnings of equity, GAAP EPS was $1.27 per diluted share, and ROTCE was 16.6%. Core EPS was $1.41, and ROTCE was 17.2. Our efficiency ratio for the quarter was 53.4%. Those are exciting numbers that we want to talk about today. When you have worked hard to negotiate and structure these transactions, and you can see firsthand the power of what happens when 2 complementary companies come together, or in this case, 3. It means something special. It is exciting to see that the hard work shows up in the operating metrics. Margin was 4.36% up 3 basis points from last quarter, driven by a more favorable earning asset mix we talked about on previous calls. And a higher bond discount accretion. As I said, the core conversion is complete and behind us. Now our teams are locked in on what we have been focused on. And that is organic growth. We have exciting things to talk about in this area. It always looks muted as we work to reset portfolios but organic growth is our priority. Let me take a moment on a topic I am genuinely excited about and 1 that Equity Bank is leaning into aggressively. AI and automation. This is not new for us. It has been core to how we built this company. When you build an organization around entrepreneurship, it naturally adapts to new technologies and new ways of thinking as they come along. We have always believed that banks that win will be the ones that grow the balance sheet and deepen relationships without growing the cost structure at the same pace. And technology is exactly how we do that. We are not talking about this We are actually doing it. Today, 15% of our staff are actively using Anthropic and 75% have Microsoft Copilot installed. I wanna be clear. We do not plan to reach 100% with Copilot or Anthropic in our organization as some roles in our company cannot use it. or benefit from it. So we are not adding the expense. We currently have 6 bots running in production and AI is actively supporting functions like loan review, and M&A due diligence along with many other practical improvements across the bank. We have moved from theory or it being cool to the implementation phase. We are putting these tools to work across our operations. Streamlining back office processes, speeding up onboarding and credit workflows, and giving time back to our bankers so they can spend it with what matters most, our customers. We have not yet fully tapped the expense reduction opportunity and that is intentional. Phase 1 is implementation stabilization, and proof of concept. Phase 2 is where the efficiency gains show up in the numbers. Honestly, this area excites me more than anything I have seen in my career since the adoption of personal computers. That era took us from assets per employee from under $1 million per employee to around $5 million per employee in a few short years. I believe we are on the front end of a similar shift and Equity Bank is positioned to lead it. Let me turn it over to Rick, our bank CEO, to walk you through the bank operations. Rick?

Thanks, Brad. Our transformative year continued in the second quarter, as we work with intention to position our teams across both the Oklahoma City and Nebraska footprints to best serve our customers and grow our franchise. In the quarter, we added a team in Lincoln led by Russ Siebeck, and saw immediate benefit. We also added experienced bankers in each of our new metro footprints. Individuals with large bank and complex customer backgrounds to position each market for growth. Notably, our Omaha team under the leadership of Kevin McArtor and Travis Fielder has already begun optimizing the inherited portfolio and attracting new customers. As we look to the back half of the year, I am excited about the contributions each of our markets is now positioned to make to our organic growth efforts. Former NBC markets should approach an inflection point over the next 2 quarters And while the Frontier portfolio will likely experience continued pruning, the addition of the Lincoln and Omaha teams should help us absorb some of that attrition. During the quarter, loan and deposit balance in total continued to face headwinds from normal runoff and optimization efforts surrounding the acquired portfolios. Importantly, our legacy markets absorb the majority of that loan pressure, resulting in effectively flat balances period over period. Production, however, began to reflect the scale of our now larger franchise. We closed $315 million in loans, our largest quarterly production level ever, at an average rate of 6.56%. That represents $119 million or 60% increase compared to the same period in 2025. Key contributors were Kansas City, Des Moines, and Western Kansas. I want to specifically recognize the work Levi Getz, our Western market president, has done. That team has demonstrated the power of a discipline, customer focused calling culture. And Levi will now be expanding his oversight to include Central Kansas as well. Loan balances in nonacquired markets grew at an annualized rate exceeding 10% and are up 3% compared to quarter 25. The underlying sales discipline, customer experience prioritization, and operational strength are clearly there. Our current pipeline, which stands at $1.6 billion, a 23% increase over last quarter, and our 75% pipeline which is now at $475 million, show the trajectory that we are on. As the more pronounced j curve from our recent acquisitions work through the balance sheet, we will be well positioned to accelerate growth. Throughout the balance sheet transition, we have maintained discipline on pricing and structure, Newer originations continue to come on at a level accretive to coupon loan yields, and we have not chased production that would erode margin or diminish returns on deployed capital. Total deposits were flat for the quarter, while nonbrokered balances declined modestly. Quarter 2 is a seasonal period of outflows, as customers meet tax obligations and service debt. This quarter was no exception. The decline in core balances were concentrated in existing customer relations which we view as transitory rather than structural. Cost of deposits declined modestly as utilization of lower cost accounts offset continued optimization of higher cost acquired funds. Looking forward, the groundwork being laid by our retail team will position the bank to deepen existing relationships and expand our customer base. Our legacy markets never lost focus during the M&A activity, and that discipline shows. On a same store basis, we generated checking accounts at our highest level ever. Up 24% versus Q2 25. And achieved net checking account growth in legacy markets at a rate this company has not previously seen. The second half of 2026 is about expanding existing relationships and winning new ones. And this team is well positioned to do exactly that. In addition, our focus on customer service in the branches is taking hold as our customer satisfaction scores continue to rise. Within fee income, we continue to see momentum. Trust and wealth management is growing revenue. Mortgage banking is benefiting from the addition of the Nebraska footprint. And debit and credit card results are expanding with added volume. Investments in our treasury functions will enhance our ability to fully serve commercial customers across the comprehensive product suite. To that end, we have brought in Melissa Morrissey to lead that strategic initiative to grow treasury management. Mirroring our commercial lending expertise with a full product suite designed to meet the complete scope of our customers' banking needs. On credit quality, nonperforming assets moved from 76 basis points to 86 basis points. Of total assets. A portion of that increase is attributed to credits inherited from Frontier. Which we are actively working through. Net charge offs were $1.7 million or 12 basis points annualized. Classified assets to regulatory capital improved modestly at 11.9%. We remain comfortable with the overall credit posture of this portfolio. We now operate in 6 states and 7 major metros. All growing markets. Behind the merger driven noise, our organic growth engine is evident and strong. Our leaders understand our value proposition, and I look forward to what they will accomplish through the remainder of 2026 and beyond. I will turn it to Chris to cover the financials in detail.

Thanks, Rick. Morning. Net income for the quarter was $26.4 million or $1.27 per share. Excluding M&A expenses, intangible amortization and losses on securities, net income was $29.4 million or $1.41 per share. Pretax pre provision net revenue adjusted for merger expenses and losses on securities was $36.4 million, up $2.4 million quarter over quarter. Net interest income was $73.9 million. This reflects declining purchase accounting accretion and lower average earning assets offset by higher security yields and a lower cost of funds. Net interest margin expanded 3 basis points to 4.36%. Loan purchase accounting accretion contributed $2.9 million or approximately 17 basis points in line with our expectations. For the second half of 26, the margin may decrease as we look for expansion of average earning assets to 6.85 to $6.95 billion. The compression reflects the expected mix shift and continued accretion burn down. Noninterest income was $8.1 million. Excluding $2.2 million in losses realized on securities and the write down of a fund investment, core noninterest income was $10.3 million, up $0.7 million linked quarter. We are encouraged by the growth in fee income from debit and credit card activity mortgage, and trust and wealth management. We are guiding to noninterest income of $18 million to $22 million for the second half. Noninterest expense was $46.9 million, down from $55 million in the previous quarter. Excluding merger costs in both periods, expenses declined $2.5 million to $46.8 million Noninterest expense also benefited from gain on sale of assets of $850 thousand in the quarter. Efficiency ratio improved to 53.4% an improvement of over 10 percentage points compared to the same quarter last year. Our second half guidance for noninterest expense is $94 million to $98 million. As Brad and Rick have noted, we remain committed to delivering on operational efficiency. Capital remains strong, TCE closed the quarter at 9.07%, CET 1 was 11.84%, and total risk based capital was 14.66%. Tangible book value per share grew to $33.45 from $32.58. We returned capital to shareholders through an $0.18 per share dividend, and the repurchase of an additional 211 thousand shares of our stock. Total shares repurchased year to date are 711 thousand shares at $44.84 per share. I will turn it back to Brad for closing remarks.

Thank you, Chris. We are proud of the progress this quarter and the trajectory of the Equity Bank franchise. A year and a half ago, we told you we were building something. You trusted us by investing new capital in equity. So that we could execute on what we saw in the marketplace. Accretive M&A targets. We thank you for the trust We are now $7.7 billion in assets, reflecting a 19.4% total compounded annual growth rate since 2010. In a franchise that is generating returns, that are among the best in our peer group. Our core ROTCE of 17.2% is evidence that the strategy is working. The second half of 2026 is about executing on what is right in front of us. Organic growth, deepening relationships across Kansas, Missouri, Oklahoma, Nebraska, Iowa, and Arkansas. Driving efficiency across the franchise. And continuing to build tangible book value for our shareholders. That is where the majority of our energy and attention is and we are seeing real momentum on all fronts. This team has done that every single year. And we plan to keep doing it. That said, M&A has always been part of how we have built this company, and that has not changed. We remain active in evaluating opportunities and our pipeline reflects that. When something fits our strategy, meets our return standards, and genuinely makes equity a better company, we move on it. When it does not clear the bar, we stay disciplined and keep our attention on the growth we are already generating. We are not chasing deals for the sake of activity, We are focused on the right deals, and right now, we like what we are seeing in the marketplace. And the opportunities in front of us. I want to thank you for joining our call today. We are happy to take any questions at this time.

We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. First question comes from the line of Damon DelMonte with KBW. Your line is open. Please go ahead.

Hey. Good morning, guys. Hope everybody's doing well. Question, just on loan growth. Good to hear the color on the pipeline and the kind of the trends in the legacy portfolio. As we kind of think about the ongoing attrition and kind of rightsizing of the acquired portfolios how do we kind of think about like net growth for the next few quarters until you kind of work through that? Do you think it is kind of flattish? Or do you think there is on a net basis, it could be kind of low single digits?

Yes, hey, Damon. Thanks. This is Rick. Yeah. We think we are going to have some loan growth in total. So are you? We are we are believing and seeing that we will have loan growth with what is happening in the legacy markets. Strong pipeline, strong growth there. You just, you know, you just start having that flowing as you get into a year past NBC. We think we are getting close to that. And then same thing as, we get later into the Frontier deal. So we are looking at low single digits or mid single digits growth for the second half of year.

Got it. Okay. that is helpful. And are there any, like, industries where you are seeing you know, a good flow of opportunities, or is it kind of broad based?

Yeah. I think it is more broad based. I do not think we are seeing good I yeah. We are we are seeing good we are honestly seeing really good originations out of everywhere, places we have not gotten it before. Like, 1 of our better credits, C and I credits, Last quarter was booked out of Southeast Kansas. And $10 million-plus credit We have never had a $10 million-plus credit out of that area. We got the right banker down there. Doing the right things. And so we are seeing credits across the footprint. Rick's done a really good job of building up a team, encouraging his people to our regional CEOs are doing a good job on getting their people doing the right things, and we are getting the business out of that So it is kind of coming from Western Kansas Oklahoma, Nebraska. Kansas City is doing great. Wichita team is doing really well. So it is kind of across the entire footprint.

Got it. Okay. Great. And then I appreciate the, the guidance on margin, Chris, and the outlook there. How would you characterize the positioning of the margin kind of given a higher for longer interest rate environment and potentially a rate hike either later this year or in the early part of or sometime in 2027.

Yeah, Damon. What I would I would point to in terms of a rising interest rate environment is really the last cycle we went through. The balance sheet has not changed meaningfully from a posturing perspective for rising interest rates. So I think we are positioned to do well in that world. You know, there is 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 are well positioned to execute similarly to the last iteration.

Okay. Great. that is all that I had. Thank you.

Your next question comes from the line of Brandon Nosal with Hovde Group. Your line is open. Please go ahead.

Hey. Good morning, folks. Hope you are doing well. Good morning. Let me just start you off on 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 is 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?

it is heavily the back 2 there, Brandon. So the first thing, and we emphasized it on the prepared comments, 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 their technological cost, the people cost associated with managing those systems, etcetera. So that is a lot of where you are seeing the benefit. there is obviously still focus internally on where we can find other opportunities to reduce cost over time. So you are seeing a little bit of that come through as you think about AI technology automation. As Brad mentioned, we are we are leaning into it. We are working hard on figuring out how it moves the needle for us over time. But there is not tangible benefit to it today where we would say, you look at expenses this quarter versus last, it is due to x artificial intelligence benefit. So that is that is still too early stage, but we are excited about where it can go. Awesome. Okay. that is helpful color. Maybe circling back to the margin for a moment. Can you just talk about the puts and takes in that back half margin outlook that would get you toward either the high end or the low end of the range as you look ahead? Yeah. The high end, actually, 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 have talked about in the past, the Frontier accounts that came on board, relatively high cost, So there is some tailwind there. If we can execute on declining that liability position, our opportunity on the asset side that we have talked about Rick talking about loans. We can hit the high end of that margin. On the low end, it is really the alternative. Right? So as if liability costs creep up, we have talked about yield curve kind of moving the other direction on us at the moment. that is the potential to deteriorate margin a little bit over time. So it is really that. Brandon.

Thanks, Chris. Appreciate you taking my questions.

Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.

Hey, guys. Good morning. Thanks for taking the questions. Curious, maybe, Rick, if you can kind of speak to kind of what you are seeing in terms of pricing on new loan production relative to, you know, roughly the 6.50 core loan portfolio yield. And curious if you are seeing any kind of degradation in new loan yield production just given that you guys seem to be going up market in terms of clientele these days to some degree?

Yeah. So I think on the loan pricing, we are continuing to see it stay fairly strong. We are really disciplined on that. So as a result, that is something that the team takes to heart and goes after. So I would actually say that, you know, maybe it is maybe we are seeing a little bit of stress there in certain markets. Every once in a while, you get an irrational player. And in those markets, we choose not to play at that level and kind of decide to go wider. So we are not really seeing a lot of downward movement in that. I, you know, 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 are we are about the same as we have been over the last 2 years in those types of exceptions. So, I think pricing's continued for us to, you know, to hold firm.

Okay, great. that is really helpful. And then changing gears, I believe you guys have just over 100 thousand shares left on the remaining buyback authorization. So just curious if you can kinda speak to the aptitude just given the valuation, relative to peers these days, which, you know, seems quite low. To that end. And, you know, just considering you guys are building capital at pretty strong clips in even have, you know, existing excess capital currently to maybe pursue some of additional acquisition opportunities as well?

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 wanna have enough there to be able to perform those transactions And then we use a you know, a model very similar to what we use on the acquisition side for the buybacks. So when we are in range, to do buybacks, we think those are no brainers. there is no integration risk. So we will deploy the capital to do buybacks And so know, it all just depends on you know, the earn back on that, and you know, does that fit our model? Or we will hold the capital looking for M&A opportunities and we balance those 3 things at the board meeting We talk about it at every board meeting. Set our target price. And so we will we will always be active in the buyback when it makes sense, and we will be out of it just like we are in the M&A side when it does not make sense. So I hope you answered that question vaguely. We cannot really figure it out. Yeah. No. I appreciate the various dynamics there, Brad, but if I could just follow-up. So it sounds like, you know, we should not be surprised if there is an increased authorization at some point. Maybe later this year. Yeah. I think we already have an authorization. The board's authorized, and we are waiting on formal approval through regulatory bodies, but we plan to maintain-- we will always have an open we always plan to maintain a buyback approval from the board. We have the board's actually already approved that, and we are just waiting for standard regulatory approval to up that. We have not been in a big rush for that because we still have shares available to buy back. Okay. Great. I appreciate all the color. Thanks, guys.

As a reminder, if you would like to ask a question, please press *1 to raise your hand. Your next question comes from the line of Matt Olney with Stephens. Your line is open. Please go ahead.

Hey. Thanks, guys. Appreciate you taking the question. Wanna circle back on the loan growth discussion. And with the pay downs we have 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 internal expectations?

Yeah. So I think when we look at both of these transactions, you know, the my expectation is it is exactly what kind of happened. In Nebraska, it is actually better than Carmen did a great job of prehiring for that market. We had already 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 wanna talk to. And so I would say that you know, 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 big enough to do the deals that they like to do without the complication of working for a $30 billion bank. And so we are really excited about the team in Omaha Lincoln Nebraska and how that team is shaping out. We have kept a core group in Omaha with us, and 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 more of ability to produce in that market, which is what attracted us to that market to begin with. And I think it is playing out exactly as we, anticipated. Oklahoma City, it is kind of the same way. We are 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 is core customers there we can expand. And it gives us a footprint to then go hire people into People do not wanna work for a loan production office because they do not know if they are truly committed to that market or not. So it is hard to get people to work for you in those environments. Long term without having something to build around. And man, we have 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 am as excited about our organic growth piece as possible. Even more so, because of the legacy markets are I do not know, 25%-30% better than they were a year ago. Today. And you add these new markets on top of it. With the acquisitions, it is great. I will turn it over to Rick.

I was gonna add, Matt, on the, on the customer side of it. 1 of the things you find in these is there is there is always these really good core blue chip customers. And what we are then able to do is really expand with them. And so that is you know, you do not see that you know, quarter 1, quarter 2. I mean but that happens over time. So then you have 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 have got stuff with numerous other banks. Those are the ones we really are able to go after and you see that in year 2 and year 3 as that expansion really comes into play. And both of these banks, both NBC and Frontier had some really good core customers that we are looking for significant expansion, over time with. So the customer the know, retention piece of that is on the core customers is really, really strong.

Okay. Great. I appreciate the color. On that topic. And I guess switching back towards the margin outlook, Chris, you have 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 as you think about the margin for 2027, any puts and takes we should be we should be mindful of? For that? Thanks.

Near term headwinds, moderating, I think there is puts and takes on both sides where I think we have both tailwinds and headwinds operating right now to where that range, 25 to 35, is reasonable. And I think could hit either end. I am more optimistic about the 35 side of it. I do not know if there is a specific kind of indicator of challenge to any of that I am worried about alleviating. As we look into 2027, to as we get this organic growth engine going, I think you are going to see over time, maintenance of where we are on a larger earning asset base. And I am optimistic we will be able to accomplish that as we look out further into 2027, 2028 and beyond. Okay.

Guys.

Your next question comes from the line of Brett Rabatin with Stonex Group. Your line is open. Please go ahead.

Hey, guys. Good morning. Wanted to ask on the fee income guidance I know at the Investor Day, you seem pretty excited about the despite where rates are that mortgage banking could be a bigger contributor. Can we talk maybe about the low end or 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? Know, any thoughts on that?

Yes. Good question, Brett. 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, MBC customers, and looking at the cross sales cycle on the commercial analysis side, looking at treasury opportunities. there is gonna be means by which we continue to expand that particular line item. Mortgage banking-- Frontier brought a good practice in that in that world The interest rates are a challenge today, you know, as you noted with the rising refinances becoming the challenge of that, you know, the opportunity for us to expand versus today is a little bit muted.

But trust and 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 have been doing. And the low end is a function of it could be seasonality. It could be, you know, mortgage banking going down somewhat with the with the changing interest rate environment. So that is what I would point to. Do not know, Rick, if you have anything else. No. I think that is right. I mean, we have added we have added the people. We have added the strategy on there. I mean, we are we are seeing you know, on the team side, for instance, which there is just a lot more calls and a lot more opportunities for winning team business, and there is just a sort of change in attitude. So we are looking at, you know, things like waivers and stuff like this. So it is just it is-- you know, I think that piece will be coming, and is absolutely right on the mortgage side. We have got a bigger, mortgage production than we did before, but, again, 1 obviously heavily rate- rents.

Okay. that is helpful. And then, Brad, you seem really excited about AI and technology, and I am I am looking at the side slide 16. Specifically. And just wanted to hear maybe what inning you think you are in adopting AI, you know, in terms of what it can do and then just aside from-- I think there is obvious benefits on loan review getting things done faster and credit review. You know, kind of maybe some of the other things that might be coming down the road in terms of efficiency from that perspective?

I think anybody that says we are not in the first inning are even at bat does not realize how much this is gonna change the world. So I think anybody that says they are on second base probably does not realize what the power of this technology trend or change is gonna be So I look at this as, you know, And I said in some of my prepared comments, you know, I think it has a lot to do with when I started banking, the bank I started at, we had 1 PC in the whole institution. It had 2 floppy drives in it. And within 4 years, everyone had 1 on their desk. And they were all connected through Novell Network. And you could communicate with 1 another and share files. And all of a sudden, we dropped from you know, 8 or $900 thousand per employee to a couple of-- a couple million dollars per employee to within 5, 6 years, it was $5 million per employee. Now we are at $10 million per employee. it is kind of the benchmark So I think we are in a trend where we are gonna be doing the same thing over the next 3 to 5 years. And so I think we are all in the beginning phases. And I think you are gonna see costs coming out of all organizations. Because of this trend and so as a growth company, it is very exciting to me because we have 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 do not 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. So you know, I think we listed some things that we actually are using today. And because they are easy to use. On the low review side. M and a review, headhunter placements, those types of things. But, you know, I think we are all in the very beginning phases. Okay.

that is great color. Thanks so much, guys.

Your next question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open. Please go ahead.

Thanks. Good morning. Wanted to ask about the added nonaccrual loans from Frontier. You know, I guess just the question of you know, why were not those added at the jump in Q1 and just kinda speaking to more of the migration. And Rick, I think you talked about you know, the Nebraska optimization of loans there. Just trying to track, you know, anything that developed kinda as you closed and from then until now, of just pointing to that migration piece.

Yeah. You know what? What happens, Jeff, is you know, there are credits that are paying as agreed we tell the customer we are not gonna renew under the current terms And so there is 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 nonaccrual. 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 do not renew them, then they are not current any longer. So it just is something that happens regularly as we work through portfolios and collect things. So it is a it is a modest uptick there is nothing systemic in it. You know? there is a house under construction. That we do not think is going the right direction and so we wanted to find another bank. Find another opportunity, or we are gonna work out of the thing. So mean, there is a whole host Appreciate it. Yes through that process. there is a divorce on an ag-- on an ag deal. there is a divorce on an ag deal that causes a problem, and, you know, there is a whole host of issues that happen in the lending business, and that is what we do. Yep.

You kind of answered the follow-up. it is that those were marked, at least on the Frontier side. Appreciate it. And it sounds like that lost content in the forward guide on provisioning, unimpacted. So a quick follow-up is on the-- so it sounds like the opportunity on the Frontier side that the decrease some of those deposit costs. Is there is there more there? Has that largely been worked through? Just wanted to get an update on how that is progressed.

Yeah. There will continue to be some opportunity there, Jeff, over time. So that Frontier had a healthy level of, call it, maturing deposits that had laddered maturities. So we will we will continue to see some of that over the next 2, 3, 4 quarters. So it is it is there. A lot of it has been worked through, but there is still some opportunity.

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.