Net interest margin expanded 7 basis points to 3.55%, primarily driven by a strategic bond portfolio restructuring completed in January and lower deposit costs.
Loan growth of $33 million was moderated by seasonal public fund outflows and planned paydowns in CRE and healthcare, though production increased $365 million year-over-year.
Management successfully onboarded 27 net new revenue producers in Q1, targeting a total of 50 for the year to accelerate market share gains in Texas and business banking.
Efficiency remained a priority with a 55% efficiency ratio, as seasonal payroll tax increases were offset by disciplined expense management and strong fee income performance.
Capital deployment was prioritized through the repurchase of 1.4 million shares and an 11% dividend increase, supported by a robust CET1 ratio of 13.3%.
The deposit mix remains a core strength with DDAs representing 36% of total deposits, despite seasonal fluctuations in public funds.
Updated guidance now assumes no interest rate cuts through 2026, with management expecting no significant negative impact on NII or NIM under this flat-rate scenario.
Loan growth is projected to accelerate in the second half of the year toward mid-single-digit targets as new banker hires from 2024 and 2025 reach peak productivity.
NIM expansion is forecasted to reach the upper end of the 12 to 15 basis point range by Q4 2026, supported by approximately $1 billion in bond cash flows reinvesting at higher yields.
Management intends to exhaust the remaining 4.1 million share repurchase authorization throughout the year, contingent on market valuation and organic growth opportunities.
Expense guidance is biased toward the upper end of previous ranges due to the accelerated pace of hiring revenue-generating personnel earlier in the year.
The January bond restructuring contributed 4 basis points to Q1 NIM, with a full quarterly impact expected to reach 32 basis points in bond yield improvement.
CD renewal rates remain healthy at 85%, though the benefit of repricing maturing CDs lower is expected to diminish as the year progresses in a flat-rate environment.
Credit quality remains stable with criticized commercial loans decreasing for the fifth consecutive quarter, though management expects a flattening of this trend rather than continued rapid improvement.
Net charge-offs are projected to remain within a range of 15 to 25 basis points for the full year, reflecting a disciplined credit posture despite macroeconomic uncertainty.
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