Executive Summary

EPS and revenue were above consensus; Diluted EPS was $0.75 vs $0.71 consensus and revenue was $32.06M vs $31.10M consensus, driven by continued NIM expansion and lower deposit costs. Bold beat: EPS and revenue beat consensus* [GetEstimates Q1 2025]*.
Net interest margin (FTE) rose to 3.70% from 3.54% in Q4 2024 and 3.16% in Q1 2024, as CDs repriced lower and loan/securities yields improved .
Asset quality remained strong: NPAs/Assets were 0.15% and ACL coverage was 1.32% of loans; ORE fully resolved with a minimal $184K loss .
Dividend increased to $0.25 (from $0.24) and the company repurchased ~127.5K shares; liquidity ratio improved to 19.8% and contingent liquidity stood at ~$1.3B .
Potential catalysts: continued NIM tailwinds (CFO expects 1–2 bps monthly), deposit growth of 2–5% in 2025, and potential further reserve releases if tariff uncertainty abates .

What Went Well and What Went Wrong

What Went Well
- Margin expansion: NIM (FTE) improved to 3.70% (Q1 2025) from 3.54% (Q4 2024) and 3.16% (Q1 2024), supported by lower cost of deposits and upward repricing of earning assets . “Our net interest margin continues to build…” — Ty Abston .
- Asset quality resilience: NPAs/Assets at 0.15% and net charge-offs annualized at 0.02%; ORE resolved with a $184K loss; ACL coverage 1.32% .
- Capital returns and liquidity: Dividend raised to $0.25, and 127,537 shares repurchased at $40.56; liquidity ratio increased to 19.8%; contingent liquidity ~$1.3B .
What Went Wrong
- Noninterest income declined 12.1% q/q due to lapping Q4 ORE-related gains and rental income; gains on loans also fell; debit fee increase was one-off from $400K MasterCard bonus .
- Noninterest expense rose 6.7% q/q (+$1.3M), primarily employee comp/benefits (plan funding, payroll taxes, bonus accruals), offset by slight salary reductions; efficiency ratio worsened to 66.78% vs 62.23% in Q4 .
- Loans declined $23.0M q/q (lower borrower demand, tariff uncertainty) and $157.1M y/y (tightened underwriting, strategic non-renewals) .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Net Interest Income ($USD Millions)	$23.587	$26.221	$26.726
Noninterest Income ($USD Millions)	$5.258	$5.726	$5.033
Revenues ($USD Millions)	$29.10*	$32.20*	$32.06*
Diluted EPS ($USD)	$0.58	$0.87	$0.75
NIM (FTE, %)	3.16%	3.54%	3.70%
ROAA (%)	0.85%	1.27%	1.13%
ROAE (%)	8.93%	12.68%	10.83%
Efficiency Ratio (%)	71.74%	62.23%	66.78%

Note: Revenue figures marked with * are standardized S&P Global values; company does not report a “Revenue” line. Values retrieved from S&P Global*.

Q1 2025 Actual vs Consensus	Consensus*	Actual
Primary EPS	$0.71*	$0.75
Revenue ($USD Millions)	$31.10*	$32.06*

Values retrieved from S&P Global*.

Segment/Lending Composition (Balances)

Loan Category ($USD Millions)	Mar 31, 2024	Dec 31, 2024	Mar 31, 2025
Commercial & Industrial	$269.56	$254.70	$226.82
Construction & Development	$273.30	$218.62	$225.05
Commercial Real Estate	$906.68	$866.68	$866.89
1–4 Family Residential	$523.57	$529.01	$534.99
Total Loans	$2,265.26	$2,131.14	$2,108.16

Key KPIs

KPI	Q1 2024	Q4 2024	Q1 2025
Total Deposits ($USD Billions)	$2.628	$2.692	$2.704
Noninterest-Bearing Deposits (% of total)	31.5%	31.1%	31.3%
Avg Cost of Total Deposits (%)	2.23%†	2.11%†	1.96%†
Liquidity Ratio (%)	10.6%	16.5%	19.8%
NPAs/Assets (%)	0.68%	0.16%	0.15%
ACL / Loans (%)	1.35%	1.33%	1.32%
Nonaccrual Loans / Total Loans (%)	0.27%	0.17%	0.23%
Dividend per Share ($)	0.24	0.24	0.25

† Non-GAAP metrics; reconciliations provided in company materials .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share (quarterly)	2025	$0.24 (2024 run rate)	$0.25 (declared March 13, 2025)	Raised
NIM (FTE) trajectory	2025	NIM improving post Fed cuts	Expect +1–2 bps monthly tailwinds over next several months	Incrementally positive
Cost of CDs (weighted)	2025	Not specified	Repricing from 4.24% to ~3.65% if renewed at current rates	Lower
Avg cost of total deposits	2025	2.11% in Q4 2024	1.96% in Q1 2025, further decline expected with CD repricing	Lower
Deposit growth	FY 2025	Not explicit	Target 2–5% net deposit growth in 2025	New
Provision for credit losses	2025	Reversals in 2024 due to lower balances	Potential additional reversals if economic outlook/tariffs clarify; no build expected at current conditions	Potentially lower
Expense/Avg Assets target	Ongoing	2.5% bogey long-standing	Maintained; short-term flexibility around target	Maintained

Earnings Call Themes & Trends

Topic	Previous (Q3 2024)	Previous (Q4 2024)	Current (Q1 2025)	Trend
NIM trajectory	NIM up to 3.33%, improving with Fed begins lowering rates	NIM at 3.54%, benefit from lower funding costs	NIM at 3.70%; CFO expects +1–2 bps monthly tailwinds	Improving
Loan pipeline/growth	Balance sheet shrunk, positioning for future growth	Strategic balance sheet shrink; ready for growth	Pipeline at multiyear high; Q1 decline due to demand/tariff uncertainty	Mixed near-term; constructive
Deposits/uninsured	Deposits +$42.8M; uninsured 26.3%	Deposits +$23.3M; uninsured 26.3%	Deposits +$12.2M; uninsured 26.7%; target 2–5% growth	Stable to improving
Tariffs/macro	Focus on positioning; no explicit tariff commentary	Margin benefits from Fed cuts	Management monitoring tariff uncertainty; no direct impacts identified; Texas economy strong	Uncertain; watching
Asset quality	NPAs elevated due to ORE; expected resolution by year-end	NPAs fell; ORE largely resolved; strong credit	NPAs at 0.15%; ORE fully resolved; low charge-offs	Strong
Liquidity/securities	Paid off FHLB; liquidity ratio 17.1%	Liquidity ratio 16.5%; contingent ~$1.3B	Liquidity ratio 19.8%; ~$116M securities cash flows expected	Strong
Capital & buybacks	Ongoing repurchases	Capital strong; buybacks used excess capital	127,537 shares repurchased; willing to reenter market opportunistically	Supportive
Expenses	Efficiency 70.47%; ORE costs elevated	Efficiency 62.23%; lower comp/benefits	Efficiency 66.78%; higher comp/benefits seasonality	Mixed; watching opex normalization

Management Commentary

“The Texas economy remains strong and growing… Our net interest margin continues to build, and we're modeling for good results for the year, regardless of whether we see rate cuts or significant loan growth.” — Ty Abston .
“We really expect [NIM] to continue to increase 1 basis point or 2 over the next several months,” supported by ~~$341M variable loans set to reprice and $263M floating-rate loans; CDs (~~$613M) are repricing from 4.24% to ~3.65% at current rates — Shalene Jacobson .
“Our liquidity right now is great… liquidity ratio of 19.8%… total contingent liquidity of about $1.3 billion” — Shalene Jacobson .
“We will open 10,000 checking accounts this year… focus on core deposit relationships” — Ty Abston .

Q&A Highlights

Loan pipeline/portfolio: Pipeline broad-based across regions and segments; Q1 loan contraction largely due to lower utilization/paydowns in C&I .
Tariff uncertainty: Clients are “on standby”; management sees no direct impacts; monitoring for indirect macro effects; Texas economy remains robust .
Reserves: No expectation to build reserves at current conditions; qualitative factors remain elevated, potential reversals if uncertainty clears .
Deposits: Expect 2–5% net deposit growth in 2025; relationship-led, mid-tier pricing .
Securities/cash flows: ~$116M of securities cash flows expected by year-end; systematic reinvestment; bond purchases at attractive pricing during market disruptions .
Buybacks: Program remains a capital allocation priority; willing to repurchase opportunistically .
Expense discipline: Long-standing 2.5% expense/avg assets bogey maintained with flexibility .

Estimates Context

Q1 2025 results compared to Wall Street consensus: EPS $0.75 vs $0.71 consensus (beat); revenue $32.06M vs $31.10M consensus (beat). Bold beats sustained by NIM expansion and lower deposit costs* [GetEstimates Q1 2025]*.
Forward view: Q2 2025 consensus EPS $0.81* and revenue $32.67M*, with two covering estimates; management commentary implies NIM tailwinds could support estimates* [GetEstimates Q2 2025]*.