Business First Bancshares Inc
NASDAQ:BFST
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
19.72
29.86
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Thank you for standing by. My name is [ Mandeep ], and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Business First Bancshares Q1 2024 Earnings Call. [Operator Instructions]
I would now like to turn the conference over to Matt Sealy, SVP, Director of Corporate Strategy and FP&A. You may begin.
Thank you. Good afternoon, and thank you all for joining. Earlier today, we issued our first quarter 2024 earnings press release. A copy of which is available on our website, along with a slide presentation that we'll reference to on today's call. Please refer to Slide 3 of our presentation, which includes the safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures.
For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our safe harbor statements are available on Page 7 of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the safe harbor statements in our slide presentation and earnings release.
I'm joined this afternoon by Business First Bancshares President and CEO, Jude Melville, Chief Financial Officer, Greg Robertson; Chief Banking Officer, Philip Jordan; and Chief Administrative Officer, Jerry [ Vascaku ]. After the presentation, we'll be happy to address any questions you may have.
And with that, I'll turn the call over to you, Jude.
Great. Thanks, Matt, and thanks, everyone, for making us a priority this afternoon. We know that you have a lot on your plate. We appreciate your interest. We have a lot to discuss today, and I want to leave time for questions, so I'll jump right in.
To begin, we were disappointed by the headline profitability for the quarter. First quarter of the year tends to be our softest but it was a little softer than normal this year because of greater-than-anticipated margin pressure and some expense timing. Core ROAA is 0.77%, core ROAE is 8.9% and core EPS $0.50. Greg will provide more detailed specifics.
But big picture, I would say there wasn't one single quarter moving event that occurred. It is more an accumulation of small impacts. We've been fortunate that many quarters, a number of small things have added up to outperformance. Sometimes the opposite occurs, and that was the case here. We've already taken a number of steps to remedy these relatively small banks and anticipate a relative flattening of both margin and expenses over the remainder of the year, leading to improved profitability which remains a priority.
Margin movement in particular, was positive in March, which leads us to believe some of the adjustments are working. Again, I'll ask Greg to get into further detail in a bit. But first, I will take a moment to survey a few of the things that I consider most important about the quarter, not all of which will be reflected in the short-term results.
First, a significant part of the margin miss was due to outside success in raising liquidity. As you know, we've been working, in particular, over the past 7 or 8 quarters to transition from a company whose priority was loan growth to one that is more balanced and robust than its production expectations. We grew loans by approximately 8% annualized to a healthy rate of growth, and that growth was led by C&I relationships and growth in relationships in Texas.
By comparison, we grew deposits by an annualized rate of 24%, a positive sign that the work we've undertaken to shift our focus is undoubtedly taking hold. While we grew [indiscernible] account significantly. We also stemmed the tide for the first time in 7 quarters have outflow of noninterest-bearing accounts remaining essentially flat and experiencing an uptick the last half of the quarter.
Wanted accounts [indiscernible] composition of the deposit base, and we're pleased with the improvement in the mix of funding sources. Present circumstances, if we're going to miss, my preference is to miss by gathering too much liquidity rather than too little, particularly given some of the opportunities we have on the horizon to continue putting those funds to work. And the fact that these deposits are relational. We conducted successful funding campaigns over the quarter, but the upside surprise was primarily the result of increases within existing accounts as we continue to grow with our clients.
Second, another of our priorities in coming years and quarters is to increase noninterest income. This quarter, we were able to consummate the acquisition of Waterstone, a loan service provider of SBA products. This partnership gives us more internal capability for generation of SBA opportunities. We're already beginning to see an uptick in the pipeline for SBA eligible credits. Waterstone also serves other banks, and we look forward to incorporating their work into our nascent corresponding banking function, along with investment portfolio management, loan participation and deposit collections and an internal swap test.
We shifted some management positions around to be certain we're given the opportunity of proper attention and look forward to seeing this portion of our revenue stream grow over the coming quarters. The acquisition had an unprojected impact this quarter on tangible capital and earnings and we're excited about that investment.
Finally, we're pleased to announce the acquisition of Oakwood Bank in Dallas, Texas. There is an end market transaction of approximately $830 million in assets and a similar culture and client focus. We believe the partnership to be a very logical next step in the continued development of our now meaningful presence in the North Texas market, bringing our total credit exposure in Texas to 44% of our loan book and 31% of our deposit base.
More important than the immediate impact, we believe it positions us well for accelerated future growth in one of America's strongest markets, both through physical presence and through the addition of substantial talent bolstering our commercial banking leadership in the market. This acquisition fits in squarely with the longer-term plans we've discussed with you on previous calls. Efficiency through scale, risk mitigation through diversity of the portfolio and increased profitability through accretive growth.
I'm honored that the Oakwood team would agree to partner with us and with no determine to the deal, leave our teams and our shareholders and linked arm alignment as we work together to continue the development of our potential field franchise. It was a meaningful and positive quarter for Ben Bank, and I thank our team for all the effort that went into it.
With that, I'll turn it over to Greg for further details for our Q&A period.
Thank you, Jude, and good afternoon, everyone. I'll spend just a few minutes reviewing our Q1 highlights, including some of the balance sheet and income statement trends. And we'll also discuss our updated thoughts on the current outlook.
On Slide 17 of our investor presentation, the first quarter GAAP net income and EPS available to common shareholders was $12.2 million and $0.48 a share and included $715,000 of pretax acquisition-related expense and $50,000 of pretax gain on a former bank premises and equipment.
Excluding these noncore items, non-GAAP core net income and EPS available to common shareholders was $12.8 million and $0.50 per share. As Jude mentioned, these results were softer than anticipated due to continued margin pressures and an elevated noninterest expense.
I'll start on the margin as there are several items to unpack here. Our reported core net interest margin of 3.27% was down 11 basis points from the linked quarter, primarily due to 3 factors: strong deposit production within our money market deposit product which weighed on the margin from both a volume and a rate perspective. As we have mentioned in the past, we have been working to establish the balance sheet in a more rate neutral position by attracting a high volume from nonmaturity deposit accounts. Our goal has been to work the loan-to-deposit ratio closer to the low to mid-90% range, but admittedly we do not anticipate getting there as quickly as we did. The combination of higher volume and the current market rate environment weighed on the NIM.
First quarter total core loan yields continued to increase on a linked quarter basis. Results were driven by Q1 new and renewed loan yields of 8.50%, which fell short of our expectations at about $65. We also benefited from a large [indiscernible] totality credit during the quarter, which came with a tax component and a $26 million in low-cost deposits. The headline rate was about 7% on the relationship, which we were comfortable with given the deposit side of the relationship, and that did pressure overall Q1 loan yields.
I'd like to point out some trends that throughout the first quarter on the margin that would -- should be helpful in understanding where we've been and where we think we're going.
Our core Net interest margin was down in the first 2 months of the quarter by 14 basis points. Then in March, we actually picked up 3 basis points to end the quarter, down 11. This was partially due to the fact that the overall total new deposit costs have been declining each month since December, which appears to have had more of an impact in the latter part of the first quarter. We also benefited late in the quarter from an inflow of noninterest-bearing deposit relationships, the quarterly impact of which was more muted during the quarter.
Dovetailing off this last point, I think it's important [indiscernible] that early in the first quarter, we experienced impactful outflows in noninterest period -- noninterest-bearing funding. So starting off like that behind the curve was a challenge from a margin perspective. That said, we certainly are encouraged to see some solid trend traction in lower cost and noninterest-bearing account wins during the first part of the second quarter. We are pleased with the early Q2 relationship gathering efforts that continue on the funding side, and we continue to see upside to the overall funding base and composition in the near term. The intermediate long term, we aim to operate around a 3.50 or 350 basis point core NIM, which we view as realistic and sustainable in a higher for longer rate environment.
Moving to the income statement. Noninterest expense was elevated during the first quarter due to the Waterstone acquisition, which contributed to about $500,000 in additional expense during the first quarter. Additionally, we had $1 million of incremental bonus related items during the quarter. And I would say it was more related to the ending point of the fourth quarter being down and the first quarter being up to more normalized levels. We also had some -- a few IT-related expenses in the quarter that we have been mentioning on calls that we have agreed to certain IT enhancements, and we brought those online sooner than anticipated. We view the core noninterest expense figure of $41.8 million is a relatively good run rate going forward, and we would expect a modest increase from 2% to 2.5%, 3% each quarter for the remainder of the year.
First quarter GAAP noninterest income was about $9.4 million with core noninterest income of $9.3 million, which excludes a small gain on former bank premises and a loss on the sale of securities. Well, this is a fairly clean run rate going forward, there were several areas that came in lower than we expected and therefore, anticipate Q2 revenue from our fee income business segments to contribute in a more managed way going forward.
Now if I could direct you to Slide 19, on our investor presentation, past due loans did increase during the first quarter, primarily due to 1 credit. That credit was about a $10 million exposure that we've seen to today have resolved. So that would push those past due loans back to a more normalized $10 million at quarter end with removal of that credit.
Nonperforming loans did pick up slightly, and they were really attributable to 2 loans that we had. Both of those relationships were reviewed and we don't see any loss given default exposure in those relationships. The overall credit book remains -- still remains very stable with no outlier with no movement -- systemic movements other than those 2 outlier credit instances that I gave.
Moving on to the balance sheet. Total loans held for investment increased to $96.1 million or 7.7% annualized during the quarter. Loan growth was largely attributable to the net growth in the C&I portfolio of $68 million and in the residential real estate portfolio of $34.6 million, somewhat offset by a $7.8 million reduction in C&D portfolio.
Proud of our team's continued focus on the drive on production through the key commercial relationship wins. DFW region accounted for 44% of the net loan growth for the quarter, while our Southwest Louisiana region, produced about 29% of that growth -- loan growth and capital region produced 14% of the loan growth in Q1. Texas-based loans, as Dev mentioned earlier, represent approximately 37% of our balance sheet today of the overall portfolio at the end of the quarter.
Deposit production exceeded our expectations during the first quarter, with total deposits increasing $324 million from the prior quarter, representing almost 25% annualized loan growth or deposit growth. Noninterest-bearing deposits remained relatively stable, both in terms of balances and as a percentage of total deposits. We're pleased with the composition of our noninterest-bearing deposits and have held us to 23.2%, which compares to the prior quarter of 24.8%, and our prior outlook to total in a low 20% range. While still early in the second quarter, we're encouraged by the level of core low-cost deposit gathering we've experienced in the first month of the quarter. Overall, we remain highly encouraged and optimistic on the prospects of head.
And that concludes my prepared remarks. I'll hand it back over to Jude to wrap up.
Good. Well, thanks, Greg. I think with that, we'll just jump to Q&A. We have a lot of movement in the quarter and of course, we just announced the acquisition. And I don't know if people maybe haven't had time yet to digest it, but look forward to answering any questions on that front as well.
[Operator Instructions] And our first question comes from Matt Olney with Stephens.
Start on the margin. It sounds like there were -- the margin this quarter was pretty volatile. Greg, I think you mentioned the first 2 months, it was down and then it stabilized in March. Can you provide what that March margin was? And do you think that's a good starting point for the second quarter? Any other considerations we should have more near term on the margin?
Yes. I think let me go into a little detail about how we kind of arrive there. And then I'll follow up with the answer to your question, it ultimately.
What we experienced, I noted this a little bit in the comments that we experienced outflow of noninterest-bearing in the beginning of the quarter of about $50 million. And that's what impacted the averages for the quarter for the margin. During the remainder of the quarter, we were very successful in gathering noninterest-bearing to almost bring that $50 million back to 0. So showing the noninterest-bearing piece of that being flat was in our eyes, a really big deal and a win for us. And Jude had mentioned those the types of accounts we're gathering or relationship accounts. So to get that money market that we were offering with a certain rate, you have to have an operational noninterest-bearing account that went with it. So I think that's important.
The second thing from a deposit standpoint, our average deposit rate for those money markets in December for the new dollars coming in the door were about 5.17%. And in March, they were 4.24%. So moving those rates down on the new dollars coming in the door, we had shown some signs of that. as well as to continue to gather the noninterest-bearing, I think really, really weighed on what we feel like the margin was 3 basis points up in March to end up where we were 14 down through February, 3 basis points up to March, only being 11% down ended at 327 million.
Okay. That's helpful, Greg. And then I guess along with that, you mentioned the liquidity build in the first quarter, and you expected. Curious what the expectations are from here from the liquidity aspect, whether that's a loan-to-deposit ratio? Or how you think about that?
Yes. I would expect -- our expectations are to continue with that high single-digit loan growth 6% to 8%, and to be able to fund that through deposit growth. Now we don't expect to have 24% annualized deposit growth going forward on the whole loan-to-deposit ratio in that 93-ish range for the balance of the year.
Okay. Got it. That's helpful, Greg. And then I guess, switching over to expenses. I think the messaging was core $41.8 million number in 1Q is a good kind of launching point. I think you said sequentially from here, 2% to 3% increase each quarter. Did I capture that right? I think for the year, that gives you some between [ 172 ] and [ 174 ], if I heard that correctly.
That's about right. Yes. We think that, that is -- you're right.
Okay. And then just lastly for me on the acquisition. Congratulations on the deal. I know you guys have been in Dallas for a number of years. Would just appreciate any kind of comparison as far as the customer base? How does the customer base in Dallas for Oakwood compared to business versus customer base? Any kind of overlap at all? And just in general, any kind of comparisons.
Yes. I think one of the attractions of the deal was the similarity of the following efforts of the client makeup. We do have a handful of shared clients already. But for the most part, they're not their clients, but they are shared client types. A lot of the production staff for Oakwood came from regional or sorry, larger banks, and they tend to do deals similar in stall and forms to us.
I think we'll have the opportunity with the expanded balance sheet to help them do more of what they do. And I don't anticipate on a culture shock when it comes to the production side of the house. Excited about them fitting in there. They also with their production staff coming from larger banks. We also look forward to benefiting from the leadership and depth that they can help us provide to that of our bankers. So we're -- I think it's a really good fit in terms of client base and in terms of bankers.
Matt, circling back to your question on the expense base. I want to make sure I heard you right. What you were implying, I think I heard low 160, 162, 160. Or do you say 170?
I thought it was [ 172 ] to [ 174 ] that's what I heard.
Yes. Yes. I thought I heard you say 170 or 162, 163.
So Matt, we do think that from an integration standpoint, that this is right down our alley, and there will be a lot of good cultural overlap. As you mentioned, we've been in the market for a while. We have about $1.8-ish billion, $1.9 billion in loans outstanding. And so we feel like we had a really good perspective through the due diligence process, and I'll let Greg talk a little bit about the diligence efforts and the all-encompassing nature of that process.
Yes. Matt, we were able to in our Investor Day, shows very deep penetration in reviewing their loan book came away with it, feeling very comfortable about not only the quality of the portfolio, but also the -- as you mentioned, it feels a lot like Business First early days where there's not a lot of clients of really great quality of clients. So came away with feeling really good about not only the level of talent they have, but also the quality of the portfolio and how it will map over to our bank, not only from a credit standpoint but also from the margin and all of those things that we get to do when we [indiscernible].
I would say, in addition to our specific to, they have to have a good track record of [ Roy Sally's ] career in particular, of being credit focused and really in terms of prioritization, I think well aligned there.
Our next question comes from the line of Michael Rose with Raymond James.
Yes. Maybe we could just start on the increase in past dues. If I look at Page 28 of the slides, it looks like it was in the all other category. So I just wanted to get some color on the increase there of the migration.
All right. Thank you Yes, the -- Michael, you there?
Yes.
Okay. Sorry. Yes, as I mentioned on the call, I think the main thing that made past dues go up is we had one commercial real estate loan that had some issues with some guarantors and we've resolved that loan. So we feel real good about other than that, past 2 seem to be very normalized. That would have been $10 million in past dues or just slightly less than that for the quarter.
Okay. Yes. Sorry, if I missed that. And then maybe just on the deal, I was looking at Oakwood and it looks like they -- were going to go through an MOE, I think, in '22 and it broke apart, I think, because of CRA issues. Can you just address that? And then maybe just holistically, what drove you to this bank out of all the other options in and around the state of Texas? I know you mentioned some of it had to do with looking like Business First in the earlier days, all the stuff you just mentioned in relation to Matt's question, but would just like some color there.
Sure. I think in terms of our ability of the partnership being an end market transition that we felt like we could understand. Certainly was attractive. The size also is kind of the ideal size. It's the size that is meaningful, but not a bear kind of acquisition, which is in line with our last acquisition a couple of years ago in Houston.
And then I would also say just we've known the management of the team for a number of years, and we still feel very comfortable that they had the right spirit in terms of the partnership. And if you look at the deal that the economics of the deal, we're very well aligned, and it's clearly a situation in which they chose to invest in us. And believe in the opportunities of the partnership versus an upfront cash out, which in terms of lining up reasons you do an acquisition, the intent and the value structure of the management and the Board is number one, that leads to the right culture, and we believe they have the right culture.
So being an end-market deal that we felt was low in terms of integration risk, being the right size, having the right culture. We felt that all fit well both with our ability to conduct the transaction successfully and in terms of [indiscernible] of our strategic plan that we've outlined here on the call. But we've had for a number of years ago to increase to [ 7.5-ish ], like that's a really good kind of sweet spot size as well and this accomplishes that with the consummation of the transaction.
We also have had a goal to approach 50% in terms of our credit risk paying outside of Louisiana. And so this materially moves us in that direction. If you're going to be there much to be desired across Texas, Dallas certainly is, I think many people would consider the strongest of the market and one of the strongest in the country. So all else being equal, certainly, that was an attractive place for us to make the investment. And doing so with the right partnership structure also was a unique opportunity to make this kind of move in the environment in which we're operating in which stocks across the board over [indiscernible].
I want to address the rationale for the breakup of the potential MOE experience. Certainly, we weren't a part of that. but CRA is an issue that we wanted to be sure that we were comfortable with prior to taking regulatory approval. And so we've had the chance as part of our diligence process to identify and understand the investments that they've made over the past couple of years, and they've been significant, including opening a branch in Southern Dallas. And we feel like they've been doing the right things, and we have a strong record as well as CRA success and name commitment. And so we feel comfortable that we're together, but they're independently on the right track from a CRA perspective. And together, we feel like will be a good candidate for approval to the regulatory process.
Okay. That's great color, Jude, I appreciate it. Maybe just last for me. It looks like the deal is going to close in the fourth quarter Slide 16, I guess it's implies some earnings accretion in 2024. So I assume that it would close sometime earlier in the quarter. Is that fair? And then just, I guess, separately, this is going to put you kind of closer to $8.5 billion. And just wanted to see where you were and what you need to do as you get prepared to cross $10 billion definitely will be closer?
Sure. Well, I think it puts us closer to $7.5 billion. But nonetheless, the point is the same, and we're certainly cognizant of the investments needed and the challenges that we'll need to prepare to take on as we approach $10 billion, whether you start from $7.5 billion or the $8.5 billion. This is something we're already working on but you witnessed a number of hires that we have made over the past couple of years. So adding folks that have had experience going over that $10 billion mark. And that's kind of step one.
We believe the people and having that experience complement the organic work that we've done over our now 18-year history. We think is the first step and preparation for that. We've also begun investing heavily and making heavily and making sure that we have the right IT infrastructure in place. So as we detailed a little bit on our last call, that means -- that has meant in this year we wanted to invest in some technology that we think better prepares us. On the production side in terms of making sure that we're doing the right things but also data flow so that we can be prepared to answer the regulatory questions that are involved. So that was in the works already.
This acquisition gives us some scale to help, frankly, go forward some of those investments that we're making. So we're trying to make those investments prior to you -- to getting to the $10 billion mark, so that we retain optionality when we do get there, and we'll be well prepared for it. So I think this actually helps us prepare and we feel like we're doing the right things to be ready hit that $10 billion mark without having to stand still for a while as we kind of catch up with ourselves. We're actively aware of that and actually and actively investing and being prepared.
What was the first part of your question? Income accretion?
Do you want to...
So just -- do you expect that close then, I meant to say $7.5 billion. I'm sorry about that. I think it looks like the deal could close earlier in the fourth quarter, just given that you expect some EPS accretion in 2024. Is that fair?
Yes. As you know, we -- there's some part of that is outside of our control, but having this will be our sixth acquisition as a team. So we feel like we have a pretty good handle on the process and on the logistics required and our hope is that we could in fact close early in the fourth quarter close to [indiscernible]
If we think so. And Michael, we -- in the Investor Day kind of lays it out. We expect the cost saves to start integrated probably in the middle half of 2025 post conversion. Kind of holding to that same time line. Hopefully, we think it's -- hopefully, it would happen sooner, but that's when we'll start getting the income accretion.
From a regulatory perspective, we feel like this is right down the middle of the fairway, and you identified the CRA being an issue that, that is one that occasionally trips up deals that are even right down the middle of fairway. But we feel like we have a good handle on that. And all the other elements of the deal are ones that would lead us to believe that our regulatory partners would feel comforted with the addition.
Our next question comes from the line of Feddie Strickland with Janney.
With this transaction, I think I see in the deck, it puts you 44% pro forma taxes on loans. Do you think given the current trajectory, you could potentially exceed 50% of loans in Texas by mid- to late '25 just with this transaction and all the loan growth?
Yes, I think that's not an unlikely scenario. We -- this obviously moves the needle in terms of about 50% of the way from where we are today to there. And around half of our growth is coming from Texas markets. So we -- in this partnership with the bankers of Oakwood should give us the ability to increase that number over time. So I don't think it's unrealistic to assume that we would be nearing if not there, by the end of next year.
Okay. And then I notice Oakwood's portfolio is a little heavier on C&I on the legacy business first portfolio. And I apologize if I missed if you said this earlier. But was that part of the consideration here just some more diversification on credit? Or was it just more having a stronger footprint in Dallas proper?
It was a mixture of things. There's certainly the makeup of the portfolio and being an outsized and exposure to C&I was an attraction to us. If you think about growth in our loan book over the past couple of years, it's been kind of a return to a C&I focus. And we're really proud of our team for decreasing our exposure relative to capital of C&D and CRE over the last 2 years pretty substantially. In C&D gone from 120-ish percent, down to 90-ish -- just below 90%. So we've been able to return to our [indiscernible] in terms of business banking sector and this partnership will accelerate that process. So yes, that was makeup of their balance sheet, the makeup of their client base, the make up of the capabilities of their banker teams were being C&I focused is something that is attractive to us.
Understood. One last modeling clarification question. I know there's been a couple questions on the margin already here. But Greg, did I hear you correctly that the [ 327 ] core margin ex accretion today, but do you see that going up to [ 350 ], but it's not going to go to [ 350 ] next quarter, right? Or is that kind of a longer-term goal?
Yes. That's a longer-term operational goal. I think in reality, when you think about this deal in the context of the deal, then being achieving that goal by the first to the middle part of next year is probably pretty reasonable.
I think that one thing intriguing about the bank is that we have similar loan and deposit costs and yields. They're a little higher than us on the loan side, but not order of magnitude higher. So we're very comfortable that they're getting paid for what they do. And then they have a little higher deposit cost. So we think we have the opportunity with our more expanded branch network to be able to continue to put to work [indiscernible] of gathering funding in other markets and putting them to work in Dallas.
And while the -- we do have -- this does help us achieve more balance than we've ever had, not only on the loan side, but the deposit time moving to about 31% of our combined franchises on a pro forma basis, deposit makeup being in Texas. We think that Louisiana franchise will continue to be able to add positively to the funding basis, which should be able to -- which should enable us to bring their deposit costs more in line with ours, which should give us an opportunity for increased margin through the acquisition as well as through our own internal efforts.
[Operator Instructions] Our next question comes from the line of Manuel Navas with DA Davidson.
I want to touch on the NIM kind of a different piece of that of the pace to build to [ 350 ]. If you get there by middle of next year that's going to have help from accretion. And you had a comment that [ 350 ] is with a higher for longer perspective, where could you get -- if we kept rates unchanged, where could the NIM reached by the end of the year? And if we do have a couple of rate cuts, where would it fall to? Just kind of looking for the variability of that outlook.
Yes. We've worked real hard in the last probably 9 to 12 months on making the balance sheet more neutral. So we feel like in a higher for long [indiscernible] 1 or 2 cuts environment, we should -- margins should be impact pretty much and we purposely tried to move it in that direction. So I think, stand-alone by the end of the year, we would expect that to be able to pick up somewhere from 10 to 20 basis points. And when I meant 350, that was ex accretion as well.
So that's helpful. Is shifting over to the transaction you announced today, there's a couple of pieces when you talk about the retention agreements and being able to keep the talent. Can you just talk about the thought process in that? And how you've been able to feel confident that you're really bringing this team over to work for you for a good amount of time. Just kind of go through that piece of it with the key producers at Oakwood?
Sure. Well, we've -- part of our diligence process is really feeling our relationships and making sure that we get culture alignment on our decision-making processes, and that includes the production leadership. We are relative how the diligence on the [indiscernible] out I wouldn't really mean anything if we didn't feel good about the diligence on the personalities and the people involved.
And it's not just us feeling good about them. It's also the feeling good about us and the way that we make decisions and the prioritizations that we have. And so we certainly spent quite a bit of time with their team. Not only their senior leadership and Board but their actual production officers and feel like we've they hit upon a group that will fit in day 1. And it is important to have retention agreements post acquisition for initial period of getting to know each other. But ultimately, our ability to maintain the talent and over the long run, will come down to the feeling like they can do what we do within our systems until [indiscernible]
We have both a good feeling about this group. But then we also have a track record. If you think about the 5 acquisitions that we've done, we've lost maybe 2 or 3 producers at the most at end. We didn't choose to help transition. So we have a good record of integration, [indiscernible] talent. And part of that is when you partner with banks that are smaller than you that you feel good about their culture and you feel good about their desire to win, then we really can offer their producers quite a bit in terms of the bigger balance sheet to work with, and a more expanded product set as well. And winners going to win. And we think we're able to offer them a chance to continue to do that at [indiscernible] and even bigger scale than they have previously.
They also have the ability as our folks do to participate in equity upside over time. And so I feel like we're well on there as well. And so I don't mean to [indiscernible]. I know it's easy to talk about the formal contracts, but success in the acquisition road is really about the about the software side and the integration of the cultural aspects of the bank and to do so like a -- we are good at prioritizing that as we've shown across prior acquisitions, and then I feel specifically really good about the shared vision that we have with this team and with the leadership of the bank as well.
It's been a comfortable feeling from day 1. And again, that not to be too soft about it, but those all things do matter. And so we feel confident that we'll be a good place for their team to continue to grow and be all they can be. And that ultimately will lead to their desire to remain a part of our team over time.
That concludes our Q&A session. I will now turn the conference back over to Jude Melville for closing remarks.
Great. Well, I appreciate everybody spending time with us. It was a quarter, and we believe that we're doing the right things from a managerial aspect to address those noise and feel as confident about our ability to produce returns over the year -- over the course of the year as we did this time last quarter, and we'll continue to work hard to make that happen.
We'll just take a moment just to welcome the team and the Board and the shareholders of the Oakwood Bank. They built a solid franchise and one that we're excited about partnering with and believe that together, we can all achieve as much as we hope to achieve and are excited about cultural alignment that we found with this deal. So thank you to them, and we welcome them. And thank you to our team for results, but also being the kind of bank that people that people want to partner with, I'm proud of it and look forward to take some more steps forward this year. Thank you.
This concludes today's conference call. You may now disconnect.