We’re actively aware of that actually and actively investing in being prepared. What was the first part of your question?
Michael Rose: Income accretion?
Jude Melville: Oh, you wanted to speak on that?
Michael Rose: Just to expect to close the deal, I meant to say $7.5 billion. I’m sorry about that. It looks like that you could close earlier in the fourth quarter, just given that you expect some secretion in 2024. Is that fair?
Greg Robertson: Yes, as you know, there’s some part of that, it’s outside of our control, but having this would be our sixth acquisition as a team. So I feel like we have a pretty good handle on the process and on the logistics part and our hope is that we could in fact close early in the fourth quarter.
Jude Melville: We think so and Michael, in the investor deck kind of lays it out. We expect the call phase to start being integrated probably in the middle half of 2025 post conversion kind of holding to that same timeline. Hopefully it would happen sooner, but that’s when we’ll start getting the income accretion.
Greg Robertson: 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 is one that occasionally trips up deals that are even right down the middle of the fairway, but 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 comfort with the addition.
Michael Rose: Great. Thanks for taking all my questions.
Greg Robertson: Sure. Thank you.
Operator: Our next question comes from a line of Feddie Strickland with Janney. Please go ahead.
Feddie Strickland: Hey, good afternoon, everybody.
Greg Robertson: Hey Feddie.
Feddie Strickland: With this transaction, I think I see in the deck it puts you at 44% pro forma taxes on loans. Do you think given the current trajectory, you could potentially exceed 50% of loans in taxes by mid to late ’25, just with this transaction and all the loan growth?
Greg Robertson: Yes, I think that’s not an unlikely scenario. 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. 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.
Feddie Strickland: Got you. And then I noticed Oakwood’s portfolio is a little heavier on C&I than the legacy of Business First portfolio. I apologize if I missed to be 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?
Greg Robertson: It was a mixture of things, but certainly the makeup of the portfolio and being announced as an 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’ve really pride of our team for decreasing our exposure relative to capital of C&I. It’s the area over the past two years pretty substantially in C&I. We’ve gone from 120-ish percent in May 119 down to 90-ish maybe just below 90%. So we’ve been able to return to our way of thinking in terms of business banking sector and this partnership celebrate that process. So yes, that was the makeup of their balance sheet, the makeup of their client base, the makeup of the capabilities of their banker teams were being C&I focus to something that is attracted to us.
Feddie Strickland: Understood. One last modeling clarification question. There’s been a couple of questions on the margin already here, but Greg, did I hear you correctly that it’s a 327 core margin excretion today, but you see that going up to 350? It’s not going to go to 350 next quarter, right? Or is that kind of a longer term goal?
Greg Robertson: Yes, that’s a longer term operational goal. I think in reality, you know, when you think about this deal and 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, you know, one thing intriguing about the bank is that we have we have similar loan and deposit costs and yields on there. 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 this thesis of gathering funding and other markets and put them to work in balance.
And then while we do have — this does help us achieve more balance than we’ve ever had, not only on the loan side, but the deposit side moving to about 31% of our combined franchises on a pro forma basis, deposit make up being in Texas. We think that the Louisiana franchise will continue to be able to add positively to the funding basis, which should enable us to bring their deposit costs more in line with ours, which should give us an opportunity for a very increased margin through the acquisition as well as through our own internal efforts.
Feddie Strickland: Thanks for the color. That was helpful and congrats on the deal guys.
Greg Robertson: Thank you.
Operator: [Operator Instructions] Our next question comes from a line of Manuel Navas with D.A. Davidson. Please go ahead.
Manuel Navas: Hey, good afternoon.
Greg Robertson: Good afternoon. Thank you for being here.
Manuel Navas: I want to touch on 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 reach 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?
Greg Robertson: Yes, we’ve worked real hard in the last probably nine to 12 months on making the balance sheet more neutral. So we feel like in a higher for longer, one or two cuts environment, margin should be packed pretty much and we purposely try 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 x accretion as well.
Manuel Navas: That’s helpful. Okay. Shifting over to the transaction you announced today, there’s a couple places where 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?
Jude Melville: Sure. Well, we’ve, you know, part of our diligence process is really feeling our relationships and making sure that we have cultural alignment on our decision making processes and that includes the production leadership. And regardless of how the diligence on the [indiscernible] I wouldn’t really mean anything if we didn’t feel good about the diligence on the personalities and the people involved. And, you know, it’s not just us feeling good about them. It’s also them 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 really hit upon a group that will fit in day one.
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 we’ll come down to them feeling like they can do what they do within our system. And so, we have both a good feeling about this group. But then we also have a track record, you know, if you think about the five acquisitions that we’ve done, you know, we’ve lost maybe two or three producers at the most that we didn’t choose to help transition. So, we have a good record of integration, production talent. And part of that is when you partner with banks that are smaller than you, then 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 a bigger balance sheet to work with and a more expanded product set as well.
And, you know, winners want to win. And we think we think we’re able to offer them a chance to continue to do that at perhaps an even bigger scale than they have previously. They also have the ability to — as our folks do, to participate in equity upside over time. And so, I feel like we’re well aligned there as well. And so, I don’t mean to talk. I know it’s easy to talk about the formal contracts, but success in the acquisition world is really about the software side and the job and the integration of the cultural aspects of the bank. And I feel like we’re 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 one. And again, not to be too soft about it, but those soft things do matter. And so, we feel confident that will be a good place for their team to continue to grow and be all they can be, and that that ultimately will feed to their desire to remain a part of our team over time.
Manuel Navas: I really appreciate it. Thank you.
Operator: That concludes our Q&A session. I will now turn the conference back over to Jude Melville for closing remarks.
Jude Melville: Okay, good. Well, I appreciate everybody spending time with us. It was a bit of a noisy 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. We’re excited about the cultural alignment that we’ve found with this deal. So thank you to them, and we welcome them. And thank you to our team for all their results, but also being the kind of bank that people want to partner with. I’m proud of it and look forward to taking some more steps forward this year. Thank you.
Operator: This concludes today’s conference call. You may now disconnect.
