Earnings Call Transcript - QCRH Q1 2026

Operator, Operator

Good morning, and thank you for joining us today for QCR Holdings, Inc.'s First Quarter 2026 Earnings Conference Call. Following the close of the market yesterday, the company issued its earnings press release for the first quarter. If anyone joining us today has not yet received a copy, it is available on the company's website www.qcrh.com. With us today from management are Todd Gipple, President and CEO; and Nick Anderson, CFO. Management will provide a summary of the financial results, and then we will open the call to questions from analysts. Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, any statements made during this call concerning the company's hopes, beliefs, expectations and predictions of the future are forward-looking statements and actual results could differ materially from those projected. Additional information on these factors is included in the company's SEC filings, which are available on the company's website. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference call is being recorded and will be available for replay through April 30, 2026, starting this afternoon, approximately 1 hour after the completion of this call. It will also be accessible on the company's website. I will now turn the call over to Mr. Todd Gipple at QCR Holdings. Please go ahead.

Todd Gipple, President and CEO

Good morning, everyone. Thank you for joining our call today. I'd like to start with an overview of our first quarter performance, and then Nick will walk us through the financial results in more detail. We are pleased to deliver the most profitable first quarter in our company's history. This performance was driven by healthy loan and deposit growth, significantly lower noninterest expense and modest margin expansion. We maintained excellent asset quality and generated meaningful growth in tangible book value per share while returning capital to our shareholders through opportunistic share repurchases. We also continue to make further investments in our digital transformation as we build a more modern, scalable bank for our clients and employees. Strong performance in our traditional banking and wealth management businesses partially offset the linked quarter reduction in our capital markets revenue. Capital markets results were in line with our expectations given typical first quarter seasonality and were equal to our 5-year average for Q1 production. As a result, we delivered a very strong return on average assets of 1.40% and earnings per share growth of 31% compared to the same period last year, highlighting the strong earnings potential of our diverse business model. Our traditional banking business continues to deliver solid organic growth supported by healthy commercial and industrial activity across our markets. Our multi-charter model enables us to consistently gain market share with locally led community banks to build deep relationships with high-value clients and communities where they live and work. Our digital transformation remains on track with the successful completion of the second of four core system conversions in early April. Modernizing our technology stack will deliver meaningful benefits for both our clients and employees, expanding our service capabilities, enhancing the client experience and driving operating leverage. Our Wealth Management business also delivered very strong results with annualized revenue growth of 14%. Our success in this business continues to be driven by the experience of our team and the power of our relationship-driven model, which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisers across our markets. We are deepening client engagement and reinforcing wealth management as a key driver of our sustained top-tier financial performance. Our LIHTC lending business also continues to perform as the demand for affordable housing remains robust, driven by a lack of supply and ongoing affordability challenges nationwide. We view LIHTC lending as a highly profitable, annually consistent and differentiated line of business for QCRH, anchored by our deep network of developer relationships, and historically high-quality assets our platform delivers. Our LIHTC business has consistently delivered strong results, demonstrating our success in navigating various interest rate cycles and dynamic market conditions. Our strong relationships with industry-leading LIHTC developers, combined with market demand position us well to grow this business and further strengthen our financial performance. Given the strength of our pipeline in our traditional and LIHTC lending platforms, we are reaffirming our guidance for gross annualized loan growth of 10% to 15% over the final three quarters of 2026. We are also increasing the lower end of our capital markets revenue guidance by $5 million, now targeting a range of $60 million to $70 million for the next four quarters. In combination with our LIHTC permanent loan securitizations launched in 2023, we have also begun partnering with private investors on LIHTC construction loan sale transactions. These transactions enable us to expand our permanent LIHTC lending capacity, which will drive increased capital markets revenue. The ability to sell off these LIHTC construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects, in addition to the permanent financing that generates our capital markets revenue. This is allowing us to grow our market share in the affordable housing space. During the quarter, we identified a total of $523 million in LIHTC loans, both construction and permanent, for securitization and sale. The transactions are planned to close during the second quarter and will mark our fifth permanent loan securitization and our second construction loan sale. This is our LIHTC flywheel in action. Strong demand for affordable housing, reinforced by the federal government's commitment to increase LIHTC tax credits, combined with our deep developer relationships and our exceptional client service, positions us to capture market share from the larger competitors in this space. LIHTC's proven long-term performance drives investor demand for these assets, enabling us to execute LIHTC loan securitizations and sales. These transactions allow us to proactively manage concentration risk, balance sheet growth, liquidity and capital levels while generating increased capital markets revenue. We are building an asset-light, capital-efficient and revenue-heavy business in affordable housing. While securitizations and LIHTC construction loan sales temper near-term on-balance sheet growth, they enhance long-term profitability by creating more capacity. The balance sheet capacity created by these transactions is then rapidly redeployed into new originations, allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the foregone interest income over time. These loan sales and securitizations are also allowing us to strategically manage our total assets under the $10 billion asset threshold this year. We anticipate growing beyond $10 billion sometime in 2027, and we plan to be fully prepared for the associated organizational impacts by mid-2028, building on the planning efforts we began in 2023. Our company is executing at a high level across all three of our core lines of business. Our team has driven a five-year earnings per share CAGR of 14% and a five-year tangible book value per share CAGR of 12.5%. Our continued investments in talent, technology and strategic growth, combined with disciplined expense management, position us to sustain this top-tier financial performance. I am grateful for our 1,000 teammates that take exceptional care of our clients, our communities and each other as they deliver long-term value for our shareholders. I will now turn the call over to Nick to provide further details regarding our first quarter results.

Nick Anderson, CFO

Thank you, Todd, and good morning, everyone. We delivered net income of $33 million or $1.99 per diluted share for the quarter. Net interest income was $67 million and increased slightly on a linked quarter basis when adjusted for fewer days in the first quarter. Our NIM TEY increased 1 basis point from the fourth quarter of 2025, which was below the low end of our guidance range. Our robust deposit growth came early in the quarter from our correspondent business, which carries higher pricing. And when combined with loan growth occurring very late in the quarter, margin expansion was muted. The increase in our margin was driven by significant improvements in the cost of funds, partially offset by a reduction in our earning asset yields. We continue to have a disciplined approach to deposit pricing. And combined with the liability-sensitive balance sheet, our cost of funds betas are more than 1.5x those of our earning assets during the current rate-cutting cycle. Since the Fed began cutting rates in 2024, our cost of funds have declined by 79 basis points compared to only a 47 basis point decline in earning asset yields. While we continue to benefit from repricing lower-yielding loans into higher market rates, the opportunity is naturally moderating as the rate cutting cycle matures. During the quarter, new loan origination yields exceeded those on loan payoffs by 22 basis points. However, loan growth arrived very late in the quarter and average loan balances were down $109 million, contributing to the decline in the loan yield compared to the prior quarter. While our balance sheet has moved closer to neutral since the rate cutting cycle began, we remain positioned to benefit from future rate reductions with rate-sensitive liabilities exceeding rate-sensitive assets by approximately $900 million, providing upside to margin in a declining rate environment. For future cuts in the Fed funds rate, we estimate 1 to 2 basis points of NIM accretion for every 25 basis point cut in rates. If the yield curve steepens, we'd expect NIM expansion at the top end of that range. And if the yield curve remains relatively flat, we would expect NIM expansion at the lower end of the range. Supported by our late first quarter loan growth, we are guiding second quarter NIM TEY ranging from static to an increase of 3 basis points, assuming no further Fed funds rate changes. Upside in our second quarter NIM is supported by repricing opportunities on approximately $163 million in fixed rate loans currently yielding 6.2%, which we would project to reset nearly 25 to 30 basis points higher. We also anticipate continued CD repricing during the second quarter, with approximately $400 million of maturities, currently costing 3.7%, which we expect to retain and reprice nearly 25 to 30 basis points lower. We project investment yields to expand, supported by a solid pipeline of new municipal bonds priced well above 7% on a tax equivalent basis. Additionally, we are planning to offtake approximately $523 million of LIHTC loans through the securitization and loan sale in the second quarter, which should be moderately NIM accretive and is reflected in our NIM guidance. Noninterest income totaled $23 million in the first quarter, including $11 million from capital markets revenue and $5 million from Wealth Management. Our LIHTC lending team closed 13 projects during the quarter, including three with new developers as we continue to expand our LIHTC platform. Our wealth management team delivered strong results this quarter, adding 80 new client relationships and $177 million in new assets under management. While market volatility pressured AUM levels, new client growth largely offset that impact. Wealth Management revenue was up 3% from the prior quarter. This business continues to provide stability, recurring fee income and meaningful diversification to our overall revenue mix. Now turning to our expenses. Noninterest expense for the first quarter was $52 million compared to $63 million for the fourth quarter. The $11 million decrease was primarily driven by a $5.5 million reduction in salaries and benefits expenses associated with variable compensation related to earnings performance. In addition, we experienced lower professional and data processing costs due to the timing of digital transformation activities and the impact of the debt extinguishment loss in the prior quarter. Our flexible cost structure, particularly variable compensation tied to performance, is designed to support operating leverage while preserving flexibility through various revenue cycles. As a result, expenses were well below our guided range, highlighting our expense flexibility. This structure closely aligns our underlying cost base with performance, supporting a pay-for-performance culture and value creation for shareholders. Our significantly lower noninterest expenses resulted in an adjusted core efficiency ratio of 57.7% for the first quarter. For the second quarter, we are guiding noninterest expenses to be in the range of $55 million to $58 million, which assumes capital markets revenue and loan growth are within our guided ranges, while also continuing to invest in our digital transformation initiatives. This outlook reflects our disciplined approach to expense management aligned with our 965 strategic model, which targets noninterest expense growth of less than 5% annually while enhancing operating leverage and profitability. Moving to our balance sheet. Total loans grew $145 million for the quarter, or 8% annualized, excluding the planned runoff of the M2 equipment finance portfolio. There are $523 million of LIHTC loans identified for securitization and sale included in the held-for-sale category. These loans consist of a $207 million pool of LIHTC construction loans identified for sale to a new private investor and a $316 million Freddie Mac LIHTC tax-exempt permanent loan pool securitization. Continued execution of our LIHTC offtake strategies has increased our confidence to support larger transactions and a broader range of developer opportunities. Complementing our loan growth, core deposit growth accelerated during the quarter, increasing $409 million or 23% on an annualized basis. Average deposit balances only rose by $31 million or 2% annualized compared to the fourth quarter as we actively managed our excess liquidity off balance sheet to optimize balance sheet efficiency. We remain highly focused on expanding core deposits and improving the deposit mix across our markets. Our deposit mix improved this quarter, driven by higher noninterest-bearing balances and a reduction in higher cost CD and broker deposits, further strengthening our funding profile. Asset quality remained excellent during the quarter. Nonperforming assets totaled $43 million, a decrease of $439,000 from the prior quarter, which resulted in the NPA to total asset ratio remaining static at 0.45%. The ratio of criticized loans to total loans and leases was 2.01%, remaining well below the company's long-term historical average and near the 5-year low of 1.94% established in the prior quarter. The marginal increase in criticized loans was primarily driven by one large credit, which is expected to be resolved favorably later this year. The company recorded total provision for credit losses of $2.5 million during the quarter, down from $5.5 million in the prior quarter, primarily due to the reclassification of LIHTC construction loans to the held-for-sale category as these loans are expected to be sold at par. Net charge-offs were $4 million during the first quarter of 2026, a decline of $300,000 from the prior quarter. Between the start of the first quarter and April 20, we returned almost $25 million of capital to shareholders with about 288,000 common shares repurchased at opportunistic valuations. Since we began repurchasing shares in August of last year, we have repurchased 566,000 common shares, returning a total of $46 million to our shareholders. These repurchases demonstrate our capital allocation flexibility, enabling opportunistic repurchases when they create value and align with our strategic and financial priorities. We delivered another quarter of strong growth in tangible book value per share, which rose $1.33 to over $59, reflecting 9% annualized growth. Over the past five years, tangible book value has grown at a compound annual rate of 12.5%, highlighting our continued strong financial performance and long-term focus on creating shareholder value. Our tangible common equity to tangible assets ratio decreased 2 basis points to 10.31%. The common equity Tier 1 ratio increased 2 basis points to 10.54%, and our total risk-based capital ratio decreased 19 basis points to 14%. These quarterly changes reflect the combined impact of strong earnings and share repurchases during the quarter. The total risk-based capital ratio was also impacted by a reduction in subordinated debt capital treatment on our 2019 issuance and lower ACL balances. Finally, our effective tax rate for the quarter was 7%, down from 8% in the prior quarter, reflecting lower pretax income and an increase in the mix of our tax-exempt income relative to our taxable income. Our tax-exempt loan and bond portfolios have continued to support a low effective tax rate. Assuming a revenue mix in line with our guidance ranges, we estimate our effective tax rate to be in the range of 8% to 10% for the second quarter of 2026. With that added context on our first quarter results, let's open the call for your questions. Operator, we are ready for our first question.

Operator, Operator

The operator provided instructions. Today's first question comes from Daniel Tamayo with Raymond James.

Daniel Tamayo, Analyst, Raymond James

Thank you. Good morning, guys. Yes. Maybe first on the capital front. You've got the two securitizations planned for the second quarter. I apologize if I missed it, but do you have a sense for how much capital that will add to the stack? And then the follow-up is on the buyback side. Do you plan to use that in buybacks? Or you're at, I think, 10.5% CET1. Is that a good bogey for you guys to settle near going forward? Or do you want to keep growing?

Todd Gipple, President and CEO

Yes. Thanks, Danny. Appreciate the question. Through the term loan securitization, we don't really free up regulatory capital because we're retaining B pieces historically. And that's okay, but it does free up GAAP capital. As you noted, we're getting into the mid-teens in terms of total risk-based capital and CET1. And so about 25 basis points gets freed up from the construction loan participation and that will allow us to continue to be fairly opportunistic with respect to buybacks. So we're getting up to really above our long-term target in terms of capital ratios. And so we would continue to be opportunistic. As you know, there's really four things to do with capital: retain it for organic growth, and that's a little less demand for us as we're going more asset-light and capital efficient in the LIHTC business; M&A is not a current priority for us; so then you get to returning capital. We did raise our dividend modestly and it remains a modest dividend because we believe at current valuations, stock repurchases are really the best use of capital. And so we're very pleased to have accomplished what we have already — and really the answer is we would continue to be opportunistic when it comes to buybacks at valuation levels that make sense. We tend not to just look at where we're at on a current price to tangible book or price to earnings; we really look at where earnings and TBV are headed. Considering we're growing those at more than 10% CAGR gives us even more confidence to be buying shares. So kind of a long answer to your short question: it frees up about 25 basis points, and we would continue to be opportunistic in share buybacks.

Daniel Tamayo, Analyst, Raymond James

That's great, Todd. I appreciate all the color there. And then maybe one on the margin. So we've got the guidance for the second quarter. Feels like maybe we're approaching stability. Curious for your thoughts on that. And then longer term, do the securitizations continue to be kind of modestly accretive every time you do them? Or is there a point where they are breakeven or don't impact the margin as much as we look forward for future securitizations?

Nick Anderson, CFO

Thanks, Danny. I'll answer several data points here. When you think about our Q1 average earning assets, we were about $8.6 billion, considering the Q1 loan growth being back-end loaded. Assuming we hit the midpoint of our loan growth, call it 12.5% for the rest of the year, and assuming roughly middle of the quarter for offtakes, we expect average earning assets would be down about $200 million. Translating that into NII and NIM: our core margin, we continue to expect to grind higher by a couple of basis points with loan and CD repricing. The offtakes here in Q2 are expected to be slightly accretive, and I'd call that about a basis point for Q2. In addition, Q2 has an extra day, and all of that leads us to feel pretty confident about holding Q2 NII static. On the go-forward picture on future offtakes, I don't think we're going to anchor every transaction to being perfectly neutral quarter-to-quarter. Future LIHTC rotations are likely to be less dilutive than it was in Q4. Q4 had a fair amount of well-priced assets that were part of that package transaction; some of the transactions here are at lower yields. We are also combining that with our securitization, so we get a little bit of upside between the two transactions. I think any time we're taking decent assets off the books, if we can hold neutral grade, our expectations might be a little dilutive, but certainly not to what we experienced during Q1 with the impact from the Q4 transaction.

Operator, Operator

The operator provided instructions. Our next question comes from Damon DelMonte at KBW.

Matt Rank, Analyst, KBW (filling in for Damon DelMonte)

This is Matt Rank filling in for Damon. Hope everybody is doing well today. My first question, thanks for the comments on the digital transformation. But just curious if any of that modernization includes anything with artificial intelligence. And maybe if you guys have identified any use cases, like could that technology speed up the LIHTC flywheel, so to speak, or help with wealth management, anything like that?

Todd Gipple, President and CEO

Sure, Matt. Thanks for joining. Give our best to Damon. We are really excited about the digital transformation that we're undergoing, and I'll give you a little background to get to your AI answer. We're about halfway done. The first conversion was our simplest, and that was last October when we went from a Jack Henry product to another Jack Henry product, where we've landed at Jack Henry SilverLake. The one we accomplished just after the end of the quarter, the first weekend in April, was our most rigorous one. It was the first one going from Fiserv Signature to Jack Henry SilverLake. It went really well, and we really wanted that to go well. We have another one coming up in October and another in April, and we expect to be all done soon. The answer to your AI automation question stems from the decision we made a couple of years ago to partner with Jack Henry for our new core. We believe them to be the furthest along with respect to AI and automation opportunities. Their open architecture has allowed us to integrate it with a little over 30 other products that link to our core. That's gone really well. Much of the AI capability will come from our large third-party vendors; we're not standing it up ourselves, but our partners are well down the path. With respect to how that impacts us in the future, I think it will be more about our retail and commercial banking. There will also be some AI that helps us in the wealth management space. For LIHTC assets, there are conversations more around blockchain with respect to tracking those assets and making securitization and sale processes more efficient. So it's more about blockchain when it comes to LIHTC. We're excited about our digital future and a little over halfway done with the core conversions.

Matt Rank, Analyst, KBW (filling in for Damon DelMonte)

Okay. Great. And then just one more question for me. The loan loss reserve came down this quarter. So just wanted to get your thoughts on how we should think about that level going forward.

Nick Anderson, CFO

Sure. While provision was down, that was really due to the reclassification of the LIHTC loans to held for sale. We used some of the provision in that regard, but we did keep our coverage ratio static at 1.26%. So while our provision was down, we maintained the same level of reserves that we had previously. I appreciate the question because it helps clarify that we didn't soften reserves or lighten reserve levels; we kept those static. The reduction in provision was about reclassifying a fair amount of loans to held for sale.

Operator, Operator

The operator provided instructions. Our next question today comes from Nathan Race at Piper Sandler. Hello, Nathan, is your line on mute perhaps? All right. It appears that we're not receiving any audio from Mr. Race's line here. So we're going to move on to our next questioner, which is Brian Martin at Janney Montgomery.

Brian Martin, Analyst, Janney Montgomery

Guys, good morning. Can you just—maybe I missed what you were saying there in terms of just—I think I got the big picture on being kind of neutral, but just kind of with how the earning assets land in the next couple of quarters as you roll through the growth and the offtake? It sounded like it might be down $200 million or so next quarter in the second quarter, given what happens. And then thereafter, it's stable to growing with the balance of the portfolio? Or just second and third quarter, as you kind of roll through, how should we think about those next two quarters from an average earning asset standpoint?

Nick Anderson, CFO

Yes. Thanks, Brian. Certainly a lot of noise here in Q2 as you think about the transactions and trying to model some of that out. But yes, you are correct. For Q2 average earning assets, we're thinking about that being down about $200 million, but that assumes we're hitting a pretty strong loan growth number for the quarter. We also have the offtake pegged for mid-quarter of Q2. When you get to Q3, the temporary noise associated with the transaction should stabilize and you'll start to see some growth from there.

Brian Martin, Analyst, Janney Montgomery

Got you. Okay. And just the margin, obviously, you gave some comments about next quarter's margin. But just longer term, the bias would be trending upward. I mean, you had some nice improvement on the funding side this quarter with the deposits. I don't know that—the timing of the loan growth coming on and any additional improvement on that funding side— but it feels like the margins are flat to up rather than down. Is that how we should be thinking about it?

Nick Anderson, CFO

Yes, Brian, that is how we're thinking about it. We continue to grind higher on our core margin, and a lot of that is coming from our loan and deposit repricing. We continue to lower deposit pricing on our non-index deposits as we can. Our expectation is that we can continue to grind out every basis point here, even into Q2 with all the activity going on, and beyond that into Q3. Something else that will contribute is our expectation of stronger loan growth.

Brian Martin, Analyst, Janney Montgomery

Got you. And the loan-to-deposit ratio, as you move through all the noise here, where do you expect that to settle out over the next couple of quarters given the dynamics? There's a lot of moving parts in there.

Nick Anderson, CFO

Yes. We did drop quite a bit to 87% this quarter, certainly below our historical levels. When you think about Q2, we're expecting that to fall more into a range between 90% and 95%. I'd probably land at 92.5% longer term.

Brian Martin, Analyst, Janney Montgomery

Got you. Okay. And then last two, I know you talked about the buybacks being the most opportunistic use of capital in the near term. But as you roll through the modernization of the technology and you're more asset-light, does M&A become a bit more important or more interesting as you look out into 2027? And you managed below $10 billion this year, but going over isn't a big cost negative to you guys given the planning you've done, but just in terms of going over with more size—is that something you would think about as you go into '27?

Todd Gipple, President and CEO

Yes, Brian, that's a fair question. Our interest in M&A will grow a bit after we get all the way through this digital transformation. I've been careful to say in the past we're not necessarily in a blackout because of the conversions; we would certainly have the ability to do something if it made a lot of sense. Our interest in M&A would be less about the gyrations of going over $10 billion. I continue to feel good about that. There's certainly more chatter around M&A. We think we are a great partner for the right potential partner, but our strike zone remains very, very small. There are a whole host of metrics with respect to a potential partner that we would have to hit. The main point is, at the pace we are accreting TBV and earnings per share, it's going to have to be a very good strategic and financial transaction because we do not want to go backward. So it would have to be an excellent partner and a well-done financial transaction because we have great momentum organically, and we really don't want to take a step backward in M&A. So we're open to it, but very selective.

Brian Martin, Analyst, Janney Montgomery

Yes. And then nothing near term, more a little bit more in the out quarters.

Todd Gipple, President and CEO

Sure.

Operator, Operator

The operator provided instructions. Our next question comes from Nathan Race from Piper Sandler.

Nathan Race, Analyst, Piper Sandler

Sorry about the technical difficulties earlier. I apologize, I hopped on late, but just in terms of the cadence of capital markets revenue and some of the impacts you saw from a revenue perspective this quarter, how much did count the volatility in rates versus some seasonality impact what you saw in capital markets transactions closing? And then do you also expect, as you look out over the next 12 months, some seasonally lighter volumes as well in the first quarter? I'm trying to understand whether the updated guidance is going to be more loaded over the next three quarters.

Todd Gipple, President and CEO

Sure. Nate, appreciate the ability to clarify. In Q1, we saw very typical seasonality for LIHTC, and it really didn't have anything to do with rates or any macroeconomic headwinds; the affordable housing industry tends to work hard to close a lot of deals at year-end and then has a slower start to the new year. We did 13 projects, right on top of the historical Q1 average of 11 projects, so we landed about where we expected. Over the last couple of quarters we've raised our guidance range because of what we're able to do with securitizations and construction loan participations. Back in Q3 we raised our guide from $50–$60 million up to $55–$65 million; in Q4 we raised the top end to $70 million and left the bottom; now this quarter we're moving the floor up as we've become more confident about future pipelines. I wouldn't get too focused on the precision of those guidance ranges—it's more about the upward direction. We have a very strong say-do ratio, and we want to keep it that way. Our pipeline is shaping up as strong as it's ever been as we get further into the year. Q1 seasonality was about industry seasonality. We're very optimistic about the pipeline. We're good at closing deals; these 13 projects we did in Q1, even though it was a slower quarter, included three projects with first-time developers. We continue to expand our roster. We're excited about the future of LIHTC; having construction offtake allows us to say yes more often to clients and to consider slightly bigger deals. That's why we've gotten to the $60–$70 million guidance range.

Nathan Race, Analyst, Piper Sandler

Understood. That's really helpful. Just going back to the margin outlook and the expectations for some additional construction LIHTC securitizations or sales: can you remind us what pricing is like on that product? I imagine it's higher than what you see on a perm basis or maybe even across some other commercial segments. So how should we think about how these additional securitizations will impact loan yields, not only in the second quarter but as you perhaps do additional construction sales or securitizations in the future?

Nick Anderson, CFO

When we look at the impact on margin for future loan sales, we continue to expect to overcome any dilution that might come from additional loan sales. Pricing on the loans we sell will vary depending on tax status and deal specifics; it's deal dependent. Also, the timing of transactions matters. Some of the loans we are selling were originated in a higher rate environment, so they carry higher yields relative to current originations. Our speed to execution in the future is likely to be much shorter, so the disconnect between the portfolio we are offtaking and current rates would be smaller. Overall, we expect to overcome dilution and be modestly accretive in many cases.

Todd Gipple, President and CEO

And Nate, to add: the upshot of both transactions we expect to close in Q2 is just a slightly improved margin, maybe a basis point. That will fluctuate from time to time depending on mix, but it's going to be really tight to static. We do not anticipate having to take significant margin pressure when we're taking these off the balance sheet.

Nathan Race, Analyst, Piper Sandler

Got it. That makes sense. And as these securitizations play out and given the loan growth outlook, should we expect some additional reserve releases going forward similar to what we saw this quarter, or how are you thinking about the reserve trajectory as some of these loans are offloaded?

Todd Gipple, President and CEO

I would say there may be another construction loan participation at the end of the year. That will depend on where we land on gross loan growth. If we're more at the lower end of our guide at 10%, we probably don't need it. If loan growth is more robust and we're closer to 15%, we're likely to do another construction offtake later in the year. If we did that, there would be another bit of lightening in provision when that happens. Absent that, provision would be more consistent with what we've done over the last six to eight quarters—around $4 million to $5 million. Any change in that steady rate of provisioning would be driven more by the level of loan growth rather than portfolio challenges, which we aren't seeing.

Operator, Operator

And that concludes our question-and-answer session. I'd like to turn the conference back over to Todd Gipple for any closing remarks.

Todd Gipple, President and CEO

Thank you all for joining us today. We really appreciate your interest in our company, and we look forward to connecting with you sometime soon. Have a great rest of your day.

Operator, Operator

Thank you, sir. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.