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Curtis Anderson

Thank you, Malcolm. We continue to make progress in managing credit risk as reflected in our first quarter results. Our relationship teams are focused on risk identification and managing cycle times to resolution. In the quarter, we realized a net decrease in past dues and criticized loans. Our charge-offs are below forecast and NPAs reflect our focus on moving names to final resolution.
Moving to page 5. Nonaccruals increased $17 million from year-end as we took targeted action on select names to bring them to final resolution. Accordingly, nonperforming assets increased from $79 million at year-end to $97 million at the end of the first quarter. The increase was primarily from two loans representing retail and office exposures. We expect resolution on a majority of our current nonaccrual exposure by early third quarter.
Property and sales agreements are in place with buyers on a number of these assets. Past due loans reflect strong oversight and management by the team and declined from $31 million at year-end to $11 million at the end of the first quarter. Net charge-offs totaled $4 million for the quarter, primarily reflecting loss exposure on commercial office and retail real estate loans with final resolution. Our 2025 full year charge-off forecast of 20 basis points has not changed.
Moving to page 6. Criticized assets were down 4.3% or $18 million from year-end and down 26% or $135 million from the first quarter in 2024. CRE criticized totals continue to show meaningful reduction. In summary, we're pleased with the risk management discipline of our relationship teams. As Malcolm noted, their focus in partnership with special assets delivers results that are not fully evident in the top line numbers. These results include criticized payoffs and paydowns, restructurings resulting in positive grade changes and early risk identification that ultimately mitigates further downgrade and loss. We are committed to this continued focus.
I'll now turn the call over to Terry.

Terry Earley

Thank you, Curtis. Starting on page 7. When I look at the results since the end of '22, I'm encouraged. The balance sheet is in a good place. Liquidity is strong. Reliance on wholesale funding is down under 14%. Capital and reserves are up and CRE concentration levels are right where we want them, just below the regulatory guidelines.
Moving to page 8. Capital ratios held relatively steady quarter-over-quarter, except for the total capital ratio. The decline in total capital is a function of a $75 million tranche of sub debt that was repaid in the middle of the quarter after the rate converted to SOFR plus 347 basis points. Over the last two years, a significant contributor to the expansion in the capital ratios has been a $700 million decline in risk-weighted assets.
Tangible book value per share is $22.33, up from $21.61 at year-end and a 13.8% increase on a year-over-year basis, including the dividends we've paid. It's worth noting since Veritex went public in 2014, its compounded tangible book value per share at a rate of 11.5%, including the dividends have been paid to shareholders. Considering our growth outlook, organic capital generation and risk profile, the bank has increased its quarterly dividend by 10% to $0.22 per share per quarter.
Finally, Veritex repurchased 377,000 shares during the quarter. The tangible book value dilution was minimal and the earn-back is just over two years. We have $37 million remaining on the authorization, which at the current stock price is sufficient to repurchase just over 3% of the company. We intend to be opportunistic in its use.
Moving to page 9. The allowance now sits at 119 basis points, up significantly in the last eight quarters. Additionally, when you exclude the mortgage warehouse, the ACL coverage rises to 127 basis points. Our general reserves comprised 95% of the total allowance. We continue to use conservative economic assumptions in the CECL modeling with 65% of the weighting on downside scenarios.
In Q1, we shifted the weighting toward the most pessimistic scenario. Part of the weighting we shifted towards the most pessimistic scenario. This seems reasonable considering all the economic uncertainty from tariffs, interest rates, reduction in government spending, I could go on and on. Bottom line, the combination of the factors and the economic forecast weighting gives Veritex a very conservative allowance result.
Moving to page 10. As Malcolm said, total loans declined 1.3% during Q1 and 3% on a year-over-year basis. We made significant progress in reducing our CRE and ADC concentrations and ended the quarter at 29.7% and 85%, respectively. The significant decline during Q1 in CRE and ADC can be seen in the top right graph. As shown in the bottom right, loan production has increased by $1.6 billion from the four quarters ending Q1 '24 to the four quarters ending Q1 '25. A meaningful part of the increased production in the ADC area.
Funding on these two loans lags for several quarters as the borrowers' equity goes into the projects first. Loan growth will remain muted in 2025 due to higher-than-normal payoffs, but this production over the last several quarters will translate into loan growth as we move into 2026 and beyond.
On slide 11, provides some details on the term CRE and ADC portfolios by asset class, including what is out of state. Also shown is the breakdown of our out-of-state loan portfolio, including the significant impact of our national businesses and mortgage. The true percentage of the out-of-state portfolio was only 10.7%, and this is predominantly where we have followed Texas real estate clients to other geographies.
On to page 12. Our strong deposit growth and low loan growth has allowed Veritex to reduce its loan-to-deposit ratio from 104% to 89% over the last two-plus years. We intend to remain below 90% going forward. Please note, the loan-to-deposit ratio would be 82.8% if you exclude mortgage warehouse. Deposit growth has also allowed us to reduce our wholesale funding reliance to 13.7%, and it was over 24% the same period the last couple of years.
As you can see from the bottom left graph, we've kept the time deposit portfolio short and have $1.9 billion in CD maturities over the next two quarters with an average rate of 4.57% A short maturity profile helps us to manage the interest rate risk given the floating rate nature of the loan portfolio. On the bottom right, we show the monthly cost of total deposits. Note the 63 basis point decline since the month of June 2024, including 24 basis points since year-end.
If you look at interest-bearing deposits, they declined 37 basis points in Q4, and we followed that up with another 33 basis points of decline in Q1 of '25. Veritex is very focused on reducing deposit pricing where possible on existing accounts. Q1 '25 was another successful quarter of deposit remixing. Growth from our core lines of business allowed us to reduce our reliance on unattractively priced deposits like brokered or public. These unattractive deposits carry a cost that is approximately 185 basis points above our core business deposits.
I'll now turn it over to Will for commentary on net interest income, investments and liquidity.

Will Holford

Thanks, Terry. Slide 13 reflects a NIM increase of 11 basis points to 3.31% in Q1, which is slightly higher than the previously guided range of 3.25% to 3.30%. The primary driver of the NIM increase is a result of continued repricing and remixing efforts within the deposit portfolio Terry mentioned on the previous slide. The cost of interest-bearing liabilities declined 33 basis points in Q1, while the yield on earning assets only declined 12 basis points.
On a dollar basis, net interest income was down $700,000 for the quarter, driven by two fewer days in the quarter, lower earning asset volume and the full quarter impact of rate cuts late in 2024 on loan yields, which were mostly offset by interest expense savings from deposit repricing efforts and lower interest-bearing average deposits. On a go-forward basis, we expect NIM to return to the 3.25% to 3.30% range for the remainder of the year, absent outsized or accelerated rate cuts.
As we mentioned in previous quarters, a $250 million pay fixed balance sheet swap matured in late Q1, which will be partially offset by the interest savings from paying back the $75 million tranche of sub debt that Terry mentioned. We expect continued deposit remixing and repricing efforts against muted loan growth to result in a relatively stable NIM throughout 2025.
Slide 14 shows certain key metrics of our investment portfolio. Key takeaways. It's only 11.6% of total assets. The effective duration is 3.6 years and 88% of the portfolio is held in AFS. Total available liquidity sits at $7.2 billion as of 3/31. The decline in available liquidity since Q3 2024 is a result of the decision to tighten wholesale liquidity policy limits in the fourth quarter, reflecting a lower liquidity risk appetite.
Finally, please note the economics of the BOLI exchange trade completed in the first quarter in which we exchanged an $18.1 million portion of our existing BOLI policy at a 2.76% yield for a new investment yielding 4.73%. We took a $517,000 onetime loss on the transaction, which equates to an annual pickup of $356,000, equating to a 1.4-year earn-back.
I'll now turn the call back over to Terry.

Terry Earley

On slide 15, operating noninterest income increased 2.4% to $14.8 million on a linked quarter basis. Fee income as a percentage of total revenue has increased to 13.4% in Q1 '25 from 12.3% in Q1 '24. The goal is to drive fee income above 15% of total revenue. Operating noninterest expense declined $2.8 million for the quarter with a good execution across all the categories. The operating efficiency ratio declined 2.5% to 60.4%.
To wrap up my comments, I see a lot of positives. The balance sheet continues to strengthen with more available liquidity, lower CRE and ADC concentrations, less reliance on unattractively priced deposits and higher capital levels. Q1 earnings were in line with internal expectations. The NIM expanded by 11 basis points to 3.31% driven by deposit cost. Fee income continues to build momentum across every category. Increased attention to expenses is showing encouraging results and loan production has increased meaningfully. The negatives I see are the lack of loan growth driven by elevated payoffs and elevated deposit costs from overreliance on expensive funding sources in earlier higher growth periods. We're working hard to address these negatives.
With that, I'd like to turn the call back over to Mal.

C. Malcolm Holland

As you've heard, the Veritex team continues to manage our balance sheet, capital, deposit costs and earnings to add additional value to our company. We obviously have no control over the national economy and the various decisions made in Washington. Uncertainty has once again entered the system, but we remain focused and committed to our shareholders, team members and communities to bring the best Veritex we can.
Operator, we will be happy to answer a few questions.

Question and Answer Session

Operator

(Operator Instructions) Brett Rabatin, Hovde.

Brett Rabatin

I wanted to start with deposits and just obviously, strong core deposit growth and just wanted to see if that DDA was sticky and just what the success of that was mostly related to? And then on the CDs that are repricing in the next two quarters, the $1.9 billion at 4.57%, what level you think those might go to?

Terry Earley

I think -- Brett, it's Terry. I think on the deposit side, some of this is seasonality and some of it is new customer attrition. On the DDA side. One of the things that's in DDA is our mortgage escrow. And Q4 is historically, especially with the T&I escrows, there's a lot of outflows during that period. So that's a contributor. And then just some good work by the banking teams on bringing in and allowing us to remix.
Regarding the question on deposits, 4.57% so far in the second quarter, we're originating in the 4.15% to 4.25% range. So there's definitely -- as you think about the NIM, and Will factored this into his comments, yes, you've got the hedge rolling off, but we still got opportunity to help compensate for that from the hedge rolling off is this repricing opportunity.

Brett Rabatin

Okay. That's helpful. And then obviously, strong performance on managing expenses. What do you guys think the expenses do from here? And are there any initiatives that would grow expenses relative to the first quarter?

C. Malcolm Holland

Yes, Brett, I'll just say on the expense side, it's been a hot topic for the last couple of quarters, to say the least, amongst my team. And we talk about expenses often. One of the things I would mention is that we're still investing in people. We made some really key hires that you all you all know about in the third quarter last year, some leadership hires. Those hires are going to be filling their teams. So there will be some investments that we make in people. In fact, we have three pretty serious commercial bankers that are all starting within -- either started in the last 30 days or going to be started in the next 30 days.
And so we're working really hard on the expense side, knowing that we have some investments coming on the people side. So we're doing a good job of trying to manage the poor performers, but also invest in the ones coming. I'm being a little evasive just to say that expenses are not going to go down from where they are. And we do have some folks coming on.
Terry, you might want to --

Terry Earley

Yes. I would add two things. One, I don't think the attention to expenses in the history of Veritex has ever been greater. Secondly, I want to make three points. I think Dom has done a really good job of moving out unproductive or not as attractive result bankers and replacing them in a good way with people who I think are going to drive this business model where we want it to go. And third, you can't -- I wouldn't annualize where we are in Q1 and say that's a good estimate for the quarter. It's going to go up a little, but I don't think you're going to see it get back to the levels you saw in Q4.

Brett Rabatin

Okay. That's helpful. Yes, that's really helpful. And then if I could sneak in one last one. You mentioned commercial bankers and new hires. It sounds like given the payoffs that maybe you're backing off loan growth expectations for the year.
Maybe Malcolm, do you think loans are flat this year with the first half being down and then the second half, you grow with all the commitments? Or what's your updated thoughts maybe on the loan pipeline relative to the loan growth?

C. Malcolm Holland

Yes, you nailed it. I think we're looking for flat from year-over-year. Obviously, down the first quarter. Second quarter, we're hoping is going to be about flat, maybe a little down. But the back half certainly -- I mean, we could see it in our pipelines. I mean you don't grow pipelines 130% without getting some benefit of that down the road. So I think you nailed it, flat for the year and '26 looks pretty good.

Terry Earley

Yes. We have a -- given the pipelines and given the production that's already on the books, the outlook for loan growth in '26 is more in the mid- to high single digits, really something like that.

C. Malcolm Holland

Correct.

Terry Earley

All that being said, it could change tomorrow if the wrong week gets posted on Truth Social.

Brett Rabatin

It's a volatile environment.

Operator

Stephen Scouten, Piper Sandler.

Stephen Scouten

So just maybe staying on that loan growth topic. Is there kind of a high-level number that you guys think about in terms of the CRE headwind in terms of what you think you might face in paydowns throughout the rest of the year? Just kind of trying to frame that up versus the $2.8 billion in production you gave over the last four quarters. And just maybe if you have any numbers on where that unfunded book is today and kind of where that's been trending?

C. Malcolm Holland

I may not be able to give you exact numbers. I can give you some directionally accurate comments. We're going to manage -- I think as Terry says, we're going to manage that CRE number at the high 290s in the 90s on the ADC. The ADC stuff is paying off quickly. I think at the end of the quarter, we had 85%. We're not going to exceed that in the next quarter. We're going to see that number start to grow hopefully in the back half. Now we'll see it grow in the back half, but it probably isn't going to see any real growth until you hit '26.
It's just those things have a long funding time. But we're going to -- our real estate team is doing an incredible job. They've kept the pricing at a really nice pricing. They deal with the best clients in the state of Texas, and it just takes a while to fund that stuff. The payoffs candidly have been pretty -- they've been pretty stable over the past couple of quarters. We expect that to continue through the next couple of quarters for sure.
And the back half could see a little bit of a raise, but not grossly over what we've already done. So the goal is to keep this a steady business instead of the wide fluctuations up and down and try to manage it right under the 300 and the 100 buckets. And we have a great core discipline in it. You can tell by our payoffs. But that's going to be a focus. But we don't -- our teams are doing exactly what we want them to do on that side of it. The investments we're talking about making are all in the commercial and industrial space, so in the C&I space. And that's the area where we're really placing the emphasis and the investment dollars.

Stephen Scouten

Okay. Really helpful color there. I appreciate that. And then obviously, you can see in the presentation where the asset sensitivity of the balance sheet has been reduced fairly significantly. Just kind of curious how you think that plays out in practice if we get, I don't know what the expectations are for today, two cuts, four cuts, who the heck knows, but kind of how you think the balance sheet will respond, especially as there continues to be room on the funding side to lower cost?

Will Holford

Sure. No, great question, and that's definitely been a big area of emphasis with us. If you look at where we stood a year ago, take the down 100 case, for example, it was over double what it stands right now. And so we really look at our profile as pretty rate neutral with the caveat that it takes us three to four months to catch up when we get a rate cut because of our loan book being so variable rate, 76% of our loans are floating.
And so when we get a rate cut, loans immediately price down and it takes us three months -- three to four months for the CD book to catch up, which that's why you've seen the NIM expansion in Q1 because we've had three months of stable rates. If we get -- if the dot plot is correct and we get two cuts, one per quarter in the back half of the year, I think the NIM remains in that range that we guided. If we get three or four and they start coming back to MA, I think you'll see a little bit of NIM pressure in the short run and then should stabilize and return to that range. Really, that's where we see it unless we see something outside of expectation, which is entirely possible.

Stephen Scouten

Definitely. Anything is possible. No, that's helpful. And then maybe just last thing for me. On the share repurchase, I know you said, I think opportunistic was the verbage used there. Even with the snapback today, which we all hope holds for the group, it looks like the repurchase this quarter was done around like [$25.20], if my math is correct. So would it be fair to assume that at or below that kind of level from the first quarter, you guys would continue to be fairly aggressive around the repurchase?

Terry Earley

I would say that if it's below tangible book value, see where the limit of our activity is, and we're going to stay close is not strong enough because it's accretive immediately and no earn back, et cetera, et cetera, et cetera. But no, I mean, look, we know what we've got left. I wouldn't expect the share buyback, 377,000 shares. I wouldn't expect that to go down. And if it's trading anywhere -- if it were to be below tangible book, it's -- I bet the over.

Operator

Michael Rose, Raymond James.

Michael Rose

Just wanted to get some color and visibility, just given some of the uncertainty in Washington just around the North Avenue capital business, the government guaranteed business. Any sort of outlook there that may be different from a couple of months ago just from what you're seeing here?

C. Malcolm Holland

No. In fact, we're probably as bullish on that business as any business that we have at the company --

Terry Earley

Government guaranteed.

C. Malcolm Holland

Yes, yes, yes.

Terry Earley

He said North Avenue.

C. Malcolm Holland

He said -- I'm talking about total government -- I'm sorry. Yes. I mean we -- again, we put them all in one basket. I know they're different, but our reliance is more on the SBA side than it is on the NAC side. And so yes, we branded it Veritex government lending, but I understand your question. But we're still seeing some USDA opportunities, actually some really good ones.
We had our first approval through the Veritex system, if you will, because now it's running through Veritex and not through NAC anymore. So we're pretty encouraged. Now we don't -- we're not going to have the volumes at one time that we had. But what's happened is those folks that were at North Avenue Capital are now into the SBA space, and they have a huge pipeline. It's -- you're dealing with the similar type folks out there, whether it's a broker community or what have you, that have been able to produce some nice volume.
We've made some substantial investments in government guaranteed and just as recently as this week. And when I say substantial, I mean substantial people across the country. And so it's going to take them a little while to get ramped up, but I think you're going to see that business be an outperformer in the back half of this year and into '26.

Terry Earley

It's had -- the SBA business has had two incredibly strong quarters in a row. And all indications are that's not slowing down even as these people come in and get on board.

C. Malcolm Holland

And an economy that arguably may be going down a little bit, this is a space that actually gets more active.

Michael Rose

Helpful. And I know this is a difficult question to ask, but you guys did about $10.1 million in that line item last year, the year before was roughly double that. Any sort of outlook just given what you laid out just in terms of some of the momentum in this quarter's start of where that could end up for the year?

Terry Earley

We're not to the point where we can get back to where we were two years ago. But we would also be very disappointed if we don't do materially better than last year. So --

C. Malcolm Holland

In between the two numbers is a good place to be.

Terry Earley

Exactly.

Michael Rose

Okay. Helpful. Yes, just because it's pretty hard from the outside looking in to kind of forecast that. So I appreciate it.

C. Malcolm Holland

And as we said, we're trying to flatten that out, Michael. We know it's discouraging for you guys and it's discouraging for us to be able to forecast. And so we're working really hard to flatten that out.

Terry Earley

And that's why SBA is such a more -- a greater emphasis. It's more granular. Our average loan size is $1.5 million. And in the USDA space, the average loan size in 2023 was probably $18 million to $20 million or something like that. And so it's just way more granular. It's easier to forecast, and it's a more stable revenue stream that we can expand on.

Michael Rose

I totally get it. Terry, maybe just one on the warehouse outlook. Obviously, a step down this quarter, but still up materially on an average basis year-over-year. Any sort of thoughts there? I know mortgage rates have remained particularly sticky. And then any sort of RWA relief that you guys are expecting just with some of the changes that are out there?

Terry Earley

It's on our radar. That's something that over the balance of the year, et cetera, the RWA relief there and in NDFI are an important priority for us. Balances, Michael, it's so hard. I mean last week, they were -- apps were down, what, 12% to 13% week-over-week, I saw. And it's so tied to rates. And yet a month ago, they were having unbelievable volumes. So we like the business. I'd like it even better with the RWA relief. But the risk-adjusted returns are still really, really good.
So I would expect -- there's a lot of seasonality and hopefully, with some clarity on the Washington economic front, if rates can come down, I like what they're doing today on the long end, then hopefully, volumes pick up and averages. I would love to see averages $100 million to $150 million higher than they are, but it's a function of rates.

C. Malcolm Holland

Did you just ask for clarity in Washington?

Terry Earley

Everyone's got a prayer every now and then.

Michael Rose

And Terry, I think this is your last earnings call. So I just want to say congrats on a great career.

Operator

Catherine Mealor, KBW.

Catherine Mealor

I just wanted to have a follow-up just on the growth outlook. And I guess two questions. One is how -- I know a lot of the -- I mean, the pipeline has built, which is so great to see. So maybe the question is how much risk do you see in that pipeline maybe not following through just given kind of the volatility that we're seeing in the market versus how much of that you feel like is money good and is loan commitments that will be following through for the next couple of quarters?
And then within that, my second question is just you talked about how a lot of your investments are in the C&I space. I'm curious how much of that pipeline is in CRE versus C&I?

C. Malcolm Holland

Yes. Just talking about the risk in that pipeline, obviously, the answer for me is going to be, oh, it's great. We just approved it. But I guess if you peel back the sheets a little bit, the underwriting on that business is actually better than it's ever been. You've got huge amounts of equity, whether it's 40% to 50% in a couple of cases. You still got good rates. And at the end of the day, it's who the sponsor is. Our team has done a great job at dealing with the cream of the crop.
And so when folks were still out of the space and we've got in maybe a quarter or two before the rest of them, you could dictate the terms. Now the terms you could see they're starting to break down a little bit. And when I say break down, I'm not talking about materially. Instead of getting 45%, you may get 40%. And so we feel really, really strongly about the type of stuff we're putting on. We're not going to go -- we're not going to put stuff on that we think we're going to have to deal with later. In terms of the percentages of that pipeline --

Terry Earley

I would say it's 2/3 C&I, 1/3 CRE. I don't have it in front of me, but it's somewhere and close to that. And you and I haven't talked about this, but my confidence is much greater in the CRE side because of all the in-migration and all the things that are going on.
On the C&I side, I mean we've seen it in revolver utilization. It's come down some. So I think you would -- I would say the risk of not getting the pull-through is higher C&I than it is CRE right now. But I don't know if you agree.

Operator

Gary Tenner, D.A. Davidson.

Gary Tenner

I wanted to ask a couple of questions. First, in terms of the securities portfolio, I think you highlighted $175 million in cash flows expected the next 12 months. Are you currently reinvesting? Or are you kind of using that as a source of cash to further reduce wholesale funding?

Will Holford

We're targeted investments. I mean we're picking up stuff if we see there's a market opportunity that (inaudible). Since loans have been muted the last couple of quarters, we've been using funds to pay down wholesale as you saw. So once you see loan growth pick up, obviously, we have to fund the other side of that and to stay at our LDR target. So you'll see us be more active in the investment portfolio once earning asset growth picks up.

Gary Tenner

Okay. Great. And then just a quick follow-up on the fee side. I know you've kind of talked about wanting a 60 handle on fees for the full year. And on an operating basis, you were basically right at that run rate or a hair below it. Anything -- as you think about the pipeline and sounded very positive on government guarantee, anything that kind of increases that kind of baseline or too early to tell?

Terry Earley

I think the momentum, I think, is going to build. I feel like our customer swap income is a place that they're having -- they had a good first quarter, and I'm encouraged by how the second quarter has started. There's some things we got going in the card and sponsorship space. We did a -- we've got a lot going on in treasury.
So to me, it's really across the board, syndications as we've gotten more active in CRE and where the size of the projects and the ability for Andrew and his team to sell down and has been really strong, too, and I'm expecting a strong year there. So that's why I said to me, it's -- you don't see it all yet, but you can feel the momentum and --

C. Malcolm Holland

And not hanging on one area. Every single area is contributing. So that's where we get some pretty high confidence that the 60 annual is a pretty decent number.

Terry Earley

Yes.

Gary Tenner

Great. And just lastly, you kind of noted the increased weighting in the Moody's downside scenario. Can you just remind us where the weighting was last quarter?

Terry Earley

It was at 65%, but we shifted some weight towards scenario 4, just out of an abundance of caution. So the overall downside stayed the same, but some of it went from, say, scenario 2 to scenario 4.

Gary Tenner

Well, Terry, keep on praying, it seems to be working today.

Operator

(Operator Instructions) Matt Olney, Stephens.

Matt Olney

Just want to go back to the discussion around capital. And you mentioned you increased the dividend, really active buyback in the first quarter, and it sounds like you want to remain active on that buyback. Curious about the -- I think there's a sub debt instrument that becomes callable later on this year. Just curious if that's on the radar, if there's any appetite to pay this down later on in the year.

Terry Earley

It's definitely on the radar. It's a $125 million tranche. It's mid-October. I don't -- we're certainly watching it, watching the market where you can refinance the debt, et cetera. And I think the outlook or the probability of paying it all off is low. I think the probability of paying some of it off, which we can do, is very high. And some of this is going to depend on what happens with our CRE payoffs.
So I'm sorry, I don't -- I mean, there's just -- it's there. We're watching it all the time, but we've decided we're not -- it's not the time to make a definitive decision until we see more -- we need to see things play out a little bit from an economic and rate perspective.

C. Malcolm Holland

The other thing, Matt, I mean, even is on the table is a complete refinance depending on what happens in the rate markets there might be a place where we want to go ahead and redo it and maybe even increase it because we could use some more of that. But it's all dependent on three or four factors and rates being probably the greatest one as well as our CRE forecast.

Matt Olney

Yes. Okay. Appreciate that. And then on the credit overall trends are good in the quarter, lower criticized loans. I think the only blemish that Curtis mentioned was some migration into the nonaccrual loan bucket. I think office and retail property was mentioned. Any more color on those migrations?

Curtis Anderson

They were -- they're long-standing names that we've been working with. We're taking the action to move them through and move forward. So I would just say that there's strategies in place to have those moved off by the beginning of the third quarter, and we feel confident in our ability to do that.

Matt Olney

Terry, congrats and keep in touch.

Operator

This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.