Old Second Bancorp, Inc.

Good morning everyone and thank you for joining us today for Old Second Bank Calls Incorporated's first quarter 2025 earnings call. On the call today are Jim Ecker, the company's chairman, president and CEO, Brad Adams, the company's chief operating officer and chief financial officer, and Gary Collins, the vice chairman of our board. I will start with a reminder that all second comments today will contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. Management would ask you to refer to the company's SEC filing for a full discussion of the company's risk factors. The company does not undertake any duty to update such forward-looking statements. On today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in our earnings race, which is available on our website at oldsecond.com, on the home page, and under the Investor Relations tab. Now I'd like to turn the call over to Mr. Jim Eckert.

Good morning, everyone. Thank you for joining us. As customary, I have a couple of prepared opening remarks. We'll give my own view of the quarter and then turn it over to Brad for some additional details. I will then conclude with certain summary comments and thoughts about the future before we open it up to questions. Net income was $19.8 million, or 43 cents per diluted share in the first quarter of 2025. Our way was 1.42%. First quarter of 2025 return on average tangible common equity was 14.70%, and the tax equivalent efficiency ratio was 55.48%. First quarter 2025 earnings were significantly impacted by several items. 575,000 MSR marks to market losses, or about a penny per diluted share, 446,000 in merger-related expenses, or just shy of one cent per diluted share, related to costs of the first merchant's five branch acquisitions, as well as costs related to pending merger with Bancorp Financial and Evergreen Bank Group. Also, a $2.4 million provision for credit losses in the absence of significant loan growth, which reduced after-tax earnings by 4 cents per diluted share. However, despite all this, profitability of the old sector remains exceptionally strong, and balance sheet strengthening continues with our tangible equity ratio increasing 30 basis points from last quarter, from 10.04% to 10.34% in the first quarter of 2025. Tangible equity ratio increased by 130 basis points over the length period one year ago. Common equity tier one was 13.47% in the first quarter of 2025, increasing from 12.82% last quarter, and we feel very good both about profitability and our balance sheet positioning at this point. Our financials continue to reflect a very strong net interest margin, even as market interest rates have declined. Pre-provision net revenues remain stable and exceptionally strong. For the first quarter of 2025, compared to the prior year light period, tax-equivalent income on average earning assets increased $221,000, or 0.3%, while interest expense on average interest-bearing liabilities decreased $2.9 million, or 21.3%. The decrease in interest expense is primarily due to the deposits acquired related to the first merchant branch purchase, which closed in December of 24, which resulted in the paydown of our higher rate other short-term borrowings, which improved our margin significantly year over year. Net interest margin improved 30 basis points year over year on both the GAAP and tax equivalent basis, and improved approximately 20 basis points compared to the prior rent quarter. First quarter of 2025 reflected a decrease in total loans of $41.1 million from the prior late quarter, primarily due to net paydowns in commercial, commercial real estate owner-occupied, and multifamily portfolios during the quarter. Furthermore, we have purposely reduced our purchase participation portfolio, which declined $46 million or more than 10% in the quarter. Since the West Suburban acquisition, our purchase participation portfolio has declined $376 million or nearly 49% as we have intentionally repositioned our loan book. The historical trend holds seconds for our banks to realize loan growth in the second and third quarters of the year due to seasonal construction and business activities. Currently, activity within loan committee remains relatively modest to prior periods, primarily due to many customers waiting to see how market volatility, including any market interest rate changes or changes due to the current over the coming three to six months. Tax-equivalent loan yields reflected a five basis points decrease in the first quarter of 2025 compared to one quarter, but a four basis points increase year-over-year. Total cost of deposits was 82 basis points for the first quarter of 2025 compared to 89 basis points for the prior mid-quarter and 71 basis points for the first quarter of 2024. Net interest margin has improved due to the more favorable funding position we are now in, even after considering the impact of market interest rate changes on the variable portions of both the loan and security portfolios. The loan-to-deposit ratio is an excellent shape at 81.2% as of March 31, 2025, compared to 83.5% last quarter and 86.1% as of March 31, 2024. I'll let Brad talk about this more in a moment. This quarter reflected a positive change regarding our loan portfolio credit remediation efforts. Specifically, we recorded $4.4 million of gross loan charge-offs in the first quarter of 2025, 3.4 of which was one C&I loan that was downgraded two quarters ago. We have now addressed the entire balance of this credit, as are the financials, collateral field on it, and bankruptcy declarations. resulted in a significant charge in this relationship, excluding balances collateralized by cash held at old seconds and the successful liquidation of equipment through an auction. This credit was discussed the last few quarters, and with fully addressing it this quarter, we should now be able to focus on any remediation or recovery efforts if the potential is there. Last quarter, we recorded $1.7 billion in Oriole valuation expense on two properties, which were both sold in the first quarter of 2025. Our total Oriel balances are now down or have declined $18.7 million quarter over. That quarter was contributed to a 27.2% reduction in non-performing assets since year end 2024. Substandard and criticized loans increased in the first quarter of 2025. Total criticized loans now total $163.7 million. and decreased 42% or $84 million from one year ago. In the first quarter of 2024, criticized loans were $200 million. First quarter of 2025, balances represented a decline in their lowest levels in three years since May of 2022, so we're very pleased with this performance. Classified and non-accrual balances continue to improve significantly on both a year-over-year and a quarter basis. Total classified assets declined by $52.2 million, or 37% year-over-year as of March 31, 2025. Special mention loans also continued to improve dramatically. These balances are now down 51% from a year ago. The allowance for credit losses on loans decreased $41.6 million as of March 31, 2025, or 1.05% of total loans. from 43.6 million at year end, which is 1.1% of total loans. Unemployment and GDP forecast used in future loss rate assumptions remain fairly static from last quarter, with no material changes in the unemployment assumptions on the upper end of the range based on recent stat projections. The impact of the global tariff volatility was considered within our modeling. And provision level quarter over late quarter reflects the reduction in our wealth allocation on substandard loans, which largely relates to the 42% reduction in criticized assets year over year. Non-entry think-outs continue to perform well, with growth in the first quarter of 2025 compared to the prior year of late quarter of 528,000, or 20.6%. and wealth management fees, and $304,000 or 12.6% in service charges and deposits. Mortgage banking income reflected a decrease in the first quarter of 2025 compared to the prior lint quarter and prior year lint quarter, primarily due to the impact of mortgage servicing rights market to market valuations. Excluding the impact of mortgage servicing rights market to market, mortgage banking income was flat quarter over lint quarter, and slightly more than the prior year length period. Other income increased in the first quarter of 2025 compared to the prior length quarter and prior years in the length quarter, with the length quarter variance primarily due to incentives received on two vendor contracts in 2025. Expense disciplines continue to be strong, with total non-interest expense for the first quarter of 2025 at $183,000 more than the prior length quarter. Our efficiency ratio continues to be excellent. As the tax equivalent efficiency ratio adjusted to exclude core deposit and tangible amortization acquisition cost, the word of cost was 55.48% compared to 54.61% for the fourth quarter of 2024. As we look forward to the balance of the year, we're focused on doing more of the same, which is managing liquidity, managing capital, and also building commercial loan origination capabilities for the long term. The goal is obviously to continue to create a more stable long-term balance sheet, and that's to be treated more loans with less securities in order to maintain the returns on equity commensurate with our recent performance. With that, I'll turn it over to Brad for additional comments.

Thank you, Jim. I'll be relatively brief this morning. There's an awful lot of complexity here in my mind. Net interest income increased by $1.3 million, or 2.1%, to $62.9 million for the quarter ended, relative to the prior quarter's total of $61.6 million. An increase of $3.1 million, or 5.2%, from the year-ago quarter. Exceptionally pleased with the ability to grow net interest income from the levels that we saw over these comparable periods. Taxable and security deals increased by 18 basis points during the quarter. although the loan yield for about five basis points lower. The increase in security yields largely relates to some maturities and relatering effects that we started on early in the quarter. As we've talked about in the past, we've done an exceptionally good job on making sure that we've got pretty significant large chunks of cash maturing on a regular basis as we can step into a different rate world. Overall, we're exceptionally well positioned. I'm pleased with what we've been able to accomplish there. The total yield on interest-earning assets decreased by only two basis points over the quarter to 570. The tab was more than offset by a 13-basis point decline in the cost of interest-earning deposits and a 35-basis point decrease in the cost of interest-earing liabilities in the aggregate. The end result was a 20-basis point increase in the taxable equivalent amount to 488 for the quarter from 468 that quarter. Obviously, this was the exceptional margin performance and surprised us a bit. Of course, that surprise was largely allocated to deposit flows during the quarter. Deposit growth accelerated throughout the quarter and has been exceptionally strong. Obviously, you can see the power of the ability to grow deposits in an environment such as this. As we sit here today, I'm exceptionally pleased with our liquidity position as we approach the potential closure of the Evergreen Bank Group transaction. This gives us a ton of flexibility and I obviously feel very good about where we are. Overall period in total deposits increased by $84 million. I don't have any grand prognostications this quarter and always feel like a more balanced person in general when I believe the curve accurately reflects the balance of risk in the greater economy. Relative to the last quarter and many times over the last few years, expectations have become much more realistic relative to absolute economic conditions and federal deficit constraints. We have been on the sidelines as it relates to the securities portfolio here recently because we see outside risk for spreads widening in the near term. As a result of the rate cuts to date and their impact on market indices, margin trends for 2025 are expected to be stable and modestly down from here. Sustained success on the deposit front positions us exceptionally well to rank profitability beyond our initial expectations as it relates to the pending merger with Evergreen. This is perhaps my largest area of optimism, as the loan-to-deposit ratio is quite low at 81% and gives us some room on the absorption of those assets and doing better on the margin side than perhaps we initially expected. Old seconds should continue to build capital, as evidenced by the 130 basis point improvement in the TCE ratio over the past year, which means we have added an astonishing $1.75 of tangible book value over the last 12 months, particularly in profit when you consider the branch purchase, which is done with cash. Evergreen will absorb some of this capital push, and however, old seconds will still have an exceptionally strong and flexible capital position. Buyback is in place and is on the table after the merger is finalized. Non-interest expense was materially on track this previous quarter, increasing only $183,000, primarily due to salaries and employee benefit increases due to annual raises and the increased payroll tax associated with the front load of FICA in the first part of the year. Non-interest expense is running higher year-over-year, increasing $6.3 million compared to the quarter ended March 31, 2024. due, again, to higher salaries and benefits, expense occupancy costs, for deposit intangibles, and OREO-related expenses. OREO-related expenses were high in the first quarter. They were high in the fourth quarter, but they should come down back to normalized levels beginning in the second quarter. Much of the year-over-year increase is attributable to the five branches acquired in late 2004 from First Merchants, in addition to the OREO operating expense increase that we talked about. For 2025, employee benefit expenses are expected to be a bit of a drag, as we talked about. Overall, we are hopeful we can keep expense growth in the 4% range consistent with our expectations shared last quarter. That's really all I have with that. I'll turn it back over to Jim. Okay, thanks, Brad.

In closing, we feel this is a pretty solid quarter for the company. We're confident in our positioning and the opportunity to handle it. We're pleased with the progress we made on the credit front. and optimistic that future quarters will be very good. We're off to a strong start in 2025, and we're optimistic about the year ahead. That concludes our prepared comments this morning, so I'll turn it over to the operator, and we can open it up to some questions.

Thank you, sir. Ladies and gentlemen, at this time we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question key. You may press star 2 if you would like to remove your questions from the key. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Chris McGrathie with KBW. Your line is live.

Great morning, guys. Great morning, Chris.

Brad, maybe coming on the margin, I heard your on-performance comments. It's really incredible where the margin is. If a forward curve comes up to first and you get two shortcuts this year, I mean, your message is basically we're going to be flat even with the cuts. Um, is that kind of roughly flat and modest down from that 490 or 480 level?

Well, you know, I said I wasn't going to do a grand for diagnostications, but I'll do it anyway. I don't think we're getting three-way cuts. I think that, um, I think inflation's stickier. But more importantly, I think it's political at this point. Um, I think that there's not going to be a ton of support for what is largely a terrorist slash political environment. It's awfully tough to cut rates in this scenario, particularly with what happened last time when you talk about yields actually going up along the curve. I would say that whereas before Just because everybody else would be talking to free rate cuts, whereas before I would have said seven basis points of margin decline. And with the contribution from Evergreen, I would probably say it's four with each rate cut from these levels. So it has been softened quite a bit. Some of that obviously is positive pickup as well. And just the margin leverage that we have with them coming on board. So overall, I'm significantly more bullish on the margin than I have been for probably over a year. Okay.

And then the other piece of the NII is what you're doing with the participation, pushing them out. What's left to go on non-core loans? Where do you think, or do you think that the loan book is at the bottom? Any kind of thoughts there?

Yeah, that's a good question, Chris. We're still... We've had that purchase participation book since West of Bourbon. And keep in mind, that represents about 25% of our classifieds. So we've been trying to aggressively push out as much of that as possible. It becomes challenging, particularly on the syndication front, when you don't have a voice at the table, per se. But we've got another, I'd say, $200 million that we're going to want to continue to try to exit over the next 24 months. So we've made good progress. We've got some more lifting to do there. But overall, we're pleased with how the book is repositioning.

I think, Chris, one thing that we've done a particularly good job of is, you know, we've talked about how big our efforts were to get on the front part of credit. I feel like we've done what we said we were going to do. I also think we've been aggressive in perhaps being pessimistic in our worldview and making sure that we're not holding credits that we could potentially get out of if things get worse. Our credit outlook today is significantly better than it's been in two years. That's for darn sure.

All right. Awesome. Thank you. Thanks, Chris.

Thank you. Our next question is coming from Terry McEvoy with Stevens. Your line is live.

Hi. Good morning, guys.

Hey, Terry. Hey, Jerry.

Good morning. I mean, you work through office, work through health care. I guess my question is, are there any new segments emerging out that in CRE or CNI just looks different?

Yeah, I think if there's one area we've seen a couple of credits come onto our radar, it's more in C&I at this point. Nothing material being a couple of credits. One in manufacturing, one in a solutions-based drug wholesale company that missed projections, that was downgraded. We've already proactively taken reserves against those. By and large, you're right. We're through office. We're working our way through health care. We feel pretty good about where we're at, but a lot of that C&I book is obviously seeing a pretty rapid increase in cost of capital, so a little bit of stress on that book, but aside from those two credits, we're not seeing any new red flags.

Thanks, and then as a follow-up, have you noticed any trends among your

lower-balance deposit customers, call it late in the quarter or here in April, and I'm thinking just balances or card transactions overall? Card transactions are down significantly, but that's a trend that started almost a year ago. We have seen significant slowdown and a move down in average balances on the low end. It actually somewhat mitigated, and some of that's probably tax-related, just with refunds slowing in. But, you know, we're a very granular deposit base. I think everybody knows that by now. But we've seen kind of weakness in balance levels in transaction activity in that deposit base starting over a year ago. So, I wouldn't say there's anything that's different here. if I'm reading your question right, I think largely what people should be looking for is that stress moving up the income stratification rather than starting at the bottom end because it started at the bottom end some time ago.

Yes, and that's what I was asking. Thanks for taking my question. Appreciate it. Thanks, Eric.

Thank you. Our next question is coming from David Long with Raymond James. Your line is live.

Good morning, everyone.

We're only a few weeks removed from Liberation Day with the tariffs, but in your recent conversations that you and your team have been having with your commercial clients, what is their sentiment like, and are you seeing deals getting pulled? Are you seeing pause? Just trying to get a sense on loan demand expectations.

Yeah, it's probably similar to what you hear from other banks. We've had these concentrations internally range from the equipment leasing side that, you know, activity remains actually, you know, pretty decent, maybe down a little bit as far as new activity from a year ago to, you know, commercial real estate, particularly on the investment side where it's settled down and we're not doing anything until we get funding. some clarity around tariffs and uncertainty. But by and large, it's a way to see we are not projecting a lot of growth in the second quarter. We're hopeful with some clarity we see an uptick in long demand in the second half of the year.

Got it. Thanks for the color, Jim. And then as a

As you look at the reserve level, reserves came down a bit in the quarter. You had non-performers up. I think there's a risk of economic forecast currently. You know, where they are today, it sounds like you sound pretty stable, but I think there's a sense that these are going to worsen. What was the math you went through at quarter end in coming up with the reserve? So we've got a situation where criticized classified and non-performers have been trending down significantly for the better part of two years. I don't think we're in the same boat as everybody else here. Our trend is not more negative at this point, even with the uncertainty that's out there. We've been very aggressive in addressing credits that we believe there is some potential weakness in. I would have been a much more pessimistic person. I was a much more pessimistic person a year ago than I am today. You can call it the leading indicator or whatever else or early in terms of this stress, but I don't see it second wave right now. Certainly brought macroeconomic weakness, little results and losses for us, but I feel exceptionally good about where we are at this point.

Great. Thanks, Brian. Appreciate the call. Thank you, Paul.

Thank you. Our next question is coming from Nathan Rinks with Piper Saunders. Your line is up.

Morning, guys. Thanks for taking the questions. I think the last quarter we were talking about maybe charge-offs can stop at 20 basis points going forward. Obviously, I had some cleanup with the one C&I credit here in the first quarter, which is generally how you guys think about the charge-off trajectory both near term and then when you layer on evergreen that, you know, is historically had. you know, slightly higher losses during all six years just given their operations.

Yeah, I think you're right. We certainly, as it relates to the one large C&R credit, when you have a credit system bankruptcy, you get unpredictable results, particularly if it relates to options, equipment options, and we felt, given the strong quarter in our name, we decided to you know, to take the final charge on that. And while we're hopeful that we get some recovery on this, we elected to put this one behind us. You heard our comments regarding the decline. It's substandard and criticized. So that looks like a leading indicator that should hold well for future credit assurance. So while our jobs are a little bit higher, we're optimistic that You know, to replace the Evergreen, you know, historically, you know, they've had year-round losses anywhere between 1% and 1.5%. However, we've got to keep in mind that contribution margins on that loan book are significantly higher, and you have to look at those two factors hand-in-hand. So they continue to be exceptionally well-reserved, and we're on.

So I realize that our tone and tenor is a little bit different maybe than most, but one data point that I had for people is that our individual specific allocations for individual credits on the commercial side right now is lower than it's ever been. The number of individual allocations hasn't been as low in three and a half years. So in terms of problems, we believe we've dealt with them.

Understood. That's helpful. I appreciate that. And Grant, just going back to your expense comments, and I apologize if you touched on this as I hopped on late, but I think you mentioned you're hopeful to get back to 4% expense growth for this year, which would imply a decent step down, close to $40 million or so over the next few quarters. Is that kind of how you're thinking about it, just with some of the noise in the first quarter?

Yes.

I believe that's all I have. Thanks, guys.

Cool. Thank you. Thank you.

Thank you. Our next question is coming from Jeff Rulis with DA Davidson. Your line is live.

Thanks. Good morning. Just checking on the growth front. I appreciate the comments on pushing out some participations and still to go starting from a kind of a net down on loans. I guess for the full year, you know, again, trying to back into expectations on growth for the full year. Sounds pretty guarded, but any detail on that side?

Yeah, as to the acquisition, which is going to get us some growth, you know, I would be thrilled with low single-digit growth. Does it come second half of the year with Keep in mind that the risk-adjusted returns today are not overly attractive in several areas. We'll be very careful improving on what we're putting on the books. Obviously, with the margin that we're carrying right now, we're not going to just grow for the sake of growing. So having said that, we are optimistic that the second half is going to be much better than the first half.

Listen, I had you six months ago on this call when I said that We had a real shout of growing that interest income one quarter in the first part of this year. I could feel the eyes cropping on the other side of this line, not believing that number. So it's about basically, as Jim mentioned, risk-adjusted returns. And you know what? It's not always entirely about growth. It's about making money. And there are times in decisions, given the cyclicality and the volatility that we've seen, that it's not time to grow. I said last quarter that growth looks much more attractive and that we would consider loan purchases. I think that's still the case. I think that I got very confused two weeks ago when we saw equity markets going down and at the same time treasury yields going up. That's been a very interesting couple weeks in terms of what interest rates are doing. I do see significant growth. risk to spread widening at this point, as I mentioned a few minutes ago. And I think there will be attractive yields available. So it's something we will consider in order to generate growth on that front. And when you've got the balance sheet flexibility that we do, you've got a lot of optionality. So, you know, it's an interesting time. Uncertainty creates opportunity. And Most importantly, I'm exceptionally pleased with where we are and how much money we're making at this point.

Brad, leaning into that margin strength, I think that's kind of the point of the discussion. Do you have a March average for the interest margin? I don't have a problem.

It wasn't down from February. So it trended higher. And that's going to function, as I alluded to earlier, of the strength in the deposit generation. I am very hopeful that continues. If it does, we have a ton of balance sheet flexibility over the next six months. It's a nice position to be in as a CFO, and it makes me generally an active person, and I treat my kids better, and they tend to upset me less. So, you know, all smiles around here.

Fair enough. I guess the last question, Brad, you mentioned, you know, kind of looking at that buyback, but you're kind of conducing it with, you know, post-deal close. You know, what precludes you from being active in the short run? Greg? You know, sorry?

Greg, Regan precludes us from being active in the short run. Otherwise, I would be.

Okay. And in the coming, you know, pre-deal, I mean, you locked out the entire time, or is there any window?

Yeah, we're not. Till we close.

Till we close. I would say that we're optimistic that our timetable for that closure will come to fruition.

I know it's your last one, but maybe one more. The tax rate, you've been kind of in that mid-24 range, is that a good number to use ahead?

You know, normally I like to go out to five or six basis points on that question, but, you know, or decimal points rather, but I don't know. Yeah, around here. Okay.

Thank you.

Thank you. Once again, ladies and gentlemen, if you do have any questions or comments, please press star 1 on your telephone keypad. Our next question is coming from Brian Martin with Johnny. Your line is live.

Hey, Brian.

Hey, guys. Congratulations on the quarter. Most of my stuff was asked, you know, just, Brad, I think one big picture question, I think you talked about the margin, I think, last quarter. You talked about the seven basis points. Maybe now it's four with Evergreen. I mean, as far as I think you talked about where it could bottom if we, you know, all the different scenarios, if we do see cuts, whether we don't see cuts. Just trying to understand, I mean, if you don't see cuts and that's more your scenario, kind of where do you think the margin may bottom, you know, now that we've stepped up much higher than we thought versus if we do get a couple cuts. I thought last quarter was kind of in that 435, 440 range, albeit that it would take a while, but just kind of take picture, kind of, you know, how we should think about that.

Yeah, I would say that the floor has no ASIN basis points by deposit flows. It's a different world for us in combination with Evergreen, though, at least at our current size. We will be structurally more profitable absent any significant credit events on that front. I have, you know, for us, Obviously, we're an exceptionally high-performing company when rates are high. And you've heard us say in the past that a high and flat yield curve is a panacea for us. And that's where we are today. So investors shouldn't be surprised by strong margin performance and a high and flat yield curve because that's where we do best. As we talked about a couple months ago with the Evergreen announcement, we will do better in a lower rate environment. But it will still remain true that a high flat curve is good for us. I don't see, wearing my macro hat for a minute, I don't see a lot of ways out of that given the balance of risk between growth and inflation at this point. We have seen a stickiness to inflation that I see no reason for that to stop. or go away anytime soon, especially not with all this tariff nonsense. That ain't going to help that. I also don't think the Fed is particularly accommodative to backing off the inflation fight when a lot of it is self-induced from the executive branch. So I don't see any reason to lurch into any of these changes, and I don't see any reason to be pessimistic about our margin performance in the near to moderate term.

Okay. And as far as where, if the bottoming would be just 10 basis points higher than you were thinking before, then I'll until we get to a little bit more.

Yeah.

Gotcha. And then maybe just one last one on credit, given, you know, the big improvement we saw this quarter. I think you guys have been talking about that. And Jim, you talked about the, you know, where the criticized and classifieds are today, you know, much lower than they have been. And Brad just mentioned, you know, credit, you know, the individual credits, but Is there any room, you know, the direction from here in terms of credit quality, just the cadence of improvements in non-performing? Is there anything big that's out there within there that's going to be coming due or if it should be a study as you work through these, see some decline down in the non-performing?

Yeah, I mean, the goals that you've given are working even lower, Brian. I mean, I don't think we'll have the magnitude of the decline in percentages that we had this quarter, but... We're optimistic. We've been very internally focused to try to improve the balance sheet. And, yeah, we think we can make incremental improvements throughout the rest of the year.

Okay. Yeah, it's just nothing big. I just want to make sure there's nothing else that was in the hop that could come out. So, okay. Thanks for taking the question, guys, and great quarter.

Thanks, Craig.

Thank you. As we have no further questions on the lines at this time, I would like to hand it back over to Mr. Ecker for closing remarks.

Okay. Thanks, everyone, for joining us, and thanks for your interest in the company. We look forward to speaking to you next quarter.

Bye. Thank you. This concludes today's conference, and you may disconnect your lines at this time. And we thank you for your participation.