Financial Data and Key Metrics Changes - The company reported earnings of $1.31 per diluted share, an increase from $1.28 in the previous quarter and $1.05 in Q1 2024, resulting in an adjusted return on assets of 1.29% and a pre-provision ROAA of 1.71% [5][10] - Net interest income (NII) reached $1,100,000, marking the fourth consecutive quarter of NII expansion despite two fewer days in the quarter [5][6] - The net interest margin improved to 4.15%, with expectations of slightly stronger performance for 2025, although modest erosion of margin is anticipated throughout the year [14][15] Business Line Data and Key Metrics Changes - Loan growth for the quarter was 3% or $78,000,000, with active production across all markets, although net growth was impacted by a $30,000,000 sale of SBA loans and a seasonal decline in tax credit loans totaling approximately $75,000,000 [6][10] - Non-interest income for Q1 was $18,000,000, including a $1,900,000 gain on the sale of SBA loans, which partially offset a decrease in tax credit income [17] Market Data and Key Metrics Changes - The Western market of Southern California experienced a strong quarter with $60,000,000 or 13% annualized loan growth, driven by refinancing loans for fully occupied medical and mixed-use properties [8][9] - Total client deposits, excluding brokered funds, increased by 7.7% year-over-year, with national deposit verticals growing by $134,000,000 or roughly 16% annualized in Q1 [9] Company Strategy and Development Direction - The company announced the acquisition of 12 branches from First Interstate Bank, enhancing its commercial banking presence, particularly in Arizona [4][20] - The management emphasized a disciplined capital allocation strategy, focusing on share repurchases and M&A opportunities to create shareholder value [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong financial performance despite economic uncertainties, with a focus on balance sheet growth and attracting new relationships [39] - The company anticipates modest erosion of net interest margin due to recent interest rate variability but remains committed to mitigating this through disciplined pricing [15][45] Other Important Information - The company’s tangible common equity ratio increased to 9.3%, and tangible book value rose by 14% on an annualized basis to $38.54 [20] - A succession plan was announced, with Scott Goodman transitioning to a part-time role, and Doug Bauche promoted to Chief Banking Officer [22][23] Q&A Session Summary Question: Terms of the branch deal and purchase price - The acquisition involves assuming approximately $450,000,000 in cash, with expectations of a similar to slightly improved margin post-deal [29] Question: Pro forma capital levels post-close and impact on buyback - Pro forma capital is expected to meet targets, allowing for continued share repurchases alongside the transaction [31][32] Question: Industry exposures from the loans brought over - The company confirmed no dairy exposure was included in the transaction [34] Question: Organic loan growth outlook for 2025 - Management anticipates mid-single-digit growth, with potential for increased activity in the second half of the year [39] Question: Margin outlook and ability to defend current levels - The company expects a slight sequential decline in margin but remains optimistic about net interest income growth [44][45] Question: Timing for resolution of non-performing loans - Management indicated that while timing is uncertain, they are confident in the ability to collect on the loans due to strong collateral [56][58] Question: Expense cadence and impact from the branch deal - The efficiency ratio for the branch operations is expected to be in the 52% to 54% range, with minimal recurring fees anticipated [49][74]

Financial Data and Key Metrics Changes - Net income for the first quarter of 2025 was $19.8 million, or $0.43 per diluted share, with a return on assets (ROA) of 1.42% and a return on average tangible common equity of 14.7% [3][4] - The tangible common equity ratio increased by 30 basis points from the previous quarter to 10.34%, and common equity Tier 1 rose to 13.47% from 12.82% [5] - Net interest income increased by $1.3 million or 2.1% from the previous quarter and by $3.1 million or 5.2% year-over-year [16] Business Line Data and Key Metrics Changes - Total loans decreased by $41.1 million from the previous quarter, primarily due to net paydowns in commercial and multifamily portfolios [7] - The purchase participation portfolio declined by $46 million or over 10% in the quarter, and since the West Suburban acquisition, it has decreased by nearly 49% [8][9] - Noninterest income grew by $528,000 or 20.6% in wealth management fees and $304,000 or 12.6% in service charges on deposits [13] Market Data and Key Metrics Changes - Tax equivalent income on average earning assets increased by $221,000 or 0.3%, while interest expense on average interest-bearing liabilities decreased by $2.9 million or 21.3% [6] - The total cost of deposits was 82 basis points for the first quarter of 2025, down from 89 basis points in the previous quarter [8] Company Strategy and Development Direction - The company aims to manage liquidity and capital while building commercial loan origination capabilities for long-term stability [15] - The focus is on creating a more stable long-term balance sheet with a mix of more loans and fewer securities to maintain returns on equity [15] - The company is optimistic about the upcoming merger with Evergreen Bank Group, which is expected to enhance profitability [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning and opportunities ahead, noting a strong start to 2025 [25] - The sentiment among commercial clients is cautious, with a "wait and see" approach due to market uncertainties, particularly regarding tariffs [50] - Management does not foresee a significant increase in loan demand in the second quarter but is hopeful for an uptick in the second half of the year [51] Other Important Information - The efficiency ratio adjusted to exclude certain costs was 55.48%, slightly higher than the previous quarter [15] - The allowance for credit losses on loans decreased to 1.05% of total loans, reflecting a reduction in criticized loans [12] Q&A Session Summary Question: Comments on margin performance and future rate cuts - Management indicated that while there may be expectations for rate cuts, they do not foresee significant declines in margins due to strong deposit flows and the upcoming merger [27][28] Question: Status of noncore loans and credit quality - The company is actively working to exit a significant portion of its purchase participation portfolio and has made progress in addressing credit quality [30][32] Question: Trends among lower balance deposit customers - There has been a significant slowdown in card transactions and a decrease in average balances among lower balance deposit customers, a trend that has been ongoing for about a year [42][43] Question: Loan demand expectations and economic sentiment - Management noted that commercial real estate activity is cautious, with clients waiting for clarity on tariffs before proceeding with new deals [50][51] Question: Charge-off trajectory and credit outlook - The company is optimistic about future credit quality, with a focus on maintaining low charge-offs and addressing any potential weaknesses proactively [56][58]

Financial Data and Key Metrics Changes - The company reported net income of $22.4 million for Q1 2025, translating to $0.77 per share, indicating a solid start despite economic uncertainties [4] - Net loan growth was $6.5 million, impacted by larger payoffs, while deposits decreased by $100.8 million primarily due to seasonal declines in public funds [5] - The net interest margin (NIM) improved to 3.09% from 2.88% in Q4 2024, reflecting effective loan pricing discipline [5][7] - Nonperforming assets to total assets increased slightly by 2 basis points to 43 basis points, with net charge-offs remaining low at 10 basis points annualized [6] Business Line Data and Key Metrics Changes - Noninterest income decreased by $3.2 million or 12.4% compared to the previous quarter, with a notable decline in contingent income from the insurance line [8] - Noninterest expense decreased by $746,000 or 1.5%, demonstrating the company's focus on prudent expense management [9] Market Data and Key Metrics Changes - The company observed a cautious approach from commercial customers due to uncertainties surrounding tariffs, taxes, and interest rates, impacting loan growth [5] Company Strategy and Development Direction - The company plans to continue stock buybacks, having repurchased 221,760 shares during the quarter, and aims to maintain a disciplined approach to capital deployment [6][16] - The management maintains a loan-to-deposit ratio target of 95% to 105%, acknowledging the seasonal fluctuations in public funds [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating uncertainties in the economic environment and highlighted a solid first quarter performance [20] - The company expects fee income growth in the mid-single digits for the year, contingent on mortgage banking performance [11] Other Important Information - The Board of Directors announced a $0.01 increase in the quarterly dividend to $0.22 per share, reflecting the company's commitment to returning capital to shareholders [6] Q&A Session Summary Question: Fee income growth expectations - Management confirmed guidance for fee income growth at 4% to 6% for the year, with mortgage banking performance being a potential driver [11] Question: Loan to deposit ratio trends - Management indicated a long-term target of 95% to 100% for the loan-to-deposit ratio, acknowledging the cyclical nature of public funds [12][13] Question: Capital returns and buybacks - Management discussed the potential for continued stock buybacks, emphasizing a cautious approach based on earnings projections and regulatory capital ratios [15][16]