Financial Data and Key Metrics Changes - UFG reported a record net written premium of $373 million in Q2 2025, with a 14% growth compared to the previous year [7][8] - The return on equity reached 10% through the first half of the year, marking a significant milestone in the company's transformation [8] - The combined ratio improved by 9.2 points to 96.4%, with all components contributing favorably [8] - Net investment income increased by 20% year-over-year, driven by sustainable improvements in fixed maturity income [11][22] - Net income for the quarter was $0.87 per diluted share, with adjusted operating income of $0.90 per diluted share [24] Business Line Data and Key Metrics Changes - Net written premium in the core commercial business grew by 20% in Q2 2025, with gross written premium exceeding $400 million for the first time [12][13] - Rate achievement for the second quarter was 7.6%, with retention improving almost five points to 86% [12][13] - New business production surpassed $100 million for the first time, with double-digit increases across all business units [15] Market Data and Key Metrics Changes - The catastrophe loss ratio for Q2 was 5.5%, significantly below historical averages and expectations [9][19] - The underlying loss ratio improved by 1.3 points to 57.6%, reflecting strong earned rate achievement and moderating loss trends [8][16] Company Strategy and Development Direction - UFG is committed to executing its strategic business plan to achieve superior financial and operational performance [11] - The company is focused on improving risk selection and pricing to enhance profitability and competitive positioning [14][35] - UFG has made significant improvements in its catastrophe management, leading to better risk profiles and lower loss ratios [20][38] Management's Comments on Operating Environment and Future Outlook - Management noted that while competition remains strong, they are confident in their ability to grow despite rate moderation in the market [34][35] - The company is optimistic about maintaining favorable trends in catastrophe loss ratios and overall performance [39] Other Important Information - UFG declared and paid a cash dividend of $0.16 per share to shareholders [24] - The company issued $30 million of Series B notes as part of its capital management strategy [24] Q&A Session Summary Question: Trajectory on improving expense ratios - Management acknowledged a decline in non-variable underwriting expenses and indicated a good run rate for the next few quarters [27][29] Question: Visibility into positive reserve development for the second half - Management stated they are not in a position to predict future reserve developments but hope trends will continue [30] Question: Competitive environment insights - Management noted a competitive market with some moderation in rates, but expressed confidence in their risk selection and pricing strategies [34][35] Question: Differences between reinsurance and primary business - Management indicated that the reinsurance business has seen some pricing deterioration and mentioned non-renewal of treaties that did not meet profit expectations [36] Question: Catastrophe management improvements - Management expressed confidence in their improved management of catastrophe exposures and the positive impact of recent underwriting guidelines [38][39]

Financial Data and Key Metrics Changes - Consolidated revenues for the second quarter were $206 million, up 17% compared to the prior year quarter, with operating income increasing to $13 million, a rise of $10.8 million [6] - Consolidated adjusted EBITDA for the second quarter was $32.3 million, reflecting a nearly 47% increase over the previous year [6] - Net earnings for the quarter were $7.3 million, or $0.23 per share, compared to a net loss of $5.2 million, or $0.17 per share, in the prior year [6] Business Line Data and Key Metrics Changes - Theater division revenue for the second quarter was $131.7 million, an increase of nearly 30% year-over-year, with comparable admission revenue up 29.3% and attendance up 26.7% [7][8] - Hotel division revenues before cost reimbursements were $64.6 million, a 1.2% increase compared to the prior year, with RevPAR decreasing by 2.9% due to a 5.4 percentage point drop in occupancy [12][14] Market Data and Key Metrics Changes - U.S. box office receipts increased by 36.5% during the second quarter compared to the previous year, indicating that the company's admissions revenue performance trailed the industry by approximately seven percentage points [8] - Comparable competitive hotels in the markets experienced RevPAR growth of 2.9%, indicating that the company's hotels underperformed the competitive set by 5.8 percentage points [14] Company Strategy and Development Direction - The company is focused on driving long-term attendance and total revenue, with strategies that include optimizing ticket prices and promotional programs to encourage repeat moviegoing [22][23] - The company plans to continue capital expenditures for fiscal 2025 between $70 million and $85 million, with a significant portion allocated to renovations [17][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second quarter results, highlighting strong consumer demand and a diverse film slate as key drivers of growth [18][19] - The company noted that while there is increased economic uncertainty, its hotel portfolio has generally performed well, with stable group bookings and no significant cancellations [29] Other Important Information - The company completed major renovations at the Hilton Milwaukee, with all guest rooms returned to service, and expects limited impact on room sales moving forward [13][27] - The company is exploring opportunities for capital deployment to grow both business segments, with a history of executing on attractive investments [30][31] Q&A Session Summary Question: Can you separate the group pace between the Milwaukee area and outside of Milwaukee? - Management indicated that group pace gains are partly due to renovated meeting spaces and acknowledged the positive impact of the convention center expansion, but did not provide specific splits [34][36] Question: What is the size of the blockbuster surcharge being implemented? - Management mentioned that the everyday matinee pricing is moving from $7 to $7.50, with certain films priced at $8.50, indicating a cautious approach to pricing strategies [35][41] Question: What are the preliminary thoughts for the domestic box office going into the second half? - Management noted that while there are tough comparisons, there are strong films expected in the latter half of the year, making it difficult to predict box office performance [46][49] Question: How do you see the hotel segment revenue netting out for the current period? - Management highlighted strong banquet and catering business growth but noted lower margins, while the impact of the Hilton renovation is expected to ease in the second half [50][52] Question: What is the outlook for capital expenditures moving forward? - Management indicated a significant step down in capital expenditures is expected next year, with ongoing smaller projects but no major renovations like those recently completed [56][60]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $759.7 million, an increase of 3.2% year over year [7] - Gross profit reached a record $137.8 million, while gross margins decreased to 18.1%, down 40 basis points from the previous year [7][8] - Net income for Q2 was $24.8 million, a decrease of 5.2% compared to $26.2 million in the prior year [9][14] - Diluted earnings per share for Q2 was $0.97, down $0.02 from the previous year [14] - Adjusted EBITDA for the trailing twelve months was $122.5 million, a decrease of 2% from $125.4 million a year ago [14] Business Segment Performance - Business Solutions segment net sales were $293.2 million, an increase of 5.4% year over year, with gross profit increasing by 3.8% to $68.8 million [10] - Public Sector Solutions segment net sales were $140.5 million, down 11.9% from the previous year, with gross profit decreasing by 11.9% to $21.3 million [10][11] - Enterprise Solutions segment net sales grew 9.1% to $326 million, with gross profit increasing by 3.4% to $47.6 million [11][12] Market Data and Key Metrics Changes - The company noted a decline in sales to state, local government, and educational institutions, which decreased by $20.9 million [10] - Sales to the federal government increased by $1.9 million, indicating mixed performance in the public sector [10] Company Strategy and Industry Competition - The company is focused on driving value through integrated IT solutions and outstanding customer service, with a strong emphasis on data center modernization and edge computing [6][19] - The company plans to invest in education and tools to assist customers with AI and next-generation architectures [19][21] - The backlog is at its highest level in nearly two years, indicating strong future demand [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, citing a strong pipeline and increased customer activity [27][28] - The company expects less impact from subscription licensing program changes in the second half of the year [18] - Management believes they can outperform the U.S. IT market growth by 200 basis points [22] Other Important Information - The company repurchased approximately 255,000 shares at an average price of $60.95 per share, totaling $15.5 million [15] - Cash flow used in operations for the first half of 2025 was $26.1 million, primarily due to increases in inventory and accounts receivable [15][16] Q&A Session Summary Question: Context for moving into the back half of the year and trends in July - Management noted strong customer discussions and planned rollouts for the second half, with a record backlog and increased activity continuing into July [27][28] Question: Staging inventory for customer rollouts - Approximately 67% to 75% of the staged inventory is customer-specific, with proactive buy-ins to take advantage of favorable pricing [31] Question: Cash flow expectations for the back half of the year - Management expects to generate positive cash flow for the year, with operating cash flow roughly aligning with net income for the quarter [34] Question: Gross margin expectations for the back half of the year - Management anticipates gross margins will hold about where they are, with potential fluctuations of ten to fifteen basis points [40] Question: Exciting vertical markets for the back half of the year - There is optimism in retail and manufacturing markets, with strong outlooks due to solution-driven technologies [41] Question: Long-term growth initiatives - The company is investing in personnel, productivity platforms, and AI initiatives to drive long-term growth [43][44]

Financial Data and Key Metrics Changes - Core FFO per share was $0.53 for the quarter, an increase of 3.3% compared to last year [13] - Leverage remains low with net debt to annualized run rate adjusted EBITDA equal to 5.1 times [13] - Liquidity stood at $961 million at quarter end [13] Business Line Data and Key Metrics Changes - The company leased 90.8% of the operating portfolio square feet expected to lease in 2025, achieving cash leasing spreads of 24.5% [7][14] - Same store cash NOI growth was 3% for the quarter and 3.2% year to date, driven by leasing spreads of 26.1% and annual escalators of 2.9% [15] - Retention for the quarter was 75.3% [14] Market Data and Key Metrics Changes - The Midwest markets, including Minneapolis, Milwaukee, Louisville, Detroit, and Cleveland, are performing well, while bulk distribution markets like Indianapolis, Columbus, and Memphis are lagging [22] - The transaction market is showing signs of improvement, with an uptick in underwritten deals [8][39] Company Strategy and Development Direction - The company is focusing on its development initiative, with approximately 3 million square feet of development activity across 12 buildings in the U.S., 42% of which is under construction [10][11] - The company aims to maintain flexibility in building designs to accommodate both multi-tenant and single-tenant leases [75][76] Management's Comments on Operating Environment and Future Outlook - Management noted that while the environment is not "business as usual," companies are making space decisions amid ongoing uncertainties [7] - The company has seen a shift in market sentiment, with businesses continuing to grow despite tariff uncertainties [8] - Management expressed optimism about the second half of the year, citing a healthy deal pipeline and improved transaction activity [9][39] Other Important Information - Moody's upgraded the company's corporate credit rating to BAA2 with a stable outlook [15] - The company funded $550 million of fixed-rate senior unsecured notes with a weighted average fixed interest rate of 5.65% [16] Q&A Session Summary Question: What markets are seeing better early signs of recovery? - Management highlighted strong performance in the Midwest markets and noted some weaker bulk distribution markets [21][22] Question: How is the transaction market evolving? - Management indicated that the transaction market is becoming more active, with a narrowing bid-ask spread and more one-off transactions being completed [39] Question: What is the status of the development pipeline? - Management provided insights into the leasing status of various developments, indicating strong demand in certain markets [50][51] Question: How is the company planning to finance upcoming deals? - Management discussed the refinancing of a $300 million term loan and the use of liquidity for potential acquisitions [45][47] Question: What are the trends in rental escalators? - The company reported a weighted average rental escalator of 2.9%, with expectations for gradual increases [65][66]

Financial Data and Key Metrics Changes - Core FFO per share was $0.53 for the quarter, an increase of 3.3% compared to last year [12] - Leverage remains low with net debt to annualized run rate adjusted EBITDA equal to 5.1 times [12] - Liquidity stood at $961 million at quarter end [12] - Same store cash NOI growth was 3% for the quarter and 3.2% year to date [14] Business Line Data and Key Metrics Changes - The company leased 90.8% of the operating portfolio square feet expected to lease in 2025, achieving cash leasing spreads of 24.5% [6][13] - During the quarter, 32 leases totaling 4.2 million square feet were commenced, generating cash and straight line leasing spreads of 24.6% and 41.1% respectively [12] - Retention for the quarter was 75.3% [13] Market Data and Key Metrics Changes - The Midwest markets, including Minneapolis, Milwaukee, Louisville, Detroit, and Cleveland, are performing well, while bulk distribution markets like Indianapolis, Columbus, and Memphis are lagging [22] - The transaction market is showing signs of improvement, with an uptick in underwritten deals observed in the last three weeks [7][56] Company Strategy and Development Direction - The company is focusing on its development initiative, with approximately 3 million square feet of development activity across 12 buildings in the US, 42% of which is under construction [9][10] - The company aims to maintain flexibility in building designs to accommodate both multi-tenant and single-tenant leases [77][78] Management's Comments on Operating Environment and Future Outlook - Management noted that while the environment is not back to normal, businesses are making decisions in an uncertain environment, indicating a shift from the previous pause [6] - The company expects cash leasing spreads to be between 23% and 25% for the year [13] - Management expressed optimism about the acquisition market improving, with a narrower bid-ask spread between buyers and sellers [40][56] Other Important Information - Moody's upgraded the company's corporate credit rating to BAA2 with a stable outlook [14] - The company funded $550 million of fixed rate senior unsecured notes with a weighted average fixed interest rate of 5.65% [15] Q&A Session Summary Question: What markets are seeing better early signs of recovery? - Management highlighted strong performance in the Midwest markets and noted some weaker bulk distribution markets [22] Question: Can you discuss the competition from well-funded users? - Management acknowledged that competition from large users is impacting net absorption positively, as it takes some vacancy out of the market [25] Question: What is the status of the acquisition pipeline? - The pipeline consists of 60% one-off assets, 20-30% portfolios, and some development deals, with an active second half of the year anticipated [39][40] Question: How is the company planning to finance upcoming deals? - The company has approximately $1 billion in liquidity and is in the process of refinancing a $300 million term loan due early next year [49][47] Question: What is the status of the development pipeline? - The development pipeline is segmented into in-service, complete but not in service, and under construction, with varying leasing activity across these categories [51][52] Question: How are embedded rent bumps trending? - The weighted average rental escalator across the portfolio is currently 2.9%, with expectations for it to increase as new leases are signed [67]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $72.8 million, with adjusted EBITDA of $26.3 million and an adjusted EBITDA margin of 36.1%, an increase of 30 basis points compared to 2024 [20][21] - Revenue excluding marketing funds decreased by 6.8% year-over-year, primarily due to negative organic growth of 5.7% and adverse foreign currency movements of 1.1% [20][21] - Selling, operating, and administrative expenses decreased by $1 million or 2.8% to $33.9 million, attributed to lower personnel expenses [21] Business Line Data and Key Metrics Changes - The decline in organic growth was mainly due to lower U.S. agent count, broker fees, and revenue from previous acquisitions, partially offset by new revenue streams from REMAX Media Network and lead concierge initiatives [20][21] - The company reported a record high of over 147,000 agents in its global network, marking the best U.S. agent count performance since 2022 [3][9] Market Data and Key Metrics Changes - U.S. existing home sales have been slow to recover, but inventory levels increased by 30% compared to June 2024, with new listings growing year-over-year for the sixteenth consecutive month [5] - The company noted challenges in the housing market due to tariffs, inflation, and high mortgage rates, which tempered expectations for a housing rebound in the latter half of the year [5][6] Company Strategy and Development Direction - The company is focused on enhancing its value proposition and expanding its global agent network, particularly in the U.S. and Canada [16] - Recent strategic moves include the introduction of the Aspire onboarding program aimed at attracting and developing new agents, which has seen nearly 60% of U.S. and Canadian brokerages sign up [11][12] - The company is investing in technology and tools to empower agents, including a new AI-powered global referral system and a pricing engine for mortgage brokerage [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing solid momentum and resilience despite a challenging macro environment [4][16] - The company tightened its revenue and profit range expectations for the rest of the year but raised agent count expectations due to strong international growth [23][24] Other Important Information - The company is strategically reinvesting in the business and building cash reserves while working to lower its total leverage ratio [21][22] - The REMAX Media Network is beginning to contribute to the top line, although its launch has been slower than anticipated due to the macro environment [14] Q&A Session Summary Question: What drove the reduced guidance range? - Management indicated that the reduced guidance was influenced by a delay in the ramp-up of the REMAX Media Network, a tempered outlook on broker fees, and near-term impacts from the Aspire program [27][30] Question: How did different geographies contribute to the agent count change? - The international expansion was identified as a key driver for the agent count guidance, with significant contributions from the U.S. and a recent large-scale conversion in Hawaii [31][33] Question: How is the Aspire program resonating with agents? - The Aspire program has seen positive adoption, with nearly two-thirds of eligible brokerages participating, and it is helping to attract younger agents and those transferring books of business [36][39] Question: What is the engagement level with the new tools launched? - While it is early to assess the stickiness of multiple tool usage, management noted good adoption rates for the tools deployed, including the global referral platform and lead concierge [41][44]

Financial Data and Key Metrics Changes - In the fourth quarter, the company originated $29.4 million of loans held for investment, a 5% increase from $27.9 million in the prior quarter [5] - Loan principal payments and payoffs increased by 83% to $42 million from $23 million in the previous quarter [5] - The outstanding balance of loans held for investment decreased by $13.2 million from the previous quarter [9] - The net interest margin decreased by eight basis points to 2.94% compared to 3.02% in the prior quarter [9] - The average cost of deposits increased to 1.33%, up seven basis points, while the cost of borrowing increased to 4.58% [9] Business Line Data and Key Metrics Changes - Loans held for investment decreased primarily in multifamily, commercial real estate, and commercial business loans, partially offset by a small increase in single-family loans [6] - The company continues to see moderate activity in loans held for investment despite cautious behavior from real estate investors [6] - The weighted average rate of loans originated in June was 6.69%, compared to 5.16% for loans held for investment as of June 30, 2025 [10] Market Data and Key Metrics Changes - The company is monitoring commercial real estate loans, particularly those secured by office buildings, with a total exposure of $39.5 million, representing 3.8% of loans held for investment [7] - The company has approximately $117 million of loans repricing in September and $98 million repricing in December, both expected to increase by 15 basis points [11][27] Company Strategy and Development Direction - The company aims for disciplined growth of the loan portfolio, recognizing the shift in monetary policy and the reversal of the inverted yield curve [13] - The strategy includes maintaining cash dividends and utilizing stock buyback programs as a responsible capital management tool [15] - The company is focused on improving operating efficiencies to lower operating expenses, with a projected run rate of $7.6 million to $7.8 million per quarter for fiscal 2026 [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that current credit quality remains strong, with nonperforming assets unchanged at $1.4 million [6] - The company is optimistic about the future, suggesting opportunities for expansion of the net interest margin in the upcoming quarters [12] - Management indicated that the mix of loans may shift based on performance, with a preference for a balanced portfolio of single-family and multifamily loans [19] Other Important Information - The company repurchased approximately 76,000 shares of common stock in June and distributed about $3.8 million in cash dividends to shareholders for the fiscal year [15][16] - The company has exceeded well-capitalized capital ratios, allowing for the execution of its business plan without complications [14] Q&A Session Summary Question: Has the recent uptick in prepayments shifted your view on portfolio mix or originations? - Management indicated that they prefer a 50% mix of single-family and multifamily loans but will adjust based on performance, noting recent strength in multifamily and commercial real estate [19] Question: Is there an efficiency ratio that you target? - Management stated that the current operating expense baseline can support future growth, and as the loan portfolio grows, the efficiency ratio is expected to improve over time [21] Question: Is the increased payout this quarter a function of increased competition? - Management responded that both pricing and structure are factors, with tighter underwriting characteristics contributing to credit quality [25] Question: What is the dollar value of loans repricing in the next two quarters? - Management confirmed approximately $117 million repricing in September and $98 million in December, with specific interest rates provided [27][28] Question: What is the seasonality of operating expenses? - Management noted that March typically sees higher operating expenses due to employer taxes, while July 1 sees merit increases impacting future quarters [28][29] Question: What is the range of the loan deposit ratio? - Management explained that a higher loan to deposit ratio is typical for their business model, with a recent reduction from the 120s to the mid-one teens [30][32]

Financial Data and Key Metrics Changes - Total Recurring Contract Value (TRCV) increased by 2% sequentially, marking the third consecutive quarter of sequential growth and the highest growth rate since early 2021 [8][9] - Adjusted EBITDA margin remains strong at 30%, reflecting disciplined cost management and operational efficiency [10][11] - The company repurchased 382,000 shares, approximately 2% of outstanding stock, at an average price of $14.96 per share during the quarter [12] Business Line Data and Key Metrics Changes - The company experienced the strongest year-to-date sales since 2021, with increased win rate percentage and average win size year-over-year [9] - Retention rates improved due to the strength of the customer success organization, indicating better customer satisfaction and loyalty [10] Market Data and Key Metrics Changes - The top 400 largest healthcare systems represent the target market, which has shown signs of recovery post-pandemic but faces budget pressures [12][13] - The competitive environment remains challenging, but the company's value proposition resonates with customers [12] Company Strategy and Development Direction - The company aims to enhance its market position by focusing on deeper, human-centered connections between healthcare providers and patients [7][8] - Plans for capital allocation include continuing dividends and share repurchases while funding organic growth opportunities and potential mergers and acquisitions [12] Management's Comments on Operating Environment and Future Outlook - The new CEO emphasized the importance of understanding the unique pressures and regulations of healthcare organizations as a competitive advantage [17][18] - The company is in the early stages of developing a strategic plan, with a focus on sustainable growth and long-term margin improvement [19][20] Other Important Information - The company is actively searching for a new Chief Financial Officer, indicating a focus on strengthening the executive team [13][14] - The CEO highlighted the importance of a high-touch customer success model, which differentiates the company from competitors [18] Q&A Session Summary Question: What is the current status of the sales organization? - The sales organization is being reorganized under Jason Rao, with positive momentum reflected in the size of the pipeline and new customer acquisitions [14][15] Question: How does the company differentiate itself in the competitive environment? - The company differentiates through deep healthcare experience and a high-touch customer success model, which builds trust and accelerates value realization for clients [16][17][18] Question: Are there any material investments planned? - The CEO is excited about future value creation opportunities but is still in the early stages of assessing specific investment plans or timelines [19][20]

Financial Data and Key Metrics Changes - The company reported net income of $133 million or $0.22 per diluted share, with adjusted net income of $134 million or $0.23 per share, compared to $106 million and $0.18 in the previous quarter, reflecting solid momentum in net interest income and non-interest income [5][15] - Profitability ratios, including return on average assets and return on tangible shareholders' equity, continue to trend higher and are on track to meet full year guidance [6][12] - The company expects approximately 3% loan growth for the year, with net interest income growth estimated at 8% to 10% [15] Business Line Data and Key Metrics Changes - Core deposit growth was $600 million, driven by growth in commercial non-interest bearing deposits and promotional CD offerings [16] - Commercial loan diversification has seen the C&I portfolio grow at a 19% compound annual rate since 2017, with nearly 15% growth over the last twelve months [9][12] - Non-interest income has grown at a 12% annual rate since 2017, with a significant improvement in the composition of that income [11][21] Market Data and Key Metrics Changes - The company added over 105,000 new deposit accounts, contributing to approximately 8% core deposit growth [7] - C&I loan growth was particularly robust, fueled by activity in fund finance and healthcare verticals, contributing roughly 60% of the quarter's net growth in C&I [18][48] - The CRE concentration ratio has declined to 349% from 474% at the end of 2023, surpassing year-end targets ahead of schedule [19] Company Strategy and Development Direction - The company is focused on deposit growth and funding transformation, with a significant reduction in reliance on indirect deposits [7][12] - Strategic imperatives include building durable high-quality fee income and enhancing treasury management offerings [11][12] - The company aims to close the valuation gap through continued execution of its strategy, despite recognizing a disconnect between franchise quality and share valuation [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of credit quality and anticipates further normalization in credit metrics [23][36] - The company remains optimistic about the long-term growth potential in its markets, particularly in the healthcare and fund finance sectors [12][40] - Management highlighted the importance of maintaining a balance between organic growth opportunities and potential share buybacks [62] Other Important Information - The company has seen a 51 basis point reduction in average cost of deposits compared to the same period in 2024 [7] - Non-interest expenses grew modestly due to merit-based salary increases and higher incentive accruals, but the efficiency ratio improved to 55.2, the best level since Q1 2023 [22] Q&A Session Summary Question: Can you speak to the ability to maintain deposit pricing given competitive nature and growth outlook? - Management anticipates margin will increase as the year progresses, driven by asset repricing tailwinds and stability on the deposit side [29] Question: What drove the increase in past dues this quarter? - The increase in delinquencies was driven by three credits, with two already cleared and the remaining expected to be resolved soon [50] Question: How is the company adapting to the competitive landscape in the technology and software sector? - The company has built infrastructure and acquired a team to leverage opportunities in the technology sector, particularly with strong connectivity to the Israeli market [39] Question: What is the outlook for loan growth in 2026? - While specific guidance for 2026 has not been provided, management anticipates low single-digit growth in CRE and overall loan growth could be closer to 5% [74]

Financial Data and Key Metrics Changes - Net income for Q2 2025 was $15.1 million or $0.50 per diluted share, down from $17.7 million and $0.58 in Q1 2025, primarily due to an increase in credit loss expense [5][6] - Return on average assets was 0.79% and return on average equity was 7.8% [6] - Pre-provision net revenues grew 3.7% or $1 million, indicating strength in core business [6] - Net interest margin increased by five basis points to 3.07%, driven by lower funding costs [6][22] - Total loans increased by $6.31 billion, or 0.4% on a linked quarter basis, with a 1.6% annualized growth [7] Business Line Data and Key Metrics Changes - Loan production for Q2 was $330 million, down 4.7% from the prior quarter, with a weighted average interest rate of 7.1% [14] - Commercial real estate (CRE) production was $112 million, down 24% from the prior quarter [15] - SBA loan production decreased to $47 million but exceeded the high end of the quarterly target range [15] - C&I production increased by 26% to $53 million, attributed to new talent and growth efforts [17] - Residential mortgage loan production was $84 million, up 52% from the previous quarter [18] Market Data and Key Metrics Changes - Non-interest bearing demand deposits increased by over 7% from 2024, representing 31.3% of total deposits [9] - USKC loan and deposit portfolios remained steady, with USKC loans at $842 million, approximately 13% of the total loan portfolio [19] - Deposits increased by 1.7% in Q2, driven by new commercial accounts and contributions from new branches [20] Company Strategy and Development Direction - The company aims to drive loan growth in the low to mid single-digit range, focusing on expanding SBA activities and C&I portfolios while reducing exposure to CRE [11] - The strategy includes strengthening relationships in select deposit-rich markets and driving growth in key regions [28] - The company is optimistic about long-term growth potential despite current economic conditions [10][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute effectively and deliver sustained profitable growth [28] - The economic outlook remains dynamic, with many USKC customers taking a wait-and-see approach regarding tariffs and their impact on the economy [10] - The company is well-positioned for growth, leveraging strong liquidity and maintaining robust credit metrics [11] Other Important Information - Asset quality improved significantly, with criticized loans decreasing by 72% and non-accruals decreasing by 27% [21] - The allowance for credit losses stood at 1.06% of loans at the end of Q2 [26] - The company repurchased 70,000 shares of common stock at an average price of $23.26, totaling $1.6 million [27] Q&A Session Summary Question: Loan growth expectations for the second half of the year - Management indicated that the second half typically sees higher production, with a strong pipeline of new loans already established [32] Question: Insights on margin and deposit costs - Average interest-bearing deposit costs were 3.64% for the quarter, with expectations for net interest margin to continue increasing, albeit at a slowing rate [35][37] Question: Credit quality and criticized assets - Management noted significant success in resolving loans in the special mention category, contributing to improved asset quality metrics [41] Question: C&I production driving loan growth - C&I production is expected to drive loan growth in the second half, supported by a higher pipeline and ongoing efforts to target more C&I opportunities [49] Question: Plans for additional hires in C&I and SBA - Major hires were completed in the first half, and the number of new relationship managers is expected to remain steady [60]