Financial Data and Key Metrics Changes - The bank's earnings accelerated as forecasted, with a significant increase in loan production from approximately $2 billion in Q1 to over $3 billion in Q2, representing a 57% increase [6][11] - Adjusted for merger costs, the return on assets was 1.45% and return on tangible common equity was nearly 20% [9][11] - Net interest income grew by $33 million over Q1, with a cost of deposits at 1.84%, a five basis point improvement from Q1 [12][13] - Non-interest income remained stable at $87 million, with an efficiency ratio of 49.1% [14][15] - Tangible book value per share increased by 8.5% year-over-year to $51.96 [16] Business Line Data and Key Metrics Changes - Loan production in Texas and Colorado increased by 35%, with non-PCD loans growing by about $200 million [6][9] - The bank's retail bank ranks in the top quartile of J.D. Power's Net Promoter Score, indicating a superior customer experience [10] Market Data and Key Metrics Changes - The bank is now established in the fastest-growing markets in the country, specifically Texas and Colorado [8][9] - The loan pipeline increased significantly, with a 45% increase in Q1 and an additional 31% in Q2 [30] Company Strategy and Development Direction - The company aims to build a strong presence in the best geographical areas with a focus on organic growth and shareholder value [7][8] - The management is focused on leveraging the successful integration of Independent Financial to enhance growth opportunities [11][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving yield curve and its potential to accelerate organic growth [11] - The bank's capital position is strong, allowing for an 11% increase in dividends and potential share repurchases [16][85] Other Important Information - The bank's asset quality remains stable, with low credit costs and strong loss absorption capacity [15][16] - The management highlighted the importance of recruiting talent, having added 47 revenue producers in Q2 [50][66] Q&A Session Summary Question: Outlook for margin and deposit costs - Management indicated strong net interest margin performance and expects deposit costs to remain manageable despite growth [20][34] Question: Loan growth and paydowns - Paydowns returned to normal levels in Q2, and management expects continued loan origination funding [36] Question: Interest rate sensitivity - The bank expects a one to two basis point improvement in overall margin for every 25 basis point cut in rates [40] Question: Regulatory environment and growth - Management believes they have time to build infrastructure before facing regulatory changes, with a focus on organic growth [54] Question: Expense outlook and revenue synergies - Management confirmed no change to prior expense guidance and noted positive retention of key talent post-merger [58][65]

Financial Data and Key Metrics Changes - Operating earnings for Q2 2025 were $81.7 million, a 21% increase from Q1 2025 [7] - Net income was $100.2 million or $0.50 per diluted share, with operating earnings of $0.41 per diluted share, reflecting a 21% increase linked quarter and a 78% increase year-over-year [12][28] - Total assets reached $25.5 billion, up 2% from March 31 [8] - Tangible book value per share increased 4% to $12.53 [8] - Operating return on average assets rose 21 basis points to 1.3%, and return on average tangible equity increased from 11.7% to 13.6% [8][13] Business Line Data and Key Metrics Changes - Robust loan growth of 8% annualized this quarter, with commercial loan pipelines steady at approximately $500 million [8][9] - Noninterest income was $42.9 million, compared to a noninterest loss of $236.1 million in Q1 2025 [15] - Wealth management assets under management reached a record high of $8.7 billion, with fees of $17.3 million, up $800,000 linked quarter [16] Market Data and Key Metrics Changes - Deposits totaled $21.2 billion, an increase of $424 million from the prior quarter, with 8% annualized growth [20] - Nonperforming loans decreased to $54.7 million or 30 basis points of total loans, improving from the previous quarter [23][24] Company Strategy and Development Direction - The company is focused on organic growth and strategic investments in talent, particularly in commercial lending [8][44] - Plans to consolidate 13 branch locations following the merger with Harbor One, with integration planning well underway [30][31] - The company raised its full-year loan growth outlook to 3% to 5%, reflecting strong results through the first half of the year [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of customers despite economic uncertainties and highlighted the importance of proactive risk management [10][11] - The company remains cautious in its outlook but is optimistic about the ongoing positive trends in credit quality and profitability metrics [11][23] - The competitive market for deposits has heated up, impacting margin expectations for the second half of the year [50] Other Important Information - The company repurchased $3 million worth of shares at an average price of $16.36 prior to the merger announcement [22] - A dividend of $0.13 is set to be paid in September [22] Q&A Session Summary Question: Will there be more securities portfolio restructurings in the coming quarters? - Management indicated that while there is potential for another restructuring, it is currently on the back burner due to the merger [35] Question: What drove the significant drop in nonperforming loans this quarter? - The drop was attributed to the resolution of five credits rather than loan sales [37] Question: Are there plans to expand into new markets following the Harbor One deal? - Management is open to expanding in Rhode Island but has no current plans to enter Connecticut or New York [39][40] Question: What drove the strong growth in commercial and industrial loans? - Growth was driven by increased customer confidence and the addition of talent in the commercial lending division [44] Question: What is the outlook for the margin in the second half of the year? - Management expects the margin to be relatively flat, influenced by core deposit growth and competitive market conditions [50] Question: Can you provide guidance on Rabbi Trust income? - Rabbi Trust income is influenced by equity market performance, and while it can have an impact, it is not expected to be a significant factor moving forward [54]

Financial Data and Key Metrics Changes - GAAP earnings were strong with core earnings continuing to increase, return on average assets was 1.51% and return on average equity was 15.12% for Q2 2025 compared to 1.45% and 14.97% respectively for Q1 2025 [5][6] - Net interest margin (NIM) increased to 4.07% in Q2 2025 from 4% in Q1 2025, with expectations for further upside [6][14] - Noninterest income increased by $1.3 million quarter-over-quarter, with fee income as a percentage of operating revenue improving to 21% [6][15] Business Line Data and Key Metrics Changes - Total loan growth was 6% on an annualized basis for the quarter, with commercial loan growth at 2% [9][10] - Wealth management fees remained the largest component of fee income, with assets under management reaching $3 billion [7][15] - Noninterest expense declined by approximately $600,000 in the quarter, indicating improved cost management [18][19] Market Data and Key Metrics Changes - The loan pipeline is reported to be the strongest since the merger, reflecting a resilient regional economy [10][11] - Credit quality remains sound with net charge-offs being nominal and classified loans decreasing by 14% [11][21] - The average yield on loans was 6.5%, impacted by lower purchase accounting accretion [23] Company Strategy and Development Direction - The company aims to enhance its wealth management business and is focused on talent acquisition to support growth [7][48] - A share repurchase program of up to 500,000 shares was authorized, indicating confidence in the company's valuation [11][12] - The company is considering strategic opportunities, including potential acquisitions, while maintaining a focus on shareholder value [26][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future earnings growth as loan growth accelerates and expenses are expected to decline [5][8] - The competitive lending environment is acknowledged, but management remains confident in their ability to grow loans prudently [10][15] - The company is asset sensitive, and potential rate cuts could negatively impact net interest income, but management is focused on managing deposit costs [42][44] Other Important Information - The efficiency ratio improved to 58.7% in Q2 2025 from 60.5% in Q1 2025, with expectations for further improvement [8][19] - The board voted to increase the quarterly dividend by $0.01 per share, marking the third increase in the past year [12] Q&A Session Summary Question: Are there still other credits in the Codorus Valley deal that you are looking to move off of or sell? - Management indicated that while there may be a couple of loans to consider selling, they have been successful in working them out with minimal charge-offs [31] Question: Is there a capital level you would like to reach before considering another acquisition? - Management stated they are at premerger capital levels and feel confident about their position for potential acquisitions [36] Question: Can you provide commentary on the potential for NIM expansion in Q3 with possible rate cuts? - Management acknowledged that rate cuts could negatively impact net interest income but emphasized the importance of properly pricing loans [42][44] Question: What initiatives are in place for growth in the wealth management business? - Management highlighted opportunities for growth through talent acquisition and expanding in markets like Maryland and Lancaster [48] Question: How has the sentiment of commercial clients changed recently? - Management reported that the loan pipeline is the largest since the merger, indicating positive sentiment among commercial clients [52] Question: What is the current line utilization rate in the commercial portfolio? - Management noted that line utilization rates have remained stable and modest [61] Question: Are you ready for another transaction a year after the Codorus Valley deal? - Management expressed that they are looking for opportunities that add value and are focused on best practices for future acquisitions [70]

Financial Data and Key Metrics Changes - Operating earnings per share for the quarter was $0.66, an increase of 14% year over year [3] - Net interest margin expanded to 3.50%, an improvement of 14 basis points over the last quarter [3] - Customer deposits, excluding merger activity, grew by 1.3% annualized [4] - Loan growth was 4.2% annualized, with strong pipelines heading into the third quarter [4] - Efficiency ratio improved to 54.8%, an improvement of 222 basis points compared to last year [5] Business Line Data and Key Metrics Changes - Deposits increased by $205 million, benefiting from the American National deal [7] - Excluding public fund seasonality, deposits grew by $64 million or 1.2% annualized [8] - Loan portfolio growth continued at a 4.2% annualized pace, excluding American National [9] - Spread income grew at a 21% annualized pace, excluding American National [11] - Operating expenses increased by $2.1 million, primarily driven by merit increases [12] Market Data and Key Metrics Changes - The CET1 ratio remained stable at 13.3%, indicating strong capital position [10] - The loan to deposit ratio increased slightly to 79% due to the acquisition and solid loan growth [9] - The total deposit beta was 34% so far, with expectations for a high 30% range through the cycle [8] Company Strategy and Development Direction - The company continues to seek small, high-performing institutions for potential acquisitions [22] - Focus remains on organic growth, M&A, dividends, and buybacks, with a cautious approach to capital management [48] - The company is actively recruiting top talent to enhance its footprint and market presence [62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for the rest of the year despite uncertainties related to tariffs and yield curve direction [15] - There is a positive sentiment among clients regarding economic conditions and potential tax benefits [43] Other Important Information - The company redeemed $100 million in senior notes to manage interest costs effectively [9] - The allowance for credit losses remained flat at 1.21%, with a provision of $11.8 million for the quarter [14] Q&A Session Summary Question: Inquiry about loan growth and hiring initiatives - Management confirmed there were some pay downs but remains optimistic about loan growth in Q3, expecting it to be around 6% [19] - The company is focused on recruiting top talent and has made recent hires to strengthen its team [20] Question: Update on M&A strategy - The company continues to look for small, high-performing institutions for acquisition, with a more favorable outlook compared to previous months [22] Question: Core margin and deposit beta expectations - Management anticipates continued core margin expansion, targeting about five basis points in the third quarter [25] Question: Openness to share buybacks - Currently, the company is not active in buybacks but retains authorization for future opportunities at lower prices [34] Question: Outlook on Navitas growth - Navitas had a strong quarter, and the company plans to maintain or increase loan sales for the rest of the year [38] Question: Capital management and securities restructuring - The company has significant excess capital and is evaluating options for securities restructuring but prioritizes organic growth and M&A [48][47]

Financial Data and Key Metrics Changes - The company reported earnings of $140 million, translating to an EPS of $2.19 per diluted share for the second quarter, indicating a positive momentum in financial performance [4] - Net interest income grew for the fifth consecutive quarter, with a reported increase of $11.9 million and net interest margin expanding by two basis points [19] - Total outstanding loans increased by 2.5% quarter-over-quarter, representing over 10% on an annualized basis [9] Business Line Data and Key Metrics Changes - Fee income rose by 7.2% sequentially, with total fees and commissions contributing $197.3 million to revenue [5][15] - The core C and I loan portfolio grew by 1.1%, driven by Native American lending and general business loans, while the specialty lending portfolio decreased by 1.6% [9] - Trading revenue increased by 31% from the prior quarter, reaching $30.5 million, as trading activity normalized [15] Market Data and Key Metrics Changes - The commercial real estate (CRE) business saw a quarter-over-quarter increase of 6.9%, primarily from multifamily housing, retail, and industrial projects [10] - The company maintained a loan-to-deposit ratio of 64%, positioning itself well for optimizing deposit pricing [6] Company Strategy and Development Direction - The company plans to launch a new mortgage finance line of business to support future loan growth, which is expected to enhance long-term sustainable growth [5][11] - The management emphasized a focus on organic growth, with M&A being a secondary strategy, indicating a selective approach to acquisitions [59][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth projections for the full year, citing robust growth in Q2 and strong pipelines across C and I and CRE [21] - The economic policy uncertainty is acknowledged as a risk factor, but it appears less significant than it did ninety days ago [22] Other Important Information - The company repurchased over 660,000 shares below $94 per share and redeemed $131 million of Tier two capital instruments, indicating a commitment to shareholder value [6][7] - Credit quality remains strong, with nonperforming assets decreasing to $74 million and a combined allowance for credit losses at 1.36% of outstanding loans [13][14] Q&A Session Summary Question: Expectations for margin trajectory behind net interest income - Management indicated satisfaction with margin behavior, attributing expansion to fixed asset repricing and deposit pricing optimization [28][29] Question: Pace of loan growth through the quarter - Management noted that loan growth built throughout the quarter, with expectations for continued growth in the second half of the year [40][41] Question: Competitive environment for loan yields - Management acknowledged strong competition in key markets, with some spread compression observed in the C and I sector [44][45] Question: Guidance for fee income and factors affecting it - Management expressed confidence in continued growth across various fee income lines, driven by strong performance in fiduciary and asset management [54][55] Question: Outlook for mortgage finance and expected balances - Management anticipates approximately $500 million in commitments by year-end, with a focus on operational risk management [86][88] Question: Expectations for deposit growth and funding loan growth - Management expects to continue growing deposits while maintaining a strong loan-to-deposit ratio, with cash flows from the bond and loan books supporting growth [108][109]

Financial Data and Key Metrics Changes - The company reported earnings of $140 million, or EPS of $2.19 per diluted share for the second quarter, indicating a positive momentum in financial performance [4] - Net interest income grew for the fifth consecutive quarter, with a loan to deposit ratio of 64% and total capital levels remaining robust, with TCE reaching 9.6% and CET1 reaching 13.6% [6][7] - Total outstanding loans increased by 2.5% quarter over quarter, translating to over 10% on an annualized basis [8] Business Line Data and Key Metrics Changes - Fee income increased by 7.2% sequentially, with total fees and commissions contributing $197.3 million to revenue [5][14] - The core C and I loan portfolio grew by 1.1%, while the specialty lending portfolio decreased by 1.6% [8] - The commercial real estate (CRE) business saw a significant increase of 6.9% quarter over quarter, primarily driven by multifamily housing, retail, and industrial projects [9] Market Data and Key Metrics Changes - The trading revenue, including trading-related net interest income, was $30.5 million, representing a growth of 31% from the prior quarter [14] - Assets Under Management (AUMA) increased by $3.9 billion to $117.9 billion, reflecting increased market valuations and continued new business growth [16] Company Strategy and Development Direction - The company plans to launch a new mortgage finance line of business to support future loan growth, which is expected to enhance long-term sustainable growth [5][10] - The management emphasized the importance of investing in talent and systems to enable future growth, despite the increase in current period expenses [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the loan growth outlook set at the beginning of the year, despite acknowledging economic policy uncertainty as a risk factor [21][22] - The company expects net charge-offs to remain below historical norms, supported by strong credit quality across the loan portfolio [12][22] Other Important Information - The company repurchased over 660,000 shares below $94 per share and redeemed all $131 million of Tier two capital instruments [7] - The combined allowance for credit losses is $330 million, or 1.36% of outstanding loans, indicating a healthy reserve level [13] Q&A Session Summary Question: Expectations for margin trajectory behind NII - Management noted that margin behaved well in Q2, with good lift from fixed asset repricing and deposit pricing, expecting continued support for margin growth [27][28] Question: Loan growth pace through the quarter - Management indicated that loan growth built throughout the quarter, with expectations for continued growth in the second half of the year, particularly in C and I and CRE [36][39] Question: Competitive environment for loan yields - Management acknowledged strong competition in their markets, with some spread compression observed on the C and I side, but overall spreads are holding well [40][41] Question: Fee income guidance for the full year - Management expressed confidence in continued growth across various fee income lines, driven by strong performance in fiduciary and asset management, transaction card, and deposit service charges [49][50] Question: Outlook on mortgage finance and expected balances - Management expects to achieve approximately $500 million in commitments by the end of the year, with a utilization rate of around 25% to 50% [81][82] Question: Funding expectations for loan growth - Management indicated a strong loan to deposit ratio and expects to continue growing deposits, with cash flows from the bond book and loan book supporting funding needs [102][103]

Financial Data and Key Metrics Changes - Net income for Q2 2025, excluding notable items, totaled $24.5 million, up 7% from $22.9 million in Q1 2025 [5] - Reported a net loss of $27.9 million for Q2 2025 due to one-time losses from selling lower-yielding legacy securities and merger-related items [5] - Pretax pre-provision net revenue, excluding notable items, grew to $41.2 million in Q2 2025, up 17% from $35.2 million in Q1 2025 [6] Business Line Data and Key Metrics Changes - Total deposits grew to $15.9 billion, an increase of 10% from the prior quarter, driven by the acquisition of Territorial Bancorp [8] - Loans receivable increased to $14.4 billion, up 8% from the end of the prior quarter, reflecting the addition of Territorial's loan portfolio [9] - Organic loan production increased by 57% from Q1 2025, contributing to modest net growth in the legacy portfolio [10] Market Data and Key Metrics Changes - Average cost of interest-bearing deposits declined by 37 basis points quarter over quarter, and average cost of total deposits decreased by 22 basis points [8] - Broker deposits decreased by $183 million or 19% quarter over quarter, with the broker deposits ratio declining to 5% of total deposits [9] Company Strategy and Development Direction - The acquisition of Territorial Bancorp is seen as a strategic move to enter the Hawaii market, enhancing growth opportunities [4] - Strengthening the deposit franchise remains a key priority, with a focus on reducing broker deposit exposure and improving the cost of funds [8] Management's Comments on Operating Environment and Future Outlook - Management expects loan growth in 2025 to be at a high single-digit percentage rate, driven by improved frontline productivity and hiring [24] - The company anticipates net interest income growth in the high single-digit percentage range for 2025, despite the negative impact of delayed Fed rate cuts [25] Other Important Information - The company declared a quarterly common stock dividend of $0.14 per share, payable on August 15, 2025 [7] - The effective tax rate is expected to be approximately 14% for the third and fourth quarters, reflecting changes in California state tax apportionment law [26] Q&A Session Summary Question: Any updates on fee income expectations for the second half of the year? - Management highlighted positive drivers for fee income growth, including customer swap fee income and loan-related fees [30] Question: What is the average yield on new loan production? - The average yield on new production was approximately 6.76% [67] Question: What is the expected impact of the Territorial acquisition on cost savings? - Management indicated that there are still integration and cost savings expected in the second half of the year, but specifics will be shared later [35] Question: How is the company viewing asset quality in the current environment? - Management expressed cautious optimism regarding asset quality, noting a decline in criticized loans and stable overall credit quality [50] Question: What is the target loan-to-deposit ratio? - The target loan-to-deposit ratio is up to 95%, with current levels below 91% [57]

Financial Data and Key Metrics Changes - The company reported record quarterly net income of $195.5 million, up from $189 million in the previous quarter [6] - Net interest income also reached a quarterly record of $547 million, driven by loan growth of $2.3 billion in the second quarter [6][10] - Total assets grew by $3.1 billion to $69 billion, including the impact of a $425 million preferred stock offering [11][16] Business Line Data and Key Metrics Changes - Residential mortgage activity increased slightly but remains muted in the current rate environment [8] - The property and casualty premium finance group saw over $1 billion in growth, while commercial real estate grew by $377 million [20][21] - The mortgage warehouse team grew by $213 million, indicating strong onboarding of new relationships [21] Market Data and Key Metrics Changes - The company experienced a 17% increase in deposits over the prior quarter, totaling $2.2 billion [10] - Loan growth for the first half of the year was $3 billion, representing a 12% annualized increase [11] - Non-performing loans as a percentage of total loans remained stable, with charge-offs for the quarter unchanged at 11 basis points [24] Company Strategy and Development Direction - The company aims for continued mid to high single-digit loan growth for the second half of the year, supported by strong pipelines [6][35] - Management emphasized a disciplined approach to growth, avoiding opportunities with unfavorable pricing or credit structures [7] - The company is cautiously optimistic about the overall business environment, with a focus on maintaining strong credit quality [24] Management's Comments on Operating Environment and Future Outlook - Management noted that credit quality remains very good, with a stable environment for non-performing loans and charge-offs [24] - There is a belief that the impacts of economic uncertainties will be limited due to strong underwriting standards [23] - The company is optimistic about the business environment as it enters the second half of the year, with strong pipelines in core markets [22][24] Other Important Information - The company continues to build tangible book value per share and has grown it every year since going public [16] - The recent preferred stock issuance will impact earnings per share calculations in the third quarter but will not affect operating net income [17][18] Q&A Session Summary Question: Loan growth expectations for Q3 - Management expects loan growth to be in line with historical trends, targeting mid to high single digits [35] Question: Sources of deposit growth - Deposit growth is broad-based, with significant contributions from commercial and consumer households [38] Question: Wealth management outsourcing progress - The conversion to the LPL platform is largely complete, and the company sees growth potential in the wealth management business [40] Question: NII growth sustainability - Management believes mid to high single-digit NII growth is reasonable given stable margins and asset growth [45] Question: Deregulation impact on M&A - The company is hopeful for regulatory adjustments that could facilitate growth and is open to acquisition opportunities [52] Question: Core C&I sentiment and growth - There is cautious optimism among core commercial clients, with sentiment improving compared to previous quarters [56] Question: Non-performing loans in CRE portfolio - The increase in non-performing loans is minor and attributed to a few specific credits, with overall management feeling confident [58] Question: Competitive pricing and loan yield compression - There has been some margin compression, but the company maintains a disciplined pricing strategy [66] Question: Capital targets and CET1 ratios - The company views a 10% CET1 ratio as a floor and expects gradual growth in capital with earnings [111]

Financial Data and Key Metrics Changes - The company reported record quarterly net income of $195.5 million, up from $189 million in the previous quarter, representing a growth of approximately 2.6% [5] - Net interest income also reached a record high of $547 million, driven by loan growth of $2.3 billion in the second quarter, which reflects a 19% annualized increase [5][10] - Total assets grew by $3.1 billion to $69 billion, including the impact of a $425 million preferred stock offering [11] Business Line Data and Key Metrics Changes - Residential mortgage activity increased slightly but remains muted in the current rate environment, with the company managing expenses to protect financial results [7] - The property and casualty premium finance group saw growth of over $1 billion, while commercial real estate grew by $377 million and mortgage warehouse grew by $213 million [19][20] - Non-interest income totaled $124.1 million, up approximately $7.5 million from the prior quarter, with increases in mortgage banking and wealth management revenue [13] Market Data and Key Metrics Changes - The company experienced a 17% increase in deposit growth, amounting to $2.2 billion on an annualized basis, which helped fund the strong loan growth [9] - The net interest margin for the quarter remained stable at 3.54%, indicating effective management of interest income and expenses [6][12] Company Strategy and Development Direction - The company aims for continued mid to high single-digit loan growth for the second half of the year, supported by strong pipelines and disciplined growth strategies [5][21] - Management emphasized a client-first approach, focusing on delivering sophisticated financial solutions while maintaining expense discipline [26] - The company is cautiously optimistic about the overall business environment, with a focus on maintaining strong credit quality and managing risks effectively [22] Management's Comments on Operating Environment and Future Outlook - Management noted that credit quality remains strong, with non-performing loans stable and charge-offs unchanged from the previous quarter [22][23] - There is a belief that the impacts of economic uncertainties will be limited due to strong underwriting standards and a diversified portfolio [21] - The company is optimistic about the potential for M&A activity, driven by market dynamics and opportunities arising from regulatory changes [51][92] Other Important Information - The company continues to build tangible book value per share and has grown it every year since going public [15] - The recent preferred stock issuance will impact earnings per share calculations in the third quarter, but not operating net income [16][17] Q&A Session Summary Question: Loan growth expectations for Q3 - Management expects loan growth to remain in the mid to high single digits based on the June 30 balance [33][34] Question: Sources of deposit growth - Deposit growth is broad-based, with significant contributions from commercial and consumer households [36] Question: Wealth management outsourcing progress - The conversion to the LPL platform is largely complete, and the focus is now on serving clients and growing the wealth business [37] Question: NII growth sustainability amid deposit competition - Management anticipates mid to high single-digit NII growth, supported by stable margins and asset growth [43][46] Question: Impact of deregulation on the company - Management is hopeful for regulatory adjustments that could facilitate growth and acquisition opportunities [51] Question: Borrower sentiment and loan growth - Borrower sentiment is cautiously optimistic, with improved confidence in the economic environment [111] Question: Non-performing loans in the CRE portfolio - The increase in non-performing loans is attributed to a few specific credits, but overall management remains confident in the portfolio's health [96]

Financial Data and Key Metrics Changes - The company reported net income of $61.4 million and diluted earnings per share of $1.12, representing an 18% increase from the second quarter of 2024 [13] - Pre-provision net revenue was $87.9 million, with a return on average assets of 1.4% and a return on common equity of 14.56% [13] - Net interest income for the quarter was $131.7 million, with adjusted net interest income at $129.4 million, which is $5.9 million higher than the first quarter of 2025 [17][19] - The adjusted margin increased to 3.05%, up 13 basis points from the previous quarter and 26 basis points from the same quarter last year [16] Business Line Data and Key Metrics Changes - Loan growth was solid at 11% annualized, with a year-to-date growth of 25% [10][13] - The company experienced elevated payoffs in commercial real estate but was able to replace these with new projects [5][6] - Non-interest income was significantly impacted by a bond book restructure, with an adjusted net interest revenue of just under $9 million for the quarter [20] Market Data and Key Metrics Changes - The company noted a normalization of higher-cost municipal and correspondent deposits during the quarter [7] - The loan-to-deposit ratio is in the mid-80% range, indicating a strong liquidity position [60][61] Company Strategy and Development Direction - The company is focusing on organic loan and deposit growth while maintaining price discipline for both loans and deposits [23] - A new merchant card processing team was hired to increase revenue from merchant services, aiming to improve penetration rates among existing customers [9][34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan demand, indicating a robust pipeline for the second half of the year despite some headwinds from payoffs [10][41] - The company expects its margin to continue increasing throughout the year, particularly if the Federal Reserve lowers benchmark rates [19] Other Important Information - The company underwent a significant restructuring of its bond portfolio, resulting in an $8.6 million loss but positioning for stronger margin performance in future quarters [14] - The tangible book value grew by an annualized 12.5% compared to the last quarter, ending at $31.27 per share [16] Q&A Session Summary Question: What is the expected trajectory for net interest margin? - The adjusted margin for the quarter was 3.06%, and it is expected to increase by about 10 to 14 basis points each quarter, potentially reaching 3.20% to 3.25% by year-end [25][26] Question: How does the company plan to drive deposit growth? - The company is managing its funding needs to align with loan growth and is prepared to onboard deposits as necessary [27][28] Question: Can you provide insights on the new lenders and markets? - The new hires include a mix of former employees and interns, with a focus on supporting existing production staff rather than expanding into new markets [30][31] Question: What trends are observed in commercial credit demand? - Management noted broad-based demand across various markets, with construction loans increasing due to a mix of new production and projects with significant equity [40][41] Question: What are the expectations for deposit cost trends? - Deposit costs are expected to normalize around the first quarter levels, with an adjusted cost of deposits around 3.50% to 3.57% [50][51] Question: What is the outlook for the loan-to-deposit ratio? - The company is comfortable with the current mid-80% loan-to-deposit ratio and prefers to be in a position where it needs to generate deposits rather than loans [61][62]