Core Insights - Norwood Financial Corp reported strong financial performance for the second quarter and year-to-date ending June 30, 2025, with significant growth in loans and deposits, alongside improved yields across all business lines [2][3][4]. Financial Performance - Net interest income for Q2 2025 was $19.065 million, a 27.7% increase from $14.925 million in Q2 2024 [4][10]. - The net interest margin increased to 3.43% in Q2 2025 from 2.80% in Q2 2024, reflecting a 63 basis points improvement [3][4]. - Net income for Q2 2025 was $6.205 million, up from $4.213 million in the same period last year, marking a 47.3% increase [4][10]. - Fully diluted earnings per share rose to $0.67, a 28.8% increase compared to $0.52 in Q2 2024 [3][10]. Growth Metrics - Loans grew at an annualized rate of 4.4% in Q2 2025 and 8.2% year-to-date [3][4]. - Total deposits increased by 10.3% year-over-year, reaching $1.997 billion as of June 30, 2025, compared to $1.811 billion in 2024 [8][10]. - The efficiency ratio improved to 58.7% in Q2 2025 from 66.7% in Q2 2024, indicating better cost management [4]. Capital and Asset Management - Total assets increased to $2.365 billion as of June 30, 2025, up 5.82% from $2.235 billion in 2024 [8][9]. - Tangible common equity ratio improved to 8.39% from 6.92% year-over-year [8]. - The company reported a return on average assets of 1.06%, up 31 basis points from the previous year [3][4]. Strategic Initiatives - The launch of the "Every Day Better" campaign received positive feedback, enhancing the company's brand and culture [2]. - The company continues to focus on delivering products and services that align with customer goals, contributing to its strong performance [2].

Financial Data and Key Metrics Changes - Net income for the second quarter of 2025, excluding notable items, totaled $24,500,000, up 7% from $22,900,000 in the preceding first quarter [5] - Reported a net loss of $27,900,000 for the second quarter 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 $41,200,000, up 17% from $35,200,000 in the first quarter [6] - Net interest income totaled $118,000,000 for the second quarter, an increase of 17% from the prior quarter [11] - Net interest margin increased by 15 basis points quarter over quarter to 2.69 for the second quarter [14] Business Line Data and Key Metrics Changes - Total deposits grew to $15,900,000,000, an increase of 10% from the end of the prior quarter [7] - Loans receivable of $14,400,000,000 were up 8% from the end of the prior quarter, reflecting the addition of Territorial's loan portfolio [8] - Organic loan production increased 57% from the first quarter level [8] - Noninterest income of $15,900,000, excluding notable losses, was up 44% year over year [15] Market Data and Key Metrics Changes - Broker deposits decreased by $183,000,000 or 19% quarter over quarter, with the broker deposits ratio declining to 5% of total deposits [8] - Criticized loans declined by $34,000,000 or 8% quarter over quarter [19] - Non-performing assets totaled $113,000,000, representing 61 basis points of total assets, up from 49 basis points as of March 31 [19] Company Strategy and Development Direction - The acquisition of Territorial Bancorp is seen as a strategic move to enter the important Hawaii market [4] - Strengthening the deposit franchise remains a key priority, with a focus on reducing broker deposits and improving the cost of funds [7] - The company expects loan growth at a high single-digit percentage rate for 2025, driven by improved frontline productivity and hiring [22] Management Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about asset quality, despite some uncertainties in the macroeconomic environment [51] - The company anticipates net interest income growth in the high single-digit percentage range for 2025, despite the negative impact of fewer Fed funds rate cuts [22] - The effective tax rate is expected to be approximately 14% in the third and fourth quarters due to changes in California state tax apportionment law [24] Other Important Information - The Board of Directors declared a quarterly common stock dividend of $0.14 per share [6] - The company plans to continue recognizing pretax acquisition accounting adjustments associated with the Territorial transaction on a quarterly basis [12] Q&A Session Summary Question: Fee income guidance for the second half of the year - Management highlighted positive drivers such as customer swap fee income growth and improved loan-related fee income [30] Question: Spot rate on deposits and assumptions for the outlook - The spot rate at June was 2.93%, with expectations for higher betas on deposit products during upcoming rate cuts [31][32] Question: Cost savings from the Territorial acquisition - Management indicated that there are still more integration and cost savings expected in the second half of the year, but specifics will be shared later [35] Question: Loan growth expectations and hiring impact - Management confirmed ongoing hiring of experienced bankers to drive loan production, with expectations for increased loan growth in the latter half of the year [47] Question: Asset quality and credit outlook - Management expressed cautious optimism regarding asset quality, noting a decline in criticized assets and manageable levels of problem loans [51] Question: One-time costs related to the acquisition - Management indicated there will be a couple million more in one-time costs in the third and fourth quarters [65] Question: Average yield on new loan production - The average yield on new production was approximately 6.76% [68]

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of 59 cents for Q2 2025, with an annualized loan growth of 11% [6][8] - Net interest income increased by over $2 million, while the net interest margin expanded by three basis points to 4.15% [14][19] - The overall allowance for credit losses grew by $9.4 million to 1.13% of total loans, with a provision for credit losses totaling $16.6 million, an increase of $6.5 million from the previous quarter [8][9][12] Business Line Data and Key Metrics Changes - Loan growth was balanced across categories, including commercial and industrial loans ($64 million), residential real estate loans ($30 million), and small ticket leasing loans ($14 million) [13] - Fee-based income was relatively stable, with a slight decline of 1% compared to the linked quarter, primarily due to performance-based insurance commissions recognized in Q1 [16][17] - Non-interest expenses declined by 1% to $70.4 million, driven by lower salaries and employee benefits costs [18] Market Data and Key Metrics Changes - The company experienced increased loan demand, reflected in the pipelines and loan growth during the quarter [12] - The investment portfolio grew by approximately $140 million, driven by investments in higher-yielding bonds [20] - Deposit balances declined by 1% or $98 million, with reductions in money market accounts and interest-bearing checking accounts [20][21] Company Strategy and Development Direction - The company aims to achieve positive operating leverage for 2025 compared to 2024, with expectations of loan growth between 4% to 6% [25][26] - The focus remains on managing the balance sheet and interest rate risk profile while generating loan growth with high underwriting standards [27][28] - The company is actively evaluating M&A opportunities, particularly in overlapping markets and adjacent states [110] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the health of the core commercial portfolio, with expectations for charge-offs to plateau in the small ticket leasing segment [36][43] - The company has not observed significant impacts from tariffs on loan growth or credit metrics, but continues to monitor the portfolio closely [12][68] - Future guidance includes expectations for fee-based income growth in the mid-single-digit percentages compared to 2024 [26] Other Important Information - The tangible equity to tangible assets ratio remained stable at 8.3% [22] - The efficiency ratio improved to 59.3% compared to 60.7% for the linked quarter [19] - The company was recognized as one of America's Greatest Workplaces 2025 by Newsweek, highlighting its commitment to employees [28] Q&A Session Summary Question: Insights on charge-offs and credit outlook - Management indicated that charge-offs in the small ticket leasing segment are expected to plateau, correlating with the decline of high balance accounts [35][36] Question: Reserves perspective and CECL impact - Specific reserves added were primarily related to small ticket leasing, with management believing they are appropriately reserved at this point [39][43] Question: Loan growth guidance and drivers - Management maintained a loan growth guidance of mid-single digits for 2025, citing strong production and pipelines [50][51] Question: Deposit growth outlook - Seasonal growth in governmental deposits is expected in Q3, with overall deposit pricing remaining stable [52][54] Question: M&A opportunities and capital management - The company remains opportunistic regarding stock repurchases and is actively exploring M&A opportunities in existing and adjacent markets [108][110]

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 net income of $22.6 million or $1.39 per diluted share for Q2 2025, compared to $18.8 million or $1.17 per diluted share for Q2 2024, reflecting a strong year-over-year growth [13] - Net income for the first half of 2025 totaled $42.2 million or $2.6 per diluted share, compared to $40.3 million or $2.5 per diluted share for the same period in 2024 [13] - Interest income on loans increased by $3.1 million during Q2 2025 compared to the prior year, driven by strong loan growth [15] - Average loans grew to $4.7 billion in Q2 2025, a nearly 7% increase from $4.4 billion in Q2 2024 [14] - The net interest margin declined by 14 basis points in 2025 compared to Q2 2024, impacted by a 100 basis point decline in the federal funds rate [17] Business Line Data and Key Metrics Changes - Mortgage banking income increased by 23.4% in 2025 compared to 2024, with a significant reduction of $50 million in residential mortgages on the balance sheet [6][8] - Service charges on accounts grew by 18.1%, reflecting growth in the deposit base and increased activity levels [8] - Payroll services revenue increased by 15.2%, indicating a successful high-service model [8] - Credit and debit card income grew by 3.7%, while interest rate swap income recovered significantly in Q2 2025 compared to Q1 2025 [9] Market Data and Key Metrics Changes - The company experienced a 13% increase in local deposits as of June 30, 2025, compared to the same date in 2024, which helped reduce the loan-to-deposit ratio from 107% to just under 100% [9] - The strategic partnership with Eastern Michigan Bank is expected to enhance deposit gathering activities and provide entry into new markets [10] Company Strategy and Development Direction - The company announced a strategic partnership with Eastern Michigan Bank, which is expected to provide cost savings and enhance balance sheet liquidity [10][11] - The transition to a new core provider, Jack Henry, is scheduled for early 2027, with expected cost savings and improved service delivery [11] - The company aims to grow its loan portfolio, particularly in mortgage banking and larger commercial loans, leveraging the strengths of Eastern Michigan Bank [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty, with expectations of loan growth of 1% to 2% in Q3 and 3% to 5% in Q4 2025 [21] - The company is focused on maintaining a strong balance sheet and minimizing the impact of changing interest rates on net interest margin [18] - Management noted that customers continue to report strong results despite the challenging operating environment [8] Other Important Information - The company recorded a provision expense of $1.6 million in Q2 2025, reflecting increased allocations on specific financially stressed lending relationships [18] - The effective tax rate for Q2 2025 was about 13%, significantly lower than the projected rate of 19%, due to the acquisition of transferable energy tax credits [19] - The total risk-based capital ratio was 13.9% as of June 30, 2025, indicating a well-capitalized position [20] Q&A Session Summary Question: Can you provide details on cost savings related to the core system change? - Management expects cost savings of approximately $5.5 million, with about 50% realized in 2026 and over 90% in 2027, following the core conversion [28][30] Question: What are the growth opportunities in the Eastern Michigan loan portfolio? - The loan book is of high quality, and management sees opportunities to grow in mortgage banking and larger commercial loans [34] Question: How does the company plan to manage deposit and loan growth? - The company aims for loan growth of 5% to 8% annually and will continue to focus on local deposit growth to support this [42][44] Question: What is the outlook for fee income in the second half of the year? - Management anticipates a step down in fee income from strong Q2 results, particularly in mortgage banking and interest rate swaps [54] Question: What is the expected timing for the closing of the Eastern Michigan Bank acquisition? - The acquisition is expected to close in the back half of Q4 2025, likely around November 30 or year-end, pending regulatory approval [55] Question: Are there additional M&A opportunities on the horizon? - Management remains open to pursuing additional M&A opportunities if they find a partner with similar strengths as Eastern Michigan Bank [64]

Financial Data and Key Metrics Changes - The company reported net income of $22.6 million or $1.39 per diluted share for Q2 2025, compared to $18.8 million or $1.17 per diluted share for Q2 2024, reflecting a strong year-over-year growth [12] - Total net income for the first half of 2025 was $42.2 million or $2.6 per diluted share, up from $40.3 million or $2.5 per diluted share in the same period of 2024 [12] - Interest income on loans increased significantly, with average loans totaling $4.7 billion in 2025, a growth rate of almost 7% compared to the previous year [13] Business Line Data and Key Metrics Changes - Mortgage banking income increased by 23.4% in 2025 compared to 2024, with a notable decrease of $50 million in residential mortgages on the balance sheet [6][7] - Service charges on accounts grew by 18.1%, reflecting growth in the deposit base and increased activity levels [7] - Payroll services revenue grew by 15.2%, indicating a strong service model [7] Market Data and Key Metrics Changes - The deposit base increased by 13% as of June 30, 2025, compared to the same date in 2024, which helped reduce the loan-to-deposit ratio from 107% to just under 100% [8] - The company expects loan growth of 1% to 2% in Q3 and 3% to 5% in Q4 of 2025, influenced by larger balance commercial real estate payoffs [21] Company Strategy and Development Direction - The strategic partnership with Eastern Michigan Bank aims to enhance organic growth and improve the loan-to-deposit ratio, while also providing entry into new markets [9] - The company plans to transition to a new core provider, Jack Henry, in early 2027, which is expected to yield significant cost savings and operational efficiencies [10][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainties, highlighting strong customer performance despite challenges [6] - The company anticipates continued growth in net interest income and a stable net interest margin, projecting a range of 3.5% to 3.6% for Q3 and 3.55% to 3.65% for Q4 [21] Other Important Information - Non-performing assets totaled $9.7 million as of June 30, 2025, representing 16 basis points of total assets, indicating strong asset quality [6] - The company recorded a provision expense of $1.6 million in Q2 2025, reflecting increased allocations on specific financially stressed lending relationships [18] Q&A Session Summary Question: Can you provide details on cost savings related to the core system change? - Management expects cost savings of approximately $5.5 million, with about 50% realized in 2026 and over 90% in 2027, aligning with the core conversion timeline [27][28] Question: What are the growth opportunities in the Eastern Michigan loan portfolio? - The loan book is of high quality, and the company plans to focus on growing the mortgage banking business and larger commercial loans in that region [34][35] Question: How does the company plan to manage deposit and loan growth? - The company aims to maintain a loan growth rate of 5% to 8% annually, with a focus on local deposit growth to support this [42][45] Question: What is the outlook for fee income in the second half of the year? - Management anticipates a step down in fee income from strong Q2 results, particularly in mortgage banking and interest rate swap income [55] Question: What is the expected timeline for the acquisition closing? - The acquisition is expected to close in the back half of Q4, around November 30 or year-end, pending regulatory approval [56]

Core Insights - Mercantile Bank Corporation reported a net income of $22.6 million, or $1.39 per diluted share, for Q2 2025, an increase from $18.8 million, or $1.17 per diluted share, in Q2 2024 [1][2] - The bank's total assets reached $6.18 billion as of June 30, 2025, reflecting a growth of $129 million from December 31, 2024 [12] - The partnership with Eastern Michigan Financial Corporation is expected to enhance Mercantile's position as the largest bank headquartered in Michigan and support strategic goals [25] Financial Performance - Net revenue for Q2 2025 was $60.9 million, up 7.4% from $56.7 million in Q2 2024 [3] - Net interest income increased to $49.5 million, a rise of 5.1% from $47.1 million in the same quarter last year [3][4] - Noninterest income grew to $11.5 million, an increase of 18.4% from $9.7 million in Q2 2024, driven by higher mortgage banking income and other service fees [7][8] Asset Quality - Nonperforming assets totaled $9.7 million, or 0.2% of total assets, as of June 30, 2025, compared to $5.7 million, or less than 0.1%, at the end of 2024 [18][19] - The bank recorded provisions for credit losses of $1.6 million in Q2 2025, down from $3.5 million in Q2 2024, indicating improved asset quality [6][19] Capital Position - Shareholders' equity increased to $632 million as of June 30, 2025, up $47 million from December 31, 2024 [20] - The bank maintained a total risk-based capital ratio of 13.9%, categorizing it as "well-capitalized" [20][21] Loan and Deposit Trends - Total loans increased by $97.2 million, or an annualized 4.3%, during the first half of 2025, primarily due to growth in commercial loans [12] - Total deposits were $4.71 billion as of June 30, 2025, with local deposits down slightly but offset by an increase in brokered deposits [16] Strategic Initiatives - The bank aims to lower its loan-to-deposit ratio through local deposit generation and has seen success in expanding existing deposit relationships [2][17] - The partnership with Eastern Michigan Financial Corporation is expected to provide substantial excess liquidity and enhance Mercantile's operational footprint [25]

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]

Financial Data and Key Metrics Changes - The company reported net income of $61.4 million for Q2 2025, representing an 18% increase from Q2 2024, but a slight decrease of 3% from Q1 2025 [12][16] - Diluted earnings per share were $1.12, with a return on average assets of 1.4% and a return on common equity of 14.56% [12] - The adjusted net interest margin improved to 3.05%, up 13 basis points from the previous quarter and 26 basis points from the same quarter last year [15] - The tangible book value grew by an annualized 12.5% from the last quarter, ending at $31.27 per share [15] Business Line Data and Key Metrics Changes - Loan growth was solid at 11% annualized, with a year-to-date growth of 25% [4][9] - The company experienced elevated payoffs in commercial real estate (CRE) but was able to replace these with new projects [5] - Non-interest income was significantly impacted by a bond portfolio restructuring, with a reported loss of $8.6 million [13][18] Market Data and Key Metrics Changes - The company noted a normalization of higher-cost municipal and correspondent deposits during the quarter [6] - The loan demand was characterized as good but not great, with a robust loan pipeline expected to continue [4][9] Company Strategy and Development Direction - The company is focusing on organic loan and deposit growth, emphasizing competitive and profitable pricing [22] - A new merchant services team was hired to enhance production in the merchant banking area, aiming to increase penetration among existing customers [8][32] - The company is strategically restructuring its bond portfolio to improve margin performance in future quarters [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the loan pipeline, indicating broad-based demand across various markets [40] - The company expects net interest margin to continue increasing, potentially reaching 3.20% to 3.25% by year-end, absent any Fed actions [25] - Management noted that while there are isolated incidents of credit deterioration, no systemic issues were identified [10] Other Important Information - The company successfully unwound a third-party processing configuration, switching to a direct relationship with Jack Henry, which is expected to yield cost savings [21] - The effective tax rate saw a slight decrease, and the company is strategizing to further reduce tax expenses [22] Q&A Session Summary Question: What is the expected trajectory for net interest margin? - The adjusted margin is 3.06% for the quarter, with expectations to increase by 10 to 14 basis points each quarter, potentially reaching 3.20% to 3.25% by year-end [24][25] Question: How does the company plan to drive deposit growth? - The company is managing through necessary funding for loan growth and is prepared to onboard deposits as needed [26][27] Question: Can you provide details on the new lenders and markets? - The new lenders are primarily support staff, with a focus on existing markets like Memphis and Auburn, Alabama [30][31] Question: What trends are observed in commercial credit demand? - Demand is broad-based across various markets, with construction loans increasing due to the need for reserves [39][40] 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] Question: What is the outlook for loan-to-deposit ratios? - The adjusted loan-to-deposit ratio is in the mid-80% range, with a preference to generate deposits rather than loans [58]

Core Viewpoint - Preferred Bank reported a net income of $32.8 million or $2.52 per diluted share for Q2 2025, reflecting a $2.8 million increase from the previous quarter but a slight decrease of $745,000 compared to the same quarter last year [1][2]. Financial Performance - Net interest income for Q2 2025 was $66.9 million, an increase of $4.2 million from the prior quarter and $767,000 from the same quarter last year [4]. - The net interest margin improved to 3.85%, up from 3.75% in the previous quarter but down from 3.96% in the same quarter last year [2][4]. - Noninterest income was $3.8 million, compared to $3.4 million in the same quarter last year and $4.0 million in the previous quarter [5]. Loan and Deposit Growth - The loan portfolio increased by 1.8% linked quarter, while deposits saw only a slight increase [2]. - Total loans reached $5.74 billion, an increase of $99.0 million from December 31, 2024 [9]. - Total deposits were $6.08 billion, up by $161.5 million from $5.92 billion as of December 31, 2024 [9]. Asset Quality - Non-accrual loans decreased from $78.9 million as of March 31, 2025, to $51.2 million at June 30, 2025 [3]. - Total criticized loans decreased to $104.5 million from $129.2 million in the prior quarter [10]. Noninterest Expense - Total noninterest expense was $22.5 million for Q2 2025, down from $23.4 million in the previous quarter but up from $19.7 million in the same period last year [6]. - The decrease from the prior quarter was primarily due to a reduction in personnel expenses [6]. Tax and Capitalization - The provision for income taxes was $13.7 million, resulting in an effective tax rate of 29.5% [7]. - As of June 30, 2025, the Bank's tangible capital ratio was 10.26%, and the total capital ratio stood at 14.43% [12].