Financial Data and Key Metrics Changes - The company reported net income of $14.5 million for Q2 2025, with earnings per share of $0.068, a return on average assets of 1.37%, and a return on average equity of 14.17% [4] - Net interest margin expanded by 8 basis points to 3.53%, while the cost of total deposits declined by 2 basis points to 2.46% [5] - The efficiency ratio was reported at 41.03% for the second quarter [5] - Total assets increased by $168.4 million, driven by loan portfolio growth, particularly in commercial real estate [6] Business Line Data and Key Metrics Changes - Loans held for investment grew by $136.2 million, or 15% on an annualized basis, while deposits increased by approximately $158.3 million, or 17% on an annualized basis [5] - Non-interest income rose to $1.8 million from $1.4 million in the previous quarter, primarily due to improved earnings from investments in venture-backed funds [9] Market Data and Key Metrics Changes - Non-interest bearing deposits made up 26% of total deposits as of June 30, 2025, an increase from 25% at the end of the prior quarter [8] - Approximately 59.9% of deposit relationships total more than $5 million, indicating a stable funding base for future growth [8] Company Strategy and Development Direction - The company announced the expansion of its food and agribusiness vertical and the opening of a new office in Walnut Creek in September 2025 [11] - The focus remains on building a strong presence in the San Francisco Bay Area, with plans for future expansion into the South Bay [25][26] - The company aims to balance its loan portfolio by reducing concentrations in commercial real estate through the new agribusiness vertical [61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to adapt to changing economic conditions while executing its long-term strategic plan [12] - The management team highlighted the importance of maintaining strong relationships with clients and community partners as a foundation for future growth [66] Other Important Information - The company recorded a provision for credit losses of $2.5 million during the quarter, with non-performing loans representing only 6 basis points of total loans held for investment [6][7] - The company is well-capitalized, with all capital ratios above regulatory thresholds [6] Q&A Session Summary Question: Impressive core deposit growth - Management attributed success to having 40 motivated business development officers driving growth across all verticals and geographies [18] Question: Bay Area business environment - Management noted a positive change in the Bay Area's business environment and expressed excitement about the Walnut Creek opening and future expansion [24][25] Question: Efficiency ratio and investments - Management indicated a commitment to continue investing in the business while acknowledging the potential for achieving a sub-40% efficiency ratio [29][30] Question: Run rate for expenses with Walnut Creek office - Management estimated an increase of $500,000 to $750,000 in expenses for the next quarter due to the new office [33] Question: Sustainability of non-interest bearing deposit growth - Management believes the growth in non-interest bearing deposits is sustainable due to the addition of new relationships [34] Question: Loan growth outlook - Management remains comfortable with a loan growth target of 10% to 12% for the full year, supported by a strong pipeline [59] Question: New food and agribusiness vertical - Management highlighted the potential for growth in the agribusiness sector, led by an experienced team targeting underserved markets [60][61]

Financial Data and Key Metrics Changes - The first quarter earnings increased by 35% compared to the first quarter of the previous year [6] - Net income for Q1 2025 was $7.8 million, up from $5.8 million in Q1 2024 and $7.1 million in Q4 2024 [21][22] - Net interest margin improved by 30 basis points compared to Q4 2024, with a cost of deposits decreasing by 38 basis points [22] Business Line Data and Key Metrics Changes - The loan portfolio remained relatively flat at just over $3 billion, with approximately $100 million in payoffs from asset sales and refinance activity [13][14] - The commercial real estate portfolio is performing well, although there are concerns regarding office property vacancies [10][11] Market Data and Key Metrics Changes - Deposit levels decreased slightly due to ordinary cash flow fluctuations, not due to loss of relationships [14] - Retail deposit growth was significant in Minnesota, with a focus on high-value retail deposits from business owners and executives [18] Company Strategy and Development Direction - The company emphasizes building comprehensive banking relationships rather than just lending, focusing on providing a range of services [41][42] - There is a commitment to maintaining strong credit quality and conservative underwriting practices despite economic uncertainties [12] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty affecting customer profitability and potential supply chain issues due to tariffs [11][36] - The company remains confident in its ability to create and maintain positive relationships with customers in a competitive market [15] Other Important Information - A dividend of 25% per share was declared, payable on May 21 to shareholders of record as of May 7 [7] - The company has completed all building construction projects, which are designed to enhance client engagement [19] Q&A Session Summary Question: Is there more challenge in bringing down deposit costs without rate cuts? - Management indicated that deposit costs have likely been optimized for the current environment and may remain static until market changes occur [25] Question: What rates were new loans added at compared to those rolling off? - New loans replacing older ones were added at higher rates, with a significant portion starting with a six or seven [26][27] Question: Will growth accelerate in the second quarter? - Management noted that while there are planned payoffs, the opportunities for new loans are expected to exceed the payoffs [29] Question: How are expenses expected to trend moving forward? - Management expects first quarter performance to be indicative of future quarters, with no significant items anticipated [31] Question: What concerns exist regarding tariffs or immigration policy? - Management highlighted concerns about tariffs affecting manufacturers, but noted that their seasoned customers typically have strong balance sheets to weather such issues [36] Question: What does the "lift out strategy" refer to? - The strategy refers to successfully recruiting key personnel from other financial institutions to enhance the company's capabilities [44] Question: How does the company retain core deposits despite low rates? - The company negotiates rates based on relationships rather than advertising retail specials, allowing for flexibility in deposit pricing [46]