Financial Data and Key Metrics Changes - The pretax, pre-provision net income increased by 15% compared to the prior quarter and 85% compared to the prior year to date [4] - The net interest income rose to $25.9 million, primarily due to a higher balance of average earning assets and a seven basis point increase in the net interest margin [10] - The total risk-based capital ratio stood at 16.25% and the tangible common equity (TCE) ratio was 9.95% [9] Business Line Data and Key Metrics Changes - Total loan originations were $68.8 million, with $50.2 million in fundings, consistent with the prior quarter [5] - The average yield on loans increased by seven basis points from the prior quarter, while the average yield on interest-earning assets increased by six basis points [10] - Noninterest income was negative due to a loss incurred on the securities portfolio repositioning, but most other areas remained consistent with the prior quarter [11] Market Data and Key Metrics Changes - Total deposits declined in the second quarter due to normal client activity, but year-to-date deposits have grown, with over 70% of outflows recouped in July [6][7] - The rate environment remains competitive, but limited attrition of deposits was noted due to service levels and community commitment [8] Company Strategy and Development Direction - The company is focused on maintaining disciplined underwriting and pricing criteria while expanding its banking teams to drive future growth [5] - The management plans to continue enhancing efficiency through technology and adding banking talent to support profitable growth [15] - The company expects to generate improved financial performance over the remainder of the year, targeting loan growth and further expansion of the net interest margin [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan demand remaining healthy despite broader economic uncertainty [14] - The loan pipeline is strong, and management anticipates loan growth in the second half of the year [15] - The company is cautious about the impact of potential securities repositioning on capital and shareholder dilution [21] Other Important Information - The company declared a cash dividend of $0.25 per share, marking the 81st consecutive quarterly dividend [12] - The securities repositioning is expected to add 13 basis points to the net interest margin and $0.20 to annual earnings per share, with benefits starting in the third quarter [5] Q&A Session Summary Question: Details on the two CRE loans that migrated this quarter - The loans are generally retail or mixed-use, located outside San Francisco, experiencing tenancy or cash flow issues, but management is optimistic about their resolution [19][20] Question: Appetite for restructuring the HTM securities portfolio - Management is cautiously considering this, balancing potential capital impacts and shareholder dilution [21] Question: Update on share buyback plans - The company has renewed its buyback allocation and is looking to execute below tangible book value, but timing constraints have limited recent actions [25] Question: Performance of the AFS book in the second quarter - The final yield on purchases was slightly above 5%, aligning with expectations [32] Question: Recent deposit rate cuts - Targeted cuts were made, with a recent reduction impacting approximately $185 million in deposits, contributing to a slight benefit in net interest margin [38] Question: Outlook for loan growth in the second half of the year - Management is targeting net growth, supported by a strong pipeline and new market leaders joining the bank [44][51]