Financial Data and Key Metrics Changes - The company reported a 13% improvement in earnings per share (EPS) over the first quarter, driven by increased net interest income and disciplined expense management [3][19] - Net interest income for the quarter was $62 million, a $2 million increase from the first quarter, with a net interest margin (NIM) expansion of 4 basis points [19][20] - Adjusted return on average assets (ROAA) was 1.29%, contributing to the increase in EPS [6][24] - Total non-interest expenses were $49.6 million, an increase of $3 million, but down 9% on an annualized basis compared to the first half of 2024 [23][24] Business Line Data and Key Metrics Changes - Loan growth reached an annualized rate of 8%, with strong new loan production, despite a planned runoff of M2 equipment finance loans [3][26] - Capital markets revenue improved significantly, up more than 50% from the first quarter, totaling $10 million for the second quarter [4][21] - Wealth management revenue remained consistent at $5 million for the second quarter, reflecting an 8% growth compared to the same period in 2024 [22] Market Data and Key Metrics Changes - The company holds the number one market share in the Quad Cities and Cedar Rapids, Iowa markets, and is ranked sixth in Des Moines, Iowa, indicating strong competitive positioning [9][10] - Total deposits declined slightly by $19 million or 1% on an annualized basis during the second quarter, while average deposit balances rose by $72 million compared to the first quarter [27] Company Strategy and Development Direction - The company is focused on three primary lines of business: traditional banking, wealth management, and LITEQ lending, with significant opportunities identified in each [8][14] - A digital transformation initiative is underway to improve operational efficiency and enhance customer experience, expected to be completed by the first half of 2027 [11][12] - The company aims to strengthen its core deposit base as a top strategic initiative, which is expected to improve funding mix and profitability [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about solid loan growth for the remainder of the year, guiding for gross loan growth in the range of 8% to 10% in the second half [4][6] - The company anticipates capital markets revenue to normalize over the next four quarters, with a strong pipeline of transactions expected to close [5][6] - Management highlighted the importance of relationships in navigating economic uncertainties and emphasized the company's commitment to community engagement [7] Other Important Information - The company plans to call and replace $70 million of subordinated debt in September, which is expected to maintain current Tier 2 total risk-based capital levels [30][74] - The effective tax rate for the quarter was 5%, up from 1% in the prior quarter, primarily due to higher pretax income [31][32] Q&A Session All Questions and Answers Question: Can you talk about the margin and the outlook? - The company is guiding for a static to up four basis points in NIM for the third quarter, assuming no Fed rate cuts [34][35] Question: What is the appetite for buybacks going forward? - The company is building capital at a fast pace and will evaluate capital deployment options in the back half of the year [51][53] Question: What are the implications of the latest legislation for affordable housing? - Management does not anticipate immediate impacts but sees significant long-term implications for LITEQ allocations [56][58] Question: Can you provide insights on the credit side, particularly non-performing loans? - There is a high correlation between the decline in non-performing loans and net charge-offs, primarily from the M2 equipment finance segment [111][112]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported net income and adjusted net income of $26 million, with reported earnings per diluted share at $1.52 and $1.53 on an adjusted basis [5][19] - The adjusted net interest margin (NIM) on a tax-equivalent basis increased by one basis point compared to the previous quarter, while the core operating margin performance overcame four basis points of dilution from expired interest rate caps [5][21] - Non-interest income for the first quarter was $17 million, including $7 million generated from capital markets revenue [7][22] - The effective tax rate for the quarter was 1%, down from 9% in the prior quarter, primarily due to tax benefits from equity compensation and new state tax credit investments [33][34] Business Line Data and Key Metrics Changes - The wealth management business generated $5 million in revenue for Q1 2025, reflecting a 14% annualized increase from the prior quarter [8][23] - Total loans held for investment grew by $39 million or 2% annualized, with annualized loan growth at 4% when adjusting for the runoff of M2 equipment finance loans [26][27] - Non-interest expenses decreased by $7 million or 13% to $47 million, well below the guidance range of $52 million to $55 million [9][24] Market Data and Key Metrics Changes - Total core deposit growth was robust at 20% annualized, reflecting success in expanding market share with both new and existing clients [7][28] - The company experienced strong deposit betas, actively managing deposit costs as the Federal Reserve began reducing interest rates [21][96] Company Strategy and Development Direction - The company intends to continue utilizing securitizations to provide flexibility, enhance liquidity, and manage growth as it approaches $10 billion in assets [6][13] - The focus remains on the growth potential of the wealth management business, driven by strategic investments in Southwest Missouri and Central Iowa markets [8][24] - The company is committed to maintaining strong liquidity and building capital, with a focus on increasing regulatory capital ratios [14][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term resiliency of markets and the financial health of clients, despite macroeconomic uncertainties [11][16] - The company is closely monitoring key industries within its loan portfolio and adapting to changing economic conditions [10][31] - Management indicated that loan growth guidance for Q2 2025 is projected at an annualized rate of 4% to 6%, reflecting current economic uncertainties [6][38] Other Important Information - The company reported a decrease in total criticized loan balances by 28 basis points from the prior quarter, marking the lowest criticized ratio in five years [9][29] - The tangible common equity to tangible assets ratio increased by 15 basis points to 9.7% at quarter end, driven by strong earnings [32] Q&A Session Summary Question: Loan growth outlook and uncertainties - Management acknowledged that first quarter loan growth was modest due to elevated payoffs from clients selling properties or businesses, and revised guidance reflects economic uncertainties [38] Question: Provision for credit losses - Management indicated that a lower provision for credit losses is likely if loan growth remains muted [41] Question: Margin and fixed-rate loans repricing - Management confirmed continued success in rolling up rates on new fundings, with a weighted average rate of 7.21% for the quarter [42] Question: Non-interest income expectations - Management expects non-interest income to grow at 6% or better, with strong performance in wealth management contributing significantly [50] Question: Capital markets revenue outlook - Management expressed confidence in improved capital markets performance in the coming quarters, driven by a return to normalcy in project activity [54] Question: Securitization plans - Management indicated that timing for the next securitization will depend on the pace of growth in the LITECH business, with plans for a larger securitization in the $350 million range [78][102] Question: Credit quality and tariff exposure - Management conducted a credit analysis of commercial borrowers and identified minimal high-risk exposure related to tariffs, with most clients having shifted imports away from China [90][92]