Financial Data and Key Metrics Changes - Adjusted diluted earnings per share increased by 18% quarter-over-quarter and 29% year-over-year, with an adjusted return on assets (ROA) improving to 1.29% from 0.99% in the previous year [3] - Net interest income rose by $1 million or 1.7% from the prior quarter, driven by a higher interest margin [7] - The net interest margin increased to 3.7% from 3.64% in the prior quarter and from 3.36% in the fourth quarter of the previous year [8][9] Business Line Data and Key Metrics Changes - Total loan balances increased by $14 million in Q4, with the loan portfolio growing by 5.54% [5] - Total deposits increased by $63 million in Q4, primarily due to a $100 million increase in interest-bearing demand deposits [5] - Investment balances decreased by $31 million, with the yield on the investment portfolio dropping to 3.26% from 3.35% in the previous quarter [6] Market Data and Key Metrics Changes - The commercial lending group closed $254 million in new loan commitments, down from $317 million in the previous quarter [15] - The commercial loan pipeline ended the fourth quarter at $468 million, down from $511 million in the previous quarter [15] - Average interest rates for new commercial loans were 6.56%, down 11 basis points from the previous quarter [17] Company Strategy and Development Direction - The company plans to close the merger with Olympic Bancorp at the end of January, which is expected to enhance profitability and position the company for growth in the Puget Sound market [4] - The focus remains on integrating Olympic and ensuring successful operations while exploring future M&A opportunities [73] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating future challenges and capitalizing on growth opportunities, with expectations for loan growth to return to historical levels in 2026 [16][18] - The company anticipates continued improvement in net interest margins and deposit costs due to recent rate cuts [22] Other Important Information - The company reported a reversal of provision for credit losses of $18,000 in Q4, attributed to a change in the loan portfolio mix [8] - Non-accrual loans totaled $21 million at year-end, representing 0.44% of total loans, an increase from 0.37% at the end of the previous quarter [10] Q&A Session Summary Question: Outlook for adjustable rate opportunity and margin - Management indicated that despite recent rate cuts, loan yields slightly grew, and they expect further improvement in margins without the merger [21][22] Question: Loan growth expectations and industry focus - Management expects loan growth to return to low single digits in Q1 and upper single digits as the year progresses, with visibility improving in the loan pipeline [25][31] Question: Operating expense growth and merger-related expenses - Management anticipates approximately $20 million-$21 million in merger-related expenses, with a projected run rate for Q2 and Q3 around $56 million [33][34] Question: Capital priorities post-merger - The primary focus is on closing the merger, which will utilize about 100 basis points of capital, with potential for buybacks considered after the deal closes [51][52] Question: Competition in loan yields and deposit costs - Management noted that competition remains strong but consistent, with expectations for deposit costs to continue decreasing [44][48]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported net earnings of $50.6 million or $0.36 per share, marking the 193rd consecutive quarter of profitability [5][6] - The return on average tangible common equity was 14.08% and return on average assets was 1.34% for Q2 2025 [5] - Net interest income for Q2 2025 was $111.6 million, slightly up from $110.4 million in Q1 2025 and $110.8 million in Q2 2024 [15][16] - Non-interest income was $14.7 million in Q2 2025, down from $16.2 million in Q1 2025 [24] Business Line Data and Key Metrics Changes - Total loans as of June 30, 2025, were $8.36 billion, a decline of $5 million from Q1 2025 and a decrease of $178 million or 2.1% from December 31, 2024 [11][12] - Commercial real estate and single-family loans increased by $27 million and $19 million respectively from Q1 2025 [12] - Non-interest expense was $57 million in Q2 2025, down from $59.1 million in Q1 2025 [25][26] Market Data and Key Metrics Changes - Total deposits and customer repurchase agreements totaled $12.4 billion as of June 30, 2025, an increase of $123 million from March 31, 2025 [8][9] - Non-interest bearing deposits grew by $63 million compared to Q1 2025 and were $157 million or 2.2% higher than the end of Q2 2024 [10] Company Strategy and Development Direction - The company continues to focus on banking small to medium-sized businesses and their owners through all economic cycles [92] - The management indicated a potential shift in acquisition strategy to consider opportunities outside California, reflecting a strategic decision to expand geographic reach [80][81] Management's Comments on Operating Environment and Future Outlook - The economic forecast indicates lower GDP growth, higher unemployment, and declining commercial real estate prices, with real GDP expected to remain below 1% until 2026 [18][19] - Management expressed confidence in the loan pipelines and anticipated that originations could outpace payoffs in the latter half of the year [63] Other Important Information - The company authorized a new $10 million share repurchase plan in November, with 1.28 million shares repurchased at an average price of $17.3 [22] - The efficiency ratio improved to 45.6% in Q2 2025 compared to 46.9% in Q1 2025 [8][27] Q&A Session Summary Question: Can you quantify the prepay income this quarter versus last? - Management noted that prepayment penalties were down, impacting overall loan yields, and indicated that without these factors, yields would have been up about five basis points [31][32] Question: What is the outlook for the competitive environment? - Management described the competition as intense, particularly from regional banks, and indicated that they would remain disciplined in underwriting while focusing on the right relationships [52][64] Question: How is the specialty banking group contributing to deposit trends? - The specialty banking group had a good year, contributing positively to deposit trends, although they are cautious about high earnings credit rates [66][69] Question: Are there any plans for M&A activity? - Management confirmed ongoing conversations regarding M&A, with expectations for reasonable pricing and potential announcements by the end of the year [70][71]

Financial Data and Key Metrics Changes - The company reported a loan volume of $414 million for the quarter, with $74.6 million in purchased loans and $218 million in originated loans, marking the second-best quarter for commercial real estate loan originations [5][6] - Net income was $18.7 million, which is $4.8 million higher than the same quarter last year but $3.7 million lower than the linked quarter [5][6] - Return on equity (ROE) was 16.47% and return on assets (ROA) was 1.86%, with tangible book value growing to $54.84 [6][10] - Net interest income decreased by $2.5 million from the linked quarter, primarily due to less accelerated income from loan payoffs and a shorter quarter [6][9] Business Line Data and Key Metrics Changes - The SBA volume increased to $121.3 million from approximately $100 million in the linked quarter, with a significant rise in the number of loans originated [5][16] - The company originated 1,069 SBA loans in the quarter, up from 330 loans a year ago, indicating substantial growth in the SBA business [13][14] - Non-interest income was $6.6 million, $700,000 higher than the linked quarter, mainly due to SBA gains [9] Market Data and Key Metrics Changes - The company noted a cautious optimism in the real estate markets, with some investors on the sidelines while others view real estate as a good inflation hedge [20] - The SBA has revised regulations, which may impact the speed of loan closures but is viewed positively from a credit perspective [16][20] Company Strategy and Development Direction - The company aims to build its SBA business as an annuity and is optimistic about future growth despite regulatory changes that may slow down the immediate ramp-up [12][53] - The company is focused on maintaining a strong pipeline and is prepared to take advantage of market opportunities, especially in uncertain economic conditions [20][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of the core business despite a decrease in income compared to the linked quarter, attributing it to non-recurring items [12] - The company is patient in its investment approach and is confident in its ability to source good loans while assessing risks effectively [20] Other Important Information - The tax rate increased to 36.7% from 33% in the prior quarter due to recurring charges and adjustments related to state tax liabilities [10][11] - The company has a balance sheet capacity for loan pool purchases of $870 million, which could increase as more income is earned [48][51] Q&A Session Summary Question: What is the outlook for loan yields, particularly on the SBA side? - Management noted that all SBA loans are currently priced at prime plus 2.75% and will consider risk-based pricing for smaller loans [25][26] Question: Was this quarter a catch-up on comp accruals, and what should be expected going forward? - The comp was partly a catch-up, with expectations for similar levels in the upcoming quarters [30][31] Question: How is the pipeline looking for loan growth? - The pipeline remains strong, but there are uncertainties in the economy that could impact origination volume [32][33] Question: What is the reason for the increase in the discount paid on purchases this quarter? - The discount is influenced by interest rate dynamics and should not be interpreted as a shift in market conditions [34][35] Question: What is the long-term outlook for the SBA business? - Management is very positive about the SBA program's growth potential, despite a potential short-term decline due to regulatory changes [52][54]