Financial Data and Key Metrics Changes - Net income for Q2 2025 was $15.1 million or $0.50 per diluted share, down from $17.7 million and $0.58 in Q1 2025, primarily due to increased credit loss expense [6][7] - Return on average assets was 0.79% and return on average equity was 7.8% [7] - Pre-provision net revenues grew 3.7% or $1 million, indicating strength in core business [7] - Net interest margin increased by five basis points to 3.07%, driven by lower funding costs [7][22] Business Line Data and Key Metrics Changes - Total loans increased by $6.31 billion, or 0.4% on a linked quarter basis, with higher contributions from commercial and industrial (C&I) and residential mortgage loans [8] - C&I production increased by $11 million or 26% to $503 million, while residential mortgage loan production rose by 52% to $84 million [18] - SBA loan production decreased to $47 million but still exceeded the high end of the target range, with year-to-date production up 20% [16][18] Market Data and Key Metrics Changes - Non-interest bearing demand deposits increased by over 7% from 2024, representing 31.3% of total deposits [9] - USKC loan and deposit portfolios remained steady, with USKC loans at $842 million, approximately 13% of total loans [19] Company Strategy and Development Direction - The company aims to drive loan growth in the low to mid single-digit range, focusing on expanding SBA activities and C&I portfolios while reducing exposure to commercial real estate (CRE) [11][28] - The strategy includes strengthening relationships in select deposit-rich markets and driving growth in key regions [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth potential despite current economic conditions, emphasizing proactive portfolio management and strong asset quality [10][11][28] - The company is well-positioned for growth, leveraging strong liquidity and maintaining robust credit metrics [11] Other Important Information - Asset quality improved significantly, with criticized loans decreasing by 72% and non-accruals down 27% [21] - The allowance for credit losses stood at 1.06% of loans at the end of Q2 2025 [26] Q&A Session Summary Question: Loan growth expectations for the second half of the year - Management indicated a strong pipeline for new loans, suggesting potential to reach mid-single-digit growth [31][32] Question: Insights on deposit costs and time deposit repricing - Average interest-bearing deposit costs were 3.64%, with expectations for net interest margin to continue increasing, albeit at a slowing rate [35][37] Question: Credit quality and criticized asset levels - Management noted significant reductions in criticized assets due to proactive management, with confidence in the overall credit quality [39][41] Question: Future C&I production and loan growth - C&I production is expected to drive loan growth in the latter half of the year, supported by a strong pipeline [47][49] Question: Plans for share buybacks and expenses - Management indicated that buyback decisions are made quarterly, with expectations for expenses to remain stable [50][51]