Banking Industry Performance & Outlook - The banking industry anticipates a strong quarter, projecting earnings per share growth of 7%, with expectations rising to 14% for the following year [1] - Revenue growth is observed within the industry, a trend not seen recently [2] - Credit costs are expected to remain well-managed [2] - Net interest income growth for the sector is projected at 9% this year [5] Loan Growth & Market Confidence - Loan growth experienced softness at the end of the first quarter and the beginning of the second quarter, but is expected to finish the second quarter stronger [2][3] - Increased confidence and market stabilization contributed to improved performance during the quarter [4] - Reduced nervousness regarding the uncertainty of a new administration is contributing to a pickup in loan growth [6] Economic Factors - The yield curve has steepened, allowing banks to function more effectively [4] - The percentage expectation for a recession continues to decrease [7] - Positive job growth and a declining unemployment rate are observed [7] - GDP growth is present, albeit slow [8] - Inflation has not significantly increased, contributing to increased comfort levels [8]

Financial Data and Key Metrics Changes - The company reported total operating revenue growth of over 2% quarter-over-quarter and more than 22% year-over-year [13][14] - Net interest income for the first quarter was $25.1 million, up 6.6% from the previous quarter [42] - The net interest margin for the first quarter was 1.82%, representing an increase of 15 basis points compared to the linked quarter [43] Business Line Data and Key Metrics Changes - Small business lending originations were down compared to the fourth quarter, but year-over-year origination and loan sale volume were up 223% and 236%, respectively [20][19] - The weighted average rate on funded originations was 7.78%, up 50 basis points from the prior quarter [18] - Construction and investor commercial real estate balances increased by $86 million, with nearly $70 million in new commitments originated [28] Market Data and Key Metrics Changes - Total deposits from fintech partners were up 37% from the fourth quarter, totaling $881 million at quarter end [36] - The average balance of deposits increased by $111 million or over 2% during the first quarter [35] - Nonperforming loans to total loans were 80 basis points, with an increase attributed to franchise finance and small business lending [24] Company Strategy and Development Direction - The company aims to continue improving its loan mix and reduce deposit costs, positioning itself for stronger earnings in the coming quarters [137] - The focus remains on expanding fintech partnerships and enhancing revenue diversification [137] - The company anticipates loan yields to increase and deposit costs to decline, projecting a 40% increase in net interest income over 2024's full-year amount [55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing improvement of net interest income and net interest margin throughout 2025, assuming no further rate actions from the Fed [16] - The elevated provision for loan losses was acknowledged, with management indicating a cautious approach to problem loans [21][60] - There is optimism regarding a slowdown in new delinquencies, suggesting potential moderation in the provision for credit losses in the second half of the year [60] Other Important Information - The company recognized $9.7 million in net charge-offs during the quarter, primarily related to franchise finance and small business lending portfolios [21] - Noninterest income for the quarter was $10.4 million, down 35% from the fourth quarter, largely due to lower net servicing revenue [47] - The tangible common equity ratio was 6.55%, with a common equity Tier one ratio of 9.16% [53] Q&A Session Summary Question: Expected one-time impact on fees in Q2 - Management estimated a range of $5 million to $6 million for the quarter, with a return to normalized levels in the latter half of the year [63] Question: Average loan size and impact of SBA fees - The average loan size is just over $1 million, and the company does not expect significant impact from the reinstated fees on smaller loans [68] Question: Impact of a 25 basis point rate cut on NII - A 25 basis point rate cut would result in an annualized impact of about $3.6 million on net interest income [71] Question: Updated thoughts on SBA loss assumptions - Management indicated that while the higher rate environment affects payments, economic uncertainty is a more significant factor influencing loss assumptions [80] Question: Share buybacks and balance sheet growth - The company is preparing to consider share buybacks if the stock price remains below 50% of book value [89] Question: Update on fintech partnerships and pipeline - The company is experiencing strong growth in fintech partnerships, with expectations to expand existing relationships rather than significantly increase the number of programs [124][127]