Financial Data and Key Metrics Changes - The company reported GAAP fully diluted earnings of $1.15 per share, up 32% from the first quarter, driven by significant net interest margin expansion and increased contributions from SBA loan sales [6][11] - Pre-provision net revenue (PPNR) increased by 21% to $11,400,000 or $1.46 per share, with PPNR return on average assets rising to 143 basis points from 118 basis points in the previous quarter [11] - The net interest margin (NIM) improved to 310 basis points, a 29 basis point increase from the linked quarter, attributed to decreasing funding costs [11][12] Business Line Data and Key Metrics Changes - The SBA business is expected to deliver material growth to noninterest income, with SBA loan originations totaling $12,000,000 for the quarter, bringing year-to-date originations to $22,000,000 [7][13] - Noninterest income increased by 34% to $2,000,000, largely due to $1,100,000 from SBA gain on sale income [13] - Total noninterest expense rose modestly to $14,500,000, primarily due to increased salaries and employee benefits, reflecting ongoing investments in banking teams and risk functions [13][14] Market Data and Key Metrics Changes - Noninterest bearing deposits grew by $48,000,000 during the quarter, with a year-to-date increase of $75,000,000 or 23% since year-end [8] - The bank's funding profile improved with a significant reduction in brokered deposits, which have been decreased by over $400,000,000 from their peak [18] Company Strategy and Development Direction - The company is focused on expanding its SBA platform, attracting talented deposit teams, and investing in risk and technology platforms to prepare for technological evolution [16][19] - The management emphasized the importance of improving asset quality, with nonperforming loans dropping significantly from $65,000,000 to just under $24,000,000 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued margin expansion into 2026, driven by the growth of noninterest bearing deposits and improved credit trends [8][12] - The company anticipates continued improvement in profitability and efficiency ratios, despite increasing noninterest expense guidance [14][19] Other Important Information - The company repurchased 14,626 shares at a weighted average price of $28.86 per share during the quarter, with 205,000 shares remaining on its authorization [15] Q&A Session Summary Question: What is the long-term target for DDAs to deposits? - Management indicated there is no hard target but aims to expand the percentage and reduce the wholesale funding ratio [21][23] Question: Should brokered deposits continue to decrease? - Management expects brokered deposits to decrease over time but acknowledges it will depend on market opportunities and deposit gathering efforts [24][25] Question: Update on health care customers? - Management reported that health care borrowers are not significantly impacted by new legislation, maintaining a positive outlook on the health care book [27] Question: Potential of new deposit teams? - Management highlighted the potential of new teams, noting their previous success in generating significant business, but emphasized that actual production will take time to materialize [32][34] Question: Timeline for resolution of nonperforming loans? - Management expects one nonperforming loan to be resolved in the next couple of months, while another may take longer due to its complexity [41] Question: Impact of a potential Fed rate cut on margin? - Management indicated that a 25 basis point cut would likely have a delayed impact on margins, but they remain optimistic about NIM improvements based on current repricing strategies [42][45]

Financial Data and Key Metrics Changes - The company reported net income of $21,800,000 for Q2 2025, resulting in diluted earnings per share of $0.72, an increase of 1.4% compared to the previous quarter [5][14] - The annualized return on average assets was 1.07%, and the annualized return on average tangible common equity was 14.38% [5] - The net interest margin increased by nine basis points to 2.95%, while net interest income rose by $414,000 to $54,300,000 [5][20] - Total loans increased by $34,700,000 or 0.8% linked quarter, primarily driven by commercial real estate loans [14][18] Business Line Data and Key Metrics Changes - New loan production for Q2 totaled approximately $293,000,000, significantly higher than the $142,000,000 produced in Q1 [8] - Commercial real estate loans were the largest source of payoffs, totaling approximately $150,000,000 in Q2 [9] - The average rate of loans funded during Q2 was approximately 6.9% [15] - Nonperforming assets remained low at 0.39% of total assets, unchanged from the previous quarter [12][15] Market Data and Key Metrics Changes - The Texas markets served by the company continue to report job and population growth, reflecting a positive economic outlook [6][7] - The loan pipeline increased to $2,100,000,000, up from $1,900,000,000 at the end of Q1, indicating strong future loan production potential [10][30] Company Strategy and Development Direction - The company is optimistic about potential hiring and client acquisition opportunities due to recent M&A activity in Texas [24] - The company is focusing on expanding its Commercial and Industrial (C&I) initiative, which now represents approximately 30% of the total pipeline, up from 25% [10][11] - The company is facing increased competition from debt funds, which are pricing deals aggressively, impacting the competitive landscape [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the economic conditions and growth prospects, despite uncertainties related to tariff negotiations [6][7] - The company anticipates moderated payoffs and new loan production consistent with the first half of 2025, slightly lowering loan growth guidance to 3% to 4% year over year [10][14] - Management believes that net loan growth will positively impact the net interest margin for the latter half of the year [36] Other Important Information - The company repurchased 424,435 shares of common stock at an average price of $28.13 during Q2 [19] - The allowance for credit losses decreased slightly to $48,300,000, and the allowance for loan losses as a percentage of total loans decreased to 0.97% [15][18] - Noninterest income, excluding net loss on the sales of AFS securities, increased by $1,400,000 or 12.7% linked quarter [20] Q&A Session Summary Question: Potential dislocation opportunities from recent deals in Texas - Management acknowledged the potential to acquire talent from recent acquisitions and expressed interest in participating in future strategic opportunities [24] Question: Update on multifamily credit restructuring - The loan continues to perform well with positive leasing activity, and management anticipates it will move out of the bank by year-end [26] Question: Confirmation on lowered loan growth outlook - Management confirmed the outlook was adjusted due to softer growth but noted a solid pipeline and increased loan production momentum [27][30] Question: Insights on net interest margin direction - Management indicated that the margin has some tailwinds regardless of loan growth, with expectations for continued improvement [36] Question: Deposit competition and pricing outlook - Management reported not seeing significant pressure on deposit pricing and anticipates some relief in the second half of the year [40]

Financial Data and Key Metrics Changes - The company reported GAAP fully diluted earnings per share of $0.87, which represents a 135% increase compared to the fourth quarter and an 81% increase year-over-year [6] - Pre-provision net revenue for the first quarter was $9.4 million, or $1.22 per share, an 11% increase from the previous quarter [12] - The net interest margin for the quarter was 281 basis points, a 21 basis point increase from the linked quarter [12] Business Line Data and Key Metrics Changes - SBA originations grew to $10 million in the first quarter, with gain on sale margins exceeding 10% [9] - Noninterest income increased by 56% to $1.5 million, driven largely by SBA gain on sale income [16] - The first quarter provision expense was $463,000, significantly lower than $4.5 million in the prior quarter [18] Market Data and Key Metrics Changes - Core deposits grew by $43 million, including $28 million in noninterest-bearing deposits, while broker deposits declined by $81 million [10] - The company expects low single-digit loan growth for the full year despite a slower first quarter [9] Company Strategy and Development Direction - The company successfully disposed of two nonperforming credits, which reduced nonperforming assets as a percentage of total assets to 83 basis points [7] - The management emphasized the importance of attracting talented professionals and has added two deposit teams in the New York Metro Area [20] - The company plans to continue expanding its net interest margin and reaffirmed its net interest income guidance for the full year 2025 of $93 million to $95 million [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the SBA gain on sale activity accelerating in Q2 2025 [9] - The management noted that credit trends were benign and highlighted the company's strong balance sheet and liquidity [19] - The company is cautious about potential changes in the SBA environment that could impact growth [52][54] Other Important Information - The company repurchased 29,924 shares at a weighted average price of $30.46 during the quarter, with 220,000 shares remaining on its authorization [19] - The efficiency ratio for the quarter was 59.9%, with expectations for improvement as net interest margin expands [18] Q&A Session Summary Question: Update on new teams and their focus - The focus of the new teams is primarily on deposits, with some loans mixed in, and both teams have prior books over $100 million [26] Question: Update on loan pipeline and growth outlook - The company still expects low single-digit growth, with a robust pipeline despite some unexpected payoffs in Q1 [30][31] Question: Core loan yield for the quarter - The core loan yield for the quarter was approximately 6.40%, reflecting a 10 basis point expansion over the fourth quarter [38] Question: Thoughts on interest-bearing costs and margin - Timing issues affected the interest-bearing costs, with some callable brokered CDs called in Q1 leading to a one-time drag [41][42] Question: Expectations for SBA originations and fee income - Originations were better than expected, with the strongest quarter anticipated in Q4 2025 [50] Question: Share repurchase strategy - The company aims to balance share repurchases with the need to build consolidated CET1 capital, currently at 11% [72]