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]

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 an increase in credit loss expense [5][6] - Return on average assets was 0.79% and return on average equity was 7.8% [6] - Pre-provision net revenues grew 3.7% or $1 million, indicating strength in core business [6] - Net interest margin increased by five basis points to 3.07%, driven by lower funding costs [6][22] - Total loans increased by $6.31 billion, or 0.4% on a linked quarter basis, with a 1.6% annualized growth [7] Business Line Data and Key Metrics Changes - Loan production for Q2 was $330 million, down 4.7% from the prior quarter, with a weighted average interest rate of 7.1% [14] - Commercial real estate (CRE) production was $112 million, down 24% from the prior quarter [15] - SBA loan production decreased to $47 million but exceeded the high end of the quarterly target range [15] - C&I production increased by 26% to $53 million, attributed to new talent and growth efforts [17] - Residential mortgage loan production was $84 million, up 52% from the previous quarter [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 the total loan portfolio [19] - Deposits increased by 1.7% in Q2, driven by new commercial accounts and contributions from new branches [20] 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 CRE [11] - The strategy includes strengthening relationships in select deposit-rich markets and driving growth in key regions [28] - The company is optimistic about long-term growth potential despite current economic conditions [10][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute effectively and deliver sustained profitable growth [28] - The economic outlook remains dynamic, with many USKC customers taking a wait-and-see approach regarding tariffs and their impact on the economy [10] - 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 decreasing by 27% [21] - The allowance for credit losses stood at 1.06% of loans at the end of Q2 [26] - The company repurchased 70,000 shares of common stock at an average price of $23.26, totaling $1.6 million [27] Q&A Session Summary Question: Loan growth expectations for the second half of the year - Management indicated that the second half typically sees higher production, with a strong pipeline of new loans already established [32] Question: Insights on margin and deposit costs - Average interest-bearing deposit costs were 3.64% for the quarter, with expectations for net interest margin to continue increasing, albeit at a slowing rate [35][37] Question: Credit quality and criticized assets - Management noted significant success in resolving loans in the special mention category, contributing to improved asset quality metrics [41] Question: C&I production driving loan growth - C&I production is expected to drive loan growth in the second half, supported by a higher pipeline and ongoing efforts to target more C&I opportunities [49] Question: Plans for additional hires in C&I and SBA - Major hires were completed in the first half, and the number of new relationship managers is expected to remain steady [60]

Financial Data and Key Metrics Changes - The company reported a GAAP net income of $51.1 million for Q2 2025, with diluted EPS of $1.20, resulting in a 1.04% return on assets and a 6.68% return on average common equity [21] - Adjusted operating net income for the quarter was $53.5 million or $1.25 diluted EPS, representing a 1.09% return on assets [21] - Tangible book value per share increased by $0.99 during the quarter, reflecting solid earnings retention [22] Business Line Data and Key Metrics Changes - C&I loans increased by 3.4% in the second quarter, while CRE and construction loan balances decreased by 1.7% [8][10] - Total loans increased modestly, with C&I balances driving growth, while transactional CRE balances experienced attrition [24] - Wealth Management business grew AUA by 4% to $7.4 billion, driven mostly by market appreciation [17] Market Data and Key Metrics Changes - Non-performing loans decreased significantly from $89.5 million to $56.2 million, representing 39 basis points of total loans [24] - The cost of deposits was reported at 1.54%, highlighting the value of the deposit franchise [16] Company Strategy and Development Direction - The company aims to reduce its CRE concentration below 300%, with a current concentration of 274% expected to rise to 310-315% post-acquisition of Enterprise Bank [10] - The strategic focus includes growing C&I loans to reduce dependence on CRE and drive deposit and fee income growth [10][20] - The company is preparing for a core conversion scheduled for May 2026, which is expected to enhance technology infrastructure and support future growth [16] Management's Comments on Operating Environment and Future Outlook - Management noted that while economic uncertainty has improved, the impact of tariffs and federal government actions remains unclear, causing customers to pause significant expansion initiatives [7] - The management expressed confidence in the ability to unlock earnings power through prudent expense and capital management, alongside the benefits from the Enterprise acquisition [20] Other Important Information - The company announced a $150 million stock buyback plan to be opportunistic in buying back stock [5] - The acquisition of Enterprise Bank is expected to enhance shareholder value and provide cross-sell opportunities [15][19] Q&A Session Summary Question: Where were new loan originations during the quarter? - Management indicated good loan originations across most segments, with a competitive landscape remaining challenging [37][38] Question: Why has small business lending been successful? - The success is attributed to experienced bankers and a centralized underwriting unit that enables quick loan request turnaround [40] Question: What is the outlook for the net interest margin? - Management expects the margin to gradually rise, particularly if the Fed cuts rates, with a focus on asset repricing [49] Question: Is the worst behind for credit? - Management is cautious, acknowledging progress but not ready to declare that the worst is over [50][51] Question: Can you provide details on a large loan modification? - A large syndicated loan was restructured into a Note A and Note B structure, with no cash payments until mid-2026 [55][56] Question: What is the expected pro forma CET1 ratio? - The pro forma CET1 ratio is expected to be in the mid-12% range, around 12.5% [92]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported GAAP net income of $51.1 million and diluted EPS of $1.20, resulting in a 1.04% return on assets and a 6.68% return on average common equity [21] - Adjusted operating net income was $53.5 million or $1.25 diluted EPS, reflecting a 1.09% return on assets and a 6.99% return on average tangible common equity [21] - Tangible book value per share increased by $0.99 during the quarter, driven by solid earnings retention [22] Business Line Data and Key Metrics Changes - C&I loans increased by 3.4% in Q2, while CRE and construction loan balances decreased by 1.7% [8][24] - The Wealth Management business grew AUA by 4% to $7.4 billion, with total Investment Management revenues increasing by 1.4% from the previous quarter [17] Market Data and Key Metrics Changes - Non-performing loans decreased from $89.5 million to $56.2 million, representing 39 basis points of total loans [24] - Core deposit growth remained strong, with period-end balances up $218 million or 1.39% for the quarter [23] Company Strategy and Development Direction - The company aims to reduce its CRE concentration below 300%, with current levels at 274% and expectations to reach 290% by year-end 2027 [9] - The acquisition of Enterprise Bank is expected to enhance shareholder value and provide synergies from a broader product set [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted that while economic uncertainty has improved, the impact of tariffs and federal government actions remains unclear, causing customers to pause significant expansion plans [7] - The company recognizes the need to improve profitability metrics and believes that prudent expense and capital management will unlock inherent earnings power [19] Other Important Information - The company announced a $150 million stock buyback plan to be opportunistic in buying back stock [5][22] - The core conversion of the entire bank is scheduled for May 2026, which is expected to improve technology infrastructure and support future growth [16] Q&A Session Summary Question: Where were new loan originations during the quarter? - Management indicated good loan originations across most segments, with a competitive landscape remaining challenging [37][38] Question: Why has small business lending been successful? - The success is attributed to experienced bankers and a centralized underwriting unit that allows for quick loan request turnaround [40][41] Question: What is the outlook for net interest margin (NIM)? - Management expects NIM to gradually rise if the Fed cuts rates, with a projected margin in the mid-3.6% range for Q3 [47][48] Question: Is the worst behind for credit issues? - Management is cautious, stating that while progress has been made, it is not ready to declare that the worst is over [49][50] Question: Can you provide details on a large loan modification? - A large syndicated loan was restructured into a Note A and Note B structure, with no cash payments until mid-2026 [53][55] Question: What is the expected CET1 ratio? - The expected CET1 ratio is projected to be in the mid-12% range, around 12.5% [89]