[Management View]
Net income for Q2 2025 was $32.8 million, with GAAP earnings per share of $2.52. The bank achieved approximately 7% annualized loan growth, driven by increased C&I line usage and construction commitments. Deposit balances remained flat as the company managed deposit costs. Net interest margin improved to 3.85% from 3.75% in Q1. $56 million of common shares were repurchased at an average price of $80.81 per share. Asset quality improved with decreases in nonaccrual, criticized, and past due loans.

[Outlook]
Management expects operating expenses to range between $21.8 million and $22.6 million in the next couple of quarters. The bank plans to open a new branch in Silicon Valley in the second half of the year, following the successful performance of the new Manhattan branch. The bank continues to monitor external uncertainties such as tariffs and inflation.

[Financial Performance]
Net income for Q2 2025 was $32.8 million, up from the previous quarter. GAAP earnings per share were $2.52. Net interest margin increased to 3.85% from 3.75% in Q1. Loan growth was approximately 7% annualized. Deposit balances remained flat. $56 million of common shares were repurchased at an average price of $80.81 per share.

[Q&A Highlights]
Question 1: On margin, if you had the average margin in the month of June and the cost of deposits as well.
Answer: The margin for June was 3.83%. Cost of deposits was $3.41. These figures have been relatively consistent through the quarter.

Question 2: Can you remind us what you have coming due on the CD side and the rate that it's rolling off on and what you're offering currently?
Answer: $1.4 billion is set to roll off in Q3 at a weighted average rate of 4.21%. Current offered rate is right around four, maybe a touch above four, and some slightly below four. On average, probably just under 4%.

Question 3: On the expense side, a little bit higher this quarter with the OREO cost. What are your thoughts on the kind of run rate going forward in the second half?
Answer: Looking forward, expenses are expected to be between $21.8 million and $22.6 million. We received insurance reimbursement on legal matters related to a resolved nonaccrual loan, which lightened professional services costs. We do not expect OREO write-downs in future quarters.

Question 4: On the buyback, it sounds like you bought back $56 million worth in Q2. Can you give us either the number of shares or the price at which you bought it back? And what's left in the remaining authorization?
Answer: The $56 million buyback was at an average price of $80.81 per share. We have authorization for another $125 million repurchase but have not started to execute due to the high price per share relative to book value.

Question 5: On loan growth, it seems to have picked up a bit in July. Can you provide some color on what occurred in the second quarter and the pipeline into the third quarter?
Answer: Loan growth in Q2 was driven by increased usage of C&I lines and funding of existing construction commitments. Early indications in July show increased demand, but the extent is still uncertain.

Question 6: On the commercial construction side, is that a function of new transactions or existing commitments funding?
Answer: The majority of commercial construction growth is from existing commitments funding as construction progresses, but we do see more new requests.

Question 7: On the $200 million of borrowings put into the bond portfolio, any thoughts about doing more of that in the back half of the year?
Answer: It was an opportunity relative to funding and asset investment, diluting the margin but increasing EPS. We funded it about 80 basis points cheaper.

Question 8: On loan growth, thoughts on competition and where new loans are coming on rate-wise?
Answer: There are lenders offering low fixed-rate loans, but we focus on relationship-driven banking and providing excellent service to existing customers.

Question 9: On deposit rotation out of interest-bearing demand and non-interest-bearing categories, anything specific driving that and expectations around deposit growth?
Answer: Our goal is to grow deposits while keeping costs in control. Depending on funding needs or loan growth, we may be more aggressive on deposits.

Question 10: Update on OREO, timeline for resolution, and thoughts on the credit side.
Answer: The remaining OREO property has faced valuation declines and remains unsold. We prefer not to fire sale it and will sell if a suitable offer emerges. Credit has held up well, but no fixed timeline for resolution.

Question 11: Update on the new Manhattan branch and plans for de novos or organic expansion.
Answer: The Manhattan branch is performing well in loan generation. A new Silicon Valley branch is planned for the second half of the year.

Question 12: Thoughts on client pulse and growth acceleration amid uncertainty.
Answer: Growth acceleration is not necessarily dependent on clearing uncertainties. We monitor borrowers affected by supply issues and tariffs monthly. The aftershock effect of tariffs is still unknown.

[Sentiment Analysis]
Analysts were cautiously optimistic, focusing on loan growth and strategic expansion. Management maintained a prudent tone, emphasizing control over costs and monitoring external uncertainties.

[Quarterly Comparison]
| Metric | Q2 2025 | Q1 2025 |
|-------------------------|---------------|---------------|
| Net Income | $32.8 million | $30.5 million |
| GAAP EPS | $2.52 | $2.35 |
| Loan Growth | 7% annualized | 5% annualized |
| Net Interest Margin | 3.85% | 3.75% |
| Share Repurchases | $56 million | $40 million |
| Operating Expenses | $22.5 million | $21.8 million |

[Risks and Concerns]
Management cited persistent external uncertainties, including tariffs and inflation. The remaining OREO property faced further valuation declines and remains unsold. No fixed timeline for resolution was given.

[Final Takeaway]
Preferred Bank reported strong financial performance in Q2 2025, with significant loan growth and improved net interest margin. The bank's strategic branch expansion and prudent cost management are expected to support future growth. However, external uncertainties such as tariffs and inflation remain a concern. Management's cautious approach to share repurchases and deposit growth reflects their focus on maintaining financial stability amid these challenges.