Q2 2026 BayFirst Financial Corp Earnings Call

August 14, 2026

Marina: Hello, everyone. Thank you for joining us, and welcome to the BayFirst Financial Corp Q2 2026 conference call and webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Al Rogers, President and CEO. Al, please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to the BayFirst Financial Corp Q2 2026 Conference Call and Webcast. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Al Rogers, President and CEO. Al, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Al Rogers, President and CEO.

Speaker #1: Al, please go ahead.

Speaker #2: Thank you, Marina. Good morning, and thank you for joining our call today. With me are Scott McKim, our CFO, and Robin Oliver, our COO.

Alfred T. Rogers: Thank you, Marina. Good morning, and thank you for joining our call today. With me is Scott McKim, our CFO, and Robin Oliver, our COO. Please remember, today's call will include forward-looking statements and non-GAAP financial measures. Please refer to our cautionary statement on forward-looking statements contained on page two of the investor presentation. My first full quarter as CEO at BayFirst has been very busy. We set to work on a number of initiatives, both short and longer term. The substantial $80 million capital raise at the end of April was the first, and was certainly the biggest step for the future of our bank. We completed and deployed our asset resolution plan to address the bank's legacy credit issues, predominantly related to unguaranteed balances of the SBA 7 loans. During the process of completing the asset resolution plan, our team also identified some material misstatements from prior periods.

Al Rogers: Thank you, Marina. Good morning, and thank you for joining our call today. With me is Scott McKim, our CFO, and Robin Oliver, our COO. Please remember, today's call will include forward-looking statements and non-GAAP financial measures. Please refer to our cautionary statement on forward-looking statements contained on page two of the investor presentation. My first full quarter as CEO at BayFirst has been very busy. We set to work on a number of initiatives, both short and longer term.

Speaker #2: Please remember, today's call will include forward-looking statements and non-GAAP financial measures. Please refer to our cautionary statement on forward-looking statements contained on page 2 of the investor presentation.

Speaker #2: My first full quarter as CEO at BayFirst has been very busy. We set to work on a number of initiatives, both short and longer term.

Speaker #2: The substantial $80 million capital raised at the end of April was the first and was certainly the biggest step for the future of our bank.

Al Rogers: The substantial $80 million capital raise at the end of April was the first, and was certainly the biggest step for the future of our bank. We completed and deployed our asset resolution plan to address the bank's legacy credit issues, predominantly related to unguaranteed balances of the SBA 7 loans. During the process of completing the asset resolution plan, our team also identified some material misstatements from prior periods.

Speaker #2: We completed and deployed our asset resolution plan to address the bank's legacy credit issues, predominantly related to unguaranteed balances of the SBA 7A loans.

Speaker #2: During the process of completing the asset resolution plan, our team also identified some material misstatements from prior periods. We have restated financial statements for the years ended December 31, 2024, December 31, 2025, and the quarter ended March 31, 2026.

Alfred T. Rogers: We have restated financial statements for the years ended 31 December 2024, 31 December 2025, and the quarter ended 31 March 2026. The amended 10-K and 10-Q have been filed this week. Scott will elaborate on both in a few minutes. We held a special meeting of shareholders on 14 July, where the company obtained shareholder approval to amend BayFirst Financial Corp.'s articles of incorporation to increase the number of authorized shares of common stock from 15 million to 100 million, and exchange all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock Series D, and all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock Series E, for a total of 22,856,000 shares of common stock. Upon conversion, all shares of Series D and Series E preferred stock were retired. The company's Series A and Series C preferred shares were redeemed in July as well.

Al Rogers: We have restated financial statements for the years ended 31 December 2024, 31 December 2025, and the quarter ended 31 March 2026. The amended 10-K and 10-Q have been filed this week. Scott will elaborate on both in a few minutes. We held a special meeting of shareholders on 14 July 2026, where the company obtained shareholder approval to amend BayFirst Financial Corp.'s articles of incorporation to increase the number of authorized shares of common stock from 15 to 100 million, and exchange all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock Series D, and all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock Series E, for a total of 22,856,000 shares of common stock.

Speaker #2: The amended 10-K and 10-Q have been filed this week. Scott will elaborate on both in a few minutes. We held a special meeting of shareholders on July 14, where the company obtained shareholder approval to amend BayFirst Financial Corporation's Articles of Incorporation.

Speaker #2: To increase the number of authorized shares of common stock from 15 million to 100 million, and exchange all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock, Series D.

Speaker #2: And all 4,000 outstanding shares of mandatorily convertible cumulative perpetual preferred stock, Series E, for a total of 22,856,000 shares of common stock.

Speaker #2: Upon conversion, all shares of Series D and Series E preferred stock were retired. The company's Series A and Series B preferred shares were redeemed in July as well.

Al Rogers: Upon conversion, all shares of Series D and Series E preferred stock were retired. The company's Series A and Series C preferred shares were redeemed in July as well.

Speaker #2: Management also noted a mid-August launch as the date for the rights offering we announced back in April. Beyond these shareholder actions, we've also moved decisively to strengthen our operating structure and leadership team.

Alfred T. Rogers: Management also noted a mid-August launch as the date for the rights offering we announced back in April. Beyond these shareholder actions, we have also moved decisively to strengthen our operating structure and leadership team. Most notably, Trey Korhn has joined as BayFirst's Chief Banking Officer. Trey has been a career banker in Tampa for over 22 years and will lead our retail and commercial banking teams. As a lifelong Tampa resident with deep roots and involvement in several real estate industry and community organizations, Trey brings the local market insight, relationship orientation, and proven leadership needed to help us sharpen execution and accelerate growth across our franchise. Adam Curtis will continue to lead commercial lending with the organization as Chief Lending Officer. He will report to Trey.

Al Rogers: Management also noted a mid-August launch as the date for the rights offering we announced back in April. Beyond these shareholder actions, we have also moved decisively to strengthen our operating structure and leadership team. Most notably, Trey Korhn has joined as BayFirst's Chief Banking Officer. Trey has been a career banker in Tampa for over 22 years and will lead our retail and commercial banking teams. As a lifelong Tampa resident with deep roots and involvement in several real estate industry and community organizations, Trey brings the local market insight, relationship orientation, and proven leadership needed to help us sharpen execution and accelerate growth across our franchise. Adam Curtis will continue to lead commercial lending with the organization as Chief Lending Officer. He will report to Trey.

Speaker #2: Most notably, Trey Korn has joined as BayFirst's Chief Banking Officer. Trey has been a career banker in Tampa for over 22 years and will lead our retail and commercial banking teams.

Speaker #2: As a lifelong Tampa resident with deep roots and involvement in several real estate industry and community organizations, Trey brings the local market insight, relationship orientation, and proven leadership needed to help us sharpen execution and accelerate growth across our franchise.

Speaker #2: Adam Curtis will continue to lead commercial lending with the organization as Chief Lending Officer. He will report to Trey. The commercial relationship managers and portfolio managers will report to Adam, as that team focuses on growing and serving our commercial business customers across our footprint.

Alfred T. Rogers: The commercial relationship managers and portfolio managers will report to Adam, as that team focuses on growing and serving our commercial business customers across our footprint. Adam's steady leadership, strong customer relationships, and strong lending expertise remains critical to our ability to serve commercial clients and grow this important line of business with quality and consistency. Samantha Hill has transitioned to Director of Retail Banking with responsibility for production, growth, and execution across our retail banking centers. She will also report to Trey. All banking center managers now report to Sam, giving us clearer accountability and a more focused retail strategy. Sam brings a strong record of team development, customer experience, and branch execution, and her leadership will be important as we expand core relationships across our banking center network. Additionally, we have submitted an application to open a new retail location in South Tampa.

Al Rogers: The commercial relationship managers and portfolio managers will report to Adam, as that team focuses on growing and serving our commercial business customers across our footprint. Adam's steady leadership, strong customer relationships, and strong lending expertise remains critical to our ability to serve commercial clients and grow this important line of business with quality and consistency. Samantha Hill has transitioned to Director of Retail Banking with responsibility for production, growth, and execution across our retail banking centers. She will also report to Trey. All banking center managers now report to Sam, giving us clearer accountability and a more focused retail strategy. Sam brings a strong record of team development, customer experience, and branch execution, and her leadership will be important as we expand core relationships across our banking center network. Additionally, we have submitted an application to open a new retail location in South Tampa.

Speaker #2: Adam's steady leadership, strong customer relationships, and strong lending expertise remain critical to our ability to serve commercial clients and grow this important line of business with quality and consistency.

Speaker #2: Samantha Hill has transitioned to Director of Retail Banking, with responsibility for production, growth, and execution across our retail banking centers. She will also report to Trey.

Speaker #2: All banking center managers now report to Sam, giving us clearer accountability and a more focused retail strategy. Sam brings a strong record of team development, customer experience, and branch execution.

Speaker #2: And her leadership will be important as we expand core relationships across our banking center network. Additionally, we have submitted an application to open a new retail location in South Tampa.

Speaker #2: This office will bring our total retail branch network back to 12, having closed an office in Sarasota last quarter. With that operational foundation in place, I will now turn the call over to Scott, who will discuss the quarter's earnings, including the impact of the asset resolution plan and restatements.

Alfred T. Rogers: This office will bring our total retail branch network back to 12, having closed an office in Sarasota last quarter. With that operational foundation in place, I will now turn the call over to Scott, who will discuss the quarter's earnings, including the impact of the asset resolution plan and restatements. Scott?

Al Rogers: This office will bring our total retail branch network back to 12, having closed an office in Sarasota last quarter. With that operational foundation in place, I will now turn the call over to Scott, who will discuss the quarter's earnings, including the impact of the asset resolution plan and restatements. Scott?

Speaker #2: Scott?

Speaker #3: Thank you, Al. Good morning, everyone. We are reporting a net loss of $32.7 million in the second quarter. This compares to the restated net loss of $5.9 million we reported for the first quarter.

Scott J. McKim: Thank you, Al. Good morning, everyone. We are reporting a net loss of $32.7 million in the Q2. This compares to the restated net loss of $5.9 million we reported for the Q1. As Al mentioned, the asset resolution plan was deployed during the Q2 and therefore has dominated the earnings results that we will talk about today. The plan was a thorough review of the bank's legacy unguaranteed SBA 7(a) portfolio as well as our other portfolios. We conducted an analysis which provided adjustments to the net amount expected to be collected on over 7,000 individual SBA loans, which resulted in the full or partial charge-off on several of those loans.

Scott McKim: Thank you, Al. Good morning, everyone. We are reporting a net loss of $32.7 million in the Q2. This compares to the restated net loss of $5.9 million we reported for the Q1. As Al mentioned, the asset resolution plan was deployed during the Q2 and therefore has dominated the earnings results that we will talk about today. The plan was a thorough review of the bank's legacy unguaranteed SBA 7(a) portfolio as well as our other portfolios. We conducted an analysis which provided adjustments to the net amount expected to be collected on over 7,000 individual SBA loans, which resulted in the full or partial charge-off on several of those loans.

Speaker #3: As Al mentioned, the asset resolution plan was deployed during the second quarter and, therefore, has dominated the earnings results that we will talk about today.

Speaker #3: The plan was a thorough review of the bank's legacy unguaranteed SBA 7A portfolio as well as our other portfolios. We conducted an analysis which provided adjustments to the net amount expected to be collected on over 7,000 individual SBA loans.

Speaker #3: Which resulted in the full or partial charge-off on several of those loans. We established the specific allowance for credit losses on six loans, increased the overall allowance on unguaranteed SBA 7(a) loan categories, and also made adjustments to the fair market values on our portfolio of loans that we have measured at fair value.

Scott J. McKim: We established a specific allowance for credit losses on six loans, increased the overall allowance on unguaranteed SBA 7(a) loan categories, and also adjustments to the fair market values on our portfolio of loans that we have measured at fair value. In total, the adjustment amounted to $38.4 million. Provision expense for the quarter was $29.7 million, and the company's total allowance for credit losses on 30 June 2026, was $45.1 million. Additionally, the company booked an impairment of $1.5 million on a non-marketable equity investment in a firm who was a partner of the company's former SBA 7(a) lending business. Finally, the company wrote down the unamortized premium on the bank's portfolio of purchased fully guaranteed USDA loans, which are at risk of default or early prepayment. I want to be clear, this adjustment is not credit specific. In total, the asset resolution plan impact was $41.5 million.

Scott McKim: We established a specific allowance for credit losses on six loans, increased the overall allowance on unguaranteed SBA 7(a) loan categories, and also adjustments to the fair market values on our portfolio of loans that we have measured at fair value. In total, the adjustment amounted to $38.4 million. Provision expense for the quarter was $29.7 million, and the company's total allowance for credit losses on 30 June 2026, was $45.1 million. Additionally, the company booked an impairment of $1.5 million on a non-marketable equity investment in a firm who was a partner of the company's former SBA 7(a) lending business. Finally, the company wrote down the unamortized premium on the bank's portfolio of purchased fully guaranteed USDA loans, which are at risk of default or early prepayment. I want to be clear, this adjustment is not credit specific. In total, the asset resolution plan impact was $41.5 million.

Speaker #3: In total, the adjustment amounted to $38.4 million. Provision expense for the quarter was $29.7 million, and the company's total allowance for credit losses on June 30, 2026, was $45.1 million.

Speaker #3: Additionally, the company booked $1 million on a non-marketable equity investment in a firm that was a partner of the company's former SBA 7A lending business.

Speaker #3: Finally, the company wrote down the unamortized premiums on the bank's portfolio of purchase fully guaranteed USDA loans, which are at risk of default or early prepayment.

Speaker #3: I want to be clear: this adjustment is not credit-specific. In total, the asset resolution plan impact was $41.5 million. As our new management team has assessed the existing business and started to make updates to the strategic plan, we identified some additional one-time charges during the quarter, which amount to $2.2 million and reflect a write-off of vendor contracts—which will no longer be used—and also the approval of a change-in-control payment to prior management.

Scott J. McKim: As our new management team has assessed the existing business and started to make updates to the strategic plan, we identified some additional one-time charges during the quarter, which amount to $2.2 million and reflect the write-off of vendor contracts which will no longer be used, and also the accrual of a change in control payment to prior management. All of these adjustments together equal $43.8 million of the company's pre-tax $44 million loss for the quarter.

Scott McKim: As our new management team has assessed the existing business and started to make updates to the strategic plan, we identified some additional one-time charges during the quarter, which amount to $2.2 million and reflect the write-off of vendor contracts which will no longer be used, and also the accrual of a change in control payment to prior management. All of these adjustments together equal $43.8 million of the company's pre-tax $44 million loss for the quarter.

Speaker #3: All of these adjustments together equal $43.8 million of the company's pre-tax $44 million loss for the quarter. We announced on July 15 that we identified $2.8 million of deferred origination costs and $2.1 million of accrued interest as of March 31, 2026, related to loans which had defaulted or were placed into non-approval status in prior periods, which resulted in a material understatement of provision expense and overstatement of net interest income during the affected quarterly periods, in which the errors were accumulated in 2024, 2025, and the first quarter of 2026.

Scott J. McKim: We announced on 15 July that we identified $2.8 million of deferred origination costs and $2.1 million of accrued interest as of 31 March 2026, related to loans which had defaulted or was placed into non-accrual status in prior periods, which resulted in a material understatement of provision expense and overstatement of net interest income during the affected quarterly periods in which the errors were accumulated in 2024, 2025, and the Q1 of 2026. Subsequent to that announcement, we further identified another $3.4 million of deferred origination costs, which should have been netted against net gain on sale of government-guaranteed loans and resulted in a material overstatement of those net gain on sale of government-guaranteed loans during the affected quarterly periods in which the error accumulated, specifically in the years of 2024 and 2025.

Scott McKim: We announced on 15 July that we identified $2.8 million of deferred origination costs and $2.1 million of accrued interest as of 31 March 2026, related to loans which had defaulted or was placed into non-accrual status in prior periods, which resulted in a material understatement of provision expense and overstatement of net interest income during the affected quarterly periods in which the errors were accumulated in 2024, 2025, and the Q1 of 2026. Subsequent to that announcement, we further identified another $3.4 million of deferred origination costs, which should have been netted against net gain on sale of government-guaranteed loans and resulted in a material overstatement of those net gain on sale of government-guaranteed loans during the affected quarterly periods in which the error accumulated, specifically in the years of 2024 and 2025.

Speaker #3: Subsequent to that announcement, we further identified another $3.4 million of deferred origination costs which should have been netted against net gain on sale of government-guaranteed loans and resulted in a material overstatement of those net gain on sale of government-guaranteed loans during the affected quarterly periods, in which the error accumulated specifically in the years of 2024 and 2025.

Speaker #3: These errors occurred in periods prior to 2024 as well, but were not material during those periods. Our restatement efforts have correctly restated the company's earnings to date and we have amended our 2025 10-K and our first quarter 10-Q.

Scott J. McKim: These errors occurred in periods prior to 2024 as well, but were not material during those periods. Our restatement efforts have correctly restated the company's earnings to date, and we have amended our 2025 10-K and our Q1 10-Q. Management and the board of directors take our obligation to provide accurate and transparent financial reporting seriously. We moved quickly to investigate what happened and to correct it and to notify our shareholders. We continue to work through internal operational remediation activities and will report in future SEC filings on our progress towards resolution and strengthening our internal controls over financial reporting. It is important to note that by exiting the SBA 7(a) lending business, these errors will not reoccur. Nonetheless, we will ensure that our internal operations are compliant. Please note, as I continue, our prior period metrics, which I will mention, are the restated metrics.

Scott McKim: These errors occurred in periods prior to 2024 as well, but were not material during those periods. Our restatement efforts have correctly restated the company's earnings to date, and we have amended our 2025 10-K and our Q1 10-Q. Management and the board of directors take our obligation to provide accurate and transparent financial reporting seriously. We moved quickly to investigate what happened and to correct it and to notify our shareholders. We continue to work through internal operational remediation activities and will report in future SEC filings on our progress towards resolution and strengthening our internal controls over financial reporting. It is important to note that by exiting the SBA 7(a) lending business, these errors will not reoccur. Nonetheless, we will ensure that our internal operations are compliant. Please note, as I continue, our prior period metrics, which I will mention, are the restated metrics.

Speaker #3: Management and the board of directors take our obligation to provide accurate and transparent financial reporting seriously. We moved quickly to investigate what happened, to correct it, and to notify our shareholders.

Speaker #3: We continue to work through internal operational remediation activities and will report in future SEC filings on our progress toward resolution and on strengthening our internal controls over financial reporting.

Speaker #3: It is important to note that, by exiting the SBA 7(a) lending business, these errors will not recur. Nonetheless, we will ensure that our internal operations are compliant.

Speaker #3: Please note, as I continue, our prior period metrics which I will mention are the restated metrics. Other financial results include loans held for investment, which decreased by $41.4 million, or 4%, during the second quarter of 2026 to $882.8 million, and decreased $237.7 million, or 21%, over the past year.

Scott J. McKim: Other financial results include loans held for investment decreased by $41.4 million, or 4%, during Q2 2026 to $882.8 million, and decreased $237.7 million, or 21%, over the past year. Most of this decrease year-over-year reflects the sale of loans and the exit of the SBA 7(a) lending in Q4 2025. Deposits decreased $97 million, or 9%, during Q2 2026, and decreased $175 million, or 15%, over the past year to $989 million. The decrease in deposits during the quarter was primarily due to reductions in high rate promotional deposits held with non-relationship customers and also a decrease in broker deposits. 80% of the bank's deposits were insured by FDIC on 30 June 2026, and the bank's on-balance sheet liquidity ratio as of 30 June 2026, was 14.95%, and the bank did not have any wholesale borrowings.

Scott McKim: Other financial results include loans held for investment decreased by $41.4 million, or 4%, during Q2 2026 to $882.8 million, and decreased $237.7 million, or 21%, over the past year. Most of this decrease year-over-year reflects the sale of loans and the exit of the SBA 7(a) lending in Q4 2025. Deposits decreased $97 million, or 9%, during Q2 2026, and decreased $175 million, or 15%, over the past year to $989 million. The decrease in deposits during the quarter was primarily due to reductions in high rate promotional deposits held with non-relationship customers and also a decrease in broker deposits. 80% of the bank's deposits were insured by FDIC on 30 June 2026, and the bank's on-balance sheet liquidity ratio as of 30 June 2026, was 14.95%, and the bank did not have any wholesale borrowings.

Speaker #3: Most of this decrease year over year reflects the sale of loans and the exit of the SBA 7(a) lending in the fourth quarter of 2025.

Speaker #3: Deposits decreased $97 million, or 9%, during the second quarter of 2026, and decreased $175 million, or 15%, over the past year to $989 million.

Speaker #3: The decrease in deposits during the quarter was primarily due to reductions in high-rate promotional deposits held with non-relationship customers, and also a decrease in brokered deposits.

Speaker #3: Eighty percent of the bank's deposits were insured by the FDIC as of June 30, 2026, and the bank's on-balance sheet liquidity ratio as of that date was 14.95%. The bank did not have any wholesale borrowings.

Speaker #3: Shareholders' equity at the end of the quarter was $115.9 million, which is $40.3 million higher than it was at the end of the first quarter.

Scott J. McKim: Shareholders' equity at the end of the quarter was $115.9 million, which is $40.3 million higher than it was at the end of Q1. The increase is from the capital raise net of the asset resolution plan. Net accumulated other comprehensive loss increased slightly by $57,000 during the quarter, ending at $2.1 million. Tangible book value per share decreased this quarter to $4.82 per share from $14.22 per share at the end of Q1. Our net interest margin was 3.48%, up four basis points from Q1. Net interest income was $9.4 million in Q2, virtually unchanged from Q1, and down $2.7 million from the year ago quarter.

Scott McKim: Shareholders' equity at the end of the quarter was $115.9 million, which is $40.3 million higher than it was at the end of Q1. The increase is from the capital raise net of the asset resolution plan. Net accumulated other comprehensive loss increased slightly by $57,000 during the quarter, ending at $2.1 million. Tangible book value per share decreased this quarter to $4.82 per share from $14.22 per share at the end of Q1. Our net interest margin was 3.48%, up four basis points from Q1. Net interest income was $9.4 million in Q2, virtually unchanged from Q1, and down $2.7 million from the year ago quarter.

Speaker #3: The increase is from the capital raise, net of the asset resolution plan. Net accumulated other comprehensive loss increased slightly by $57,000 during the quarter, ending at $2.1 million.

Speaker #3: Changeable book value per share decreased this quarter to $4.82 per share from $14.22 per share at the end of the first quarter. Our net interest margin was 3.48% of four basis points from first quarter.

Speaker #3: Net interest income was $9.4 million in the second quarter, virtually unchanged from the first quarter, and down $2.7 million from the year-ago quarter. On a normalized basis, the net interest margin for the second quarter, excluding the one-time impact that I mentioned as part of the asset resolution plan, was 4.07%. This was driven by positive trends in cost of funds, which decreased 24 basis points from the prior quarter to 2.66%.

Scott J. McKim: On a normalized basis, the net interest margin for Q2, excluding the one-time impact that I mentioned as part of the asset resolution plan, was 4.07%, which was driven by positive trends and cost of funds, which decreased 24 basis points from the prior quarter to 2.66%. The bank's cost of funds is now down 49 basis points year to date, reflecting our efforts to exit promotional rate balances and broker deposit balances. Non-interest income was -$6.8 million in Q2 2026, which is $7.7 million worse than Q1 and a decrease of $17.3 million from Q2 2025. Current quarter net interest income includes an $8 million in one-time impacts related to the board-approved asset resolution plan.

Scott McKim: On a normalized basis, the net interest margin for Q2, excluding the one-time impact that I mentioned as part of the asset resolution plan, was 4.07%, which was driven by positive trends and cost of funds, which decreased 24 basis points from the prior quarter to 2.66%. The bank's cost of funds is now down 49 basis points year to date, reflecting our efforts to exit promotional rate balances and broker deposit balances. Non-interest income was -$6.8 million in Q2 2026, which is $7.7 million worse than Q1 and a decrease of $17.3 million from Q2 2025. Current quarter net interest income includes an $8 million in one-time impacts related to the board-approved asset resolution plan.

Speaker #3: The bank's cost of funds is now down 49 basis points year to date, reflecting our efforts to exit promotional-rate balances and brokered deposit balances.

Speaker #3: Non-interest income was negative $6.8 million in the second quarter of 2026, which is 7.7 million worse than the first quarter and a decrease of 17.3 million from the second quarter of 2025.

Speaker #3: Current quarter net interest income includes an $8 million one-time impact related to the board-approved asset resolution plan. Additionally, the year-over-year decrease is exacerbated by exiting the SBA 7A lending business, as no additional gains on sales of government-guaranteed loans will be booked.

Scott J. McKim: Additionally, the year-over-year decrease is exacerbated by exiting the SBA 7(a) lending business, as no additional gains on sales of government-guaranteed loans will be booked. Non-interest expense was $17.7 million, an increase of $2 million compared to the first quarter. Essentially all of this increase is related to one-time charges that were driven by our actions under the asset resolution plan and the one-time items that I have mentioned. In total, approximately $2.5 million. Compensation costs were about $600,000 higher, driven largely by an accrued change in control payment that I mentioned. Also, as I mentioned, our provision for credit losses was $29 million in the second quarter, compared to $3.4 million in the first quarter and $7.6 million in the second quarter of 2025. Net charge-offs were $4.5 million, down $200,000 compared to the first quarter, which was $4.7 million.

Scott McKim: Additionally, the year-over-year decrease is exacerbated by exiting the SBA 7(a) lending business, as no additional gains on sales of government-guaranteed loans will be booked. Non-interest expense was $17.7 million, an increase of $2 million compared to the first quarter. Essentially all of this increase is related to one-time charges that were driven by our actions under the asset resolution plan and the one-time items that I have mentioned. In total, approximately $2.5 million. Compensation costs were about $600,000 higher, driven largely by an accrued change in control payment that I mentioned. Also, as I mentioned, our provision for credit losses was $29 million in the second quarter, compared to $3.4 million in the first quarter and $7.6 million in the second quarter of 2025. Net charge-offs were $4.5 million, down $200,000 compared to the first quarter, which was $4.7 million.

Speaker #3: Non-interest expense was $17.7 million, an increase of $2.0 million compared to the first quarter. Essentially all of this increase is related to one-time charges that were driven by our actions under the asset resolution plan and the one-time items that I have mentioned.

Speaker #3: In total, approximately $2.5 million. Compensation costs were about $600,000 higher, driven largely by accrued change in control payments that I mentioned. Also, as I mentioned, our provision for credit losses was $29 million in the second quarter compared to $3.4 million in the first quarter, and $7.6 million in the second quarter of 2025.

Speaker #3: Net charge-offs were $4.5 million, down $200,000 compared to the first quarter, which was $4.7 million. Total unguaranteed SBA 7(a) loan balances were $142 million on June 30.

Scott J. McKim: Total unguaranteed SBA 7(a) loan balances were $142 million on 30 June. In comparison, the bank had $159.3 million of unguaranteed SBA 7(a) loan balances at the end of the first quarter. Total annualized charge-offs as a percentage of average loans held for investment at amortized cost were 2.08% for the second quarter, a decrease from 2.14% in the first quarter of the year. The ratio of allowance for credit losses on loans to total loans held for investment at amortized cost was 5.37% on 30 June, compared to 2.36% on 31 March 2026, and 2.43% as of the end of 2025. The ratio of allowance for credit losses to total loans held for investment at amortized cost and excluding government guaranteed loan balances was 5.82% on 30 June 2026, 2.55% at the end of the first quarter, and 2.60% at the end of 2025.

Scott McKim: Total unguaranteed SBA 7(a) loan balances were $142 million on 30 June. In comparison, the bank had $159.3 million of unguaranteed SBA 7(a) loan balances at the end of the first quarter. Total annualized charge-offs as a percentage of average loans held for investment at amortized cost were 2.08% for the second quarter, a decrease from 2.14% in the first quarter of the year. The ratio of allowance for credit losses on loans to total loans held for investment at amortized cost was 5.37% on 30 June, compared to 2.36% on 31 March 2026, and 2.43% as of the end of 2025. The ratio of allowance for credit losses to total loans held for investment at amortized cost and excluding government guaranteed loan balances was 5.82% on 30 June 2026, 2.55% at the end of the first quarter, and 2.60% at the end of 2025.

Speaker #3: In comparison, the bank had $159.3 million of unguaranteed SBA 7A loan balances at the end of the first quarter. Total annualized charge-offs as a percentage of average loans held for investment at amortized cost were $2.08% for the second quarter, a decrease from 2.14% in the first quarter of the year.

Speaker #3: The ratio of allowance for credit losses on loans to total loans held for investment at amortized cost was 5.37% on June 30, compared to 2.36% on March 31, 2026, and 2.43% as of the end of 2025.

Speaker #3: The ratio of allowance for credit losses to total loans held for investment at amortized cost, and excluding government-guaranteed loan balances, was 5.82% on June 30, 2026, 2.55% at the end of the first quarter, and 2.60% at the end of 2025.

Speaker #3: The bank's Tier 1 leverage ratio was 8.3% as of June 30, 2026, compared to 5.89% on March 31, 2026, and 7.73% as of June 30, 2025.

Scott J. McKim: The bank's Tier 1 leverage ratio was 8.3% as of 30 June 2026, compared to 5.89% on 31 March 2026, and 7.73% as of 30 June 2025. The total capital to risk-weighted assets ratio was 12.77% as of 30 June 2026, compared to 9%

Scott McKim: The bank's Tier 1 leverage ratio was 8.3% as of 30 June 2026, compared to 5.89% on 31 March 2026, and 7.73% as of 30 June 2025. The total capital to risk-weighted assets ratio was 12.77% as of 30 June 2026, compared to 9%

Speaker #3: The total capital-to-risk-rated assets ratio was 12.77% as of June 30, 2026, compared to 9.00% on March 31, 2026, and 10.77% as of June 30, 2025.

Scott J. McKim: On 31 March 2026, and 10.77% as of 30 June 2025. I will now turn the call over to Robin to make some operational and credit comments. Robin?

Scott McKim: On 31 March 2026, and 10.77% as of 30 June 2025. I will now turn the call over to Robin to make some operational and credit comments. Robin?

Speaker #3: I will now turn the call over to Robin to make some operational and credit comments. Robin?

Speaker #1: Thank you, Scott. Good morning, everyone. First, I want to provide some further details around the asset resolution plan and the related impacts. As Scott mentioned, the asset resolution plan identified and provided resolution for troubled loans, but it also provides protection from future charge-offs.

Robin L. Oliver: Thank you, Scott. Good morning, everyone. First, I want to provide some further details around the asset resolution plan and the related impact. As Scott mentioned, the asset resolution plan identified and provided resolution for troubled loans, but it also provides protection from future charge-offs. As Scott mentioned, our allowance for credit losses divided by total loans held for investment at amortized cost, excluding government-guaranteed loans, increased to 5.82% at the end of June. That is up from 1.86% a year ago. Further, the SBA BOLT loan portfolio now has 32.8% reserved against unguaranteed balances, and the SBA Flash CAP portfolio now has a 25% reserve. These two small loan portfolios represent $83 million of unguaranteed SBA balances. As these loans season, we continue to learn how they perform, but we believe the actions taken under the asset resolution plan have adequately positioned the bank to manage future charge-offs.

Robin Oliver: Thank you, Scott. Good morning, everyone. First, I want to provide some further details around the asset resolution plan and the related impact. As Scott mentioned, the asset resolution plan identified and provided resolution for troubled loans, but it also provides protection from future charge-offs. As Scott mentioned, our allowance for credit losses divided by total loans held for investment at amortized cost, excluding government-guaranteed loans, increased to 5.82% at the end of June. That is up from 1.86% a year ago. Further, the SBA BOLT loan portfolio now has 32.8% reserved against unguaranteed balances, and the SBA Flash CAP portfolio now has a 25% reserve. These two small loan portfolios represent $83 million of unguaranteed SBA balances. As these loans season, we continue to learn how they perform, but we believe the actions taken under the asset resolution plan have adequately positioned the bank to manage future charge-offs.

Speaker #1: Also, as Scott mentioned, our allowance for credit losses divided by total loans held for investment at amortized cost, excluding government-guaranteed loans, increased to 5.82% at the end of June that is up from 1.86% a year ago.

Speaker #1: Further, the SBA bulk loan portfolio now has a 32.8% reserve against unguaranteed balances, and the SBA flash cap portfolio now has a 25% reserve. These two small-loan portfolios represent $83 million of unguaranteed SBA balances.

Speaker #1: As these loans season, we continue to learn how they perform, but we believe the actions taken under the asset resolution plan have adequately positioned the bank to manage future charge-offs.

Speaker #1: That being said, we know we must remain diligent in collecting and resolving problem assets. To that end, progress is being made. At the end of the second quarter, total non-performing loans, excluding government-guaranteed balances, were $14.4 million, down from $15.9 million at the end of the first quarter.

Robin L. Oliver: That being said, we know we must remain diligent in collecting and resolving problem assets. To that end, progress is being made. At the end of the second quarter, total non-performing loans, excluding government guarantee balances, were $14.4 million, down from $15.9 million at the end of the first quarter. The percentage of non-performing loans, excluding government guarantee balances compared to total loans held for investment, was also down to 1.72%, which was a 10 basis points drop from 31 March 2026. Although that is up from a year ago, we are still making clear progress. I should also note that of the $14.4 million in non-performing loans, $3.1 million of these balances were current and paying as agreed, and we will be evaluating those for potential return to approval status as time continues.

Robin Oliver: That being said, we know we must remain diligent in collecting and resolving problem assets. To that end, progress is being made. At the end of the second quarter, total non-performing loans, excluding government guarantee balances, were $14.4 million, down from $15.9 million at the end of the first quarter. The percentage of non-performing loans, excluding government guarantee balances compared to total loans held for investment, was also down to 1.72%, which was a 10 basis points drop from 31 March 2026. Although that is up from a year ago, we are still making clear progress. I should also note that of the $14.4 million in non-performing loans, $3.1 million of these balances were current and paying as agreed, and we will be evaluating those for potential return to approval status as time continues.

Speaker #1: And the percentage of non-performing loans, excluding government-guaranteed balances, compared to total loans held for investment, was also down to 1.72%, which was a 10 basis point drop from March 31, 2026.

Speaker #1: Although that's up from a year ago, we are still making clear progress. I should also note that, of the $14.4 million in non-performing loans, $3.1 million of these balances were current and paying as agreed, and we will be evaluating those for potential return to accrual status as time continues.

Speaker #1: And in addition, as I noted last quarter, although our classified loans are elevated at the moment, 68% of our classified loans were current and performing loans, whereby we are working with the borrowers towards resolution.

Robin L. Oliver: In addition, as I noted last quarter, although our classified loans are elevated at the moment, 68% of our classified loans were current and performing loans whereby we are working with the borrowers towards resolution. Switching gears from credit, as we look toward the future growth of the bank and work towards a return to profitability, we are also focused on becoming as efficient as possible in our processes while ensuring we provide an excellent experience for our customers to make banking easy with a high level of personal touch. Our focus over the last two years has been on growing business deposits and treasury services, but the infusion of capital this past quarter really allows us to get back to lending, which will help the bank grow both loans and deposits to add stable net interest income and fee income instead of transactional earnings.

Robin Oliver: In addition, as I noted last quarter, although our classified loans are elevated at the moment, 68% of our classified loans were current and performing loans whereby we are working with the borrowers towards resolution. Switching gears from credit, as we look toward the future growth of the bank and work towards a return to profitability, we are also focused on becoming as efficient as possible in our processes while ensuring we provide an excellent experience for our customers to make banking easy with a high level of personal touch. Our focus over the last two years has been on growing business deposits and treasury services, but the infusion of capital this past quarter really allows us to get back to lending, which will help the bank grow both loans and deposits to add stable net interest income and fee income instead of transactional earnings.

Speaker #1: Switching gears from credit, as we look toward the future growth of the bank and work toward a return to profitability, we are also focused on becoming as efficient as possible in our processes while ensuring we provide an excellent experience for our customers—to make banking easy with a high level of personal touch.

Speaker #1: Our focus over the last two years has been on growing business deposits and treasury services, but the infusion of capital this past quarter really allows us to get back to lending, which will help the bank grow both loans and deposits to add stable net interest income and fee income instead of transactional earnings.

Speaker #1: Without adding significant headcount, we've also added leadership and talent in various areas of the bank, which we believe will position us for growth. This includes Trey, the Chief Banking Officer that Al mentioned, a Chief Data Officer, and retail personnel, including individuals to support our new South Tampa location that is scheduled to open in September.

Robin L. Oliver: Without adding significant headcount, we have also added leadership and talent in various areas of the bank, which we believe will position us for growth, including Trey, the Chief Banking Officer that Al mentioned, a Chief Data Officer, and retail personnel, including the retail individuals to support our new South Tampa location that is scheduled to open in September. We are excited about further expanding in Hillsborough County as we seek to round out our presence in the Tampa Bay market. At this time, I will turn the call over to Al to make some final comments.

Robin Oliver: Without adding significant headcount, we have also added leadership and talent in various areas of the bank, which we believe will position us for growth, including Trey, the Chief Banking Officer that Al mentioned, a Chief Data Officer, and retail personnel, including the retail individuals to support our new South Tampa location that is scheduled to open in September. We are excited about further expanding in Hillsborough County as we seek to round out our presence in the Tampa Bay market. At this time, I will turn the call over to Al to make some final comments.

Speaker #1: We are excited about further expanding in Hillsborough County as we seek to round out our presence in the Tampa Bay market. At this time, I will turn the call over to Al to make some final comments.

Speaker #2: Thank you, Rob. As I complete my first few months, what I’ve seen only reinforces my belief that we have a significant opportunity ahead.

Alfred T. Rogers: Thank you, Robin. As I complete my first few months at BayFirst, what I've seen only reinforces my belief that we have a significant opportunity ahead. I've spent time with our employees, customers, shareholders, and community leaders, and one thing is clear. BayFirst has the people, relationships, and market position to become the leading community bank in the Tampa Bay region. Our focus is simple. We're building a high-performing community bank centered on relationship banking, disciplined execution, sound credit practices, and exceptional service. We believe local businesses and consumers are best served when decisions are made close to home by bankers who know the market, understand their customers, and are invested in the success of the communities in which they serve. That community banking model starts with strong customer relationships. Our deposit mix and cost of funds remain a top priority.

Al Rogers: Thank you, Robin. As I complete my first few months at BayFirst, what I've seen only reinforces my belief that we have a significant opportunity ahead. I've spent time with our employees, customers, shareholders, and community leaders, and one thing is clear. BayFirst has the people, relationships, and market position to become the leading community bank in the Tampa Bay region. Our focus is simple. We're building a high-performing community bank centered on relationship banking, disciplined execution, sound credit practices, and exceptional service. We believe local businesses and consumers are best served when decisions are made close to home by bankers who know the market, understand their customers, and are invested in the success of the communities in which they serve. That community banking model starts with strong customer relationships. Our deposit mix and cost of funds remain a top priority.

Speaker #2: I've spent time with our employees, customers, shareholders, and community leaders. And one thing is clear: BayFirst has the people, relationships, and market position to become the leading community bank in the Tampa Bay region.

Speaker #2: Our focus is simple: we're building a high-performing community bank centered on relationship banking, disciplined execution, sound credit practices, and exceptional service. We believe local businesses and consumers are best served when decisions are made close to home by bankers who know the market, understand their customers, and are invested in the success of the communities in which they serve.

Speaker #2: That community banking model starts with strong customer relationships. Our deposit mix and cost of funds remain a top priority. We're working to deepen existing relationships and improve the mix from higher-cost transactional accounts to relationships that value service, responsiveness, and long-term partnerships.

Alfred T. Rogers: We're working to deepen existing relationships and improve the mix from higher-cost transactional accounts to relationships that value service, responsiveness, and long-term partnerships. On the lending side, loan growth has already begun. While we continue to manage payoffs and charge-offs associated with the legacy SBA portfolio, our focus has shifted toward growing traditional commercial and consumer lending with borrowers located in the markets we serve. Our loan pipeline is strong, and we are seeing encouraging opportunities across our footprint. We're also investing in technology and process improvements that enhance efficiency, improve customer experience, and position us to scale responsibly as we grow. The capital we raised earlier this year provides us with strength and flexibility as we execute this strategy. We intend to deploy that capital thoughtfully, focusing on opportunities that strengthen the franchise, improve profitability, and support sustainable growth.

Al Rogers: We're working to deepen existing relationships and improve the mix from higher-cost transactional accounts to relationships that value service, responsiveness, and long-term partnerships. On the lending side, loan growth has already begun. While we continue to manage payoffs and charge-offs associated with the legacy SBA portfolio, our focus has shifted toward growing traditional commercial and consumer lending with borrowers located in the markets we serve. Our loan pipeline is strong, and we are seeing encouraging opportunities across our footprint. We're also investing in technology and process improvements that enhance efficiency, improve customer experience, and position us to scale responsibly as we grow. The capital we raised earlier this year provides us with strength and flexibility as we execute this strategy. We intend to deploy that capital thoughtfully, focusing on opportunities that strengthen the franchise, improve profitability, and support sustainable growth.

Speaker #2: On the lending side, loan growth has already begun. While we continue to manage payoffs and charge-offs associated with the legacy SBA portfolio, our focus has shifted toward growing traditional, commercial, and consumer lending with borrowers located in the markets we serve.

Speaker #2: Our loan pipeline is strong, and we are seeing encouraging opportunities across our footprint. We're also investing in technology and process improvements that enhance efficiency, improve customer experience, and position us to scale responsibly as we grow.

Speaker #2: The capital we raised earlier this year provides us with strength and flexibility as we execute this strategy. We intend to deploy that capital thoughtfully.

Speaker #2: Focusing on opportunities that strengthen the franchise, improve profitability, and support sustainable growth. While there is still work to do, I'm encouraged by the progress we've made and the momentum we are building.

Alfred T. Rogers: While there is still work to do, I'm encouraged by the progress we've made and the momentum we are building. Our priorities are clear: grow core relationships, strengthen performance, expand our presence in Tampa Bay, and deliver consistent long-term value for our shareholders. I want to thank our employees for their dedication, our customers for their trust, and our shareholders for their continued support. I am optimistic about our future and excited about what lies ahead. Marina, I'll turn the call back over to you for some questions. Thank you.

Al Rogers: While there is still work to do, I'm encouraged by the progress we've made and the momentum we are building. Our priorities are clear: grow core relationships, strengthen performance, expand our presence in Tampa Bay, and deliver consistent long-term value for our shareholders. I want to thank our employees for their dedication, our customers for their trust, and our shareholders for their continued support. I am optimistic about our future and excited about what lies ahead. Marina, I'll turn the call back over to you for some questions. Thank you.

Speaker #2: Our priorities are clear: grow our relationships, strengthen performance, expand our presence in Tampa Bay, and deliver consistent long-term value for our shareholders. I want to thank our employees for their dedication, our customers for their trust, and our shareholders for their continued support.

Speaker #2: I am optimistic about our future and excited about what lies ahead. Marina, I'll turn the call back over to you for some questions. Thank you.

Speaker #3: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Marina: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ross Haberman with RLH Investments. Your line is open. Please go ahead.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ross Haberman with RLH Investments. Your line is open. Please go ahead.

Speaker #3: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ross Haberman with RLH Investments.

Speaker #3: Your line is open. Please go ahead.

Speaker #4: Good morning. Thank you for taking my call. Just two or three quick questions. Al, could you talk about this new branch you're going to open?

Ross Haberman: Morning. Thank you for taking my call. Just two or three quick questions. Al, could you talk about this new branch you are going to open? How big could it be, and how quickly do you think you will hit a breakeven on it? How long will that take?

Speaker #4: How big could it be? And how quickly do you think you will hit a break-even on it? How long will that take?

Speaker #2: The location is in South Tampa, a very prosperous area in the market where we do not have a significant presence. We do have an office that's about four miles away, but it's in a significantly different demographic and market.

Alfred T. Rogers: Location is in South Tampa, a very prosperous area in the market that we do not have a significant location. We do have an office that is 4 miles away, but in a significantly different demographic and market. We have already started opening accounts in this area, and we expect that ability could come quickly as this is initially a leased location in that market.

Al Rogers: Location is in South Tampa, a very prosperous area in the market that we do not have a significant location. We do have an office that is 4 miles away, but in a significantly different demographic and market. We have already started opening accounts in this area, and we expect that ability could come quickly as this is initially a leased location in that market.

Speaker #2: We've already started opening accounts in this area, and we expect that ability would come quickly, as this is initially a leased location in that market.

Speaker #4: Will it be a two-year breakeven, or hopefully something less than that, or what's your guess?

Ross Haberman: Will it be a 2-year breakeven or hopefully something less than that, or what is your guess?

Speaker #2: I would say, given our investment, it would be sooner than that.

Alfred T. Rogers: I would say given our investment, it would be sooner than that.

Al Rogers: I would say given our investment, it would be sooner than that.

Speaker #4: And just a question or two for Scott. Scott, the $142 million on guaranteed SBA loans—I think you broke that out into a piece of $82 million and then another $60 million.

Ross Haberman: And just a question or two for Scott. Scott, the $142 million of unguaranteed SBA loans, I think you broke that out into a piece of $82 million and then another $60 million. Could you go over the reserves on each of those parts? How quickly do you think they will be paying down? I think you said in the last quarter, they paid down a total of $17 million. Is that correct?

Speaker #4: Could you go over the reserves on each of those parts and how quickly you think they'll be paying down? I think you said in the last quarter they paid down a total of $17 million.

Speaker #4: Is that correct?

Speaker #5: Hi, Ross. Yeah, so we went from $159 down to $142. That's a pretty quick drop, but also keep in mind some part of that was also related to the asset resolution plan.

Scott J. McKim: Hi, Ross. Yeah. We went from 159 down to 142. That is a pretty quick drop. But also keep in mind, some part of that was also related to the asset resolution plan. So it was a little bit higher than what I would consider to be a true run rate for it. I will start to break the pieces down as far as what is in the portfolio for you. The BOLT portfolio is the largest part of. Ross, I am getting a little feedback in your phone there. If you can mute me real quick, I can check for this.

Scott McKim: Hi, Ross. Yeah. We went from 159 down to 142. That is a pretty quick drop. But also keep in mind, some part of that was also related to the asset resolution plan. So it was a little bit higher than what I would consider to be a true run rate for it. I will start to break the pieces down as far as what is in the portfolio for you. The BOLT portfolio is the largest part of. Ross, I am getting a little feedback in your phone there. If you can mute me real quick, I can check for this.

Speaker #5: So it was a little bit higher than what I would consider to be a true run rate for it. I will tell you that I'll start to break the pieces down as far as what's in the portfolio for you.

Speaker #5: The full portfolio is the largest part of it. Ross, I'm getting a little feedback on your phone there. If you can mute me real quick, I can answer this.

Speaker #4: Sorry. Is that better?

Ross Haberman: Sorry, is that better?

Scott J. McKim: That is all right. Okay. Here we go. The BOLT portfolio, and this is all of the loans that are booked at amortized cost. This excludes the fair value portfolio. We ended the quarter with $60 million in the BOLT, and that has a 33% reserve against that. So that is a little over almost $9.1 million. The Flash CAP portfolio, and this is the one that really is amortizing a little bit quicker, that had $29 million in balances and has a 25% reserve against it, which is $3.2 million. Then the core, what we call a core C&I, so this is some of the larger loans that have collateral other than real estate, have $45 million in balances in it, and that has a 23% reserve against it, or $1.5 million. Now, there is another component of the SBA portfolio that is all real estate-backed.

Scott McKim: That is all right. Okay. Here we go. The BOLT portfolio, and this is all of the loans that are booked at amortized cost. This excludes the fair value portfolio. We ended the quarter with $60 million in the BOLT, and that has a 33% reserve against that. So that is a little over almost $9.1 million. The Flash CAP portfolio, and this is the one that really is amortizing a little bit quicker, that had $29 million in balances and has a 25% reserve against it, which is $3.2 million. Then the core, what we call a core C&I, so this is some of the larger loans that have collateral other than real estate, have $45 million in balances in it, and that has a 23% reserve against it, or $1.5 million. Now, there is another component of the SBA portfolio that is all real estate-backed.

Speaker #5: That's all right. Okay, here we go. So, the full portfolio—this is all of the loans that are booked at amortized cost. This excludes the fair value portfolio.

Speaker #5: We ended the quarter with $60 million in the bulk, and that has a 33% reserve against it. So, that's a little over—or almost—$9.1 million.

Speaker #5: The FlashCap portfolio, and this is the one that really is amortizing a little bit quicker, had $29 million in balances and has a 25% reserve against it, which is $3.2 million.

Speaker #5: And then the core, what we call the core CNI—so this is some of the larger loans that have collateral other than real estate—have $45 million in balances in it, and that has a 23% reserve against it, or $1.5 million.

Speaker #5: Now, there's another component of the SBA portfolio that is all real estate-backed. It has $53 million in balances, and there's a relatively small reserve of about 1% against that.

Scott J. McKim: It has $53 million in balances, and there's a relatively small reserve of about 1% against that. That part of the portfolio performs as expected. It is not a big loss driver for us. You roll all those bits and pieces together, and on the riskier parts of the portfolio, we're reserved in the high 20%.

Scott McKim: It has $53 million in balances, and there's a relatively small reserve of about 1% against that. That part of the portfolio performs as expected. It is not a big loss driver for us. You roll all those bits and pieces together, and on the riskier parts of the portfolio, we're reserved in the high 20%.

Speaker #5: That part of the portfolio performs as expected. It is not a big loss driver for us. So, you roll all those bits and pieces together, and on the riskier parts of the portfolio, we're reserved in the high 20%.

Speaker #4: Thank you. And just one final question: could you be a little more specific on "mid-August"? We're basically here. Is it going to be this week or next week?

Ross Haberman: Thank you. Just one final question. Could you be a little more specific on the timing of the rights offering? You said mid-August. We're basically here. Is it going to be this week or next week? What's your timing on the execution of the rights offering for the shareholders?

Speaker #4: What's your timing on the execution of the rights offering for the shareholders?

Speaker #5: Yeah, Ross, thanks for asking that question. I was kind of expecting that one this morning. Just for you and everybody else that's listening, the rights offering is coming.

Scott J. McKim: Yeah, Ross, thanks for asking that question. I was kind of expecting that one this morning. Just for you and everybody else that's listening, the rights offering is coming. Because of the restatement, we wanted to make sure that we had updated, reliable financials in all prior periods and current periods available to all investors so that you have a complete package of information for consideration before we launch the rights offering. Obviously, that's pushed the timing out on that a little bit, but now that we have everything filed, the Q2 10-Q will be filed later today, that kind of frees us up to move on to the rights offering component. What we'll end up doing is preparing the communication that goes out to all of the shareholders of record as of 12 May.

Scott McKim: Yeah, Ross, thanks for asking that question. I was kind of expecting that one this morning. Just for you and everybody else that's listening, the rights offering is coming. Because of the restatement, we wanted to make sure that we had updated, reliable financials in all prior periods and current periods available to all investors so that you have a complete package of information for consideration before we launch the rights offering. Obviously, that's pushed the timing out on that a little bit, but now that we have everything filed, the Q2 10-Q will be filed later today, that kind of frees us up to move on to the rights offering component. What we'll end up doing is preparing the communication that goes out to all of the shareholders of record as of 12 May.

Speaker #5: There was, because of the restatement, we wanted to make sure that we had updated, reliable financials in all prior periods and current periods available to all investors, so that you had a complete package of information for consideration before we launched the rights offering.

Speaker #5: The obviously, that has pushed the timing out on that a little bit, but now that we have everything filed or we'll have the second quarter 10Q will be filed later today, that kind of frees us up to move on to the rights offering component.

Speaker #5: So what we'll end up doing is preparing the communication that goes out to all of the shareholders of record as of May 12th. And those communications—we should have in hand or be ready to mail those next week.

Scott J. McKim: Those communications we should have in hand or be ready to mail those next week. Coincidentally, we also have the full proxy, which will be going out. Our annual shareholder meeting is scheduled for 22 September. Really, we're going to have a full population of all important documents in hand for investors to look at before they make a decision around the rights offer. It is coming. I know it's taking a little bit longer than what we had initially wanted to do, but we wanted to make sure that we were checking all the boxes for everyone.

Scott McKim: Those communications we should have in hand or be ready to mail those next week. Coincidentally, we also have the full proxy, which will be going out. Our annual shareholder meeting is scheduled for 22 September. Really, we're going to have a full population of all important documents in hand for investors to look at before they make a decision around the rights offer. It is coming. I know it's taking a little bit longer than what we had initially wanted to do, but we wanted to make sure that we were checking all the boxes for everyone.

Speaker #5: Coincidentally, we also have the full proxy, which will be going out. Our annual shareholder meeting is scheduled for September 22nd. So really, we're going to have a full population of all important documents in hand for investors to look at before they make a decision around the rights offer.

Speaker #5: So, it is coming. I know it's taken a little bit longer than what we had initially wanted to do, but we wanted to make sure that we were checking all the boxes for everyone.

Speaker #4: So, you're saying it's going to be pushed off to September? Is that what you're implying?

Ross Haberman: You are saying it is going to be pushed up to September? Is that what you are implying?

Speaker #5: No, no. The rights offering—we'll launch that in August. I just wanted to mention when the shareholder meeting was, and that's in September.

Scott J. McKim: No. The rights offering, we will launch that in August. I just wanted to mention when the shareholder meeting was, and that is in September.

Scott McKim: No. The rights offering, we will launch that in August. I just wanted to mention when the shareholder meeting was, and that is in September.

Speaker #4: Got it. Thank you for your help, guys. Thank you very much.

Ross Haberman: Got it. Thank you for your help, guys. Thank you very much.

Speaker #5: Sure. Thanks for the question, Ross.

Scott J. McKim: Sure. Thanks for the question, Ross.

Scott McKim: Sure. Thanks for the question, Ross.

Speaker #3: Your next question comes from the line of Julianne Caserino, Sycamore Analytics. Your line is open. Please go ahead.

Marina: Your next question comes from the line of Julianne Kassarino, Sycamore Analytics. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Julienne Cassarino, Sycamore Analytics. Your line is open. Please go ahead.

Speaker #6: Hi. Good morning.

Julianne Kassarino: Hi, good morning.

Julienne Cassarino: Hi, good morning.

Speaker #5: Hi, Julianne. Morning.

Scott J. McKim: Hi, Julianne.

Scott McKim: Hi, Julianne.

Ross Haberman: Morning.

Scott J. McKim: Dan.

Scott McKim: Dan.

Speaker #6: Hi. Just trying to cut through a lot of the noise in the quarter. On the call, you just said that, of the $44 million pre-tax loss, $43.8 million came from the restructuring and non-recurring.

Scott J. McKim: Hi. I am just trying to cut through a lot of the noise in the quarter. On the call you just said that of the $44 million pre-tax loss, $43.8 million came from the restructuring and non-recurring. That implies still a loss for the quarter, excluding all one-time, or what was the core earnings power in the quarter?

Scott McKim: Hi. I am just trying to cut through a lot of the noise in the quarter. On the call you just said that of the $44 million pre-tax loss, $43.8 million came from the restructuring and non-recurring. That implies still a loss for the quarter, excluding all one-time, or what was the core earnings power in the quarter?

Speaker #6: So that implies there's still a loss for the quarter, excluding all one-time items? Or what was the core earnings power in the quarter?

Speaker #5: I think if I understand your question, the one-time items and the asset resolution component was $43.8 million. The total loss was $44 million.

Scott J. McKim: I think if I understand your question, the one-time items in the asset resolution component was $43.8 million.

Scott McKim: I think if I understand your question, the one-time items in the asset resolution component was $43.8 million.

Julianne Kassarino: Three,

Julienne Cassarino: Three,

Scott J. McKim: The total loss was $44 million. The remaining operating loss to think about was about $200,000 for the quarter.

Scott McKim: The total loss was $44 million. The remaining operating loss to think about was about $200,000 for the quarter.

Speaker #5: So the remaining operating loss to think about was about $200,000 for the quarter.

Speaker #6: And that was just a regular, recurring operating loss, right? Is that correct?

Julianne Kassarino: That was just a regular recurring operating loss, right? Is that correct?

Julienne Cassarino: That was just a regular recurring operating loss, right? Is that correct?

Speaker #5: Yeah, I think you can refer to that as being core, Julianne.

Scott J. McKim: Yeah, I think you can refer to that as being core, Julianne.

Scott McKim: Yeah, I think you can refer to that as being core, Julianne.

Speaker #6: Okay, so really, the core earnings power that we're starting with is kind of zero right now, right? Or is there anything masking that?

Julianne Kassarino: Okay. The core earnings power that we're starting with is kind of zero right now, right? Or is there anything masking that? Is there any core earnings power on the non-resolution piece?

Julienne Cassarino: Okay. The core earnings power that we're starting with is kind of zero right now, right? Or is there anything masking that? Is there any core earnings power on the non-resolution piece?

Speaker #6: Is there any core earnings power on the non-resolution piece?

Speaker #5: I will tell you this: as we look forward, essentially, the things that we talked about—if you recall, I mentioned the net interest margin, really on a core basis, was 4.07%.

Scott J. McKim: I will tell you this. As we look forward, essentially the things that we talked about. If you recall, I mentioned on the net interest margin, really on a core basis, was 4.07%.

Scott McKim: I will tell you this. As we look forward, essentially the things that we talked about. If you recall, I mentioned on the net interest margin, really on a core basis, was 4.07%.

Speaker #5: So, there's a lot more in terms of overall earnings and revenue that we are expecting going forward, plus all of the components that Al talked about in terms of growth in the balance sheet.

Scott J. McKim: There's a lot more in terms of overall earnings revenue that we are expecting going forward, plus all of the components that Al talked about in terms of growth in the balance sheet, combined with continued efforts to reduce the bank's overall cost of funds. I'd like to think about it from the standpoint that core earnings in the second quarter was just below break even. But now that we have a clear path ahead, a lot of strength, a lot of good focus as far as what's coming, the bank is positioned for profitable earnings going forward.

Scott McKim: There's a lot more in terms of overall earnings revenue that we are expecting going forward, plus all of the components that Al talked about in terms of growth in the balance sheet, combined with continued efforts to reduce the bank's overall cost of funds. I'd like to think about it from the standpoint that core earnings in the second quarter was just below break even. But now that we have a clear path ahead, a lot of strength, a lot of good focus as far as what's coming, the bank is positioned for profitable earnings going forward.

Speaker #5: Combined with continued efforts to reduce the bank's overall cost of funds, so I'd like to think about it from the standpoint that core earnings in the second quarter was just below break even, but now that we have a clear path ahead, a lot of strength, a lot of good focus as far as what's coming, the bank is positioned for profitable earnings going forward.

Speaker #6: Okay. With operating leverage and stuff, what about the tax rate? So, is there a deferred tax—is there a DTA valuation allowance that's been set up, or no?

Julianne Kassarino: Okay. With operating leverage and stuff. What about the tax rate?

Julienne Cassarino: Okay. With operating leverage and stuff. What about the tax rate?

Scott J. McKim: Yes.

Scott McKim: Yes.

Julianne Kassarino: Is there a DTA valuation allowance that has been set up or no?

Julienne Cassarino: Is there a DTA valuation allowance that has been set up or no?

Speaker #5: No, there's no valuation allowance against the deferred tax asset. Truthfully, and these are conversations that, obviously, we've had internally, the bank is positioned for profitable growth going forward.

Scott J. McKim: No, there is no valuation allowance against the deferred tax asset. Truthfully, and these are conversations that obviously we have had internally, the bank is positioned for profitable growth going forward. A new leadership team, a lot of strength is coming in. We believe that we will have no issues whatsoever in terms of reacquiring that asset in the future. There is no valuation allowance at this time. Like I said, we continue to look at it, but at this time it is zero.

Scott McKim: No, there is no valuation allowance against the deferred tax asset. Truthfully, and these are conversations that obviously we have had internally, the bank is positioned for profitable growth going forward. A new leadership team, a lot of strength is coming in. We believe that we will have no issues whatsoever in terms of reacquiring that asset in the future. There is no valuation allowance at this time. Like I said, we continue to look at it, but at this time it is zero.

Speaker #5: And with a new leadership team, a lot of strength is coming in. We believe that we will have no issues whatsoever in terms of reacquiring that asset in the future.

Speaker #5: So, there is no valuation allowance at this time. Like I said, we continue to look at it, but at this time, it is zero.

Speaker #6: Okay. So does that mean what tax rate to use going forward?

Julianne Kassarino: Okay. Does that mean what tax rate to use going forward?

Julienne Cassarino: Okay. Does that mean what tax rate to use going forward?

Speaker #5: The tax rate for the quarter is about 25%.

Scott J. McKim: Tax rate for the quarter is about 25%.

Scott McKim: Tax rate for the quarter is about 25%.

Speaker #6: Okay. Okay. And so the quarter end, did that include the redemption payments of, I think, almost $10 million, right? The $9.7 million payment to redeem the—forgive me if I get the names wrong—but basically the preferred holders, did that $9.7 million include yet that payment?

Julianne Kassarino: Okay. And so the quarter, did that include the redemption payments of, I think, almost $10 million, right? The $9.7 million payments to redeem the, forgive me if I get the names wrong, but basically the preferred holders. Is that $9.7 million included yet, that payment, and is that pre-tax or after tax? Should we be adjusting the TCE for that?

Julienne Cassarino: Okay. And so the quarter, did that include the redemption payments of, I think, almost $10 million, right? The $9.7 million payments to redeem the, forgive me if I get the names wrong, but basically the preferred holders. Is that $9.7 million included yet, that payment, and is that pre-tax or after tax? Should we be adjusting the TCE for that?

Speaker #6: And is that pre-tax or after-tax? Should we be adjusting the TCE for that, or?

Scott J. McKim: The payout for the Series A and Series B, which I think you are referring to, actually concluded this week. So that will actually get Q3 event.

Scott McKim: The payout for the Series A and Series B, which I think you are referring to, actually concluded this week. So that will actually get Q3 event.

Speaker #5: The payout for the Series A and Series B, which I think you're referring to, actually concluded this week. So that will actually be at the Q3 event.

Speaker #6: That's in Q3. So, does that total $9.7 million? Is that pre-tax or after?

Julianne Kassarino: That is a Q3. So that is totaled $9.7 million, right? Is that pre-tax or after?

Julienne Cassarino: That is a Q3. So that is totaled $9.7 million, right? Is that pre-tax or after?

Scott J. McKim: It is a redemption. It is not really an income statement component, so it is not an earnings.

Scott McKim: It is a redemption. It is not really an income statement component, so it is not an earnings.

Speaker #5: It's a redemption; it's not really an income statement component, so it's not an earnings hit.

Speaker #6: Oh, but is it a TC? Does it come out of tangible common equity, or no, because it's just one bucket from the other? Okay.

Julianne Kassarino: Oh, but does it come out of tangible common equity? Or no, because it just goes from one bucket to another.

Julienne Cassarino: Oh, but does it come out of tangible common equity? Or no, because it just goes from one bucket to another.

Scott J. McKim: We have already adjusted for that. Yeah.

Scott McKim: We have already adjusted for that. Yeah.

Julianne Kassarino: Okay. So no.

Julienne Cassarino: Okay. So no.

Speaker #6: So, no—no impact on TC from that. No impact on shares, either, right? Share count?

Scott J. McKim: Correct. Yeah.

Scott McKim: Correct. Yeah.

Julianne Kassarino: No impact on TCE from that. No impact on shares either, right? The share count.

Julienne Cassarino: No impact on TCE from that. No impact on shares either, right? The share count.

Speaker #5: Correct.

Scott J. McKim: Correct.

Scott McKim: Correct.

Speaker #6: So the redemption payment is kind of going from one bucket to another. Don't need to adjust for that. What about the exchange, too? Nothing to adjust for that?

Julianne Kassarino: The redemption payment is kind of going from one bucket to another. Don't need to adjust for that. What about the exchange too? Nothing to adjust for that? You mentioned 22.9 million shares from an exchange. But we don't have to adjust for that, or is that a Q3 adjustment that we should make?

Julienne Cassarino: The redemption payment is kind of going from one bucket to another. Don't need to adjust for that. What about the exchange too? Nothing to adjust for that? You mentioned 22.9 million shares from an exchange. But we don't have to adjust for that, or is that a Q3 adjustment that we should make?

Speaker #6: You mentioned 22.9 million shares from an exchange, but we don't have to adjust for that, or is that a third quarter adjustment that we should make?

Speaker #5: Yeah, it's a third quarter event, but that is your preference to comment. And obviously, the share count is going to go up accordingly as well.

Scott J. McKim: Yeah. It's a Q3 event, but that moves from preferred to common. And obviously-

Scott McKim: Yeah. It's a Q3 event, but that moves from preferred to common. And obviously-

Julianne Kassarino: So we're going to

Julienne Cassarino: So we're going to

Scott J. McKim: the share count's going to go up accordingly as well. Yeah. So if you're asking the tangible book value already has that dilution component baked into it.

Scott McKim: the share count's going to go up accordingly as well. Yeah. So if you're asking the tangible book value already has that dilution component baked into it.

Speaker #5: Yeah, so if you're asking about the tangible book value, you already have that dilution component baked into it.

Speaker #6: That's what I was asking. Okay. Now, so the only thing to adjust in the third quarter for tangible book per share is the rights offering.

Julianne Kassarino: That's what I was asking. Okay. Now, the only thing to adjust in Q3 for tangible book per share is the rights offering. Is that correct?

Julienne Cassarino: That's what I was asking. Okay. Now, the only thing to adjust in Q3 for tangible book per share is the rights offering. Is that correct?

Speaker #6: Is that correct?

Speaker #5: That is correct. And obviously, we would, but we're not sure how much we will get. We'll report that when it's done.

Scott J. McKim: That is correct. And obviously

Scott McKim: That is correct. And obviously

Julianne Kassarino: Okay. Because

Julienne Cassarino: Okay. Because

Scott J. McKim: we would like to maximize that for shareholders, but we are not sure how much we will get. We will report that when it is done.

Scott McKim: we would like to maximize that for shareholders, but we are not sure how much we will get. We will report that when it is done.

Speaker #6: So let's just assume everyone exercised, that everyone who could exercises at $3.50, I believe it is. So what would be the impact on TCE and share count if everyone were to exercise?

Julianne Kassarino: Let us just assume everyone exercised, that everyone who could exercises at $3.50, I believe it is. So what would be that impact on TCE and share count if everyone were to exercise? Is that something I can calculate or?

Julienne Cassarino: Let us just assume everyone exercised, that everyone who could exercises at $3.50, I believe it is. So what would be that impact on TCE and share count if everyone were to exercise? Is that something I can calculate or?

Speaker #6: Is that something I can calculate, or?

Speaker #5: Yeah, 350 at 4.1 million shares.

Scott J. McKim: Yeah. $3.50 at 4.1 million shares.

Scott McKim: Yeah. $3.50 at 4.1 million shares.

Speaker #6: 4.1 million?

Julianne Kassarino: 4.1 million?

Julienne Cassarino: 4.1 million?

Speaker #5: Yes. Yeah.

Scott J. McKim: Yes. Yeah. Mm-hmm.

Scott McKim: Yes. Yeah. Mm-hmm.

Speaker #6: Okay. Okay. All right. All right. Very good. It was the 4.1, I think, I needed to have. Okay. And then just to ask about the deposit franchise, so you mentioned that you've gone through the loan book pretty completely. But now, the deposit franchise—is there, have you finished the review of depositors?

Julianne Kassarino: Okay. All right. Very good. It was the 4.1 I think I needed to have. Okay, then just to ask about the deposit franchise. You mentioned that you have gone through the loan book pretty completely, but now the deposit franchise. Have you finished the review of depositor? You mentioned in the press release, I think, or the earnings release, non-relationship customers. About what percent of the deposit franchise right now would you estimate is non-relationship customers approximately?

Julienne Cassarino: Okay. All right. Very good. It was the 4.1 I think I needed to have. Okay, then just to ask about the deposit franchise. You mentioned that you have gone through the loan book pretty completely, but now the deposit franchise. Have you finished the review of depositor? You mentioned in the press release, I think, or the earnings release, non-relationship customers. About what percent of the deposit franchise right now would you estimate is non-relationship customers approximately?

Speaker #6: You mentioned in the press release, I think—the earnings release—non-relationship customers. About what percent of the deposit franchise right now would you estimate is non-relationship customers, approximately?

Speaker #5: It's Julianne. It's very small. We are strictly focused on relationship-based, I guess, depositors, and when I say relationship, it's not just on the deposit side.

Scott J. McKim: Julianne, it is very small.

Scott McKim: Julianne, it is very small.

Julianne Kassarino: Okay.

Julienne Cassarino: Okay.

Scott J. McKim: We are strictly focused on relationship-based depositors. When I say relationship, it is not just the deposit side. In a lot of cases, we also have lending relationships. That is something that we have really been focused on, and I think Alan did a really nice job of explaining how we will go about that in the future. The key thing is, in the past we had some relatively large, what I will call Well, I will just say it. They were more of a place for entities to park money. We were paying them a very attractive rate to do it because it was funding business, funding loan growth around the SBA business. That is not what we are doing any longer. We had conversations with those people. We said, "Look, we are not going to pay these rates anymore.

Scott McKim: We are strictly focused on relationship-based depositors. When I say relationship, it is not just the deposit side. In a lot of cases, we also have lending relationships. That is something that we have really been focused on, and I think Alan did a really nice job of explaining how we will go about that in the future. The key thing is, in the past we had some relatively large, what I will call Well, I will just say it. They were more of a place for entities to park money. We were paying them a very attractive rate to do it because it was funding business, funding loan growth around the SBA business. That is not what we are doing any longer. We had conversations with those people. We said, "Look, we are not going to pay these rates anymore.

Speaker #5: In a lot of cases, we also have lending relationships. That's something that we have really been focused on, and I think Al did a really nice job of explaining how we will go about that in the future.

Speaker #5: The key thing is, in the past we had some relatively large—what I'll call, well, I'll just say it. I mean, they were more of a place for entities to park money.

Speaker #5: We were paying them a very attractive rate to do it because it was funding business—funding loan growth around the SBA business. That's not what we're doing any longer.

Speaker #5: So, we've had conversations with those people. We said, "Look, we're not going to pay these rates anymore—they're out of market." Most of that money has left, and that was by design, as well as due to the runoff of the brokered deposits that we have.

Scott J. McKim: They are out of market." Most of that money has left, and that was by design, as well as the runoff of the brokered deposits that we have, and that was also part of our strategy.

Scott McKim: They are out of market." Most of that money has left, and that was by design, as well as the runoff of the brokered deposits that we have, and that was also part of our strategy.

Speaker #5: And that was also part of our strategy.

Speaker #6: Right. So you'd say this quarter, or as this quarter ends, the deposit franchise is what? There's no more transition to be done, looking at the interest-free and the broker.

Julianne Kassarino: Right. So you would say this quarter end's deposit franchise is what? There is no more transition to be done. Looking at the interest free and the broker. This is a good base to go forward. There is no more-

Julienne Cassarino: Right. So you would say this quarter end's deposit franchise is what? There is no more transition to be done. Looking at the interest free and the broker. This is a good base to go forward. There is no more-

Speaker #6: This is a good base to go forward. There's no more.

Speaker #5: Yeah. Excluding, yeah, there's still some brokerage in there that's going to run off, but really, what's there, I'm going to call core deposits, I suppose.

Scott J. McKim: Yeah. Excluding Yeah. There is still some brokered in there that is going to run off. But really what is there I am going to call core deposits, I suppose.

Scott McKim: Yeah. Excluding Yeah. There is still some brokered in there that is going to run off. But really what is there I am going to call core deposits, I suppose.

Speaker #6: Right. And is it all local? Is it 100% local, or about how much would you say is out of market? Just excluding the brokerage.

Julianne Kassarino: Right. Is it all local? Is it 100% local, or about how much would you say is out-of-market? Just excluding the brokered. So excluding brokered, is it all predominantly local customers?

Julienne Cassarino: Right. Is it all local? Is it 100% local, or about how much would you say is out-of-market? Just excluding the brokered. So excluding brokered, is it all predominantly local customers?

Speaker #6: So, excluding brokerage, is it all predominantly local customers?

Speaker #5: It's local. It's local. Yes. Yeah. These are people we know that you can drive for about an hour to go visit them. Yeah.

Scott J. McKim: It's local. Yes. These are people-

Scott McKim: It's local. Yes. These are people-

Julianne Kassarino: Okay

Julienne Cassarino: Okay

Scott J. McKim: We know that you can drive for about an hour to go visit them. Yeah.

Scott McKim: We know that you can drive for about an hour to go visit them. Yeah.

Speaker #6: Okay. Great. Great. And is any one customer more than or any one customer 5 to 10 percent or more of total deposits?

Julianne Kassarino: Okay. Great. Is any one customer 5% to 10% or more of total deposits?

Julienne Cassarino: Okay. Great. Is any one customer 5% to 10% or more of total deposits?

Speaker #5: No.

Scott J. McKim: No.

Scott McKim: No.

Speaker #6: Okay. Great. Thank you so much. Thank you.

Julianne Kassarino: Okay, great. Thank you so much. Thank you.

Julienne Cassarino: Okay, great. Thank you so much. Thank you.

Speaker #5: You got it. Sure.

Scott J. McKim: You got it. Sure.

Scott McKim: You got it. Sure.

Speaker #3: Your next question comes from the line of Ian Greene with Penn Dragon Capital Management. Your line is open. Please go ahead.

Marina: Your next question comes from the line of Ian Greig with Pentagon Capital Management. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Ian Green with Pendragon Capital Management. Your line is open. Please go ahead.

Speaker #7: Hi, thank you. There are lots of great questions here. I just wanted to come back a little bit to some of the new initiatives, like your treasury business, as well as some other incentives or initiatives to grow fee income.

Ian Greig: Hi. Thank you. Lots of great questions here. I just wanted to kind of come back a little bit to some of the new initiatives, like your treasury business and some other initiatives to grow fee income. Do you have the systems in place to do that? Is this going to require any significant capital expenditures in technology and so forth? I guess, it is a very crowded space, a lot of those businesses. Where do you think you have the edge to compete?

Ian Green: Hi. Thank you. Lots of great questions here. I just wanted to kind of come back a little bit to some of the new initiatives, like your treasury business and some other initiatives to grow fee income. Do you have the systems in place to do that? Is this going to require any significant capital expenditures in technology and so forth? I guess, it is a very crowded space, a lot of those businesses. Where do you think you have the edge to compete?

Speaker #7: Do you have the systems in place to do that? Is this going to require any significant capital expenditures in technology, and so forth? And I guess it's a very crowded space—a lot of those businesses.

Speaker #7: Where do you think you have the edge to compete?

Speaker #2: Yeah. Hi, Ian, this is Robin. I'll take that one. We do already have the systems in place that we need. I think we have all the tools to be successful here.

Robin L. Oliver: Yeah. Hi, Ian. This is Robin. I will take that one. We do already have the systems in place that we need. I think we have all the tools to be successful here. If you look at our growth in 2025 over 2024, our treasury fee revenue grew about 75% year over year, and we continue to be on track to continue that increase this year. I think really what it is we move up market a bit. We are now really targeting our commercial business customers, and we are going to be banking some larger businesses than we have in the past, and those customers have more sophisticated needs. Basically, if we are going to do their loan, we are going to get their operating account, and those operating accounts are just, by the nature of the business, going to come with treasury.

Robin Oliver: Yeah. Hi, Ian. This is Robin. I will take that one. We do already have the systems in place that we need. I think we have all the tools to be successful here. If you look at our growth in 2025 over 2024, our treasury fee revenue grew about 75% year over year, and we continue to be on track to continue that increase this year. I think really what it is we move up market a bit. We are now really targeting our commercial business customers, and we are going to be banking some larger businesses than we have in the past, and those customers have more sophisticated needs. Basically, if we are going to do their loan, we are going to get their operating account, and those operating accounts are just, by the nature of the business, going to come with treasury.

Speaker #2: And if you look at our growth in '25 over '24, our treasury fee revenue grew about 75% year over year. And we continue to be on track to maintain that increase.

Speaker #2: This year, I think really what it is, is we moved up market a bit. We are now really targeting our commercial business customers, and we are going to be banking some larger businesses than we have in the past.

Speaker #2: And those customers have more sophisticated needs. And, basically, if we're going to do their loan, we're going to get their operating account. And those operating accounts are, just by the nature of the business, going to come with treasury.

Speaker #2: So I really think there's a strong opportunity there. We have two different treasury platforms: one for very small businesses and another that is more sophisticated.

Robin L. Oliver: I really think there is a strong opportunity there. We have two different treasury platforms, one for very small businesses and another that is more sophisticated. I think we are well-positioned.

Robin Oliver: I really think there is a strong opportunity there. We have two different treasury platforms, one for very small businesses and another that is more sophisticated. I think we are well-positioned.

Speaker #2: So, I think we're well positioned.

Speaker #5: Yeah. I'll add that—talk about the edge. Our bankers know their customers. They're accessible. At 5 o'clock, they don't turn their cell phones off.

Alfred T. Rogers: Yeah. I will add that.

Al Rogers: Yeah. I will add that.

Ian Greig: Okay.

Ian Green: Okay.

Alfred T. Rogers: This is Al. Talk about the edge. Our bankers know their customers. They are accessible. At 5:00, they do not turn their cell phones off. It is true relationships, solving problems, being accessible, being local, not outsourcing or offshoring customer support. Generally speaking, banking professional executives in small businesses and investors and companies, they generally have larger average balances, and their cost of funds is generally lower. That comes with our initiative to act as a commercial bank serving commercial customers in our community. It comes all together.

Al Rogers: This is Al. Talk about the edge. Our bankers know their customers. They are accessible. At 5:00, they do not turn their cell phones off. It is true relationships, solving problems, being accessible, being local, not outsourcing or offshoring customer support. Generally speaking, banking professional executives in small businesses and investors and companies, they generally have larger average balances, and their cost of funds is generally lower. That comes with our initiative to act as a commercial bank serving commercial customers in our community. It comes all together.

Speaker #5: So it's true: relationships, solving problems, being accessible, being local—not outsourcing or offshoring customer support. And generally speaking, banking professionally, executives, and small businesses and investors and companies generally have larger average balances, and their cost of funds is generally lower.

Speaker #5: So that comes with our initiative to act as a commercial bank serving commercial customers in our community. So it all comes together.

Speaker #7: Okay, thanks. So, in the end, we shouldn't see a significant—

Ian Greig: Okay. Thanks. So in the end, we shouldn't see a significant

Ian Green: Okay. Thanks. So in the end, we shouldn't see a significant

Speaker #2: There won't be a significant investment. I mean, we will need to continue to expand the treasury team; it's a small team today. They're a small but mighty team.

Robin L. Oliver: There won't be a significant investment. We will need to continue to expand the treasury team. It's a small team today. They're a small but mighty team. But certainly, the opportunities that this will provide will need some additions to the team. But we don't have investments in software or other things, and certainly the revenue that we get from it should balance off the additional costs that we may have.

Robin Oliver: There won't be a significant investment. We will need to continue to expand the treasury team. It's a small team today. They're a small but mighty team. But certainly, the opportunities that this will provide will need some additions to the team. But we don't have investments in software or other things, and certainly the revenue that we get from it should balance off the additional costs that we may have.

Speaker #2: But certainly, the opportunities that this will provide will require some additions to the team. But we don't have investments in software or other things, and certainly the revenue.

Speaker #2: What we get from it should balance off the additional costs that we may have.

Marina: There are no more questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Operator: There are no more questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.