Q2 2026 Enterprise Financial Services Corp Earnings Call

July 23, 2026

Operator 2: Thank you for joining us and welcome to the Enterprise Financial Services Corp 2026 Earnings Conference Call. 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 James Lally, President and Chief Executive Officer. Please go ahead.

Operator: Thank you for joining us and welcome to the Enterprise Financial Services Corp 2026 Earnings Conference Call. 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 Jim Lally, President and Chief Executive Officer. Please go ahead.

Speaker #1: 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 Jim Lally, President and CEO.

Speaker #1: Please go ahead.

Speaker #2: Thank you all very much for joining us this morning, and welcome to our 2026 second quarter earnings call. Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank and Trust.

James Lally: Thank you all very much for joining us this morning, welcome to our 2026 Q2 earnings call. Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank & Trust. Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. The presentation and earnings release were furnished on SEC form 8-K yesterday. Please refer to slide two of the presentation titled Forward-Looking Statements and our most recent 10-K for reasons why actual results may vary from any forward-looking statements that we make today. Our financial scorecard begins on slide three. For the quarter, we earned $41 million, or $1.09 per diluted share.

Jim Lally: Thank you all very much for joining us this morning, welcome to our 2026 Q2 earnings call. Joining me this morning is Keene Turner, EFSC's Chief Financial Officer and Chief Operating Officer, and Doug Bauche, Chief Banking Officer of Enterprise Bank & Trust. Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. The presentation and earnings release were furnished on SEC form 8-K yesterday. Please refer to slide two of the presentation titled Forward-Looking Statements and our most recent 10-K for reasons why actual results may vary from any forward-looking statements that we make today. Our financial scorecard begins on slide three. For the quarter, we earned $41 million, or $1.09 per diluted share.

Speaker #2: Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website.

Speaker #2: The presentation and earnings release were furnished on SCC form 8K yesterday. Please refer to slide 2 of the presentation titled "Forward-looking Statements" and our most recent 10K for reasons why actual results may vary from any forward-looking statements that we make today.

Speaker #2: Our financial scorecard begins on slide 3. For the quarter, we earned $41 million, or $1.09 per diluted share. This compares to the $1.30 that we earned in the first quarter of this year, and the $1.36 that we earned during the second quarter of 2025.

James Lally: This compared to the $1.30 that we earned in the Q1 of this year and the $1.36 that we earned during the Q2 2025. This level of performance produced a return on average assets of 95 basis points and a pre-provision ROAA of 1.58%. While our core operating performance remained stable, a larger than expected provision expense impacted the operating results for the period. During the quarter, we took the opportunity to reposition our securities portfolio by selling investments with tax-equivalent yields in the low threes and reinvesting the proceeds into securities with tax-equivalent yields in the low fives, resulting in an additional $3.5 million in net interest income annually.

Jim Lally: This compared to the $1.30 that we earned in the Q1 of this year and the $1.36 that we earned during the Q2 2025. This level of performance produced a return on average assets of 95 basis points and a pre-provision ROAA of 1.58%. While our core operating performance remained stable, a larger than expected provision expense impacted the operating results for the period. During the quarter, we took the opportunity to reposition our securities portfolio by selling investments with tax-equivalent yields in the low threes and reinvesting the proceeds into securities with tax-equivalent yields in the low fives, resulting in an additional $3.5 million in net interest income annually.

Speaker #2: This level of performance produced a return on average assets of 95 basis points and a pre-provisioned ROAA of 1.58%. While our core operating performance remained stable, a larger-than-expected provision expense impacted the operating results for the period.

Speaker #2: During the quarter, we took the opportunity to reposition our securities portfolio by selling investments with tax-equivalent yields in the low 3s and reinvesting the proceeds into securities with tax-equivalent yields in the low 5s, resulting in an additional 3.5 million dollars in net interest income annually.

James Lally: Pulling this lever resulted in a current period pre-tax loss of approximately $6 million that was mostly offset by over $4 million in pre-tax gains on the sale of Visa Class B common stock and the sale of a piece of land. Net interest income expanded by $2.6 million to $169 million, and net interest margin expanded 2 basis points to 4.30% when compared to the linked quarter. Higher loan and investment balances, coupled with higher rates and stable deposit costs, contributed to these results. Given the increasingly competitive environment that we find ourselves in, I'm pleased with how we were able to defend margin with our relationship-oriented business model. Our well-positioned balance sheet continues to be a strength for our company as it continues to provide great flexibility with respect to capital planning.

Jim Lally: Pulling this lever resulted in a current period pre-tax loss of approximately $6 million that was mostly offset by over $4 million in pre-tax gains on the sale of Visa Class B common stock and the sale of a piece of land. Net interest income expanded by $2.6 to 169 million, and net interest margin expanded 2 basis points to 4.30% when compared to the linked quarter. Higher loan and investment balances, coupled with higher rates and stable deposit costs, contributed to these results. Given the increasingly competitive environment that we find ourselves in, I'm pleased with how we were able to defend margin with our relationship-oriented business model. Our well-positioned balance sheet continues to be a strength for our company as it continues to provide great flexibility with respect to capital planning.

Speaker #2: Pulling this lever resulted in a current period pre-tax loss of approximately $6 million, that was mostly offset by over $4 million in pre-tax gains on the sale of Visa Class B common stock and the sale of a piece of land.

Speaker #2: Net interest income expanded by $2.6 million to $169 million, and net interest margin expanded 2 basis points to 4.30% when compared to the prior quarter.

Speaker #2: Higher loan and investment balances coupled with higher rates and stable deposit costs contributed to these results. Given the increasingly competitive environment that we find ourselves in, I'm pleased with how we were able to defend margin with our relationship-oriented business model.

Speaker #2: Our well-positioned balance sheet continues to be a strength for our company, as it provides great flexibility with respect to capital planning. Capital levels at quarter-end remain stable and strong, with total stockholders' equity at $2 billion and a tangible common equity to tangible assets ratio of 9.04%.

James Lally: Capital levels at quarter end remain stable and strong with total stockholders' equity at $2 billion and the tangible common equity to tangible assets ratio of 9.04%. Additionally, our tangible book value per share increased to $42.30. Other balance sheet activity during the quarter included the repurchase of 382,000 shares, the aforementioned balance sheet restructure, and the issuance of $175 million of 6.25% fixed to floating rate subordinated notes. All three of these tactics put us in great shape for the growth and expanded profitability for quarters to come. Keene will discuss all three of these strategies in his comments. Turning to slide four, you will see that loan balances grew as we expected by $200 million in the quarter.

Jim Lally: Capital levels at quarter end remain stable and strong with total stockholders' equity at $2 billion and the tangible common equity to tangible assets ratio of 9.04%. Additionally, our tangible book value per share increased to $42.30. Other balance sheet activity during the quarter included the repurchase of 382,000 shares, the aforementioned balance sheet restructure, and the issuance of $175 million of 6.25% fixed to floating rate subordinated notes. All three of these tactics put us in great shape for the growth and expanded profitability for quarters to come. Keene will discuss all three of these strategies in his comments. Turning to slide four, you will see that loan balances grew as we expected by $200 million in the quarter.

Speaker #2: Additionally, our tangible book value per share increased to $42.30. Other balance sheet activity during the quarter included the repurchase of 382,000 shares, the aforementioned balance sheet restructure, and the issuance of $175 million of 6.25% fixed-to-floating rate subordinated notes.

Speaker #2: All three of these tactics put us in great shape for the growth and expanded profitability for quarters to come. Keene will discuss all three of these strategies in his comments.

Speaker #2: Turning to slide 4, you will see that loan balances grew as we expected by 200 million dollars in the quarter. Doug will get into the specifics of where we saw this growth and other nuances related to our markets and businesses, but I appreciate the diversity of where we experienced this growth and would expect similar activity for the remainder of the year.

James Lally: Doug will get into the specifics of where we saw this growth and other nuances related to our markets and businesses, but I appreciate the diversity of where we experienced this growth and would expect similar activity for the remainder of the year. Our diversified deposit base continues to be a differentiator for us. While overall deposit growth was flat for the quarter, we did see a positive remixing that resulted in DDA growing modestly to 34% of total deposits and overall cost of deposits remaining flat at 1.53%. We are working on several exciting opportunities in this area, and when combined with our normal back-of-the-year swell, should produce a similar level of deposit growth that we have achieved in the years past.

Jim Lally: Doug will get into the specifics of where we saw this growth and other nuances related to our markets and businesses, but I appreciate the diversity of where we experienced this growth and would expect similar activity for the remainder of the year. Our diversified deposit base continues to be a differentiator for us. While overall deposit growth was flat for the quarter, we did see a positive remixing that resulted in DDA growing modestly to 34% of total deposits and overall cost of deposits remaining flat at 1.53%. We are working on several exciting opportunities in this area, and when combined with our normal back-of-the-year swell, should produce a similar level of deposit growth that we have achieved in the years past.

Speaker #2: Our diversified deposit base continues to be a differentiator for us. While overall deposit growth was flat for the quarter, we did see a positive remixing that resulted in DDA growing modestly to 34% of total deposits and overall cost of deposits remaining flat at 1.53%.

Speaker #2: We are working on several exciting opportunities in this area, and when combined with our normal back-of-the-year swell, should produce a similar level of deposit growth that we have achieved in the years past.

Speaker #2: Our teams have worked extremely hard for many years to garner full relationships. The results of which are the combination of larger, more sophisticated commercial relationships, granular business banking and consumer accounts, and the expanding national deposit verticals.

James Lally: Our teams have worked extremely hard for many years to garner full relationships, the results of which are the combination of larger, more sophisticated commercial relationships, granular business banking and consumer accounts, and the expanding national deposit verticals. In my opening comments, I mentioned a higher provision expense in the quarter than we expected. Late in the quarter, we experienced approximately $14 million in charge-offs related to two commercial accounts. The first of these was a Texas-based C&I relationship that failed on the integration of an expansion strategy and subsequently had to be liquidated. The second of these was an entity within our sponsor finance group whose healthcare consulting business model was severely disrupted when the Centers for Medicare & Medicaid announced on 13 May a 6-month moratorium on all new hospices and home health agencies.

Jim Lally: Our teams have worked extremely hard for many years to garner full relationships, the results of which are the combination of larger, more sophisticated commercial relationships, granular business banking and consumer accounts, and the expanding national deposit verticals. In my opening comments, I mentioned a higher provision expense in the quarter than we expected. Late in the quarter, we experienced approximately $14 million in charge-offs related to two commercial accounts. The first of these was a Texas-based C&I relationship that failed on the integration of an expansion strategy and subsequently had to be liquidated. The second of these was an entity within our sponsor finance group whose healthcare consulting business model was severely disrupted when the Centers for Medicare & Medicaid announced on 13 May a 6-month moratorium on all new hospices and home health agencies.

Speaker #2: In my opening comments, I mentioned a higher provision expense in the quarter than we expected. Late in the quarter, we experienced approximately $14 million in charge-offs related to two commercial accounts.

Speaker #2: The first of these was a Texas-based C&I relationship that failed on the integration of an expansion strategy and subsequently had to be liquidated. The second of these was an entity within our sponsor finance group, whose healthcare consulting business model was severely disrupted, when the Centers for Medicare and Medicaid announced on May 13 a 6-month moratorium on all new hospices and home health agencies.

Speaker #2: With this change, ownership concluded that there was not an opportunity to rehabilitate the business, given this nationwide regulatory action. Through the first quarter of 2026, this company was generating positive cash flow, and was current on all debt.

James Lally: With this change, ownership concluded that there was not an opportunity to rehabilitate the business given this nationwide regulatory action. Through the Q1 2026, this company was generating positive cash flow and was current on all debt, but things obviously deteriorated quickly, and the business ceased operations abruptly in early June. With the charges taken in Q2, our net charge-offs year to date are 31 basis points annualized, and we expect to have better results in the back half of the year. All other credit statistics were relatively stable in the quarter. On our Q1 earnings call, I reported that we had four of the seven Southern California OREO properties under contract. Since then, a party has filed an appeal to the bankruptcy court's ruling, which challenges title to one of the properties that is not under contract.

Jim Lally: With this change, ownership concluded that there was not an opportunity to rehabilitate the business given this nationwide regulatory action. Through the Q1 2026, this company was generating positive cash flow and was current on all debt, but things obviously deteriorated quickly, and the business ceased operations abruptly in early June. With the charges taken in Q2, our net charge-offs year to date are 31 basis points annualized, and we expect to have better results in the back half of the year. All other credit statistics were relatively stable in the quarter. On our Q1 earnings call, I reported that we had four of the seven Southern California OREO properties under contract. Since then, a party has filed an appeal to the bankruptcy court's ruling, which challenges title to one of the properties that is not under contract.

Speaker #2: But things obviously deteriorated quickly, and the business ceased operations abruptly in early June. With the charges taken in Q2, our net charge-offs year-to-date are 31 basis points annualized, and we expect to have better results in the back half of the year.

Speaker #2: All other credit statistics were relatively stable in the quarter. On our first quarter earnings call, I reported that we had 4 of the 7 Southern California OREO properties under contract.

Speaker #2: Since then, a party has filed an appeal to the bankruptcy court's ruling, which challenges title to one of the properties that is not under contract.

Speaker #2: This appeal has delayed our ability to close on those that are contracted for sale. The buyers of these properties remain committed, and we fully expect to resolve this and execute on the disposition.

James Lally: This appeal has delayed our ability to close on those that are contracted for sale. The buyers of these properties remain committed, and we fully expect to resolve this and execute on the disposition. There's a table in our press release that provides some insight and further clarity with respect to our NPAs. You can see that $135 million of the $160 million of non-performing assets, net of government guarantees, are secured by real estate that mostly has been recently appraised. These values support our comfortability, and we expect to resolve these with little or no loss. I would characterize the remaining $25 million, or 14 basis points, as normal for our company. Turning to slide five, you will see our priorities for the remainder of the year.

Jim Lally: This appeal has delayed our ability to close on those that are contracted for sale. The buyers of these properties remain committed, and we fully expect to resolve this and execute on the disposition. There's a table in our press release that provides some insight and further clarity with respect to our NPAs. You can see that $135 million of the $160 million of non-performing assets, net of government guarantees, are secured by real estate that mostly has been recently appraised. These values support our comfortability, and we expect to resolve these with little or no loss. I would characterize the remaining $25 million, or 14 basis points, as normal for our company. Turning to slide five, you will see our priorities for the remainder of the year.

Speaker #2: There is a table in our press release that provides some insight in further clarity with respect to our NPAs. You can see that 135 million dollars of the 160 million dollars of non-performing assets net of government guarantees are secured by real estate that mostly has been recently appraised.

Speaker #2: These values support our comfortability, and we expect to resolve these with little or no loss. I would characterize the remaining $25 million, or 14 basis points, as normal for our company.

Speaker #2: Turning to slide 5, you will see our priorities for the remainder of the year. Our realized that credit is not where it needs to be, and we are focused to have a path to materially improve this over the next few quarters.

James Lally: I realize that credit is not where it needs to be, and we are focused to have a path to materially improve this over the next few quarters. The momentum we have in the business is solid, and adding core relationships and reaching our mid-single-digit growth for the year is another key focus and certainly attainable. Along the way, we will continue our automation journey using the existing technology framework that we have invested in, focusing on integrating manual procedures into automated workflow processes. We are already seeing strong adoption of various automation tools throughout our company, the benefits of which will provide a better overall associate and client experience. In my most recent travels and discussions with clients throughout our footprint, it is encouraging to hear the optimism that they have despite some headwinds related to increased energy costs and other inflationary factors that are present in our economy.

Jim Lally: I realize that credit is not where it needs to be, and we are focused to have a path to materially improve this over the next few quarters. The momentum we have in the business is solid, and adding core relationships and reaching our mid-single-digit growth for the year is another key focus and certainly attainable. Along the way, we will continue our automation journey using the existing technology framework that we have invested in, focusing on integrating manual procedures into automated workflow processes. We are already seeing strong adoption of various automation tools throughout our company, the benefits of which will provide a better overall associate and client experience. In my most recent travels and discussions with clients throughout our footprint, it is encouraging to hear the optimism that they have despite some headwinds related to increased energy costs and other inflationary factors that are present in our economy.

Speaker #2: The momentum we have in the business is solid, and adding core relationships and reaching our mid-single-digit growth for the year is another key focus—and certainly attainable.

Speaker #2: Along the way, we will continue our automation journey, using the existing technology framework that we have invested in, focusing on integrating manual procedures into automated workflow processes.

Speaker #2: We are already seeing strong adoption of various automation tools throughout our company, the benefits of which will provide a better overall associate and client experience.

Speaker #2: In my most recent travels and discussions with clients throughout our footprint, it is encouraging to hear the optimism that they have despite some headwinds related to increased energy costs and other inflationary factors that are present in our economy.

Speaker #2: Companies in and around the data center ecosystem—power generation, defense, and aerospace—have a clear and robust run ahead of them. We are also still seeing pockets of industrial and retail demand, and faster-growing markets in the Southwest.

James Lally: Companies in and around the data center ecosystem, power generation, defense, and aerospace have a clear and robust run ahead of them. We're also still seeing pockets of industrial and retail demand in faster-growing markets in the Southwest. However, increased costs related to new construction could pose a challenge for some projects to reach desired return levels, and subsequently could push back the commencements of these projects until later in 2026 or early 2027. Competition for new clients is fierce, but we've worked extremely hard on our funding base and our consistent model of delivery such that we should continue to garner our fair share of the market in all of our geographies and businesses for the foreseeable future. With that, I would like to turn the call to Doug Bauche. Doug?

Jim Lally: Companies in and around the data center ecosystem, power generation, defense, and aerospace have a clear and robust run ahead of them. We're also still seeing pockets of industrial and retail demand in faster-growing markets in the Southwest. However, increased costs related to new construction could pose a challenge for some projects to reach desired return levels, and subsequently could push back the commencements of these projects until later in 2026 or early 2027. Competition for new clients is fierce, but we've worked extremely hard on our funding base and our consistent model of delivery such that we should continue to garner our fair share of the market in all of our geographies and businesses for the foreseeable future. With that, I would like to turn the call to Doug Bauche. Doug?

Speaker #2: However, increased costs related to new construction could pose a challenge for some projects to reach desired return levels, and subsequently could push back the commencements of these projects until later in 2026 or early 2027.

Speaker #2: Competition for new clients is fierce, but we've worked extremely hard on our funding base, and our consistent model of delivery, such that we should continue to garner our fair share of the market and all of our geographies and businesses for the foreseeable future.

Speaker #2: With that, I would like to turn the call to Doug Bauche. Doug?

Speaker #3: Thank you, Jim, and good morning, everyone. Consistent with our expectations, our team's executed well on the developing pipeline of quality CRE and C&I opportunities leading to 200 million dollars in organic loan growth in the quarter.

Doug Bauche: Thank you, Jim, and good morning, everyone. Consistent with our expectations, our teams executed well on the developing pipeline of quality CRE and C&I opportunities, leading to $200 million in organic loan growth in the quarter. Turning to page six, you will see that the loan growth occurred in our investor-owned CRE secured portfolio and our C&I book, inclusive of our specialty lending niches of life insurance premium finance, tax credit, sponsor finance, and SBA. Gross loan originations were particularly strong in the quarter, up 32% and 48% over the prior year and linked quarters, respectively. Growth in our investor-owned CRE portfolio is balanced between Kansas City, Phoenix, Dallas, Southern Nevada, and Southern California. New CRE-funded projects in the quarter were largely centered around pre-leased and stabilized industrial and retail projects as we expanded relationships with existing clients and onboarded new high-quality developers and investors in our markets.

Speaker #3: Turning to page 6, you'll see that the loan growth occurred in our investor-owned CRE secured portfolio and our C&I book, inclusive of our specialty lending niches of life insurance premium finance, tax credit, sponsor finance, and SBA.

Speaker #3: Gross loan originations were particularly strong in the quarter, up 32% and 48% over the prior year and linked quarters, respectively. Growth in our investor-owned CRE portfolio is balanced between Kansas City, Phoenix, Dallas, Southern Nevada, and Southern California.

Speaker #3: New CRE-funded projects in the quarter were largely centered around pre-leased and stabilized industrial and retail projects, as we expanded relationships with existing clients and onboarded new high-quality developers and investors in our markets.

Speaker #3: Examples of traditional C&I originations in the quarter include working capital and owner-occupied real estate financing for an approved distribution company in Arizona, a manufacturer of made-to-order stainless steel HVAC systems in Kansas City, and a Southern California-based manufacturer of truck and van body equipment used in the utility, emergency, and construction industries.

Doug Bauche: Examples of traditional C&I originations in the quarter include working capital and owner-occupied real estate financing for a food distribution company in Arizona, a manufacturer of made-to-order stainless steel HVAC systems in Kansas City, and a Southern California-based manufacturer of truck and van body equipment used in the utility, emergency, and construction industries. Within our specialty lending business lines, originations of SBA 7 owner-occupied real estate loans remained stable in the quarter, with 32 new loans funded totaling $59 million, ranking us again in the top 25 SBA originators in the country. Additionally, we continue to capitalize on our strong brand and momentum in the life insurance premium finance market, with strong originations leading to $42 million in quarterly net growth and 8% growth over the trailing 12 months. Page seven demonstrates the diversity of the loan portfolio across our geographic markets and our specialty lending divisions.

Speaker #3: Within our specialty lending business lines, originations of SBA 7A owner-occupied real estate loans remain stable in the quarter, with 32 new loans funded, totaling 59 million dollars, ranking us again in the top 25 SBA originators in the country.

Speaker #3: Additionally, we continue to capitalize on our strong brand and momentum in the life insurance premium finance market, with strong originations leading to $42 million in quarterly net growth and 8% growth over the trailing 12 months.

Speaker #3: Page 7 demonstrates the diversity of the loan portfolio across our geographic markets and our specialty lending divisions. Roughly 7.6 billion dollars, or 65% of total loans, are attributed to our Midwest, Southwest, and West region community banking markets.

Doug Bauche: Roughly $7.6 billion, or 65% of total loans, are attributed to our Midwest, Southwest, and West Region community banking markets, while $4.2 billion, or 35%, is from our specialty lending business lines. Previously discussed reductions in our low-income housing tax credit portfolio in Q1 2026 have muted the overall growth in our specialty lending lines to only 3% year over year, while our geographic markets have grown 8%, or $570 million, year over year inclusive of the loans acquired in the First Interstate branch acquisition in Q4 of 2025. Coming off a solid quarter of loan originations and net growth, I am encouraged by the depth and diversity of our current pipeline of new opportunities yet to come. We are seeing resilient traction and growth, particularly from San Diego, Dallas, and Southern Nevada, complementing our historic strongholds in St. Louis, Phoenix, and Kansas City.

Speaker #3: While 4.2 billion, or 35%, is from our specialty lending business lines. Previously discussed reductions in our low-income housing tax credit portfolio in Q1 2026 have muted the overall growth in our specialty lending lines to only 3% year over year, while our geographic markets have grown 8% or 570 million dollars year over year inclusive of the loans acquired in the first interstate branch acquisition in Q4 of 2025.

Speaker #3: Coming off a solid quarter of loan originations and net growth, I'm encouraged by the depth and diversity of our current pipeline of new opportunities yet to come.

Speaker #3: We are seeing resilient traction and growth, particularly from San Diego, Dallas, and Southern Nevada, complementing our historic strongholds in St. Louis, Phoenix, and Kansas City.

Speaker #3: Turning to slides 8 and 9, while total deposits remained relatively flat quarter over quarter, core deposits are up 1.2 billion dollars year over year, inclusive of the branch acquired deposits in Q4 of '25.

Doug Bauche: Turning to slides eight and nine, while total deposits remained relatively flat quarter over quarter, core deposits are up $1.2 billion year over year inclusive of the branch-acquired deposits in Q4 of 2025. The mix of our deposit base remains favorable, with 34% non-interest-bearing compared to 33% in the linked quarter. Traditional outflows in the front half of the year are normal for our deposit portfolio, with growth particularly from our geographic markets occurring in late Q3 and into Q4. Specialty deposits grew $62 million in the quarter, which is consistent with the growth in the prior year quarter. The breakout of deposit mix and growth within the specialty channels is reflected on slide 10. Property management deposits account for 42% of specialty deposits and 12% of total bank deposits, while community associations account for 39% of specialty deposits and 11% of total bank deposits.

Speaker #3: The mix of our deposit base remains favorable, with 34% non-interest-bearing compared to 33% in the linked quarter. Traditional outflows in the front half of the year are normal for our deposit portfolio, with growth particularly from our geographic markets occurring in late Q3 and into Q4.

Speaker #3: Specialty deposits grew $62 million in the quarter, which is consistent with the growth in the prior-year quarter. The breakout of deposit mix and growth within the specialty channels is reflected on slide 10.

Speaker #3: Property management deposits account for 42% of specialty deposits and 12% of total bank deposits. While community associations account for 39% of specialty deposits and 11% of total bank deposits.

Speaker #3: As we've said during previous calls, the branch-light specialty deposit verticals provide us with an attractive, cost-adjusted source of funding that complements our community banking deposit base.

Doug Bauche: As we've said during previous calls, the branch-light specialty deposit verticals provide us an attractive, cost-adjusted source of funding that complements our community banking deposit base. With our favorable 82% loan-to-deposit ratio, we continue to execute disciplined pricing strategies to effectively manage our blended cost of deposits to protect net interest margin. Continuing with deposits, slide 11 reflects our deposit base across our commercial, business banking and consumer, and specialty deposit channels. The strength of our commercial base with nearly $5 billion in deposits is well complemented by the granular and diverse nature of our business banking and consumer channels, contributing $4.5 billion in deposits with an attractive 1.25% weighted average cost of funds. The consistency, stability, and balance of our deposit base across these business channels remains a core strength of our company. With that, I'll turn the call over to Keene.

Speaker #3: With our favorable 82% loan-to-deposit ratio, we continue to execute disciplined pricing strategies to effectively manage our blended cost of deposits and protect net interest margin.

Speaker #3: Continuing with deposits, slide 11 reflects our deposit base across our commercial, business banking, and consumer, and specialty deposit channels. The strength of our commercial base with nearly 5 billion dollars in deposits is well complemented by the granular and diverse nature of our business banking and consumer channels, contributing 4.5 billion dollars in deposits with an attractive, 1.25% weighted average cost of funds.

Speaker #3: The consistency, stability, and balance of our deposit base across these business channels remains a core strength of our company. And with that, I'll turn the call over to Keene.

Speaker #2: Thanks, Doug, and good morning, everyone. Turning to slide 12, we reported earnings per share of $1.09 in the second quarter on net income of 41 million dollars.

Keene Turner: Thanks, Doug, and good morning, everyone. Turning to slide 12, we reported earnings per share of $1.09 in Q2 on net income of $41 million. Excluding certain non-recurring items, earnings per share on an adjusted basis was $1.13 compared to $1.31 in the linked quarter. Pre-provision earnings totaled $68 million, a $2 million decrease from the linked quarter. The primary driver of the decrease was lower fee income, which was partially mitigated by a continued expansion in net interest income. On the cost side, non-interest expense was relatively stable compared to Q1. The linked quarter increase in the provision for credit losses was primarily due to the loan charge-offs from the two relationships Jim detailed, along with reserves for $200 million of loan growth in the period.

Speaker #2: Excluding certain non-recurring items, earnings per share on an adjusted basis was $1.13, compared to $1.31 in the linked quarter. We provisioned earnings totaled $68 million, a $2 million decrease from the linked quarter.

Speaker #2: The primary driver of the decrease was lower fee income, which was partially mitigated by a continued expansion and net interest income. On the cost side, non-interest expense was relatively stable compared to the first quarter.

Speaker #2: The linked quarter increase in the provision for credit losses was primarily due to the loan charge-offs from the two relationships Jim detailed, along with reserves for $200 million dollars of loan growth in the period.

Speaker #2: Turning to slide 13, with more details to follow on 14, net interest income in the second quarter was $169 million, an increase of $3 million from the first quarter, which was largely attributable to higher yields on earning assets and an additional day during the period.

Keene Turner: Turning to slide 13 with more details to follow on 14, net interest income in Q2 was $169 million, an increase of $3 million from Q1, which was largely attributable to higher yields on earning assets and an additional day during the period. Interest income increased $4 million from the prior period, including $3 million of loan income and $2 million from investment securities, partially offset by lower earnings on cash balances. Interest expense increased $2 million compared to the linked quarter, including $1 million in deposit interest expense along with additional costs on short-term borrowings and our Q2 subordinated debt issuance. The net interest margin for Q2 was 4.30%, an increase of two basis points from the linked period.

Speaker #2: Interest income increased $4 million from the prior period, including $3 million of loan income and $2 million from investment securities, partially offset by lower earnings on cash balances.

Speaker #2: Interest expense increased $2 million compared to the linked quarter, including $1 million in deposit interest expense, along with additional costs on short-term borrowings and our second quarter subordinated debt issuance.

Speaker #2: The net interest margin for the second quarter was 4.30%, an increase of two basis points from the linked period. Earning asset yields expanded by five basis points, led by a five basis point increase in loans, including some favorable discount accretion, and an additional eight basis points on securities.

Keene Turner: Earning asset yields expanded by five basis points, led by a five basis point increase in loans, including some favorable discount accretion and an additional eight basis points on securities. The rate on loans booked in the quarter was 6.58%, and the average tax-equivalent purchase yield on investments was 5.03%, both of which improved the yield on each of those asset classes. The cost of interest-bearing liabilities increased two basis points, mainly due to higher interest-bearing deposit balances, short-term FHLB advances, and the recent sub-debt issuance. Net interest income remains slightly asset sensitive, primarily in parallel interest rate simulations, with each quarter point cut in rates affecting net interest income one to two million dollars per quarter or a couple of basis points of net interest margin.

Speaker #2: The rate on loans booked in the quarter was 6.58%, and the average tax equivalent purchase yield on investments was 5.03%, both of which improved the yield on each of those asset classes.

Speaker #2: The cost of interest-bearing liabilities increased two basis points, mainly due to higher interest-bearing deposit balances, short-term FHLB advances, and the recent sub-debt issuance. Net interest income remained slightly asset-sensitive, primarily in parallel interest rate simulations, with each quarter point cut in rates affecting net interest income 1 to 2 million dollars per quarter or a couple of basis points of net interest margin.

Speaker #2: Including deposit-related non-interest expense in this analysis, we modeled that we are effectively neutral as we continue to have success growing the related deposit vertical balances.

Keene Turner: Including deposit-related non-interest expense in this analysis, we modeled that we are effectively neutral as we continue to have success growing the related deposit vertical balances. We also added $200 million in loan hedges over the last several months to further reduce sensitivity to interest rate movements. We completed a modest repositioning trade on $180 million in investment securities in the latter part of the quarter, realizing a net loss of $6 million and adding $3.5 million in annual earnings. We offset the majority of this loss by selling Visa shares and a small parcel of land that generated a combined gain of $4.4 million. The trade added 10 basis points to the portfolio yield and approximately two basis points to margin without any material change in the overall duration of the portfolio. We anticipate margin to remain in the mid to upper 4.20s in the current interest rate environment.

Speaker #2: We also added $200 million in loan hedges over the last several months to further reduce sensitivity to interest rate movements. We completed a modest repositioning trade on $180 million in investment securities in the latter part of the quarter, realizing a net loss of $6 million and adding $3.5 million in annual earnings.

Speaker #2: We offset the majority of this loss by selling Visa shares and a small parcel of land that generated a combined gain of 4.4 million dollars.

Speaker #2: The trade added 10 basis points to the portfolio yield and approximately 2 basis points to margin, without any material change in the overall duration of the portfolio.

Speaker #2: We anticipate margin to remain in the mid to upper 420s in the current interest rate environment. While the yield on asset additions and resets has been accretive, and the repositioning trade is beneficial, we also expect to see some modest pressure on funding costs with a full quarter of the sub-debt issuance at 6.25% and rates on brokered and wholesale balances moving slightly higher.

Keene Turner: While the yield on asset additions and resets has been accretive and the repositioning trade is beneficial, we also expect to see some modest pressure on funding costs with a full quarter of the sub-debt issuance at 6.25% and rates on brokered and wholesale balances moving slightly higher. Slide 15 reflects our credit trends. Net charge-offs totaled $13.6 million in Q2, compared to $4.4 million in the linked quarter. As previously discussed, the charge-offs were primarily related to two credits that accelerated to a loss position at the end of the quarter. The ratio of non-performing assets to total assets increased by five basis points compared to the linked quarter, primarily due to the addition of the $16 million loan secured by a flagged hotel in California. Net charge-offs totaled 46 basis points of average loans compared to 15 basis points for Q1 2026.

Speaker #2: Slide 15 reflects our credit trends. Net charge-offs totaled 13.6 million dollars in the second quarter, compared to 4.4 million dollars in the linked quarter.

Speaker #2: As previously discussed, the charge-offs were primarily related to two credits that accelerated to a lost position at the end of the quarter. The ratio of non-performing assets to total assets increased by five basis points compared to the linked quarter, primarily due to the addition of the $16 million dollar loan secured by a flagged hotel in California.

Speaker #2: Net charge-offs totaled 46 basis points of average loans, compared to 15 basis points for the first quarter of 2026. The provision for credit losses was $14.2 million, compared to $7.2 million in the linked quarter.

Keene Turner: The provision for credit losses was $14.2 million, compared to $7.2 million in the linked quarter. The provision was mainly due to net charge-offs and, to a lesser extent, loan growth. Slide 16 shows the allowance for credit losses. The ratio of allowance to total loans decreased to 1.17%, compared to 1.21% at the end of Q1 2026. When adjusting for government-guaranteed loans, the ratio increases to 1.27% of total loans. On Slide 17, Q2 non-interest income was $13.5 million, a $5.6 million decrease compared to the linked quarter. The decrease was primarily due to the net loss on the investment portfolio restructuring and lower tax credit income from a decline in projects carried at fair value. The benchmark interest rate used to value these projects increased in the quarter, driving the decline in fair value.

Speaker #2: The provision was mainly due to net charge-offs and to a lesser extent loan growth. Slide 16 shows the allowance for credit losses. The ratio of allowance to total loans decreased to 1.17%, compared to 1.21% at the end of the first quarter of 2026.

Speaker #2: When adjusting for government-guaranteed loans, the ratio increases to 1.27% of total loans. On slide 17, second quarter non-interest income was 13.5 million dollars, a 5.6 million dollar decrease compared to the linked quarter.

Speaker #2: The decrease was primarily due to the net loss on the investment portfolio restructuring and lower tax credit income from a decline in projects carried at fair value.

Speaker #2: The benchmark interest rate used to value these projects increased in the quarter, driving the decline in fair value. Non-interest income was also impacted by lower levels of private equity and community development distributions.

Keene Turner: Non-interest income was also impacted by lower levels of private equity and community development distributions. We also elected not to sell SBA loans as we were evaluating the sale of certain REO properties in the quarter that may have generated a potential gain. As Jim noted, recent developments on those properties have delayed the timing to a later date. We did, however, take the opportunity to sell a small parcel of land at a gain to also offset the investment portfolio restructure. Turning to Slide 18, Q2 non-interest expense of $116 million was relatively flat with the linked quarter, with a few movements among various line items. Employee compensation and benefits declined by $2.6 million due to the seasonal impact on payroll taxes and certain benefits.

Speaker #2: We also elected not to sell SBA loans, as we were evaluating the sale of certain OREO properties in the quarter that may have generated a potential gain.

Speaker #2: As Jim noted, recent developments on those properties have delayed the timing to a later date. We did, however, take the opportunity to sell a small parcel of land at a gain to also offset the investment portfolio restructure.

Speaker #2: Turning to slide 18, second quarter non-interest expense of $116 million dollars was relatively flat with the linked quarter, with a few movements among various line items.

Speaker #2: Employee compensation and benefits declined by 2.6 million dollars due to the seasonal impact on payroll taxes and certain benefits. Deposit costs increased 1.8 million dollars quarter over quarter, largely driven by an additional day in the quarter and the expiration of certain unused allowances that reduced expenses in the first quarter.

Keene Turner: Deposit costs increased $1.8 million quarter over quarter, largely driven by an additional day in the quarter and the expiration of certain unused allowances that reduced expenses in Q1. Other expenses increased by $1.4 million from the linked quarter, primarily due to the recovery of a credit card loss that reduced expenses in Q1. The core efficiency ratio was 61.1% for Q1, compared to 60.2% in the linked quarter. Our capital metrics are shown on Slide 19. Tangible book value per share increased approximately 9% on an annualized basis to $42.30, and our tangible common equity ratio of 9% was stable with the linked quarter.

Speaker #2: Other expenses increased by 1.4 million dollars from the linked quarter, primarily due to the recovery of a credit card loss that reduced expenses in the first quarter.

Speaker #2: The core efficiency ratio was 61.1% for the first quarter, compared to 60.2% in the linked quarter. Our capital metrics are shown on Slide 19.

Speaker #2: Tangible book value per share increased approximately 9% on an annualized basis to $42.30, and our tangible common equity ratio of 9% was stable with the linked quarter.

Speaker #2: Our capital management actions in the quarter included the issuance of $175 million dollars of subordinated debentures to bolster total risk-based capital, the repurchase of $382,000 shares of common stock for approximately $23 million dollars, and an increase to the quarterly dividend of $0.01 to $0.35 per share for the third quarter of 2026.

Keene Turner: Our capital management actions in the quarter included the issuance of $175 million of subordinated debentures to bolster total risk-based capital, the repurchase of 382,000 shares of common stock for approximately $23 million, and an increase to the quarterly dividend of $0.01 to $0.35 per share for Q3 2026. These actions have helped to reduce our weighted average cost of capital while ensuring that our regulatory capital levels remains a strong foundation to support the balance sheet. For H1 of the year, we have returned approximately $75 million to shareholders through common stock repurchases and dividends. As of the end of the quarter, we have 249,000 shares remaining in our current repurchase plan. In July, the board approved an additional 2 million shares to the plan. With that, we can continue to opportunistically manage our excess tangible common equity.

Speaker #2: These actions have helped to reduce our weighted average cost of capital, while ensuring that our regulatory capital levels remain a strong foundation to support the balance sheet.

Speaker #2: For the first half of the year, we have returned approximately $75 million to shareholders through common stock repurchases and dividends. As of the end of the quarter, we have 249,000 shares remaining in our current repurchase plan.

Speaker #2: In July, the board approved an additional $2 million shares to the plan. With that, we can continue to opportunistically manage our excess tangible common equity.

Speaker #2: Our operating results drove a 1% return on average assets and a 10% return on average tangible common equity. While these results are below our expectations, our core business remains sound, and we expect to return to a level of profitability that is more in line with our standards.

Keene Turner: Our operating results drove a 1% return on average assets and a 10% return on average tangible common equity. While these results are below our expectations, our core business remains sound, and we expect to return to the level of profitability that is more in line with our standards. I appreciate your attention today, and we will now open the line for questions.

Speaker #2: I appreciate your attention today. And we will now open the line for questions.

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

Operator 2: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 Daniel Tamayo with Raymond James. 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 *1 to raise your hand. To withdraw your question, press *1 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 Daniel Tamayo with Raymond James. Your line is open. Please go ahead.

Speaker #1: 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 #1: 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 Daniel Tamayo with Raymond James.

Speaker #1: Your line is open. Please go ahead.

Speaker #3: Yeah. Thank you. Good morning, guys.

Daniel Tamayo: Yeah. Thank you. Good morning, guys.

Speaker #4: Good morning.

Keene Turner: Morning.

Jim Lally: Morning.

Speaker #3: Yeah. Maybe if you could just frame the decline in the charge-off activity that you're expecting in the back half of the year for us.

Daniel Tamayo: Yeah. Maybe if you could just frame the decline in the charge-off activity that you're expecting in H2 for us. I think you just said you expect that to come down, and that kind of the underlying outside of these losses, the underlying loss rates remain solid at roughly 15 basis points. If you can kind of give us a thought on timing and size of the decline in H2, that'd be helpful.

Speaker #3: I think you just said you expect that to come down and that, kind of underlying, outside of these losses, the underlying loss rates remain solid—roughly in the 15 basis point range. But if you could give us your thoughts on the timing and size of the decline in the back half, it’d be helpful.

Keene Turner: Hey, Daniel. Listen, let me just kind of break it down in some buckets here. As we had pointed out, there's $160 million in non-performing assets, 84 of which are in other real estate owned today that we've largely discussed. It's the $77 million that makes up the Laguna, California portfolio that we're highly confident in our carry balances, given our commercial buyers on four of the seven properties and active interest on the remaining three. The rest of the REO portfolio is largely made up of two SBA loans related to properties that we foreclosed on totaling $5 million, where we have the 75% SBA guarantee on any deficiency that's realized from the sale of that REO, which we really expect to be minimal, if any.

Doug Bauche: Hey, Daniel. Listen, let me just kind of break it down in some buckets here. As we had pointed out, there's $160 million in non-performing assets, 84 of which are in other real estate owned today that we've largely discussed. It's the $77 million that makes up the Laguna, California portfolio that we're highly confident in our carry balances, given our commercial buyers on four of the seven properties and active interest on the remaining three. The rest of the REO portfolio is largely made up of two SBA loans related to properties that we foreclosed on totaling $5 million, where we have the 75% SBA guarantee on any deficiency that's realized from the sale of that REO, which we really expect to be minimal, if any.

Speaker #4: Hey, Daniel. It's Doug. Listen, let me just kind of break it down in some buckets here. As we had pointed out right there's 160 million dollars in non-performing assets, 84 of which are in other real estate owned today that we've largely discussed.

Speaker #4: It's the $77 million that makes up the Laguna, California portfolio that we're highly confident in our carry balances, given our commercial buyers on four of the seven properties and active interest on the remaining three.

Speaker #4: The rest of the OREO portfolio is largely made up of two SBA loans related to properties that we foreclosed on, totaling $5 million dollars, where we have the 75% SBA guarantee on any deficiency that's realized from the sale of that OREO, which we really expect to be minimal if any.

Speaker #4: So that leaves non-performing loans, which total $76 million and 64 basis points at the end of the quarter, which we believe will normalize to closer to 45 basis points over time.

Keene Turner: That leaves non-performing loans, which total $76 million, or 64 basis points at the end of the quarter, which we believe will normalize to closer to 45 basis points over time. Of that bucket, $76 million, roughly $50 million of that, or 2/3 of non-performing loans, are secured by real estate, and the balance, or 1/3, or $25 million, secured by C&I-related credits. With that, I would expect our charge-offs going forward to normalize back to kind of our 10-year historical norms, which is 15 basis points. I think that's the rate that we would expect against that level of non-performers and the quality of the balance of our portfolio.

Doug Bauche: That leaves non-performing loans, which total $76 million, or 64 basis points at the end of the quarter, which we believe will normalize to closer to 45 basis points over time. Of that bucket, $76 million, roughly $50 million of that, or 2/3 of non-performing loans, are secured by real estate, and the balance, or 1/3, or $25 million, secured by C&I-related credits. With that, I would expect our charge-offs going forward to normalize back to kind of our 10-year historical norms, which is 15 basis points. I think that's the rate that we would expect against that level of non-performers and the quality of the balance of our portfolio.

Speaker #4: And of that bucket—$76 million—roughly $50 million of that, or two-thirds of non-performing loans, are secured by real estate. The balance, or one-third, or $25 million, is secured by C&I-related credits.

Speaker #4: So with that, I would expect our charge-offs going forward to normalize back to kind of our 10-year historical norms, which is 15 basis points.

Speaker #4: And I think that's the rate that we would expect, given that level of non-performers and the quality of the balance of our portfolio.

Speaker #3: That's great color, Doug. Appreciate that. So just a follow-up on the credit side. The Medicare change that you described that impacted the one of the biggest charge-offs in the second quarter.

Daniel Tamayo: That's great color, Doug. Appreciate that. Just to follow up on the credit side, the Medicare change that you described that impacted one of the bigger charge-offs in Q2, anything else in the portfolio you think might be impacted by that? I'm not sure if you've done a kind of a deep dive yet on that.

Speaker #3: Anything else in the portfolio you think might be impacted by that? I'm not sure if you've done kind of a deep dive yet on that, but...

Speaker #4: Yeah. We have. Yeah. There's roughly in the entire portfolio, there's about close to $12 billion, about $150 million or so that involves payment through a Medicaid, Medicare process.

James Lally: We have. The entire portfolio is about close to $12 billion, about $150 million or so that involves payment through a Medicaid/Medicare process. These are treatment centers and assisted living and traditional things of that nature with other assets behind it. We've looked at it, and those loans are performing well and diversified throughout our footprint.

Jim Lally: We have. The entire portfolio is about close to $12 billion, about $150 million or so that involves payment through a Medicaid/Medicare process. These are treatment centers and assisted living and traditional things of that nature with other assets behind it. We've looked at it, and those loans are performing well and diversified throughout our footprint.

Speaker #4: But these are treatment centers and assisted living, and traditional things of that nature, with other assets behind it. So we've looked at it, and those loans are performing well.

Speaker #4: And diversified throughout our footprint. And Daniel, it's Doug. I just want to make a distinction because that moratorium from CMS was specific to new applicants for Medicare licensing.

Doug Bauche: Daniel and Doug, I just want to make a distinction because that moratorium from CMS was specific to new applicants for Medicare licensing, and that moratorium did not affect those that are already licensed and practicing and providing services for Medicare or Medicaid reimbursement. This particular credit was unique in that it was a consulting business that was largely engaged in qualifying applicants for Medicare/Medicaid recipients.

Speaker #4: And that moratorium did not affect those that are already licensed and practicing and providing services for Medicare and Medicaid reimbursement. So this particular credit was unique in that it was a consulting business that was largely engaged in qualifying applicants for Medicare and Medicaid recipients, so.

Daniel Tamayo: Great. All right. Well, thank you for all the color on the credit side. Appreciate it, guys. I'll step back.

Speaker #3: Great. All right. Well, thank you for all that color on the credit side. Appreciate it, guys. I'll step back.

Speaker #4: Thank you.

James Lally: Thank you.

Jim Lally: Thank you.

Speaker #1: Your next question comes from the line of Jeff Ruless with D.A. Davidson. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open. Please go ahead.

Speaker #5: Thanks. Good morning. Keen on the margin I just wanted to make sure I heard that right. It looks like the go-forward is that maybe the tail of benefit from the restructure is muted by maybe the sub debt impact, and then so kind of a wash, and then just regular way kind of a core margin slight pressure is kind of where you get to the range.

Jeff Rulis: Thanks. Good morning. Keene, on the margin, I just wanted to make sure I heard that right. It looks like the go forward is that maybe the tail of benefit from the restructure is muted by maybe the sub-debt impact, kind of a wash and then just regular way, a kind of a core margin slight pressure is kind of where you get to the range. Do I have the pieces of that right? That's maybe oversimplifying, but just checking.

Speaker #5: Do I have the pieces of that right? That's maybe oversimplifying, but just checking.

Speaker #4: No. I think that expresses the high level. And then I would say the upside case is to the extent that we continue to have strong loan growth in sequential quarters, we expect that that will further strengthen that interest margin given where the loan to deposit is.

Keene Turner: No, I think that expresses the high level. I would say the upside case is to the extent that we continue to have strong loan growth in sequential quarters, we expect that that will further strengthen that interest margin given where the loan to deposit is. Yeah, I think we feel pretty good about, absent any changes, that that margin is pretty stable.

Speaker #4: So but yeah, I think we feel pretty good about absent any changes that margin is pretty stable.

Jeff Rulis: Keene, do you have the June average on the margin? Do you think that's a fairly good read on the core as it came out of the quarter?

Speaker #5: Keen, do you have the June average on the margin? And do you think that's a fairly good read on the core as it came out of the quarter?

Speaker #4: Yeah. The 430 is really like 427, 428. We had some prepayment activity that benefited the total quarter in the period. So yeah, I think that's a pretty good proxy for moving forward.

Keene Turner: Yeah. The 4.30 is really like 4.27, 4.28. We had some prepayment activity that benefited the total quarter in the period. Yeah, I think that's a pretty good proxy for moving forward.

Speaker #5: Okay. And Jim, I wanted to circle back on the just the puts and takes of the OREO. It sounded like you said maybe one of the properties not under contract appealed, which is holding up the sale of the four that other excuse me, that are under contract.

Jeff Rulis: Okay. Jim, I wanted to circle back on just the puts and takes of the OREO. It sounded like you said maybe one of the properties not under contract appealed, which is holding up the sale of the four that are under contract?

Speaker #4: Yeah, yeah, yeah. The fact of the matter is, the order from the bankruptcy court that was dismissed was encompassing of all seven. And because there was an appeal on one, it creates a bit of a cloud for the entirety of the portfolio.

James Lally: Yeah. The fact of the matter is the order from the bankruptcy court that was dismissed, it was encompassing of all seven. Because there was an appeal on one, it creates a bit of a cloud for the entirety of the portfolio. We're confident relative to what's in front of us. It's just a matter of time. We just need the attention of the courts to look at these last couple appeals and put them aside we can go ahead and move forward with what's planned.

Jim Lally: Yeah. The fact of the matter is the order from the bankruptcy court that was dismissed, it was encompassing of all seven. Because there was an appeal on one, it creates a bit of a cloud for the entirety of the portfolio. We're confident relative to what's in front of us. It's just a matter of time. We just need the attention of the courts to look at these last couple appeals and put them aside we can go ahead and move forward with what's planned.

Speaker #4: And we're confident relative to what's in front of us. It's just a matter of time. We just need the attention of the courts to look at these last couple of appeals and put them aside so we can go ahead and move forward with what's planned.

Speaker #5: And on maybe the other properties that are not under contract, you said there's interest. Are those closer to being—maybe it's interrelated with if there are bankruptcy issues or appeals, and that holds it up?

Jeff Rulis: On maybe the other properties that are not under contract, you said there's interest. Are those closer to being- maybe it's interrelated with if there's bankruptcy issues or appeals, it holds it up.

Speaker #5: But is there movement on the go ahead.

James Lally: Yeah.

Jim Lally: Yeah.

Jeff Rulis: Is there movement on the- Go ahead.

Speaker #4: Yeah, there's high interest. And based upon—

James Lally: Yeah. There's high interest. Based upon the status.

Jim Lally: Yeah. There's high interest. Based upon the status.

Speaker #5: But no contract.

Jeff Rulis: No contract.

Speaker #4: There's no contract in hand, no.

James Lally: There's no contract in hand, no.

Jim Lally: There's no contract in hand, no.

Speaker #5: Okay. Got it. And maybe just the last.

Jeff Rulis: Okay. Got it.

Speaker #4: I'll just say, Jeff, it's Doug.

Doug Bauche: Jeff, I'll just say, Jeff, it's Doug.

Jeff Rulis: Sorry.

Speaker #5: Sorry.

Doug Bauche: I'll just say we have received contract offers on the other three. The challenge, Jeff, is we can't go into a contract with new parties that require us to pass title to them within a specified period of time because this appeal is going to require the ruling from the appellate court. We just unfortunately don't control that timing. We're highly confident in what the outcome will be, and in time, this will satisfactorily resolve itself. Suffice it to say, there's a high degree of interest, and we have had offers and offers pending right now on the other three.

Speaker #4: I'll just say we have received contract offers on the other three. The challenge, Jeff, is we can't go into a contract with new parties that require us to pass title to them within a specified period of time because this appeal is going to require the ruling from the appellate court.

Speaker #4: And we just, unfortunately, don't control that timing. We're highly confident in what the outcome will be, and in time, this will satisfactorily resolve itself.

Speaker #4: But suffice it to say there's a high degree of interest and we have had offers. And offers pending right now in the other three.

James Lally: I'll just finally add to this. The parties of interest of the four that we've talked about remain highly engaged. We talk to them often. I was just with one of them last week, and there's no trepidation or what have you. We're very confident that they'll remain patient with us.

Speaker #5: And I'll just finally add to this: the parties of interest, of the four that we've talked about, remain highly engaged. We talk to them often.

Jim Lally: I'll just finally add to this. The parties of interest of the four that we've talked about remain highly engaged. We talk to them often. I was just with one of them last week, and there's no trepidation or what have you. We're very confident that they'll remain patient with us.

Speaker #5: I was just with one of them last week. And there's no trepidation or what have you. So we're very confident that they'll remain patient with us.

Speaker #5: Okay. Appreciate the backdrop there. Maybe just one last one on the fee income side. Certainly, the tax credit impact in the quarter, but kind of pretty low across the board on a number of fronts, even once you exclude the one-timers, just try to get a sense for the run rate on fee income.

Jeff Rulis: Okay. Appreciate the backdrop there. Maybe just one last one on the fee income side. Certainly the tax credit impact in the quarter, but kind of pretty low across the board on a number of fronts. Once you exclude the one-timers, just try to get a sense for the run rate on fee income. Seems like this is certainly a low water mark. Expectations on maybe the H2 in the overall non-interest income.

Speaker #5: It seems like this is certainly a low watermark, but expectations on maybe the second half, in the overall non-interest income.

Speaker #4: Yeah. I think, Jeff, maybe if you look back to one Q, I think that's a little bit more of what we would expect on a recurring basis.

Keene Turner: Yeah, I think, Jeff, maybe if you look back to Q1, I think that's a little bit more of what we would expect on a recurring basis. I do think that we expect the tax credit line to at least break even for the year. I know that that's not anything that's material, but we don't expect that to be a negative consistently moving forward, that there will be activity or reversals of the fair value there. We do expect to resume our posture of selling SBA loans. Again, I think in my comments, we expected there to be maybe some more one-timers, and you were kind of poking around at that. Just given the timing of when everything came together, we're a little light in that line item.

Speaker #4: I do think that we expect the tax credit line to at least break even for the year. I know that's not anything that's material, but we don't expect that to be a negative consistently moving forward, that there will be activity or reversals of the fair value there.

Speaker #4: And then we do expect to resume our posture of selling SBA loans. So again, I think in my comments, we expected there to be maybe some more one-timers and you were kind of poking around at that.

Speaker #4: And just given the timing of when everything came together, we're a little light in that line item. We didn't sell SBA loans, but we'll earn interest and come on those, and it'll strengthen margin in other places of the business.

Keene Turner: We didn't sell SBA loans, but we'll earn interest income on those, and it'll strengthen margin in other places of the business. Unfortunately, just a little bit of bad timing. PPNR fundamentals, I think as I view them, are strong and improving. We feel good about it rolling forward.

Speaker #4: So unfortunately, just a little bit of bad timing, and PP&R fundamentals, I think, as I view them, are strong and improving. So we feel good about it rolling forward.

Speaker #5: Great. Thank you.

James Lally: Great. Thank you.

Jeff Rulis: Great. Thank you.

Speaker #4: You're welcome. Thank you.

Keene Turner: You're welcome. Thank you.

Speaker #2: Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.

Adam Crow: Hey, this is Adam Crow on for Nate Race. Good morning, and thanks for taking my questions.

Adam Kroll: Hey, this is Adam Crow on for Nate Race. Good morning, and thanks for taking my questions.

Speaker #3: Hey, this is Adam Kroll on for Nate Race. Good morning. And thanks for taking my questions.

Speaker #4: Good morning.

Keene Turner: Morning.

Jim Lally: Morning.

Adam Crow: Yeah. Maybe just starting on the loan growth guide for the mid-single digit guidance. It'd imply a little pickup in growth in H2 of the year. I guess I'd be curious if you could dive into where the pipeline stands today and sort of what segments you see driving that growth.

Adam Kroll: Yeah. Maybe just starting on the loan growth guide for the mid-single digit guidance. It'd imply a little pickup in growth in H2 of the year. I guess I'd be curious if you could dive into where the pipeline stands today and sort of what segments you see driving that growth.

Speaker #3: Yeah, so maybe just starting on the loan growth guide for the mid-single-digit guidance. It would imply a little pickup in growth in the back half of the year.

Speaker #3: So I guess I'd be curious if you could dive into where the pipeline stands today and sort of what segments you see driving that growth.

Speaker #4: Yeah. So this is Jim. I'll just say this, that to me, it's very similar to what we saw in the first half. It's throughout the company.

James Lally: Yeah. This is Jim. I would say this, that to me, it's very similar to what we saw in H1. It's throughout the company. We've got great momentum here in the Midwest for sure. Strength of Arizona, Doug had mentioned San Diego and Nevada will continue. The life insurance premium finance certainly is a bright point in our business. It's really diversified throughout the portfolio and the markets, and that's really by design in how we've built the company.

Jim Lally: Yeah. This is Jim. I would say this, that to me, it's very similar to what we saw in H1. It's throughout the company. We've got great momentum here in the Midwest for sure. Strength of Arizona, Doug had mentioned San Diego and Nevada will continue. The life insurance premium finance certainly is a bright point in our business. It's really diversified throughout the portfolio and the markets, and that's really by design in how we've built the company.

Speaker #4: We've got great momentum—here in the Midwest for sure, strength in Arizona, and as Doug had mentioned, San Diego and Nevada will continue. And then the life insurance premium finance certainly is a bright point in our business.

Speaker #4: So it's really diversified throughout the portfolio and the markets, and that's really by design and how we've built the company.

Speaker #3: Got it. I appreciate the cover there. And maybe for Doug or Jim, I was wondering if you could provide some color on what you're seeing from a pricing perspective.

Adam Crow: Got it. I appreciate the color there. Maybe for Doug or Jim, I was wondering if you could provide some color on what you're seeing from a pricing perspective. From your comments, it sounds like loan yields are still coming on above the portfolio, would just be curious to hear what you're seeing in terms of competition there.

Adam Kroll: Got it. I appreciate the color there. Maybe for Doug or Jim, I was wondering if you could provide some color on what you're seeing from a pricing perspective. From your comments, it sounds like loan yields are still coming on above the portfolio, would just be curious to hear what you're seeing in terms of competition there.

Speaker #3: From your comments, it sounds like loan yields are still coming on above the portfolio, but it would would just be curious to hear what you're seeing in terms of competition there.

Speaker #4: Yeah. Adam and Doug, listen, it's a highly competitive market. There's no question. There's pressure on loan yields today in terms of new originations. But I think, listen, we take a disciplined relationship pricing view on everything that re-originates.

Doug Bauche: Yeah. Adam, it's Doug. Listen, it's a highly competitive market. There's no question. There's pressure on loan yields today in terms of new originations. I think, listen, we take a disciplined relationship pricing view on everything that we originate. We've got to be competitive in the market to continue to grow and originate at the clips that we expect. I think, listen, we're in that six and a quarter, six and a half type probably origination rates. Again, if you're not familiar, Adam, the duration of our portfolio is relatively short. Absent the SBA portfolio, that originates with longer-term maturities and repricing. The balance of the portfolio is typically a three- to five-year type maturity. Again, I think we just exercise pretty good discipline in terms of both variable and fixed-rate pricing, and we price to market to win.

Speaker #4: And we're going to be competitive in the market to continue to grow and originate at the clips that we expect. But I think, listen, we're in that six and a quarter, six and a half type probably origination rates.

Speaker #4: And then again, if you're not familiar, Adam, the duration of our portfolio is relatively short. Absent the SBA portfolio, you know that originates with longer-term maturities and repricing, the balance of the portfolio is typically a three to five-year type maturity.

Speaker #4: And again, I think we just exercise pretty good discipline in terms of both variable and fixed-rate pricing, and we price to market to win.

Speaker #4: And then complement that with the ancillary services that we sell through to those relationships.

Doug Bauche: Complement that with the ancillary services that we sell through to those relationships.

Adam Crow: Got it. Thanks for the color there, Doug. Last one for me. Maybe for Keene. Just expense growth expectations for the H2 of the year.

Adam Kroll: Got it. Thanks for the color there, Doug. Last one for me. Maybe for Keene. Just expense growth expectations for the H2 of the year.

Speaker #3: Got it. Thanks for the cover there, Doug. And then last one for me, maybe for Keene—just expense growth expectations for the back half of the year?

Speaker #4: Yeah, I think really the only material growth that we expect in the back half is maybe just a $1 to $2 million per quarter step-up in deposit costs running through non-interest expense.

Keene Turner: Yeah. I think really the only material growth that we expect in the H2 is maybe just a $1 to 2 million per quarter step-up in deposit costs running through non-interest expense. I think we're looking to make sure we're being optimized and efficient, and maybe we can continue to whittle away at some of the line items to mitigate that. Really modest quarterly step-up, really driven by that line item and growth in that business is what we expect.

Speaker #4: I think we're looking to make sure we're being optimized and efficient, and maybe we can continue to whittle away at some of the line items to mitigate that.

Speaker #4: But really modest quarterly step-up, really driven by that line item and growth in that business is what we expect.

Speaker #3: Got it. Thanks for taking my questions.

Adam Crow: Got it. Thanks for taking my questions.

Adam Kroll: Got it. Thanks for taking my questions.

Speaker #4: Thank you.

Keene Turner: Thank you.

Speaker #2: Your next question comes from the line of Damon DeMalte with KDW. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Damon Del Monte with KBW. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Damon Del Monte with KBW. Your line is open. Please go ahead.

Speaker #1: Hey, good morning, guys. And thanks for taking my questions. Good morning. Just Keene, just a follow-up on the last comment on the expenses. You said one to two million step-up in deposit costs.

Damon Del Monte: Hey, good morning, guys, thanks for taking my questions. Good morning. Keene, just to follow up on the last comment on the expenses. You said $1 to $2 million step-up in deposit costs. Is that per quarter, or is that kind of in aggregate off of Q2 numbers during the next 2 quarters?

Damon DelMonte: Hey, good morning, guys, thanks for taking my questions. Good morning. Keene, just to follow up on the last comment on the expenses. You said $1 to $2 million step-up in deposit costs. Is that per quarter, or is that kind of in aggregate off of Q2 numbers during the next 2 quarters?

Speaker #1: Is that per quarter, or is that kind of in aggregate off of second quarter numbers during the next two quarters?

Speaker #4: Yeah. I mean, I think it goes up a million two Q to three Q and then depending on strength of seasonality it balances in four Q.

Keene Turner: Yeah. I think it goes up $1 million Q2 to Q3. Depending on strength of seasonality of balances in Q4, maybe it's another 1 to 2, is sort of what I think given how averages tend to be a little heavier in Q4. Obviously, we earn on averages, that comes with some stronger net interest income, albeit maybe at a lighter ROA and spread. That's how we expect that line item and then that bucket to trend.

Speaker #4: Maybe it's another one to two is sort of what I think given how averages tend to be a little heavier in the fourth quarter.

Speaker #4: Obviously, we earn on averages. So that comes with some stronger net interest income, albeit maybe at a lighter ROA and spread. But that's how we expect that line item.

Speaker #4: And then that bucket to trend.

Speaker #1: Got it. Okay. Thank you. And then with regards to the fee income and the kind of the outlook for the tax credit, I know it tends to be stronger in the back half of the year.

Damon Del Monte: Got it. Okay. Thank you. With regards to the fee income and the outlook for the tax credit, I know it tends to be stronger in the back half of the year. Do you think that's expected again this quarter or this go around? You could get some positive income in Q3 and then a big step up in Q4?

Damon DelMonte: Got it. Okay. Thank you. With regards to the fee income and the outlook for the tax credit, I know it tends to be stronger in the back half of the year. Do you think that's expected again this quarter or this go around? You could get some positive income in Q3 and then a big step up in Q4?

Speaker #1: I mean, do you think that's expected again this quarter or this go-around? You could get some positive income in the third quarter, and then a big step up in the fourth?

Speaker #4: Yeah. I think third quarter would have to be some a little bit of rate-driven assistance there. Just because activity is not usually very strong in the third quarter.

Keene Turner: Yeah, I think Q3 would have to be a little bit of rate-driven assistance there, just because activity is not usually very strong in Q3. I would expect Q4 will have some activity in it, which we think if rates are stable, makes up for maybe the -2 that we have with maybe a little bit of upside there possible. That book, depending on what sells, some of it's already at fair value, so that is affecting it. We did expect a lighter contribution year-over-year. We didn't expect rates to be against us on that portfolio, the advantage is that net interest income is strong, deposits continue to be well-priced, and we're driving net interest income. I think we'll take that trade given the size of the contributions and the line items day in and day out.

Speaker #4: And then I would expect the fourth quarter will have some activity in it, which we think if we don't get any—if rates are stable, it makes up for maybe the negative $2 million that we have, with maybe a little bit of upside there possible.

Speaker #4: That book depending on what sells, some of it's already at fair value. So that is affecting it. We did expect a lighter contribution year over year.

Speaker #4: We didn't expect rates to be against us on that portfolio, but the advantage is that our net interest income is strong. Deposits continue to be well-priced, and we're driving net interest income.

Speaker #4: So, I think we'll take that trade, given the size of the contributions in the line items day in and day out.

Speaker #1: Got it. Okay. And then just lastly, any updated thoughts on the buyback that you called out the announcement from last week? So fair to assume you guys will remain active kind of the stock's currently trading?

Damon Del Monte: Got it. Okay. Just lastly, any updated thoughts on the buyback? You called out the announcement from last week. Fair to assume you guys will remain active kind of where the stock's currently trading?

Damon DelMonte: Got it. Okay. Just lastly, any updated thoughts on the buyback? You called out the announcement from last week. Fair to assume you guys will remain active kind of where the stock's currently trading?

Speaker #4: Yeah. I think you saw us do the capital markets work and bolster the whole co-liquidity and the total capital. Total and TCE are roughly 100 basis points higher than where we'd like to see them.

Keene Turner: Yeah, I think you saw us do the capital markets work and bolstering the holdco liquidity and the total capital. Total and TCE are roughly 100 basis points higher than where we'd like to see them. I think the announcement of the additional 2 million shares and us continuing to be active reflects our posture on managing that capital to where we think it's optimized.

Speaker #4: And I think the announcement of the additional 2 million shares and us continuing to be active reflects our posture on managing that capital to where we think it's optimized.

Speaker #1: Got it. Okay. Great. Everything else has been asked and answered. So thank you very much.

Damon Del Monte: Got it. Okay. Great. Everything else has been asked and answered. Thank you very much.

Damon DelMonte: Got it. Okay. Great. Everything else has been asked and answered. Thank you very much.

Speaker #4: Thank you, Damon.

Keene Turner: Thank you, Damon.

Speaker #2: Your next question comes from the line of Brian Martin with Green Capital. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Brian Martin with Janney Montgomery Scott. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Brian Martin with Janney Montgomery Scott. Your line is open. Please go ahead.

Speaker #5: Hey, good morning, guys.

Brian Martin: Hey, good morning, guys.

Speaker #6: Good morning.

Keene Turner: Morning.

Brian Martin: Say just maybe one or two, I joined here late, but Keene, just with the restructuring and whatnot, and I appreciate the color on the margin outlook. In terms of where average earning assets kind of shake out into Q3 given the restructuring and some of the other initiatives, can you just give us an idea of a landing spot and how to think about average earning assets into Q3 and then can model it from there?

Speaker #5: Say just maybe one or two. I joined here late, but the Keene, just with the restructuring and whatnot, just and I appreciate the color on the margin outlook.

Speaker #5: In terms of where average earning assets kind of shake out into three Q given the restructuring and some of the other initiatives, can you just give us an idea of a landing spot and how to think about average earning assets into three Q and then kind of model it from there?

Speaker #4: Yeah. I mean, the size of the earning asset base didn't really change with the restructure. So we had 180-plus million dollars of proceeds, and it was all redeployed.

Keene Turner: Yeah, the size of the earning asset base didn't really change with the restructure.

Brian Martin: Okay. Yeah.

Keene Turner: We had $180-plus million of proceeds, and it was all redeployed. We didn't lever up or down the balance sheet in that process. We'll just start Q3 with a higher-

Speaker #4: So we didn't lever up or down the balance sheet in that process. We'll just start three Q with a higher rate on the securities portfolio.

Brian Martin: Higher level

Keene Turner: rate on the securities portfolio. Then, as Jeff noted, we're a little bit behind in terms of what we did with the sub-debt. I think as we continue to manage share count, that should net-net kind of make up for it. Margin fortunately stays intact in the high 420s, and we should be able to get some EPS advantage here as we buy more stock.

Speaker #4: And then as Jeff noted, we're a little bit behind in terms of what we did with the sub debt. But I think as we continue to manage share count, that should net-net kind of make up for it.

Speaker #4: So margin fortunately stays intact in the high 420s. And we should be able to get some EPS advantage here as we buy more stock.

Speaker #5: Okay. Yeah. I just wanted to make sure it was anything on that. I know you said you had done it late in the quarter.

Brian Martin: Okay. Yeah, I just wanted to make sure there wasn't anything on that. I know you said you had done it late in the quarter, so that's helpful. Then just in terms of the strategic outlook, it sounds like the buyback's just kind of the best use, and it's really an organic focus going forward. Right now, that's kind of the primary focus rather than anything strategic in terms of excess use of capital.

Speaker #5: So that's helpful. And then, just in terms of the strategic outlook, it sounds like the buybacks are kind of the best use, and it's really an organic focus going forward right now.

Speaker #5: That's kind of the primary focus, rather than anything strategic in terms of excess use of capital?

Speaker #4: Brian, I think you hit the nail on the head. It's really about growth and buybacks and certainly keep looking to dividend.

James Lally: Brian, I think you hit the nail on the head. It's really about growth and buybacks and certainly keep looking to dividend.

Jim Lally: Brian, I think you hit the nail on the head. It's really about growth and buybacks and certainly keep looking to dividend.

Speaker #5: Yeah. Okay. And Jim, just it sounds like just in general, the clients are optimistic on I mean, I guess I don't want to put words in your mouth, but listening to your commentary and visiting with them recently, I mean, you're given the diversity of the loan book and just your segments, you still feel good about the growth and the clients are still relatively optimistic as you go into the back half and then into '27 on loan growth and sustaining that?

Brian Martin: Yeah. Okay. Jim, it sounds like just in general, the clients are optimistic on I guess I don't want to put words in your mouth, but listening to your commentary and visiting with them recently, given the diversity of the loan book and just your segments, you still feel good about the growth, and the clients are still relatively optimistic as you go into the back half and then into 2027 on loan growth and sustaining that?

Speaker #6: Yes, very much so. And I think, too, entrepreneurs are amazing people. I mean, they have great confidence in their own business. They have great confidence in the economy.

James Lally: Yes, very much so. I think too, entrepreneurs are amazing people. They have great confidence in their own business. They have great confidence in the economy. Doug Baucke's out there with me and very bullish on the impact of manufacturing turning to the United States. Despite all the things that are going on in and around the world, we feel good about what we're hearing, what we're seeing, and frankly, what we're experiencing in the growth of the pipeline.

Jim Lally: Yes, very much so. I think too, entrepreneurs are amazing people. They have great confidence in their own business. They have great confidence in the economy. Doug Baucke's out there with me and very bullish on the impact of manufacturing turning to the United States. Despite all the things that are going on in and around the world, we feel good about what we're hearing, what we're seeing, and frankly, what we're experiencing in the growth of the pipeline.

Speaker #6: And so Doug's out there with me and very bullish on the impact of manufacturing turning to the United States, despite all the things that are going on in and around the world.

Speaker #6: We feel good about what we're hearing and what we're seeing. And frankly, what we're experiencing in the growth of the pipeline.

Speaker #5: Okay. And then just the last one for me. I appreciate the commentary about the credit quality and the expectations to get that better. I mean, at the end of the day, if we're not if the loss content appears low, I mean, I guess the delay really, if anything, could be that could this could these issues just extend out with the courts?

Brian Martin: Okay. Just the last one from me. I appreciate the commentary about the credit quality and the expectations to get that better. At the end of the day, if the loss content appears low, I guess the delay really, if anything, could these issues just extend out with the courts? I guess if you kind of frame up kind of the tail risk that it could just take longer than you thought, even if there are limited losses. Is that real? I guess it sounds like you expect to see a little bit of improvement sooner rather than later, but I don't want to frame that the wrong way or put words in your mouth.

Speaker #5: I mean, I guess if you kind of frame up the tail risk that it could just take longer than you thought, even if there are limited losses.

Speaker #5: Is that real, or I guess it sounds like you expect to see a little bit of improvement sooner rather than later, but I don't want to frame that the wrong way or put words in your mouth.

Speaker #6: That's exactly right. So, I would say this: I think it has been extended longer than I would have imagined. And could they continue putting roadblocks up? I don't know.

James Lally: I would say this. I think it's extended longer than I would have imagined. Could they continue putting roadblocks up? I don't know. Maybe they could, but I doubt it. I think these last two are the ones that we're looking to get resolved and move forward.

Jim Lally: I would say this. I think it's extended longer than I would have imagined. Could they continue putting roadblocks up? I don't know. Maybe they could, but I doubt it. I think these last two are the ones that we're looking to get resolved and move forward.

Speaker #6: Maybe they could, but I doubt it. I think these last two are the ones that we're looking to get resolved and move forward. And so, but Brian, I don't run the courts.

Brian Martin: Yeah.

Keene Turner: Brian, I don't run the courts.

Speaker #5: Yeah. I got you. Okay.

Brian Martin: I got you. Okay.

Speaker #6: Yeah.

James Lally: You know.

Jim Lally: You know.

Speaker #5: Yeah. Okay. I mean, if you feel it seems like you're going in the right direction, it's just timing issues. So okay.

Brian Martin: Yeah. Okay. It seems like they're going the right direction. It's just timing issues. Okay.

James Lally: Very much so.

Jim Lally: Very much so.

Speaker #6: Very much so. Very much so. The tea leaves look good.

James Lally: Yeah.

Jim Lally: Yeah.

James Lally: The tea leaves look good.

Jim Lally: The tea leaves look good.

Speaker #5: Yeah, okay. Well, good. All right, we'll look forward to seeing that. And thanks for taking the questions.

Brian Martin: Yeah. Okay. Well, good. All right. We'll look forward to seeing that, and thanks for taking the questions.

Speaker #6: Thank you.

James Lally: Thank you.

Jim Lally: Thank you.

Operator 2: There are no further questions at this time. I will now turn the call back to James Lally, President and CEO, for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to James Lally, President and CEO, for closing remarks.

Speaker #2: There are no further questions at this time. I will now turn the call back to Jim Lally, President and CEO, for closing remarks.

James Lally: Kristen, thank you, and thank you all very much for joining us this morning and for your interest in our company. We look forward to speaking to you again at the end of Q3, if not sooner. Have a great day.

Jim Lally: Kristen, thank you, and thank you all very much for joining us this morning and for your interest in our company. We look forward to speaking to you again at the end of Q3, if not sooner. Have a great day.

Speaker #6: Kristen, thank you. And thank you all very much for joining us this morning. And for your interest in our company, we look forward to speaking to you again at the end of the third quarter.

Speaker #6: If not sooner, have a great day.

Speaker #2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 2: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining Enterprise Financial Services Corp Q2 2026 earnings conference call. The line will disconnect automatically.

Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining Enterprise Financial Services Corp Q2 2026 earnings conference call. The line will disconnect automatically.

Q2 2026 Enterprise Financial Services Corp Earnings Call

Request DemoDemo

Enterprise Financial Services

Earnings