Peoples Bancorp of North Carolina, Inc.

Good day and welcome to the Bank of California second quarter 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ann DeVries. Please go ahead.

Good morning, and thank you for joining Bank of California's second quarter earnings call. Today's call is being recorded, and a copy of the recording will be available later today on our investor relations website. Today's presentation will also include non-GAAP measures. The reconciliations for these measures and additional required information are available in the earnings press release and earnings presentation, which are available on our investor relations website. Before we begin, we would like to remind everyone that today's call will include forward-looking statements, including statements about our targets, goals, strategies, and outlook for 2026 and beyond, which are subject to risks, uncertainties, and other factors outside of our control, and actual results may differ materially. For a discussion of some of the risks that could affect our results, please see our safe harbor statement on forward-looking statements included in both the earnings release and the earnings presentation, as well as the risk factors section of our most recent 10-K. Joining me on today's call are Jared Wolf, Chairman and Chief Executive Officer, and Joe Cowder, Chief Financial Officer. After our prepared remarks, we'll be taking questions from the analyst community. I would like to now turn the call over to Jared.

Thanks, Anne, and good morning, everyone. The second quarter was another strong quarter for Bank of California. Our loan and deposit growth shined. With 9% annualized loan growth, and 12% annualized deposit growth. Loan production of $2.8 billion was particularly strong. I mention these items at the outset so they are not overshadowed by the important strategic moves that we made in the quarter. In fact, the strength of the underlying franchise is one of the key reasons we decided to take the strategic actions we did. In order for the true earnings power of our team and this franchise to show up quarter after quarter, We felt it was time to remove some of the weights hanging over us, namely over $2 billion yielding long-duration securities in our held-in maturity portfolio. Accordingly, the second quarter was an important step for Bank of California, as we made a strategic decision to allocate capital towards opportunities that we believe will enhance stronger long-term returns for our shareholders and allow the true earnings power of this franchise and team to come through. We implemented that strategy through three complementary actions, which included, first, the repositioning of $2.3 billion of lower yielding securities, two, a targeted loan sale of approximately $825 million of select loans, and three, the retirement of $385 million of subordinated debt ahead of a significantly higher contractual reset rate. Together, we believe these actions will create a more efficient balance sheet, increase recurring earnings power, and Accelerate Capital Generation. The securities repositioning was the largest and most impactful component of this strategy. We sold $2.3 billion of lower yielding securities, which we partially redeployed into higher yielding, shorter duration securities, with the remaining proceeds expected to be reinvested in this quarter. The repositioning generated a 276 basis point yield pickup, which will drive net interest margin expansion and higher recurring earnings power. Importantly, We executed this sale without raising equity and maintained capital ratios well above well-capitalized regulatory thresholds. At a time when many banks are managing margin pressure, this strategic repositioning puts us in a favorable position, with early benefits to the net interest margin already visible. We expect our NIM following the targeted loan sale close and full reinvestment of the securities repositioning proceeds to come in above 330 and to expand further in the second half of the year. We also use favorable market conditions to sell approximately $825 million of select commercial real estate and multifamily construction loans. After a competitive sale process, we have executed purchase and sale agreements for the entire $825 million. We expect closings to be completed by the end of the third quarter. The loans chosen for sale fell into two buckets. The first group, about $300 million, were construction loans to a single borrower that were personally guaranteed but showing signs of weakness. The second group, about $525 million, were all performing CRE loans but on average carried lower interest rates. The blended interest rate of all $825 million is around 4.6%. The sale allows us to redeploy funds into market rate loans, reduce concentration risk, and lower the risk of future credit-related volatility. Combined with other actions taken in the quarter, Credit metrics improved meaningfully quarter-over-quarter, with reductions in special mention loans by 56%, classified loans by 31%, and delinquent loans by 50%. These changes provide a positive glide path for the strong earnings trajectory we expect going into the second half of the year. Finally, retiring $385 million of subordinated debt ahead of a much higher reset rate lowers our future funding costs, and together with the securities repositioning and the impact of the anticipated loan sales, supports immediate expansion of net interest margin, higher recurring earnings, and accelerated organic capital generation. Capital remains solid, and we expect CET1 to build as the loan sale closes and return earnings increase, with expected CET1 of approximately 9.5% to 9.6% in the third quarter, 9.8% to 9.9% by year end, and above 10% in early 2027. This assumes no regulatory capital reform, which if implemented, is expected to increase capital by roughly 60 basis points. Our expected capital generation, combined with a larger earnings base and stronger margin trajectory, gives us greater flexibility as we evaluate future capital allocation, including for the potential to redeem our preferred stock in 2027. As I noted at the outset, our franchise continues to perform very well. In addition to our strong deposit and loan growth, new loan production was broad-based and continue to support our remix toward higher return categories. We continue to add new non-interest-bearing business deposit relationships, which is one of the clearest indicators that our franchise is gaining traction. Our cumulative new non-interest-bearing deposits from relationships opened in the last two years reached approximately $1.2 billion at quarter end. That reflects the strength of our teams, the quality of our client relationships and the continued value of our relationship-based banking model. Having taken these important balance sheet steps, we entered the second half of the year with a higher margin trajectory, strong franchise momentum, and a clear focus on execution. Our updated outlook reflects the earnings power created by the actions we took this quarter. By year end, we are now targeting our NIM, ROA, and ROTC to be in a higher range and fourth quarter pre-tax pre-provision income of $125 million to $130 million. These targets are conservative. and reflect stronger earnings profile driven by more productive securities portfolio, continued balance sheet remixing, disciplined expense management, and higher recurring net interest income. We believe these actions position Bank of California to generate stronger returns, build capital organically, and create meaningful long-term value for shareholders. Now let me turn the call over to Joe for a financial update, and then I'll return back at the end. Joe?