reserve against it which is 3.2 million and then the um the the core uh what we call a core cni so this is some of the larger loans that um have collateral other than real estate have 45 million dollars in balances in it and that has a 23 percent reserve against it or 1.5 million dollars Now, there's another component of the SBA portfolio that is all real estate-backed. It has $53 million in balances, and there's a relatively small reserve of about 1% against that. That part of the portfolio performs as expected. It is not a big loss driver for us. So you roll all those bits and pieces together, and on the riskier parts of the portfolio, we're reserved in the high 20%.
Thank you. And just one final question. Could you be a little more specific on the timing of the rights offering? You said mid-August, we're basically here. Is it going to be this week or next week? What's your timing on the execution of the rights offering for the shareholders?
Yeah, Ross, thanks for asking that question. I was kind of expecting that one this morning. Just for you and everybody else that's listening, the rights offering is coming. There was, because of the restatement, we wanted to make sure that we had updated, reliable financials in all prior periods and current periods available to all investors so that you have a complete package of information for consideration before you launch the rights offering. And obviously that's pushed the timing out on that a little bit, but now that we have everything filed or we'll have the second quarter 10Q will be filed later today, that kind of frees us up to move on to the rights offering components. So what we'll end up doing is preparing the communication that goes out to all of the shareholders of record as of May 12th, and those communications we should have in hand or be ready to mail those next week. Coincidentally, we also have the full proxy, which will be going out. Our annual shareholder meeting is scheduled for September 22nd. So really, we're going to have a full population of all important documents in hand for investors to look at before they make a decision around the price offer. So it is coming. I know it's taking a little bit longer than what we had initially wanted to do, but we wanted to make sure that we were checking all the boxes for everyone.
So you're saying it's going to be pushed off to September? Is that what you're implying?
No, the rent's offering. We'll launch that in August. I just wanted to mention when the shareholder meeting was, and that's in September.
Got it. Thank you for your help, guys. Thank you very much. Sure. Thanks for the question, Ross.
Operator
Your next question comes from the line of Julianne Casarino with Sycamore Analytics. Your line is open. Please go ahead. Good morning.
I'm just trying to cut through a lot of the noise in the quarter. On the call, you just said that of the $44 million pre-tax loss, $43.8 million came from the restructuring and non-recurring. So that implies still a loss for the quarter, excluding all one time, or what was the core earnings power in the quarter?
I think if I understand your question, the one-time items in the asset resolution component was $43.8 million. The total loss was $44 million. So the remaining operating loss, to think about, was about $200,000 for the quarter.
And that was just a regular recurring operating loss, right? Is that correct?
Yeah, I think you can refer to that as being core, Julianne.
Okay. So we're really – the core earnings power that we're starting with is kind of, you know, is kind of zero right now, right? Or is there anything masking that? Is there any core earnings power on the non-resolution piece?
I will tell you this. As we look forward, essentially the things that we talked about, if you recall, I mentioned on the net interest margin, really core base was 4.07%. So there's a lot more in terms of overall earnings revenue that we are expecting going forward, plus all of the components that Al talked about in terms of growth in the balance sheet, combined with continued efforts to reduce the bank's overall cost of funds. So I'd like to think about it from the standpoint that core earnings in the second quarter was just below break-even, but now that we have a clear path ahead, a lot of strength, a lot of good focus as far as what's coming, the bank is positioned for profitable earnings going forward.
Okay, you know, with operating leverage and stuff. What about the tax rate? So is there a deferred tax, is there a DTA valuation allowance that's been set up or no?
No, there's no valuation allowance against the deferred tax asset uh truthfully and these are conversations that obviously we've had internally um the bank is positioned for a profitable growth going forward and a new leadership team a lot of strength is coming in we believe that we will have no issues whatsoever in terms of reacquiring um that asset in the future so there is no valuation allowance at this time Like I said, we continue to look at it, but at this time, it is zero.
Okay. So does that mean what tax rate to use going forward?
Tax rate for the quarter is about 25%.
Okay. Okay. And so the quarter, and did that include the redemption payments of, I think, almost $10 million, right? the 9.7 million payments to redeem the, forgive me if I get the names wrong, but basically the preferred holders. Did that, is that 9.7 million included yet, that payment, and is that pre-tax or after-tax? Like, should we be adjusting the TCE for that, or?
The payout for the Series A is Series B, which I think you're referring to, actually concluded this week. So that will actually be a Q3 event.
That's a Q3. So is that, that's totaled $9.7 million, right? Is that pre-tax or after?
It's a redemption. It's not really an income state, a component. So it's not, not an earnings hit.
Oh, so, but is it a TC, does it come out of tangible common equity? Or no, because it's just from one bucket to another. Yes. Okay, so no impact on TC from that. No impact on shares either, right? Share count.
So the redemption payment is kind of going from one bucket to another. Don't need to adjust for that. What about the exchange, too? Nothing to adjust for that. the you mentioned 22.9 million shares from an exchange um but that's already like we don't have to adjust for that or is that a is that a third quarter um adjustment that we should make yeah it's a third quarter event but that mission preferred to comment and obviously the share count's going to go up yeah so that if you're asking the tangible book value already has that dilution component baked into it. That's what I was asking. Okay. Now, so the only thing to adjust in the third quarter for tangible book for share is the rights offering. Is that correct?
That is correct. And obviously, we would like to maximize that for shareholders, but we're not sure how much we will get.
We'll report that when it's done. so let's just assume everyone exercised that everyone who could exercises at 350 um i believe it is so what would be that what would be that impact on tce and share count if everyone were to exercise is that something i can calculate or yeah 350 at 4.1 million shares 4.1 million yes okay okay all right all right very good it was the 4.1 I think I needed to have. Okay. And then just to ask about the deposit franchise, you know, so you mentioned that you, you know, you've gone through the loan book pretty completely by now, but now the deposit franchise, is there, have you, have, have you finished the review of, of depositor, you know, you mentioned in the press release, I think it's like the earnings release, non-relationship customers. Are there about what percent of the deposit franchise right now would you estimate is non-relationship customers approximately?
It's, Julianne, it's very small. We have, we are strictly focused on relationship-based, I guess, depositors. And when I say relationship, it's not just the deposit side. In a lot of cases, we also have lending relationships that's something that we have really been focused on and i think out there really nice job of explaining how we will go about that in the future uh the key thing is in the past we had some relatively large what i'll call um well i'll just say it i mean they were more of a you know a place for you know for entities to park money we're paying them a very attractive rate to do it because it was funding business funding loan growth around the SBA business. That's not what we're doing any longer. So, you know, we had conversations with those people. We said, look, we're not going to pay these rates anymore. They're out of market. Most of that money has left, and that was by design, as well as the runoff of the broker deposits that we have. And that was also part of our strategy.
Right. So you'd say this quarter ends deposit franchise is what there's no more transition to be done, you know, looking at the interest-free and the broker, you know, this is a good base to go forward.
Like, there's no more... Yeah, there's still some brokerage in there that's going to run off, but, you know, really, what's there, I'm going to call, you know, core deposits, I suppose.
Right. And is it all local? Is it 100% local, or about how much would you say is out of market? just excluding the brokered so excluding brokered is it all um predominantly local customers local it's local yes yeah these are people we know that you can drive for about an hour to go visit them okay great great and is there is any one customer more than uh or any one customer you know um five to ten percent or more of total deposits no okay great thank you so much thank you you got it sure Your next question comes from the line of Ian Greed with Pendragon Capital Management.
Operator
Your line is open. Please go ahead.
Ian Greed
Analyst — Pendragon Capital Management
Hi, thank you. Lots of great questions here. I just wanted to kind of come back a little bit to some of the new initiatives like your treasury business and some other incentives to or initiatives to grow fee income. Do you have the systems in place to do that? Is this going to require uh any significant um capital expenditures in technology and so forth um and i guess you know it's a very crowded space a lot of those businesses where do you think you have the edge to compete yeah hi and this is robin i'll take that one um we do already have the systems in place that we need.
I think we have all the tools to be successful here. And if you look at, you know, our growth in 25 over 24, our treasury fee revenue grew about 75% year over year, and we're continuing to be on track to continue that increase this year. I think really what it is as we move up market a bit, You know, we are now, you know, really targeting our commercial business customers, and, you know, we are going to be banking some larger businesses than we have in the past, and those customers have more sophisticated needs. And, you know, basically, if we're going to do their loan, we're going to get their operating account, and those operating accounts are just by the nature of the business going to come with Treasury. So I really think there's a strong opportunity there, and we have two different Treasury platforms, one for very small businesses and another that is more sophisticated. So I think we're well-sufficient.
Yeah, Ian, I'll add to that. Okay. Talk about the edge. um our bankers know their customers they're accessible um at five o'clock they don't turn their cell phones off um so it's it's true relationships solving problems being accessible being local um not outsourcing or uh offshoring uh customer support um and generally speaking banking professional executives and small businesses and and uh investors and and companies they generally have larger average balances and their cost of funds is generally lower so that comes with our initiative to you know act as a commercial bank serving commercial customers in our community so that it comes all together.
Ian Greed
Analyst — Pendragon Capital Management
Okay, thanks. So we shouldn't, so in the end, we shouldn't see a significant...
There won't be a significant investment. I mean, we will need to continue to expand the treasury team. You know, it's a small team today. They're a small but mighty team, but certainly, you know, the opportunities that this will provide and we'll need some additions to the team. But we don't have investments in software or other things. And certainly the revenue that we get from it should balance off the additional costs that we may have.
Operator
There are no more questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
