Q3 2020 Pacific Premier Bancorp Inc Earnings Call
She just by pressing the star key followed by zero after todays presentation, there be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note that this event is being recorded I would now like to turn the conference over to Steve Gardner Chairman and CEO. Please go ahead Sir.
Thank you Chuck good morning, everyone. I appreciate you joining us today.
As you're aware worn.
Good morning, do you really need to report.
20 Twond.
We've also published an updated investor presentation that we will be speaking to you today, if you have not gone.
We would encourage you to visit our investor website.
To access a copy of the presentation contains.
And information.
Ongoing response.
[laughter].
Yeah, My nature of our organization and how we are well.
From a defensive posture to one of our offense.
In terms of our coal today, Ron and I will walk through the presentation and then we will open up the call to questions.
I note that in our earnings release, and Investor presentation that we have our safe Harbor statement relative to the forward looking comments and I would encourage all of you to read through those carefully particularly in light of the COVID-19 pandemic the uncertain economic outlook and how it may impact our business financial.
In addition, and results of operations.
I want to start by recognizing and thanking everyone of the talented and dedicated colleagues of mine who can.
Price the Pacific Premier team through.
Through their commitment to each other they are having a positive impact on the lives of tens of thousands of individuals throughout the communities we serve.
The challenges brought on by the COVID-19 pandemic has served to strengthen our collective resolve to continue to be a source of strength for all of our constituents.
I'm going to begin on slide four of the presentation with a summary of third quarter results.
Overall, we delivered solid financial performance well, having another highly productive quarter as we continued to execute on our strategic priorities for managing through the pandemic integrating the OPIS acquisition and positioning the company well to enhance franchise value in the years ahead.
We generated net income of $66.6 million or 70 cents per share along with $98 million or pre provision net revenue.
Which reflects our increased operating leverage earnings power and the benefits derived from the sale of our SB eight P.P.P. launch.
I've been impressed by how quickly the teams have integrated and are operating at a high level, particularly given the challenges presented by the pandemic.
We completed the open systems conversion in early October.
Consolidated 20 branch locations during that same period.
We have already exceeded the initial 25% cost savings estimates for the transaction as our annualized non interest expense run rate in the third quarter was less than our pre merger estimates.
With the ongoing pandemic, we remain focused on credit trends closely monitoring our clients' business cash flows and proactively managing the associated risks.
In general we saw positive trends in asset quality this quarter with declines in non performing assets and delinquent loans along.
Along with significant reductions and deferrals how's the vast majority of the loan modifications. We made earlier this year have returned to making regularly scheduled payments.
During the quarter. We also sold approximately $100 million lower rated C.N. <unk> and commercial real estate loans. So we felt that the potential for further deterioration.
With the positive trends, we saw in asset quality, our provision was relatively small compared to the second quarter.
Cecil is accelerated our reserve build and combined with a fair value credit discounts on the Opus one portfolio. It has put us in a strong position.
We have built a fortress like balance sheet and maintained a high level of reserves and total loss absorbing capacity equal to 3% of our loan portfolio.
Another material event in the quarter was the sale of over $1 billion, a P.P.P. loans, which enabled us to accelerate our fee income recognition.
While relieving our team from the burden of managing through the complex and ever changing forgiveness process.
With this distraction eliminated we spent the quarter rebuilding our loan pipelines.
In the third quarter, while the pace and strength of the economy remains uncertain, we began to return to an offensive posture toward new business development.
As we get more confidence in the sustainability of the economic recovery, we expect loan production to grow from the levels. We saw during the third quarter.
Given the increase in our earnings power and overall risk profile weve been able to increase the amount of capital that we are returning to shareholders.
Our board approved a 12% increase in our common stock dividend to 28 cents per share.
With our strong capital and liquidity levels, we are well positioned to take advantage of any opportunities that may arise in this uncertain environment.
On slide five we highlight key investment themes of the organization that we've built over the years.
Financial performance has consistently placed us above our peers and as such positions us as one of the premier franchises in the Western U.S.
We have always prided ourselves on being a high performing institution to maintain strong internal controls and robust risk management practices.
Our culture of continuous improvement and client focused business model underpinned, our track record of creating shareholder value.
On slide six we lay out the comparison to our western bank peers on a number of important financial metrics.
We have consistently delivered a superior level of performance and have achieved these results by maintaining a long term perspective on what is in the best interest of all stakeholders.
We expect this will continue well into the future.
Slide seven and eight cover some of our key differentiators.
The innovative manner in which we manage the company and our ability to leverage technology to better serve our clients.
We were one of the first banks to implement the sales force technology solution back in 2012.
Early on we realized the power and Playability of the platform and began expanding its use beyond merely a CRM tool.
Since that time, our program developers have continually enhanced and customize the system.
Our investment in technology has positioned us well to handle the increased demand for digital banking solutions when the pandemic began earlier this year.
We anticipate the pace of innovation in the financial services industry will only accelerate and our team is meeting the higher expectations of entrepreneurs and small businesses.
Our technology solutions are enabling us to meet the more complex needs of larger commercial banking customers and driving gains in productivity.
We believe the depth and breadth of our capabilities and innovative approach or a key competitive advantage.
Slide nine highlights one of the important lines of business, we acquired from the OPIS acquisition.
Which has served to strengthen diverse and diversify our fee income.
Pacific Premier Trust is a leading to IRA custodian for alternative investments.
And with over $15 billion in assets under custody. This business line generates approximately $28 million of fee income annually.
We are excited about the meaningful opportunities to expand this business once we convert the existing trust platform, which will take place in the second quarter of 2021.
Slide 10 displays a timeline of the 11 acquisitions, we've completed over the past 10 years.
Our team has a well developed playbook that covers the entire lifecycle of acquisitions.
With each transaction, we fully integrate the teams and processes into one unified culture.
Following the integration, we look back and review our assumptions approach and the execution, both quantitatively and qualitatively to learn how we can improve.
We take that knowledge and apply it to subsequent transactions.
We view our ability to successfully attracted acquire M&A partners as a core competency that ultimately results in expanding franchise value.
Slide 11 summarizes our capital strength at both the bank and the holding company.
Each of our regulatory ratios exceeding the well capitalized thresholds.
Additionally, we highlight the consistent growth in our tangible book value over the past decade.
The value we create is reflective of the disciplined approach, we take towards acquisitions and organic growth, while remaining focused on prudent capital management.
At this point.
All over to Ron to provide some additional details on our third quarter financial results Ron.
Thanks, Steve and good morning.
I'll pick up on slide 13, which illustrates the strength of our core operating performance now, reflecting a full quarters impact of the OPIS acquisition.
Highlighted here.
On the strength of our strategic long sales and cost savings achieved to date.
We delivered a 47.4% efficiency ratio and a pre provision net revenue return on average assets of 1.92%.
Both of these measures improved from the prior quarter, excluding along sales highlighting the merits of the office transaction.
Our strong pre provision net revenue continues to generate significant capital to support both our growth capital management initiatives.
Slide 14 provides a highlight highlights the key components of our net interest margin.
For the third quarter, we reported a net interest margin of 3.54%.
In a core net interest margin of 3.23%.
As highlighted with our attribution waterfall chart.
The largest drivers were the full quarter impact of the OPIS acquisition.
And the deployment of excess liquidity from the sale of the PPP loans.
Slide 15 highlights our noninterest expense post acquisition.
Our third quarter operating expenses, excluding merger related costs extrapolates to $382 million annually locked in the $390 million expense run rate we estimate it.
The announcement of the transaction.
We still have some temporary staff on the payroll as we wrap up our post conversion activities.
On slide 16 highlighted our loss absorbing capacity of $409 million.
This is comprised of our $282 million allowance for credit losses, and the remaining fair value discount on our acquired loans.
As highlighted.
Yeah for loans held for investment remained flat from a dollars perspective, but increased to 2.10%.
The key drivers of the Hcl for the third quarter were the overall loan composition of the portfolio off.
Offset by slightly increasing impacts related to the economic forecasts.
And our credit quality profile.
As highlighted on slide 17.
Our deposit cost has come down nicely this quarter to 20 basis points driven.
Driven by our deposit repricing actions.
The deposit run off we experienced of approximately $650 million.
Both deliberate unexpected.
In particular with the higher cost money market accounts, as well as retail and brokered Cds.
Notably each of these categories fell significantly in terms of the costs from the second quarter.
Lastly, turning to slide 18, we summarize the composition of our investment securities portfolio.
During the quarter, we increased our securities portfolio to $3.6 billion redeploying excess liquidity.
The increase was largely in AAA rated municipal and MBS securities.
This brought down our securities portfolio yield and extended our duration.
Our liquidity remains strong and depending on our deposit trends in loan demand in future periods.
We may expand or contract our securities portfolio.
At this point I'm going to turn the call back to Steve.
Great. Thanks, Ron.
Since the onset of the pandemic, we have provided extensive information data and commentary on the metrics quality and performance of our loan portfolio.
So you.
Slides 20 through 25, which provide an update on credit quality trends.
We summarize the diversity and composition of the loan portfolio on slide 20.
Our concentration in multifamily loans has obviously increased with the OPIS acquisition.
Multifamily has historically been one of the best performing asset classes, owing in part to the housing shortage in the western U.S. and in this uncertain environment, we remain comfortable with these loans.
Multifamily will likely continue to make up a significant portion of our loan portfolio in the near term, but over the medium to longer term, we expect it to comprise a lower percentage of the total.
On page 21, we provided an update on our COVID-19 temporary loan modifications.
The majority of these loans have returned a regularly scheduled payments.
While extensions of previously modified loans and new modifications dropped to 1.8% of total loans.
Turning to slide 22, we provided detail around certain loan types that are perceived to be at greater risk from the impact of the pandemic.
Our hotel loan portfolio continues to be under the greatest stress.
However, some borrowers are indicating slightly improving operations under these challenging conditions.
Pre pandemic. These loans were prudently underwritten with relatively low loan to values and solid debt coverage ratios.
Given that the portfolio is reasonably well seasoned.
Growers rain motivated to protect the substantial equity it built up over many years.
On slide 23, we highlight our overall strong asset quality metrics.
What classified loans have increased this quarter, given the economic environment, and our proactive approach to identifying and addressing credit issues. It is not surprising.
On slides 24, and 25, we provide perspective on our long standing track record of effectively managing credit risk.
Over more than a decade, including the 2008 through 2012 credit cycle, we've consistently had credit losses and problem loans well below our peers.
Our CRT concentrations of typically increased with each acquisition.
But overtime, we reduced concentration short commercial banking focus.
Turning to slide 27, we summarize the Pacific Premier culture that has been the foundation of our success.
Through the years, our capabilities and level of sophistication has grown.
But the foundation of our approach to the business remained steadfast.
On slide 28, we highlight our commitment to corporate responsibility.
We have a long track record of investing our time and capital to help strengthen our communities and support charitable organizations that foster diversity and the economic inclusion.
We conclude with some thoughts on beginning on slide 29.
As businesses and consumers continue to show resiliency in the face of the pandemic.
We are seeing increased opportunities to expand existing relationships and develop new business.
Additionally, it is clear that we are going to be in a low rate environment for an extended period of time.
Well, which will present challenges industry wide.
Tobey 19 has accelerated many large macro trends and we believe that is true for our industry as well.
Consolidation has been ongoing for more than three decades, and we expect that trend to accelerate in the years to come.
For many financial institutions earnings growth will largely be dependent on improving efficiencies, particularly through increasing scale by partnering with other institutions.
And we have consistently demonstrated our ability to execute on acquisitions.
The value that we've created for the shareholders of the combined company has proven to be a key factor in helping us attract new merger partners over the years.
We believe we are well positioned to capitalize on opportunities in the current environment as well as to manage through these uncertain economic times.
And on behalf of the board of Directors I want to once again express our appreciation to every member of our organization for their efforts in this challenging environment.
With that we'd be happy to answer any questions. You may have Chuck Please open up the call for questions.
Yes, Sir we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.
And our first question will come from David Feaster with Raymond James. Please go ahead.
Hey, good morning, everybody.
Good morning, David.
I just wanted to start on the loan sale and just get your thoughts on that strategy behind it would be more of a noncore portfolio or potential problem loans could you just wanted to get off the books and you know as you look at the breakdown.
Looks like it might have been a pool of note non owner occupied series just curious what was in that and.
Yeah, you can provide on that and I guess to why did net charge offs.
Today that it <unk> I think most folks are pretty familiar with a history of of our.
Strategy around either acquiring portfolios and selling portfolios and we have frequently done this over the years tipping.
Typically following acquisitions up this was a group of senior <unk> and CRH properties are a mix across the board of types that knows Uh huh.
To a large broad categories and Weve done this over the years, a if we see as part of proactive portfolio management, if we see maybe a degradation or concern.
In in future cash flows will take the opportunity.
To sell these portfolios and that's what we did here in the third quarter.
Our next question will come from Matthew Clark with Piper Sandler. Please go ahead.
Hey, good O'neil.
Hi, good morning.
Just to follow on that first question do you anticipate additional loan sales and where those opus.
Credits.
They were a combination of credits from from either we originated or or May have been acquired from opus or other institutions.
It's it's hard to say, we'll see circle.
You know depending upon.
The cash flow is the characteristics of the individual loans.
We're proactive in that regard.
At the same time, we saw improving credit quality.
Generally across the board other than the a slight uptick in classified assets, but just given the environment. The oh worst recession that weve seen in our lifetime in the second.
Second quarter, it's not to be Onyx, it's it's to be expected to a certain degree. So we'll see as we move forward, we're going to be proactive as we manage our credit risk in the portfolio. We think that's the best way to do it allows us to focus on the vast majority of the existing.
Clients that we have that are doing very well and in this challenging environment.
Okay, Great and then just.
On loan growth in general I think loans were down about 400 million extra loan sale ex TPP sounds.
Sounds like they're coming from elevated payoffs and how much of that was competitive.
Where are you where you just kind of let the credits go.
How much of that is just selling the businesses and and projects being completed and then just as a follow on to that going on offence and kind of developing new business.
How does that how does the pipeline look at this stage maybe.
Linked quarter with Opus.
And where are you seeing.
The the greatest opportunities.
Sure. So it was a combination of Paydowns and payoffs certainly line utilization has been declining here since the mid part of this the second quarter.
I think you have to take a step back here and look that when as the pandemic sat in and in the contraction began in earnest.
We pulled back ROM.
From an end we had opus, we pulled opus back once we closed on that transaction. So the pipeline was very low headed into the third quarter as the teams came together as we got better visibility around the portfolios of both companies the modification.
Patients in the white the conversations we were having from clients and and as the teams fully integrated that pipeline began to grow materially.
In the third quarter, and we ended up in a very strong position here as we head into the fourth quarter and into 2021 odd the loan.
Pipeline is been fairly well diversified a good chunk of multifamily has come in that we're seeing a attractive risk reward opportunities a part of that is the long standing relationships that are some of the opus folks have had and the ability to expand those relationships.
Some very strong individuals.
Okay, and then just on the cost saves mentioned I think you've got a lot of them.
Out, but the conversion was in early October which isn't isn't likely in the fourth quarter run rate. So just wanted to get a sense for the amount of annualized cost saves left.
And any thoughts on kind of a core.
Core expense run rate.
Yeah, I think well have better visibility.
Once we move through the fourth quarter here, but you're absolutely right. The conversion did not take place till after the third quarter that first weekend in October we did consolidate 20 branches as Ron mentioned, we do still have some temporary staff on board.
And now we'll be finalizing.
Their projects and tasks here in the coming weeks and those folks are slated to leave us. So we'll get some additional impact here in the fourth quarter and as I said, well, Ron I'll have a better visibility as we get to the end of the quarter. Ron is there anything that you'd like to add in particular there around that.
<unk> expenses.
I think you summarized it very well Steve.
Well get a clearer visibility I think that given the the the slate, which those folks are going to be be exiting we'll probably have another partial quarter here exceed additional savings and then we'll get as I think you mentioned earlier the first clear our clean quarter. If you will will be the first quarter from an.
Noninterest expense standpoint.
Okay.
And last one for me just on.
The potential share buyback you have an authorization out that are out.
Hi, there I know it's been on hold.
Are you are you waiting for maybe a regulatory exam to get the green light or.
Is there any expectation that you might revisit the share repurchase program.
Yes, so we're not waiting for any green light from a regulatory standpoint, certainly is a 10 billion dollar answer institution were under.
The continuous monitoring program that the regulators have in place we have ongoing conversations with them.
Capital Management is certainly a key focus and we as you mentioned Mount we suspended that stock buyback program.
And towards the end of the first quarter early part of the second quarter.
And as we're getting better clarity and visibility here and I think that we all hope that we'll have a.
Better visibility here in the coming weeks as to how the economy is going to perform and then how the outlook is for the company that certainly that is something that we're going to have be having further conversations about at the board level.
Okay. Thanks.
Our next question will come from Gary Tenner with D.A. Davidson. Please go ahead.
Good morning, guys.
Good morning, Gary.
So just a couple of questions left on my end.
And notice that.
The spot rate at September 30 was a few basis points above the average of just wondering about any trends there was it more of a mix kind of quarter end versus the average or what was the moving parts there.
Ron do you want to address that.
Sure sure Gary.
Yes. The 23, that's the spot at the end of the quarter as we noted obviously there is a there is.
The dynamic situation in terms of the cost the actual average cost excluding the benefit of the CE Mark to market was closer to 25 26 basis points for the quarter and then the CD Mark to market amortization benefit brings it down to 20, so what you actually.
Do you see is a reduction.
In the average rates.
Down to the 23 base.
Basis points at quarter end so.
You know without the benefit of the CE mark to market amortization.
Okay, Great and then just secondly on the classified loan you.
Only about 1% of the total but just in terms of the kind of sequential quarter increase any kind of commonalities within that.
In terms of the underlying amongst.
No not really I mean, it theres you know their side there are certainly some that are in there that were.
Right.
Modified loans that were.
We're not going to get an additional extension and then not just the normal course of of going through the loan grading is as I said, our proactive approach towards managing up a potential future credit issues.
Were very proactive in that and so it's a.
I think to be expected to a certain extent just given what we've seen here in the economy.
Okay. Thank you my other questions were answered.
Very good.
Our next question will come from Jackie Boland with KBW. Please go ahead.
Hi, guys good morning.
Hi, Good morning had a question on on Slide 16, just looking at that 31 million impact Q, but it's all based on loan competition.
I've been affected the loan sales have on that number in the quarter.
The 100 million of CN, I and see our E loans.
Mhm yeah.
You know that not significant this is ah.
This is you are looking at really the change from not one.
Where the portfolio was at Q2 versus Q3 <unk>.
And as noted earlier.
Lower line utilization pay downs and pay offs had.
How did it impact up Ron do you have anything else that you want to add in particular there.
Sure and I just want to make sure Jack you are talking about the $31 million.
Decrease in the Hcl related to what we categorize this loan composition is that is that correct.
Yes.
And maybe I'm looking at the wrong category, but I was just trying to see if there were any specific reserves that may have been released with the loan sale.
Everywhere there, yes, there were I don't have the exact number here, but it was proportionately a little higher than obviously that does the 2% if you will related to the.
Overall reserve so but that is included in that number as well as the things that Steve mentioned the run off of the portfolio. The additional 200 million, but that did have an impact also on the.
And is included in that $31 million.
Okay. Okay. Thank you.
And then just looking more broadly at expenses.
I mean, you've done a fantastic job.
<unk> expenses out of the combined organization and I'm just curious.
Exceeding those expectations, even ahead of that conversion.
Its tremendous and I wanted to see did you find that you weren't expecting to have but where there are efficiencies at the legacy.
Pacific Premier that maybe you picked up.
Some of it related to lower cost just due to less travel and everything from the pandemic just any color you have there would be great.
I think it's there's a multitude of factors that that come into play has certainly the impact of.
The pandemic.
But broadly speaking has allowed us to push down on costs in a variety of areas.
And there's a number of other little items and then Ed.
Really our proactive approach.
Towards managing our expense base very closely so we were certainly pleased with where we came in.
I mean at the end of the third quarter and looking forward to the benefits that we derive from the system conversion and the the branch consolidation.
Okay.
And then just one last one from me.
In terms of securities purchases I'm, just looking for the timing of some of those and whether or not the the full impact is reflected in the quarters investment yield or if theres going to be an understanding obviously going to your liquidity position is going to fluctuate in there could be more purchases in fourth quarter, but if that's fully reflected in the third quarter yield or if theres going to be more pressure just from activity that's already.
And.
Ron you want to go ahead.
Recent sure sure Thats the bulk of the Jack in the bulk of the purchases were done in the <unk>.
First half of the quarter predominantly in the first is the first two months and that so the full effect. If you will the full yield of that portfolio. I think is reflected in our Rob our third quarter numbers, if anything we may see a little bit more live.
Maybe five basis points going forward.
Okay, great. Thank you.
Our next question will come from Tim Coffey with Janney. Please go ahead.
Good morning, gentlemen, thanks for hosting this call right.
Ron how should we think about the margin going forward you had some really good details within the press release today.
But it didn't look like that new production was coming on below the average of the portfolio.
Sure Ken.
Yes, obviously the environment itself on demand.
The pricing the low interest rate environment, Oh that is having a a pretty impactful.
On the on the new originations coming in the door, obviously the mix of business, Steve mentioned earlier the multifamily.
Predominantly we saw here in the third quarter. So thats also having an impact on the the new yields coming on the books I think.
No we're going to continue to see that pressure now obviously, we've been able to I think offset some of that with our deposit repricing.
But we'll see we should start to see it settle down.
We may see another three five basis points, but I don't think anything significant obviously, the big drivers this quarter with the compression of the NIM and the core NIM. We're obviously, though the full effect of of Opus and the excess liquidity. Both obviously are are fully.
Realized in this quarter, so on a quarter to quarter comparison, I think you're going to see a fairly decent.
Decent stability.
Okay, Thanks, and Steve jobs.
You kind of look at the origination potential for the combined business.
Quarter over quarter, you had a good pick up in original originations you know despite not being the best and circumstances.
Where do you see originally we think originations could be in a normalized environment for a purpose of tumor.
Tim It's a it's a great question and it's hard to know.
At this point I think that you know as we move through the fourth quarter and some of these uncertainties.
That exist in the economy around.
The election, the hot therapeutics and vaccines and the hub.
Oh on the virus and how this all plays out.
I think we'll have some better visibility on what the demand is in the marketplace I'm certainly encouraged.
By some of the quality of folks.
We brought over from Opus certainly from the team that we've built and getting them to move back into an offensive posture, our commercial bankers.
I think that they are seeing increased level of conversations with existing clients as they are becoming more comfortable in the operating in this environment and they're seeing opportunities.
And then and then certainly new business development as well so I think as we moved through the quarter again, and we get through some of these things will certainly have better visibility and understanding on really what is.
The run rate on new production for the loan book.
Okay, and just kind of a follow up on that.
Do you see borrowers sitting on the sidelines right now kind of waiting to see where valuations vaccines things of that nature shake out.
I think you're seeing the spectrum I, you're seeing more investors that who moved to the side line are starting to put capital back to work certainly recognizing.
Dot as excess liquidity sits on the sideline, earning very little and that they've got more comfortable with where the economy is headed in the short medium term. They are putting money to work you still have some folks who are on the sidelines and then you have those folks who really.
Looked at this as offered.
I looked at it opportunistically.
To put money to work so I think it's a spectrum as we move through the quarter people began to get certainly more comfortable obviously, we all expect GDP to a high.
Hi to bounce back here pretty significantly from Q3, and then we're all sitting here looking as we look forward what is the impact of the election, what's the impact of the virus and the pandemic on the economy, but I think we've been very impressed with the resiliency.
Of business owners.
Soon murders their ability to adjust to the current environment has been very impressive.
Okay. All right those are my questions. Thank you very much.
Sure thing.
Our next question will come from Andrew to rail with Stephens. Please go ahead.
Hey, good morning, everyone.
Good morning.
I just wanted to start really quickly I think we talked on the second quarter call about maybe expectations for additional talent investments in the back half of the year Love just give any color you could provide on success, you've had this quarter and hiring or.
Pipeline, maybe looks are shaping up going forward.
Yeah, I think from a hiring standpoint, it's really just refinements at at this point.
Where we can bring a good talented individuals into the organization and something that is.
Is a part of our culture and ongoing that recruiting aspect.
But I don't see any.
We're not wonder necessarily bring overt games per say, Oh, we're pretty comfortable with the team we have today and they are functioning at a very high level.
Okay. Thank you.
Then maybe Ron could could you give us an expectation for kind of purchase accounting accretion moving forward is this.
Michelle million dollars. This quarter is that kind of a good run rate maybe modestly declining from here to think about.
I would say Andrew that that.
I think declining from here a modestly trigger point you know in the three four basis points on a.
Well expected basis on a quarterly.
From a quarterly standpoint.
That's probably reasonable yes.
Got it okay. Thank you guys for taking my questions sure.
Sure thing.
Again, if you have a question. Please press Star then one our next question will come from David Feaster with Raymond James. Please go ahead.
Hi, sorry, I had some technical issues due to user error here, but I did have a couple high level questions. Steve you always got a good pulse on the broader landscape. So I just wanted to get your thoughts on some of the pending legislation, specifically prop 13 and crop 22 and just.
How do you think about the implications on the C.R.E. and multifamily markets in California.
Well.
I I think that what we've seen is a long history in the a and the great state of California, Legislators' trying to be helpful and Fortunately the entrepreneurs and business people.
Figure out what is the landscape what are the rules and make adjustments and that's exactly what we will do along the Y O. What we'll see how this plays out.
There's always as I said adjustments.
That folks make odd to to find ways to.
Be successful.
Given the size of the state that its economy is the six largest globally are the size of the population 40 million folks.
Summit.
Some of the University system, all the things that California benefits from its location on the Pacific rim and the like those aren't changing certainly it makes the environment a bit more challenging abide entrepreneurs and investors are very creative.
And find ways.
Two.
Be successful in the state, there's just too much opportunity. So we'll see how it plays out.
Okay.
And then just you know the timing of the old deal was just extremely proud to it and I guess as you've gotten to dig into the combined franchise with the EPS improved expense profile. The fee income contribution and just the organic growth potential of the combined at Juicy just as the economy improves I guess, how do you think about the earnings power of the can.
Bind franchise and.
How did your kind of updated any targets for our away and return on tangible common that you might be long zero that's.
We haven't shared any specifics in that regard but.
I think that as we look at the organization today, we have never been stronger or better positioned.
To take advantage of opportunities and that is exactly what we intend to do as I mentioned in my prepared remarks. This is a consolidating industry. It has been for 30 years Cove. It has accelerated many large macro trends and we think consolidate.
Nation in financial services is going to be one of those and we expect to be active.
And at the same time, we as always we'll be disciplined, but we think that with where we are today, we're extremely well positioned.
All right. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Steve Gardner for any closing remarks. Please go ahead Sir.
Very good. Thank you again, all for REIT, joining us and if you have any additional questions. Please do not hesitate to reach out to either Ron or myself, we'd be happy to answer them. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].