Q2 2021 First Foundation Inc Earnings Call
[music].
Good morning.
[music].
Greetings and welcome to the first foundation second quarter 2021 earnings conference call.
Today's call is being recorded.
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Speaking today will be Scott Kavanaugh, first Foundation's Chief Executive Officer.
Kevin Thompson.
<unk>, Chief Financial Officer, and David the Pillow President.
Before I hand, the call over to Scott. Please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results.
Forward looking statements are made subject to the safe Harbor statement.
Quoted in today's earnings release.
In addition, some of the discussion may include non-GAAP financial measures.
For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward looking statements and reconciliations of non-GAAP financial measures see the company's filings.
<unk> in the Securities and Exchange Commission.
And now I would like to hand, the call over to Scott Kavanaugh. Please go ahead.
Hello, and thank you for joining us we would like to welcome all of you to our second quarter 2021 earnings conference call, we will be providing some prepared comments.
Things with regarding our activities and then we will respond to questions.
We delivered another strong quarter of results as our business model is performing well.
Okay.
[laughter].
Yeah.
Okay.
Comments.
And then a 17% increase over the first quarter of 2021, and a 46% increase year over year.
Total revenues were $71.9 million for the quarter, a 9% increase for the first quarter.
For 2021.
A 25% increase year over year.
Our tangible book value per share ended the quarter higher at $14 from 2007.
We declared and paid our second quarter cash dividend of <unk> <unk> per share.
The transformation of our business model has really taken share.
As I had mentioned on these calls before we have been focused on transforming our balance sheet and diversifying our offering there.
This is only strengthened our position as a regional commercial bank.
As we look at our business.
Quarter, Inc. We are much different bank than what we were just 3 short years ago. When many of you on the call first invested Dennis let.
Let me elaborate on a few points related to this.
And commercial loans now account for 28% of our loan portfolio.
And no 1 sector accounts for more than 20% our business lending portfolio showcasing the diversity of the businesses we serve.
We still do an amazing job with originating and funding multifamily loans, but our C&I division has been responsible for.
<unk> uptick in originations, including 30% under $1.1 billion, we originated this quarter.
We continue to add to our commercial lending capability with the addition of a new lending teams in Las Vegas, and the Los Angeles area.
<unk> brought on a new dedicated builder finance team that is focused on the construction lending. Another way we are diversifying our loan offerings. We also established our municipal finance team last year and the equipment finance continues to be a strong source of loan originations.
In our single family.
And we have a team is consistently adding high credit quality low LTV loans to our portfolio looking at deposits. Our core funding is also increased over the past quarters and today accounts for 98% of our total deposits.
<unk> 2 are significant.
Family reduction and our brokered deposits and an increase in more business related operating accounts.
We have zero federal home loan bank advances today, while at the same time, our loan to deposit ratio improved to 85% at the end of the quarter.
<unk>.
We think this updated profile of our bank's balance sheet has several meaningful benefits to move which that I would like to highlight on this call. We have a solid pipeline of loans that generate attractive yields in spite of low interest rates environment.
During a time when many banks are having trouble generating interest income we have experienced net interest income growth of 20% year over year.
Related to this our funding costs have decreased to 18 basis points in the month of June even.
As we have increased our total deposits by 26% year over year. This also means that we will not have an immediate need for home loan bank borrowings for the foreseeable future.
In addition to the transformation of our balance sheet I want to remind everyone that we have add.
Has the added benefit.
And in house private wealth management, offering, which also reached record levels of assets under management by adding $529 million and ending the quarter at $5.3 billion.
This important offering includes investment management.
While planning trust services and each provides meaningful value to our clients and generate additional sources of revenue for the company.
Also the wealth management business is continuing to gain scale.
The combined pretax margin for trust and wealth.
Instrument was 23% for the quarter.
And soon we will have a crypto currency offering through our collaboration with our partners <unk> dig in price.
This project is well underway and we are closely working with our regulators on the scope of digital assets <unk>.
<unk> that we can bring to traditional banking, we expect to rollout our offering in the fourth quarter of this year.
All of these services position us well as we seek to serve our clients. Our business model is designed to help clients wherever they are in their financial lives and.
Today's results indicate that our model is working very well across the diverse and dynamic markets we serve.
Related to our expansion efforts our growth in Texas is growing very well and we are so grateful for the warm reception.
Okay.
Okay.
Scott.
Okay.
Okay.
Yeah.
Thanks.
As we operate today, our newly appointed General Counsel Kelly rental joins me in this space along with several other team members who are based here in Dallas.
We are also pleased that we.
Additionally, opened our first L. P O in Las Colinas, and taxes, and we'll be looking for future growth in Plano and other areas. This includes signing space, where our first retail branch.
There are so many attractive markets and taxes that are business friendly.
And a great fit for our offering we are really pleased to be here during the quarter, We announced our planned acquisition of an April base first Florida integrity Bank.
We are so pleased at the offer at the opportunity to expand into.
Another.
New business friendly state.
Florida also.
Excited about adding new talent from the existing team to our operation at.
At the close of the transaction Gary types will join our board and Garrett Rector will become a regional president of our Florida operation.
<unk>.
It will be really exciting to work with them and the <unk> team as we expand upon the legacy of what they have built.
This truly is a merger of 2 firms with a common vision and.
In terms of a timeline related to the acquisition there are still several.
From steps ago.
But we are making good progress we have filed our S..4 and expect regulatory approval by sometime next quarter.
Then we would like to convert their operations onto the first foundation blank bank platform in early 2022, there is.
Great presentation about the details from the merger on our Investor Relations page for those that would like more information I want to say how pleased I am with the entire team at first foundation, we have a great group of people, who are very committed to serving clients and building a valuable business.
And the amazing clients, who entrust us with their financial wellbeing is truly an honor to be able to lead this organization and I am really excited about our future now let me turn the call over to our CFO Kevin Thompson.
Thank you Scott.
Per diluted share of <unk> 58 in the second quarter included $1.2 million of expenses related to our acquisition of <unk> financial.
The return on assets was strong at 1.4% with a return on tangible common equity of 16, 7%.
Adjusting for the merger related expenses, our return on assets.
Earnings been 145%.
And our adjusted return on tangible common equity would have been 17, 3%.
The net interest margin expanded 4 basis points to 3.2% in the quarter as a result of strong loan growth and the continued success, we've had in lowering deposit pricing.
We maintain discipline.
<unk> loan production with the average yield on loans dropping slightly by 11 basis points to 388%.
Our cost of deposits decreased from 31% to 20 basis points in the quarter and continued the downward trend to 18 basis points in June.
With strong C&I loan production and increasing core deposits.
Disciplined over the past several quarters, our balance sheet is trending less liability sensitive.
We completed the sale of $133 million of multifamily loans in the quarter, recognizing a $3.3 million gain.
Again.
We recognized $900.905000 of PPP fee income or 16%.
Deposits of the total net PPP fees, bringing.
Bringing the cumulative fees realized 77% from the total PPP loans funded a $227 million.
Excluding the effects of PPP, the NIM would have been $3, 1.9% for the quarter.
Credit metrics remained.
Percent in all of our loan portfolios and the allowance for credit losses per loans decreased to 40 basis points of total loans.
This was primarily a result of improvements in the economic scenario, we utilized for the seasonal calculation.
We had net charge offs of 1 basis point and nonperforming assets remained low at 20 basis points to total assets.
We recognized a $1.3 million valuation allowance on mortgage servicing rights in the quarter as a result of changes in the interest rate environment in prepayment speeds.
Asset management fees were strong with revenues of $8.7 million and as Scott referenced our advisory and trust divisions achieved a combined pre tax profit margin.
Of 23% in the quarter.
Assets under management at FSA increased to $5.3 billion, while trust assets under advisement at FSP remains strong at $1.2 billion.
Our noninterest expense increased from the quarter, but excluding the $1.2 million in merger related expenses was essentially flat.
Efficiency ratio for the quarter was 47, 3%.
With strong expense management and the investments we've made in our infrastructure, we continue to realize benefits from operational leverage and efficiencies.
I will now turn the call over to David Day Pillow. Thank.
Thank you, Kevin and as Scott mentioned, the transformation of our balance sheet.
Just to develop nicely and today, we are well positioned as a regional commercial bank servicing a diverse client base and in some more detail to that I would like to highlight a commercial business lending accounted for 39% of our originations for the first 6 months of the year and the quarter, we funded $336 million of C&I loans, which.
<unk> contributed to our third straight record quarter of originations of $1.1 billion per this quarter.
57% of our C&I loans from the quarter were adjustable commercial revolving lines of credit, which is a strategic move for us.
As we continue to shift the balance sheet to more rate new truck from liability sensitive.
The remaining C&I originations were comprised of $73 million of commercial term loans.
$34 million of public finance loans $27 million of equipment finance loans and $10 million of owner occupied commercial real estate loans.
They're all high quality business loans that generate strong yields from continuing to diversify our loan portfolio.
Included in commercial term loan originations gross $10.1 million in the second round of PPP funding.
Looking more broadly at the $1.1 billion of loans. So we originated in the second quarter as a percentage breakdown was as follows.
C&I, including owner occupied commercial real estate, 30% multifamily 64%.
Percent single family, 5% and 1% other.
We continue to focus on high quality loans to solid borrowers.
It's always important to note that we accomplished this record quarter of originations without changing our high underwriting standards.
Our NPA fell to a low of 20 basis points during the quarter.
Loan pipeline remains strong heading into the third quarter as we expect to have some seasonal cyclicality over the summer months.
Speaking more specifically about loan yields we achieved a weighted average interest rate of $3.35 on loan originations, which held steady from the first quarter, which was also a 335.
5.
This continues to demonstrate our ability to achieve record volumes, while defending the yields on our portfolio.
As of June 32021.
Our loans held for maturity consists of 51% multifamily loans, 28% C&I loans, 5% other CRE 15.
Consumer and single family loans from 1% land and construction.
Our deposit business also experienced historic levels of inflows with an increase of $861 million during the second quarter of 2021 to end the quarter at $7.1 billion, which reflects a 26% increase compared to the second quarter of 2.
Percentage.
Deposit growth during the second quarter of 2021 was primarily driven by an increase of $1.1 billion or 50% in noninterest bearing demand deposits.
Actually attributed to our commercial deposits service position in retail branches. The increase in deposits were offset by a reduction in interest bearing.
<unk> thousand 2 positive of $116 million, a reduction in money market and savings accounts of $28 million largely from our digital Bank channel. In addition to a reduction in Cds of $89 million, primarily due to our intentional runoff of higher costing brokered deposits are.
Our noninterest bearing deposits now account for 46.
<unk> of our total deposits.
$861 million growth in deposits during the second quarter of 2021 includes an increase in commercial deposits service group of $859 million and retail branch deposits of $76 million of.
Of the $892 million an increase in core deposits 880.
Personnel in dollars or 99% or attributed to commercial business deposits. Both from our commercial deposit channel serving complex Treasury management commercial customers and from our business banking customers served by our retail branches.
Commercial deposits were 74% of our total core deposits as of June 30.
Core deposits now account for 98% of total deposits.
Our cost of deposits have continued to improve and reached a low point of 18 basis points in June as noted this reflects the benefit of our continued transformation to a commercial regional banks.
Although.
As mentioned.
<unk>, Kevin mentioned NIM expanded to $3.20 during the quarter, our robust deposit growth has provided us some additional excess liquidity this excess liquidity will likely provide a.
Slight drag to NIM over the next couple of months as we put it to work through loan fundings, which tend to slow down during the summer, but accelerate in the fourth.
<unk> fourth quarter.
Looking further out we are preparing for our upcoming loan sale, which we expect to complete in the third quarter, which will be our seventh such deal to date.
And it's become a routine part of our business.
Few final points about our investment in technology, our efforts in technology and digital.
<unk> innovation are going well with key several key implementations already complete and some planned for later this year, including a significant enhancement to our digital offering for both our business and personal banking clients as well as a new mobile app for those clients that choose to engage with us using mobile devices.
Including phones and tablets. These enhancements should put our digital offering on par with anything offered by the fin techs from neo banks, but in a safe and secure environment of a traditional bank.
We also continue to make further enhancements to our enterprise data that helps us better service, our clients and improve.
<unk> efficiencies.
With the addition of <unk> and soon to be added Florida locations.
This will be investments that our share to pay off as we scale. These opportunities all of this success in the core could not have been achieved without the great team. We have in place I am so grateful for their dedication and hard work.
At this time, we are ready to take questions. So I will hand, it back to the operator.
Thank you the floor is now open for questions. If you would like to ask a question Press Star then the number 1 on your telephone keypad and.
And your first question comes from Matthew Clark of Piper Sandler.
Hey, good morning, guys margin.
At the first half.
Just wanted to hone in on the non interest bearing deposit growth a little more can.
Can you give us a better sense of how much of that came from your Dallas initiative, how much of it might it come from.
Candidates.
Efforts.
And then just speak to the kind of the more traditional types of.
Yeah.
Sources of growth.
It's a pretty meaningful increase it's almost could.
Could be considering the size of a bank in 1 quarter.
So Dallas.
Dallas has not really kicked in yet.
Yes.
The reality is we are just signing our first.
Branch opportunity.
And that probably won't even be online until the first quarter of next year.
On cannabis.
Has.
Slowly increase that it's still a very minor portion.
I would say that.
The increase is really attributable more to the traditional means and the people that we've had in staff for a while.
Yes.
First.
Some of that is growth from existing clients a lot of it is new client acquisition.
But we would mention that.
We do have existing clients in the.
Dallas market that contributed.
<unk> contributed a pretty significant growth.
During the second quarter, 1 particular client.
Several hundred million dollars so.
We are seeing.
Gross.
Market, we saw happened.
Start banking that client prior to or moving the headquarters, but yes, it's organic growth through our distribution channel.
Clearly demand is outstripping our ability to deploy it.
Deposits at this point.
Okay.
Out of that.
And do you feel like those balances are sticky or do you feel like there is some portion of that growth. This quarter that was more of a timing issue that might move.
So I think they are very sticky, but the reality is there are high points and low points.
Okay, and with some of those clients and right now the balances are starting to build back and mill for 1 day then.
Fourth quarter slightly and then bill yes.
I would say, we will probably see a lot of the traditional balance growth of existing customers as Scott just stated.
Stated typically hits during the third quarter and then the cyclicality nature of some of those will we there are way downstream the fourth quarter and then start building.
However.
We have made a conservative effort to diversify those business deposits away.
Way from some of the cyclicality that we see in some of the clients. So we probably won't see the level of movement, but again mathew that demand out there.
From new customers is so high had pretty much data.
Yes.
Turning away deposits have.
Our record levels.
Okay.
And then just shifting gears to the.
The loan pipeline and kind of growth outlook a lot stronger this quarter.
It sounds like you expect some seasonality in the third quarter, but how do you what are your overall thoughts on production in the back half.
Yes.
Net growth in June.
So we still expect the first quarter to be the low 0.3rd quarter will be obviously down from the second quarter, just because of the summer months and actually.
Knock on wood post Covid people are actually traveling so we're seeing more of a unlike last.
Last year.
We had record lows in production, mostly related to COVID-19 during the third quarter.
This will be a traditional cyclicality, but it still should be.
And then what we experienced in the first quarter, but I would say that we traditionally haven't run.
Anywhere from 2.5.
<unk>.
$2.8 billion.
Our current run rate is $3.5 billion to $4 billion in Rx expectation is we're going to continue at that run rate.
And we don't see demand at this point falling off so.
As we stated previously we kind of built infrastructure and teams to.
To support a much greater funding level than we've historically achieved in the past and we're starting to see the fruits of those labor pay off.
Okay and is it fair to assume with the addition.
With the acquisition that you'll probably be at 5 billion next year.
Roughly.
It depends on how quickly we expand in that market.
Their historical run rate.
Kevin Correct me, if I'm wrong, I think it's $2 million to $300 million a year ex PPP.
We think thats going to be a gradual increase as we expand in that market. So.
I'm not sure it's going to be a $1 billion by next year, but it will certainly be scaling up from what they historically have done but again I think it depends.
I think it depends on what Florida can chip in.
Texas is already gearing up pretty substantially on the loan side.
They are approaching $100 million in our pipeline, which is pretty healthy considering the team has only been here for a couple of loans.
So.
That may be a little bit ambitious on the $5 billion, but.
Yes, I would say we have not modeled that however.
Not completely integrated all of.
The modeling around.
Post acquisition at least from our expectations outside of what we put.
Yes.
Redeployment of cash in the model, but.
I would say, we're our plan is to step up there.
Historical run rate and enter into new markets relatively rapidly as they were.
Plenty to do that on their own but had tended to be a little more capital constrained in the past.
Okay, and then just on the reserve.
Down a little bit ex PPP I think roughly 41.
We appointed I think some of that macro.
Factors and I would assume some of it is also just less C&I contributing to the overall <unk>.
Production this quarter relative to last but what.
What are your thoughts on the on the reserves. So should we expect that to kind of reset back to 50 basis points with the acquisition in the fourth quarter.
We haven't fully modeled that yet other than you can see our when we announced the deal that's our latest modeling and you saw in our S..4 we did some estimates as well so more to come we have a lot of work to do before we close to understand their loan portfolio better and to implement seasonal as a smaller bank they werent subject to seasonal.
Based environment, So we'll run them their loans from our model.
<unk>.
To your point there are more commercial loans. So we do anticipate a higher reserve rates I wouldn't say it would be that significant given the credit quality of our portfolios from the historical performance and the seasoning of it.
They are very very conservative bank and the reserve levels are at.
All over.
They are 1.5%.
Yes, but on.
Commercial real estate and commercial they are probably a little higher than that.
Yes.
It.
It may drive us up a little Matthew but.
Given their portfolio compared to ours and size.
The primary driver is obviously.
Multifamily and residential mortgage tender.
Our ratio down since we do tend to reserve higher levels on C&I.
Understood. Thank you.
Thank you. Your next question is from Steve Moss from B Riley Securities.
Hi, good morning.
Anything.
Nice quarter here, maybe just tie net loan growth a little bit further.
Obviously, some good on the pipeline and originations from.
Price you have a pickup in paydowns.
As you think about the pace of growth maybe even with <unk> are you guys comfortable were kind of like a mid teens type growth rate heading into next year.
Yes, I think so.
Like you say it all really depends on.
Where the market is as far as rates from our CPR standpoint, we have tended to step those up in our modeling.
<unk>.
To reflect current pay down rates, but if if the CPR stay where they're at I would say mid teens is probably.
Where we expect to see.
Okay perfect.
That's helpful. And then just in terms of the teams you guys added in Vegas, and Los Angeles I think it was this quarter, maybe a little more color as to what youre expecting from them and their business focus.
Sure.
So la is more.
Mid market and below.
Traditional team that's been in the market per.
Sure.
I would say several years now.
So that would be kind of.
La Metro mid market and below.
<unk> is a little different animal it's part of our corporate banking.
Team.
It's a team that originally came out of U S Bank.
Eventually made their way over to us whichever.
Our stronghold in the Western region on the corporate so we would say that's mid market and above.
<unk>.
Theyre hitting stride and have been very successful.
The management team there as well.
Also helping in leveraging our overall corporate initiatives.
Nationwide so.
It was really.
To add it is true.
Really additive not only from just a pure production standpoint, but just the depth and breadth.
Onto our corporate banking group.
Dave You May also talk about the new builder finance team and Theyre puzzling.
Yes.
We ended the builder finance team that actually.
Individual lever on staff, who worked with us.
At a bank.
Several years ago, and it's been very successful. This is what we would consider more of an infill.
Spec and owner builder.
Program, they do infill.
As well as some multifamily construction as well so this isn't large track or.
Large builder finance.
And it's primarily in.
California, the majority of their production they are actually doing extremely well so far building their pipeline and.
We're adding additional expertise.
We always had a very very strong.
Funds to control and infrastructure, but.
We lacked a team to focus on really driving.
More scale on that production side. So we're very pleased <unk> been here for a few months now.
We have a nice pipeline building.
Got it and maybe on the Texas <unk> I think Scott you mentioned, the $100 billion gross margin dollars.
Pipeline, just kind of curious what's the.
The type of loans you are seeing.
GAAP executive.
So traditional.
Commercial real estate, mostly.
Alrighty family focused for us.
As you know, Texas is a very large market for that.
And these are individuals that have been servicing the market.
We are doing some bridge financing around that as well.
<unk>.
Because of the repositioning.
Non flexes within the market as that market continues to be.
Grow and prosper.
So I would say is it's majority of it's multifamily multifamily bridge in a little bit of CRE.
We have plans to add additional C&I bankers in the market.
Some have been very very selective.
And our approach to that market as it relates to C&I.
Okay, Great and then just flow.
With all the investments ongoing.
Excluding to your kind of curious how you guys are thinking about expenses and expense growth rates here.
So because we've always not been shy about adding infrastructure as needed in order to continue to expand our profitability and we kind of manage to an overall expense ratio. So we want to try to maintain that that kind of 50% or below.
From an efficiency.
Standpoint, and I think you saw in the second quarter. Some of the investments we made in previous quarter now starting to pay off.
We still are going to add additional production and infrastructure.
But our expectations are.
Kind of target of 50%.
<unk> the only thing I would add on that Steve is as we were.
Stock at like 500 employees for a while until we decided to kind of ramp up the production side and with that we had to ramp up the underwriters processors condors compliance people.
<unk>.
<unk> really have to have that same infrastructure build and so we've gone just this year alone.
From 500 employees around the start of this year.
Think it's about 540 or 50.
If not we're leaning that way towards getting very close to it so.
Dave's right, we're trying to do with lockstep with making sure that our efficiency ratio.
Maintains around that 50 ish level until we can taper off and then hopefully get.
Some efficiencies to scale.
And I will just add that with.
But the position of <unk> financial we anticipate getting to the $9.4 billion level by year end and some time next year dipping into 10 billion area, which as you know brings a new regulatory regime.
Additional requirements for a bank and we're well on the way of preparing for that and.
Investing is we need to and talent 1 of the nice things about T. J, our financials, they come with a very talented team.
Great addition to our both our culture, but as well as the the infrastructure we need to add in order to have a really high functioning team, so where normally you would see higher cost saves.
We have opted to retain meaning really talented employees from TCR at close so.
So that we can be prepared for this $10 billion Mark So there will be expenses related to that but to Dave's point, we anticipate staying at or below the 50% efficiency ratio Mark.
Okay, great well thanks.
Thanks very much line.
Hey, Steve.
Thank you. Your next question comes from Gary Tenner of D. A Davidson.
Thanks, Good morning.
Just touch on the on the margin for a second that the last couple of quarters or 3 quarters, you've been able to.
Kind of offset the decline in headwinds.
He was on the earning asset yield side by lowering deposit costs.
Given where those deposit costs are right now.
Is there enough room to kind of sustain the margin at the current level.
Or given kind of the.
New loan production rate in the low threes and drag on loan yields.
Are we likely to see a little bit of a professional.
It's been I'll start with the deposit side, we have squeezed a fair amount now and I would say that for the most part.
Probably drawing to a close on what we think we can really squeeze out of the marketplace.
So.
So.
I think we've done an exceptional job of lowering the cost of deposits.
But I don't think that youre going to see much more in a new way of our cost per funded shrinking much more than the 18 basis points that was experienced in June.
I would say on the loans.
Loans side, it is interesting areas little less to do whether or not we're getting.
Loans.
Lower loan yields on our portfolio and really.
Getting cash that's earning close to zero deployed into some earning net set of bumps thereof, So whether we fund at $3, 35% or $3.20.
5 or even 300.
On new loans is getting that $1 billion. So excess cash are turning 20 basis points or less into earning assets, earning 3% or more and that will probably have a much more material impact to maintain maintain our margin then.
Slightly.
Our loan yields, but as you can see we've been funding emphasis range for quite some time.
And whatever the yield curve does.
Day out weekend week out we pretty much have been funding at a floor rate for I would say oh, well over a year.
Our rate may vary.
10 basis points up or down but.
That certainly has some impact, but a truly getting cash, earning almost zero into some something more than that is going to have the biggest impact.
Agreed yes.
That makes sense, so with the backdrop of obviously the liquidity build.
No.
Slightly led win in terms of.
Asset yields can you talk about the decision to sell loans this quarter in advance of the share position.
So it's.
Kevin it's interesting.
Sure.
Dealing with the agencies when we originally were talking to them there was a focused on them secure.
As I said that Matt a national DLA calculator.
Very little of what we originate needs the national BLI.
Scenario. So we said well if we may move away from a single securitization itself.
2 private institutions and smaller blocks.
We completed 1 of those and then went back into the agency said, where we can actually complete a transaction, which also benefited us. So net net at the end of the day, we're probably doing a slightly smaller transaction.
<unk> and our bulk scenario versus what we sold in the second quarter.
So that was really the primary reason why you have a little bit of sale in this quarter and then we'll have a larger sale in the third quarter again. The majority of the reason we're selling these assets are to make room with existing customers.
Maintain our loans to 1 borrower ratio.
It's just.
Our ability to service those customers here in and year out.
It's strategic for us to to.
Maintain the.
The relationship also the servicing through bulk securitization, but thats there.
The reason why we have that split.
I appreciate the color.
Thank you once again, if you would like to ask a question Press Star then the number 1 on your telephone keypad.
Your next question is from David <unk> of Wedbush Securities.
Hi, Thanks.
Thanks, a couple questions for you.
Follow up on deposits you mentioned about how the commercial deposit services channel serving complex Treasury management commercial customers. I was curious is there anything new with that with the product offering.
As you approach clients.
Or was it this las Vegas corporate banking team that was a big contributor there I'm just curious if theres any change or anything new that that helped drive the strong growth.
First primary.
I would say that the.
The main reason for it.
Client changes that came about historically most of our clients have done more batch operation.
And some of our clients have now gone to more of an online type of thinking.
<unk>.
Which has required some changes.
So I would say we are much more.
And mix than we previously were and how we handle those clients.
Overall has made are our systems better, but frankly, there really hasnt been any product offerings or anything is really changed other than meeting the.
<unk> new clients to agree.
Key to handle those types.
Online versus.
Yes.
In particular, we did.
Conversion of our commercial system.
This year in order to service those clients as Scott mentioned.
Mention there is.
Several complexities as far as open API environment, and our ability to service those clients that have.
I would say more real time needs for.
Versus nightly batch, which is a segment of the clientele. So yes strategically.
<unk> we made.
And investment in our transformation of our C&I platform.
2.
What we consider best in class delivery mechanism and a conservative.
Clients from 1.
2.1 billion it really doesn't matter and.
The our ability to handle large volumes of transactions significantly increase during that conversion process and post conversion process.
And as Scott mentioned, just outsized demand.
From.
Our.
Client.
Not necessarily that much was driven by the Vegas group, there, particularly focus more on the loan side of the business, but they do provide us.
Additional deposits through those relationships.
Got it that's helpful. And then shifting gears. This is more of a housekeeping question, but I saw the.
Professional services and marketing line item.
And expenses jumped up a little bit is that a function of the merger charge is that where that was.
Yes, all the merger charges are in that line that's correct it's illegal.
Brookdale leases.
First.
Got it thanks very much.
Thank you we have no further questions at this time I will turn the call back over to Mr. Scott Kavanaugh for closing remarks.
Thank you again for participating in today's call very proud of the results. We reported all of our business lines are doing in.
Exceptionally well and I'm very pleased that the path we're on.
There are great opportunities related to our geographic expansion in the Dallas Fort worth Metroplex, and in Florida, and we continue to invest in and serving our existing markets in California, Nevada and Hawaii.
As a.
In our earnings report and Investor presentation can be found on the Investor Relations section of our website. Thank you and have a great remainder of your day.
Thank you everyone. This does conclude today's conference call you may now disconnect.
Minder.
[music].
Yes.
Okay.
Okay.
David.
Scott.
Okay.
Yes.
Thank you.
Okay.
Net earnings.
Good day.
Okay.
Sure.
Right.