Q4 2022 Pacific Premier Bancorp Inc Earnings Call
Good morning, and welcome to the Pacific Premier Bancorp fourth quarter 2022 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays 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 from the question queue. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Steve Gardner. Please go ahead.
Thank you Ram Jay Good morning, everyone. I appreciate you joining us today as you were all aware we released our earnings report for the fourth quarter of 2022 earlier. This morning. We have also published an updated investor presentation with additional information and disclosures on our financial performance.
If you've not done so already we encourage you to visit our Investor relations website to download a copy of the presentation.
In terms of our call today I'll walk through some of the notable items related to our performance Ron Nicolas Our CFO will also review.
Few of the details on our financial results and then we'll open up the call to questions.
I note that our earnings release and Investor presentation include a safe Harbor statement relative to the forward looking comments I encourage each of you to carefully read that statement.
We delivered another quarter of solid financial performance, while maintaining a conservative approach to managing our balance sheet to drive long term shareholder value.
We generated a record level of quarterly total revenue of 201 $9 million and our net income increased from the prior quarter to $73 7 million, while earnings per share of <unk>, 77 cents, which consistent with the prior quarter.
We generated an increase in pre provision net revenue and realized a return on average tangible common equity of nearly 17%.
Tangible book value per share grew three 7% to $19 38 per share and we ended the year with a TCE ratio of 888%, while all of our regulatory capital ratios further strengthened.
Our ability to generate strong financial performance in a challenging environment is attributable to the deep client relationships. We have built over several years as well as our proactive and strategic approach to balance sheet management.
I want to thank every one of my Pacific Premier colleagues for the outstanding work that they do every day.
Positively impact our clients the organization and the communities we serve.
We entered 2023 with high levels of liquidity and capital, which will provide us with optionality and flexibility in a number of areas as we move through the year.
Okay.
Many of the trends of the fourth quarter were similar with what we observed in the third quarter.
During this period of rising interest rates, we have maintained a disciplined approach to our loan and deposit production and pricing.
By leveraging our robust Treasury management solutions and innovative technology platforms. Our bankers are successfully developing new commercial banking relationships.
We saw a slight reduction in total loans from the prior quarter due to both a lower level of loan demand in connection with higher interest rates, particularly in the areas of commercial real estate and multifamily.
The prudent underwriting standards, we maintain in light of the ongoing economic uncertainty.
In the fourth quarter nearly half of our loan production was business related loans, which reflects our ability to add quality banking relationships to the franchise.
Our fourth quarter loan production continues to be attractive as the average yield on new loan commitments increased 79 basis points over the prior quarter.
Although we experienced a decline in core deposits the strength of our client relationships coupled with disciplined pricing resulted in a relatively low cost of core deposits of 31 basis points.
Our commercial escrow and exchange business experienced another quarter of deposit outflows declining by $396 $7 million.
As a result of decreasing commercial real estate transactions.
Additionally, we have seen clients utilizing excess cash to pay down or pay off loans as well as some deposit mix shift.
During the quarter, we added brokered time deposits have varying maturities, which kept our loan to deposit ratio in the mid 80% range.
These actions resulted in relatively low deposit betas for 'twenty, 'twenty, two which Ron will discuss in more detail.
Beginning in the fourth quarter of last year. Our teams began executing on a number of new initiatives and marketing efforts to expand the products and services, we are offering to existing clients and to enhance new client acquisitions, which we expect will benefit growth in future period.
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Our asset quality remained solid as always our teams are proactive in terms of portfolio management and credit monitoring.
We receive frequent updates on our clients' financial performance liquidity and collateral values, which informs our approach to managing individual credits.
Our nonperforming assets totaled 14 basis points at year end.
And although we did see some migration of a few credits we're not seeing an overall degradation in our borrowers cash flows or their ability to service their obligations.
With that I'll turn the call over to Ron to provide a few more details on our fourth quarter financial results.
Thanks, Steve and good morning.
For comparison purposes, the majority of my remarks on a linked quarter basis.
Let's start with the quarters financial highlights.
Fourth quarter earnings increased to $73 $7 million, driven by slightly higher revenues and lower operating expense.
As a result, our efficiency ratio improved to 47, 4% from 48, 3% and our pre provision net revenue totaled $102 $7 million, an increase of $2 $3 million from the prior quarter.
And as a percentage of average assets rose to 189% from 185%.
Our return metrics were solid.
As return on average assets and average tangible common equity increased to 136% and $16 99% respectively.
Taking a closer look at the income statement.
Noninterest income increased to 181 $4 million, driven primarily by higher yields on interest, earning assets and $3 $8 million of additional swap income benefit compared to the prior quarter.
The higher yields were partially offset by higher cost of funds and lower loan related fees and accretion income as a result of decreased prepayment activity.
On the funding side.
Our core deposit cost was well controlled at 31 basis points with the spot rate of 43 basis points at year end.
Average total deposit costs came in at 58 basis points, reflecting an increase in brokered deposits of $418 million.
On a full year basis, our cumulative period end total deposit beta was 18%.
Our low cost deposits supported the fourth quarter net interest margin of 361%, which was flat to the third quarter.
As reported loan yields rose 33 basis points to 494% inclusive of the fixed to floating rate swaps.
Our core net interest margin narrowed six basis points to 338% with the decline being predominantly attributable to lower prepayment activity compared to the third quarter.
Noninterest income increased $333000 from the prior quarter, driven mostly by a $582000 increase in other income.
Simply due to loan recoveries.
These increases were partially offset by a $306000 decrease in net gains from loan sales.
We also saw slightly lower fee revenues in our escrow and exchange and trust business lines.
In the escrow and exchange business as we noted earlier the decrease in fee revenue is attributable to the lower transaction activity in the commercial real estate market.
We also anticipate an increase in trust income for the first quarter.
For annual tax service fees.
As a result for the first quarter of 2023.
We expect our total noninterest income to be in the range of 21% to $22 million, excluding any security sales.
Yeah.
Noninterest expense decreased $1 $7 million to $99 $2 million, primarily due to a $2 million decrease in compensation and benefits, reflecting lower performance based variable comp as well as reduced staffing levels, which decreased to 1400 30 employees.
Commensurate with higher interest rates as anticipated deposit expense increased $1 $9 million from the prior quarter.
Looking at our expectations for the first quarter, we anticipate our noninterest expense to approximate $102 million to $103 million due to increases in deposit expense FDIC insurance costs as well as the timing of certain seasonal items, such as payroll taxes and annual staff Merit increase.
Yes.
Our provision for credit losses of $2 $8 million increased compared to the prior quarter's $1 $1 million impacted by changes to the overall size and composition asset quality and unfunded commitments of the loan portfolio.
While we have not seen a meaningful deterioration in our assay quality. We are closely monitoring the systemic issues impacting our borrowers such as supply chains inflationary pressures and higher interest rates.
Turning to the balance sheet, we saw a slight decline in loans of $239 million driven by lower loan fundings.
The higher interest rates. We also saw the continued trend of slower prepayments and payoffs.
Deposits ended the year at $17 $4 billion, which represented a linked quarter decrease of $394 million attributable mostly to the escrow and exchange business as well as lower deposits in both commercial and consumer businesses as we continue to defend our deposit costs.
Yes.
To help mitigate the cyclicality of deposit flows.
We added another $418 million in term brokered deposits and $214 million of retail Cds, which provided additional liquidity as well as interest rate protection.
We saw a slight reduction in our securities portfolio as we did not purchase or sell any securities during the fourth quarter, our overall securities portfolio yield increased to 235%.
Additionally, we realized an incremental benefit with the fair value Mark to market loss reduction of $26 million on the available for sale portfolio compared to September 30th.
Yeah.
Our tangible common equity increased 29 basis points to 888%. Additionally, we further strengthen our other risk based capital ratios this quarter with tier one risk based tier one leverage and total risk based capital ratios all increasing meaningfully from <unk>.
Timber 30th.
And finally from an asset quality standpoint.
Asset quality remains stable as both nonperforming assets and delinquent loans totaled one 4% and three zero percent respectively.
Although classified assets did increase from September 30th Dave.
They remain relatively low.
Our allowance for credit loss was effectively flat in terms of dollars and our coverage ratio increased two basis points to 133% and our total loss absorption, which includes a fair value discount on loans acquired through acquisition finished the quarter at 170%.
We would not anticipate any decreases in our coverage ratio given the uncertain economic environment and could see an increase if a potential downturn materializes with that I will turn the call back to Steve.
Thanks, Ron.
I'll wrap up with a few comments about our outlook.
We have always managed the company in a conservative manner balancing growth with prudent risk management, while maintaining strong levels of capital ample liquidity and reserves.
This has enabled us to effectively manage through a variety of economic cycles and consistently deliver strong financial results for our shareholders and this will remain our approach.
At this point, it's difficult to forecast, how the economic environment will evolve and to project its impact on our clients' businesses.
For the near term pressure on deposit costs likely will remain.
But given our strong liquidity levels, we are well positioned to mitigate some of those pressures.
And as previously noted during the fourth quarter. Our team began executing on a number of targeted business development initiatives that we expect will enhance our loan and deposit production in coming periods.
Our disciplined approach to expense management will not change we believe our history of investing in employees and innovative technology platforms position us to enhance both efficiencies and business development activities, while generating profitable long term growth.
As we've grown the company.
We have maintained a proactive approach to credit risk management, which has helped us to achieve consistently strong credit metrics given the strength of our balance sheet and strong capital position combined with our results oriented culture. We believe we will navigate this period of economic uncertainty.
From a position of strength and remain positioned to deliver long term value for our shareholders.
That concludes our prepared remarks, and we would be happy to answer any questions.
Jay Please open up the call for questions.
Thank you Steve we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Jonathan The question queue. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Today's first question comes from David Feaster with Raymond James. Please go ahead.
Hey, good morning, everybody.
Good morning, David Good morning.
I wanted to start out on the deposit side and just you know if.
If you could help us think about flows going forward it kind of feels like we're kind of nearing a trough or at least the level of stability in the escrow business I guess, where do you think we are in terms of some of the surge deposits and some of those more price sensitive deposits would you expect to see maybe some more outflows and in the near.
Term and how do you think about funding those future outflows, whether brokered funding borrowings and.
The securities off the cash flow.
Cash flows off the Securities book.
Right I mean there.
There's a lot of questions wrapped up there David David I was going to ask you. If you could give me insight on deposit flows.
I think it's.
We're in a little bit of an unusual period I don't know if we're in the early middle or late innings I think in many respects it has to do with some.
Some of the decisions that the federal reserve ultimately may sign on both where the terminal fed funds rate is how quickly we get there and how long do we remain there.
And then coupled with quantitative tightening.
And the shrinking of their balance sheet.
At $95 billion, a quarter or a month, rather how that impacts the entire industry and we've clearly seen some level of dish and remediation.
We I think it's right to that.
The commercial escrow and exchange business, maybe is that a trough to we'll see Oh, we ended the quarter at $680 million roughly.
Hi, Hi, and weed.
Do have some new business development initiatives going on there, but we'll see how that plays out.
Over time, you know if you.
If you strip that out and the volatility we saw in the third and fourth quarter, there really owing to the pretty substantial decline in commercial real estate transactions the deposit base has been.
Pretty stable, which we're pleased with and so with some of the initiatives that were.
Deployed and began to execute on in the fourth quarter and really are in their infancy stages. We believe those will some of those activities will offset the pressures that we're seeing around the deposit side.
Okay that makes sense and maybe just touching on on the loan side. You know I was hoping you could maybe elaborate on some of the initiatives you talked about to improve production and you also talked about weaker demand and I know your appetite for credit is somewhat muted here just given your conservatism and economic.
Backdrop, what segments from your standpoint are still providing good risk adjusted returns in and if we maintain maybe the slower pace of production how do you think about.
The loan balances as we look forward.
Yes, I think that there.
Theres always some things we can do around the margin on on the pricing standpoint.
Q.
That.
That will benefit production, where we're seeing it is naturally in the business segments owner occupied commercial real estate C&I as far as opportunities go to grow the business and and that goes part and parcel with the fact that that those loans.
We have always done with with full banking relationships.
And given the pressures on the deposit side, that's what we're going to continue to focus on.
They're also the fact that we've we do have.
Excess liquidity that we can deploy so we'll we'll look to do that incrementally depending upon deposit flows here.
But again I think that some of the initiatives that we began again in the fourth quarter.
And and tweaks that we've made.
<unk> are going to benefit us as we move forward.
Okay.
That makes sense.
And then last one just maybe touching on on the margin side I just want to make sure that I understand some of the dynamics within that especially on the core front you know it seems like you guys are the swap benefits are being accounted for in that accretion line.
Was hoping you could help us just think about given the the loan and deposit dynamics do we just kind of talked about.
Exclusive of the four basis points of loan fees.
The margin actually.
Would've expanded if we include the swap so just help us think about the core margin as we look forward and then some of the dynamics of how the swap will play out and play into that.
Yeah.
It's a really good point, David and I can let Ron expand on it more.
Yeah David.
As Steve indicated as you highlighted.
When you include the swaps, which were taken out in the second half of 2021, where actually our core margin actually expanded a couple of basis points. So we're getting very good lift from there and you saw it you know.
You know what.
We're looking at a loan beta that's running somewhere in the 25% to 30% with with the inclusive of those.
Of those swaps the deposit beta has been running the core deposits closer to 10, the total deposit closer to 18 and that obviously is somewhat a function of the additional broker deposits, but we continue to defend on the deposit side to Steve's earlier comments, we'll hopefully we.
Hit that inflection point on escrow and we continue to to the loans that we're putting on the books, we are getting very attractive.
Our loan yields on on that on an incremental basis. So we'll continue to see lift here if the fed moves in the first quarter as the market believes it will we will get additional lift on the swaps on that and an additional lift on our.
On our floating rate loan portfolio, So, we'll see where it goes although we're not providing margin guidance at this point in time.
Ron can you can you.
Clarify on the loan or asset side on the betas.
Yes, the loan beta that the the loan beta which we include the fees the fees came down about four basis points. So the loan beta was about 27% right for this for this particular quarter, but if you were to normalize that it would be right, where we anticipate rate net 30% 31% level.
On the loan beta so we're marching right along as we anticipated on that.
That loan a loan beta so hopefully that helps David but.
It is a good point on just the way that we happened to characterize things. One good would include maybe or some do the swap income in your core margin.
We like we want to be fully transparent with everyone in and break all of these different components out so they can see it in so for some people that the reported margin.
Is.
Consistent across the board with other institutions, but you could peel the onion back and see the core for us.
No. That's extremely helpful and just is there any rough math on on on the swap the swap benefits for each hike.
Yes for every 25 basis point Dave.
David.
We see about three quarters of a million dollars of benefit on that so again if.
If the fed does move in this first quarter whatever they move we will see that that benefit on an incremental go forward basis.
I might also add as you think about the margin.
And that I think that but both accretion and in this environment.
Fees prepayment differed.
Fees that did amortize, we're seeing high single digit.
In terms of basis points.
And that 7% eight basis points nine basis point range and that that margin, which is down obviously from where we were running last year when we saw higher prepayments.
Okay. That's helpful. Thanks, everybody.
Welcome.
The next question comes from Matthew Clark with Piper Sandler. Please go ahead.
Hey, good morning.
Good morning.
Maybe just drilling down a little more on the margin if we can get the spot rate on.
The cost of deposits our interest bearing deposits at the end of the year.
And then the average NIM for the month of December I thought it was in the earnings release.
Right.
It might be in light of them yes.
The core deposit spot rate was about 44 basis points. So up from the average that we saw in the fourth quarter of 31.
Matt So if you want to think about it probably across the board.
Youre looking at right now on a spot basis, probably around eight or so eight to 12 basis points increasing.
On the spot rates over the average rates that we saw in the quarter or yeah.
But that's just on the core right I mean, you've done some other stuff.
So he might be underestimating kind of a lift in deposit costs in total.
That's not fair.
Trying to get into kind of an all inclusive.
Deposit costs.
She have pulled on and.
I think do you have the spot rate on total deposits run my yes, I do it's 80 basis points on the total deposits at year end at year end, that's correct, that's correct versus the 58, Matt.
That you saw for the quarter the quarter average.
Great.
Helpful. Thank you.
Okay, and then in terms of.
The uptick in classified I mean, I know these balances can bounce around but everybody is pretty hyper focused on credit. These days. So just wanted to get a sense for what drove the uptick in what would your outlook is.
For that increase.
Yes.
They are.
Some one off credits or three or four there's a couple on the AG sector, where folks were impacted.
On on.
On some labor costs and also fuel costs.
Gas petroleum.
Diesel and light.
There were a couple on the franchise side, where it were poultry costs and labor costs, but they seem to be as we go through these.
They are specific to these individual borrowers.
And most of our other businesses are working through various challenges whether it's on the supply chain side inflation labor and the like.
Okay, and then just last one for me around your comment in the release and I think also on the call here about.
Executing on new initiatives and marketing efforts to expand the products and services.
You are offering to existing clients.
Enhancing new client acquisitions I guess.
Knowing that your relationship.
To begin with I assume you've been doing a lot of this already I guess what's different.
No.
You are right. We have these are just some refinements in in various areas.
And things that we've been doing where we can expand on some of our efforts and in particular in maybe some of the specialty areas where.
Whether it's Iot MLA deposits.
Gaining greater deeper relationships with existing.
Existing clients.
There is.
And so just.
In a number of areas, there and I'm not going to go into any other specifics and then it is coupled to with some of the marketing efforts that we're doing to support these initiatives as well.
Perfect. Thank you.
The next question comes from Chris Mcgratty with K B W. Please go ahead.
Hey, How's it going this is Andrew Leischner on for Chris Mcgratty.
Good morning, So marni I'm on your capital priorities just couple of questions a.
A couple of others, obviously are really healthy right now are there any thoughts on using the buyback at this point or is the environment still little too uncertain.
Hi.
We regularly consider and discuss internally and with the board.
So it's always an option I think as we gain greater visibility on the outlook is again something that we very well may deploy.
But we will consider to.
To think about it.
Okay. Thank you and just sticking on capital is M&A still a possibility right. Now are you having conversations or are those sort of slowed quite uncertainty and potential rate marks.
I think it's it's slowed pretty materially.
We're very focused on protecting tangible book.
And just given the volatility and the equity markets and in the right markets and the uncertainty around the outlook.
That makes M&A as hard as it is throw in those additional factors and and really limits.
Most folks appetite.
Okay. Thank you and then last one just on.
Credit I appreciate all the detail on the slide deck on the different portfolios.
But can you maybe provide a little more color and statistics on the office and retail portfolios.
Yes.
To shorten up the deck, we Oh, we did included this quarter no real change, but I think it's in there from a in Q3 or anything in particular.
Around the office.
There you are.
Anything in particular, you're looking for.
Oh, just like the statistics around them.
Debt service and Ltvs.
You know, it's Uh huh.
Pretty consistent.
With the overall.
Investor owned CRE, which.
Debt coverages are pretty strong.
As you could see in the one slide on page.
Page 31.
190, DC our coverage loan to values are relatively low at 50%.
These are mostly all stabilized.
Properties, but something that we are monitoring closely.
Okay. Thank you.
The next question comes from Andrew <unk> with Stephens. Please go ahead.
Hey, good morning.
Good morning.
Maybe just to start on the on the margin.
Ron I know you did I think a really good job in preparing our balance sheet kind of ahead of rate hikes at the swaps.
And locked in maybe some funding at a certain point in time.
The curve projecting rate cuts later this year I'd be curious to hear your thoughts on just how you're thinking about managing the balance sheet I had at that point in time in any any specific actions you're looking to take kind of throughout the year in preparation for the potential of rate cuts.
Maybe before you give any specifics you run all I'll just give you broadly Andrew.
We've always thought about it is that we generally manage the balance sheet to be close to neutral slightly asset sensitive.
Really not looking to take.
Position, one way or another that.
Generate pretty consistent good earnings in and a variety of environments and to be able to provide the the deposit and loan products that our clients need and they're competitive in the market. So.
That has been our approach and that will continue to be the approach.
We certainly did take some actions.
In 2021, and 2022 that are benefiting us and we will continue to look at various options as we move through the year.
Great.
Andrew just to add to what Steve.
As said.
You know if we have reached what we believe to be our hope to be believe that we've reached an inflection point on the deposit side and we've seen.
Some stabilization there.
We do have some excess cash as Steve indicated earlier that we've got some reinvestment opportunities.
As it relates specifically to the to the swaps.
You know I think we've been pretty.
<unk>.
Well pretty fortunate we have a good chunk of those swaps by yearend that'll be coming off the books.
So if you believe right now what the market is telling us.
Where we could see you know a reversal in monetary policy by the fed by yearend.
We've got we've got a good chunk of those swaps that'll be coming off.
And as a result that will position us better for the for what we could see is again a reversal in the.
In that.
In that direction by the by the fed so we feel pretty good about where we are and how they're positioned right now and as you said, we've we benefited very nicely.
Knowing full well that we were putting on.
No.
Some hybrid type loans that we needed to protect for this eventuality.
Yeah.
Okay do you have the percentage amount I'm just.
The notional swaps.
<unk> come off this year.
Yes about 50% of those swaps will be.
It will be matured.
By the end of the year and they don't start until that fourth quarter.
Okay awesome. Thank you.
And maybe just thinking on the margin.
7% of loans on our balance sheet that are adjustable rate.
Can you just remind us how much of those have resets occurring throughout 2023, and just what the average.
Spread is between the back book to the front book, where those would re price. So I'm just trying to get a sense of some of the repricing dynamics on the asset side as well.
Here's what I can tell you that.
Then I've got ready ready if you will.
The loan book has about a 22% just a loan book of floating rate. Currently we also have probably.
Another.
Call it 8% to 10% of fixed rate maturing during the year over the next 12 months and then we've got.
We've got of course, the benefit of the swaps. So when you kind of total that all up we're looking at a.
Our beta as I mentioned earlier, our loan betas that are repricing beta that would be somewhere in the low 30% levels. Okay understood.
<unk>.
And then.
Last one for me I appreciate the.
The expense commentary I think I was wanted to don't want to three in the first quarter.
I guess I'd be curious to hear your thoughts on kind of the expense.
<unk> throughout the year I know, there's maybe some seasonality in <unk>, but I think I caught in your prepared remarks, you mentioned, maybe some reduced staffing levels just would be curious to hear the puts and takes on the expenses in 'twenty three and how we should think about the progression throughout the year.
When we get to the first quarter earnings we'll give you some idea of what we think about the second quarter at that point, how does that.
Well no.
Not very helpful.
<unk>.
Right.
Here's what I would say is obviously as we have seen in years past the first quarter, we do get.
Like the industry, we get hit with payroll taxes right upfront, it's always a little bit outsized you have some resetting of some of the.
The performance incentives and compensation on that front merit increases all the things that we've talked about.
As well.
In addition of course, we saw the FDIC.
Premium I would not anticipate the same delta if you will from the fourth quarter to the first quarter that were projecting today to be to carryforward drawdown or incremental to carry throughout the year that would not be the case.
From the staffing levels, we don't see any material change one way or another on the staffing side, which of course that the comp and benefits is the biggest component.
On the expense base and we will those see continued pressure on some of the deposit costs.
That are that are there.
So.
I said.
As we get better visibility into it here.
We're happy to share our thoughts as we get through.
At the end of the first quarter, how things are playing out.
Understood.
It was helpful. I appreciate it thank you for taking the questions.
Youre welcome.
The next question comes from Gary Tenner with D. A Davidson. Please go ahead.
Thanks, Good morning.
Lot of my questions were already asked but just one more in terms of just kind of balance sheet management thoughts for the year.
Of.
Securities cash flows or cash flows coming off the investment portfolio.
Expectation would be that you continue to reinvest those to keep some duration on the balance sheet for a potential reversal.
How are you thinking about that broadly.
I think that Gary.
Depends on.
Deposit flows.
Loan growth loan activities, what is the magnitude there.
And and how those different dynamics play out but.
But certainly we could we could look to.
Invest some of that excess liquidity and the cash flows from those securities.
Back in two securities that at more attractive yields today.
Yeah.
And Ron what is the projected cash flows off the portfolio in this year, yes.
Yes.
It's a little north of $400 million, but it is a little lighter in the first half of the year call. It about 80 on average per quarter for the first half and closer to a $121 25 on the back half per quarter.
Great appreciate it and then just one other question just kind of big picture.
I think your kind of sales, we're calling effort and has always been pretty aggressive.
And separate from the credit side of the house, so in an environment, where your where your risk appetite and credit appetite, maybe it's a little lower than it's been.
They repurpose some of those folks on that side of the business.
Or is it just really continuing to turn rocks over four opportunities that might fit within kind of the current appetite.
I think it's a combination of the two Gary and as we've said.
We've had some staff reductions here during the second half of 2022.
Where we are at at this point, we think is pretty stable, but you're you're always assessing that but.
But we've got we've got a lot of activity going on here.
Beginning with some of the initiatives in the fourth quarter I think there was it was a pretty big adjustment that our team had to go through and the level of activity.
That we were running to the bank with a pipeline.
<unk>.
Two $2 $5 billion and closings on on new commitments, while in excess of $1 billion.
And as that adjustment occurred throughout last year.
There is there is no question that.
That was a big impact on folks and I think the team has done an outstanding job of adjusting to the current environment and and really got to sort of switch gears and in the fourth quarter here to start playing a bit more offense, if you will.
Great I appreciate the thoughts thank you.
Lately.
This concludes our question and answer session I would like to turn the conference back over to Steve Gardner for any closing remarks.
Thank you Jay and thank you all for attending.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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