Q2 2023 Banc of California Inc Earnings and PacWest Bancorp M&A Call

July 25, 2023

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one.

To withdraw your question you May Press Star then two please note this call is being recorded.

The presentation will include non-GAAP measures. The reconciliation for these and additional required information is available in the earnings press releases, which are available on each company's investor Relations website.

The reference presentation is also available on each company's Investor Relations website before we begin we would like to direct everyone to the safe Harbor statement on forward looking statements included in both the press releases.

And Investor presentations published today I would now like to turn the conference call over to Mr. Jared Wolff Banc of California's Chairman, President and Chief Executive Officer.

Good afternoon.

And thank you for joining us.

With me on the call today is Joe counter the new CFO think of California.

Paul Taylor, Kevin Thompson, and Bill Black from Pac West.

Each company is going to provide a brief review of the second quarter financial results.

With more limited commentary than usual.

So we can spend the majority of the call discussing the merger that was announced today.

Let me start off by saying how thrilled we are to announce this transaction we.

We are very excited to discuss the tremendous benefits to stockholders clients communities and colleagues that this merger will bring.

The transaction will result in the third largest bank headquartered in California with day, one tangible book value per share accretion and significant EPS accretion in 2024 will inspect expense savings have been realized.

The transaction will result in the third largest bank headquartered in California with day, one tangible book value per share accretion and significant EPS accretion in 2024 spec expense savings have been realized.

The transaction is accompanied by $400 million of capital from two very sophisticated bank investors, which will accelerate the transformation of the combined company.

Paul and his team have done an outstanding job transforming the balance sheet in a short amount of time through the initial restructuring efforts they have undertaken.

Paul and I are both committed to making this successful and I know this will be a powerhouse franchise we.

We have worked extremely closely to bring this deal together and it's going to be highly successful, let me turn it over to Paul.

Thank you Jerry and good afternoon, everyone.

I wanted to start off by saying, what a great job.

Garrett has done with the bank in California. He took over bank a few months before I took over Opus bank. So we've known each other for many years, having turned around a few banks myself I've been impressed with the transformation. He has led at that institution in a short period of time.

With that backdrop. It makes me excited about what's to come with this combination. This is a great deal.

With very compelling economics, the ability to reposition the combined balance sheet and set the stage for growth.

We are clearly better together I believe this merger will be beneficial for all of our stakeholders with clients, having access to an expanded set of products and services employees, having more opportunities for career advancement as part of a larger institution.

The merger creates a premier California banking franchise.

We'll be well positioned to capitalize on market opportunities and broaden the channels and customers and service through increased scale and expanded product offerings. This is an opportunity to assemble a world class team from both banks.

I would like to thank all of the hard work people at Pac West.

That they do every day and they've done through this year and they will continue to do so.

In the years to come and the new combined organization.

With that I will turn it back to Jerry.

Thank you very much Paul I am now pleased to introduce Joe counter our new CFO.

As you know we conducted a national search and saw many many talented candidates and of course he stood out on top I know you've all seen this background having served in various senior finance positions at Wells Fargo for a long period of time, including as CFO of their wholesale bank, which had hundreds of billions in assets.

Joe just started his third week on the job and he couldnt have come at a more exciting time at.

He has been instrumental in bringing this transaction together and we're certainly grateful to have him here.

Before turning it over to Joe I really do want to thank our deputy CFO and Chief Accounting Officer Ray written Tony who did a truly outstanding job as interim CFO. So thank you very much Ray let me now turn it over to Joe.

Thank you Jared of course, I'm very excited to be here at Banc of California, having spent my entire career at much larger organizations I've been highly impressed with the caliber of talent at banc of California, as well as the culture that exist does well grounded in banking fundamentals and delivering high quality service to clients has been a fan.

Tastic an exciting start.

Let me turn to a few comments about the quarter's financials, our earnings release and Investor presentation provide a great deal of information. So I will limit my comments to some areas areas, where additional discussion is warranted. Please feel free to refer to our investor deck, which can be found on our investor Relations website as I review, our second quarter performance unless otherwise indicated all.

For additional discussion is warranted please feel free to refer to our investor desk, which can be found on our investor Relations website as I review, our second quarter performance unless otherwise indicated all prior period comparisons are with the first quarter of 2023.

Prior period comparisons are with the first quarter of 2023, our net income for the second quarter was $17 9 million or <unk> 31 per diluted share on an adjusted basis net income totaled $18 4 million for the second quarter or <unk> 32 per diluted common share when net indemnified legal cost or exclude.

Our net income for the second quarter was $17.9 million or 31 cents per diluted share on and adjusted basis net income totaled 18.4 million for the second quarter or 32 cents per diluted should common share when net indemnified legal costs are excluded.

This compared to adjusted net income of $21 7 million or <unk> 37 per diluted common share for the prior quarter.

As compared to adjusted net income of $21.7 million or 37 cents per diluted common share for the prior quarter.

Overall, our second quarter performance was fairly straightforward with loan growth and corsi and I'm warehouse in improved asset margins driven by loan and securities repricing into higher rates and our deposit balances remain stable. However.

Overall, our second quarter performance was fairly straightforward with loan growth and core C&I and warehouse and improved asset margins driven by loan and securities repricing into higher rates and our deposit balances remained stable. However.

However, our net interest margin decreased 30 basis points from the prior quarter to 3.11% largely due to the impact of the higher levels of cash that we carry during the first two months of the quarter in response to the recent banking turmoil the cost of the excess liquidity in the quarter was 12 basis points and we saw a strong.

However, our net interest margin decreased 30 basis points from the prior quarter to 311% largely due to the impact of the higher levels of cash that we carried during the first two months of the quarter in response to the recent banking turmoil the cost of the excess liquidity in the quarter was 12 basis points and we saw a strong.

<unk> name recovery in June subsequent to repayment of the associated FHL B and F. R B advances.

NIM recovery in June subsequent repayment of the associated FHA Ob and FRB advances.

Overall, earning asset E O and increased by 21 basis points to 5.2% or.

Our overall, earning asset yield increased by 21 basis points to five 2%.

Our average loan yield increased 21 basis points to 5% to 8%, which was largely attributable to variable rate loans in the portfolio continuing to reprice higher rates on new loans production and the increase in warehouse line balances, which is one of the highest yielding asset classes in the portfolio.

Our average loan yield increased 21 basis points to 528%, which was largely attributable to variable rate loans in the portfolio continuing to reprice higher rates on new loan production and the increase in warehouse line balances, which is one of the highest yielding asset classes in the portfolio.

The average yield of securities increased 17 basis points to 483%, mainly due to cielo portfolio resets.

The average yield on securities increased 17 basis points to 483%, mainly due to CLO portfolio resets.

Our total cost of funds increased by 52 basis points to $2, 2% or average cost of deposits was 167 points for the basis points for the second quarter up 45 basis points.

Our total cost of funds increased by 52 basis points to 228%. Our average cost of deposits was 167 points for the basis points for the second quarter up 45 basis points.

Power compared to the average fed funds rates would you want which increased 48 basis points.

However, compared to the average fed funds rates, which won't which increased 48 basis points.

Over the same time period.

The net interest margin drivers page and the Investor presentation deck further illustrates this information.

The net interest margin drivers page in the Investor presentation deck further illustrates this information.

Or non interest income decreased $1.8 million from prior quarter's primarily due to the inclusion of certain non-recurring items in the first quarter, including recovery of a loan acquired in the Pacific Mercantile transaction and the timing of games recognized on CRA investments excluding goes items. The other areas of noninterest income a relatively consistent with the.

Our noninterest income decreased $1 8 million from prior quarters, primarily due to the inclusion of certain nonrecurring items in the first quarter, including recovery of our loan acquired in the Pacific Mercantile transaction.

And the timing of gains recognized on the CRA investments excluding those items. The other areas of noninterest income were relatively consistent with the prior quarter.

Prior quarter.

Our justice non interest expense decreased 825000 from the prior quarter as the full benefit of cost savings from the headcount reduction made last quarter were realized and more than offset the continued investment in other areas of the companies such as our new payments processing business.

Our adjusted noninterest expense decreased 825000 from the prior quarter as the full benefit of cost savings from the head count reduction made last quarter were realized and more than offset the continued investment in other areas of the company such as our new payments processing business.

Turning to our balance sheet total assets were 9.4 billion at June 30, a decrease of Approx approximately 7% from the end of the prior quarter, which was largely due to the reduction in excess liquidity held in cash and a corresponding reduction in FHL be an FRB borrowings are total equity decreased by 1.9 billion during the set.

Turning to our balance sheet total assets were $9 4 billion at June 30, a decrease of approximately approximately 7% from the end of the prior quarter, which was largely due to the reduction in excess liquidity held in cash and a corresponding reduction in <unk>, an FRB borrowings our total equity decreased by $1 9 billion during the <unk>.

<unk> quarter at $18 million of net earnings were offset primarily by capital actions, which included with common stock dividends in the repurchase of approximately $16 billion of our common stock.

Second quarter at $18 million and net earnings were offset primarily by capital actions, which included both common stock dividends and the repurchase of approximately $16 million of our common stock.

Our total loans increased approximately $102 million from the <unk> from the end of the prior quarter, primarily due to increases in our core CNI and warehouse portfolios.

Our total loans increased approximately $102 million from the from the end of the prior quarter, primarily due to increases in our core C&I and warehouse portfolios.

Our total deposits decreased $81 million from the end of the prior quarter due primarily to lower interest bearing checking and non interest bearing deposits, partially offset by higher certificates of deposit. However, after an initial decline total deposits increased as we move through the quarter in our end of period balances were 102 million higher than our average balance.

Our total deposits decreased $81 million from the end of the prior quarter due primarily to lower interest bearing checking and noninterest bearing deposits, partially offset by higher certificates of deposit. However, after an initial decline total deposits increased as we moved through the quarter and our end of period balances were $102 million higher than our average balance.

As in the quarter.

In the quarter.

Importantly are non interest bearing deposits were 36% a period and balances and as noted our earnings release, we have substantially inflows of new deposits from new client relationships.

Importantly, our noninterest bearing deposits were 36% of period end balances and as noted in our earnings release, we have substantially inflows of new deposits from new client relationships.

Ah credit quality remains solid in the second quarter, we had increases in both the link with loans and non performing loans, but this was largely due to R. S. A barb loans, which are well reserved for and have low loan to values that we view the lost potential as remote.

Our credit quality remains solid in the second quarter, we had increases in both delinquent loans and non performing loans, but this was largely due to our <unk> loans, which are well reserved for and have low loan to values that we view the loss potential is remote.

We recorded a provision for credit losses of $1.9 million, which included a 1.7 billion provision for for credit losses, which was largely to to replenish the reserved for charge offs of alone acquired from Pacific Mercantile and other small CNI loans.

We recorded a provision for credit losses of $1 9 million, which included a $1 7 million provision for credit losses, which was largely due to replenish the reserve for charge offs of a loan acquired from Pacific Mercantile and other small C&I loans.

Our allowance or credit losses at the end of the second quarter total $84.9 million compared to a four 9.9 at the prior quarter and or allow us to total loss coverage ratios too at 1.19% compared to 1.27% at the end of the quarter.

Our allowance for credit losses at the end of the second quarter totaled $84 9 million compared to $8 90.

At the prior quarter and our allowance to total loss coverage ratio stood at $1, one 9% compared to 127% at the end of the quarter.

At the at this time I would turn the call over to Kevin.

At this time I will turn the call over to Kevin.

Thanks Joan.

Thanks, Joe.

At the beginning of the year, we announced to renewed strategic plan to focus on our core community Dang franchise and to de-emphasize done for businesses we.

At the beginning of the year, we announced a renewed strategic plan to focus on our core community bank franchise and to deemphasize non core businesses.

We accelerated visa for experienced second quarter in line at the turmoil in the banking market.

We accelerated these efforts during the second quarter in light of the turmoil in the banking market.

We're very proud that you were a S. T dot a cell of our national construction loan portfolio site $2.6 billion loans, and 2.3 billion, Nevada, uncommitted instead of discount of 4.5%.

We're very proud that <unk> executed on the sale of our national construction loan portfolio, selling $2 6 billion of loans and $2 3 billion.

Commitments at a discount of four 5%.

We also sold $2.1 billion, a blender finance loans and $200 million of unfunded commit instead of 3% discount.

Also sold $2 1 billion of lender finance loans and $200 million of unfunded commitments at a 3% discount.

Another $1.1 billion unfunded commitments to be transferred over time buyer that's funny.

With another $1 1 billion of unfunded commitments to be transferred over time to the buyer as funding.

Just the beginning of the year, we also loaned down our civic operations, you sold 521 million funded $24 million unfunded commitments of the civic loan portfolio this quarter.

Since the beginning of the year, we also wound down our civic operations, you sold $521 million funded 24 million of unfunded commitments.

<unk> loan portfolio this quarter.

As a result of this divestiture, we also anticipate annualized compensation savings of 53 million another expense savings $17 million.

As a result of this divestiture, we also anticipate annualized compensation savings of $53 million and other expense savings of $17 million.

As part of our efforts to improve our operational efficiency, we are closed and subleased, none of our facilities, we're simplifying improving our business processes. Your consolidated contracts and we are working to reduce expenses around the company.

As part of our efforts to improve our operational efficiency, we have closed and sublease to number of our facilities, we're simplifying and improving our business processes, we're consolidating contracts and we are working to reduce expenses around the company.

Swift actions of our team this quarter resulted in increasing our capital proving on liquidity decision.

Swift actions of our team this quarter resulted in increasing our capital and improving our liquidity position.

We're very pleased that our deposit base stabilized in the quarter and has now begun to grow.

We are very pleased that our deposit base stabilized in the quarter and has now begun to grow.

Alone to deposit ratio decreased 81% immediately available liquidity and $18 billion in a coverage ratios uninsured deposits of 335%.

The loan to deposit ratio decreased to 81% with immediately available liquidity of $18 billion and our coverage ratios uninsured deposits of 335%.

You're holding a large amount of cash on the balance sheet at the end of the quarter Munching, which we plan to use to pay down wholesale funding.

We are holding a large amount of cash on balance sheet at the end of the quarter much of which we plan to use to pay down of wholesale funding.

R. C T. One capital ratio increased dramatically into ninth two 1% to 11.16 per cent.

Our CET one capital ratio increased dramatically from 92, 1% to $11 one 6% in the quarter.

The diluted earnings per share with the loss of $1.75 and a quarter.

The diluted earnings per share was a loss of $1 75 in the quarter adjusting for onetime items associated with loan sales and restructuring the adjusted earnings would've been 22 per share, which is just ahead of analyst estimates for the quarter.

Adjusting for one time items associated with loan sales and restructuring the adjusted earnings would have been 22 cents per share, which is just ahead of animals estimates for the <unk>.

We're very proud of the <unk> team members screen passengers were everyday Sir.

We are very proud of the <unk> team members, who bring passengers over every day as we serve our loyal customers and communities with that I'll turn the call back over to Gerry.

Loyal customers of communities with that I'll turn the call back over to Jareth.

It takes a lot of Kevin.

Thanks, a lot Kevin.

We're now excited to discuss the highly strategic murderer and capital raised we announced this morning.

We're now excited to discuss the highly strategic merger and capital raise we announced this morning.

I should say this afternoon.

We've provided a great deal of information regarding the transaction and the investor deck that was published today.

Spend a few minutes discussing the highlights for the merger.

Going to spend a few minutes discussing the highlights from the merger.

The merger think of California, and pack last is a transformational combination.

The merger of Banc of California, and Pac West is a transformational combination.

A unique opportunity to deliver significant value to all of our stakeholders.

When I joined think of California, near the four and a half years ago.

When I joined Banc of California, CEO, nearly four and a half years ago.

We had to undertake our own restructuring.

Journey to build a relationship focus business tank that would prioritize three things.

Journey to build a relationship focused business bank that would prioritize three thanks.

First a high level of non interest bearing deposits and core deposits.

To a healthy level of capital.

And three little credit noise.

And three low credit noise.

We set out to do this by being best in class.

Delivering great deposit strategies.

Delivering great deposit strategies and.

And lending to businesses in our footprint.

In lending to businesses in our footprint.

We achieved those three objectives.

And completed the transformation that bank of California faster than most had expected.

And completed the transformation of banc of California faster than most had expected and.

And many would say with better results in terms of deposits capital and credit quality.

As a result, the work we have done put us in a position to enter into this transformational merger with <unk> <unk>.

As a result, the work we have done put us in a position to enter into this transformational merger with Pac West.

That will create the leading commercial bank in California, with strong well capitalized and a highly liquid balance sheet.

That will create the leading commercial bank in California, with strong well capitalized and highly liquid balance sheet.

We believe this transaction is highly compelling for both company shareholders.

We believe this transaction is highly compelling for both companies' shareholders.

In addition to creating the lead in California franchise.

In addition to creating the leading California franchise.

[noise] combination bolsters capital and liquidity.

The combination bolsters capital and liquidity.

Highly accretive EPS intangible book value.

He is highly accretive to EPS and tangible book value.

Resulting attractive profitability and is limited execution risk.

Resulting attractive profitability and has limited execution risk given that significant cost savings opportunities and from the familiarity between the two organizations.

Even that significant cost savings opportunities and it's been the familiarity between two organizations.

Our combined strategy will continue to focus on in market relationship banking.

With a primary objective.

[noise] Viding superior level of customer service experts.

<unk> superior level of customer service experts.

Expertise and robust Treasury management solutions.

I still think of California, and pack less to have demonstrated providing superior Treasury management services.

As both banc of California, and Pac West have demonstrated providing superior Treasury management services.

With lending expertise.

Paired with lending expertise.

Will enable us to attract a low cost commercial deposits.

It will enable us to attract low cost commercial deposits.

That will utilize to fund high quality learning opportunities.

That we utilized to fund high quality lending opportunities.

On a combined basis, we will be the third largest commercial bank headquartered in California.

Which is absolutely one of the most attractive banking markets in the country.

As we all know over the past 18 months.

A competitive environment in California has changed dramatically.

The competitive environment in California has changed dramatically.

During this time period, we've seen many other banks either completely exit or.

During this time period, we have seen many other banks either completely exit.

We're significantly pullback from California.

Significantly pullback from California.

As a result.

As a result, there is a sizable opportunity for skilled free skilled commercial bank.

A sizable opportunity for skilled skilled commercial bank with.

With a high level of service and expertise to capitalize on this corruption.

With the high level of service and expertise to capitalize on disruption.

By adding clients and increasing market share.

The combined company will be well positioned to do this.

And as a larger institution with increased scale.

And there is a larger institution with increased scale.

We will have even more resources to invest in technology.

Continue to attract the best talent.

To attract the best talent.

And further elevate the client experienced enhance overall efficiencies and support our community.

And further elevate the client experience.

Hence overall efficiencies and support our communities.

Warburg and Centerbridge too highly sophisticated bank investors have signed commitments to invest $400 million concurrently with the closing of the transaction.

Warburg and Centerbridge to highly sophisticated bank investors have signed commitments to invest $400 million concurrently with the closing of the transaction.

The merger and concurrent capital raised.

The merger and concurrent capital raise.

Will enable us to take advantage of several strategic actions designed.

We will enable us to take advantage of several strategic actions designed to create a very strong balance sheet.

Designed to create a very strong balance sheet.

And enhance the capital and liquidity profile of the combined institution.

And enhance the capital and liquidity profile of the combined institutions.

These actions include selling liquid assets.

And utilizing excess cash to pay down 13 billion of wholesale funding.

And utilizing excess cash to pay down $13 million of wholesale funding.

We have derisked these transactions by entering a number of hedges to protect the balance sheet and pricing through clothes.

We have derisked these transactions by entering a number of hedges to protect the balance sheet and pricing through close.

These actions will reduce the wholesale funding ratio of the combined institution to below 10% will.

These actions will reduce the wholesale funding ratio of the combined institution to below 10% while.

While maintaining 8% cashed assets and 10% C T. One.

While maintaining 8% cash assets and 10% CET one.

It will also enhance our funding profile with a pro forma alone to deposit ratio of approximately 85% and a deposit base. It will be comprised of 90 per cent core deposits and 30 per cent non interest bearing deposits.

It will also enhance our funding profile with a pro forma loan to deposit ratio of approximately 85% and a deposit base that will be comprised of 90% of core deposits and 30% noninterest bearing deposits.

This transaction is immediately accretable detention, we looked at your per share and 20 plus percent accretive to EPS on 2024 expected EPS of $1.65 to $1.80.

This transaction is immediately accretive to tangible book value per share.

20% accretive to EPS on 2020 for expected EPS of $1 65 to $1 80.

We believe there is little execution risks and achieving these projections as most of the upside will be driven by the balance sheet repositioning and.

We believe there is low execution risk in achieving these projections as most of the upside will be driven by the balance sheet repositioning and reduction of Pac west non run rate expenses.

A reduction of Pac West Nonrun rate expenses.

We estimate the combined company will produce the run rate will produce a run rate return on assets exceeding 110.

Around Q4, and 2024 when the expense savings have been achieved.

Return on tangible equity or at least 13%.

Return on tangible equity of at least 13%.

And generate 100 basis points of capital annually.

This does not include additional upside opportunities that we have identified but did not model.

This does not include additional upside opportunities that we've identified but do not model.

An important.

An important and particularly unique aspect of this merger.

Particularly unique aspect of this merger.

The high degree of familiarity that are two institutions have.

Is the high degree of familiarity that our two institutions have.

Which we believe significantly minimises the execution risks.

Which we believe significantly minimizes the execution risks.

One of our guiding principles principles and M&A.

One of our guiding principles principles in M&A.

Only do deals where we have a high degree of confidence in the success of the transaction.

Is to only do deals where we have a high degree of confidence in the success of the transaction.

And this is certainly in the case with this transaction.

And this is certainly the case with this transaction.

As most of you know.

I previously served as president of specific Western Bank.

I previously served as president of Pacific Western Bank.

And during my 12 years plus there.

Hope to lead more than 20 acquisitions.

To lead more than 20 acquisitions.

We also have a number of other executives at bank of California, who held leadership roles or worked at Pac West include.

We also have a number of other executives at Banc of California, who held leadership roles or worked at Pac West include.

Including our Chief Credit Officer, Bob <unk>, who is chief whether officer Pacific Western Bank.

Including our Chief Credit Officer, Bob <unk>, who is chief credit Officer Pacific Western Bank.

Accordingly, we know the culture of the organizations and the businesses that they operate.

We know the true depth of talent that exists at the organization and have tremendous respect for their employees.

During the diligence process and evaluation of the transaction.

During the diligence process and evaluation of the transaction our ability to discuss issues on a deeper level was evident.

Our ability to discuss issues on a deeper level was evident.

We believe the high degree of familiarity and a foundation of trust will lead to a very smooth integration.

Abel us to effectively capitalized on the projected synergies for this merger that.

Enable us to effectively capitalize on the projected synergies for this merger that will enhance our ability to serve commercial clients.

It will enhance our ability to serve commercial clients.

And create additional value for shareholders of the combined company.

With that let me turn the call over to Paul.

Thanks, Derek I couldn't get off off mute sorry about that over the past few months. We have spent a great deal of time evaluating the best fast forward per pack West and we believe this merger.

Thanks, Jared I Couldnt get off.

Sorry about that over the past few months, we have spent a great deal of time evaluating the best path forward for Pac West and we believe this merger is a tremendous opportunity for the company.

There is a tremendous opportunity for the company our clients our employees and our shareholders.

Our clients our employees and our shareholders over the last few quarters, we've laid out a plan to reduce our reliance on wholesale funding increased capital and improved profitability.

The last few quarters, we've laid out a plan to reduce our reliance on wholesale andi increased capital and improve profitability.

This merger meaningfully accelerates are standalone plan, while putting the complaint company into a position of strength within the market.

This merger meaningfully accelerates, our Standalone plan, while putting the combined company into a position of strength within the market.

With the increase scale expanded capabilities and robust capital and liquidity.

With the increased scale expanded capabilities and robust capital and liquidity.

We will be able to better serve the needs of our clients.

And given the complementary nature of our franchises similar cultures shared values and vision along with the senior management team that will be a combination of executives from both companies. We believe that we will have a smooth integration that will enable us to quickly realized this.

And given the complementary nature of our franchises similar cultures shared value and vision along with the senior management team that will be a combination of executives from both companies. We believe that need will have a smooth integration that will enable us to quickly realize this.

Synergies that we project for this transaction.

Synergies that we projected for this transaction.

Simply put we believe this merger will be beneficial for all stakeholders with clients, having access to an expanded set of products and services employees had any more opportunities for career advancement as part of a stronger institution.

Simply put we believe this merger will be beneficial for all stakeholders with clients, having access to an expanded set of products and services employees, adding more opportunities for career advancement as part of a stronger institution and most importantly long term shareholder value being.

And most importantly, long term shareholder value being created to a greater extent.

Created to a greater extent.

Then what we believe we could carry as a stand alone <unk>.

Then what we believe we can create as a stand alone <unk>.

With that Jarod I will turn it back to you.

With that Jared I'll turn it back to you.

Thanks, Paul.

I would just like to add it it's been a real pleasure to work with you and the rest of the management team at Pac less through this process, it's been a truly collaborative process.

I would just like to add it's been a real pleasure to work with you and the rest of the management team at Pac West through this process, it's been a truly collaborative process.

And we couldn't be more excited to bring our two organizations together and begin realizing the benefits that we all anticipate for our stakeholders.

And we couldnt be more excited to bring our two organizations together and begin realizing the benefits that we all anticipate for our stakeholders.

We are fortunate to have attracted the most talented colleagues in banking and.

We are fortunate to have attracted the most talented colleagues in banking.

And look forward to bringing them altogether.

And look forward to bringing them all together.

Thank you to all of our colleagues for the tremendous dedication and hard work.

Thank you to all of our colleagues for their tremendous dedication and hard work.

Operator, we'd now be happy to answer any questions and open up the lines.

Thank you we will now begin the question and answer session. As a reminder to ask a question you May press star one on your telephone keypad.

Thank you we will now begin the question and answer session. As a reminder 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 to withdraw from the question queue. Please press Star then two.

If you're using a speaker phone please pick up your handset before pressing the keys to withdrawal from the question can you. Please press Star then too.

At this time, they all paused momentarily to assemble Arras day.

At this time, we will pause momentarily to assemble our roster.

Okay.

Today's first question it comes from Matthew Clarke with Piper sampling. Please go ahead.

Today's first question comes from Matthew Clark with Piper Sandler. Please go ahead.

Hey, good afternoon, everyone.

Good afternoon.

Maybe just first on the costs saves the 130 million.

Maybe just first on the cost saves the $130 million.

It seems a little low to me just thinking through what.

It seems a little low to me just thinking through you know what.

What legacy Pac West.

What legacy pack West might've been able to extract from their franchise on a standalone basis can you just give us a sense for where that $130 million is coming from is it is it predominantly all legacy pack west or is there are also some come.

<unk> been able to extract from their franchise on a standalone basis can you just give us a sense for where that $130 million is coming from is it predominantly all legacy Pac west or is there also some.

Coming out of legacy Bank.

Well, there's really two buckets for our expense savings assumptions.

The first is there are temporary elevated expenses that existed pack west that they have identified including higher FDIC assessments consultants and some legacy cost that will run for a little while that have to do with the the closing down of some of the businesses they've exited including the run out.

The first is there are temporary elevated expenses that existed Pac west that they have identified including higher FDIC assessment consultants and some legacy costs that will run for a little while to have to do with the closing down of some of the businesses they've exited including the run off port.

Portfolio for civic.

Leo for civic.

Additionally.

There's a lot of expense saving overlap that we've identified for the combined company going forward.

There's a lot of expense saving overlap that we have identified for the combined company going forward.

And so.

As a result, we believe that on the model we model.

Getting to $191 nine no expense ratio, which we believe is is very conservative and very achievable. So there isn't going to be more in there Matthew but that's what we felt comfortable modeling and we'd like the output. That's you know on a highly.

Getting to a $191 nine no expense ratio, which we believe is is very conservative and very achievable. So there isn't going to be more in there Matthew but that's why we felt comfortable modeling and we like the output that's.

On a highly conservative basis.

Basis.

Okay, and then what kind of a related question.

Okay and then.

It's kind of a related question.

You guys have been under $10 billion <unk>.

You guys had been under $10 billion, but <unk>.

And above it for awhile.

Love It for a while do.

Do you have any is there any investments you need to make to cross 10 or do you feel like you can leverage would pack less is done.

Do you have any are there any investments you need to make to cross 10 or do you feel like you can leverage with Pac life is done.

Well, we were over 10 as you mentioned previously we have the infrastructure that really was there to build to a large organization I think between the two of US where we are going to be fine.

Well, we were over 10 as you mentioned previously we have the infrastructure that really was there to build to a larger organization I think between the two of US we're going to be fine and we're going to have a substantial transition leadership team and integration team combined of folks from both organizations and so I think we'll be good there.

We're going to have a substantial transition leadership team and integration team combined.

Both organizations and so I think we'll be good there.

Okay, and then just thinking kind of longer term in the strategic merits.

Okay, and then just thinking kind of longer term in the strategic merits and kind of what you're left with after all of this.

What you're left with after all this.

Is it fair to assume there won't be any national lending once this is.

Once you are combined and and can you maybe speak to I think single family residence multifamily. It looks like legacy bank is going to have some <unk>.

Once you are combined and.

Can you maybe speak to I think single family resi multifamily it looks like.

<unk> bank is going to have some.

Loan sales on that front, and whether or not you'll still be in that business.

Loan sales on that front, and whether or not youll still be in that business.

Yeah. So the the heart of the combined company is gonna be the community banking franchise.

Yes.

Part of the combined company is going to be the community banking franchise.

And Paul and Kevin and the team had done a great job.

And Paul and Kevin and the team have done a great job.

Building progress toward converting a pack last into a strong community bank with a couple of other lending initiatives, but they had largely exited the national lending businesses already.

Building progress toward converting.

Pac west into a strong community bank with a couple other lending niches, but they have largely exited the national lending businesses already.

Think of California at its heart is a community banking franchise, we don't have any national learning businesses. So these two franchises together are going to make a really strong partnership in California, and the markets that we continue to serve.

Hi, Thank you for California at its heart is a community banking franchise, we don't have any national lending businesses. So these two franchises together are going to make a really strong partnership in California in the markets that we continue to serve.

There are some niches that we both have that we really like we have some niches on the on.

There are some niches that we both have that we really like we have some niches on the.

On the on the deposit side, we have some interesting verticals that we used to gather deposits and they do too they have a great HOA business that Alan TADA leaves they have a fun finance and.

On the deposit side, we have some interesting verticals that we used to gather deposits and maybe two they have a great HOA business that Alan Retarder leaves they have a fund finance and.

And venture funding business that Sean Lineen leads that are really strong, they're very low loan to deposit businesses with low credit and so we believe that it's worth holding on to those businesses as long as we can live within our means and reduce concentration.

And venture funding business that Sean Linden leads that are really strong theyre very low loan to deposit businesses with low credit and so we believe that its worth holding on to those businesses as long as we can live within our means and reduce concentration. This bank pro forma day, one is going to be 85% loan to deposit with very low wholesale funding.

Bank Pro forma day, one is going to be 85% loan to deposit with very little wholesale funding and I think it's going to be a.

And I think it's going to be a.

A very strong franchise, we're going to make sure that we look to avoid the concentration risk that I think all banks experienced over the last several years.

And.

With the low wholesale funding ratio that we have the capital we have the excess liquidity, we're going to be well positioned to do that.

Okay, and then just throw in like two minutes.

Okay, and then just sticking on that thank you.

Yeah, you had another question they are about S. F. R. So as as part of the restructuring of the balance sheet, we plan to sell and these are not.

You had another question there about SSR, so as part of the restructuring of the balance sheet, we plan to sell and these are not <unk>.

We've identified the assets that we.

May sell but we have not determined which ones they will be but we put in place hedges to protect the likely outcome.

And so it includes.

So it includes.

Rsfsr portfolio, it back to California, or multifamily portfolio Bank of California. Those are one eight and $1.6 billion are available for sale Securities and pack west available for sale Securities and so in doing so we're going to create a tremendous amount of liquidity and be able to pay down wholesale funding.

Our <unk> portfolio at Banc of California, our multifamily portfolio of Banc of California. Those are one eight and $1 6 billion are available for sale Securities and Pac West available for sale Securities.

So in doing so we're going to create a tremendous amount of liquidity and be able to pay down wholesale funding.

Pac West and on the combined institution any with less than 10 per cent wholesale funding at close.

Pac West and on the combined institution, ending with less than 10% wholesale funding at close.

Neither of US originates single family today, So that was just you know.

Neither of US originate single family today, So that was just.

Purchases that we had done to add assets in a low rate environment. I think those portfolio has performed really well, but in this design, we would sell them down and pay down borrowings.

Purchases that we had done to add assets and the low rate environment I think those portfolios performed really well, but in this design, we would sell them down and pay down borrowings.

Okay, Great and then just on the merger charge it looks a little high but it includes the cost of hedging and dealers.

Okay, Great and then just on the merger charge it looks a little high but it includes the cost of hedging and.

Deal related costs in the capital raise I mean, if you strip he stripped at the cost of the capital raising hedging.

Deal related costs and the capital raise I mean, if you strip if you stripped out the cost of the capital raise and hedging.

Would that what what would that number look like relative to the deal value.

Would that what would that number look like relative to the deal value.

It's about one and it wouldn't have to two per cent of costumes, which is where these things end up being and.

It's about one and half to 2% of cost savings, which is where these things end up being and.

Some some comparable deals that we looked at so you're right. It's highly elevated because it has the costs associated with the capital raised as well as the hedging costs, which were.

Some comparable deals that we looked at so youre right its highly elevated because it has the cost associated with the capital raise as well as the hedging costs, which were.

Were substantial those two things combined were substantial.

Were substantial does those two things combined were substantial.

Okay, and then were there any other bidders in this process or was it.

Just Youtube.

For the most part.

There's gonna be a robust description and the proxy about the background of the merger, but I think this combination is going to be fantastic and.

There is going to be a robust description in the proxy about the background of the merger, but I think what this combination is going to be fantastic.

We're excited to get it done.

Okay.

Okay, great. Thank you.

Yeah.

Thank you.

The next question comes from Christmas Graddy with K B W. Please go ahead.

The next question comes from Chris Mcgratty with K B W. Please go ahead.

Oh, great. Thanks, I, just wanted to dig into the the deposit or something for a moment.

Oh, great. Thanks.

I just wanted to dig into the.

Deposit assumptions for a moment.

Slide 10 and slide.

Slide 10, and slide 20 give a slightly different starting point for the core deposits.

20 give a slightly different starting point for the core deposits.

I guess, what I'm getting after it if you if you combine the two companies non interest bearing deposits.

I guess, what I'm getting after is if you combine the two companies noninterest bearing deposits.

I think to get to that 30 per cent mix you, you're assuming some growth of nfib's from the second quarter. So interested in commentary there to start please.

I think to get to that 30% mix youre, assuming some growth of NII from the second quarter. So interested in commentary there to start.

Yeah, I mean, there's going to be a little bit. It. We both know what we're expecting to do we are expecting to close this just pro forma 930.

There's going to be a little bit we both know what were expecting to do we are expecting to close this pro forma 930.

Because we expect to close late Q for early Q1, so we based it on 930.

Because we expect to close late Q4.

Early Q1, so we based it on 930.

And we the plan is to be approximately 30 per cent non interest bearing.

And we the plan is to be approximately 30% noninterest bearing.

At close and we hope to exceed that of course.

Okay, and then maybe a question on credit accurate historically had a little bit Ah volatility in the credit numbers and you're you're not mark and the balance sheet maybe.

Okay.

And then maybe a question on credit.

<unk> has historically had a little bit.

Volatility in the credit numbers and youre, not marking the balance sheet maybe.

A comment or two on how you see the portfolio today I think there was a little bit of migration like banks.

A comment or two on how you see the portfolio today I think there was a little bit of migration like thanks.

And the second quarter, but just color on the Sim loss rates, maybe on a per line combined basis. Thanks.

In the second quarter, but just color on the assumed loss rates, maybe on a combined basis. Thanks.

I'm happy to talk about the the robust diligence, we did and kind of what we're modeling going forward, but before we do that Kevin or Paul do you guys want to comment on the quarter at all.

Sure I'm happy to talk about the the robust diligence, we did and kind of what we're modeling going forward, but before you do that Kevin or Paul do you guys want to comment on the quarter at all.

You bet first I'll mention you know we executed on a number of balance sheet restructuring initiatives include selling national lending portfolios as part of that with our civic portfolio since the portfolio had some a little bit of credit deterioration credited cap.

You bet first of all mentioned, we executed on a number of balance sheet restructuring initiatives included selling national lending portfolios as part of that with our civic portfolio since the portfolio had some a little bit of credit deterioration Crazy gap cow.

Counting rules.

<unk> rules.

We had to count those those losses on sale as a credit loss rather than a loss on sale. So that shows up in our provision so to your point, Chris It does create a little bit noise of noise and that provision, but those aren't true losses God.

We had to count those those losses on sale as a credit loss rather than a loss on sale. So that shows up in our provision so to your point, Chris It does create a little bit noise of noise in that provision, but those aren't true losses.

Got it.

Charge offs, and our my and they're just losses on sale that happened to be in that geography, and then from a credit perspective and a quarter.

<unk> offs in our mind, there just losses on sale that happened to be in that geography, and then from a credit perspective in the quarter.

There are some ups and downs past due loans or down or nonaccruals her up because of a specific loans are special mentioned or down get classifieds are out of our normal incidentals that will see overtime that as a reminder, we did sell our national construction, which was very high credit quality.

There are some ups and downs past due loans are down our non accruals are up because of.

Specific loans, our special mentioned or down get classifieds are out of our normal is analysis will see overtime, but as a reminder, we did sell our national construction portfolio, which was very high credit quality.

But I think as even a bed.

But.

Think adds even a better credit profile for the combined bank.

Credit profiles and bite back.

And I think it's important dimension of the civic portfolio that we've seen ever since our involvement civic [noise].

And I think it's important dimension of the civic portfolio that we've seen ever since our involvement civic.

It'll push past us.

It will push past dues.

Yeah, there are more of a sloppy loan for Mac lack of a better term.

Yes, they are more of a sloppy loan for lack of a better term.

They seem to always pay it's just more of a slow pace. So we're not we're not concerned the Thursday.

They seem to always pay it's just more of a slow pace. So.

We're not we're not concerned that there is a systemic.

Systemic trend or anything in that portfolio.

Systemic trends or anything in that portfolio.

So.

Then yeah.

Ben Yes.

Chris.

Alright, Chris.

No no I can keep going through.

I can keep going.

Alright.

Yeah, No problem I mean, we did substantial diligence on on each other of course, but substantial.

Yeah, No problem I mean, we did substantial diligence.

On each other of course, but.

Substantial diligence on the credit portfolio I mean, those are the things that you've got it really makes you look at very carefully new sorts of transactions because of the the potential risk first of all I would say that <unk> has done an excellent job of derisking their balance sheet and through the sales that they undertook not to say that those portfolios were necessarily risky, but they were the national lending portfolio.

Substantial diligence on the credit portfolio I mean, those are the things that you've got to really make sure you look at very carefully in these sorts of transactions because of the potential risk first of all I would say that <unk> has done an excellent job of derisking their balance sheet and through the sales that they undertook not to say that those portfolios were necessarily risky, but they were the national lending.

That I think were larger loans didn't generate deposits and put some pressure on the balance sheet and how they had had exposure. Even if there was no loss content. So I think they've done an excellent job of reducing that risk and the remaining loan portfolio is far more granular than it was before they started engaging in that as it relates to civic it's 2 billion plus of loans.

Is that I think we're larger loans didnt generate deposits and put some pressure on the balance sheet and how they had expected.

Exposure, even if there was no loss content. So I think they've done an excellent job of reducing that risk and the remaining loan portfolio is far more granular than it was before they started engaging in that as it relates to civic. It's 2 billion plus of loans that are in run off that are primarily for rental housing.

Or in runoff that are primarily for rental housing.

It acts more like a consumer portfolio, even though it's not it's gonna have some some delinquency, but it pays and we've seen that transaction, we've seen those transactions over timing as I mentioned, we did we did very deep diligence we brought in.

It acts more like a consumer portfolio, even though it's not it's going to have some some delinquency but.

And we've seen that transaction, we've seen those transactions over time and as I mentioned, we did we did very deep diligence we brought in.

Third parties as did these very too sophisticated investors came in that put in a lot of money in this field.

Third parties as did very to sophisticated investors came in that put in a lot of money in this deal.

That's been committed they did substantial diligence on on on both banks and we were able to leverage that as well and I think we both feel very comfortable about the credit portfolios of each other like I said going forward you know.

That's been committed they did substantial diligence.

<unk>.

On both banks, and we were able to leverage that as well and I think we both feel very comfortable about the credit portfolios of each other like I said going forward.

The portfolio is going to be more akin to the community bank lending that we both do.

Learning and market with some opportunity to do other types of learning on a niche basis and it's not to say never is never but I think at its core this bank will be learning in its footprint primarily.

Lending in market with some opportunity to do other types of lending on a niche basis and it's not to say never is never but I think at its core this bank will be lending in its footprint primarily.

So we feel good about that in terms of the coverage ratios. We typically run 120 to 125 pack.

<unk> is closer to 90 basis points, obviously, we can't prejudge, what the numbers are going to be but I can tell you from a modeling perspective, we assumed that we were going to have a a coverage ratio that was closer to ours than theirs and we're obviously going to have to run this through Cecil and but there's plenty of extra support in the numbers for us to get there.

Pac West is closer to 90 basis points, obviously, we can't prejudge, what the numbers are going to be but I can tell you from a modeling perspective, we assume that we were going to have a coverage ratio that was closer to ours and theirs and we're obviously going to have to run this through seasonal and but there is plenty of extra support in the numbers for us to get there.

[noise] Granton and then maybe just one more.

Okay.

Great and then maybe just one more.

The 165 to 180 I just wanted to confirm that that's a pro forma number and then I didn't get the full year, so I'm I'm interested kind of.

The $1 55 to 180 I just wanted to confirm that that's a pro forma number and then I think thats a full year, so I'm interested in kind of.

<unk> of that as you get the savings and I think correct me if I'm wrong the 140.

The 140 goes to the accretion accretable yield.

140 goes through the accretion incredible yield that Ah life alone I assume that just 2024 does any color on the marks and the and the noise there.

Life of loan I assume not just 2024, just any color on the marks and the noise there.

I'm going to let somebody else comment on the Ah marks who has an advanced degree but.

Let somebody else to comment on the marks who has an advanced degree but.

In terms of the 165 to 180 that that is are we thought it would be helpful to put on an estimate for 2024 estimated earnings.

In terms of the 165 to 180 that is are we thought it would be helpful to put out an estimate for 2020 for estimated earnings.

In terms of the cadence of getting there obviously expense savings are gonna you know.

In terms of the cadence of getting there obviously expense savings are going to do.

You're gonna you're gonna get the full year benefit at the end of the year not earlier in the year. For example, you know 18% of pack less facility charges.

Youre going to Youre going to get a full year benefit at the end of the year not earlier in the year for example, 18% of Pac West facility charges are there costs associated with your facilities.

Their costs associate with their facilities.

18% mature or expire at the end of 2024, so without any termination lots to assess whether we want to terminate them early and pay some fear just wait till they expire, but it's stuff like that that we're going to realize at the end of 2024, we do estimate that we think we're gonna get the full benefit of our savings estimates through the end of 2024.

18% mature or expire at the end of 2024, so without any termination you know we'll have to assess whether we want to terminate them early and pay some fear just wait till they expire, but it's stuff like that that we're going to realize at the end of 2024, we do estimate that we think we're going to get the full benefit of our savings estimates through the end of 2024.

There'll be closed out by then so that 165 to 180 is for 2024 estimated EPS.

There'll be closed out by then so that 165 to 180 is for 2020 for estimated EPS.

Hopefully I gave you guys enough time to figure out what the accounting numbers are.

Joe or.

Joe or Ken.

So you want to take that.

Kevin Joe you want to take that.

Yeah, So I just I.

Yes.

I, usually like to clarify specifically your question.

I just like to clarify specifically your question.

I guess the the 140.

I guess the 140.

The Mark.

Mark Thank you.

Slide 22 against accreted back into earnings.

Turning to get accreted back into earnings.

Yeah, I guess, the timing of the timing of that and then.

Yes, I guess the timing of the timing of that and then.

Usually yeah yeah.

Because usually yes.

Yes, thats over six years.

That's over six years I think that's the.

Core deposit intangible that comes back in over six years.

Pardon.

Alright.

And then the loan.

So the the low marks if you think about it most of those.

So the the loan marks.

Think about it most of those bank of Cal loan portfolios, we intend to sell so those would not be accretive back in to earnings. So the AUM all of accretions on the CDI.

Bank account loan portfolios, we intend to sell so those will not be accretive back in two earnings. So the only all the Christians on this area.

Okay. The only the only incredible yield is the one for it okay. Yeah.

Okay. The only.

On the Accretable yield is the the one important okay. Yes.

And you have the non P. C D box that will be a critical as well and.

And you have the non PCI loans that will be accretive as well.

148 remarks.

And the 140 <unk> remarks.

Thanks.

The next question comes from Andrew Terrell Stephens. Please go ahead.

The next question comes from Andrew <unk> with Stephens. Please go ahead.

Hey, good afternoon.

Theater.

Andrew.

Jan just quickly on the on the planned asset sales just to make sure I have the foreign contracts you've put in place fully hedged for the potential of rate volatility between now and clothes and then can.

Jan.

Just quickly on the on the planned asset sales.

Just to make sure of the foreign contracts you've put in place fully hedged for the potential of rate volatility between now and close and then.

Can you discuss the comfortability with any kind of discount you'd expect on the asset sales or maybe once baked into the pro forma assumptions in terms of non non right related discount.

Can you discuss just the comparability with any kind of discount you would expect on the asset sales or maybe what's baked into the pro forma assumptions in terms of non non rate related discount.

So we we have hedged for interest rate risk, that's right and I'm Gonna turn it over to Joe because he's the expert on the on the hedges, but we have hedged for interest rate risk and we've accounted in our model for potential variation, but let me let me mention a couple of things the timing of the sales is something which is with aren't within our control. So if there's a <unk>.

So we have hedged for interest rate risk.

And then I'm going to turn it over to Joe because he's the expert on the on the hedges, but we have hedged for interest rate risk and we've accounted in our model for potential variation, but let me. Let me mentioned a couple of things the timing of the sales.

Is something which is with aren't within our control so if theres a non.

Non.

Interest rate dislocation and value supply and demand.

Interest rate dislocation in value.

<unk> demand.

We don't have to sell at that moment, we could sell later again, we were getting down to below 10 per cent of wholesale funding, but we could keep it higher if we wanted to for timing purposes to make sure that we hit the hit the numbers that we are targeting.

We don't have to sell at that moment, we could sell later again, we are getting down to below 10% wholesale funding, but we could keep it higher if we wanted to for timing purposes to make sure that we hit the hit the numbers that we are targeting in our in our projections.

In our in our projections, but Joe you want to walk through kind of exactly what we've done.

But Joe you want to walk through kind of exactly what we've done.

Yeah.

So on our single family loan portfolio, which.

Single family loan portfolio.

Which was about 1.8 billion, we enter into a contingent board sale agreement is contingent Betty.

Which was about $1 8 billion, we entered into a contingent forward sale agreement.

Tianjin embedded.

For some reason the deal would it not close the contract terminates it doesn't doesn't survive that of that but the the.

If for some reason the deal did not close the contract terminates.

It doesn't it doesn't survive that event, but.

The contract isn't wasn't right at right on top of our Mark on those assets.

The contract is right at right on top of our Mark on those assets.

Which was largely a ah right Mark So there was no incremental <unk>.

Which was largely.

Great Mark So there's no incremental.

Credit or spread really in there and then on the rest of the balance sheet. What we were hedging is the interest rate risk between now and closed to protect the to protect the capital of the entity between now and the closer to the transaction. So those are just the interest rates swaptions, which we used caliber.

Credit or spread really in there and then on the rest of the balance sheet, what we were hedging as the interest rate risk between now and close to protect the.

To protect the capital of the entity between now and the close of the transaction. So those are just the interest rate swaps of which were used.

Calibrate to the tenor of the appropriate portfolios. So that we could make sure that we were protected.

Calibrated to the tenor of the appropriate portfolios. So that we could make sure that we were protected.

Understood. Thank you and then on on.

Understood. Thank you.

And then on an.

On modeling assumptions on page 13 of a slight accent, but 2.4% pro forma funding costs because I'd just take the the two Q run right funding costs for both companies and then back out the the planned restructuring so.

On modeling assumptions on page 13 of the slide deck too.

Two 4% pro forma funding costs does that just take the <unk> run rate funding costs for both companies and then back out the planned restructuring so.

Send another way would not account for any incremental funding cost increase from here.

Said another way it would not account for any incremental funding cost increase from here.

Oh wait that's correct.

I believe that's correct.

We do.

We do it.

It does it does take into account the the current yield curve.

It does it does take into account the.

The current yield curve.

Jackson using the card yogurt, Kevin and do you have any other perspective on that.

Using the current yield curve, Kevin do you have any other perspective on that.

I apologize I missed that part of the what was the question.

I apologize I missed that part of it what was the question.

Just on the the 240 pro forma cost of funds does that assume any incremental funding author deposit cost increases.

Just on the $2 40 pro forma cost of funds.

Does that assume any incremental funding cost or deposit cost increases.

In the back half of the year or does it just used to queue and profile them off for the.

In the back half of the year or does it just use <unk> and then pro forma for the.

It does.

Yeah, He just right as the foreign Kirven it.

Yes, he just right as the forward curve in it.

So there is a wonderful unexpected right height.

So there is one unexpected rate hike.

Okay, that's right.

And then.

Jared and it sounds like I mean, you made a comment Ah earlier on the prepared remarks just.

Jared It sounds like I mean, you made a comment.

Earlier in the prepared remarks just.

Additional outside and and maybe some additional earnings that you don't really have including the pro forma assumptions here and it sounds like expensive you're fairly optimistic about achieving the the expenses that are being discussed in the presentation. I was just curious if you could talk kind of outside of that other opportunities are areas you've identified that could.

Additional upside and maybe some additional earnings that you don't really include in the pro forma assumptions here and it sounds like expenses.

You're fairly optimistic about achieving the expense saves that are being discussed in the presentation. I was just curious if you could talk kind of outside of that other opportunities are areas you've identified that could be sources of earnings upside here.

B sources of earnings upside here.

[noise] well.

Well.

Look in terms of being highly conservative we were targeting expense ratio that we thought was you.

Look in terms of being highly conservative we were targeting expense ratio that we thought was.

Easily achievable pack less has done a great job of.

Easily achievable Pac West has done a great job of de.

Have you ever seen the balance sheet and when it has a standalone plan that had already identified both cost.

Derisking the balance sheet it has a standalone plan.

It had already identified.

Cost savings that we're going to go away because they were no longer run rate and then other cost savings that they thought we'd be more efficient in terms of how they would handle themselves as a franchise going forward layering on top of that with just the way you would do it in a normal merger, where you look at.

Cost savings that we're going to go away because they were no longer run rate and then other cost savings that they thought we'd be more efficient.

In terms of how they would handle themselves as the franchise going forward.

Layering on top of that with.

Just the way you would do it in a normal merger when you look at.

Your core provider and all the other large expenses that to run the business.

Your core provider in all of your other large expenses that to run the business.

It was pretty easy to get to 190 number. So I think in 190 as you know I don't think that's exceptional but it's it's good I think 185 is probably.

It was pretty easy to get to a 190 number. So I think in 190 is I don't think thats exceptional but it's it's good I think 185 is probably.

Below that is what we would like to get to longer term. So.

Below that is where we would like to get to longer term. So.

Certainly on the expense side, we think there's a lot on the gross side.

That's certainly on the expense side, we think there's a lot on the growth side.

On the revenue side, we were very conservative in our assumptions going forward looking ahead I don't like pressing on the gas what I'm seeing brake lights in the economy right now is slow and.

And on the revenue side, we were very conservative in our assumptions going forward looking ahead I don't like personnel on the gastro <unk> seen brake lights in the economy right now is slow and.

And so we're not projecting ton of growth.

So we're not projecting a ton of growth.

Going into 2024, and if you listen to what Paul says he doesn't see hitting target inflation until 2025. So if we're all wondering when rates are gonna come down, but we're not we're not trying to get ahead of that we just think that the economy is going to be slow there's gonna be some shrinkage and run off in the portfolio will have the opportunity to grow I mean, this pack west is not.

Going into 2024, and if you listen to what Powell says he doesn't see hitting target inflation until 2025. So it's we're all wondering when rates are going to come down, but we're not we're not trying to get ahead of that we just think that the economy is going to be slow there's going be some shrinkage in runoff in the portfolio will have the opportunity to grow Pac west is now.

I've been learning as much as they are probably demand has been because of the number of things that have been done been doing so I think as a combined institution, we're gonna have some opportunities to learn.

Been lending as much as they are probably demand has been because of the number of things that had been done in doing so I think as a combined institution, we're going to have some opportunities to lend.

But it is not going to be expansive unless the economy picks back up into deposits are there to support it.

But it's not going to be expansive unless the economy picks back up into deposits are there to support it.

And then 2025 is when we see growth starting and historically we.

And then 2025 is when we see growth starting in historically.

We would run our bank with low single digits, but probably try to we would we would project excuse me high single digit loan growth and probably end up with low double digits and pack West was there may be higher and there's no reason why this franchise can't do that but we projected much lower growth.

Would run our bank with low single digits, but probably tried to we would project excuse me high single digit loan growth and probably end up with low double digits and Pac West was there may be higher and Theres. No reason why this franchise can't do that but we projected much lower growth.

And I would say that you look at the overall model and the nurse Scott pack Wes forecast in there and do our liquidity issues. We've had this year I mean, just the sort of reiterate what jarod already said is that our our growth as well.

And I would say that as you look at the overall model I mean that Scott pack Wes forecast in there and do our liquidity issues. We've had this year I mean, just to sort of reiterate what Jerry already said is that.

Our growth is well below our demand.

The lower demand.

There's a decision as to whether you do with the economy and everything but.

There is a decision as to whether you do with the economy and everything but it is.

The demand is much much higher than we have in the plant.

Demand is much much higher than we have in the plant.

Got it okay. Thank you for the questions and congrats my deal.

Got it okay. Thank you for the questions and congrats on the deal.

Thanks, Andrew.

The next question comes from Gary Turner D. A Davidson. Please go ahead.

The next question comes from Gary Tenner with D. A Davidson. Please go ahead.

Thanks, Good afternoon.

Just a couple of points of clarification on that slide 22, again, where you highlight the fair value March the 500 million pre tax under 40 goes into earnings is that Delta.

Just a couple of points of clarification on that slide 22 again.

To highlight the fair value marks to 500 million pre.

Pre tax 140 goes into earnings is that Delta.

The multifamily single-family discount that's locked in effectively on the sale at closing.

The multifamily and single family discount that's locked in effectively on the sale at closing.

Yes, because you're selling a number of the loan portfolios. There. So those are the labs are being a creative back in neighborhoods.

Yes, because you are selling a number of the loan portfolios. There. So both in the labs are being accretive.

Okay. That's what I wanted to clarify that thank you and then secondly on slide 12, where you note an additional $2 billion of cash generated of closing just.

Okay I just wanted one and clarified thank you and then secondly on slide 12, where you note an additional $2 billion of cash generated a closing just.

Helping me out with mechanics of of of of.

Help me out with the mechanics of.

That cash generation.

So you got West go ahead go ahead, Kevin Kevin Please take it go ahead.

So you've got West go ahead go ahead, Kevin Kevin Please take it go ahead.

Okay pack west on our side, we do plan to sell some of our available for sale securities. After closing as well as last Samantha Castle hold the high levels of operating cash flow from quite as much at this level of balance sheet, so that leaves us with $2 billion excessive.

Okay.

West on our side, we do plan to sell.

Some of our available for sale securities after closing as well as we'll have some excess cash to both hold high levels of operating cash quite as much of it at this level of balance sheet, so that leaves us with $2 billion excess there.

[noise] got it thank you.

Got it thank you.

And then the other question I had was just.

And then the other question I had was.

Just.

In terms of the.

Especially that question was answered.

Thanks for that question was answered.

Thank you for taking my questions.

Guys. Thank you for taking my questions.

Taking gang.

Thank you John.

The next question comes from 10 coffee with Jenny. Please go ahead.

The next question comes from Tim Coffey with Janney. Please go ahead.

Hey, good afternoon gentlemen.

Good afternoon.

Good afternoon, Tim.

Mmm.

Hey, Jared given the.

Given the.

Sound familiar at the time of the merger approval have you received any assurances that this can happen within that kind of time frame you laid out.

Could you talk a little bit at the timing of the merger approval have you received any assurances that this can happen within that kind of timeframe you laid out.

So yeah.

So we've said in the documents that were looking for to close the transaction at the end of Q4.

We've we've said in the documents that we are looking for to close the transaction at the end of Q4.

Or early Q1 of course, we previewed this transaction with regulators and.

Our early Q1 of course, we previewed this transaction with regulators and.

And based on those conversations in the specifics of this transaction.

And based on those conversations and the specifics of this transaction. We believe that timeframe is achievable. So look we're not going to pin the regulators down they have to go through their process and that process is well laid out, but we believe that that timeframe is achievable.

We believe that timeframe is achievable. So look we're not going to pay the regulators down they have to go through their process and that process is well laid out, but we believe that that timeframe is achievable.

Okay.

Can you comment on how long ago, you bought the regulators and.

Can you comment on how long ago, you bought the regulators then.

We have.

Made the regulators aware of this process from a very early.

The regulators are aware of this process from a very early very early phase.

Faith.

Okay Fair enough and then on going back to the $200 million pretax charge.

Okay, that's fair enough.

And then on going back to the $208 million pre tax charge that includes does that includes change in control.

Includes does that include change in control.

Hi.

So both parties have a double trigger change of control.

We've got a plug in there for <unk>.

<unk> that would be paid to people who are terminated as part of the deal.

Severance that would be paid to people who are terminated as part of the deal.

Most people don't have contracts right. So there's there's normal severance, but we have you know.

Most people don't have contracts right. So there's there's normal severance, but we have.

Based on our estimates our numbers in that number.

Based on our estimates numbers in that number.

Okay.

Right.

That's right.

And then.

Can I get your thoughts on the venture banking.

Just can you give your thoughts on the venture banking business.

Business.

Are you planning to establish any kind of concentration limits.

Sorry are you planning to establish any kind of concentration limits.

In terms of customers or capital or things of that nature.

Let me start off on the concentration limit topic generally.

Well, let me start off on the concentration limit topic generally.

Cause I have very strong feelings about this but let me say without any pause that I think the venture business is a great business and the way that they do it the way they do fund finance I think they they knew exactly what they're doing and they're doing it very very well with concentration is a is an issue.

Because I have very strong feelings about this but let me say without any pause that I think the venture business is a great business in a way that they do it the way they do fund finance I think they know exactly what they're doing and they're doing it very very well with concentration is there is an issue.

In banking across all banks.

And every bank has some level of concentration that we all have these illegal lending limits that say you cannot lend more.

And every bank has some level of concentration that we all have these legal lending limits that say you cannot lend more.

To a single customer or a group of related customers above a certain percent of your capital there's no corollary on the on the on.

To a single customer or a group of related customers above a certain percent of your capital Theres no corollary on the on the.

The deposit side, and we all need to live within our means.

On the deposit side, and we all need to live within our means.

And make sure that we're not overly concentrated bye.

And make sure that we're not overly concentrated by customers either on the asset or the liability side, so I'm in favor of reducing concentration where it makes sense.

My customers either on the opposite where the liability side, so I'm in favor of reducing concentration where it makes sense.

And you can do it in a couple of ways you can do it by making sure that their time based where has some contractual obligation so they can't pull their money.

And you can do it at a couple of ways you can do it by making sure that they are time based or had some contractual obligations. So they can't pull their money.

Giving you notice so you can convert licked.

Giving you notice so you can convert liquor.

Liquid stuffing something that acts more like a like a time based deposit we do that with some of the larger deposits at bank of California, their money markets with institutions, but we have a contract with them. So if the money wanted to leave it was scheduled it would be scheduled to leave out over time, and we can plan for it but overall I believe that you know concentration risk is something we have to manage throughout the entire bank.

Liquid stuff and it's something that acts more like a like a time based deposit we do that with some of the larger deposit at banc of California, there are money markets with institutions, but we have a contract with them. So if the money wanted to leave it was schedule it would be scheduled to leave out overtime and we can plan for it but overall I believe that concentration risk is something we have to manage throughout the entire bank.

Not just at venture or HOA or you know.

Not just at venture or HOA or.

In your community bank or the San Diego region, or the L. A region or anywhere we just have to mention manage it overall and it's something that obviously will look at that look at but I I think pack last would tell you. They feel the exact same way and that's something that all banks are going to have to manage better going forward.

Community Bank or the San Diego region, or the La region or anywhere we just have to manage manage it overall and it's something that obviously, we'll look at it look at <unk>.

Zinc Pac West would tell you they feel the exact same way and that's something that all banks are going to have to manage better going forward.

Okay.

And then there's one I think you're right on sorry.

And then just one last I think youre right on that sorry.

Sorry, Paul please.

Yeah, No I think you're right on here.

Yes, no I think youre right on Jared.

Okay. Thank you and then.

Okay. Thank you.

And then.

For Jared Jared Paul any sense of how much customer overlap you have between the two institutions.

For Darrin and Paul any sense of how much customer overlap you have between the two institutions.

Just I mean, you know we haven't done the math, but anecdotally we know that it's it's.

Just I mean, we haven't done the math, but anecdotally, we know that it's it's some.

This is a massive market so you're not gonna have significant overlap because there's just too much business here, but we do share some customers today and we've done business together on a couple of customers and of course, giving him. My my history at a pack last where I really learned banking and I've I've gotta have such deep respect for.

This is a massive market so youre not going to have significant overlap because there's just too much business here, but.

But we do share some customers today and we've done business together on a couple of customers and of course, given my history at Pac West, where I really learned banking and such.

Such deep respect for the people I work with there that are still there and in those that have left.

The people I work with there that are still there and and those that have left.

There are some customers that that we share.

Okay I spoke to one of our customers are right before this call here.

Okay I spoke to one of our customers right before this call Sharon.

Oh, you did Oh, great yeah.

So you did great.

Yeah.

Yes.

Well great. Thank you. Thank you very much that was my questions.

Great. Thank you. Thank you very much those are my questions.

Thanks to them.

Thanks, Tim.

The next question comes from Kelly, Martha with K B W. Please go ahead.

The next question comes from Kelly Motta with <unk>. Please go ahead.

Hi, Congrats on the deal Thank you Kelly.

Hi, congrats on the deal.

Thank you Kelly I wanted to I wanted to circle back on.

Wanted to circle back on and your outlook for deposits in your disclosure there I know deviates I think iPhone Pittsburgh for you and.

Your outlook for deposits in your disclosure there Jared I know DVA has had been a focus for you in <unk>.

You've kept them at a nice level.

A nice not at all I do think that 30 per cent of total deposits implies some site grow can I know, you're you're working on some things in the back and.

Do you think that 30% of total deposits implies some slight growth and I know, you're you're working on some things in the deep stack in the.

Coming on just wondering you know what gives you confidence.

The HOA coming on just wondering what gives you confidence in being able to get to that 30% level potentially.

And being able to get to see that 30 per cent level potentially.

Modesty, probably another C D a.

Modestly growing those DDA and maybe any color around what youre seeing in terms of trends that you are banking at legacy back last would be very helpful.

And maybe any color around like you're seeing in terms of trends that your bank and add him like if he had class.

Class would be very helpful.

Sure. So so first of all.

Deposits of both banks are are have been highly statement.

Deposits of both banks are or have been highly stable.

We both experienced.

Obviously, a different magnitude, but we both experienced you know kind of the the initial shock and then deploy.

Obviously, a different magnitude, but we've both experienced kind of the the initial shock and then.

Deployed strategies and stabilize deposits and certainly for bank of California, I knew what our pipeline looks like and we brought in a lot of money from new customers.

Deploy the strategies and stabilize deposits and certainly for Banc of California, I know, what our pipeline looks like and we brought in a lot of money from new customers.

This quarter and last quarter and.

This quarter and last quarter, and we're doing it primarily through.

And we're doing it primarily through you know.

Serving people with really high value Treasury.

Hi, Hi cost of high value Treasury management solutions, which are primarily non ish bearing deposits.

Not high cost or high value Treasury management solutions, which are primarily non interest bearing deposits.

<unk> has always had an excellent franchise in terms of building a core deposit base and for the longest time they had a very high percentage of non ashbury and deposits.

<unk> has always had an excellent franchise in terms of building a core deposit base and for the longest time they had a very high percentage of non interest bearing deposits.

When I came to bank of California, we were at 12% or 13% on their spring and we got it up to 40 per cent growth. We're currently at 36% right now.

When I came to banc of California, we were at 12% or 13% non interest bearing and we got it up to 40%.

Currently at 36% right now.

Yes.

Every everything about the way that that.

Pack less to setup and the way that we're setup will drive greater growth in non despairing deposits and and low cost DDA.

Pac west to setup in a way that we're set up will drive greater growth in non risk bearing deposits and low cost DDA.

It's just at the heart of both of our franchises and we will make sure that we we achieve that some of the tools that they have are fantastic I mean, the HOA business that they've pulled together is is really a strong strong business and I think it's gonna do very well, but the core community bank.

It's just at the heart of both of our franchises and we will make sure that we achieve that.

Some of the tools that they have are fantastic. The HOA business that they've pulled together is is really a strong strong business.

It's going to do very well, but the core community bank.

At Pac West is fundamentally under alone you have some really strong.

At Pac West is fundamentally under loan you have some really strong.

You know learning areas in L, a and San Diego, but you are in the central coast other areas, where they have got great loans, but really really good deposits and they're under alone.

Lending areas in La and San Diego, but youre in the central coast other areas, where they have got great loans, but really really good deposits and they're under loan.

Based on the prospects that I've looked at with them and I've talked to many of the leaders at Pac West who I know well I think we both believe that deposit growth is something we're going to be to be able to do well and remember.

Based on the prospects that I've looked at with them and I've talked to many of the leaders at Pac West too I know well I think we both believe that deposit growth is something we are going to be to be able to do well and remember.

This franchise is going to be very dominant in the market that we're in not dominant from a HSR standpoint, but dominant in terms of.

This franchise is going to be very dominant in the market that we're in not dominant from a HSR standpoint, but dominant in terms of we're gonna be highly visible there were some massive banks in this market, but when you cut back the top $2 50.

We're going to be highly visible there are some massive banks in this market, but when you cut back the top 250 and you know for.

For citizens is in there too.

As in there too.

If you look at the top for banks in terms of presence below the the money center banks first citizens disperse we have the chart and the deck, but they're not based here and so if you look at the banks that are based here at city national east-west enough and I think we're all of us are going to be able to compete well against the money center banks and the larger banks to bring deposits.

If you look at the top four banks in terms of.

Below the.

The money center banks for citizens. This first we have the chart in the deck, but theyre not based here and so if you look at the banks that are based here at city National East West in Us and I think we're all of us are going to be able to compete well against the money center banks and the larger banks to bring deposits over.

Over.

I appreciate the caller all set back.

I appreciate the color I'll step back.

Thanks Kelly.

The next question comes from team I Appraise L a with wells.

The next question comes from chemo or Brazil, or with Wells Fargo Fargo. Please go ahead.

Fargo. Please go ahead.

Hi, good afternoon.

That was really short suspicion of coverage teamwork you back.

Really short suspension of coverage anymore you are back.

Yes back and better than ever.

[laughter] you know.

Hello.

Following up on on the deep stack commentary I guess, how does this deal affect the rollout of deep stack and that integration and then any kind of commentary you can provide on what this combination means for the magnitude of the <unk> contribution.

Following up on the deep stack.

Commentary I guess, how does this deal affect the rollout of deep stack in that integration and then any kind of commentary you can provide on what this combination means for the magnitude of the deep stack contribution.

Yeah. So first of all we you know we are on track with <unk>, We said that we would get at live.

Yes, so first of all.

We are on track with deep stack, we said that we would get it live.

At the end of the second quarter or early this quarter and that's happening.

At the end of second quarter or early this quarter and Thats happening.

So we've got we've got customers line up we have our pipeline. We're goin' slow as I mentioned, we are making sure we get all of the risk monitoring and transaction monitoring right, but I liked the progress that I'm seeing were up to 20 people plus we started with 11. So we've been able to build out the teams and do what we thought we would do.

So we've got we've got customers lineup, we have our pipeline, we're going slow as I mentioned, we are making sure we get all of the risk monitoring and transaction monitoring right, but I like the progress that I'm seeing we're up to 20 people plus we started with 11, so we've been able to build out the teams in doing what we thought we would do.

What's really exciting about about about this opportunity to combine.

What's really exciting about about about this opportunity to combine as the.

You know the businesses that pack must have are gonna are gonna threat really nicely with deep stock. So whether it takes you away or the clients of of their of their venture in tech businesses. They need a solution like this.

Businesses that Pac West have are going to are going to thread really nicely with deep stack.

Whether it takes you away.

Or the clients of their of their venture and tech businesses. They need a solution like this and they would love to be able to direct clients to an in house solution as opposed to some third party.

And they would love to be able to to direct clients to an in house solution as opposed to some third party.

And so we both believe that this is going to accelerate the progress for pretty attack again, we gotta get the transaction monitoring right and that that plan is going to continue through the end of this year, we're going to go slow and make sure we get it right, but as we talked about we thought it would contribute meaningfully to earnings an extra two fee income next year and it.

And so we both believe that this is going to accelerate the progress for <unk> again, we got to get the transaction monitoring rate and that that plan is going to continue through the end of this year, we're going to go slow and make sure we get it right, but as we talked about we thought it would contribute meaningfully to earnings an extra two fee income next year and it.

It'll be great to do it on a combined basis.

It will be great to do it on a combined basis.

Okay, and then you know the decision to to sell out so far in the multifamily books. They they asked if ourselves seems to to me quite a bit of sense I guess I was a little surprised on on the sale of the multifamily book, just given kind of the strength of that portfolio in the southern California market I'm, just wondering kind of the rash.

Okay and then.

The decision to sell that so far in the multifamily books. So far sales. It seems to me quite a bit of sense I guess I was a little surprised on the sale of the multifamily book, just given kind of the strength of that portfolio in the southern California market I'm, just wondering kind of the rationale there and then as you look at additional repositioning from <unk>.

Now there and then as you look at additional repositioning from Pac West standpoint is this an indication that they're restructuring is more or less complete or is there anything else that you'd like to divest or maybe trim back on the loan side there.

West standpoint is this an indication there.

Restructuring is more or less complete or is there anything else that you'd like to divest or maybe trimmed back on the loan side there.

So if you were to look at the portfolios of the loan portfolios of both banks.

So if you were to look at the portfolios of the loan portfolios of both banks and.

And just decide what makes sense.

Without looking at any other factors to sell the top two things would be the single family in a multifamily multifamily are there are longer term fixed rate.

Without looking at any other factors to sell the top two things would be the single family and multifamily multifamily are there longer term fixed rate.

Transaction based with low low relationship deposits every bank has them in this market, but it's really easy to build back.

And you're not you're not giving up much given given the rate that those Ron.

And youre not youre not given up much given given the rate.

Ron.

And it's a transaction like this that allows it to happen so on a standalone basis, it would be a little bit punitive, but when you put two balance sheets together and you can create the opportunity to derisking delever, the lower yielding portfolios I think it's the perfect thing to shed.

Lower yielding portfolios I think it's the perfect thing to shed.

It's not gonna affect relationships with clients.

And.

It's not going to affect relationships with clients.

So far one either the way British stuff well in terms of other things to to you know look at exiting I think I think pack less has already done that and they've left the roadmap.

<unk>, one either the way bridged off well in terms of other things to look at exiting I think I think Pat has already done that and they've left the roadmap.

They've done the roadmap really really well and so.

Civic is running off.

You know, it's as we talked about we don't think there is a loss content there and if it is it's remote.

As we talked about we don't think there is a loss content there and if it is it is remote.

And every time, there's kind of something that spikes up they've got a third party that they've been able to play it off on at pretty close to par. So I think that they've kind of laid it out pretty well.

And every time, there is kind of something that spikes up they've got a third party that they've been able to laid off on at pretty close to par. So.

Think that they've kind of laid it out pretty well.

Great.

Great and then just lastly for me looking at Slide 14, the $155 million of other adjustments and run off I just wanted to make sure. That's the loan sales. The security sales is there anything else embedded in that number or is that comprised the entirety.

And then just lastly for me looking at Slide 14, the hundred and $55 million or other adjustments and run off I just wanted to make sure. That's the loan sales. The security sales is there anything else embedded in that numbers that comprised the entirety.

I I think it might have some other stuff in there.

I think it might have some other stuff in there.

It would have some <unk>.

It would have some Kevin Steve.

I'll, just add that legacy Pac west portfolios.

I'll just add a legacy pack last portfolio that we've wound down and deemphasize that will wind down over time.

We've wound down and deemphasize that will wind down over time.

Okay great.

Okay, great. Thanks.

Thanks for the questions and congratulations on the deal.

Hey, Thank you very much. Thank you. Thank you.

Okay. Welcome back will come back to coverage I guess.

Well welcome back welcome back to coverage I guess.

<unk>.

Thanks.

The next question comes from David Feaster with Raymond James. Please go ahead.

Hey, good afternoon, everybody congrats on the deal.

Thank you. Thank you.

Hi, Thank you.

These types of transactions, obviously look like they're they can be really financially compelling, but tough from a cultural and a personnel perspective and I know you talked on this about how close the cultures or a line, but I was hoping you were.

These types of transactions, obviously look like they could be really financially compelling.

Tough from a cultural and a personnel perspective, and I know Jerry you talked on this about how close the cultures are aligned but I was hoping you intimately know both of these obviously and you've done a lot of M&A.

Intimately know both of these obviously and you've done a lot of M&A in the past and I was hoping you could maybe elaborate a bit on the cultural alignment and then maybe just touch on some of the guard rails or strategies that you've put in place to help retain talent lockup lenders and just kind of ensure that seamless integration.

So I was hoping you could maybe elaborate a bit on the cultural alignment and then maybe just touch on some of the guardrails are strategies that you've put in place to help retain talent lockup lenders and just kind of ensure that seamless integration.

Minimize disruption as you alluded to.

<unk> disruption as you alluded to.

Sure Let me, let me take the back half of that first so on the retention peace.

Sure let me take the back half of that first so on the retention piece all of these transactions involve identifying what could be at risk and in making sure that you put guardrails around that I would say that this transaction is unique and that we structured it. So all restricted stock is staying outstanding and we'll continue to divest over time.

All of these transactions involve identifying what could be at risk and and making sure that you put guard rails around that I would say that this transaction is unique in that we structured it. So all restricted stock is staying outstanding and will continue to invest overtime.

So we are not accelerating any restricted stock on either side of the steel.

So we're not accelerating any restricted stock on either side of this deal.

And so the people that have the restricted soccer people that you know obviously, we're we're giving it initially because you wanted to keep him and so we feel that there is already an embedded retention tool that exists.

And so the people that have the restricted stock or people that obviously, we're we're given initially because you wanted to keep them.

So we feel that there is already an embedded retention tool that exists and.

And we'll be looking at others will be smart about it and make sure that we're judicious and we'll do it would make sense to protect the franchise on a go forward basis, but David I cannot say enough about the uniqueness of this overlapping the familiarity that we both have with each other I mean, I can start with Chris Blake who is the.

And we will be looking at others will be smart about it and make sure that we're judicious and we'll do what makes sense to protect the franchise on a go forward basis, but David I cannot say enough about the uniqueness of this overlap in the familiarity that we both have with each other I mean, I can start with Chris Blake who is that.

The presidency of the community Bank and.

The president and CEO of the community Bank and.

His key regional President that report to them. We all work together I mean, we're going back 20 years together, Bob <unk> was that your credit officer pack Western and cheap credit hours of the bank Frank Orsini, Who's the Chief Credit Officer of pack last was there when Bob and I were there. He came out of Capitalsource. He's a terrific guy we all know each other very very well, including his top.

His key regional presidents that report to him. We all work together I mean, we're going back 20 years together, Bob Dyck was the Chief credit officer of Pac Western and Chief Credit Officer of the Bank, Brian <unk> Who's the Chief Credit Officer of Pac West was there when Bob and I were there he came out of capital source. He's a terrific guy we all know each other very very well, including his top.

Lieutenants that are there that are doing a great job on portfolio management, and and and credit management and I I mean, I can just go down the list because I can go down to the individual people, but also I would say that you know Matt and John.

Tenants that are there that are doing a great job on portfolio management, and and and credit management and I can just go down the list because I can go down to the individual people, but also I would say that Matt and John have.

Have just really done an exceptional job over many many years to build what I think was an exemplary franchise and while I understand that today people are looking at things and saying look this is different it's it's changed dramatically.

Just really done an exceptional job over many many years to build what I think was an exemplary franchise, while I understand that today people are looking at things and saying look this is different it's changed dramatically.

I I have a different perspective, and it's not sympathetic.

I have a different perspective, and it's not sympathetic.

It's actual which is that.

Actual which is that.

Getting caught in the headlines could have happened to any bank.

And liquidity run could have happened to anybody.

And liquidity Ron could have happened to anybody.

And it wasn't because they had credit problems. It wasn't because they were bad managers. It was because somebody did a screen of of venture deposits and they came up on the screen and they couldn't get out of the headlines.

And it wasn't because they had credit problems. It wasn't because they were bad managers. It was because somebody did a screen of.

Venture deposits and they came up on our screen and they couldnt get out of the headlines.

And a lot of shareholders made a lot of money on that franchise for a very long amount of time.

Fundamentally, though today I think the way that they've derisked the franchise.

And fundamentally though today I think the way that they've derisked the franchise.

And moved it more toward a community bank and.

And moved it more toward a community bank.

And layered on some bolted on some pieces that are really good deposit generators is going to be a really good fit for us.

Yeah.

In terms of you know just kind of day to day culture. I mean, we're very focused on relationship learning and a high touch way to serve clients and.

In terms of just kind of day to day culture. I mean, we're very focused on relationship lending and a high touch way to serve clients.

And I know this because we compete with them frequently on deals.

Realistic southern California is fundamentally a real estate market. It's 70 per cent real estate 30 per cent CNI, we've been able to diversify into a little bit more CNI then they have they have a little bit higher concentrations. So one of the things that they're still does is it kinda balances out both of us and gives us.

Realize that southern California is fundamentally a real estate market, it's 70% real estate, 30% C&I, we've been able to diversify into a little bit more C&I than they have they are a little bit higher concentration. So one of the things that this deal does is it kind of balances out both of us and gives us a better mix overall in terms of loans and deposits and I think the chart slate.

Better mix overall in terms of loans and deposits and I think the charts lay that out so I can go on and on about the cultural fit here I don't think there's been a deal that you know I I can't say that because there have been a lot of deals done but in all the deals that I've done I've never seen one that has.

It out so I can go on and on about the cultural fit here.

I don't think Theres been a deal that I can't say that because there've been a lot of deals done but in all the deals that I've done I've never seen one that has.

You know this amount of overlap and commonality between two institutions.

This amount of overlap and commonality between two institutions.

Okay. That's helpful. I appreciate that that color and maybe just a quick question on the technology platform and the conversion there could you just touch on the respective platforms and how you see those coming together, obviously technology has been a big initiative for you both but I guess as you talk about the core back office in your system is you know how how do you think about the plan.

Okay. That's helpful. I appreciate that color and then maybe just a quick question on the technology platform and the conversion there could you just touch on kind of the respective platforms and how you see those coming together, obviously technology has been a big initiative for you both but I guess as you talk about the core back office and your systems you know how do you think about the plan.

Form and do you need do you have the infrastructure to really support a much larger it.

That form and do you need do you have the infrastructure to really support a much larger entity.

So I think when you when you look at Tech today, you have to look at it more broadly than core because you're looking at it infrastructure as well as the core operating system that provides services to clients.

So I think when you when you look at Tech today, you have to look at it more broadly than core.

Youre looking at it infrastructure as well as the core operating system that provides services to clients.

We're in if I were a <unk>.

We're a fiserv bank <unk> bank, we bought.

<unk> Bank <unk> bank.

We both have contracts that come up pretty pretty similar time-frame their contract actually ends.

Have contracts that come up pretty pretty similar Timeframes theyre contract actually ends in April 2024 with notice in October 2023, so opportunity there as I mentioned in terms of <unk>.

In April 2024 with notice in October 2023, so opportunity there as I mentioned in terms of you know.

Termination fees and things like that we're gonna have a a talented.

Termination fees and things like that we're going to have a a.

A talented.

Transition leadership team that will be made up of of leadership from both organizations to kind of define the organization going forward and and look at those key decisions and give direction to our integration teams, which would be doing it on the ground and so.

Transition leadership team that will be made up of of leadership from both organizations to kind of define the organization going forward and look at those key decisions and give direction to our integration teams, which we're doing it on the ground.

And so.

It's a big opportunity, but beyond the core.

Look, it's a big opportunity, but beyond the core.

Staying there for a second when you're looking at core you're also looking at how you're integrating api's because most of US today are relying on outside services from not just from five server F. I asked to deploy really good solutions to your clients you're not just looking at your no longer taking that as the packaging delivering that out alone.

Staying there for a second when Youre looking at core Youre also looking at how you are integrating Apis because most of US today are relying on outside services from not just from five server phys to deploy really good solutions to your clients you're not just looking at you are no longer taking that as the packaging delivering that out alone.

Bolted on other things that deliver things to your clients. So we have you know our payments up through volante. There are things that we're doing through deep stack and there are things that we've partnered with you know give <unk> sort of a lot of credit because they've opened up to api's, perhaps faster than most realizing that can't be a one stop shopping it's better to partner than to push away and so.

Bolted on other things that deliver things to your clients. So we have our payments hub through <unk>. There are things that we're doing through deep stack and there are things that we've partnered with.

<unk> serve a lot of credit because they've opened up to Apis.

That's faster than most realizing that can't be a one stop shop, and it's better to partner than to push away and so.

We'll be looking at that at that really closely and and try to figure out what the best solution is going forward and then on the icy architecture side, Amy we're both trying to be cloud first and make sure that we have the right infrastructure and that can support us.

And we will be looking at that that really.

Mostly in and try to figure out what the best solution is going forward and then on the architecture side, Amy we're both trying to be cloud first and make sure that we have the right infrastructure that can support us.

And the changing environment that we're in which is highly mobile I think they've done a great job of thinking about how to be tech forward in terms of providing solutions to their clients. We've been a I think we punch well above our weight class in terms of the technologies delivery to our clients.

The changing environment that we're in which is highly mobile I think they've done a great job of thinking about how to be tech forward in terms of providing solutions for their clients.

<unk> been a I think we punch well above our weight class in terms of the technology delivery to our clients.

Their specific systems that they have that we're going to have to keep the HOA system is unique.

There are specific systems that they have that we're going to have to keep the HOA system is unique.

And we're going to have to make sure that we build on that and make sure. We supported for the growth. That's there. There's there's tons of deposit growth I think that we see through.

And we're going to have to make sure that we build on that and make sure. We support it for the growth. That's there there's there's tons of deposit growth I think that we see.

<unk> HOA as well so.

Through HOA as well so.

Those technology solutions decisions are going to be very very important and we've obviously made some initial attempts that at assessing that in and we have some initial ideas, but we're going to you know obviously starting now as as they say is one of the real work against.

Those technology solutions decisions are going to be very very important and we've obviously made some initial attempts that at assessing that in and we have some initial ideas, but we're going to.

Obviously, starting now as they phase one of the real work begins.

Okay, and and the last one for me you know fee revenues haven't been a big part of either institution.

Got it and then last one from me.

<unk> revenues haven't been a big part of either institution.

I'm just curious how you think about these going forward, obviously deep stacking play into that disarm regard, but I'm. Just curious think about how do you think about the fee the fee revenue generation, especially as you become you know a much larger institutions.

I'm just curious how you think about these going forward, obviously deep stack can play into that in some regards but I'm just curious to think about how you think about the fee the fee revenue generation, especially as you become a much larger institution.

Yeah.

Yeah, I mean, we're both not heavy on the fee side right.

Yes, I mean, we're both.

Not heavy on the fee side right.

<unk> did a better job than we did in terms of making up for it because they had.

<unk> did a better job than we did in terms of making up for it because they had they were.

They were earning a lot more than we were so it made up for it.

We're earning a lot more than we were so it made up for it.

I think deep stack is gonna be is going to be key they are an issuer of cards and they generate some fees. There we are going to be an issue of cards speaking in fourth quarter and sweet.

I think deep stack is going to be is going to be key.

They are an issuer of cards and they generate some fees. There we are going to be an issuer of cards beginning in the fourth quarter and so I think that's going to be a good opportunity for for fee generation.

Think that's going to be a good opportunity for for the generation I think the payments business ecosystem that we're building around payments through deep stack through issuing an through partner programs through bass.

I think the payments business and the ecosystem that we're building around payments through deep stack through issuing and through partner programs through bass are is going to be a probably the initial place where we're going to see fee income grow faster than other parts of the company.

Is going to be a probably the initial place where we're going to see fee income grow faster than other parts of the company.

Yep that's helpful. I appreciate it thanks everybody.

Okay. That's helpful. I appreciate it thanks everybody.

Thank you David.

This concludes that question and answer session. The call has now concluded. Thank you for attending today's presentation. You may now disconnect.

This concludes our question and answer session. The call has now concluded. Thank you for attending today's presentation. You may now disconnect.

Q2 2023 Banc of California Inc Earnings and PacWest Bancorp M&A Call

Request a DemoDemo

BANC

Banc of California

Earnings